Aena S.M.E., S.A. (OTCPK:ANNSF) Q3 2022 Earnings Conference Call October 26, 2022 7:00 AM ET
Company Participants
Jose Leo – Chief Financial Officer
Ignacio Castejón – Finance Director
Conference Call Participants
Nicolo Pessina – Mediobanca
Cristian Nedelcu – UBS
Luis Prieto – Kepler
Stephanie D’Ath – RBC
Elodie Rall – JPMorgan
Sathish Sivakumar – Citi
Johannes Braun – Stifel
Dario Maglione – BNP Paribas Exane
Achal Kumar – HSBC
José Arroyas – Santander
Jose Leo
Good afternoon, everybody and welcome to this Third Quarter 2022 Results Presentation. On the call today, we have sitting next to me Ignacio Castejón, who is the new Finance Director of Aena. He joined just three weeks ago. He has a wealth of experience both in the finance side of the business and in the airport industry.
I will hand you over to Ignacio, who will be welcoming you and saying hello.
Ignacio Castejón
Thank you, Jose. Good afternoon, everyone. It’s a real pleasure being today with all of you. I’m really looking forward to start working with you in the near future and I hope that we are able to interact very soon. Thank you, Jose.
Jose Leo
Thank you, Ignacio. And we start with the revenue. We’ll start going through the main slides of the presentation. Starting with the key highlights. I think we are presenting to you today good set of results. Honestly speaking, it is a good set of results and I will do my best to make you convinced that this is the case over the rest of the call.
To start with the traffic numbers are going really well. We see a significant growth indeed in the Spanish network, more than 140% year-on-year. And similarly, more than 153% across the group. We will later on comment on how this involves a significant improvement vis-à-vis 2019 and improve them vis-à-vis our expectations a couple of months ago – three months ago on the guidance that we provided exactly at that time.
The total revenue is growing by 65.6%. As we discussed over the last results presentations, this is not in line with the passenger number growth, due mainly to the accounting adjustments impacting the commercial revenues that we will discuss as well in a minute.
The EBITDA is now reaching a really meaningful figure. €1.3 billion in EBITDA is a very, very healthy figure taking into account well the background, where we are coming from and the challenges of the industry, reaching already more than 44% EBITDA margin going in the right direction and trajectory. The net result is healthy as well, close to €500 million in net profit. Obviously, now entirely out of the tunnel of the losses from the challenges of the COVID experience.
Finally, I would like to stress very, very importantly, the performance in terms of cash. We have generated more than €1.56 billion in cash. The difference between the cash generated by the operation of activities and the EBITDA is precisely the impact of the accounting adjustments impacting the – or affecting the commercial revenues, as they are obviously deducted from the EBITDA that they have no impact, whatsoever in cash terms.
And I would like to stress that this is the company back in the – it’s good of generating very healthy cash very, very quickly and now in full compliance with the covenants and the obligations stated in the commitments.
Moving on to the next slide. The most relevant thing here is that, as I said before, we are already recovering a good chunk – a very significant chunk of the 2019 traffic. For the whole group, we are close to 86% of the total traffic of 2019.
In the case of Spain, in the Spanish network this is 86.1%. For Luton, it’s slightly less. As we discussed a number of times in the U.K. the traffic recovery is going slightly slower, but it’s still 71%.
And in the case of the Brazilian Airports we have already exceeded the 2019 figures. Particularly in the month of September, the traffic in that group of airports exceeded the September 2019 traffic by 8%. So this is a very good signal of how attractive and healthy EBITDA that particular market might be.
Taking into account that the October traffic is also going in the right direction, to the point that it’s showing a level of recovery, even above the, you know our experience in the months of — in the summer months.
We are now indicating that we expect to close the year with a level of traffic that will be slightly above the upper-end of the range that we provided some months ago. So we will be north of 85%.
I don’t propose to dwell any longer on this slide, so we can move on to the next slide. As you know in the month of August, we were awarded the concession of 11th airport in Brazil. We are providing here some — let’s say, descriptive information.
We may provide more insight into this project when we share with you the strategic plan, in the coming weeks. Probably you are aware that we are planning to share with the market to arrange Capital Market Day, on the 16th of November. And at that time on that occasion we will probably dwell a little bit more on this.
But in the mean time I would like to share with you, the strategic side of this transaction. Of course when you travel abroad, when you are acquiring airports in other countries there is always an element of risk extra element of risk in that.
That is the knowledge of the market whether or not you are right, strategically whether or not you feel that you can apply some of the experiences and templates you applied in your own country. Well, we believe that Brazil is ideally shaped for Aena to deliver the sort of values that we have delivered in Spain over the last decades.
The reasons for that first of all this is a large country. It’s a country where the tourism industry hasn’t been developed to the extent that we believe it could be developed. It is from the let’s say, volumes and the level of revenues that the tourism industry is generating in Spain. But we believe Brazil is ideally placed to do this and even more.
On the other hand for the country the air transport connections are critical for obvious reasons I don’t need to tell you why. There is still huge headroom to develop the low-cost carrier business proposition. Of course there are very healthy companies, low-cost carriers on that. But still they have room to grow and to improve that industry.
