Hello, and welcome to the ADP first quarter 2021 revenue call. My name is Rosie, and I'll be your coordinator for today's event. Please note, this call is being recorded, and for the duration, your lines will be on listen only. However, you will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If you require assistance, please press star zero and you'll be connected to an operator. I will now hand you over to Philippe Pascal, CFO of Groupe ADP, to begin today's conference. Thank you.
Good Morning, ladies and gentlemen. Thank you for joining this conference call for the first quarter of 2021 revenues. This first quarter is marked a bit by the continuation of the COVID-19 pandemic. As you know, we have a huge impact in our revenue, in particular in the aeronautical revenue, but also in the retail activities in Paris, but also around the world. When you see the traffic figures, slide one, we can see a sharp decline in traffic in Paris and around the world. Groupe ADP traffic decreased by 60% over the first quarter of 2021 compared to the first quarter of 2020. At the Paris level, for Paris Aéroport traffic, this traffic decreased for 75.1% over the first quarter of 2021 compared to the first quarter of 2020.
Globally, we can see that we have a good resilience for our international asset around the world, especially for the moment in India and through TAV Airports. You can see the detail, Slide two, for each airport of Groupe ADP. We can see that in Turkey, we have a decrease compared to 2020, for around 50% in Antalya and Ankara. We can see also that in India, we have a slight decrease of 30% or 35% in Hyderabad and New Delhi, and a strong impact in Jordan with 70% decrease, Chile 66%, and obviously in Paris Aéroport with around 75% decrease. Slide three, we have the detail of the traffic figures for Paris Aéroport.
You can see that if we have a strong decrease in Paris with 75%, we have also a strong decrease in the other European airport, like Madrid with 80%, Frankfurt with 77%, Amsterdam with 83%, and London Heathrow with 88%. We have a different element in Paris to explain this bad performance, especially the strong decrease linked by the new lockdown in France with the domestic traffic, but also the impact of the restriction in Europe for the European traffic and Schengen traffic. We have also good news. For example, with a huge increase of the connecting rate, plus 5.5 points to reach 30% of the traffic for Paris Aéroport. We can see that we have a good resilience of the Africa traffic, but also the Asian traffic. That is good news for us. We can also see the good performance of the North America traffic for the moment.
That is clear. You can see slide four, we have an impact for all the activities of Groupe ADP except the real estate with a good resilience linked by our strategy with long-term rent policy. In the aviation sector, we can see mechanically the decrease in Paris of the level of traffic. We can see also this impact in the retail activities. We have two impact in the retail activities. The first, it's obviously the decrease of the traffic. The second, it's the French policy to close a part of shops at the end of the first quarter. At the same time, we can see that our strategy to concentrate all the flow of passenger in a few number of terminal have a good result.
We can see our sales per pax with a strong increase compared to the next year, to 2020 specifically, with a strong increase +31% to reach EUR 26.1 per pax. That is a good performance, especially in CDG, with a strong recovery in terms of duty-free shop. For our international activities, we can see an impact, obviously, but also moderate impact in TAV Airports with a good performance with just a decrease of around 50% compared to 2020. All in all, we can confirm our guidance, and this is the slide five. We can confirm our forecast in terms of traffic with 2021 group traffic assumption between 45%-55% of the 2019 group traffic. We can confirm our guidance in Paris Aéroport.
You know that we are also very cautious in terms of guidance. We can assume with this guidance the new impact of the new wave of pandemic in France and the new lockdown. We can confirm that we can reach the range between 35%-45% of the 2019 Paris Aéroport traffic. We can mechanically assume the consequences in terms of EBITDA and group revenue ratio between 18%-23%. We can assume our guidance in terms of net financial debt and EBITDA ratio between multiple of 6 to 7x by the end of 2022. For the moment, we know that we have a new wave in France, probably a new wave around the world, especially with the bad news in India. We can, for the moment, confirm our guidance, and assume the fact that we can reach our target for the end of this year.
I am now available for your question. Thank you. Do not hesitate to ask your question.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, you can press star two. You will be advised when to go ahead. Our first question comes from the line of Elodie Rall from JP Morgan. Please go ahead.
