Earnings Call: Q2 2020

Sep 29, 2020

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the ENAL First Half twenty twenty Results Conference Call. As a reminder, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Stefan O'Sanghini, Head of Communications 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 NAM's First Half twenty twenty Results Call. I'm here in Rome with our Chief Executive Officer, Mr. Pawel Sinoni and Luca Coleman, our Chief Financial Officer. As always, we will go through a formal presentation followed by a Q and A session, whether we'll be happy to reply to. With that, I will hand the call over to Mr. Pawtin Goni. Okay. Thank you, Stefano. Good afternoon, ladies and gentlemen, and welcome to NUP six Mov twenty twenty Results Call. As you know, starting from March 2020, the reaction of sector has been severely impacted by COVID-nineteen with our route service unit down 58.4% 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 May, we saw a pickup 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 third quarter twenty twenty results, which we have indicated we have indicated a net revenue decline of a mid single digit year on year and the net income decline of a high single digit. The first time, we confirm our CapEx outlook of roughly EUR 80,000,000 for the year, lower than the normalized CapEx spend of around 120,000,000. 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 $416,000,000 to EUR $372,000,000 despite a reduction in revenues from operations of 61.7%, which was largely offset by a positive balance. As we will explain later in the presentation, the balance recorded in the 2020 is based on our best estimate on the effect of the temporary delegation 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 EUR45 million net revenue decline, leading to an EBITDA of €88,000,000 down by €27,000,000 year on year, minus 23.5%. Our EBITDA margin was up 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 2020 with a net profit of EUR 15,600,000.0 compared to a net profit of EUR 34,000,000 recorded in the previous year. To conclude the figures, the CapEx was EUR 27,900,000.0, in line with the 2019. In spite of the very critical situation created by coronavirus, we are well equipped to work at the store, banking on a strong liquidity profile and a solid balance sheet that provides resilience over the medium term. Okay. Moving on the slide two, let's have a closer look at the traffic trends recorded in the first six months of twenty twenty. As I said before, our traffic performance reflects the severe effects of the COVID-nineteen outbreak with a total decrease of 58% in service units year on year. That line is the combined effect of the of a very strong growth in traffic experience in January and February when when service unit growth was 8.511.2%, followed by a sharp decline in March, reaching a 90% decline in April and May with a minor recovery in June. Looking at in detail at our list, it's important to observe the largest percentage of decline in traffic over 2019 was mainly related to the international flights with national traffic and other flights recording a less severe decrease. As a result, as you can see in the graph, the split of total routes saw other flights accounting for 44%, international 36% and national 20%. The decreasing 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 lead 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 U. 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 charging 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 we have seen a gradual improvement of the situation in Italy with our service unit over the key summer months in June of July and August down 67.555.8%, 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 operations, down 61.7 from EUR $229,000,000 to EUR 164,000,000, largely offset by a positive balance of EUR 191,400,000.0. We saw a material decrease in both our group and terminal revenue, down sixty four point five percent and sixty five point eight percent, mainly as a result of the lockdown following the COVID-nineteen combined with lower tariff in 2020 versus 2019. However, thanks to the existing traffic potential mechanism, its net revenues decreased from EUR €417,000,000 to €372,000,000 which includes the positive balance of €191,400,000 but mainly driven by our route and terminal traffic materially lower than forecast. It's worth highlighting that the positive balance posted in our first half twenty twenty accounts includes our best estimate of the impact of the European Commission valuation proposal for 2020 and 2021 published last July as you know. The derivation under under indirectly imposed a cap on the total amount of balance that can be recovered by service providers over the two years in order to have the traffic service sector in such a difficult scenario. The best estimate is based on the assumption of another rate reduction of Enel's total active terminated cost of 2019 to be applied to the cost recoverable in the 2020, assuming a recovery of the capital balance accumulated for 2020 and 2021 over five years from 2023. In spite of this, positive contribution to our top line came from the non regulated business, mainly due to revenue from ABS or NAV that was not consolidated during the 2019, with revenue almost tripling year over year to €11,700,000 Finally, quarter operating income was €16,600,000, a slight decline of €1,300,000 over H1 twenty nineteen, mainly due to a lower level of EU funded found projects. Following up on the cost on Slide four. In the 2020, we continue to deliver on our OpEx efficiency plan, implementing further exceptional initiatives in the second quarter to offset the material decline in revenue and help to reduce our cash burn. Overall, total costs were reduced by 5.9 year on year, reaching million. More in detail, as you can know on the graph, we recorded external cost savings of about €3,600,000 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%. Also due to lower consumption in our facilities driven by most admin staff is not working from March onwards