And also it’s a country where honestly our experience of operating over there in the Northeast region is extremely positive in terms of the seriousness, the — how trustworthy, the regulation and the institutions are. So with all that in mind we believe this is a good country to be in long-term.
This is a good country to try and apply the similar obviously, some differences, but similar let’s say, experiences that we have already have in Spain and a little bit there is value to be generated there.
Now we are going to manage 20% of the total traffic — air traffic in Brazil, more than 40 million passengers, 17 airports and the second largest airport in the country. So we believe there is value on that proposition. I just wanted to share this with you of course there would be more questions later, I’m pretty sure.
And then finally, I go straight to the slides on commercial revenues and OpEx. The commercial revenue performance that we can see on page 10 because you know that one thing is the headline revenue figure. Different thing is the real underlying business. When we look at the fixed variable rents that we are invoicing and collecting every day we are reaching now a level of €903 million that is 136% more than in 2021 which is not a surprise at all.
But when you look at the next slide number 11 and compare these figures with the 2019 figures that was a year exceptional year in terms of traffic as you know the best in history.
Can we move on to slide number 11 please. You can see there that the performance of the business has been improving quarter-by-quarter to the point that in Q3 overall our rents are exceeding the same period rents in 2019 by 8.5% with only one activity or only one commercial line the specialty shops underperforming for obvious reasons because this is the part of the business that was more affected by the COVID in the sense of the number of shops ended up shutdown.
And they remain shut down until we — let’s say put them again in the market through different vendors. So in total, we are now at close to €900 million of fixed variable rents billed and collected on a regular basis against €897 million in 2019. For me this is good performance. And we can discuss the drivers, we can discuss the reasons, we can discuss whether or not this is a structural or it’s just a matter of time that this can be impacted by other factors that frankly nobody knows in full. But good news this is good performance.
Finally on other operating expenses what we can see is that what we have been telling you a number of times is being the — well there is a reality. The operating costs of this business excluding the electricity costs is at levels of 2019. And I believe this is going to be the case for the rest of the year there or thereabout. This can be seen as bad news by some. This can be seen as a reality and the confirmation of something that I have been sharing with you for years already. They have already shared with you the reasons.
I’m happy to answer again questions about what is behind this. It is a combination of structural changes in the business. It’s a combination of quality standards required by regulators and passengers and airlines and stakeholders. It’s a combination, of course, of change in the reality of the Spanish market the Spanish labor market so on and so forth.
Then with regard to the electricity cost this is the result of the evolution of the market conditions. We are not hedging yet. I’m sure you will be making questions on that and I will be very happy to provide some answers that the electricity is the maverick element of this year’s operating cost base.
And let me finish — spend five minutes trying to wrap up a number of things. Obviously, I’m not going to be focusing on every particular slide. I think Aena’s situation coming out of the COVID tunnel is really good. To start with, we have improved right in the way we manage through the crisis in terms of our resources. And we are not experiencing, we are not facing any of the havoc situations, other airports are experiencing across Europe. So we are accommodating a significant amount of growth and providing what I believe is a very good, very good, very good operational experience.
We have no issues whatsoever other than obviously strikes in some of the airlines and things like that inevitably we have to face. But other than that, we haven’t experienced any of the terrible situation, but obviously, we’re not happy with that. Some of our colleagues faced over the last months.
Secondly, the traffic is performing really well. It’s surprising us positively. Believe me that we were not expecting this kind performance to become a reality so quickly. Of course, no one knows what is behind or around the corner as a result of the macro conditions, nobody really. The airlines themselves are, let’s say watching out monitoring this by the day. So far they have no indication of any set back that they remain vigilant and the same.
Thirdly, the revenues, the airport revenues, the airport charges are what they are. They are not coming as a surprise. You know all the regulation, you know what the level of charges is set by the regulator. You know that we are until 2026, we have it up and this is it. So, no surprises.
In terms of the commercial revenues, in my view, we are performing really, really well. I believe exceptionally well, much better than we could do six months ago. Obviously, the headline figures are affected by the DF7 adjustment. But that makes no difference to the cash and that makes no difference to the reality of the business.
In terms of cost, the operating cost evolution is nothing. We are celebrating of course. But it’s not coming as a surprise, other than the energy costs that I’m prepared to take any hit you want to give me. In terms of cash, the business is generating €1.6 billion in cash. And as a result of that, the debt is evolving very, very well, very healthy. And the impact of the changes in the market conditions is not going to be huge. We can discuss later. It’s not going to be sort of make-or-break kind of situation in terms of the financial costs, because we have already now as we speak 80% — this is not what you can see in the presentation, but we are already now hedged under fixed rates for 80% of our debt.
In terms of the international experience, Luton and the Northeast Brazilian airports are performing really well. They are contributing already a meaningful amount to our EBITDA and this is going to improve over time. So they are good contributors, they are good businesses. And in the case of Brazil, the recovery of the traffic is amazing. In the case of our international strategy, I shared with you my — our strategic news about Brazil. But of course, I’m ready to discuss further in detail.