Hi, Philippe. Thanks for taking my question. My first one will be on traffic. You haven't changed your guidance, but can you give us a bit more granularity on your expectations for the summer? Are you seeing some bookings improving? You previously said that you were expecting traffic to ramp up in June, is this still the case? That's my first question. My second question is on sales per pax. Obviously very strong performance here in Q1. How do you expect this to go through to evolve for the remaining of the year? How do you actually justify such a strong performance in Q1? Is it because of the such a small number of passengers that actually the comparison is not that relevant, or is it the MAGS?
My last question is on the ban on domestic flights that has been announced by the government, where a two-and-a-half-hour rail journey could be substituted. How do you think this could impact ADP, please? Thank you.
Thank you for your question. In term of traffic forecast, your first question. As you know, when we announce our guidance, our assumption from 2021, we give some element with more color. We can see that for the first quarter, we don't expect a huge traffic, and for the moment with these figures, we can say clearly that we are in line with our forecast for the first quarter, despite the new wave. We don't have a bad news for this first quarter. We are in line. Second element, in fact, with this new wave, we are probably a huge impact in our second quarter, because we expect previously, beginning of recovery in May, end of April and beginning of May, and we know now that we don't have to expect a new recovery before the end of May and June.
All in all, for the summer, in our forecast, our main assumption is to recover around 50% of the traffic. It's good figures, and for the moment, it's very coherent with the assumption of all the airlines. In fact, in our traffic figures, we can see that we are in the low part of the range, not the high part of the range. We can confirm for the moment with forecast, without huge trouble. In term of sales per pax. The key element for us, it's our strategy to concentrate all the flow of passenger. For that, we try to manage our terminals to close and to open in a very smart policy to be able to concentrate this flow of passenger and to create the condition to guarantee a good performance in our retail area.
For that, we have to work with all the airlines, and we have to modelize step by step if we have to open or to close terminal. If we can implement this policy at the same level that we try to do in the end of 2020 and in beginning of this year, in 2021, we can assume the fact that we have a slight increase in term of sales per pax in 2021. For the moment, it's difficult to give you some comfort about that because, as you know, if we know clearly that we have probably a good recovery at the summer, we don't know exactly the quality of traffic and the mixed traffic, and we don't know exactly what is the load factor in Paris CDG and Paris Orly. That is a key element to open or to close some infrastructure.
For us, the sales per pax, it's a key element because we can make the proof that our model, in terms of retail activities, it's a good model, very resilient. This crisis of this pandemic, it's not a game changer in terms of retail. It's just a huge impact, very bad impact. We cannot change our strategy because this strategy makes the proof that when we can implement this retail strategy, we have a huge performance, like this first quarter, for example. For your third question, in terms of the decision of the French government to close a part of flight, in domestic flight, with Bordeaux, Lyon, Nantes. It's just three line between Paris Orly, not CDG. As you know, we have a cap, in terms of number of slots in Orly.
We have also a curfew. We don't expect a huge impact and bad impact for ADP. It's just 1% of traffic for Paris Aéroport. It's 3% of the traffic of Paris Orly. It's very little part of the traffic. First point. Second point, it's not a huge and very important part in term of quality of traffic. We can expect a new medium range routes with more high contributive passenger and with probably a good profitability for the airline and probably a huge load factor, more than the current load factor between Paris Orly and Bordeaux, Lyon, and Nantes. For us, it is not a problem. Perhaps an opportunity, but not a problem.
Great. Thank you very much.
Thank you for your question.
Our next question comes from the line of Cristian Nedelcu from UBS. Please go ahead.
Hi. Good morning. Thank you for taking my questions. Three, if I may. First of all, for Q1, if passenger traffic in Paris was down 75%, the spend per pax was up 31%, but the retail activities revenues were down 69%. What explains this dimension? It seems that the spend per pax doesn't fully fall down into revenue per pax. The second one, just in terms of retail spend per pax the next 12-18 months, we understood your answer earlier with the optimization of space and the self-help that you have there. Could you elaborate a little bit, what trends do you actually see in terms of retail spend per pax over the next two years or so, both positive and negative, and a bit of color from those? Lastly, just looking at your strong growth in the connecting rate recently.
I guess, when you think at the next 12 to 18 months, how do you see transfer traffic evolving in Paris? Do you believe you can benefit from a weak recovery in point-to-point connectivity over the next couple of years? How do you account for that within your midterm traffic guidance? Thank you.
