Earnings call: Fraport AG sees strong recovery and sets ambitious 2030 targets

During the latest earnings call, Fraport AG (FRA.DE) reported a robust recovery in passenger traffic and financial performance for the full year 2023. CEO Stefan Schulte highlighted the significant rebound, with Frankfurt Airport nearing pre-pandemic levels and the international portfolio of airports almost fully recovering. The company's group EBITDA exceeded EUR 1.2 billion, surpassing mid-term expectations.

Fraport AG also updated its Group strategy with ambitious targets for 2030, including an operating result of EUR 2 billion EBITDA and EUR 1 billion free cash flow. Despite the positive outlook, the company faces challenges such as increased net debt, which rose to EUR 7.7 billion, and no anticipated dividend distribution for fiscal year 2024 due to elevated debt levels and negative free cash flow resulting from expansion investments.

Key Takeaways

• Fraport AG reported a near-full recovery in passenger numbers, with Frankfurt Airport at 84% and the international portfolio at 98% of 2019 levels.
• Group EBITDA surpassed expectations, reaching over EUR 1.2 billion.
• The company is progressing in decarbonization, aiming for CO2-free Scope 1 and 2 by 2045.
• Fraport AG's revenue was just under EUR 3.5 billion, with Fraport Greece significantly contributing to the group's EBITDA.
• Net debt increased to EUR 7.7 billion, but liquidity remains high at over EUR 4 billion.
• The company provided guidance for Frankfurt Airport's passenger numbers and near-term EBITDA, expecting full traffic recovery in Peru.
• No dividends are expected for fiscal year 2024 due to increased net debt and negative free cash flow.
• Fraport AG is confident in achieving a long-term target of EUR 2 billion EBITDA by 2030.

Company Outlook

• Fraport AG has set a long-term target of EUR 2 billion EBITDA and EUR 1 billion free cash flow by 2030, focusing on existing business and concessions.
• The company expects Terminal 3 in Frankfurt to generate about EUR 450 million in revenue by 2024.
• Maintenance CapEx and minor investments outside Frankfurt are planned to be between EUR 300 million to EUR 400 million.
• Net debt to EBITDA ratio is aimed to be kept below 5, with room for growth through mergers and acquisitions.

Bearish Highlights

• Elevated net debt has led to the decision not to distribute dividends for fiscal year 2024.
• Free cash flow was negative due to expansion investments in Frankfurt and Lima.
• The ground handling segment experienced a revenue decline due to lower traffic volumes.

Bullish Highlights

• Aviation charges and the retail and real estate segment revenues almost reached pre-pandemic levels.
• The international activities and services segment, particularly Fraport Greece, outperformed pre-crisis levels.
• Positive traffic growth of 3% to 8% is expected for Greece this year.

Misses

• Despite the recovery, the spend per passenger (Pax) in Q4 2023 was lower than the previous year due to special effects related to minimum annual guarantee (MAC) payments.

Q&A Highlights

• Fraport AG is prepared for the introduction of sustainable aviation fuel (SAF) regulations, stating that the obligation is with the airlines.
• The company plans to renovate Terminal 2 and move airlines to Terminal 3, providing additional capacity.
• No specific details were provided on the dividend for 2025, and the return to pre-pandemic traffic levels at Frankfurt in 2024 is uncertain.

Fraport AG's executives remain optimistic about the company's future, emphasizing the importance of cooperation and cultural change within the company to achieve their ambitious targets. Despite the challenges posed by the current financial situation, the company's strategic updates and recovery in passenger numbers point to a confident path forward.

Full transcript - None (FPRUF) Q4 2023:

Operator: Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Conference Call of Fraport AG Full-Year 2023 and Annual Report. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] May I now hand the call over to your host today, Christoph Nanke, SVP, Head of Finance and IR.

Christoph Nanke: Thank you, Dorian and warm welcome also from my side. I think we have some topic to talk about and explain today. So therefore I’m very happy to have our CEO Stefan Schulte and our CFO Matthias Zieschang at the table and I hand the floor to Stefan to start the presentation.

Stefan Schulte: [Technical Difficulty] Thanks very much and a warm welcome also from my side. Good afternoon, ladies and gentlemen. We have had a business morning, so let's go straight into the presentation. My first slide today provides you an overview on our latest developments. Frankfurt Airport, our main site recorded just under 60 million passengers last year. This was one of the midpoint of our full-year guidance, which was a terrific recovery of 80% to 90%. In fact, the second-half of the year showed an even more dynamic development at about 88% of 2019 or 91% for the fourth quarter on a standalone basis. On stronger traffic recovery, we saw in our international portfolio in total the airports outside of Frankfurt reached 98% of the passenger number handled 2019. Correspondingly, our international portfolio achieved our midterm guidance of a full traffic recovery, which we provided you 2.5 years ago. Benchmarking our results against expectations also shows very good progress regarding our operating results. Our group EBITDA, reached more than EUR1.2 billion and therefore recorded an all-time high and outperformed our mid-term expectations. In addition to the financial progress, we continued our way to decarbonize the group. During the past year, we amended our so-called master plan decarbonization to include our majority-owned efforts. The updated master plan describes a way on how to decarbonize the individual efforts in order to achieve a CO2 free Scope 1 and 2 by fiscal year 2045. Besides our master plan decarbonization, we also updated our Group strategy Fraport.2030 to include new midterm targets. The new strategy comes along with an updated corporate purpose and a new claim connecting the world with tomorrow, but more on this topic later in my presentation. Moving on to our financial highlights of the past year on slide four, despite the fact that Frankfurt just recovered to 84% of the 2019 traffic revenues increased on a group wide to just under EUR3.5 billion, at Frankfurt Airport in particular the real estate and parking divisions, as well as the security business contributed to the revenue increase. Internationally, we record more than EUR210 million of higher revenues just from our Fraport Greece subsidiary a strong increase of our very important international operation, but also Fraport Brazil and USA showed higher revenues. In terms of our Group EBITDA Fraport Greece also helped us to exceed the pre-COVID level at EUR271 million, our Greek subsidiary contributed EUR100 million more EBITDA than 2019. At the Frankfurt site, especially the aviation segment exceeded the 2019 benchmark year. Bottom line, our Group result exceeded the upper end of the guidance for 2023, but remained some EUR20 million below 2019, key drivers for the better performance in our Group result were higher interest received in our financial asset management and the development in Antalya. At EUR430 million, this was our third highest result in our Group history. Looking at the traffic performance of last year on slide number five, as mentioned before, Frankfurt Airport showed a year-over-year recovery to just under 60 million passengers or an increase of 21% against 2022. While full-year traffic thus recovered to 84% of 2019, the second-half of 2023 and Q4 in particular, a better traffic development at about 91%. Reason for the improved Q4 development was mainly the gradual market opening of China. In our international portfolio, our Greek Airport showed again the strongest traffic momentum. At 34 million passengers, Fraport Greece was 12% above the 2019 benchmark year and reached the highest traffic result in its history. Besides Fraport Greece also Antalya exceeded the 2019 year and recorded just under 36 million passengers. The development in Antalya is even more remarkable when considering that about 4 million passengers from Russia are still missing, compared to 2019. In addition to Fraport Greece and Antalya, Lima Airport is also showing into the right direction, while Lima on a full-year base was still 10% below 2019, November, December, and the first two months of this year recovered to about 100%. Correspondingly, our outlook for this year indicates a full traffic recovery in Peru. Moving on to our business update on slide number six, the upcoming summer flight scheduled in Frankfurt will start in two weeks from now. Here scheduled seat capacities are expected to reach just under 90% of the 2019 summer season, while the second quarter will still be somewhat below this figure of Q3 is expected to be at about 90%. On a regional perspective, we expect North America, Central America, and Southeast Europe to exceed the 2019 benchmark year, and opposite especially domestic traffic. And Eastern Europe, due to the war in Ukraine, are expected to remain clearly below 2019. Regarding China, we expect summer capacities to come back to 70% to 80%. Here, Beijing and Shanghai will be close to 100% or secondary cities like Shenyang or Shanghai are still missing. The long-term end of the expected traffic growth at Frankfurt Airport will also see good progress in our Terminal 3 investments this year. The first milestone we already achieved in February, the new parking house of Terminal 3 partly opened with 2,000 slots. Despite the distance to Terminal 1 and 2, the new offering is very well taken up by the market. At the beginning of March, all parking lots were pre-booked and the new parking house was completely sold out. With the progress we will also see with our ESG activities in Frankfurt, for example, we will complete the construction of our new photovoltaic plant this year. The photovoltaic plant will provide sufficient energy to run, among others, our entire electric car fleet and our airport hospital in Frankfurt. A very good step ahead with the important topic CO2. Besides the progress in Frankfurt, we also set a date for the terminal opening at Lima Airport. On December 18, we will make the new terminal available after a construction time of just three years. This is more than remarkable and a big thank you to the involved parties, including the local authorities. Three years will also be the construction time of the terminal extension in Ontario. Here we have meanwhile completed more than 70% of the entire project while the asset areas are almost done too. Ladies and gentlemen, we are seeing good progress at our main sites. After three years of COVID-19, we can finally say the pandemic is more or less over. Fraport is emerging as a different, yes in our opinion, a stronger company. We have taken clear steps to change the company and shape the corporate culture. For their dedicated work in the past years, we have to especially thank our employees at all our airports. A big thank you on that side. And to set ourself new goals, we updated our new strategy -- I’m on slide seven for Fraport.2030. It's the headline of our new strategy, which also provides new targets for fiscal year 2030. To be clear, we are just talking about six years to go. You'll find these targets on the right-hand side of slide number seven. Fraport.2030, we want to fascinate our [Technical Difficulty] with our airports, regardless of whether they are passengers, airlines, whether it's cargo or other business partners. Financially, we want to achieve an operating result of an EBITDA of EUR2 billion and we want to generate a free cash flow of EUR1 billion. This will leave us sufficient headroom to reduce leverage, to raise the dividend, but also to pursue new growth projects. In order to achieve this project, we defined three main strategic priorities; growth and sustainability, efficiency and innovation, and to be a top employee. And these priorities you find, among others, the operational growth at our Group airports, the completion of our extensive growth programs, but also ESG related priorities, whether environmentally or socially linked. Our most important level to tackle these priorities is cooperation. This includes cooperation, especially within the Fraport Groups or across countries and divisions, but also outside. Being an airport operator, we know there's no takeoff and landing without cooperation. We also know that's the most difficult thing to change, to change development, to change culture, to change the DNR, but it's important. It's really important for the future and we are really on track there already. We started with first projects on that site, for example, with the full digitalization of our HR processes. So I'm very excited to see the progress in the future and how we'll further change the company over the next years. Moving on to our near-term outlook, I’m on slide eight. For Frankfurt Airport, we again provided you a comparably broad guidance range of 61 million to 65 million passengers. While the current forward capacity indicates about 63 million passengers, further progress of the seat load can lead to upper end of our guidance. Simultaneously, further strikes or aircraft availability restrictions, that's the most difficult thing to predict these days, can't be ruled out. This may lead to the lower corridor. So from today's point of view, we are optimistic to be somewhere in the middle range, but we will have to see. Equally on the level of EBITDA here the upper end is EUR1.36 billion, while the lower end is EUR1.26 billion and the midpoint is slightly above EUR1.3 billion and you know Matthias he likes always to be on the upper end of a guidance. So that's also a clear message. As a consequence the Group net result can range between EUR435 million and EUR530 million. Assuming continued negative free cash flow, as Matthias will discuss in a minute, our net debt to EBITDA key leverage ratio is expected to remain broadly unchanged to the year-end 2023. Bearing the negative free cash flow of 2024 and the elevated net debt in mind, we currently do not foresee a dividend distribution for fiscal year 2024 at this point in time. Having said this, thank you very much and I would like now Matthias to handle over for the financials.