Finally, in terms of developing new businesses, the real estate business is already, let’s say moving on with the award of the first slot — sorry lot of land to with a very good result.
So of course, this is not the world we were used to in 2019. But I believe, honestly, that China from any angle is coming out of the COVID crisis in a very positive and a very attractive manner, and this is it. Now we can open the Q&A session. Thank you very much, everyone.
Question-and-Answer Session
Operator
[Operator Instructions] The first question is from Nicolo Pessina of Mediobanca. Please go ahead.
Nicolo Pessina
Yes. Good afternoon, all. I have about three questions. The first one, we read about the approval of the new strategic plan. So, I’m wondering if you can give us any visibility on that dividend policy? Second question, maybe if you can provide an update on the level of yield dilution and concentration in the nine months? And if you can give us any visibility on the full-year figure and on the 2024 K factor? And last question on the new airports in Brazil.
If I look at the material made available by ANAC in Brazil, I see a regulated target of approximately BRL 16 per passenger in 2023, increasing 50% in 2024, which is well below the 43.6% you indicate, for example, for Congonhas in the press release this morning. So, I’m wondering if you can explain how tariffs work in the contract? Which kind of tariff you expect to implement and if it’s correct to assume a 50% increase over the next year? Thank you.
Jose Leo
Okay. Well, with regard to the dividend policy, please bear with me. We should wait until the 16th of November. I think this is the kind of information that should be part of the strategic plan presentation, one of them. We’ve been discussing it today. In terms of the K factor and the yield dilution, I can share with you this data so far. This means in Q1, we had concentration by €38.7 million. In Q2, we experienced dilution by €29.3 million. In Q3, we experienced dilution by €48.1 million.
So in total, now we are in a position of €38.6 million of dilution — yield dilution accumulated. For the rest of the year, we may try to give you some indication later on. But frankly, I would say probably it’s going to be there or thereabout with Q2 maybe, or something between Q2 and Q3. But please don’t take this as categorically, okay?
But what is clear is now the passenger mix and growth of the business and the load factors are taking us in the direction of further dilution coming back to the situation we experienced over a number of years before the COVID, okay?
With regard to the Brazilian revenues, I would rather ask you to be provided with this information at the time of the — sorry, the strategic plan presentation we will be shedding some light on that, what is clear is that, the analysis we have made of that airport is a combination of two things. One thing is definitely financials, of course. Otherwise, we wouldn’t be there.
On the other hand, don’t forget the strategic perspective. We are going to be there for 30 years, 30 plus years in one of the largest air traffic markets in the world, and managing 20% of the traffic of that country. So any views based on assessing the coming two, three, years would be in my view shortsighted.
Nicolo Pessina
Okay. Thanks.
Operator
The next question is from Cristian Nedelcu of UBS. Please go ahead.
Cristian Nedelcu
Hi. Thank you very much for taking my questions. The first one, if we look the cost of living crisis and potential implications for 2023 I know, it’s very early on, but could you give us any color on how you see the moving parts in 2023 traffic in Spain? Maybe what’s the worst-case scenario? And can we say 90% of 2019 traffic is the worst-case scenario and a recession in 2023 could it be more or less?
Secondly, the retail revenues per passenger the strong growth versus 2019, could you elaborate there how much of that is in the structural? You think there are still some temporary benefits in there and how you see the next few quarters? Do you think there is room for further improvement versus what you had in Q3? And the last one, if I may can you comment a bit about the recent new wage inflation proposal for Spain for public servants in 2023 and over the next three years? When do you expect to see a final decision there? Thank you.
Jose Leo
Okay. Starting with views or expectations. Frankly, Cristian, you know, we don’t provide or at least we are not providing any news on 2023 for the time being. What I can tell you is that, we don’t know what the worst-case scenario could be. It depends very much on the severity of the evolution of the macroeconomic conditions the war as well. I think this is definitely an element that everybody in Europe at least should keep in mind.
So, what we know is that, so far there is no indication whatsoever of any worsening of the current trends. And when I say that, it is not only because Aena is monitoring that, it is because we are talking day-in and day-out to the airlines, and they don’t see any indication of that. They are insisting that today they are really predict the evolution of the bookings. So it’s let’s say almost – it has diminished dramatically. So they are mainly looking at the next month or next month at maximum. But at the same time, they don’t see any indication of issues. And you have to take into account as well that they are – there is a large market closed so far which is the Asia market.
I don’t mean, this is a dramatically important market for Spain, I recognize that. But this market is going to open as well sooner or later probably sometime next year. And this will have a knock-on impact a knock-on effect. So frankly, I cannot tell you, what the worst cases scenario would be. What I can tell you is that, everything seems to be heading in the right direction.
