Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ENAV First Half 2020 Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they need signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Stefano Songini, Head of Communication and Investor Relations. Please go ahead, sir.
Good afternoon. Thank you, operator. Good afternoon, ladies and gentlemen, and good morning to those of you connecting from the U.S., and welcome to ENAV's first half 2020 results call. I am here in Rome with our Chief Executive Officer, Mr. Paolo Simioni, and then Luca Colman, our Chief Financial Officer. As always, we will go through a formal presentation, followed by a Q&A session that we'll be happy to reply to. With that, I will hand the call over to Mr. Paolo Simioni.
Okay. Thank you, Stefano. Good afternoon, ladies and gentlemen, and welcome to ENAV sixth month 2020 results call. As you know, starting from March 2020, the aviation sector has been severely impacted by COVID-19 with en route service unit down 68.4% and terminal down 60.1% in the first half of the year. Despite the challenging environment further affected by the lockdown measures in Italy from March to May, we have maintained full business continuity while also protecting our employees in terms of health and physical safety, while maintaining their full salary. Following the gradual reopening of the country from the second half of May, we saw a pick up in traffic volume in June, further confirmed by an improvement in July and August.
We are currently monitoring the development of the traffic for the last part of the year, but the situation remains very volatile. For this reason, we are withdrawing the 2020 outlook provided in our first quarter 2020 results, which we had indicated a net revenue decline of a mid-single digit year-on-year, and a net income decline of a high single digit. At the same time, we confirm our CapEx outlook of roughly EUR 80 million for the year, lower than the normalized CapEx spend of around EUR 120 million per year. Moving on to our results, let's take a closer look at the first half financial performance.
Net revenue decreased by 10.7% year-on-year from EUR 416 million to EUR 372 million, despite a reduction in revenue from operation of 61.7%, which was largely offset by a positive balance. As we will explain later in the presentation, the balance recorded in the first half of 2020 is based on our best estimate on the effect of the temporary derogation to the performance scheme regulation, proposed in July 2020 by the European Commission for 2020 and 2021. As to the cost efficiency put in place in the second quarter, we managed to offset a significant part of the EUR 45 million net revenue decline, leading to an EBITDA of EUR 88 million, down by EUR 27 million year-on-year, - 33.5%. Our EBITDA margin was 23.6%.
Notwithstanding the dramatic decline in the traffic revenue, the efficiency measures put in place and the solid traffic risk-sharing mechanism enabled us to close the first half of 2020 with a net profit of EUR 15.6 million, compared to a net profit of EUR 34 million recorded in the previous year. To conclude the figures, the CapEx was EUR 27.8 million, in line with the first half of 2019. In spite of the very critical situation created by the coronavirus, we are well equipped to weather the storm, banking on a strong liquidity profile and a solid balance sheet that provides resilience over the medium term. Moving on the slide two, let's have a closer look at the traffic trends recorded in the first six months of 2020.
As I said before, our en route traffic performance reflects the severe effects of the COVID-19 outbreak, with a total decrease of 58% in service unit year-over-year. The decline is the combined effects of the very strong growth in traffic experienced in January and February, when service unit growth was 8.5% and 11.2%, followed by a sharp decline in March, reaching a 90% decline in April and May, with a minor recovery in June. Looking at en route, it's important to observe the largest percentage decline in traffic over 2019 was mainly related to the international flights, with national traffic and other flights recording a less severe decrease. As you can see in the graph, the split of total en route saw other flights accounting for 44%, international 36%, and national 20%.
The decrease in traffic seen in Italy in the first half of the year is in line with the performance of the other major countries in Europe, with Germany suffering the least with a decline of 50.3%, and France suffering the most with a decline of 58.8%. Terminal traffic volumes were also materially hit by the virus emergency, with a 60.1% decrease in service unit determined by an overall negative performance in both national and international traffic segments and in all three scheduling zones. In percentage terms, Terminal Zone 3 saw the largest percentage decrease year-on-year, followed by the Terminal Zone 1 and Zone 2. Starting from June, we have seen a gradual improvement of the situation in Italy, with our en route service unit over the key summer months of July and August, down 67.5% and 55.8% respectively. Looking at our revenues more in detail on slide three.
