Good morning, ladies and gentlemen, to ADP 2021 Half Year Results. During this call, you can only listen, but you can put your questions at the end by dialing star one to record your question. If you need any help, please dial star zero for the operator. Now I'll give the floor to Mr. Augustin de Romanet, CEO for today's conference. Please, sir.
Ladies and gentlemen, hello. With Philippe Pascal, we're presenting results for the first half of 2021. It was a volatile half year once again, a bit more dynamic in airports outside of Paris, as you can see on the slide. In blue, we can see traffic outside of Paris. You can see the blue curve is continuous, translating the second Indian wave that led to a sharp decline in April and a sharp pickup in May, June.
Traffic outside of Paris reached 30% versus 2019, down by 26%. It was sharper in Paris at -45% as compared to the first half of 2021 and 20.7% of the half year level in 2019. The first half was a bit chaotic, let's say. Forecasts were more difficult than ever before. The airline and companies' forecasts were really upheld. Given the difficult circumstances, we tried to take many steps for clients and for economic profitability that we described to you.
Our revenue is down by 50.3%. EBITDA is positive, but Philippe Pascal will explain the realities organically. It was just slightly negative, and the positive figures are due to non-reproducible effects. I would also say that our operating income from other activities declined, but not as much as last year. Operational income is negative by EUR 172 million.
The first source of satisfaction is that the quality of services. You know that in our business, when you reach four, you can start to look at yourself in the mirror. During the crisis, 395 quality of service. We had the wait time at the border police is what it is, that we'll need to comment on that. You know that it is volatile and increasing. That's a great source of satisfaction.
During the crisis, therefore, we thought first and foremost of passengers for health reasons to restrict, to limit the waiting times and working with the state services. This had positive impact on passenger traffic. Let me take one example. You know that China accepted no passengers if they did not have a double test in the originating airport arriving in China.
Someone coming from Africa and transiting through Paris had to do a double test in Paris. The same if they came from London or Frankfurt. We were the first in Europe to use our experience with the partners we worked with to set up a test for 500 passengers coming from China every day. That enabled us to make the Paris hub the best hub for connecting with China. Moving on to the next slide.
You can see that we continued to work on promoting brand loyalty by adjusting our terminals upon request and opening up enough terminals to make passengers satisfied. Not all terminals. If we had left all terminals open, which would have had two negative effects: heating, air conditioning, high taxes we would ensue from that, and stores would be closed. A store in an airport under the circumstances cannot be profitable.
In some terminals, we managed to maintain a certain level of retail business. We were very agile in opening up Terminal two that was far more modern, and it is totally renovated. That's what you find on the next page. You can see that we're agile in opening and shutting down terminals. We shut down several terminals.
We opened up 2BD, and the savings linked to the shutdown of infrastructures and cars reached about EUR 50 million for the first half only. A few comments about 2B and 2D, that's new terminals we haven't presented yet. 77,500 sq m and 5,200 m of additional retail services.
It has two statuses. It can receive long-haul flights and medium-haul flights, and it was done for a good part of May and June. In May, we decided to open up 2A for registrations. We realized that we also needed to put planes in contact with this terminal. In this first half, priority was given to passengers. We were very committed with opening up the terminals. I must also say a few words about the employment situation.
At the end of the first half, that was on the 3rd of July, we reached an agreement with two trade unions to change employment contracts and to reduce ADP compensation remuneration until we return to traffic, the normal traffic. There was solidarity. The company and the trade unions accepted to opt for solidarity by reducing pay for each and every one of us. We avoided several hundreds of dismissals. 1,150 employees will be leaving the company on a volunteer basis.
The company will seek to reemploy them as far as possible, 450 to be reemployed in the coming years. We've also decided to slightly reduce pay by 5% maximum in 2021, 2022, and 4% maximum in 2023. As of the 1st of January 2024, we are committed to see to it that everyone returns to the level of pay in 2019. If people refuse, we will replace them, of course.
The first half, a lot of energy deployed by the company to reduce costs, to enhance the quality of service, and to be agile in opening and shutting down terminals. A lot of effort had to be made by the teams, and also solidarity, since we set up something that was unique in a state-owned company and quite unique amongst any companies with solidarity with employees. Philippe Pascal will now tell us about the financial statements.