as well as thanks to lower cost related to our full IP digital network. We also showed a reduction by 5.7 of that, some expenses related to the work performed by our subsidiary, Tecnoskaya, given the lockdown, but mainly due to the health emergency. This significant reduction, we are partly counterbalanced by higher cost for external services linked to COVID-nineteen specific initiatives undertaken by the company, including extraordinary segmentation of our facilities. It's worth noting that the external cost savings on a like for like basis, including the impact of EDS and NAV, which was not consolidated in the 2019 were a significant 10.9%. Customer cost in the first six months of the year decreased by €13,900,000 to €235,200,000 down 5.6% year on year. The further result the further result was mainly driven by the material decreasing variable pay and social security cost as a consequence of reduce overtime and the use of outstanding and a cash balance of our customer. The fixed salary component increased 2.5% year on year as an effect of 2018 labor contract in Renovas. And more importantly, the inclusion of EDS and Mab employees in H1 twenty twenty. I want to underline that excluding the EDS and Mab employees, customer 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 2020, organization, including ADS and LAN, reached health count of 4,004 230 people. Lastly, capitalizing internal work was almost stable year on year at about €13,200,000,000 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-nineteen since 03/02/2020, Enel has undertaken several measures to deal with the implication of the traffic performance of 2020 and beyond. As mentioned in our first quarter results, Aerocontrol and the vast majority of its member states agreed to postpone the payment of traffic changes with airlines to service provider related to the period of February 2020. This is intended to allow airlines to take down 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 payments will be postponed in twenty twenty twenty one with a locked cash in due in August 2021. However, it's worth noting that April and my traffic was down about 90%, which in terms of revenues also means much lower revenues on a COVID truck this month and the minimum impact on cash flow of roughly €35,000,000 in total from March to May. Starting from the traffic flow in June, the normal two month billing and settlement cycle has been restated, and the receivables from airlines for both June and July have been cashed in in August and September, respectively. Let me now give you a summary update on the regulatory approval process for AirP3 also in light of the recent reorganization program to the single European Sky performance scheme made last July by European Commission for the next year or for the present and the next year, 2020 and 2021. As you you may recall, the 33 regulatory framework was approved in February 2019, and the EU wider competition targets were set in May 2019. Based on this framework and targets, each country submitted their performance plan for at the 2019. The approval by the European Commission of Country Specific Performance Plan for FLT3 originally scheduled for March 2020 was put on hold due to the COVID-nineteen pandemic. Based on the follow-up submission by Italy, they apply 2020 tariffs on the following: 56.02 per service unit for our group 167.33 for permanent one one one hundred and sixty seven point five six for Ground 2, 298.93 for ground 3. These tariffs were all reviewed compared to those applied in 2019. In July, European Commission published proposal for a temporary delegation to single European Sky performance and charging scheme, allowing for special rules for the setting of the union wide performance targets for 2020 and 2021 in order to mitigate the impact of COVID-nineteen and ensure the long term liabilities of the sector. Based on this proposal, the commission expects the National Supervisory Authority to provide for data and information about traffic forecast for 2020 to 2021 by November 2020, as input for the setting of the revised human wide performance target for FP3. Then the commission should adopt the revised performance target for RP3 no later than later 2021. Later, the nation of supervisory authority should submit a new RP3 performance plan up to 2024 to the commission within July 2021. And finally, the commission should approve the RP3 performance plan by year end 2021. It's possible that the timeline will meet by one or two months, but the performance plan certainly is affected to a quality, in any case, by the 2021. That's all I have to say about this part of the presentation. So I'll now hand the the call to Luca Colma for the paying the view of the first financial health. Okay? Thank you, Mr. Peony. So let's move on 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 Enwood 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 annual activities, which saw a revenue decrease of EUR 200,100,000.0. Terminal activities also posted a negative performance with revenue down EUR 71,000,000 over last year. It is worth noting that both results were impacted by the effect of COVID-nineteen emergency, combined with the lower tariff supplied in 2020 on Elwood and terminals. And as mentioned before, the significant negative contribution of revenue from operations was, however, largely compensated by a positive contribution of €221,200,000 The increase of annual panels over last year was 164,100,000, while the increase in terminal balance over last year was EUR 70 EUR 67,100,000.0. As we mentioned previously, the balance recorded in the first half of this year was defined as the best estimate by the company on the new rules proposed by the European Commission that allow the potential recovery of the lower revenue resulting from the COVID-nineteen pandemic based on the recovery of the total actual determinant costs for 2019, minus a percentage per cap borne by the company. Despite the material reduction in the top line of EUR44.8 million, thanks to our relentless focus on personnel and external cost