Good day, thank you for standing by. Welcome to the Aena nine months 2021 results presentation. At this time all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you will need to press star and one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to our first speaker today, Emilio Rotondo, Finance Director. Please go ahead.
Thank you. Good morning to everybody and welcome to the nine-month results presentation. This occasion, we will presenting José Leo, Aena CFO, and myself. Also, we will try to be brief, so we will just highlight the things that we consider the most important this quarter, and we'll move into the Q&A session right over. Now, I hand over the floor to Mr. Leo. Thank you.
Thank you, Emilio. Very good afternoon to everyone, and welcome. Let's start on the usual slide with the key highlights. Rather than going one by one through the different graphs, I'm going to try and summarize what, as Emilio said, are the most relevant messages or indicators this particular quarter.
First of all, you can see that the accumulated figures for the first nine months of the year are showing an improvement. They are showing a recovery, which clearly is driven by the traffic performance. To the point that we can say that the third quarter of the year has been a very good quarter, given the place where we are coming from.
First of all, we have a significant EBITDA level in the quarter close to EUR 500 million, although it's fair to say that a significant chunk of that is linked to the way we are accounting for the minimum guaranteed rent revenues that I will come to that in a minute. Also, we have a positive, for the first time in a good while, a positive net result of EUR 223 million. Once again, I'm talking about the quarter three in isolation. Probably more importantly, we have a positive cash flow, operating cash flow of EUR 240 million, which is taking us in the right trajectory to be able to. Sorry, I have someone here making.
Taking us in the right trajectory to become, I would say, cash flow positive by the end of the year pre-CapEx, which is consistent with the comments I made in the previous quarterly results presentations. As I said, this is not surprisingly driven by the passenger number evolution, although we, on an accumulated basis, are now recovering close to 36% of the 2019 figures, at this time of the year. When you look at the quarter in particular, we have reached 60% of the traffic achieved in Q3 of 2019. It's once again a good and positive trajectory.
We are heading for the 40%+ level of recovery for the whole year vis-à-vis the 2019 figures that I'm sure you remember I mentioned at the second-quarter results presentation. We expect to close the year with something between 40, 42, maybe 43% of the total traffic in 2019, which is once again positive, taking into account the COVID-19 background. Of course, that doesn't mean that I mean we can be 100% confident that this is going to be let's say moving in the same direction going forward. In every occasion I share this kind of discussions with yourselves, I mention that we are entirely in the hands of the evolution of the pandemic.
Any negative signs of the pandemic going the wrong way would for sure trigger decisions, actions by governments that could be damaging to our business. If nothing happens in that regard, we expect this positive trend to carry on over the coming months. Clearly, the capacity that the airlines are now initially putting in the market for the winter season is a very good signal of their determination to bet on the recovery. Literally, the total capacity they are putting forward online in our network is exceeding the total capacity they put forward in 2019 in the winter 2019 season. That's promising.
Once again, one thing is to have that capacity declared, different thing is to operate it. That will be fully dependent on the COVID-19 news. Also, an important factor is to see how full these aircraft will fly. Without dwelling any more on these global figures, I would like to move on to the next slide to focus on one particular thing, and only one, which is the commercial revenues. As you know, we have been accounting on the basis of the IFRS 16 for the whole of our minimum guarantee rents, as we are entitled to do so, because they are clearly set in our contracts.
This is the case at the end of September 2021 as well. We are accumulating already EUR 388 million in MAG revenues in 2021 that can be added to the EUR 620 million that we already accumulated in 2020. We have around EUR 1 billion in MAGs accounted as assets in our balance sheet. Well, you know that recently the Spanish Congress, the Spanish Parliament, approved a law that will force Aena, a bespoke law, addressed to Aena specifically, that will force us to cut the MAG that we can invoice and charge to the operators, for as long as the traffic levels are below the 2019 levels.
That should be done on an airport-by-airport basis. That will apply to three categories of commercial revenues: duty-free shops, specialty shops, and food and beverage outlets. The law will apply retrospectively from the fifteenth of March 2020, and as I said before, until such time by which we recover the 2019 levels on an annual basis. That law has been published and enforced on the third of October 2021. That means that it is only on the third of October 2021 that we will introduce a change in the way we account for the MAGs. You might be surprised that in September the figures are not affected, but this is it. This is the way the accounting rules apply.
As I said in a number of occasions, whether or not these rules are intuitive, we cannot afford to have an audit qualification, so we have to apply the rules strictly. On the 3rd of October, the new law will become applicable, and there are a number of consequences. The most important, of course, are the consequences in terms of cash. We have calculated the total impact of the total amount of MAGs and other revenues that we will be losing from the 15th of March 2020 onwards until the final date of application of the new law, and we have quantified that at EUR 1.35 billion. It's less than the EUR 1.5 billion we declare some weeks ago.
The reason for that is that, once we refined the calculation, we took into account a number of things. For instance, some of the activities that we initially thought were affected by the law were not affected by the law. There were a number of. Well, one very important point as well, when we ran the first calculation, we took into account all the potential duration of the different contracts.
This is not the case anymore. Of course, we are not going to extend any contract that would be affected by this law. Otherwise, we would be somehow a little bit silly. When we take into account that the base case is going to be a non-extension. Of course, that will reduce also the impact of the.