We start with the first driver, the traffic. On slide nine, we have all the figures for platforms directly and indirectly held by ADP Group. You can note that the group traffic stand by 26.6% as compared to the first half of last year. The first half where a half of this half-year period was not impacted by COVID-19 from the 1st of January to the end of March.
Traffic was also impacted by a sharper decline in Paris, -45.7% as compared to the first half of 2020. All in all, when you look at the details for all the figures on the group's platforms, we can note that they reflect organic rates that are quite different around the world with different sequences of the pandemic and the recovery that is differentiated.
Fast recovery in Asia, relatively fast in the Middle East and in Turkey, far slower in a certain number of mature countries. Yet, there's no hard set rules. Antalya, for example, traffic rose by +70% due to the massive return of Russian and German traffic. Other airports for tourism like Mauritius, well, there's almost zero impact in the first impact.
For Paris traffic, Parisian platforms are doing better than their peers, Madrid, Frankfurt, Amsterdam, and London, with a percentage of traffic of about 20.5% compared to 2019. Yet, despite the distortions with Orly, we had good traffic. It came back quickly due to domestic flights, European flights, and also French overseas territories. In recent days, French overseas territories is slowing down a bit due to the health situation.
What's noteworthy on this slide is to look to the correspondence rates that is quite significant due to a hub that is doing well with an interesting percentage of 27.5%. The 58.5% was filled up because airline companies are maintaining or opening up a certain number of flights or destinations to occupy market shares, even though it's harder than to fill up the planes at that period.
Before moving on to slide 11 and looking at the figures in detail, I must say that there are four major highlights in this first half that should be borne in mind to properly understand. First of all, the base effects with respect to 2020 and two factors that are one-off. The two base effects, the first one I mentioned before, is that in the first half of 2020, there was no pandemic, the COVID-19.
In the Q2 of 2020, we had a certain number of impairments for large amounts, especially for international global assets. These two factors are mirrored in the financial statements for the first half of 2021 with the health crisis that impacted the entire first half of 2021, and the lack of additional impairments in 2021 as compared to what was done in 2020.
The two other factors are one-off. On the one hand, good opportunities on the real estate market, where we took over full ownership, and we'll be working on that in the coming weeks to take over certain buildings for our Paris platforms, leading to a positive impact on our EBT of about EUR 170 million in Paris. Secondly, a major effort in financial restructuring at international level.
We have extended a certain number of our concessions, and we're now working on financial restructuring of the debt on some of our platforms. I'm referring to good news on restructuring the financial debt of TAV and Tunisia, leading to a favorable impact of over EUR 100 million in the financial results. Bearing in mind these four important factors, we can move on to EBITDA and net revenue.
You can see that our revenue was impacted negatively for SDA and Relay, given less than dynamic operations in traffic and the shutdown of retail. AIG's revenue was stable as compared to the first half of 2020, with a decline in airport use linked to an increase in non-rental fees. For TAV, revenue is up as compared to 2020, mainly due to the scope effect with the integration of Almaty Airport, generating EUR 90 million.
You can see that without this revenue, Almaty's, TAV's overall revenue would be declining. For EBITDA, all of EBITDA is rising due to the fact of keeping costs under good control. SDA and Relay, EBITDA is positive, although its revenue was positively impacted. No, its revenue was declining rather, as compared to the first half. AIG and ADP made major efforts in keeping expenses under control, thanks to furlough and TAV with EUR 31 million in additional EBITDA.
Despite this, Almaty effect has seen a positive effect on EBITDA. Paris alone has EBITDA that is rising due to good financial opportunities and one-off effects by taking over some buildings, as I pointed out, in full profit, EUR 170 million impact on EBITDA, and less write-backs of reversal of provisions in the first half of 2021.
The overall EBITDA for the group would have been slightly negative by about EUR 5 million versus EUR 155 million on this chart for current operating income and net revenue. We can see the base effect with the impairment of activities in the first half of 2020. This did not lead to a new provision since 2021 in large amounts.
Net income was positively impacted in addition to the base effect by the restructuring of the Tunisian debt for just over EUR 100 million net. The last slide bears on cash flow, cash flow that is still secure thanks to EUR 4 billion in bond issues in 2020. For the last month of 2020, cash flow was stable due to our plan for financial stabilization. During 2021, cash flow will decline significantly by about EUR 1 billion over the year. You can see the first effects in the Q1.