Thank you for your question. For your first question, sales per pax, increase of 31% compared to a decrease in term of traffic in Paris for 75%. Clearly, the key element, it's our strategy to concentrate the flow of passenger to create a good mix traffic. The quality of traffic, it's a key element. For example, we know clearly that an Asia passenger spends a little more than a French passenger. When you open in terminal 2E, Hall K, very huge and very good offer with luxury brands, we can mechanically increase the sales per pax if we put a good mix traffic in this terminal. This is our strategy. We close part of retail area, but when we open the retail area, we try to guarantee the fact that we have a good mix traffic, and this is the main explanation of these figures.
In terms of infrastructure, in fact, we know that for this year, we probably have to open some terminal in the summer. We try to manage this situation with two main issues. First, it's a retail issue, and second, in the management of our cost-cutting plan, because when we open a new infrastructure, mechanically, we have a rebound in terms of OpEx. For the moment, when I can say clearly, we probably stay close the Terminal 1 in CDG for all this year. Terminal 3 and Terminal 2G. That is the three main terminals for the moment. Probably, we try to manage the situation in Paris Orly, to open step-by-step Paris Orly, to accompany the recovery of the traffic. The main element for us is to manage this situation step-by-step and with a huge agility, to be able to accompany the recovery and to guarantee the sanitary rules.
It's a key element for us for the moment. Your last question in terms of connecting rate, obviously in terms of recovery, we expect a huge recovery with the domestic traffic, after recovery in terms of European traffic, and at the end of the day, international traffic. For international traffic, we expect a huge recovery for North America and after for Asia and Africa. When we start the recovery by the domestic and European traffic, mechanically, we have a decrease in terms of connecting rate. In the absolute figures, we expect an increase in terms of number of connecting passenger. It's just a mechanical decrease due to the fast recovery of domestic and European flight, compared to the international flight. As you know, we expect a full recovery of the traffic between 2024 and 2027.
We expect a huge recovery for 70% or 80% in one or two years, probably two years. Due to the fact that we have a huge and full recovery with domestic and European flight. For international flight, we expect a huge recovery, but not a full recovery in the next two or three years. We have to wait for the full recovery, probably 2025, 2026. Thank you for your question.
May I kindly add one short follow-up on my first question? If traffic was down 75% and spend per pax was up 31%, why aren't the retail revenues down 40%? Retail activities are down 69%. What's the incremental negative there that doesn't make this relationship hold?
Yes. In terms of passenger, we have in our decrease of number of passenger, we have the arrival and the departure passenger. When you calculate the sales per pax, we have just the departure passenger. Be careful when you model this element. It's not the same level of traffic. In the sales per pax, we have just the airside shops. We don't have the shops in the public zone. For the moment, all the shop of public zone are quite closed. Be careful, it's not the same element.
Understood. Thank you.
The next question comes from the line of Siobhan Lynch from Deutsche Bank. Please go ahead.
Hi. Good morning. Thank you very much for taking my questions. Three also from me, if possible. The first, would you be able to remind us if you're considering any incentive fees for this summer, or for the rest of this year for the airlines in Paris? I think it was something you'd considered last year. Will you be going ahead with it? My second question, just following on from the questions on French domestic. Are you able to tell us how much of the French domestic traffic in Paris feeds into connecting flights? I guess, flying into Paris, then onto a long-haul flight. Then my final question was just on the flex in the CapEx levels for 2021, and I guess also 2022.
If traffic is much worse, let's say similar to last year, can that kind of EUR 500 million-EUR 600 million CapEx come down further? Then I guess on the other side, if we have a stronger recovery this summer than expected, can that CapEx be flexed up? I guess what is the ease to kind of move that around? Thank you very much.
Thank you for your question. First question, for the moment, we try to implement a new incentive in terms of connecting traffic. We don't, for the moment, have to implement other incentive than incentive in terms of connecting traffic. That is a key element for us because, as I said previously, we have to accompany the recovery of the connecting traffic due to the fact that we start by the recovery with the domestic and European flight. As you know, we try to accompany all the airlines with a good operational exchange and a good element in terms of operational activities like infrastructure. I don't have in mind the figures for the connecting traffic between domestic and international flight. Probably in 2019 is the main part of the connecting traffic. The main part. I don't have in mind.