Matthias Zieschang: Thank you, Stefan and also [Technical Difficulty] from my side. Let me start my presentation today with our cash flow and indebtedness situation on slide number 10. Overall, the operating cash flow and capital expenditure developed in line with our expectations. Reflecting the positive traffic and financial result developments, the operating cash flow was clearly up, compared to the previous year at EUR863 million, the operating cash flow reached about 90% of the 2019 level and was clearly sufficient to cover the maintenance CapEx on a group-wide basis of about EUR360 million. Therefore, without considering the expansion CapEx, we would have generated a solid cash flow surplus of about EUR400 million, due to the continued expansion investments in Frankfurt and Lima, our free cash flow was negative at minus EUR656 million. Correspondingly, our Group net debt increased to EUR7.7 billion at the end of last year. Despite the higher net debt, our net debt to EBITDA key leverage ratio improved thanks to the operational [Technical Difficulty] growth from 6.9 times to 6.4 times. Moving on to our updated repayment profile at the end of fiscal year 2023. I'm now on slide number 11. Despite the negative free cash flow, our liquidity position remained at the high level of more than EUR4 billion respectively EUR5 billion, including the unused project finance and committed credit lines. Gross debt on the other side grew to slightly more than EUR11.7 billion. The increase in gross debt also reflects the project finance at Lima airport, where we have meanwhile made use of more than EUR650 million. The unused project finance in Lima still amounts to EUR470 million. As a result of the ongoing refinance and Lima drawdowns, our average cost of debt increased slightly to 2.9% at the end of 2023. On the other side, our available funds also reflected an increased profitability, while we started 2023 with an average yield of about 0.8%. We are now standing at an average yield of about 2.7% on our liquidity. Looking ahead, we expect the year to steadily increase to about 3% by end of H1, which will help us to further reduce our cost of carry. Moving on to our segment development starting with aviation on slide number 12. While we just handed 84% of our pre-COVID passenger number, the aviation charges reached the pre-COVID level at about EUR814 million. Here, the fee increases which we implemented in the meantime became visible. So 4.3% in ‘22 and 4.9% in ‘23. In addition, the segment EBITDA reflected the restructuring measures, which we carried out during the pandemic. When adjusting for the higher security revenues, which basically come without a margin, our underlying OpEx, so excluding for security OpEx was some EUR30 million below the level of 2019, a decrease in underlying OpEx led Ceteris Paribus to an EBITDA improvement of more than EUR30 million. At EUR308 million EBITDA reached an all-time high and was well in line with our guidance. For fiscal year ‘24 we expect a further improvement in revenues, EBITDA and margin due to the expected traffic growth and the 9.5% price increase, which we enforced on January 1. Coming to our retail and real estate segment on slide number 13. Segment revenues almost reached the pre-pandemic level of EUR508 million, despite handling 11 million passengers less. The revenue recovery was once again driven by the real estate and parking divisions, which outperformed the 2019 benchmark year. Regarding our retail activities, the picture remains mixed. While shopping and services revenues were higher than 2019 on a per passenger basis, advertising revenues continue to underperform the 2019 level. We also show the relevant figures on slide number 14. Regarding advertisement, despite a negative full-year performance, we are encouraged by the most recent trend. Q4 showed a clear improvement on a per passenger basis, compared to the previous quarters. With the increasing share of Far East passengers, but also the European football championship in Germany this year, we are confident to see further progress in advertisement and that the division will catch up again. Simultaneously, we expect the improved passenger mix to have a positive impact on our overall retail revenues per passenger key figure in ‘24. Regarding the segment EBITDA, we had been still confronted with headwinds from elevated cost items such as energy costs, compared to 2019. Consequently, the EBITDA was mildly down compared to 2019. For the fiscal year ‘24, we however expect an outperformance versus 2019, due to the expected passenger growth and continued favorable conditions in real estate, as well as parking. Turning the page to our ground handling segment on slide number 15, following the positive development in the third quarter, the ground handling segment turned negative again in the fourth quarter. While costs were slightly higher in Q4 when compared to Q3, the lower traffic volumes led to a revenue decline. Correspondingly, EBITDA was negative at minus EUR10 million in the fourth quarter and on a full-year basis. Looking ahead, we are relatively confident to achieve an EBITDA break even this year, so in 2024. The turnaround will be driven by higher charges for the usage of the central infrastructure, higher prices in ground services, and the expected traffic recovery. Moving on to our final segment, International Activities & Services on slide number 16. As you can see on the slide, our international segment continues its outperformance against 2019. Revenues, EBITDA and EBIT stood well above the pre-crisis level. Here, especially Fraport Greece performed strongly, compared to 2019. While revenues excluding for IFRIC 12 grew by some EUR212 million in Greece, EBITDA was up by more than EUR100 million. Besides Fraport Greece, also Fraport Brazil and Fraport U.S. showed an improving earnings momentum with Fraport U.S. being positively impacted by the compensation for the early termination of the Pittsburgh lease agreement. At an EBDA of EUR560 million, our international activity segment was once again the biggest single segment on a group-wide basis with an EBITDA share of about 47%. For the year ahead you will have also seen this in our annual report. We agreed on another state settlement agreement in Greece. The agreement will lead to an extra income of roughly EUR28 million and will support the segment development in 2024. Based on this, we expect the EBITDA in 2024 to remain on the high level of 2023 or to rise slightly above. Coming now to my final slide for today, our free cash flow and net debt outlook for 2024. As a starting point to reconcile the net debt development in 2024, we take our EBITDA guidance as a proxy for our operating cash flow, which ranges from EUR1.26 billion to EUR1.36 billion. From this basis, we deduct the CapEx amount of roughly EUR1.4 billion to EUR1.5 billion. Please note here that this year will mark the final year of the elevated CapEx levels in Frankfurt and Lima, and we expect a clear reduction of the CapEx next year. Following the CapEx, we subtract another EUR200 million for fixed concession payments, borrowing costs and IFRS 16, as well as around EUR250 million for net debt and taxes. Adding all the components together, this will mean a negative free cash flow of around EUR490 million to EUR690 million this year, before we will reach breakeven next year, so in 2025. As a result of the free cash flow outlook, we expect our group net debt to grow to around EUR8.2 billion to EUR8.4 billion this year. Having said this, ladies and gentlemen, I'd like to thank you for your attention and we are now looking forward to your questions.