The consequences of any macro conditions or war conditions worsening we need to monitor it day-by-day. With regard to commercial revenues, well the answer is, yes. I think, the way the commercial revenues are going I think – I cannot tell you, whether this is a or not in the sense of – of course there are number of behaviors, social and personal behaviors taking place in our industry and other leisure industries that seems to be driven by psychological reactions, on things like that
But on the other hand, we have headwinds — sorry tailwinds, coming from potentially the evolution of the dollar and the US, travelers coming to Europe or more the fact that the UK citizens, are now out of the obviously they — we can apply them duty free let’s say prices, things like that. So I can tell you, short-term — and by short-term, I mean this year, probably good part of this year subject to the conditions I mentioned before, I don’t see any reason to see the revenue per passenger, going south at all.
This is not a prediction. This is just an impression. Because of we expect specialty shops to also join, at some point in time. The churn, they are lagging behind big time for aviation. So I don’t see any reasons, to believe that this is going to change in the coming let’s say 12 months or so. [indiscernible]
As you know, Aena is subject to the same rules. I already agreed to the best — let me think twice. I think this year, we have a 3.5% salary increase so wage increases. And then combining this years 2023 and 2024, because the subject to final signing, but I would say you can take it for granted.
Combining 2022, 2023 and 2024 I think the compound growth in salaries will be probably around 9% between 8% and 9%. I can’t check that number for you specifically, but something between those two figures. And this is given it’s already done. So this is the kind of salary wage increases, that you should wait across the Board for Aena’s personnel.
Cristian Nedelcu
Understood. Thank you very much
Operator
The next question is from Luis Prieto of Kepler. Please go ahead.
Luis Prieto
Good afternoon. Thanks for taking my question. I had a couple of questions accelerated cost from Q3 versus Q1 and Q2. Can you shed more light on this your because it seems to be from now on or do you want to lock in price. [indiscernible] And the second question, is if you could provide us with any. So what was happening in the over next couple of years, as you see in the context of today’s inflationary environment? Thank you.
Jose Leo
Okay. Well, with regard to the energy costs the increasing in this quarter, is all driven well maybe there is an element of consumption. Is all driven by the price of the electricity. In Spain, the price of electricity — well normally in Spain, the price of electricity their spot price is something that is called OMIE O-M-I-E, that you can check online if you wish.
And if you look at that, this has been going south going down since I would say, mid — I would say mid of the year slightly later than that. But that was combined with the approval by the Spanish government from June 2022, till the March 31, 2023 of a so-called gas price cap. This gas price cap is suppose and this indeed, benefiting the whole system overall because the price of producing electricity across the country has gone down, because the gas producers have their price cap.
But on the other hand, this should be, obviously, money isn’t falling from the trees. So there is a levy or is an extra cost imposed to final that across the different users. If you add to the same market price, the cost of this cap, the cost of electricity for Aena and for everybody else in the third quarter has been much higher than any quarter before. I think something like 30% from memory. I mean, if you add those components the total cost has been not very far from €300 per megawatt hour over the last quarter. So that’s the reason.
If you look at the market today, it’s interesting, because the gas reserves have grown across the continent. They — is relatively broad, what is individual. And the gas is being accumulated and not consumed. And that’s certainly something got the price is falling.
If we look at the price today — just today, probably this is €300 per megawatt hour, it’s probably something in the region of, I don’t know, €200, so significantly lower than that. So when we look at this and you can imagine this travel to make decisions on hedging.
Because what you can see today is that the prices has — of electricity sale over the last weeks. Obviously, nothing that you can compare with the trade prices bases, but there are still prices that look more attractive. So all I know, you are going to hedge.
When we look at the hedging prices they are higher. On the other hand the liquidity of the market is really, really slimmed. So it’s very, very difficult, if not impossible, to hedge more than a very, very small portion unless you are prepared to push the prices up.
And then, when we look at the futures, the future market is indicating that 2022 — sorry, 2023 is not looking good either. That June 2023 things improve, well, who knows? This is what the market is signaling today, the futures. It’s very difficult, what do you hedge, taking into account the 2023 prices today are, let me double check, well, on average €253 is what I have here. So 250, let’s say, for the sake of argument, euros per megawatt hour to hedge on 2023. Not easy.
So it’s not that we are skipping this. Simply, the market is sending signals that are difficult to weigh into.
And on the other hand, once again, the hedge capacity is very, very limited — very limited listing in this country or in this market, to be more precise, because this is the market is both the Spanish and Portuguese market together.
Of course, we are working on a long-term solution. The long-term solution would be a combination of our deployment of solar panels. It is already part of our plan well before this took place. Secondly, we never throw some PPAs. We never throw some PPAs.
With the right conditions on the temporary basis, because, as I said before, for 2024 onwards the market is signaling a significant reduction, let’s say, a significant fall in prices to the tune of one-fourth of the 2023 prices. I hope this helps. Seem that it really means is a very convoluted and cumbersome situation that I think we’re now experiencing.
Luis Prieto
Thank you. [indiscernible]
Operator
The next question is from Stephanie D’Ath of RBC. Please go ahead.