Net revenues, as you can see, decreased by 10.7% year-on-year due to a decline in revenue from operation down 61.7%, from EUR 229 million to EUR 164 million, largely offset by a positive balance of EUR 191.4 million. We saw a material decrease in both our route and terminal revenue, down 64.5% and 65.3%, mainly as a result of the lockdown following the COVID-19, combined with lower tariff in 2020 versus 2019. However, thanks to the existing traffic protection mechanism, with net revenues decreased from EUR 417 million to EUR 372 million, which includes the positive balance of EUR 191.4 million, was mainly driven by a route and terminal traffic materially lower than forecast. It's worth highlighting that the positive balance posted in our first half 2020 accounts includes our best estimate of the impact of the European Commission derogation proposal for 2020 and 2021, published last July and November.
The derogation indirectly imposes a cap on the total amount of balance that can be recovered by service providers over the two year in order to help the traffic carriers sector in such a difficult scenario. The best estimate is based on the assumption of an adequate reduction of ENAV's total after the Determined Costs of 2019 to be applied to the cost recoverable in the traffic for 2020, assuming a recovery of the cap of the balance accumulated for 2020 and 2021 over five years from 2023. In spite of this, a positive contribution to our top line came from the non-regulated business, mainly due to revenue from IDS AirNaV that was not consolidated during the first half of 2019, with revenue almost tripling year-over-year to EUR 11.7 million.
Finally, operating income was EUR 16.6 million, a slight decline of EUR 1.3 million over H1 2019, mainly due to a lower level of EU funded projects. Moving on the cost on slide four. In the first half of 2020, we continued to deliver on our OpEx efficiency plan, implementing further exceptional initiatives in the second quarter to offset the material decline in revenue and help reduce our cash burn. Overall, total costs were reduced by 5.99% year-on-year, reaching EUR 284.5 million. More in detail, as you can note in the graph, we recorded external cost savings over EUR 3.6 million, a 5.4% reduction year-on-year, mainly thanks to lower cost of external services such as utilities and telecommunication cost, which declined by 21%.
Due to lower consumption in our facilities, driven by most admin staff is not working from March onwards. As well as thanks to lower costs related to our full IP digital network. We saw the reduction by 5.7% of some expenses related to the work performed by our subsidiary, Techno Sky, given the lockdown of many cities due to the health emergency. These significant reductions were partly counterbalanced by higher costs for external services linked to COVID-19 specific initiatives undertaken by the company, including extraordinary sanitization of our facilities. It's worth noting that external costs on a like-for-like basis, including the impact of IDS AirNav, which was not consolidated in the first half of 2019, were a significant 10.9%. Personal cost in the first six months of the year decreased by EUR 13.9 million to EUR 235.2 million, down 5.6% year-on-year.
The third result was mainly driven by a material decrease in variable pay and social security costs as a consequence of a reduction of time and the use of outstanding vacation balances of our personnel. The fixed salary component increased 2.5% year-on-year as an effect of the 2018 labor contract renewal, and more importantly, the inclusion of IDS AirNav employees in H1 2020. I want to underline that excluding the IDS AirNav employees, personal costs would have decreased by a material 5.2% over last year. Excuse me, I made a mistake, 7.2%. At the end of the first half of 2020, our organization, including IDS AirNav, reached a head count of 4,230 people. Lastly, capitalized internal work was almost stable year-on-year at about EUR 13.2 million. As you can see on page five, there have been certain important developments over the recent months.