Well, the amount of cash that we will be losing to this new regulation. The figure now is EUR 1.35 billion. I will be more than pleased to answer questions later on. I'm sure there will be a number of them about this particular subject. This is the cash impact. How about the accounting impact? Well, on the third of October, there will be two consequences that resulting from the application of this new law. Consequence number one is the only positive thing coming out of this new of this particular law.
This means that from that moment onwards, we will start accounting for the revenues as they are accrued on the basis of the underlying sales, the variable fees, plus any potential impact of the minimum guaranteed rent as amended by the law, that honestly I expect not to be very material, but I might be wrong, but of course this is just a guess, no?
The positive thing here is that the revenues and the cash will be in sync and will follow similar trajectories. This is very helpful for you all, and for us as well. What about the backlog, so to speak? What about the amount of receivables that we have been accounting for until the third of October?
Well, the receivables in our balance sheet, as a result of accounting for MAG until the third of October, will be written off, but not day one, but on a straight-line basis over the years of duration of every single contract. That means that that amount. That hit will be taken over a number of years. It will be different depending on the contract. Of course, we are now in the process of calculating that potential impact. There will be an impact on the last quarter of 2021, of course, there will be an impact on 2022, there will be an impact on 2023, 2024, so on and so forth. That will be a straight-line impact calculated through all these years.
Of course, the total amount, finally, the final impact will be fully dependent on the actual traffic numbers. The figures we are sharing with you, of course, are calculated on the basis of our best expectation or our best forecast for the coming years. One final comment on this particular point of accounting. As I said before, we have accumulated EUR 1 billion in MAGs. Not all those will be affected by the new law, what we call the final provision number seven of Law 13/2021. No, the majority of it will be affected for obvious reasons, because the largest chunk of our revenues are driven by duty-free shops and food and beverage outlets.
There will be a part of that EUR 1 billion that will be treated as we did before. I cannot tell you how much is going to be with precise data because we are running the calculation on a contract-by-contract basis, but probably something between 70%-80% of this total EUR 1 billion would be potentially impacted by the new accounting. Please don't hold me accountable for this figure because we are running the calculation right now. Then the next big thing this quarter is DORA 2. Sorry, I would like to.
I was expecting you to make questions on the new law through the Q&A, but I forgot to mention something just in response to some of the headlines today in the media. We are going to abide by the law. We are not planning to, I don't know, do silly things. We will abide by the law. We will apply the law. As I said before, in accounting terms, that will be reflected in the fourth quarter, not before, for obvious reasons. In terms of the relationship with our commercial tenants, of course, we will be returning back money to them. We will be canceling invoices.
It's not that simple and that straightforward because there are a number of cases in which the dispute is being assessed in court. When making decisions about effectively doing things with the invoices, in every case where we are now dealing with a court, we will be taking care of that.
We may or may not be automatically canceling the invoices. It will depend very much on how our lawyers assess the right way of proceeding. This is just using the law and being, let's say, consistent with the fact that there are judges involved in the process. That doesn't mean in any way, shape, or form that we are not going to abide by the law.
Of course, when all this, if you like, confusion could be driven by the 2020 MAGs that were invoiced in 2020. The 2020 MAGs that were invoiced at the beginning of 2021. Of course, the MAGs of 2021 should be invoiced in 2022, and we won't do it.
We won't invoice MAGs that are not covered by the new law. We will be only invoicing those MAGs that are clearly consistent and in compliance with the new law. That will happen in January, February 2022. I wanted to clarify this as a by the by. DORA 2. The most important highlights about DORA 2 are, number one, tariffs will be flat, which is not exactly what we asked for, but it is what it is.
Secondly, the one very important thing, the adjusted annual maximum revenue per passenger of any particular year won't be acting as a cap, as a, let's say, stopper for the next year. That means that if for one particular year, as a result of the significant adjustments introduced to the calculation, the IMAAJ is going down by a particular amount, that won't be a cap for the year to come.
This is helpful because of course, any adjustments should be reflected. This is what it is. It would be very damaging if that particular annual adjustment is setting a condition that will impact the rest of the years in the DORA. We are clear on that.
That has been discussed and clarified by both the CNMC and the DGAC, and I would be more than happy to answer questions if you wish later on. Secondly, the COVID-19 expenses will be recovered, and they will be recovered over and above the adjusted annual maximum revenue per passenger, as calculated on the basis of the standard formula. I believe the rest of the features of this DORA 2 are important, but probably are not the ones that you are more focused on. Of course, we will deal with that at the Q&A session. I think I will stop here, and we can start asking questions. Thank you.
Thank you, José. Operator, we can move into the Q&A session, please. Thank you.
Thank you. Dear participants, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. The first question comes from the line of Luis Prieto from Kepler. Please ask your question.
Good afternoon. Thanks a lot for taking my questions. I had a couple of questions. The first one is coming back to the MAG situation, the accounting. I was curious to see how you will approach the quarterly reporting of those MAGs, given that there's I'm not sure what traffic you need to be taking according to the new legislation. If it's a yearly traffic, then quarterly reporting can be difficult. Are you gonna take just quarterly traffics and go with that? The second question is regarding Article 27. Excuse my ignorance here. I think I get the sense that it got a bit lost with all the noise, and I haven't seen anything being mentioned or your position on this one.