Stephanie D’Ath
Hi. Thank you for answering my question. The first one is regarding the Brazilian Airport exhibition. And you mentioned, we would know more about it in your presentation during the strategic plan. But I was curious to know if we look at about €0.5 billion acquisition and about €1 billion of CapEx. How are you thinking about financing that? What kind of cost of debt are you able to hedge locally? And you did mention 80% was hedged, but I’m nor sure I get to your comment right, is that regarding the Brazilian debt.
And my second question is regarding the strong operating cash flow of the third quarter. You had a positive impact from working capital. What should we expect for the last quarter, is still positive impact and for the full year?
And then finally, regarding other operating expenses. If I’m not mistaken, you’ve historically said that absolute amount of increase compared to 2019 for every quarter, we kind of remain in the same range. I think for the first quarter, we were above €60 million higher at operating cost versus 2019 for the second quarter about €75 million. And for the third quarter that number is around €205 million. So what should we expect for Q4 in particular inside of the commentary you just made that electricity prices have been coming down and that therefore, hopefully the energy headwind for this fourth quarter won’t be as high? Thank you so much.
Jose Leo
To start with, I need to request to ask you to remind me some of the question, sorry. Anyway, to start with the Brazilian, what I going to share with you now about the Brazilian on new acquisition is numbers. To make it numbers clear, because I think there is some confusion around that.
The enterprise value of this acquisition is BRL 3.2 billion. BRL 3.2 billion, if I’m not mistaken, is something like €700 million. And how we can come to this figure? First of all, there is an obligation to inject BRL 1.64 billion by way of capital in the company. Secondly, we offered BRL 2.45 billion of — let’s say, to pay that for the concession, the upfront payment. So this, in total, means some BRL 4.1 million shy of that figure BRL one billion.
Out of the BRL 2.45 billion going to the company and straight away will be paid to the Brazilian authorities. That the BRL 1.64 billion of capital will be used to deal with a number of costs including the redundancies of all the staff in the airports as it happened with concession in Brazil before.
But then, there will be something like BRL 800 million has left in cash in the business. So that means that the enterprise value of this transaction is deducting that cash is BRL 3.2 billion. This is figure. Nothing else. There is no more — well, there are no more payments to be made.
Our plan is to one, how to leverage, how to raise debt to pay for that is a matter that we are working on. Now, as we speak, what is clear for us the equity element is BRL 1.64 billion, okay? With our [indiscernible], what is the particular solution we are going to implement to gain the business. But this business, you have to move in the Northeast Airports. All the CapEx, all the capital developments will be funded via debt. And in Brazil that debt is always important, or to a very significant extent provided by the public banks by the DNDS [ph] in particular.
And then we may need to add from the capital market, some amount of debt raised in the capital markets over there. But normally the majority of this funding is coming from the long-term, is coming from the public institutions in Brazil. I don’t know if that helps. Otherwise please let me know.
Then there was a second question, sorry?
Stephanie D’Ath
On the working cap side.
Jose Leo
Okay. Well, don’t be too fixated on the working capital, because the reason why the working capital is better this year than the previous year is because remember we were accumulating max. And this time we are accumulating very little by way of max. So I’m not — I cannot predict to this — to the year, how the working capital is going to be evolving over the coming months. But this is in the current circumstances where the max has very little weight in the business. This is not the big deal.
If you can say that the €1.56 — €1.55 billion of cash generated is exactly EBITDA plus the DF7 adjustments. So, obviously, in the past where we have a very significant amount of max being accumulated to be built uncollected and yet at the end of the year that could play a much more significant part. But definitely in 2020-2021 years, a massive, that was massive was unbelievably high.
Why? Because we have this €700 million accumulated that we are now taking to P&L. But in normal circumstances today this is not going to be a major element. And if anything involved, let’s say some of the cash to be collected three months later, three months earlier seems like that, but nothing critical.
And then there was another question.
Stephanie D’Ath
The last question was on OpEx and the trend…?
Jose Leo
Clearly you’ve got me, so now I’m going to more prudent. I would say the total cost is claiming excluding for the whole year; it’s going to be there and thereabout at the 2019 level. This is my summary.
Of course there are always elements of the cost that you cannot predict it fully, because in this business the traffic and the impact of the volume is sometimes let’s say [indiscernible] a bit. But by way of headline this is as clean energy, energy is something I cannot commit. Energy comparing seems to be going in the right direction. So I would have thought that my expectation is to have an energy bill in the fourth quarter that would be held in the third quarter, but I cannot commit to that because we entirely subject to the evolution of the market and the price gap, sorry, the gas price gap element as well.
Operator
The next question is from Elodie Rall of JPMorgan. Please go ahead. Ms. Rall, your line is open. Please go ahead.
Elodie Rall
Yes, sorry. Can you hear me?
Jose Leo
Yeah. We can hear you all right.
Elodie Rall
Thanks. Sorry about that. So my first question is on the debt and you said that 80% of your debt is fixed rated. But could you remind us of the portion of debt that is maturing between the next like between 2023 and financing across in fact…
Jose Leo
Because of you for a while — we’ll – you let say, drop from the line.
Elodie Rall
Okay. Is it better?
Jose Leo
Yeah.