In light of the material impact of COVID-19 since March 2020, ENAV has undertaken several measures to deal with the implications to the traffic performance for 2020 and beyond. As mentioned in our first quarter results, Eurocontrol and the vast majority of its member states agreed to postpone the payment of traffic charges due by airlines to service provider related to the period February, May 2020. This is intended to allow airlines to take care of the liquidity issues they are facing currently and to be able to pay those charges starting from November 2020 onwards. To understand the impact of this measure, as you can see on slide five, February 2020 traffic will be paid within the current year in November, while March, April and May payment will be postponed in 2021, with the last cash in due in August 2021.
However, it's worth noting that April and May traffic was down about 90%, which in terms of revenues also means much lower revenues are recorded for this month, and a minimal impact on cash flow of roughly EUR 35 million in total from March to May. Starting from the traffic flow in June, the normal two-month billing and settlement cycle has been reinstated, and the receivables from airlines for both June and July has been cashed in in August and September respectively. Let me now give you a summary update on the regulatory approval process for RP3, also in light of the recent revision proposal to the Single European Sky performance scheme made last July by European Commission for the present and the next year, 2020 and 2021.
As you will recall, the RP3 regulatory framework was approved in February 2019, and the EU-wide competition targets were set in May 2019. Based on this framework and target, each country submitted their performance plan for RP3 at the end of 2019. The approval by the European Commission of country-specific performance plans for RP3, originally scheduled for March 2020, was put on hold due to the COVID-19 pandemic. Based on the formal submission by Italy, the applied 2020 targets are the following, 66.02% unit for en route EUR 167.33 for Terminal Zone 1, EUR 167.56 for Terminal Zone 2, and EUR 298.93 for Terminal Zone 3. These tariffs were all reduced compared to those applied in 2019.
In July, European Commission published a proposal for a temporary delegation to Single European Sky performance and charging scheme, allowing for special rules for the setting of Union-wide performance targets for 2020, 2021 in order to mitigate the impact of COVID-19, ensure the long-term viability of the sector. Based on this proposal, the Commission expects national supervisory authority to provide core data and information about traffic forecast for 2020 to 2021 by November 2020 as input for the setting of the revised Union-wide performance target for RP3. The Commission should adopt revised performance target for RP3, no later than April 2021. Later, the national supervisory authority should submit the new RP3 performance plan up to 2024 to the Commission within July 2021. Finally, the Commission should approve the RP3 performance plan by year-end 2021.
It's possible that the timeline will slip by one or two months, but the performance plan certainly is expected to approve in any case by the end of 2021. That's all I have to say about this part of the presentation. I will now hand the call to Luca Colman for the detailed view of the first financial half.
Thank you, Simioni. Let's move on to slide eight. As you can see, our net revenue in the first quarter of the year decreased by 10.7% year-on-year, driven by a negative performance in both en route and terminal revenue, which were largely offset by a positive balance. The main contribution to the year-on-year decline in revenue from operations came from en route activities, which saw a revenue decrease of EUR 200.1 million. Terminal activities also posted a negative performance with revenue down EUR 71 million over last year. It is worth noting that both results were impacted by the effect of COVID-19 emergency, combined with the lower tariff supplied in 2020 on en route and terminals. As mentioned before, the significant negative contribution of revenue from operations was, however, largely compensated by a positive contribution of EUR 221.2 million balance.
The increase of en route balance over last year was EUR 164.1 million, while the increase in terminal balance over last year was EUR 57.1 million. As we mentioned previously, the balance recorded in the first half of this year was defined as the best estimated by the company on the new rules proposed by the European Commission that allow the potential recovery of the loan revenue resulting from the COVID-19 pandemic, based on the recovery of the total actual determined costs for 2019, minus a percentage per cap borne by the company. Despite the material reduction in the top line of EUR 44.8 million, thanks to our relentless focus on personal and external cost discipline, we managed to contain the impact on EBITDA to EUR 0.7 million, reaching EUR 88 million with an EBITDA margin of 23.6%.