Can you remind us where that is at the moment? Thank you.
Yes, of course. Well, with regard to the MAGs, you are absolutely right. You have to assess the MAGs on a monthly and quarterly basis. Definitely the only actual and final figure will be calculated at the end of the year. Frankly, this is the case in many other things when dealing with any company, you run estimates. I'm not particularly worried about it. The write-off I call it write-off, although it's not strictly speaking a write-off because it won't be taken to P&L day one. The write-off of the accumulated receivables would be distributed on a straight line basis. That wouldn't be.
In a way, this is massive progress in terms of clarification with regard to the situation we have been living through, no? You're right, there will be some estimates. I don't think that will be a massive problem at all. The element we will take to P&L over years will be calculated on a straight line basis, so there will be no, let's say, major issue there to identify the impact. With regard to Article 27, I think the ball is still rolling.
Of course, in terms of the time already, let's say, behind us, since we submitted the request, I think we could be taking a negative view on it, in the sense that there has been no feedback, so silence about it, formal silence. That means that you could think, well, this has been thrown to the basket, no, to the. I don't think it is the case. We believe that there is still a dialogue, there are still discussions ongoing, and we are not giving up, but I'm afraid I cannot share with you any more information. The ball is rolling, and we will keep pursuing the case.
The outcome, obviously, is something nobody can predict at this stage.
José, from what you're saying, the ball is rolling, which is obviously good. There's no timeframe. There's no-
Yeah. I'm afraid you're right. Of course, we cannot live forever with this situation, but I think we should be patient. In this particular case, the most important thing is not to, well, let's say, close the door, no? As long as the door is not closed, then let's keep working on it.
Sounds pretty clear. Thank you.
Thank you. The next question comes from the line of Cristian Nedelcu from UBS. Please ask your question.
Hi. Thank you very much. Thank you for taking my questions. Maybe the first one, we are seeing a rising inflationary environment, either in wages, either in electricity costs. Can you talk a little bit as you look at 2022 about potential productivity improvements that you could pursue in the Spanish network? And equally so, how do you assess the ability of the travel retailers to actually raise prices next year and effectively pass through some of the inflation that they are seeing? The second question, just looking at Q3 or at the current situation, could you give us a bit of color in terms of the retail spend per passenger before any marks or anything like that?
Just the behavior of the tourist, how much they're actually spending these days versus pre-COVID levels, and if you can comment on your expectations or moving parts into 2022, headwinds and tailwinds to this retail spend per pax. The last one, if I may, the regulation effectively talks about an OpEx per APU ceiling at 266-271, which is higher versus what you achieved in 2018, 2019.
You are at around EUR 2.4 OpEx per APU. So I guess, can you comment a little bit? It looks like there is a bit of space for Aena to perform on the OpEx side. Would that be a fair conclusion, or are there any other points you want to flag there? Thank you.
Okay. Starting by the cost, inflation pressures, of course, definitely it's one of these bad news that everybody is facing now, and we are not an exception to that. Particularly the energy prices, the energy costs are pressing up significantly. The rest of the pressures, let's say in terms of raw materials, construction, salaries, things like that, we haven't seen it yet in action.
We stay vigilant, but so far we haven't seen it. I wouldn't rule out the possibility of these problems to start popping up over the coming months? Of course, we will try to manage very strictly our cost base. Don't forget that our best tool to deal with that is our procurement process.
We are sometimes criticized by our procurement processes here in Spain, because we tend to be well, very prescriptive about what we want. I think our procurement process is somehow a guarantee that every possible saving in the supply chain will be delivered, will be obtained, because we run competitions in every single procurement process.
And trying to manage properly the operation, which is what we do every day, believe me, and this is the reason why we are so efficient. The pressures are there and could potentially increase, and we will need to deal with them. I cannot tell you we have a solution for because first of all, we don't know what the nature of the beast is going to be.
We don't know whether this is going to be permanent or temporary. Even the central banks don't know. We have to remain vigilant. I will link this with your last question. Of course, the EUR 2.71 per ATU is something we believe is challenging, but we are up for the challenge. The problem here is the first years of the DORA 2, because the first years of the DORA 2, the traffic, the passenger numbers are affected by the COVID-19 impact. We will struggle, if you like, to reduce the fixed element of the costs if the number of passengers are subdued.
We need volume to grow, at least in line with the DORA, or preferably more than that. Because when you have a cost base, you can be very efficient, but with less number of passengers, you will struggle more to reach the 2.71. I don't know if I'm clear enough, but you can later on confirm it or otherwise. Travel retailers rising prices. Well, honestly, I don't know. I would be too brave to say.
I don't know. I think the trends are, as you know well, on one side the challenges of recovering the traffic, this is the first challenge. I think their ability to increase prices. Just guessing, believe me, this is not my business. They...
It will be dependent on the level of recovery of the traffic. I'm pretty sure that if there is a healthy recovery, they will try and they will potentially succeed to do it. What else? Headwinds and. Sorry. Go.
Yeah. The spend per passenger, so these days and how you see headwinds, sales in next year. Thank you.