Elodie Rall
Do you hear me better?
Jose Leo
Yes. Now you’re absolutely fine. So your question was sorry?
Elodie Rall
My question was on the debt. And the maturities that coming – are due in the next three years between 2023 and 2025? And what would you expect in term of refinancing conditions for those maturities? If you could remind us how much is maturing and what you would expect? And the additional impact on the financial costs going forward? That’s my first question. And my second question just quickly on COVID compensation. I think you still registered some compensation in Q3 so if you could just clarify how much and what we should expect for Q4? Thanks.
Jose Leo
Okay. The maturity schedule is something you can find on slide number 22 of the presentation. What you can see there is that there is a significant pick in 2024. 2023 is well – currently is a very modest year in terms of debt maturities. 2024 is close to 2 billion. But this is driven by the fact that we took some debt over the COVID period with a view to pay it back to be perfectly honest if and when.
So we are not at all concerned by that. We may even if the conditions are right even we pay it earlier or we can refinance part of that. And to let’s say spread it over a number of years. So this is the deeper refinancing of part of the debt is something that we promised and I’m sure we will be doing shortly.
And of course that the refinancing will come with a cost and that will depend on the market conditions. For instance to get to the 80% fixed or hedged rates that we have today. Today, we mean today because if you look at the slide number 22 at the end of September that figure was 71%. To get to this point, obviously, we needed to pay more because we transformed some of our floating debt into fixed debt. And on average we ended up paying 3% over that chunk of that is something around €1.2 billion of debt.
So this coming on the cost, of course, inevitably. [indiscernible] let’s say, cost debt. We have to accommodate to that reality. In the case of — for Aena as a regional company, of course, this will have an impact. But this is really, really moderate very moderate impact in the tens of millions nothing major.
The different thing is when you contemplate acquisitions when you are financing large capital projects in all other subsidiaries. Of course, that will come with the cost that will be, let’s say, commensurate with the reality of the market. But that you need to look at that on a case-by-case basis. But when you think of Aena, which is what you can see on slide number 22. The impact is of any refinancing will be more than 8%.
But it’s true we are not in the world of the zero percent interest. We see the average interest rate to move up. But the still our long-term debt is in such a good set of conditions. The average cost of debt will be at probably I would say were best-in-class.
Operator
The next question is from Sathish Sivakumar of Citi. Please go ahead.
Sathish Sivakumar
Thank you. Actually I have one question on Brazil. If I look at the market share of the top three airlines in Brazil it’s around 90%. And in your opening remarks you did mentioned about your plans around stimulating traffic given the consolidated nature of the market and how do you actually like stimulate more traffic growth? And then specifically can you actually comment around the utilization of the airports that you actually have won concession for just to get a sense like what are we doing there to actually grow for the volumes i.e. traffic? Thank you.
Jose Leo
Yes. Sorry I didn’t understand your second question. With regard to the first question, well, there are three airlines there, but there is still room too. That market hasn’t been liberalized to the extent that all the markets have. We believe that over a long period of time there for the Brazilian low cost market to develop further. Of course the way — I have to be very clear that particularly in Congonhas in Congonhas, the story is not one-of-growth or dramatic growth.
Of course we expect that Portugal but it’s not one of dramatic growth. Because it’s an airport that has a number of constraints and limited growth capacity. So, this is more a matter of utilizing properly the airport and improving some of the parameters.
The rest of the airports obviously they don’t have the wait of Congonhas. Really this is Congonhas is proportionately important to us. But the rest of the airports have room to grow. There is a huge amount of congestion in the key Brazilian Airports. And in the Sao Paulo area definitely this is the case.
And you can read in the press there that there is a need to find ways to final call that into other airports. And some of the airports in the portfolio are not very, very nearby. But that not very far from being able to operate and serve to this region.
So, without getting into the detail, I’m not a technical individual. But what I can tell you this is not a growth trend is not driven by growth stories that the equity story here is they are going to be driven by growth at Congonhas. It is an element of that — there is an element of that participants the critical point. There is no growth in the other airports indeed. And the second question if you can say that again please?
Satish Sivakumar
Yes. Sure. It’s actually around the utilization i.e. like say what is the terminal utilization today and what is the runway utilization for the portfolio? Just to understand that how much scope is there in terms of capacity point of view to grow further?
Jose Leo
You are asking about these particular 11 airports that we are
Satish Sivakumar
Yes. Yes.
Jose Leo
Definitely. Already there is room because they haven’t recovered. Congonhas hasn’t reach the level of traffic recovery that for instance we have in the Northeast Airports. And I think from memory they are around 75%. So there is still room coming from the COVID impact. But Congonhas is also ready fully. And Congonhas will be full. So, Congonhas will be over a number of years. But this is not about adding massive numbers of extra capacity. This is not the case which is in the middle of city.
Satish Sivakumar
Got it. Thanks Jose.
Operator
Your next question is from Johannes Braun of Stifel. Please go ahead.
Johannes Braun
Yes. Thanks for taking my questions. I have two. First question would be on your good performance in the commercial business. In the press release, you mentioned that you have also increased prices in car rental and VIP. I was wondering if you can quantify the price increase there?