Looking at the P&L on slide nine, with regard to below EBITDA items, P&L was substantially stable year-on-year at EUR 65 million. Provisions and write-downs in the first half of 2020 grew to EUR 2.3 million, materially higher than those recorded last year due to the application of the valuation model utilized to measure the recoverability of receivables in light of the current issues faced by the air transport sector. It is purely a prudential accounting approach since, as mentioned before, we have not had any issue with the receipt of payments due so far. August and September payments due were in fact fully cashed in. The item net financial income and expenses was stable year-on-year.
You can also see a material decrease in income taxes in the first half, driven by lower taxable income and by the positive impact of deferred taxes on balance actualization. As a result of the [bull] movements the first six months of 2020, we recorded a net profit of EUR 15.6 million, despite the severe impact on revenue caused by COVID-19. Moving on to slide 10, let's have a look to our cash flow and financial position. ENAV's liquidity and financial position remain solid. In addition to the cash available at the end of June 2020 of EUR 218.3 million, we also have financial investments for EUR 25 million and undrawn credit lines for EUR 247.5 million, of which EUR 150 million committed.
Our net financial position as of June 30 decreased by EUR 225 million year-on-year, reaching a net debt of EUR 98.5 million, mainly due to the lower cash in due to the sharp decline in traffic and to the postponement of receivables due from the airlines, for the months of April to July, as well as the payment in May of dividends for EUR 112.1 million and payments of amounts due to the Italian Air Force for EUR 10.2 million. Partly compensated by the receipt of balance fund and funds received under OPM-financed projects and bonds. En route and terminal charges from June onwards have been cashed in regularly, which means within the normal two-month billing and settlement cycle. On the cost side, we have reduced our average cost run rate from approximately EUR 50 million per month to EUR 45 million per month, thanks to further cost-cutting initiatives.
We also have an additional liquidity buffer by postponing part of 2020 CapEx, which have been reduced from approximately EUR 120 million to about EUR 80 million. It is important to point out that the remaining CapEx of EUR 40 million are only postponed and do not have a negative impact on our key strategic initiatives. Finally, I would like to highlight that we have no material debt maturities until 2022. Before opening the floor to your questions, let me give you an update on 2020 outlook, which remains high uncertainty. Traffic, after reaching a trough in April and May due to the COVID-19 pandemic and subsequent lockdown, has gradually recovered over the summer period of June to September to levels approximately 50% below 2019. This, as you know, is the most important period of the year for ENAV in terms of traffic.
It is also worth noting that the comparison is unfavorable, considering that 2019 was a record year in terms of traffic for ENAV. In recent weeks, we are seeing growing concerns on a potential second wave of COVID and a number of countries have introduced limitations on travel, quarantine, lockdowns, et cetera, which could have a negative effect on air traffic in the last part of the year and into early 2021. It is currently not the case for Italy, but the potential slowdown of traffic in other European countries could have a negative impact on international travel and overflight. In light of this uncertainty, we have decided to withdraw the fiscal year 2020 outlook we had communicated in May 2020 of a mid-single-digit decline in net revenue versus 2019 and a high single-digit year-on-year decline in net income.
However, we confirm our outlook on CapEx for 2020 of approximately EUR 80 million. We also decide to postpone any decision on the 2020 financial year dividend until the approval of the full year 2020 results by ENAV's board of directors in order to have a clear view on the cash flow dynamics for the last part of the year and a more robust view on the business outlook for 2021. In the meantime, we remain fully focused on maintaining operational continuity while ensuring maximum protection for our employees. We are continuing to deploy further cost efficiency measures in order to preserve our margins and liquidity. With that, we are now ready to answer any questions.
Excuse me. This is the conference call conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone with a question may press star and one at this time. The first question is from Nicolò Pessina of Mediobanca. Please go ahead.