Okay. The spend per passenger is a mix of things. I would invite you to probably talk to my IR team. There are different trends in different activities, or maybe some of my colleagues want to jump now and answer you. There are different trends in different activities. Of course, the most important thing these days is not the spend per passenger. Being important is the number of passengers, because the trends are affected by many different things. For instance, if you look at the rent a car activity, the rent a car is interesting because you have a relatively lower level of international travelers hiring a car. There is a car scarcity.
The prices are going up, and then the revenues is going up for the operators. Obviously, you look at the duty-free shop, the trend is completely different because as we are missing the international passenger, the spend per pax is not at all good. These kind of things, there are different dynamics, and I wouldn't like to answer with a sort of a one-size-fits-all response.
I think the headwinds definitely will be if the traffic doesn't recover. I think for me, the key is traffic, believe me. The traffic will heal the wounds and will heal the relationships and will make people, let's say, forget part of the past. Not all, but part of the past. Without traffic or with the COVID-19, well, that will be the most significant headwind you can think of.
Thank you very much.
Cristian, just to give you a little more maybe detail on the spend per pax on the retail. Let's say that is recovering if we compare it with the first months of the year in the three activities, duty-free, specialty shops and food and beverage, okay? Of course, there still exists a gap between what is the current spend per pax and the one we had in 2019. Maybe trying to give a little more insight, let's say that duty-free is performing better, and maybe the larger would be the specialty shops in terms of that gap until they match again the numbers they had back in 2019.
There's still room to be recovered, as José was mentioning. That would depend a lot on the kind of traffic and the traffic recovery itself.
Understood. Thank you very much.
Thank you.
Thank you. The next question comes from the line of Neil Glynn from Credit Suisse. Please ask your question.
Good afternoon, everybody. I'll ask two, please. The first with respect to the commercial business following on from all of the very helpful detail you provided. Is it possible to give us a feel for the maturity profile of the current contracts in terms of what kind of percentage of contracts might mature in 2022 versus 2023? That would be very helpful.
And then the second question, with respect to traffic prospects, and I guess capacity possibly even more so than traffic. I think it was very notable that you mentioned that you're seeing capacity plans higher this winter versus pre-pandemic. Which I guess is surprising on one hand. How is your thinking evolving as we look forward to next summer?
Because I presume that kind of statistic must give you increasing confidence that at least your more leisure-focused airports may well see full traffic recovery for peak season next summer. Thank you.
Well, with regard to the maturities, I think Emilio, maybe I don't know, could share with you some more precise data. I can tell you know, the most significant tenant we have in the business, its contract was running until 2023 with the possibility of October 2023, with the possibility of extension to October 2025. Well, the extension won't be on the table anymore, as you can imagine. We are not going to enjoy ourselves the, let's say, suffering cuts in our revenues for two more years if it is not strictly necessary. This is the most important one by far. Emilio later on, maybe could share with you some other relevant cases. With regard to the traffic prospects, of course, we are.
Once again, everything is subject to the evolution of the pandemic and the, let's say, weather of this or whether or not this is moving forward or just going backwards again. But we would be, at this stage, very positive about the leisure traffic in the summer 2022. Of course, without sharing with you any specific data, because I think at this stage will be a little bit confusing. You know what we put forward in our DORA 2 about 2022. That was our expectation, and that's it. Our view was that the full recovery of the traffic to 2019 levels wouldn't be achieved until 2025, end of 2025, beginning of 2026.
Inside those boundaries, I think clearly we are positive, or we would like to be very positive about 2022, the summer 2022 leisure traffic. If things go the right way, I think we would see the majority of the leisure traffic coming back. Fingers crossed.
Many thanks.
Okay. This is Emilio. Regarding your first question, I think the larger part of your analysis on for you to do that work is to duty-free items and duty-free shops that has been mentioned by José. If we talk about the specialty shops, you might take around two to three years average life. In the case of food and beverage, a little bit longer, maybe four to five, or even six in some cases.
Excuse me, Neil, is your question?
Yes.
Has been answered?
Yeah.
Yeah.
Very, thank you.
Okay, perfect. Thank you. The next question comes from the line of Siobhan Lynch from Deutsche Bank. Please ask your question.
Hi, good afternoon. Thank you very much. I have two questions, if possible. The first is just on CapEx. I think there's still, from what we've seen in the presentation, a good chunk of the CapEx to come out in Q4. Firstly, what are those kind of projects that are left? And secondly, is there a risk of any delays to these because of the kinds of materials and labor shortages that we've been seeing in the market in the last few months?
Then my second question is just thinking about the longer term, for the retail contracts. In terms of the revenue per passenger you take from the retailers, the kind of turnover, I think you call it the concession fees. How could this evolve post-COVID when we think about signing new contracts?
Would you expect to increase the percentage of turnover that you kind of sign into these contracts in, you know, offsetting maybe a lower max amount? Or how would you kind of expect these to evolve in the medium and longer term? Thank you.
With regard to the CapEx, I know it seems challenging, but we are still confident that we will deliver the EUR 800 million there or thereabout. I'm not aware of any major pressure from the supply chain or the logistics, let's say, the logistics side of the business that could pose major risks on that. As I said before, so far in our case, the only thing that we can see crystallizing as a problem big time is energy costs. The rest, well, so far so good. Later on, maybe Emilio can comment on the projects, but I think there is a variety of them.