And then secondly coming back to the cost inflation at which traffic level will you reach the 2019 EBITDA performance for the furthering cost inflation? Obviously, I guess we need to adjust for the net write-down for that. But still what the levels that you need for 100% EBITDA recovery given the structurally higher cost base?
Jose Leo
Well, I’m afraid, I’m not going to answer your second question — your last question and I would rather stay silent on that. But definitely they will be higher than the 2019 traffic levels. On the other hand, commercial revenues you mentioned car rental and VIP, happy to share with you the price increases, but I don’t know if we have been handy now. So the IR team will be providing you with this. I understand that was it.
Johannes Braun
Okay.
Jose Leo
Okay. Sorry, I forgot to answer your question before on the COVID costs. So let me — okay, the COVID costs say on quarter one was €12.4 million in quarter two €51 million in quarter three, €59 million. So in total we have accumulated in our charges €122 million in COVID costs charged to the airlines. And I don’t know if we have an estimate of the quarter four, but anyway we will be — we could provide that offline later on as you wish. I’m sorry for not answering the fourth.
Operator
The next question is from Dario Maglione of BNP Paribas Exane. Please go ahead.
Dario Maglione
Hi. I have three questions. One on cost — depending on Q3 for Aena SME cost of CMS in 2019 apart from the decrease it’s cost. Has inflation kicked in yet in the outsourced or public company? And if not when will that happen? Second question on commercial revenue. Within commercial revenue from Q3, how much was energy pass-through the tenants? And same figures for Q3 2019? And the next question is on the P factor which was around 0.7 for next year tariff. And my understanding is that was calculated based on the change in cost between 2021 and the previous year. So in theory next year are you going to get a much bigger P factor. However, the CMC is saying that the energy cost inflation that belongs to Aena would have been hedged and so if not exceptional. So what shall we expect the P factor the next year? Thanks.
Jose Leo
Okay. The first question it’s difficult to say. I think there is an element of inflation already in some of the cost increases. But honestly, is not the key — is not the key driver. So I have to say that the level of inflation that we are witnessing these days in the Western countries such as 7%, 8%, 9% of that. It hasn’t been impacting us yet on the — on our third-party services. But on the other hand, at the minute, we have 90% of the 2023 third-party services already contracted. So I believe this is a protection to the extent that these inflation rates are not going beyond 2023, I suppose that will maintain well, let’s say, the impact would be potentially diluted. And people will be back aggressively. But it will depend very much on the nature of these inflationary pressures. If they become as strict early at that level that will be massive problem. But hopefully, the monetary policy decision makers will be fighting hard to about that to happen. So if this is a transitory or temporary situation to establish 90% of our cost bill — third-party cost bill is already engaged and contracted and they should honor the contracts the way they are.
So on balance, I believe that we are not going to be hit that hard. But if I notice I can tell you we have already experienced this sort of impact that the stated 9% inflation rates could bring about.
With regard to the P factor because I forgot the second question. Okay positive of energy cost — the positive of energy costs on average for 2022 on average should be around 20%. So, obviously, you can take that as a reference for the whole year for every quarter. In terms of P factor well you’re right. We are supposed to gain, let’s say, passing through from the energy costs. And I think you may have seen this is in — this is my personal view after talking to them. They have a more flexible opinion about the possibility of taking a look at the P factor on the coming years.
Because they have realized that this index is not working at all. I have two refuse entirely that we should have hedged these. We have done alright for a number of years for years we have been buying energy in the spot market. As a result of that we achieved two goals. First goal we believe it have been already effective efficient and cheap energy being through the airport in assertion and nobody complained about it.
And secondly, we also make sure that the regulator when assessing the cost to be factor in the broader discussions we’re looking at the real actual costs and nothing had — would have been legitimate obviously to hedge. But when you hedge normally this is more costly. So nobody complained about it, everybody was happy with that. And then all of a sudden there is no major change in the market.
We are taking a hit I think this is not a reasonable. But this is the kind of discussion that will take a while to entertain with the regulators. And I would say, we’ve covered them as well because we need to take a look at how these things should be hopefully modified that going forward. We will do our best.
Dario Maglione
Thank you very much. Very clear.
Operator
The next question is from Achal Kumar of HSBC. Please go ahead.
Achal Kumar
Hi. Good afternoon. Thank you for taking my [indiscernible] I was dropped-off in between. So what kind of growth is structural? What kind of growth is not structural? How do you see the retail revenue going ahead given that Asian traffic is still not recovered fully? And they have the high standards. But then, there is some as mentioned in the release that bids are spending more. So, how do you see this overall retail spending going ahead? And then, how would that impact, how would that impact your re-letting of duty-free context you must have started the process and how that how that could impact?
Second question is around your strategy. First, you believe that you’re going to close in few of the state in November. But then what are the key themes, I will focus on of course you might not disclose the details, but is it possible for you to share the key themes, what key themes. So what is that we could actually think of? And finally, on the cost structure cost inflation, how should we look at your cost going ahead especially with the inflation? I’m sorry, if you’ve already addressed some of this. Thank you.