Operator: Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Ruxandra Haradau-Doser with HSBC (LON:HSBA). Please go ahead.

Ruxandra Haradau-Doser: Yes, good afternoon. Thank you very much for taking my questions. First, impressive 2030 targets, the EBITDA guidance this year is up to 200% higher than when Dr. Schulte joined the executive board, almost up to 150% higher than when Dr. Zieschang joined Fraport. You guide another improvement of 50% from this year level over the next six years. It's really a very impressive performance and congratulations for this. Could you please help us with an interim EBITDA target, maybe in 2026 or 2027? Second, I understand that depreciation has increased because of future renovation of Terminal 2. Do you have already details how this terminal will be used going forward? Will it be used by Lufthansa or by the partners of Lufthansa? And the CapEx for T2 is still within the limits of your future maintenance CapEx? And what will be the distribution of the CapEx between regulated and non-regulated activities? Third, what traffic performance increase have you considered in your group guidance this year? And what seat capacity growth is the current flight schedule indicating this summer? And the final question for Dr. Schulte, please. We are now a few months ahead of the introduction of the EU requirements with respect to sustainable aviation fuel. How are your EU airports prepared for this? And how is the sector in general prepared for SAF? I understand that only 1% of global airports are currently offering SAF, so why is the number so low and what needs to happen for airports to engage more in providing SAF and investing in the required infrastructure? Thank you very much.

Stefan Schulte: Thanks very much for your questions. I may start and start with your final question, sustainable sectors, sustainable fuels. Yes, we have to -- we have the first quotes from 2025 onwards, I think it's 2%, if I'm correctly informed, and we always have been in favor of those quotes that we are obliged as an industry in total to go up there and over the time that we reached an amount and in quotes, which are meaningful and that the industry is getting sustainable, so that's very positive. You know that the obligation is with the big refineries, the Shell (LON:SHEL), Total, and so on of this world, they have to produce this and it complicates technical procedure how to produce SAF. We in Germany say it's a couple of productions on a Biogen (NASDAQ:BIIB) base, but we'll see what the different suppliers are at the end doing. We know that a lot of airlines are contracting soft arrangements in different parts of the world. So from that point of view, that's okay. And I'm sure that all airlines will try to fulfill the quotes they have to fulfill, so the percentages, which are raising up to 6% in the year 2030. From the infrastructure on the airport, that's not a topic for us, because it's not necessary by regulation that SAF has to be provided exactly on the same consumption, by the airport it's the same consumption of the airline. The airline has to guarantee that they, for their flight, they are doing worldwide or under the regime of the European Commission, that they are doing, that they are fulfilling the quotas, the obligations, but it's not important that they do it airport by airport exactly. Here in Frankfurt we are prepared. It's not a problem. On other airports that we're taking Island Airport is probably more difficult, but it's not necessary. This will change over the time, it’s a question over the time after the year 2030. Then you have to be more airport, but that's still a discussion with the European Commission. So at the moment we don't have any restrictions there. It's not an obligation with the airport. The obligation is with [Technical Difficulty] and the airlines, but not with the airports. On traffic performance, I'll just get -- on traffic performance regarding Greece, how is the booking situation, what we see as a pre-booking that's very positive. Also the first two months have been quite positive on that side. But to be quite honest, my colleagues here in Greece, they're a little bit more conservative after the strong growth last year. They are more believing in a smaller growth this year. I'm a little bit more optimistic on that side. So let's see, it will be in between 3% to 8%, something like this. But it depends on the market, it depends on the availability of hotels, it depends a little bit also on the competition with other tourist destinations like Antalya, for example, because what we see from the market side is that the demand is very, very high and the demand is there. It's more of the question, what are the passenger flows and what direction are they finally going? And there I can just say Greece is very optimistic. So our expectations for Greece in this year are, if you take the numbers, which Matthias just presented, are not so high. They are slightly lower for Greece, and hopefully they will outperform us at the end. Terminal 2 just as a final quality answer, because the numbers are with Matthias, he's much more professional on that side than I. With Terminal 3 we get the big advantage that we get first time free capacity or additional capacity, so on terminal infrastructure. So we can move the Terminal 2 airlines, maybe the one or the other, from Terminal 1 to Terminal 3. But Terminal 1 would stay very much fully loaded. So with Star Alliance and Lufthansa, they have chances after renovation of Terminal 2, after the technical renovation especially, but also some functional things to provide a Terminal 2 with a good hub product with seamless traveling in between Shanghai and Nanjing and so on. Lufthansa and Star Alliance will move into the Terminal 2, because they have big advantages on that side. They can use it on the Shanghai side. They can use it on the Nanjing side and we had a lot of good discussions with them. So that's absolutely clear. They are happy that they have the chance over the next five, 10, 15, 20-years to go in Frankfurt and to have a terminal infrastructure to go there. Last answer from my side, intervenes on EBITDA target we don't publish. Of course we are following on detail the different projects on that side and the different targets we have internally. And if we would run out of that, we would, of course, inform you. But otherwise, from today's point of view, yes, we are quite optimistic and quite confident that we will achieve those targets, as we mentioned. It's for sure much easier on the free cash flow side than on the EBITDA side, but also on the EBITDA side, if you know the potential we have on the international portfolio, but also with the normal growth on Frankfurt that won't work, Matthias?

Matthias Zieschang: Yes, in addition to this, again there's no intermediate target for the EBITDA, but looking forward we have the target in 2030 EUR2 billion, we had EUR1.2 billion in ‘23, there is a difference of EUR800 million in seven years. So it's relatively simple to make a rough calculation what it could be year-by-year as an increase regarding the EBITDA and we are not targeting for a curve. So regarding CapEx in Terminal 2, first of all, how will be the phase in 2027 after the opening in 2026 of Terminal 3. We are going to close Terminal 2 for a period of three years. In this period we are going into the so-called course of the terminal. In these, I think, 16 course, all the technology is embedded and included and everything has to be renewed. So that's the reason why we're going to close this infrastructure otherwise there would be a lot of problem to do this under the year rolling wheel so to say. And so there's a clear focus in these three years, but the whole concept of refurbishing the terminal is in a period of up to 10-years. So the amount which we're going to invest and this is about EUR700 million for the pure maintenance plus X and this is a three digit amount for the functional other things which Stefan mentioned. This will be invested over a period of 10-years of course with more load in the year ‘27 till 2030. Everything of this is embedded in our maintenance CapEx program for the next couple of years. So far the answer to your questions.

Ruxandra Haradau-Doser: Thank you very much. Thanks.