We can give you the figures after the call, if you want. Your third question, for the CapEx. The CapEx policy, it's a long-term policy. When you decrease the CapEx, we try to decrease the CapEx not for further years, not just for 2020 or for 2021, but we have to decrease the CapEx for several years. First point. Second point, we don't need immediate CapEx when we open a terminal or when we have a strong recovery in terms of traffic. Our job is to anticipate this policy, to prepare the infrastructure to accompany the traffic. Last year, in 2020, we managed the situation to preserve part of CapEx that is very important for us, to accompany the recovery of traffic in 2021, in 2022, and 2023.
For example, we confirm the finalization of the works in Terminal 1, despite the fact that we don't need the Terminal 1 before 2022. We have to finalize now the works to prepare the recovery. It's just a long-term policy. It's not volatile element for us. I can confirm the figures that we have in the slideshow. For 2021 and 2022, the annual invest in Paris will be between EUR 500 million and EUR 600 million per year for the regulated and non-regulated scope in Paris, for 2021 and 2022. After, for 2023 and 2024, clearly, we need probably a slight increase of CapEx. We try to manage the fact that we have to preserve our room of maneuver, our agility, to guarantee a good recovery in term of debt net and EBITDA ratio. Thank you for your question.
Thank you very much.
The next question comes from the line of Jean-Christophe Lefèvre-Moulenq from CIC. Please go ahead.
[Non-English content]. Good morning. I have only one question, it is a follow-up question regarding annual investments. Could we have maybe more flavor on the consolidated investment this year and maybe in 2022, including, of course, TAV and Jordan? Many thanks.
In terms of CapEx and investment at the group level, the main part for around 60%-70% for the consolidated figures of CapEx, it's linked by Paris Aéroport.
Yes.
We have the figures. Second element, we have a small CapEx in TAV for around, if I have the good figure in mind, EUR 100 million to EUR 200 million. As you know, we prepare a new element in. Excuse me, I check the figures. We have a new element in this scope. It's the fact that TAV have to finalize the deal with Almaty Airport. If we reach to close this deal in the next few weeks or few days, we have to launch a part of works for around EUR 80 million or EUR 90 million. It's not a huge impact if you compare with the CapEx of ADP. For the other airport included in Jordan Airport, we have a very low CapEx, around EUR 10 million or EUR 20 million, but it's not significant.
Okay. Many thanks. [Non-English content ]
Thank you.
The next question comes from the line of Laurence Frost from Thomson Reuters. Please go ahead.
Hi there. Morning. I just wondered if you could give us a bit of color on the way that the comments we've had or the disclosure of talks between the European Union and Washington on mutual recognition of vaccination certificates and opening traffic to those passengers, the way that might inflect or influence your third quarter expectations for traffic and so on.
Thank you for your question. Clearly, in our expectation, we modelize for the summer, a good recovery for the North America traffic, linked by a good policy between European Union and the U.S. government. As you know, it's vital for a large part of the airlines to operate the flight between Europe and North America. It's a very profitable line. It's a key priority for the French government, it's a key priority for all the European governments to recover a good level of traffic between North America and Europe. For the moment, we have the full support of the European Union and the French government to reopen quickly this line linked by the vaccination, but also by very easy administrative element between both companies.
Okay. Do those comments by Slaven de Lyon, do they materially improve your outlook or not necessarily?
No, it's in our forecast. We don't have a upside. We have just to deliver.
Okay. Thank you.
The next question comes from the line of Arthur Truslove from Credit Suisse. Please go ahead.
Good morning. A few from me, if I may. I guess the first one is just in respect to any restructurings that are going on in TAV and potentially India as well, and I was just wondering, in what circumstances would the mothership, if you like, have to put in more cash into those businesses? Question two, just wanted to touch on what your latest thinking was in terms of when we might ultimately see a new ERA in place. Then finally, just following up from a previous question, you mentioned that you were expecting sort of 50% of 2019 traffic for the summer. Just to confirm, how do you think about that split between the second quarter and the third quarter, or indeed, does that just refer to the third quarter? Within that assumption, what are your assumptions on the use of vaccine passports? Thank you.