Jose Leo
Sorry, don’t worry. I understand. Well, first of all, the revenue – the commercial revenue per passenger growth that will have – this time is significantly over the 2019 level. As I said before, half components they have sold all their sort of components. It’s difficult for me to specify and to be very precise. But suffice to say that, I believe that, this healthy performance on a revenue per passenger basis on a per-passenger basis, I believe is, we will remain at least for the coming years. So I think, there are drivers there that would act as tailwinds.
I don’t mean by that, that business is going to be the case beyond that point. What I’m saying is that, I’m confident that, this very healthy revenue – commercial revenue per passenger figures will remain in place for a while. And I said before, as well subject to market conditions. Don’t forget that, we are living in an uncertain time in terms of weather. The consumer’s reaction, the people’s reaction the fact that, the savings may grow.
We’re basically going to have an impact across the economy in general and even the – on the air transport industry. But adding to that, I think, there are good reasons to believe that, this is here to stay, at least to the point that, I have basically in the coming months for sure.
With regard to the things that we are going to discuss, obviously, please bear with me. I would be fired, if I anticipate what the revenue, well it’s a joke. But definitely, anything that you may expect, anything that is relevant about the future of the business will be contemplated at the strategic plan presentation.
I will do that today, first the cost inflation impact over the coming, let’s say year or years. As I said before, I don’t believe, we have been hit by the inflation other than the in terms of the electricity. But on the other hand, 90% of our contracts are already in place and they will be in place over the coming year at least – next year 90% of the cost will be already contemplated in contracts that are already up and running.
So in my view this is a sort of insurance policy. Whether or not, the inflation trends – the very high inflation rates remained in the point and that could be an issue in 2024? I don’t know. But as I said before, again, the monetary policy, the central banks are there to supposedly to impede that to happen.
Operator
The next question is from José Arroyas of Santander. Please go ahead.
José Arroyas
Yes, good afternoon, gentlemen. Just three from me. Thank you. The first one is on the international strategy. I was wondering from the international strategy I was wondering if I might happy with the footprint that in their portfolio. Or if we should instead expect the company to remain active in new product applications in the near- and medium-term?
Second it’s on electricity and energy in general. A few days ago, the Chairman was on record for saying that Aena maneuvering forward its decarbonization target by a full decade. What would he really mean by this assignment? And could this be something that Aena be considering that accelerating its solid PPA strategy. You mentioned before something about PPA contracts. Could you be more specific about this? And lastly from the – I noticed on Page 11 of the earnings report that there have been several appeal against the value for 2023 by several airlines, what could this mean? Thank you.
Jose Leo
First thing is. So with the rapid integration activity the answer is yes. We remain active. To the extent that we can find good opportunities, we will remain active in that camp in that field. On – in terms of what the Chairman said is that we were aggressive for how you like ambitious about bringing forward the carbon-neutrality agenda and things like that. Because he was not to the best of my knowledge, speaking specifically about the solar panel development plan. This is something that is very specific.
We have a plan for that. The carbon-neutrality agenda obviously, goes beyond that point. This is a result of a combination of many other things. It’s not only about your energy being provided or sourced by doing sources is more than that. This is one piece and that piece is a key part of our dollar plan. And we are working on it, as we speak.
Bringing that forward is sustainable, because there are administrative and bureaucratic steps to be taken that are going to stay and precisely, one who head in the right direction to be perfectly honest. You need to get access to capacity to develop your plans, that capacity is part of a process that is putting the market — as part of the process that is run by an electric car then you have to comply with the number of terms and conditions. You have to apply for a number of licenses things like that.
And this part of the process in Spain is particularly agile. But other than that, we are very ambitious and working hard to get to where we want to get to. Then with regard to the — we mentioned that the PPA in particular, is because due to low and the time where we deploy our solar plant in full. Obviously, we’re planning to do nothing, nothing with the electricity price.
Now, the conditions are such that you have to take a look at that. If you can find a way of breaching that period of time and to weather, the price volatility you should do it. As I said before, it’s difficult to hedge for the 12 months, because it is economically irrational, if I would say.
But between that time and the time-to-time where we could deploy in full of it the panels where we may think of implementing something. If the market conditions are right and the prices are meaningful and sensible. And this is what we are exploring, so this is what I want to — what I meant nothing else. We’re not changing the strategy.
Then would regard to these clients, yes, it did the number of airlines appear on the competition now the CNMC decision for both 2022 and 2023 tariffs. Obviously they have the right to do that. And we need to wait and see.
Obviously, we have every confidence that this is not going to fly the CNMC was pretty clear rejecting the 2022 appeals. And we are working now on the 2023 appeals. The 2023 appeals are still work-in-progress as you may expect, because the CNMC hasn’t yet made a final decision on this.
Okay. No more questions, I can see. No more questions, I can see. So, thank you very much everyone for being part of the call today and all the best. I’m sure we will see you at the November 16, event. Thank you very much.
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