Operator: Thank you. We have the next question from the line of Graham Hunt with Jefferies. Please go ahead.

Graham Hunt: Thanks. I've got two questions please. First one on pricing, what are your expectations for regulated pricing in 2025? Have you had any preliminary discussions on that with the airline's CPI, obviously, in a lot lower place today than it was a year ago? Is that a reasonable proxy for the stepdown in pricing that we could expect for next year? And then second question on retail, I'm just trying to understand what a realistic outlook is for 2024 there with spend per Pax down year-over-year, despite higher percentage of those international travelers, which tend to spend a bit more? And this trend seems pretty much -- pretty at odds with what your peers are seeing in this space? So just want to get some color on what's really going on here and what your expectations are for 2024? Thank you.

Stefan Schulte: I can start on fees. It's very early in the year, so we haven't had discussions with the airports. The consultation has not happened up to now. It will start the next day, so the next week. You are absolutely right that CPI these days is not a good indicator. And it's not a reason of it. It's not my point that it's a good indicator or not a good indicator, it's not reasonable. If you see what's happened on the tariff increase or the staff cost increases, if you see what's happened on the material cost, then it's absolutely clear that we cannot go for an increase of 2% or 3% for the next year. That's absolutely not reasonable. So we need a higher increase and we see also from other airports in Germany, but also in Europe. There's the same situation, because we have a very big staff amount in the lower segment of the salary ranges where you see over-proportional high staff costs increases these days, which some will have to be financed. That is the main topic on that side where we have to go for a higher increase, but it's too early to give you any indications or any number on that side. But it's clear that CPI is not possible. Matthias?

Matthias Zieschang: Yes, and regarding, in addition to this, retail so we are relatively positive regarding the year 2024. What are the reasons? First of all some underlying facts and figures. In 2019 3% of our passengers have been Chinese passengers. In these 3% passengers, they generated 15% of our retail revenue, so 5 times above average. And when you look in the past, past means in 2023, we had between 40%, just 40% to 50% of the former Chinese passengers, because we started with about 20% Chinese in the beginning of the year ‘23, then between 40% and 50% in the summer and we ended up at about 70% in Q4 ‘23. Now looking into the year ‘24, we assume that we will see 70% to 80% of the former Chinese passengers back. So this number, which is twice as much as this number of Chinese which we welcomed in ‘23, must just double the income from the Chinese. And again, remember that it is still 5 times of the average. So this increase of Chinese is good for -- I would say about EUR15 million just coming from the Chinese. So this is a big positive impact in ‘24. Another positive momentum is advertisement media. So when you look on the Q4 numbers, you see already a spend per Pax of EUR0.73, which is nearly on the level of 2029. Now we have a recovery of big companies now paying money for media, for advertisement like auditing companies like Chinese automotive companies. We have the European Soccer Champion in Germany. This is also good for additional money on the advertisement sector. And this combination of still strong F&B expenses, good momentum regarding media, plus the Chinese impact on the retail side, plus a new bigfoot store which will be opened in Terminal 1B, Concourse B. All these elements give us a confidence that the spend per Pax in retail in ‘24, which will be clearly better than in ‘23. So we have a double effect. We are benefiting from the increased number of passengers which we expect in ‘24 plus these mentioned structural drivers, which are running in favor of us.

Graham Hunt: So can I just…

Matthias Zieschang: Yes.

Graham Hunt: Can I just come back very quickly on that, I mean in Q3 and Q4 your spend per Pax was down year-over-year, despite those higher percentages of Chinese travelers that you called out? So should I interpret that as the core traveler is actually deteriorating more?

Stefan Schulte: Yes, if you look, I'm now on slide number 14 in the presentation. I think you're focusing and looking on Q4. So first of all, in Q4 the spend per Pax in ‘23 was at EUR4.08, which was clearly above 2019. But of course, it was less than the year before where we had EUR4.23. But in this year there was so far a special effect, because we are in ‘22, we were benefiting from the so-called MAC from this minimum annual guarantee. And these payments for locking in these MAC have been paid at the end of the year. So this was so to say positively spoiled by the MAC, which was working in ‘22. In ‘23 when the passenger numbers went up there was no further MAC payment from the tenants. That's the reason why we have this overshooting in Q4 2022. So you have to look on the EUR4.08 in Q4 2023 versus the EUR3.76 in 2019. This is a 10% increase compared to 2019 and this defines and shows the momentum in Q4 and this you have to now to continue for the full-year ‘24, again, based on the high recovery of Chinese, which is already there, because we had already in Q4 about 70% of the former Chinese passenger numbers. And this will, of course, continue, perhaps even can go up to 80% plus again an increase in advertisement so for example, we have a new contract with a big Chinese bank on the bridges at the piers and so there are a lot of elements, which give us a confidence that the retail spent per Pax in 2024 will be clearly above ‘23.

Graham Hunt: Thank you.

Operator: Thank you. The next question comes from the line of Carlos Caburrasi Ortega with Kepler Cheuvreux. Please go ahead.

Carlos Caburrasi Ortega: Hi, hello and thank you for the presentation and taking my questions. I have three, the first one is on the traffic outlook. I recall that during the nine-month presentation, you implicitly guided for well above 65 million passengers in 2024, when mentioning the net tariff increase of 5% to 6%? And considering that February's strikes affected 225,000 passengers, the total impact on an annual basis would be around 2.5 million passengers. Therefore, why is the passenger range so wide to the negative and what are the moving parts impacting your traffic expectations? Then the second one is on the dividend side. You have reiterated that there will be no dividends in 2024 and we will have to wait for 2025. And then I will ask you if you could comment on your expectation for that dividend? Would it be in line with the pre-pandemic EUR2 per share? And the last one is for the long-term view for 2030. Considering that guidance in terms of EBITDA and free cash flow. Could you also share with us your view on the allowed return and when would you expect to earn it? Thank you.

Stefan Schulte: Let me start. Thanks very much for this traffic outlook. Yes, I don't know, I don't remember exactly whether we indicated above EUR65 million, but we indicated for sure that the U.S. would be right, higher traffic outlook for this year in September, in beginning of November, so it was a Q3 numbers last year. What is the reason? What's happened in the meanwhile on the one side, the airlines, especially our main carrier, got aware on the topic with the A320 turbines, and how much this affects its operation, how many aircrafts have to go out over the year for three months or six months or nine months to get the topic done, that's the one thing. The other thing is that to be quite clear, Boeing (NYSE:BA) has much more problems and challenges than everybody expected, which means that aircraft are not coming or new aircraft are coming or new aircraft are coming late, but it's not just on new aircraft, it's also on spare parts. So a lot of topics on that side where the radio chain, especially on Boeing, but probably not exclusively on Boeing, is really a topic which led to reductions on the summer flight plan over the recent months. So that's the reason we are now more on the plus [Technical Difficulty] percent or in the range in between 61 million to 65 million passengers. The strike effects, you mentioned, we lost up to 500,000 passengers per today. So hopefully there are no further strikes, but up to now it was 500,000. The dividends, there haven't been any discussion on at the moment, but it will depend on the question of how the outlook at that time is. So how confident we are on the growth rate of the business for the next year and how clear the way forward is. We are confident on that side, especially on the international side. On Frankfurt, I would expect that the traffic growth is less and internationally, not just because Frankfurt, because of Germany. So I would calculate with a gross 2% to 3% maximum, not higher on average. But the discussion hasn't happened up to now. So I can't give you an indication, but whether we start immediately in first year directly with a dividend of EUR2, it's at least a question mark, but more I can't say at the moment. There's no positioning on that.

Matthias Zieschang: Yes and regarding your third question, it was a bunch of questions. First of all, a loud return. So in our guidance for 2030, of course, we are focusing on the assumed WACC at that point of time. It's very difficult, but there's a normal, let me say, level of how these WACC could be, should be at that point of time. On the other side, the second relevant criteria, of course, is the regulated asset base, it’s much more easier to define the rep in the coming years because this is based on our scheduled CapEx plan. And in the moment, you know, in [Technical Difficulty] return on allowed -- on the rep was 3.3% in aviation. So there is a lot of headroom now for EBITDA as well as EBIT increase in the next couple of years. And let me say we have all this on our radar screen. And so that we are able also to deliver the EUR2 billion EBITDSA, as well as the EUR1 billion free cash flow in 2030. So we are of course we are now ramping up with the return. We cannot make an excess return. This is also for clear. But now we are ramping up to more or less to the ceiling and then we are running along the ceiling till 2030.