Yes. Good afternoon, all. First question on the derogation to the regulation. Can you provide us with some quantitative details to better explain the reasoning behind your best guess? In particular, how much would there be in the balance generation in the first half of 2020 if there had been no derogation to the rules? Second question, do the air navigation service providers get anything in change for this derogation? Is it just a net loss for the system, or can we expect maybe a more supportive framework when we go back to normality in 2022? I would like to ask a comment, if possible, on the tariff we should expect for next year and maybe an update on the traffic in September and your best guess for the last quarter of the year. Many thanks.
Okay. I will start with the first one about the derogation and what is our guess that we use for our half-year results. What we have done in following what the proposal of the commission said in their paper, we try to figure out what could be the best environment where we could move together with the national authority. We worked with our national authority in July and August, tried to find what could be the level of cost that could be in some way acceptable for ENAV. On the base of that in some way was also discussed with the European Commission, not approved, nothing at all, it was agreed at least at the national level with our national authority. We have set our figure in our half year results. After we have an idea what could be the figures in 2020 or so.
That's for the first point. The second point, I would say net loss, there's not anything on the table at the moment. It will be part of negotiation when we have to negotiate the target for 2020 and 2021, but also for 2022, 2023, and 2024. There is a general negotiation. For what concerns the tariff, let's say the 2021 tariff, they will be the one that we present in the performance plan. At the moment, just see it, and that is definitely will be the one that we already in some way give some disclosure some months ago when we show what could be our tariff, take in consideration our previous performance plan. The reason is 2020 and 2021 tariff, as the commission is not able to change or to approve any performance plan before the end of 2021, they will accept that tariff.
The balance that we will calculate, we will be able to recover in the future year in the way that you already know. To what concern traffic forecast, at the moment, there is not any forecast done for Italy by the official Office of Eurocontrol, so the STATFOR. They are supposed to publish for all the countries in November, the one that will be considered the base of traffic, so the forecast for the traffic that we have to consider in our performance plan. November, December, there will be some data available. Right now, what we are considering in our internal forecast is the general scenario that the Eurocontrol published. It's not for Italy, but it's just a general view of all European country, all Europe. We are using that to inform our internal forecast analysis.
For September, Nicolò, the traffic we're seeing is very much in line with what we saw in August, down about 50, 55%. Yeah.
[Full end of the year]
[Yeah]
All right. It's all very clear. Can you just remind us which kind of disclosure you gave in the past on the 2021 tariff?
Okay. It is my mistake. I thought we did, but we didn't. If you take in consideration, Sorry, I thought that we gave some disclosure on 2021, but we didn't. Let's say that we are in some way down, in a way very close to 2020 tariffs, because it's part of the previous performance plan. The traffic that is considered and the costs that are considered are the ones that in some way follow 2020 tariffs and performance plan. They will not be updated with the current traffic, but they will be more or less in line with the ones that we are applying in 2020.
Excellent. It's clear. Thanks a lot.
You're welcome.
The next question is from Luigi Grelli of Equita SIM. Please go ahead.
Yes, good afternoon. I have three questions. The first one is on the net financial position. Assuming a route terminal traffic in the range of -50% on a full year basis, could you provide a guidance for the net debt by year-end? The second question is on the RP3. What is your feeling on negotiation, in particular on the Determined Costs for 2022? How far, in your view, would be the Determined Costs compared to the pre-COVID level, you are feeling so far? The last question, if you can quantify the assumption related to the balance side cutting for STATFOR that you include in for STATFOR and which amount do you expect for 2020 and 2021? Thank you.
Okay. For what concerns the net financial position at the end of the year, I don't think we give any disclosure. I just give you some information about the next month. As our CEO said before, in November, we will cash in also traffic that was done in February, that we were supposed to cash in in April. This is a really important amount of money. Now we are cashing regularly what is the traffic that the airline are doing in this month. This is a good signal. Looking what is our position now, in the first half of the year, we will a little bit worsen this number, for the reason that, as we said, we had a cash out of about EUR 45 million on average per month.
At the moment, the traffic that we cash in is not able to cover totally this amount of money. Probably we will worsen a little bit that number. I mean, the number that you.