discipline, we managed to contain the impact on EBITDA to EUR 700,000.0, reaching EUR 88,000,000 with an EBITDA margin of 23.6%. Looking at the P and L on Slide nine, with regard to below EBITDA items, G and A was substantially stable year on year at €65,000,000 Provisions and write downs in the 2020 grew to €2,300,000 materially higher than those recorded last year due to the application of the valuation model applied to measure the recoverability of receivables in light of the current issues faced by the air transport sector. This is a 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. The items net financial income and expenses were stable year on year. You can also see material decrease in income taxes in the first half, driven by lower taxable income and by the positive impact of a deferred taxes on balance sheet provision. As a result of the low movements, the first six months of twenty twenty, we recorded a net profit of EUR 15,600,000.0 despite the severe impact on revenue caused by COVID-nineteen. Moving on to Slide 10, let's have a look to our cash flow and financial position. Enel's liquidity and financial position remain solid. In addition to the cash available availability sorry, the cash available at the June 2020 of €218,300,000 We also have financial investments for €25,000,000 and underlying credit lines for €247,500,000 of which €150,000,000 committed. Our net financial position as of June 30 decreased by €225,000,000 year on year, reaching a net debt of €98,500,000 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 EUR112.1 million and payments of amounts due to the Italian Air Force for EUR10.2 million. Partially compensated by the receipt of a VAT refund and funds received under OPM financing projects and funds. Envelope and terminal charge from June onwards have been cashed in regularly, which means within the normal two months billing and settlement cycle. On the cost side, we have reduced our average cost run rate from approximately €50,000,000 per month to EUR 45,000,000 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 120,000,000 to about EUR 80,000,000. It is important to point out that the remaining CapEx of EUR 40,000,000 are only postponed and did 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 uncertain. Traffic after reaching a trough in April and May due to COVID-nineteen 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 Enova 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 energy. However, in recent weeks, we are seeing growing concerns on a potential second wave of COVID, and the number of countries have introduced limitations on travel, quarantine, lockdown, etcetera, which could have a negative effect on air traffic in the last part of the year and into early twenty twenty one. This is currently not the case for Italy, but the potential slowdown of traffic in other European countries could have a negative impact on information of travel and overflight. In light of this uncertainty, we have decided to withdraw the fiscal year 2020 outlook we have 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 million euros 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 Chorus Call conference operator. We will now begin the question and answer session. The first question is from Niccolo Pepcina of Mediobanca. First question on the debugation to the regulation. Can you provide us some quantitative details to better explain the reasoning behind your business? In particular, how much would have been in the balance generation in the 2020 even where it had been no derogation to the rules? Second question, do you be in 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? Then 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 regulation and what is our guess that we use for our half quarter result. Half a year, sorry, year ago. What we have done in following what the the proposal of the commission said in in their in their paper, we try to figure out what could be the best environment where we could move together with the national authority. So we work with our national authority in July and August, try to find what could be the, let's say, the level of cost that could be in some way acceptable, right, acceptable for Italy and so for right now. On the base of that, that in some way was also, let's say, discussed with the European Commission, not approved, at all, but it was just already I mean, there is a base that was agreed at least at the national level with our national authority. We have set our figure in our half year results. And after we have an idea what could be the end of the, you know, the 02/2020. What what could be the figures in 2020 or so? That's for the first time. The second point, I would say NetEase, there's not any any thing on the on the 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 twenty twenty twenty twenty and '24. There is a general negotiation. For what concerned the tariffs, let's say that 2021 tariffs will be the one that we present in the performance plan. So at the moment, just see it and that's something that is definitely that will be the one that we already in some way give some disclosure some months ago when we show what the our tariff taking consideration our previous performance plan. And the reason is that 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. And then the balance that we will calculate, we will be able to recover in the future year in the in the way that you you already know. To what's concerned traffic forecast, the moment, there is not any forecast done for Italy by the official office of your control, so the staff. I think they're supposed to they are supposed to publish for all the countries in November, but the the one that will be considered the the the the base of traffic. So before I got for the traffic that we have to consider in our performance plan. So then November, December, there would be there would be some data available. Right now, what we are considering in our internal forecast is the scenario that you're going to general scenario that you're going to publish. And