It's not that there is one particular project or two particular projects that are lagging behind. It's more a general rule, the way we operate and the way our works are progressing over the year. Taking into account that at the moment, we are not dealing with major projects. Normally, when you are spending, I mean, the amount of CapEx we are spending right now, there are no huge projects ongoing.
With regard to the commercial revenues, I think it's difficult to say now because we are precisely at the time of reflecting with the help of others, definitely third parties and people in the industry across the world, on what is the right way forward in terms of setting the conditions for new tenders.
We are not pulling from our interest in keeping a significant MAG structure in place, but who knows? Maybe we have to change our mind. Now is the time to start that process, that reflection, testing what's happening around the world, talking to the different players. When one player is leaving, someone probably is very, I don't know, very keen on coming. It's exactly the kind of thing we are going to do over the coming months and probably one year in order to be ready for the largest contract to be tendered out, probably soon after.
Okay, brilliant. Thank you very much.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star and one on your telephone keypad. The next question comes from the line of Nicolo Pessina from Mediobanca. Please ask your question.
Good afternoon, all. Thanks for taking my questions. First one is on the K-factor for next year. Can you give us an idea of the amount of yield concentration you expect in 2021 based on your traffic estimates? Second question on the amount of incentives you expect during the winter season. We have seen an extension of the incentive scheme for the air carriers. Last question, if you can remind us the amount of COVID-related sanitary costs to be recovered in the tariffs over the next couple of years. Thank you.
Okay. With regard to the K-factor, for 2023, we are accumulating now clearly yield concentration, obviously. At the end of September, we have close to EUR 54 million in accumulated, let's say, yield concentration effect. The interesting thing here is that in the third quarter, we experienced yield dilution, not a huge amount, something in the region of EUR 8 million.
This is well, it's a change in the trend because. Hopefully, that will be the case in quarter four. I cannot tell you at this minute what would be the final figure for the year. Our expectation now is to get dilution and then the EUR 54 million to go down rather than up.
With regard to the COVID costs, the COVID costs incurred in 2020 have been EUR 53 million, and in the first nine months of 2021, EUR 81 million. Emilio can answer on the incentives.
Yes. Thank you, José. On the incentives, just we'll remind you that the board of directors approved yesterday the new incentives for the winter season. These incentives are similar to the ones we had on the last summer season. The change is that the threshold in order to achieve or to have the discount is 75%, okay, of the operations recovered versus 2019, okay? It would be also applied to the landing charge, okay? Our forecast of what would be those incentives will depend on the traffic on this winter season. Hopefully, as you can imagine, the larger the discount we have to apply, the better, because it would mean we have a higher traffic.
It would be around, let's say, on current forecast, around EUR 20 million.
Okay. Very clear. Thanks.
Thank you. The next question comes from the line of Andrew Lobbenberg from HSBC. Please ask your question.
Oh, hi there. Can I just ask, I should know this, of course. The traffic recovering to 2019 levels. Does that calculation only take place on a calendar basis or is it a rolling twelve-month basis? Then in terms of the writing off or writing down of the MAG that are on the books. We're kind of getting the understanding that the majority of it or the largest part of it should be written off by October 2023, I guess. Where will it fit in the P&L? How will you report it? Thanks.
Okay. Well, it is calendar year, clearly. I think, well, intuitively, I don't want to share with you yet the path of the, let's say, impact in P&L of the write down, as you said. Yes, intuitively, it's true that probably by the end of 2023, the majority of it will be down for obvious reasons. As I said before, the most important contract that we are dealing with has an end in October 2023. It's clear that that is going to be the case. There will be a tail end, but clearly, less material. I think that.
I was just wondering, where will it be accounted?
Yeah, you're right.
Is it below EBIT?
No, I honestly haven't got into that level of detail, but I have nothing against that being part of the EBITDA, of course. I don't want to. I mean, if this is above EBITDA, better off. I want our EBITDA and our cash to be as closely as possible. I mean, accounting rules prevented us from doing that for a while. Obviously, it still will prevent us from doing that for a while, but hopefully, that will go in the right direction. Without taking any commitment, I suppose that will be part of the clearly pre-EBITDA costs.
Sorry, I'm gonna be really stupid here. I mean, I thought this was a build-up of stuff that you've booked, but you have not had cash in. When you run it down, it's not cash out, is it?
No. Exactly, Andrew. Don't forget one thing. What this write down would be doing would be to take out of the revenues things that were in the revenues over the last let's say a year and a half or less than a year and a half. Okay. Of course, that wouldn't be in line with the cash. At least we'll make this oddity, if you like, disappear. Then every single revenue from the third of October 2021 onwards will be clearly based on fees or max adjusted according to the law. That means that the cash and the revenues will be working very closely. This is what I mean.
Of course, you have to get rid of the past somehow, and that will be done on a straight line basis. There will be no connection between that adjustment and the cash, but that's inevitable, no? And this is it. In the meantime, I want to be clear, I didn't mention this before. We are going to apply the law, we are going to abide by the law, but we will challenge the law. In every instance, we feel it's appropriate, we will challenge the law because we believe it's some. It's a decision that is beggars belief.
Okay. Thank you.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star and one on your telephone keypad. The next question comes from the line of Akhil Khatri from Citi. Please ask your question.