Carlos Caburrasi Ortega: Thank you.

Operator: Thank you. The next question comes from the line of Christian Nedelcu with UBS. Please go ahead.

Christian Nedelcu: Hi, thank you very much for taking my questions. The first one on CapEx, I think your CapEx in ‘23 came out a bit higher than initially expected and also your FY ‘24 guidance has seen a EUR100 million higher CapEx? Could you elaborate a little bit what is behind this? And how should you think about it, is this CapEx pulled forward? And if that is the case, should an FY ‘25 show you a, I don’t EUR200 million, EUR300 million cash positive rather than a break even -- break even free cash flow? So I guess any comments you can make here also on CapEx ‘25 and ‘26 would help? Secondly on the Frankfurt OpEx, please correct me if I'm wrong, but on my calculations, if I exclude the security OpEx, I calculate that in Frankfurt your OpEx was EUR40 million above 2019 levels in 2023? And I believe, to go back sort of around H1 results, you were talking potentially about a target of EUR0 million to EUR30 million lower OpEx. So I guess the question is, what's surprise to the upside on the OpEx side? And more importantly, looking at 2024, how should OpEx in Frankfurt develop year-over-year? I guess the last one on international EBITDA is very helpful to present as the one-offs that help the results. I guess if we strip out all these one-offs in Greece, U.S., and Brazil, can you talk a little bit what is driving the EBITDA growth in 2024 year-over-year? How much is coming from Greece versus Lima versus others? Thank you very much.

Stefan Schulte: Yes, I start with the CapEx question, so first of all, your doubts about the CapEx level of ‘23, we interpret this as a good signal. Why? Because we are running exactly on the time schedule which we have planned. So it's a good expression that we are going for success time-wise and regarding the budget. So starting with Lima, you referred in the morning that there was a clear signal that on the 18 of December we are going to inaugurate the new midfield terminal. This is earlier than it was scheduled before, so we are before the time. And as an expression of this, already, again, in 2024, we will spend the full budget for Lima, because otherwise we cannot open Lima in December this year. So with other words, there will be another high CapEx amount for Lima in ‘24 and the same applies for Terminal 3. So we spend about EUR600 million in ‘23 and you will see more or less the same amount in ‘24. Why? Because we are absolutely on time to be ready with the construction in the middle of ‘25 more or less and to open this terminal in ‘26. So you will see another CapEx high in ‘24 up to EUR1.5 billion, but therefore the first significant reduction of CapEx in the year ‘25. And that's the reason why we gave the guidance for another about EUR600 million to EUR700 million indebtedness increase in this year, because on one side, we will see a higher EBITDA, on the other side you will see perhaps even a little bit higher CapEx this year, this is more or less a wash, so that the net indebtedness increase will be the same like in ‘23. But again, a clear confirmation that we are going to achieve free cash flow breakeven in ‘25 and [Technical Difficulty] a positive free cash flow generation in ‘26. Why breakeven in ‘25 and not a surplus? Because we still spend a lot of money for Terminal 3 and also some remaining expanses for Lima on a much lower level, but there are still CapEx and that's the reason why there is breakeven and not a positive generation in ’25, but then positive in ‘26. OpEx will be driven in ‘24 by wage increases based on the actual tariff agreements. So as a rough calculation, the wage effect for the three segments in Frankfurt is a little bit above 9%. This is very high. But on the other side, therefore, we have this 9.5% tariff increase. So it's an equivalent of the wage inflation, which we see in 2024. And this is explaining the OpEx increase, so in absolute numbers, you can expect, personnel cost increase of about EUR100 million in ‘24 for the three segments, compared to 2023. Regarding EBITDA contribution of the international segment, as you mentioned, we have some positive special effects in ‘23. This was COVID compensation in Greece, about EUR30 million, this will happen again in ‘24. So this is more or less the same, let me say, compensation effect, but not any longer in Brazil. So we have a gap of EUR20 million in Brazil in this year, as well as EUR10 million which we received for the Pittsburgh deal in ‘23. So with other words, we expect based on positive growth expectations in this year, full -- positive compensation of these extraordinary effects in ‘23, as well as an upside and that's the reason why our guidance is the same level as ‘23 or even a little bit more depending that at the final passenger growth outside Frankfurt and of course main drivers. Greece, in Greece we are again, we will receive the same COVID compensation on nearly the same EUR28 million in ’24, compared to the little bit more than EUR30 million in 2023, plus again, a good single-digit passenger growth. In Lima, there is a relatively strong recovery, which we expect in 2024. In Bulgaria, we have a good fee increase, plus also some passenger growth, the same applies for Slovenia. So that all in all, we are very happy with the growth expectation in our portfolio for ’24. But again, not a big increase. Why? Because we have these explained three special effects in ‘23.

Christian Nedelcu: That's very helpful. I think if I can follow-up on the OpEx, I think you said EUR100 million more on the staff cost in Frankfurt. Is it fair to assume that the electricity prices are coming down, so you have a tailwind there? And I think you used to talk about excess temporary workers in Frankfurt, so should there be another benefit reduction in OpEx there? I'm just trying to get the picture for the overall staff cost and other operating expenses in 2024? Any color you could offer, please?

Stefan Schulte: Yes, this is -- but we have two effects, as you mentioned. We are going to reduce the number of external workers in ground handling. On the other side, we are still ramping up in ground handling on workers on our payroll. So this is more compensating effect whether it's a little bit net positive or net negative, we can't say. But the final effect is a wage increase of about EUR100 million, which we are going to expect primarily in ground handling in ‘24. And as you mentioned, energy costs flat or even a little bit lower. So we do not expect any further increase. Again, there could be some tailwind from reduced energy prices, but today to predict what are the final prices end of this year is a little bit too early, but we are in a positive mood so to say.

Christian Nedelcu: Thank you very much.

Operator: Thank you. The next question is from the line of Harishankar Ramamoorthy. Please go ahead.

Unidentified Analyst: Good afternoon, everyone. Thanks for taking my questions. Just a couple from me, so if I understood that right, the main reason behind the lower summer capacity is, as you said, you know, supply-related issues from Boeing, et cetera. But if I take a step back and look at Lufthansa adding capacity elsewhere, they do seem to be adding capacity in some of the other airports? Just wondering, you know, what's leading them to cut capacity at Frankfurt, but at elsewhere like in Munich or Zurich, for example? The second is on the 2030 guidance or the target of EBITDA at EUR2 billion, would it be possible to give us building blocks behind this EUR2 billion of target? I mean, how much should we think comes incrementally from Frankfurt itself? How much incrementally from retail within that? What is the passenger assumption you're making by 2030? And if I heard you right, you said you're looking at some further opportunities on the international segment. So, wondering if the EUR2 billion target encompasses any further additions to international Ops, and if there would be any investments towards that?

Stefan Schulte: Let me start with your first question on Lufthansa. Why is it different in Frankfurt from Munich or Zurich? Lufthansa has taken a lot of years ago already a principle decision that they try to handle the multi-hub strategy costs that way to reduce it some way, to keep it under control somewhere. That Munich is a pure Airbus industry fleet and Airbus is now delivering the A350s, maybe with some delay, but in principle they are delivering. They had some problems there, but new aircrafts on the A350 are coming in and that's the same for Zurich. We are also on Airbus, but we are mainly on Boeing 747, 787, 777, and you know that especially the 777 has big problems and the 787 is also somewhere delayed. That's the reason behind, so our positive thing is that the 747 so-called jumbo, is still in operation, is even going in complete overhaul and will be taking much longer. The 740, they are still in operation since they will continue to operate, but it's of course not optimal. And whether Lufthansa will take at some time a principle decision depending on the delays that they also take A350 to Frankfurt, I don't know. We have to ask this to Frankfurt, it depends very much on their strategy. But that's the reason behind. On the guidance of the target of EUR2 billion, we don't give more details at the moment. We have to work out more details behind that point, going through all the strategic priorities. But we have a view that this will be roughly 50-50 on the international business and on the Frankfurt business, whether that's at the end 50-50 or 45 to 55, something like this in this range it will be. And then you can calculate the growth rate, because it's on the actual business, including, of course, the prolongation of the new concession in Antalya. But it's not calculated big acquisitions or something like this that's not in. We're not going for big acquisitions these days, big tickets, that's due to our policy. We mentioned this that we first have to bring down net debt to be very clear, free cash flow positive. That does not mean that we are not going for small issues like consultancy contracts or something like this, or smaller new contract in the States or the center management or something like this, but the EUR2 billion is on the existing business with the existing concessions.