This is due to a continued investment policy and because traffic is below the 35% level with respect to overhead costs, 35% of traffic in 2019, and due to the bond repayments in 2021. Despite this decline in available cash flow, the situation is still under control, and we can still cope with unexpected events in the future. That is for the financial data, and I will give the floor to Augustin de Romanet.
Thank you very much, Philippe. Just a few words now for the outlooks concerning the future. We still have three main preoccupations. The first is our customers' quality of services and the way in which you are welcomed at the airport, also with other people at the borders, officers, et cetera. It is even more delicate for us to provide guarantee for this satisfaction.
The second element is to provide efforts to control our assets abroad and in Paris, and this requires the redeployment of activities in Chile, India, Jordan, and countries that we weren't able to visit as much as we would have liked during the crisis, the pandemic. We started again in Dubai. We have a partnership with India, and we worked on our industrial partnership since, as you know, it's an important part of our cooperation.
A third priority is the recovery of our Parisian activities. The slide, I think it's page 15, you have the first items there of the recovery, relying on six axes: the optimization of operations, investments in terms of our real estate assets. First, the optimization of operations. It is about finding a balance between preserving our competencies, going back to activities, and the sanitary situation as well, and being agile and obtaining performances.
By 2023, we want to progressively reopen our different infrastructures, and they will all be reopened except for Terminal 2C, which will have a construction work to reach the European Standard 3 standards. The traffic will go back to the levels of 2019 by 2027, but probably not before 2024, 2025. What about the costs? I talk the cost structure. I talked about the realization of structural savings.
It is at the origins of two-thirds of the structural savings, EUR 150 million per year that we hope to cash in. There are measures taken to reduce cost base, that's ADP, and improve the OpExs also, and our duty-free namely. The recovery of Parisian activities also requires investments.
On the same chart, you can see on slide 15, we need to maintain our investments for maintenance, as I said, and at the same time, we must keep all the investments for green and smart airports. At the same time, we must take into account the fact that we'd have no visibility on our tariffs, and we must preserve our treasury, our cash flow. This led us to decrease our investments, and they will be reduced between EUR 50 million in 2021 and 2022 and between EUR 650 million-EUR 750 million per year in 2023 and 2024.
This is confirmed more than ever. Now there's a lot of telework going on, so there's still a lot of demand for cargo, and in Orly, as you know, it's close to the Grand Paris Express and the center of Paris. This will contribute to this development. Our strategy of recovery, real estate strategy has AOT.
For the retail sector, more than ever, we have the ambition to develop in Paris and internationally what has been experimented in the 2E Hall K, emblematic of the global vision. It represents six figures per passenger, and we still want to provide a better offer, more adapted offer, as in Orly for domestic flights or Charles de Gaulle for international flights. This last pillar of the restructuring plan is the recovery of regulated activities.
As you know, we have positive revenues in 2022, we will have, and that's we're aiming at, and it will be all about finding a right balance between the tariffs that don't create an exposure and the new conversions towards better security. This done in good intelligence with the transport regulation and the stakeholders while increasing, adjusting these tariffs. The group remains totally mobilized to create value and to be ready at any time to grasp the recovery that is taking place.
As I said numerous times, in periods of crisis, we underestimate the size of and the importance of the crisis, and this is why, since March 2020, we decided to borrow money because we know that the opening of the markets we didn't think could happen. We weren't surprised by the long-lasting crisis. We had been ready since March 2020.
We knew it would last for a long time, and it was probably longer than what many anticipated. In March 2020, we were explained that things would go very well in 2021, but we saw what the situation was, and we could believe that things will be all right in November 2022. The recovery, when it happens, has a tendency to be underestimated. When there's a crisis, we underestimate the crisis, and then we underestimate the recovery.
Now, more than ever, we are determined to be fully mobilized on retail, on the quality provided, and it is not because we are determined to go and fight for what we want that we mustn't be careful to the guidance. In terms of traffic for our forecast, our guidance is down by 5 basis points, and in Aéroports de Paris, we're going to 35-40 of the ratio of EBITDA.