Hi. Thanks for taking my questions. You know, I have two. The first one is on the MAG, you know. Rather than rolling the impairment over the life of the contract, did you consider to take the write-off all in one go? I mean, because it gives a lot more clearer number, no? This is the first question. The second one is, you know, I mean, we appreciate that there's a lot of calculation going on for the EUR 1 billion revenue that's already accounted for in the receivables. By when can we expect a more clearer number, you know, on the EUR 1 billion write-off, you know, that needs to be done? Thank you.
I presume that for anyone being an old accountant, as I am, your suggestion would be fine, but unfortunately, the international accounting standards won't allow us to do that. We have to under IFRS 16, we have no alternative other than to account that over the life of the contracts, of every single contract on a straight line basis. There is no alternative. There's no option. Sorry, but I forgot your second question.
Hold on, Akhil. Maybe when you ask your second question, put your mute after you finish because I think there's some echo.
Yeah. My second question was really, you know, on the clarity on the EUR 1 billion receivables that you already accounted for. By when can we expect more visibility on the potential impact of that EUR 1 billion?
Well, what I told you, I think, is. There is a return here. Very annoying. Is everybody on mute? Okay. Well, fine. Fantastic. No, no. Well, anyway. The. As I said before, out of the EUR 1 billion, the majority of it will be subject to the new law, the final provision number seven of the new law. This is going to be around 70%-80% of the total. Of course, by the end of the year, you will have the figure in precise terms, but we are still running the calculations. I think this information is more than I think enough to have a good guess, no?
Okay. Thanks a lot.
Thank you.
Thank you. The next question comes from the line of José Manuel Arroyas from Santander. Please ask your question.
Good afternoon, gentlemen. I have two, actually. One is on DORA 2. I have a question on tariffs and the impact of the type of traffic you might have from now on. You mentioned before that one good element of DORA 2 is that the cap on the IMAAJ has been removed, and I agree with that. I have one question. What happens if the revenue per pax that Aena effectively realizes is below the IMAP? Presumably, that could happen if traffic is dominated by short-haul traffic, which is a lower yielding traffic. Can Aena reclaim the delta between the IMAAJ and the IMAP?
My second question is on Aena's dividends from now on, especially in light of the IFRS 16 rule that will force Aena to book negative revenues for several years, which I presume would also dent net income. Will Aena change its dividend policy? Will it reformulate it somehow to account for this one-off impact, or should we assume lower dividends for several years? Thank you.
Okay. Clearly, the IMAAJ for every year will be calculated and then compared with the IMAAJ of the previous year. If the IMAAJ of the previous year is higher, before this clarification, you could think. Sorry, the other way around. You calculate the IMAAJ for one year, and then if the IMAAJ for this year is higher than the IMAAJ for the previous year, until the clarification was made, you could say, you could think, "Well, I cannot effectively implement my IMAAJ." Now this is not the case. You have the reference of the IMAP. As long as the IMAP is above, you can go perfectly well ahead with that calculation. Then you say, what if in one particular year you have dilution? Correct?
Well, if you have dilution, you have the K-factor to recover it in two years' time. So any revenue per passenger, which is above or below what you have been entitled to for a particular year, will be recover or return it back in two years' time. I don't know if I'm answering your question, but I understood that was what you were asking for. What you are asking is whether or not these particular accounting entries will be adjusted at the time of deciding what is the net profit for the purpose of.
Yes.
Well, I don't know. It's too early. I mean, we need this to be a decision to be made by the board of directors once they set the new dividend policy. Frankly, at this stage, I cannot even think of it.
Next question, please.
Thank you. Elodie Rall is asking the next question from JPMorgan. Please ask your question.
Oh, hi. Just two remaining questions please on my side. First, the provision of EUR 30 million, can you explain where you've taken it? Did it hit the EBITDA level, or is it below the EBITDA? That's my first question. The second question is just on tariffs on 2022. When will we know actually the actual tariffs after the K-factor and the COVID compensation and all that? What's your best guess in terms of tariffs for 2022? Thanks.
Okay. First of all, the 30 million of the application of the impairment to the financial assets, the IFRS 9, that is sitting above EBITDA. So this has an impact on EBITDA. Okay? The 2022 process, well, the approval of the 2022 tariffs is, I think, going to start very, very quickly. I think, I hope by the end of the year, they will be approved, by the end of 2021. Of course, you know, the big elephant in this room will be the K-factor impact, which is very significant. We are talking about EUR 150 million of yield concentration that should be given back to the airlines.
Also there are other elements there to take into account, which probably will have a positive impact. Anyway, what is clear is that with the K-factor in mind, the natural trend will be for the tariffs to go down vis-à-vis 2021. This is pre-COVID costs because the COVID costs will be recovered on top of that. Okay? This is pre the incorporation of the PPI, the inflation index. Before those two elements, obviously you should expect a reduction in charges vis-à-vis 2021, but I wouldn't like to go any further.
Okay, thanks.
Thank you. The next question comes from the line of Charles Maynadier from Kempen. Please ask your question.
Hi, good afternoon. Apologies, José, to come back on the 2022 tariffs. I just wanted to understand if the reasoning works. Assuming that we know the K-factor impact using the DGAC traffic forecast, and assuming that you can recover fully the 2020 COVID-19 costs, it's fair to assume then a tariff decline of high single digits for 2022. As a follow-up, if we look at the path of tariffs for the next DORA, we should see a drop year-on-year in 2022, and most likely an increase in 2023 and again an increase in 2024. Would that make sense?