Unidentified Analyst: That's very helpful, thanks. And if I may have a follow-up, on the free cash flow target on around EUR1 billion by 2030, just wondering if that marks or coincides with the end of the bulk of the CapEx for the T2 refurb. So would it be any different picture if we were to look at 2029 instead?

Stefan Schulte: No, no. It's just very simple, when you have a target of EUR2 billion EBITDA and EUR1 billion free cash flows, the difference is determined by CapEx and interest expenses. And so as we mentioned, the CapEx will be on a sustainable basis much lower than as of today, because the expansion programs are running out. And then we still focus on maintenance CapEx and the rest is interest expenses and so on. And this is explaining the number in ‘23 and there is no distortion so to say in ‘29 or in ‘31. So it's more a linear function than coming from ‘29 over ‘30 to ‘31.

Unidentified Analyst: Wonderful thanks. That's very helpful.

Operator: Thank you. The next question comes from the line of Patrick Creuset with Goldman Sachs (NYSE:GS). Please go ahead.

Patrick Creuset: Hi, thanks for taking my questions. Just first one coming back on your pricing comments on return on RAB headroom. Basically the question is at what pace can you keep increasing prices? And at what pace can you converge to your allowed return considering that I think in the last 18-years you've not met your allowed return once. And of course you still have a lot of headroom and I think there's more of a willingness to push pricing? But just have a bit more of a feel over how many years you hope to reach your allowed return now? Second question is just to clarify on the CapEx, I think, previously I think you budgeted more for EUR1.3 billion maybe a little more of group CapEx in ‘24. And it seems there's some pull forward based on your earlier comments. But just to clarify, the CapEx upgrade basically for 2024 is really just a pull forward and we get sort of an equivalent reduction in CapEx, therefore in 2025, ‘26, thank you.

Stefan Schulte: You know, starting with the second question, this is clear, so up to EUR1.5 billion in this year now, it's an expression that we are already in December ready with the terminal in Lima. And again, Terminal 3 is running with full steam to the inauguration. So it's a positive impression, a positive signal for the progress on these two sites and therefore a significant decrease in the following years. And regarding your first question, first of all it's not true if you go into the past before the expansion in Frankfurt we always have been very close to the allowed return. So in the years, I don't know, 2005, 2006, 2007, so we have been close to the allowed return on assets. Then of course we started the expansion with Frankfurt with the fourth runway, with the A plus peer, et cetera, all this stuff. And then we always had these headroom because the rep on one side went up and also traffic didn't, let me say, develop as expected and then we had COVID and all this stuff which you know that's the reason why we are now underperforming. But now we are ramping up and you can see the positive escalation on the EBITDA side and now looking forward also it depends a little bit from the inflation side because we always say inflation/wage increase determines also the OpEx. And when the OpEx is higher, the EBIT would be lower and this we are compensating by higher fees. So there is some link between the wage escalation on one side and the fee escalation on the other side. There's a compensating mechanism which we have in our business model. And if you tell me what will be the wage increase in three, four, five years, we can tell you what could be about the fee increase in the next couple of years.

Patrick Creuset: I mean, just to clarify, there's still a large gap, right, and between the actual and allowed return. So you would, on paper, have a strong case to continue with very high price increases somewhere in the same region that you've put through for 2024. I mean, is that basically the strategy to make sure you hit the allowed return as soon as possible?

Stefan Schulte: First of all, it's good to have the headroom, because otherwise we couldn't increase EBITDA as well as EBITDA. So we are happy to have this headroom because this gives you the guarantee that our EBITDA and EBIT numbers will go up. Otherwise we have to pay back fees if we would achieve an excess return, this is not the case. So we have the headroom, we are happy to have the headroom, and we are going to close the gap between the actual return on assets in comparison to the allowed return. And so last year, 3.3%, which was very low, and in ‘24, the return on allowed assets, which will be higher, and now we are ramping up. And I think this is good, and this is combined with a mid or long-term target of EUR2 billion EBITDA. And of course embedded in this is that at a certain point of time we exactly achieve our allowed return on assets otherwise we cannot move up to EUR2 billion EBITDA target.

Patrick Creuset: Alright, thank you.

Operator: Thank you. The next question comes from the line of Elodie Rall with JPMorgan (NYSE:JPM). Please go ahead.

Elodie Rall: Hi, good afternoon. Thanks for taking my questions. I just have some follow-ups at this stage. First of all, on CapEx, you're talking about 2024 being the last year of elevating CapEx. I know there's been questions around CapEx outlook post-2024, but is it fair to assume CapEx of around $1 billion in 2025? Is that what gets you to about break even? Second, a follow-up on dividend. I was under the impression that it was more likely to see a dividend in 2026, but in one of the previous questions, I wasn't sure if you said there was a possibility it could happen as soon as ‘25, so if you could clarify that. And lastly on traffic at Frankfurt, you still expect to be quite below ‘19 level in ‘24 obviously. What about ‘25? Do you see traffic returning to ‘19 level as soon as ‘25 now? Thanks. Thank you.

Matthias Zieschang: Perhaps, I'll take the first question regarding CapEx. So if we assume the guidance for ‘24 is EUR1.4 billion to EUR1.5 billion, assume because we are running like hell, which is good. So let's assume we would achieve EUR1.5 billion. Then in ‘25, Lima is significantly reduced. T3 is still on track because we still continue to construct in '25, and there is always a delay between the construction progress and the payment of the builds. So with other words good. You mentioned the EUR1 billion, I would recommend, as of today, EUR1.1 billion in '25. And if you take this in your internal consideration, calculating the free cash flow, you can come to the conclusion that the free cash flow should be -- must be about around zero.

Stefan Schulte: So if we take the other two questions, thanks very much. So you mentioned that we probably gave an impression that we could speed up with dividend payments. We didn't want to give any impression on that was. So it was very, very neutral. The question we got earlier was what we pay immediately whenever we pay the EUR2, yes or no. And on that side, I mentioned it depends on the one and at what time we start with dividend payments, depends on the strategy which has to be discussed with the Supervisory Board at that time then. And I mentioned -- I make a question mark whether we go with the first dividend payment on a level of EUR2. So you should just take my personal view on that. I would assume that whenever we start with the first payment, it's probably not direct to the EUR2, because so that even if we start with net debt producing, there's still a high debt situation. But it depends on the [Technical Difficulty] the figures, the outlook are and so on and so on. If you now ask me, I think we meant to very clear today that the decision that we are not paying dividends in this year for the year 2023, and we gave really the indication that we are not expecting to pay dividends in the year 2025 for the year 2004. Further indications, we haven't given at the moment, but we have given you the indication that we expect to be free cash flow positive in the year 2025, and you had already a lot of questions on this. This is a breakeven as it is a big positive development, but you know that the net debt will be quite high at that time, even if the ratio is becoming better because the results are better. So I can't say today, yes, but I can't say no, I don't want to go to any discussions on probability because, first, it has to be discussed then with the Supervisory Board. On the traffic recovery, this depends very, very much on the questions, how are aircraft available, then there are pilots or they trained, whether the Board on with me topic is solved versus -- the [October 7] (ph) topic is on the way. Yes, I understand that Boeing seems to have bigger problems with the ‘27. This could be further delayed. And if you take all this together, I hope that we would come in 2025 close to the recovery level of 100%, but it's more a question mark on these days. So to give a guidance now for 2025 is too early, but if we would be in between 95%, above 95% of the year 2019, I think that's best what we could estimate at the moment, depends very much on the aircraft availability because Yes, very much also linked to the main customer here in Frankfurt and the market in general seems to stay positive from today's point of view.

Elodie Rall: Great, thank you.

Stefan Schulte: Thanks.