We're decreasing our average support from 15- 20, our investments, I will give you the figure, between EUR 550 million and EUR 650 million in 2023, 2024. We are maintaining our objective of EBITDA ratio 6x to 7x by the end of 2022. In terms of traffic, we hope to return to the 2019 level by 2024, 2027. In 2023, 75%, in 2024, 90% of the 2019 traffic. During this crisis, the reassertion of our engagements for the environment are more than ever topical.
For all of our airports and ADP are the objectives to reach carbon neutrality by 2030, with a aim of net zero emissions by 2050 at the latest. Yes, for 2050, our objective is that for all the airports of the group have net zero emissions. We have a strong program to help us reach these net objectives.
We also underlined by the importance of biodiversity with the initiative on the protection of biodiversity, act4nature international, and other initiatives that I could mention, if you like. Roissy-CDG and Zagreb joined to answer to a call for a green airport in February 2021. We had a call for projects for Airbus. We signed a partnership with Air Liquide and Airbus to study the reception conditions for hydrogen aircraft.
We had also a call for interest to select 11 projects out of 124 that will help develop the value chain of hydrogen in airports. This is what I am able to tell you, and now we are at your disposal for any questions you might have. If you wish to ask a question, please press on your phone and make sure you're not on silent mode.
I will let you know when you're able to ask your question. First question comes from Mr. Jean-Jacques Christophe Lefevre. Mr. Lefevre, you can speak. The next question from Mrs. Rousseau.
Yes. Hello, and thank you for taking my question. First question about the air traffic. We saw the improvement in May and June. Could you give us indications on the dynamics in July for the moment that you might have? Second question about the CapExes. I saw your new program.
We see an increase of the level of CapExes in 2023, 2024. Could you give us some elements concerning what you are going to do additionally to that, maybe compensations for what you haven't done before? Otherwise, what is planned in terms of environmental CapEx in the budgets that you mentioned? Mr. de Romanet, you mentioned the adaptation of our infrastructures for the welcome of electric planes.
Are there already elements in the CapEx programs that are mentioned? If it's not the case, what could that represent in terms of investments? Lastly, about your agreement with Schiphol, I saw that you have renounced to this agreement. What are the consequences, please?
Perhaps I will answer to the Schiphol question. We decided that the agreement wouldn't be renewed. It was therefore terminated on the beginning of November, on the 30th of November, sorry. We put in place a process for the different participations for on 18 months, and this would get placed to the disposal first by Schiphol of ADP. Then on the base of the disposal price, ADP would sell its shares to Schiphol, and it's a commonly agreed separation.
Our economic models are quite different, and therefore, we agreed to find good profit from this alliance that we had for 12 years, and now it was time to part and to each become autonomous again. This was for Schiphol. Maybe Philippe will answer to the question on green and air traffic.
For traffic, the dynamics in July is in line with our trajectory. We indeed had a slow recovery, but a true recovery of the traffic to reach 50% beginning of August. Today, we are at 49%, so we are on the right tracks. The expected traffic is by 50% compared of that of 2019. It's these 50% compared to 2019 that give an average point of 35%.
The question, which consists in knowing and understanding whether our traffic will be between 30%, 40% and at what level it will be, we'll know more in September, October, when the change is made towards the CapEx. For the CapEx, the main explanation, the motive for the increase of the CapEx, these are regulated and non-regulated in Paris. The main motivation, which explains this increase in 2024, is due to two elements.
The first is the compliance of our baggage sorting to realize the examining of the baggage compartments in compliance with the Standard 3, and these had been delayed for 2024. The compliance, it's a mandatory compliance, this has been done. On the non-regulated perimeter taken in charge by the airport, this is the first point.
The second point is a certain number of heavy maintenance measures for the aeronautics, which must be done every eight to 10 years, depending on the tracks, on the trails. In 2023, the runways. I'm sorry. We will prepare our infrastructures before the full back to normal of the situation. For the investments and the green aspects, at this stage, for green, for the 2021 CapEx to 2024, they are not only translated by a change of an adaptation of our modalities.
It is not any different from the previous investments or volume of investments that we had of the specific CapExes in line with the environment. These are elements that we are studying. There could be overcosts, but for the investment as it is presented at this stage, they are not significant. This is about traffic and CapExes. Thank you very much.