You said 2022 pre or post COVID-19 costs recovery?
No, taking everything into account. The K-factor and the COVID-19 costs together.
In that case, it wouldn't be high single, y ou said high single digit?
Yes.
No, no, definitely I don't expect that to be the case considering t he COVID-19 costs as well. It's quite likely. I think the CNMC themselves said some days ago in a public event that they are likely to consider all the 2020 and 2021 COVID costs until September in the calculation of the 2022 charges. They said that, so it's not me.
No. Okay. So then it would offset most of the big part of the drop, indeed. It's quite likely that we'll see an increase in 2023 tariffs.
Yeah. Yeah. Yeah, definitely.
Yeah.
Expect that. Yeah.
Oh, clear. Then another last follow-up on the dividend. Is it fair to assume that we will get a medium-term visibility on the payout on the new policy? Just if you could confirm that.
Yeah, I think and the sooner the better, frankly. It's not that we have any interest in delaying that decision, but I think probably the board of directors will need. I'm just guessing, yeah, but of course, I'm part of the process. I think the board of directors probably will like to see 2021 closed and then the trends in winter 2022. That's my view, no? Then, of course, I think for everybody, it would be good to have clarity about our strategy, our dividend policy as soon as possible, for sure. We are also very keen on that. I think now it would be premature, very premature.
Okay, thanks, José. That's helpful.
Thank you. The next question comes from the line of Nicolas Mora from Morgan Stanley. Please ask your question.
Yes, good afternoon, guys. Just two quick ones. First one on, I mean, you highlighted the importance of cash. So with the outflows on net working capital linked to retail up into September, should we expect another large outflow in Q4? Or, since from here things are gonna normalize somewhat, the outflow should neutralize. From that, can you give us a bit of a feel of where you think net debt could end up at the end of 2021? Same questions for 2022. When things normalize, should you finally get paid for the 2021 retail revenues and then benefit from a big inflow of net working capital, which will decrease down then quite dramatically next year? That's the first question.
Second one is just on costs. We've seen costs so creeping back, let's see, what is expected more and more, I mean, closing the gap versus 2019. With the expected good traffic in the winter, would you expect costs to actually match 2019 level in Q4 and actually in 2022, considering, you know, a bit of inflation from energy rising in Spanish minimum wage, could we actually? Could 2022 costs go beyond the 2019 level?
I think, Nicolo, really let me tell you that this particular time the working capital movement is a bit of a red herring because you have to go to the bottom line. Why? Because clearly the working capital is moving dramatically as a result of the MAX being recorded. You know, I have never been telling you that those revenues are going to generate cash anytime soon. Now with the new legislation in place, well, we don't count on that cash to run the business. Of course, we will work hard, we will challenge the law, we will do our best to get back to the offer we made or something in that along these lines.
We are not naive enough to expect that cash to come in anytime soon. As this is going to change a little bit as a result of the change in accounting. Once again, I would recommend you to focus on the bottom line operating cash flow because the working capital is driven by the MAX. Of course, it's dramatically changing for obvious reasons. We are accounting for revenues that we are not collecting. I hope that helps. And in that sense, the business is clearly the cash generation is ramping up, and it's good news.
Sure.
Yeah, go on.
José, I mean, you've barely been paid in 2021, so you've been paid a little bit in Q1. So you've been accruing hard cash retail revenues that should be paid most likely in February and March next year. Then we start to normalize a little bit EBITDA and cash. So some of that cash should come your way, not Q4, but clearly next year in quite a meaningful way.
You have to distinguish two different things. One is the fees, the revenues that are driven by the underlying sales. They are coming in, and they will carry on coming in, and they will be growing as long as traffic is growing. Everything is down to traffic. Traffic will drive the whole thing. Then you have the MAGs.
The MAGs, with this decision made by the Spanish Congress or the Spanish Parliament, the MAGs will be contributing, well, not very materially. For a while, you will have to focus on traffic. For a while, meaning until the 2019 traffic gets back, and this can take years. For those contracts, I don't mean new contracts. Any new contract we sign won't be subject to the new legislation.
For the existing contracts, forget about the MAGs. The MAGs will contribute, but it wouldn't be a massive amount of cash. The MAGs that we accounted for in 2020 and 2021 so far are those that I'm telling you will be taken to P&L. The 2021 MAGs under the old rule won't be invoicing in January 2022. I mean, I think it's much more simple. It's just looking at the cash you generate, looking at the revenues generated in the commercial business on the basis of the traffic and the underlying sales. Plus probably still some MAGs, no doubt, but those MAGs that are allowed by the new law, and that's it. That wouldn't be massive.
That wouldn't be the sort of hundreds of millions of max that we used to deal with in the past. Okay? In terms of costs, I think I don't expect quarter two to four to get costs back at 2019 levels. Actually, if you look at the figures today, you have to take into account that the total costs these days are inclusive of the COVID-19 costs that are to be recovered. If you compare costs, the costs incur in quarter three now, excluding the COVID-19 costs with the costs to incur in quarter three 2019, obviously it's not a massive saving, but are meaningfully below, and that will be meaningfully below in the next quarter.