Operator: Thank you. The next question comes from the line of Dario Maglione with BNP Paribas (OTC:BNPQY) Exane. Please go ahead.

Dario Maglione: Hi, good afternoon. Four questions from me. The first one on the 2030 target. Can I just confirm that basically you don't expect big M&A internationally, not before 2030? Second question on CapEx guidance for 2024. You're guiding for EUR350 million of CapEx in Frankfurt, excluding the Terminal 3. I think this was a bit higher than what we had before. Is this a maintenance CapEx that we should expect to continue in the next years? Third question is on -- just on the OpEx. Sorry, we had some question on the OpEx for the three segments in Frankfurt. But just to sum it up, how much of a year-on-year increase shall we model for the three segments of Frankfurt in 2024? And the fourth question is on the fixed concession payments. The guidance for 2024, especially, I think EUR150 million in, including IAS '23 is higher than 2023. So I just wonder why fixed concession payments are going up? And should we expect them to increase faster in 2025? Thanks.

Stefan Schulte: Let me start with the target on the M&A project, because I'm responsible for the international segment, myself. And I can just tell you, and because I'm responsible and I have to go on my contract another three years, that for the next three years, I can exclude big topics, big targets on that side. Thereafter, we have to see. If you ask me, can I guarantee you not exactly before the year 2030? No, I don't know, because it depends very much what on the market, how are the figures at that time, all the equity situation and the debt situation, the profit situation and so on. What's clear strategy was we want to grow the International business organic, but also long term may be inorganic, but that depends very much whether they are attractive assets on the market, yes or no. From today's point of view, for the next three, four years, I would say no. We don't see this. That's not our target. We will even not go for that, at least not for the next three years. I'm responsible for that, thereafter, we have to see what's going on and whether it's at the end of the year 2029, and there would be a very effective airport like Munich on the market. Of course, I would go there, but I'm not responsible any longer then.

Dario Maglione: Thanks.

Matthias Zieschang: Perfect. Then CapEx guidance. I would like to go back to slide 17 in our presentation where we described the cash flow as well as the CapEx guidance and you can see each and everything also regarding the future. So again, in '24, we spent about EUR600 million for the Terminal 3. And you can see up to EUR350 million for the rest -- for maintenance. So in one year, it can be EUR300 million, and another year it can be EUR400 million. So this is a range -- maintenance CapEx range for Frankfurt also on a sustainable basis. The EUR600 million will disappear at that point of time when T3 is open. Lima, again, we have this about EUR450 million. And we think, we will achieve this amount in '24. Why? Because we are going to open at the 18th of December this year, with otherwise, an EPC contract. So with fixed installments, fixed regarding the amount as well as the timing, the point of time. So this is a relatively clear amount. Also, again, this will be significantly lower than in ‘25. And yes, then looking forward, again EUR300 million to EUR400 million maintenance CapEx plus some investments outside Frankfurt, which are minor. And here, we have a proven track record when you look on slide 10, where we showed what we spent for Brazil, EUR20 million, what we spent for Greece, just EUR14 million. This is showing our CapEx discipline after finalizing the expansion of our refurbishment programs, which we did in the past and the same will happen in Lima as well as in Frankfurt. OpEx again, OpEx development or OpEx escalation will be determined in ‘24 from the new tariff agreements, which are good for a little bit more than 9% increase, a little bit more on the volume side, and this describes a cost increase of EUR100 million, maximum EUR110 million for the three segments at Frankfurt and of course, a majority is determined or allocated to ground handling, because this is a personnel-intensive segment, which we have here in Frankfurt. And on the material expense side, again, driven by inflation price increase on the energy side, this has stopped now. So we are confident that this is flat or even going down, that's the situation.

Operator: Thank you. [Operator Instructions] The next question comes from the line of Manish Beria with Societe Generale (OTC:SCGLY). Please go ahead.

Manish Beria: So yes, I will take the question one by one. The first question is just a very simple one. On the guidance, so what I understood is that -- of course, you are giving a range. But in terms of traffic, probably you will be at the midpoint. So let's say, if you achieve the midpoint of traffic, so where you land at the EBITDA, so that would be at the higher end or not? I mean, this is a very simple one. Then I will ask the next once you answer that.

Stefan Schulte: Yes, it's very simple. We have a relatively broad range, and this is exactly linked to the traffic expectation to 61 on one side, in the worst case, and 65 in a positive case. And as you mentioned, if you are in the middle, EBITDA will also be it, more or less, in the middle.

Manish Beria: So basically, middle traffic meets middle EBITDA. So it's like one-to-one mapping in this case, right? I mean okay, one-to-one math in that space, yes?

Stefan Schulte: Everything from today's point of view, we are always working for more. So second question.

Manish Beria: Yes. So the second question, I wanted to understand what is your like sustainable, let's say, once you do all the CapEx and everything comes very normal? What is it like? How much net debt EBITDA you want in your balance sheet? Because I just got your calculation 2030, it looks fine, the EUR2 billion EBITDA without acquisition, free cash flow EUR900 million, EUR1 billion, whatever fine. But I'm just trying to see, like, because if you have too much debt, because in my model, I get a net debt EBITDA or something like than 3 times, 3.2 times, 3.3 times net debt EBITDA. So just trying to see this EUR1 billion is totally free cash or we have to further deleverage our balance sheet from here? Like something goes for making it more sustainable balance sheet. So just trying to see what is your long-term net debt-to-EBITDA target in that sense?

Stefan Schulte: First of all, it's good to have headroom. So we have this free cash flow and then we can talk about how to allocate the money. And in principle, there are three sources, and Stefan have already mentioned this. On one side, we are coming back with good dividends, that's for clear. Second, there's a focus on bringing down the absolute [Technical Difficulty] this is also for clear to end up with a net debt to EBITDA number, which is below 5. And then we have the third item, which we could manage or where we could go for. And this is if and when there are attractive assets in the market, we also, again, have headroom for further growth, which today is not in our plan, but then we have the firepower to go for it. And these are the three elements: dividends/reduction of indebtedness/headroom for M&A projects.

Manish Beria: But, but, but 3 times is fine, right? 3 times, if you have long-term basis, it's fine, net debt to EBITDA, correct?

Matthias Zieschang: Yes, sure. But it can also be 4 times. So it should be below 5 times, and then we have to see what's on the market.

Stefan Schulte: Normally, you would go from today's perspective on a gearing in between a broad range, 80% to 120%. But that depends on equity. That depends very, very much how the markets are and what are the opportunities, as Matthias mentioned. So it makes no sense. There is not the one goal, and you cannot manage the company by just one figure. That's one of the figures, one of the -- on the ratios, you have to have a look on, depending on the results. And I know you would like to make a model now and exactly precise that figure, but sorry, business is not working that way. [X120] (ph) would be a good range from today's point of view, in today's market. It could be competitive in five years.

Manish Beria: Okay. And the last one is that -- sorry to come back again on this one. So if I do my math, I mean, it seems your -- the return on the regulated emission business will improve to something like 5.5% with the tariff that you have made, you know, 99.5%, still below like what you mentioned in your annual report, 7.5%, 7.6% WACC. So the question is, okay, there is some inflation, wage inflation moving ground handling, less inhibition, but still there is some inflation. So in that sense, will you try already in 2027 to reach this 7%, 7.5% WACC or it will be gradual, let's say?

Stefan Schulte: Gradually, gradually, will be gradually. And we don't give a confirmation what the final level in the year 2030 exactly is because we have to go also through consultations with airlines, you should not always put everything on the table.

Manish Beria: Okay, understood. So that’s all from me. Thanks for your answers.

Matthias Zieschang: Welcome.

Stefan Schulte: Thanks.

Operator: Thank you. The next question is from the line of Jose Arroyas with Santander (BME:SAN). Please go ahead.

Jose Arroyas: Yes, good afternoon, gentlemen. Two quick clarifications I'm afraid, again, on CapEx. And on Terminal 3 in Frankfurt, do you still maintain the assumption that the project will cost EUR4 billion, considering that by the end of 2024, the cumulative spend will be EUR3.6 billion? And also regarding Terminal 3 and Lima, what are your current assumptions for the leftover payments? The receivable payments that we will see in 2025 and 2026? Thank you.