The next question comes from the line of Ruxandra Haradau-Döser from Kepler. Please go ahead.
Yes. Good morning. Thank you very much for this-
Ruxandra, could I please check your audio, as you cannot be heard.
Yes, hello. Sorry, can you hear me now?
Yes, please go ahead.
Okay. Sorry for this. First on traffic. Looking at the second half of the year, do you assume in your new guidance that August will be a peak traffic month, and then traffic later this year will stabilize below the level of August? Or do you expect sequentially improving traffic trends relative to 2019 until the end of the year? And do you see signs of recovery of city tourism in Europe at this stage?
And if not, do you expect this to happen later this year, or is it something to be expected next year? second, on costs. In addition to the voluntary departure scheme, you mentioned some new personnel cost savings today. Just to make sure I understand correctly, you agree with labor unions on a change in remuneration terms of 4%-5% over the next years. However, each employee still needs to approve a change of its employment contract. What is the flexibility of the employees to accept or reject this change in remuneration?
What would be consequences if they reject these changes? To which extent are the structural cost savings of EUR 100 million-EUR 150 million that you mentioned today, sustainable post-COVID, since you indicated that employees' remuneration would return to current levels at the beginning of 2024? Third, considering the drastic recovery that you expect over the next years, when do you expect to return to dividend payment? Thank you very much.
Who got me there? Murphree?
Yes.
It's like we heard you as if you were on the moon. On top of the bad sound, we heard the French translation, so we only heard about 15% of what you said. Philippe Pascal is very brave, and he will try to answer your question. You will tell us if we have answered your question from what we have understood in bits and pieces. You have the floor, Philippe.
There were two questions, I believe. One, on the recovery of traffic in the second half, another question on costs. Starting with costs. The goal is to clearly sort out the notion of economics versus what's business due to the business environment and what structural environment. Starting with structural savings. The figures given, EUR 100 million-EUR 150 million, are savings that will continue after the crisis and when traffic recovers entirely.
Savings, basically, due to two things. First of all, the non-replacement of a certain number of departures, with the 700 departures that will not be replaced at ADP SA. Additional savings on payroll due to the changes in some provisions in the employment contracts. That's the first part regarding payroll, covering about two-thirds of our efforts. The second point relates to savings in terms of procurement.
Procurement in the sense of buying at a lower cost and also buying less. All of these savings for ADP SA, structurally, including when traffic recovers entirely, would amount to EUR 100 million to EUR 150 million in savings. In addition to that, we have structural events at group level, preparing for TAV, as well as our other Parisian subsidiaries in the group. You know that our engineering operations, once the European BU in engineering is shut down.
Regarding specific matters related to employment, there are two provisions. The first, we have a collective amicable termination agreement signed by all trade unions. The departure of 150 people, of which 700 will not be replaced, unless Augustin said, we will be gradually recruiting 1,550 people, depending on how traffic recovers. Secondly, we have the employment contract adaptation plan with a drop in pay based on the business environment, that means that employees will accept individually a wage drop.
If employees reject that wage drop, this will start a procedure. We will try to have them redeployed, if that is not possible, they will be dismissed on economic grounds in 2022. The company has pledged to replace all departures linked to the employment contract adaptation plan. These are one-shot savings from a financial perspective only.
When you say that remuneration in 2019 will return to its same level by 2024 the latest, that means that between 2019 and 2024, we will have generated structural savings. That's for the savings plan. In addition to the structural savings plans, we have one-off savings plans, which are mainly linked to the shutdown of infrastructures or to decline in traffic in general, leading to less subcontracting.
As a result, in addition to these savings in 2021, 2022, and the following years, we will see a positive impact on our expenses. The second question relates to traffic in the second half. We're talking about 50% of traffic in 2019. 50%, that's a percentage which will be linked to the traditional drop in traffic in autumn. You know that traffic is far more dynamic in July, August for ADP with the end of the season, that's quite long, in September.
As of October, November, we have a decline in traffic before it picks up again in December. 50% of that base in 2019 is modeled in our traffic equation. Now, based on forecasts and information obtained from airline companies, it is on that basis that we have recorded these figures. That was my attempt to reply to your question, which we did not understand.