Maybe just worth adding, Luigi, that the cash burn in the second quarter is obviously the worst cash burn of this year, because clearly we had four months of no cash in whatsoever from the airline. Clearly Q3 and Q4 should be slightly better, but in any case, we will be absorbing cash.
Yeah. For what concerns the. Okay. The negotiation of RP3 will officially start after the Commission will approve the new regulation, the change of the new regulation. This will happen, I would say, just in a month, more or less. It's not possible at the moment to say what would be the level of cost that will be recognized in 2022, but for what we think is it would be a mix between the negotiation we will have for 2020, 2021 in terms of cost reduction, because we need to do some action. Probably not too many, not too much, because just to keep the cost base in a consistent way to restart to over-perform in 2022 onwards. That's more or less our suggestion. It's not yet discussed with the European Commission. We had some discussion internally with the national supervisory authority. That was important.
Not with the European Commission. For what concerns the impact of the balance by the end of the year, based on our assumption and based on what I said before, we expect to have an air cap on the balance recorded for 2020 of around EUR 65 million to EUR 70 million. That's what we expect. That will be on our net revenue directly. This air cap to the balance of 2021. Actually, sorry, the one in 2021 should be lower than the one in 2020. 2020, around EUR 65 million to EUR 70 million. In 2021, less.
Thank you very much. Very clear.
The next question is from Arthur Strub of Credit Suisse. Please go ahead.
Hi there. Thanks very much for taking my questions. Two from me. I guess the first one was really around why you had decided to sort of drop the guidance at this point. I mean, I guess when we spoke at Q1, we would have been thinking about a level of traffic whereby operating revenue would have been fully offset by balance, and therefore, nothing really would have changed there from a sort of total revenue perspective. Just wondering why that's happened. Second question, really. You're obviously accruing at determined unit cost of EUR 66.02 for this year. Clearly the cost base that you're accruing is materially lower than what you would have expected prior to the COVID-19 crisis.
My question there is, will the regulator subsequently adjust the Determined Costs down, and therefore there will be an adjustment in respect of the tariffs accrued for the year, or indeed, is there something that I have missed there? I guess my third question is, you have obviously mentioned that you are going to have five years to utilize the balance receivable, and you are obviously accruing more balance than you ever had. How confident are you that you are going to be able to utilize all of the balance within that five-year period? Thank you.
I will start from the last one, for the balance. Yes, the balance is going to be very high for 2020, if we look at what was the balance a couple years ago, even in 2019 tariff, I remember that we cover more than EUR 60 million of balance in that year. If you think that we should split in five years that amount of balance, you can imagine that more or less, we are assuming that same amount of money, same impact on the tariff that we had in 2019. For what concerns the second question about the cost, we are not really having a heavy drop of cost. Actually, what we are using are the variable part of other costs.
The one related to the vacation balances, extra time, travel cost, all the variable parts that we stopped and some way we are not having, because there's no traffic. While the traffic will come back, we will have this cost. The regulator knows that, and we are telling that it's just an impact of the reduction. The costs are just impacting this year because we have no traffic, but our cost, and in general term, um..
Fixed.
Fixed costs, rigid costs. For that reason, we will start probably 2022 with amount of Determined Costs very in line, more or less in line with the one that we used to have in 2019, 2020 tariff that we applied. For what concerned the outlook. Yes. The main reason why we built the outlook is because the uncertainty on the traffic scenario that was increasing since the three, four months ago when we give the outlook. The reason is mainly related to the possibility of second wave of COVID-19, and then for the regulation, because the regulation is not set yet, even if we know more or less what could be the impact. We try to anticipate it also with the figure that we are giving to you, what could be the impact?
Until we will finish the negotiation with the commission, with the regulator, we cannot say that will be definitely the impact.