it's not typical it's not for Italy, but it's just a general view of all European country or Europe. And we are using that for to to for now in general forecast and outlook? For September, Nicolo, the traffic we're seeing is very much in line with what we saw in August. So down about 505055%. All right. So very clear, maybe if I can, can you just remind us which kind of disclosure you gave in the past on the 2021 tariff? Okay. Sorry. It's my mistake. I thought we did, but we didn't. But if you take in consideration what are the tariffs sorry. I I just I I was almost I thought that we we gave some some disclosure on 2021, but we didn't. Let's say that we are in some way down in a way very close to 2,020 targets because it's part of the previous performance plan. So the traffic that is considered and the costs that are considered are the one that's in some way follow 2020 tariff and performance plan. So yeah. They will not be updated. That's they will not be updated with the the current traffic, but they will be more or less in line with the one that you that we are applying in 2020. The next question is from Luigi Gedeli of Equitasium. Please go ahead. Yes. Good afternoon. I have three questions. The first one is on the net financial provision. So assuming the route to terminal traffic in the range of minus 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 terminated cost for 2022? So how far, in your view, would be the terminated cost compared to the pre COVID level you're seeing so far? And the last question, if you can quantify the assumption related to the balance side cap in for staff that's included in for staff and which amount do you expect for 2020 and 2021? Okay. For what concerns the net financial position at end of the year, I don't think we give any any disclosure. It's just that just give you some some information about the next month. At the our CEO said before, in November, we will cash in also traffic that was done in in February that we were supposed to to cash in April, and this is a really important amount of money. Now we are cashing regularly what the the, you know, what what the traffic that the airline are doing in this in this month. So this is a good signal. Looking what is our position now in the in first half of the year, we will a little bit worse this number for the reason that, as we said, we have a cash out of about $45,000,000 on average per month. And at the moment, the traffic is not the the traffic that we cash in is not able to recover to cover a totally give the this this amount of money. So probably we will have worse than we will be that that number. I mean, the number that you Maybe just worth adding, which is that the cash burn in the second quarter is obviously the the worst cash burn of this year because clearly we had four months of no cashing whatsoever from the airline. So clearly Q3 of Q4 should be slightly better, but in any case, we'll be absorbing cash. For what concerns the Okay. The negotiation of f p three will I mean, actually, officially start after the commission will approve the the new regulation. So the the change of the new regulation. Evaluation. And this will happen, I would say, just in a month, more or less. It's not possible at the moment to say that what what would be the level of cost that would be recognized in 2022. But for for what we are 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 to do some action. Or probably not too many, not too much because just to keep the the cost being in a in a consistent way to restart, to over perform in 2022 onwards. That's more or less our situation, but it's not yet discussed with the peer commission. We have some discussions with the initial authority that was important, but not with the peer commission. So what could benefit 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 aircraft on the balance of the quarter for 2020 of around 65,000,070 million dollars That's what we expect. That will be on our net revenue directly. And these are capped to the balance of the screen '21 actually, sorry, and the 01/2021 should be lower than the one in 2020. So 2020, around $6,570,000,000, million and 21,000,000 less. Thank you very much. Very clear. The next question is from Arthur Poonclaw of Credit Suisse. Please go ahead. There. Thanks very much for taking my questions. A few 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, we spoke at Q1, the operator 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. So just wondering why that's happened. And second question really, you're obviously accruing determined unit cost of 66.2 for this year. But clearly, the cost base that you're accruing is materially lower than what you would have expected prior to the COVID-nineteen crisis. And my question there is, will the regulator subsequently adjust the determined cost down and therefore there'll be an adjustment in respect of the tariffs accrued for the year or indeed if there's something that I have missed there? And I guess my third question is you've obviously mentioned that you're going to have five years to utilize the balance receivable, and you're obviously accruing more balance than you ever have, how confident are you that you're going to be able to utilize all of the balance within that five year period? I will start from the last one for the balance. Sir. The balance is going to be very high for 2020. But if we look at what was the balance couple of years ago, even in 2019 tariff, I remember that we cover more than 60,000,000 of balance in that year. And if you think that we should split in five years that amount of balance, can imagine that more or less we are assuming that same amount of money, same amount of it's an impact on the tariff that we had in 2019. For what concerns the second question about cost, are not really having a drop of cost, heavy drop of cost actually. What we are using are the valuable part of our cost. So the one related to the vacation balances, extra time, travel costs, all the valuable part that we stopped and some way we are not we're not heading because