Thank you very much. Thank you very much for the answers. I had a third question with respect to the dividend policy. Could you maybe give us an update? Given the traffic trajectory that you expect over the next years, when do you expect to return to dividend payments? Thank you very much.
Hello. Listen, we have no reason as it stands today to believe that our dividend policy should change. As we speak today, there will probably be no positive results in 2021, no positive revenue, so there will be no need to address the issue of dividend in 2022. Once we return to profitability, I believe that our shareholders were very much in favor of about the 60% that we had before, and my forecasts are based on that figure.
Thank you very much. Thanks.
The next question comes from the line of Cristian Nedelcu from UBS. Please go ahead.
Hi. Thank you very much for taking my questions. The first one is on the OpEx in the first half of this year. Despite the fact that the traffic is lower than the second half of 2020, your OpEx is higher. Could you talk a bit about the moving parts? The second question, you had this EUR 117 million positive in real estate that you flagged. Did you know about this in your budgeting exercise at the beginning of the year?
If you didn't, why didn't this increase your EBITDA guidance for the full year? Is anything else deteriorating versus your initial plans? The last one, if I may, looking at net debt, I think you're roughly at around EUR 8 billion at the 30th of June. What are your expectations for the full year? I think you talk about potentially EUR 80 million financing for some of your subsidiaries. Could you talk about other moving parts in the second half? Thank you very much.
Three questions. About OpEx in the first half, the guidance we gave last year, and also when we announced our annual results, we knew how to make our expenses variable up to 35% of traffic, the equivalent in 2019. When we fall below 35% of traffic, we have a certain number of fixed costs that could not be reduced.
That is what took place in the first half of 2021. You can see that traffic, on average, in Paris, is below 35%. Due to the rigidity of our costs, this is what we noted. At the same time, a certain number of exogenous factors were less favorable. For example, the fact that state took charge of a portion of furlough. All of that was anticipated in our budget. To reply to your second question on real estate.
Real estate was in our budget, maybe not at the level of EUR 117 million, but to a large extent. It was anticipated in the EBITDA margin as disclosed between 18% and 23%. The revision of this EBITDA margin is not linked to new operations, but it is due to the expected decline in traffic and cautious guidance. On the AOTs, you should bear in mind the mechanism.
For some 10 years now, ADP has granted construction leases that we call AOT in certain legal systems, but they are hangars and construction leases from an accounting perspective. ADP has granted leases on land that led to the construction of buildings that were owned by the lessee at the end of the construction, because the lease, the lessee was obliged to destroy it unless ADP wanted to take it over.
Our strategy was announced two years ago at the investors day. There's a specific slide stipulating potential gains expected from these AOTs. This strategy sought to try to recover as far as possible the different property for them to be re-leased. It was assessed on a case-by-case basis to see if taking over these buildings would be compatible with our new layout at the airport, or if the buildings could be re-leased.
Most of the AOTs that are being negotiated today have led ADP Group to re-lease to the lessee who erected the building. It's a good opportunity to renew things in coming years so that us being able to tell you exactly year by year, half year by half year, what amounts will be generated in terms of gains or improvement in EBITDA, or when these AOTs will be finalized.
Once again, that is negotiated on a case-by-case basis. That's what we had to say about AOTs. About cash injections, what we can tell you is that we confirmed our goal in terms of net financial debt at the end of 2022. We did not give any transition point for the net financial debt at the end of 2021 because the situation is too volatile, in our opinion.
At this stage, we believe that we can reach the target. This is why we confirm it in our guidance, despite a certain number of factors, the decline in debt that was reported in this slide, or our CapEx strategy, where we gave most of the group's CapEx by giving you the CapEx for Paris. Of course, there will be reinvestments, potential reinjections at the international level.
That will not lead to significant changes in the net debt to EBITDA ratio, but they could be interesting because new cash injections could enable us to reduce the overall cost of debt on a certain number of international platforms. The first half saw exceptional profitability in terms of financial results due to the restructuring of the Tunisian debt.
A lot of work was done by TAV, and that ultimately led to a certain number of lenders abandoning, relinquishing, a part of the Tunisian debt. Same exceptional conflicts. This is what we'd like to keep confidential for the time being, since most of them are still being negotiated.