Got it. Just one thing to sort of clarify there on the second one that you answered on the cost side. Correct me if I'm wrong, but the finalization of the Determined Unit Cost for 2020 will take place by the end of 2021. You obviously talked about, for example, this year, your labor cost being EUR 5 million per month lower for nine months of the year, so sort of EUR 45 million on a full-year basis. I guess what I'm trying to understand is that if the regulator had the opportunity to look back over that period, my question is really, why wouldn't they adjust that EUR 66.02 Determined Unit Cost down proportionally? Indeed, is that something that I've missed there? Thank you.
The main reason is if they adjust the tariff, they should adjust not only the cost, but also the traffic. This moment, if they adjust the traffic, the tariff would increase around EUR 100. The reason is they prefer to lose EUR 50 million in cost other than increasing the tariff so much, because the impact on the system would be much higher. In this case, we prefer to generate balance that we will recover in three years onwards, other than adjusting the tariff and reducing the impact on service provider, but increasing impact on the system, on the airlines.
Sure. That's really helpful. Thank you. I guess just finally on that point, if the regulator does come out with a different Determined Unit Cost, whatever that may be, whether higher or lower, at the end of 2021, what would happen? Would there be a sort of big restatement to your 2020 and indeed part of 2021 accounts, or how would that work?
No. At the moment, as we said, we have the European Commission, we will set all the targets for 2020, 2021 around April 2021. That time, they will also set the target for 2022, 2023, 2024. After that, we will submit the performance plan. It will be clear what is the amount of Determined Costs that will be allowed for 2020, 2021 onwards. We have to wait. Before that, it's impossible to know. We have to wait. Yeah. The people know.
Thank you very much indeed. Thank you.
You're welcome.
The next question is a follow-up from Nicolò Pessina of Mediobanca. Please go ahead.
Yes, just a very quick clarification. The EUR 65 million- to EUR 70 million air cap you expect for 2020, does it include both the en route and the Terminal Zone 1 and 2?
Yes.
All right. Thanks.
The next question is from Jishika Savani of Barclays. Please go ahead.
Hi, good afternoon. Just one follow-up question from me. Could you talk about how the industrial plan has been affected by COVID? Are you still going ahead with your plans to shrink the four air control centers down to two operations in two that are left, and your plans around retired technology and so on at the remaining two? Can you confirm if those plans are on track?
I give you the answer regarding the strategic plan. We've kicked off a review of our business plan 2020-2024 over the last weeks, and together with management team and the consultant, we expect to have a new plan at the beginning of 2021. Let me say, however, that our business plan will depend to target what the European Commission will set in mid-2021. As such, we've not planned to host an investor day to present the new business plan, and we will only officially communicate our targets after we have a clear indication from the European Commission. Generally, in terms of business initiatives, our updated business plan will maintain as much as possible continuity with the initiative included in our last existing business plan. This is what I say regarding that. Thank you.
Gentlemen, there are no more questions ready for you at this time. Excuse me, there is a follow-up question from Arthur Strub of Credit Suisse.
Thank you for taking the additional question. At a glance, it looks like the personnel costs in the second quarter were sort of down less than you might have seen in the first quarter there of the prior year. Is that sort of quick analysis right? If so, why is the decline smaller? Thank you.
Yeah. Let's say that the main reason is we push a lot on vacation balances that were on the first quarter. As actually people start to finish the balance, this part of the impact was resumed. Then we start to came back a little bit.
From 2nd of May.
Yeah. From 2nd of May, part of us came back in office, part of the cost reduction that we were able to achieve previously, we were not anymore able to do it. That was the main reason.
Understood. Thank you.
Gentlemen, there are no more questions ready for you at this time.
All right. Thank you very much, operator. Thank you very much, ladies and gentlemen, for being on the call this afternoon. As always, if you have any follow-up questions, please reach out to myself or to Vittorio. You have our contact details. With that, thank you, Mr. Simioni. Thank you, Luca, and thank you everyone for being on the call this afternoon. Bye-bye.
Bye-bye. Thank you to all. Bye. Thank you.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones. Thank you.