there's no traffic. While the traffic will come back, we will have this cost and the commission I mean, the the regulators knows that and we are telling that that it's just an an impact of the reduction to cost are just impacting this year because we have no traffic. But our cost are, in general term, very fixed fixed cost, rigid cost. And for that reason, we will start probably 2022 with the amount of determining cost very very in line, more or less in line with the one that we used to have in 02/2019, 2020 tariff that we have like. And then for what concern the the outlook, yes. The the I mean, the main reason why we build the the the outlook is because the uncertainty on the the scenario traffic scenario that it was it was increasing since the three or four months ago when we did the the the the outlook. And the reason is mainly related to the possibility of second wave of COVID. And then for the regulation, because the regulation is not set yet, even if we know more or less what could be the impact. And we try to anticipate with the also with the figure that we are giving to you what could be the impact. Until we will not be able I mean, we will finish the negotiation with the commission, with the regulator, we cannot say that that would be a definite impact. Got it. Just one thing to sort of clarify that on the second one that you answered on the cost side. So mean, correct me if I'm wrong, but the finalization of the term unit cost for 2020 will take place to the by the 2021. You've obviously talked about, you know, for example, this year in your labor cost being million euros per month lower for nine months of the year. Sort of €45,000,000 on a full year basis. And I guess what I'm trying to understand is that if the regulator has the opportunity to look back over that period, wouldn't they or my question is really why wouldn't they adjust that €66.02 to turn the unit cost down proportionally? Or do you think something that I've missed out? Thank you. The main reason is if they they adjust the price, they should adjust also the the sorry. If they adjust the price, yes, they should adjust not only the cost, also the traffic. And this moment, to the adjusted traffic, title would be increased around EUR 100. So the reason is that we prefer to lose, you know, EUR $50,000,000 in cost other than increasing the tariff so much because the impact on the system would be much higher. And 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 by increasing impact on the system on the airlines. Sure. That's that's that's really helpful. Thank you. I guess, finally on that point, you know, if you're if the regulator does come out with a different determining unit cost, whatever that may be, you're gonna hire at the 2021. What would happen? Would that be a sort of big restatement to your 2020 and indeed 2020 well, part of 2021 accounts? Or what how would that work? No. At the moment, as we said, we have the routine commission, and we'll set the target, all the targets for 2020, 'twenty one in April, around April 2021. And that time, they will also set the target for twenty two, twenty three, twenty four. After that, we will submit the performance plan. That will be I mean, it will be clear what is the the the the amount of the term because that it will be allowed for 2021 and onwards. But, you know, we have to wait Right. Before that, it's impossible to know. We have to I mean, we have to wait. Yeah. May April, May. Thank you very much indeed. Thank you. You're welcome. The next question is a follow-up from Niccolo Pesina of Mediobanca. Please go ahead. Yes. Just a very quick clarification. The EUR 65,000,000 to 70,000,000 aircraft you expect for 2020, does it include both the En route and the terminal Zones 1 And 2? Yes. Alright. Thanks. The next question is from Dichy Kasavyani of Barclays. Please go ahead. 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 kind of shrink the four area control centers down to two operations in in in two that are left and your your plans around kind of on retired technology and so on that the remaining two. Can you can you confirm if those plans are on track? So I give you a the answer regarding the strategic plan. We keep it we keep it keep it off a review of our business plan twenty twenty, twenty twenty four over the last weeks, and together the management team and the consultant, we expect to have a new plan at the 2021. But then say, however, that our business plan will depend to target that European Commission will set in mid twenty twenty one. As such, we've not planned to offer an Investor Day to present a new business plan, and we'll only officially communicate our targets after we've 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 initiatives included in our last existing business. This is what I say regarding that. Thank you. Gentlemen, there are no more questions registered at this time. As you see, there is a follow-up question from Arthur Struklav, Credit Suisse. Thanks 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 prior the prior year. Is that sort of quick analysis right? And if so, why is the decline smaller? Yeah. Let's say that the main reason is we push a lot on vacation balances in the first part of the I mean, the first quarter. And as actually people start to finish the balance, this is part of the impact that was I mean, the impact was reduced. And then we start to came back a little bit in the second half. Yes. For May, we came back to part of us came back to in office. So part of the cost reduction that we were able to achieve previously, we're not anymore able to do. But that's the main reason. Wonderful. Thank you. Gentlemen, there are no more questions registered at this time. Alright. Thank you very much, operator. Thank you very much, ladies and gentlemen, for being on the call this afternoon. As always, we if you have any follow-up questions, please reach out to myself or to Vittorio. You have our contact details. With that, thank you, mister Simone. 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 telephone. Thank you.