Thank you very much. Could I please add, does the EUR 117 million in real estate, is that cash also, or is it just an accounting, has only an accounting character?
It's an accounting, where we recognize in our accounts the value given to a part of future flows linked to the final destination of the building and the residual lifetime of the building. It's just an accounting effect and not a cash effect.
Excellent. Thank you very much. That's very helpful.
The next question comes from the line of Dario Maglione from Exane BNP Paribas. Please go ahead.
Hello. Good morning, everyone. Two questions. One, retail spend per pax. The target pre-COVID was for EUR 25.5 per passenger in 2021. How do you think spend per pax will evolve in the next three or four years? Any impact of Chinese passengers not traveling to Europe or change in purchasing behavior for luxury products? Second question on your joint venture with partner Lagardère for retail. Are there any discussions to reduce rent for SDA and SLA? Thank you.
To answer your first question on revenue per passenger, there's no public target. We spoke about the figures for the first half as we think to half year revenue. We're talking about the level of revenue per passenger in Paris. You must bear in mind, though, two important factors: bringing down revenue per passenger and secondly, pushing up passenger revenue. What lowers revenue is due to the traffic mix.
We can clearly see that the recovery of traffic will take place on domestic and European flights, first of all, before a strong recovery of international traffic. This is the main reason why the trend is for SPP to decline. That is offset by a certain number of important initiatives taken, thanks to the work and the strategic guidance for several years now. In particular, changing the product mix per se, with a move towards fashion and luxury items.
In particular, in the flagship, we have the laboratory at Terminal 2E, perfectly in line with revenue per passenger, reaching about EUR 58 per passenger in the first half. This is a hospitality model, first of all, and also commercial retail model based on luxury, and this is what will be deployed gradually in all the Group's premium infrastructures.
With these two things, we can state that revenue per passenger in 2021 will be higher than in 2019 before the COVID crisis, despite the dilutive aspects linked to the gradual return to a traffic mix, with a balance between European domestic traffic and international traffic. Your second question?
I think I understood that you're asking about our work with Lagardère. We have a JV called SDA with Lagardère. For the time being, we are very much focused on improving SDA's operating performance. It was hard hit by COVID, and we're working with Lagardère to improve the performance of SDA's operating performance.
Do we have any other questions? 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 question, which is on your economic regulation agreement, the ERA. My question is, do you still expect to have a new five-year economic regulation agreement from 2023, or could it be delayed further? Thank you.
In terms of economic regulation, a point on the current situation, indeed, we terminated the 2016-2020 contract, and we stopped negotiations for the next regulation economic contract planned at the time for 2021 and 2025. When we want to put in place an economic regulation contract, there is a very formal procedure which takes a long time, and this takes about two years' time.
This is the first point to prepare for this negotiation that will last two years. Internally, it takes a big year to define the investment plan and define our missions in terms of service quality, define our trajectory for OpEx and for the regulated perimeter, define our strategy and for our tariffs and the structure of our aeronautic taxes. Three years of preparation for an economic contract that can last up to five years.
In order to establish this economic balance, this equilibrium, we need to have an eight-year visibility for traffic, for the composition of the traffic, for the needs of the capacity that this traffic induces, and for our investment plan and our tariffs. With an absence of visibility for the eight future years, it is impossible to conclude a regulation economic contract. The situation hasn't provided the visibility that is necessary.
If we start from the principle that we need eight-year visibility, and if we have it in 2022, it means we cannot have an economic regulation contract before 2025 at the earliest. We need a year preparation and two years of negotiations. If we have no visibility by 2022, and we don't have it in 2023, there will be a contract only after that. I prefer repeating it as such.
At this stage, what I can say is that an economic regulation contract is first of all, a formal commitment for investment by the ADP Group. It does seem unreasonable to take such an engagement or commitment for such a long period. Would it be just by regard to our shareholders, we cannot take this commitment without having the right visibility.
Okay. Well, thank you.
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Since I see no further question, I want to thank you all for being here during this call. If we look at the statistics with the people I meet, 62% of people are leaving for Greece, so I see. I wish you a really good flight and good experience in our airports. Please, if you have other questions, you can write me an email and I will answer shortly. Thank you very much and have a good day.