Thank you. For your first question, we don't expect a new injunction for TAV. Included if TAV reach to close the Almaty Airport. First point. Second point, for the economic regulation agreement. As you know, we have to preserve our room of maneuver. In this situation, we want to guarantee that we can deliver our financial guidance, link by the net debt EBITDA ratio first, but also to de-leverage the companies. If we have to manage or to change our CapEx plan, we have to do. The main commitment for the airport in the economic regulation agreement is the level of CapEx. It's not the full interest of ADP to conclude an economic regulation agreement for the moment. Probably, we have to conclude an economic regulation agreement when we have enough visibility for the next eight years.
As you know, an economic regulation agreement is just for five years. We have two years to negotiate and one year to prepare the negotiation. We need eight years with a good visibility to conclude an economic regulation agreement. It's not the case for the moment. We have to wait probably one or two years to prepare an economic regulation for 2025, not for the moment. For the moment, we want to preserve our room of maneuver to manage the CapEx plan without specific commitment in an agreement. For your last question, clearly, as you know, the summer season start in the beginning of April. April, May, and June. This is the second quarter, traditionally, it's the beginning of the summer season in IATA season.
For the moment, we don't expect with the new wave, a huge recovery before the end of May or the beginning of June. Probably the middle of June. For the summer, so for July, August, and September, we expect a good recovery with 50% of the traffic globally in Paris. In September, October and November and December, we expect a good effect in terms of vaccination with a strong recovery in terms of domestic and European flights. That is the key of our forecast, is to stabilize our recovery after July this year. If we have some delay in terms of recovery, probably we have to change our guidance. For the moment, when you see clearly the capacity program of each airline, we know that we are probably in a good position to deliver this traffic this year.
Thank you very much. Just one follow-up on the first one. In what sort of circumstances could you see yourself having to put more money into India? Thank you.
For the moment, without the new lockdown in India, that is the case since last week, we don't have to inject a new element for the moment. Yes. You know that in India, it's not the same traffic because in our Indian airport, we have a huge part of the traffic that is domestic flight with more than 70%, and it's very resilient traffic. When we close the domestic flight, when we reopen, mechanically, we recover immediately the level of traffic. It's difficult to modelize for the moment. We can modelize, we don't have, for the moment, to inject new cash in the Indian airport.
Thank you very much.
The next question comes from the line of Marcin Wojtal from Bank of America. Please go ahead.
Yes. Good morning. Thank you for taking my questions. The first one, it relates to the so-called COVID-19 passports. In Europe, well, there are Digital Green Certificate that are supposed to be rolled out by the European Union. What is your view on these efforts? Do you believe passengers will need to have some sort of certificates to travel over the summer, whether it's a European Union certificate or it is some sort of different COVID-19 passport issued by one of the member states? What about people who do not have these certificates yet over the summer, so they don't have a vaccine perhaps, or they don't have a negative test? Do you think these passengers, they actually will not be allowed to travel?
Overall, are you more optimistic on the progress that is being made on all these initiatives compared to three months ago? Thank you.
Thank you for your question. Clearly, for us, the certificate, it's a facilitation. It's not an obligation. It's a huge facilitation, that it's a key element to recover a strong level of traffic, between European countries, but also with a specific partner like North America. As you know, ADP was very pushy and is still very pushy to implement this strategy in Europe. We work a lot with the European Commission, we work a lot with the French government. Yesterday in Paris-Orly, we had the first experimentation of this certificate with a digital specific app that is your current app in France, that is called TousAntiCovid. We've declined this new app with TousAntiCovid Carnet. That is the key element to have the proof that we have vaccination, or we have a good test in the last 24, 36 or 72 hours before the flight.
We implement this experimentation between France and Corsica. For the moment, we can have a good result. We have a specific visit yesterday, with two French minister in Paris-Orly to launch this experimentation. That is the first experimentation in Europe. It's linked by ADP, and probably we can have, if we can hear correctly the different passenger, a good element in this policy. Thank you.
Okay. Thank you.
We have no further questions in the queue. I will now hand back to Philippe for any closing remarks. Thank you for joining this call, and see you for the half result in July. Thank you very much. Bye-bye.
Thank you for joining today's conference. You may now disconnect your lines. Thank you.