Matthias Zieschang: Yes. Regarding Terminal 3, assuming we spend another EUR600 million in this year, which is very likely. So we have an accumulated CapEx of about EUR3.5 billion. So looking forward, now it depends what is the final amount. And we always said, the target was EUR4 billion. We said there is some -- there could be some cost overrun up to EUR4.2 billion, we have to see at the end of the day, what is the final bill. So with other words, when we are end of '24, we have another headroom, so to say, for cash out between EUR500 million to EUR700 million allocated over the next couple of years. Regarding the terminal in Lima, assuming EUR400 million in this year or EUR450 million. So we have accumulated CapEx end of ‘24 of about EUR1 billion. And then there are some remaining costs in ‘25, plus further CapEx for the second phase. So let's assume there's another headroom up from end of '24 of about EUR300 million next couple of years, so in '25, '26 following.

Operator: Thank you. The next question comes from the line of Sathish Sivakumar with Citi. Please go ahead.

Sathish Sivakumar: Yes. I got two questions here. First is on 2024 target. If I look at the aeronautical segment right now, you did around EUR300 million this year. And if I add on the tariff hike, probably that gets me to another EUR80 million, somewhere around that mark plus the volume growth. So is it reasonable to say that your 2024 for aeronautical would be around EUR400 million? But in your annual report, you do say that it's unlikely to get to that EUR400 million. So could you just explain to me is that the rest of the delta is just the cost, is what taking it off? And then the second one is around, again, 2030 targets. So if you have a EUR2 billion of EBITDA, I'm assuming a 75% cash conversion just based on historical average for the sector as such. So that would give me about EUR1.5 billion of cash flow from operations. So the rest should be like CapEx, maintenance CapEx? Is it a fair assumption to say that EUR500 million is what likely to be in maintenance CapEx as we go into 2030? And then just related to, again, 2030 target as such, is there any split between, say, from where we are to-date, '24 to 2030 between aeronautical and commercial, how much is actually the upside is going to come from aeronautic versus commercial? Yes. Those are my three questions, actually. Yes, thank you.

Matthias Zieschang: Perfect. Yes, starting with aviation, your calculation is correct. So we have 9.5 times about EUR700 million -- EUR800 million, sorry. So we are talking about roughly EUR80 million price increase plus the volume effect depending now whether we end up with 62 million or 63 million passenger or 64 million, nobody knows. So this is a variable in this game, but it's relatively sure that we have minimum EUR100 million revenue increase in aviation, so which is like-for-like going directly into the EBITDA level. But on the other side, we have -- it's also relatively personnel-intensive, as I mentioned. We have about EUR100 million just wage increase or let me say, personnel cost increase at the Frankfurt side, some is allocated to aviation. And that's the reason why if you take the EUR300 million in last year, you cannot end up with EUR400 million in '24, it's EUR400 million minus x for the OpEx increase, and that's the reason why we will end up in the second-half of EUR 300 million as the EBITDA guidance for aviation. In CapEx, EUR400 million as a guidance for maintenance CapEx, of course, it can be EUR100 million less or more. But this is a good and rough number plus interest expenses, which we have in this year based on still a relatively high absolute indebtedness, of course, and plus tax payments. So in the moment, we are in very comfortable situation due to the loss carryforward that we are more or less paying very minimal taxes, but this is changing when the tax load -- the loss carryforward is exhausted, then we have to pay again taxes, real taxes, so to say, not IFRS taxes, and this is also a little bit absorbing then parts of the EBITDA. So with other words, we have CapEx, we have interest expenses, and we have taxes and the rest is the free cash flow.

Stefan Schulte: Split of aviation and commercial, we are not giving. So we gave you already the indication that Frankfurt, on path with international business, it will be roughly 50-50 or in the range of 45 to 55, something like this.

Sathish Sivakumar: Okay. Yes, thank you.

Operator: Thank you. The next question comes from the line of Nicolas Mora with Morgan Stanley (NYSE:MS). Please go ahead.

Nicolas Mora: Yes, good afternoon, gentlemen. Quick one. On -- just looking at the guidance for '24, I'm struggling with your International activities guidance. You're pointing to a similar level of EBITDA as in ‘24 versus ‘23. So EUR560 million, that includes another COVID contribution in Greece, so let's call it, let's say, EUR530 underlying. Your underlying base in '23, stripping out the one-offs was EUR500 million. So EUR500 million to EUR530 million. But in there, you've got the headwinds from Greece in terms of the step-up in concession fee. You also have a step-down in Fraport USA because you're switching from contracts, not recognizing leasing costs. So I'm not quite sure where the growth is going to come from year-on-year in International? A bit of growth in traffic in Greece, a bit tariffs in Bulgaria, but that doesn't give you the EUR50 million, EUR60 million EBITDA you need to hit your guidance. So if you don't mind sharing a little bit of light on how you get to your math, that would be very helpful. Thank you.

Matthias Zieschang: It's relatively simple. So first of all, we had in '23, we had three positive extraordinary effects. This was a COVID compensation in Greece, more than EUR30 million, it was COVID compensation in Brazil, about EUR20 million, and it was a Pittsburgh deal of EUR10 million. What will happen in '24? No further Pittsburgh deal, no further corporate compensation in Brazil, but another COVID compensation in '24 of EUR28 million. So this EUR28 million, I'm not talking about the EUR5 million difference, it's more or less the same like in the previous year. So with other words, we have a net delta from '23 to '24 of EUR30 million, again, EUR20 million coming from Brazil as well as EUR10 million from the Pittsburgh deal. So this, we have to compensate to be on the same level again. How we are going to compensate this? This is traffic growth everywhere. Strong traffic growth expected in Lima, for example, but everywhere, good, solid traffic increases plus everywhere, fee increases. So with these elements, volume times price increases, we are compensating the EUR 30 million are all positive from '23 plus hope that it will be a little bit more. And that's the reason why we gave the guidance, same level as in '23 or even slightly above.

Nicolas Mora: Right. But if I may, the -- we agree on the EUR30 million, but your starting point is even lower than that, your concession fee in Greece is stepping up on paper?

Matthias Zieschang: No.

Nicolas Mora: Okay. So it's not. And then Fraport U.S. is a contribution going down [remarkedly] (ph)?

Matthias Zieschang: Just for clarification, in Greece, everything was spoiled by the COVID compensation. But the mechanism are as follows. We, in Greece, we have to pay 28% from the EBITDA as a variable concession fee, plus EUR23 million fixed concession payment every year. So this is the mechanism running as long as a concession is there. This was in so far, spoiled, while the COVID compensation has not been paid in cash. It was always a reduction of these concession payments. And this made the whole situation a little bit intransparent. But again, the underlying concession payments have always been the same. And we have -- the only difference is that, I think in last year, it was EUR30 million, how many was the COVID compensation? EUR30 million or EUR34 million, and now we are going to receive EUR28. So we have a minus of EUR6 million as a net debt to EBITDA between '24 versus '23. Yes. And, again, we'll be compensated by volume increase everywhere plus fee increase everywhere.

Stefan Schulte: Thank you.

Operator: We have a follow-up question from Graham Hunt with Jefferies. Please go ahead with your question.

Graham Hunt: Thanks for the follow-up. Just a quick one actually on 2025 free cash flow. So I think you said, you expect CapEx to step down to EUR1.1 billion in 2025. So from the EUR1.4 billion to EUR1.5 billion, down to EUR1.1 million. So that gives you EUR350 million additional on your EUR600 million negative free cash flow. The remainder on your 2025 bridge, is that all coming from EBITDA? Or is there some other variation in that free cash flow bridge that we should be thinking about to get to neutral in 2025? Thanks.

Matthias Zieschang: No. No. It's again, it's EBITDA. Of course, we have some positive contribution and equity from Antalya, but this is more or less in a normal range. So again, it's EBITDA minus interest risk minus CapEx, then the outcome is zero, about zero.

Graham Hunt: Okay, thanks.

Matthias Zieschang: Welcome.

Operator: Thank you. There are no further questions at this time. I now hand the call back over to Christoph Nanke with closing comments. Over to you.

Christoph Nanke: Thank you all for your good questions, interesting discussion. If you have further questions, please call us in IRR. And I wish you a good rest of the day. Thank you.

Stefan Schulte: Thank you very much.

Operator: Thank you. Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.

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