Beyond that point, the inflation pressures I mentioned before, so far we haven't seen anything massively important, but we don't know. These trends could enhance over the coming months and years.
Okay. Just to remind us, the electricity bill, it's, I mean, you mentioned it's around EUR 80 million per annum, no? On 2019 prices.
Okay. Emilio will answer.
Yes. Effectively, it is this quarter we have seen the electricity prices rising. The impact on this quarter in September versus September 2020 is EUR +30 million. That, as long as the prices stays at the levels we are seeing now, we will have that impact on our OpEx in Q4 and onwards if that's the case.
You maybe for your forecast, you should maybe separate that electricity prices versus the rest of the OpEx that will follow the trend that has been mentioned by José.
Right. Thank you very much.
Thank you, dear participants. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad. The next question comes from the line of Marcin Wojtal from Bank of America. Please ask your question.
Good afternoon. Thank you. Just one question is on your OpEx allowances. I think you suggested that you're quite comfortable with your ability to outperform a little bit what is in the DORA, or at least match it. When I compare what is finally in the DORA for OpEx allowances with your initial submission to the regulator, you actually included higher OpEx allowances. Can you just elaborate a little bit how are you thinking about operating costs and whether you can outperform a little bit or not?
Well, I can summarize this in one word, challenge, particularly in the first two years. Beyond that point, it's not that we are saying that we can outperform. If we could outperform, well, we haven't submitted these figures. I think there is room for us to work hard and to improve the figures maybe. The first two years are going to be challenging because of the level of traffic. When you have a significant element of fixed costs as every airport normally have, the lower the traffic, the more difficult it's for you to operate efficiently, so to speak, or more rather than efficiently, to move your costs down accordingly, no? It's challenging. Challenging.
Okay. Thank you.
Thank you. The next question comes from the line of Dario Maglione from Exane BNP Paribas . Please ask your question.
Hi, José, Emilio. I have two questions, one on traffic expectation for Q4 and Q1. Can you give a bit more detail in terms of your expectations and assumptions that underline those expectations? Question number two on MAG. Thanks for sharing the information, it's very clear. Just to give us a sense, for Q3, Aena charged, I think EUR 133 million. How much MAG would have been charged if the new law applied in Q3? A question on cost. For the nine months, Aena booked in the P&L EUR 81 million of other net losses, stating that these expenses are related to the pandemic. Shall we assume that when the pandemic is over, these costs go to zero?
The final question again on cost. There are a few moving parts like, you know, less concession fees, a U-turn of some ICAO costs. In terms of OpEx in Spain for the Spanish airports in Q3, how do they compare to 2019? Thanks.
I didn't quite get your last question, but we will come back to that. With regard to traffic, well, the traffic for the fourth quarter, I think will be at the level that will deliver what we are sharing with you, which is something for the total year, for the total 2021 year, we will be something in the region of, let's say 40%-43% of the total traffic. This is it. Emilio can maybe give us some a little bit more detail, but this is it. For the first quarter of 2022, well, I would stop short of telling you anything else than I think in the absence of any setback on the COVID front, I think there will be progress, there will be improvement.
The capacity that the airlines are putting in the market for the winter season will be matched with an increase in load factors. Although they want to operate the capacity they are putting in the market now, believe me, more than 100% of the 2019 levels, I don't think that that's going to be realistic. The combination of a very ample capacity available plus potentially an improvement in load factors will make the first quarter of 2022 well being part of that improvement trend. Everything subject to the news that we could have from the COVID-19 pandemic side. You mentioned the MAG impact in the before September under the new law. Well, this is a very long shot.
We are still calculating the future, so frankly, we haven't done that calculation, honestly. The EUR 81 million COVID costs hopefully will disappear as soon as the COVID. We are COVID-free, but I cannot guarantee you that. That will depend on the final decision of the health authorities. Remember, we are being paid euro for euro for those costs. It's not ideal because. Probably what is more important is the constraints that these kind of things pose on the operation. At the end of the day, we recover these costs, so this is not something, let's say, terribly bad. I don't know.
I suppose the health authorities will make a decision if and when they believe they are not needed anymore. The final question, I didn't get it.
Sorry, I'll just simplify it. The OpEx in Spain in Q3, how does it compare to 2019?
You can see, I mean, the numbers are very easy to. Well, OpEx, I have other. I mean, what we call third-party supplies because, you know, the staff costs and the rest of the costs linked to the traffic control are very flat. They are flat, so they don't go up or down. They simply are flat. So we call what we call the other operating or general expenses, I think with regard to 2019 is something like 14%-15% down in the quarter, in Q3. This is what I have. Yeah, this is a note I have now in front of me.
This is just for Spain. It doesn't include.
Yeah, yeah. Yeah, of course. Yeah. If we look at the. No, this is the consolidated, but Spain shouldn't be too far from this. And take into account that the 2021 figures have the Brazilian concession costs and things like that. I mean, we can provide it, but this is the. The headline is 15% down.
Okay, thanks.
Thank you. Dear participants, thank you very much for all your questions today. I would like now to hand the conference back to the speaker for closing remarks.
Okay, thank you very much, everybody, to join this conference call of the September results, and we will talk again with full year results in February. Take care. Goodbye.
That does conclude our conference for today. Thank you for participating. You may all disconnect. The speakers, please stand by.