Warm welcome from my side to Fraport analyst call for the first quarter, 2023. I'm here in the room with our CFO, Matthias Zieschang, and he's ready to start the presentation.
Yeah. Thank you, Christoph. Good afternoon, ladies and gentlemen, also warm welcome from my side to our presentation of the first quarter 2023. Today, my first slide provides you an overview of our four highlights in the first months of the year. Before going into the presentation, let me say that we are well encouraged by the most recent business developments. We are clearly seeing that private travel is back on the 2019 level, not only in our international portfolio, as I will show you in a minute, but also in Frankfurt. We also see this across our peer airports here in Europe. Having said this, we are still missing a certain share of corporate travelers in some international markets on our way to the full traffic recovery.
We are, however, confident that this gap will be filled over time, and we also expect the continued traffic recovery to lead to financial growth for our group. Now let's move on to our most recent development. On slide four of our presentation, you see our latest capacity addition to the group airport, the second runway at Lima Airport. Following a construction time of roughly two years, our team in Peru has managed to commission the new runway in Lima on time and budget. A very good execution of our local management team. As a result of the commissioning, a clear bottleneck situation has been solved and Lima Airport is now, from an airside point of view, prepared for future growth and to welcome many more guests, tourists, and business travelers to Peru.
Financially, there has been no cost overrun during the construction process due to the favorable framework conditions agreed in our EPC contract. Looking ahead, we are also convinced that the new terminal will be delivered on time and according to the budget. In this context, Lima Airport has also reached another important milestone in closing the new project finance in a total amount of $1.25 billion. Here, the first disbursement already took place end of March, paying back the bridge loan in the amount of roughly $400 million. Consequently, Lima Airport Partners had more than $800 million of unused project finance left. This amount will entirely back the upcoming CapEx for the expansion. The U.S. dollar-based project finance has a term of seven years and is agreed at a minimum fixed rate of 70%.
On the back of the current interest rate level, we are starting with an average interest rate of about 6%, which is very good for an international project finance in this size and duration. The moderate interest rate level also clearly shows the confidence of banks in our business case in Lima and our track record. An update on our current indebtedness and funding level overall, I will present you later on in my presentation. Slide five provides you an overview of our current traffic performances at our international airports. As you are well aware, fiscal year 2022 marked a fantastic year for our investment in Fraport Greece from a traffic and from a financial point of view. Correspondingly, we will now receive the first distribution from Fraport Greece in the second quarter.
As already mentioned in our full-year presentation, this will be an amount of roughly EUR 250 million for 100% or about EUR 160 million for us based on our 65% shareholding. The current traffic development is very encouraging. Based on preliminary figures, April exceeded the level of 2019 by about 13% and now stands on a cumulative basis at 105% of 2019. A strong traffic momentum we are also seeing at Antalya Airport. At 101%, Antalya Airport exceeded the 2019 benchmark year during the first quarter. April performed very strong and was entirely recovered compared to 2019. Here, the traffic performance resulted from continued demand from Western European countries, but also a strong share from Russian travelers.
A very good start to the year was also recorded at our Twin Star Airport in Bulgaria. While the absolute number of passengers handled was still very low, the reopening of a Ryanair base at Burgas Airport is, however, a good sign that Bulgaria will regain attractivity from a touristic point of view. For Ljubljana Airport, the road to full traffic recovery will be a little bit longer. Following the insolvency of the national flag carrier Adria Airways in September 2019, the gap hasn't been filled yet. Both the state of Slovenia and our local management team are working on solutions to bring back connectivity to the capital airport of Slovenia. Good progress as well we are seeing at Lima Airport. Lima Airport is starting to catch up to 2019 levels due to an increased connectivity. We are also optimistic for the year ahead in Peru.
Compared to Lima, our two Brazilian airports are recovering at a little bit slower rate. Here, it seems harder for mid-sized airports in Brazil to recover the entire pre-pandemic traffic. Thanks to reopened domestic and international routes, we remain nonetheless very optimistic for the remainder of the year. Overall, our group airports outside of Frankfurt are showing a good recovery rate of 89% in Q1, 2023, respectively. For the rest of the year, we expect the international airports to continue their way to full recovery. On slide six, we are moving on to our main airport in Frankfurt. Frankfurt Airport is gradually getting closer to pre-COVID levels.
While the first quarter of fiscal year 2023 showed a passenger recovery of about 77% or close to 80% when adjusting for the two days of strike, April 23 showed a slightly better passenger recovery of about 80%. As of today, we are at 82%. Here, no news are sometimes also good news. Despite the accelerated traffic momentum, operations turned out to be smooth without any major hiccups or delays. The strongest traffic recovery we continue to see on routes to the Americas, Middle East, and Africa. All these markets have meanwhile exceeded the level of 90% of 2019. European short-haul traffic is still impacted by the war in Ukraine, which leads to a drop in passenger numbers to and from Eastern Europe of about 45%.
Southeast Europe, on the other side, developed fine and was back at 99% of 2019 for full recovery. As encouraging as those figures are, the traffic recovery in Frankfurt is still held back. The temporary reasons are the reduced rate of corporate travelers, low traffic to and from China, but also the temporary cap on our maximum movements per hour, which we implemented due to capacity shortages. While we are currently offering some 90 movements per hour at Frankfurt Airport, we expect to come back to our pre-COVID level of 104 slots per hour by the end of this summer season. We also expect the cap on routes to China to be lifted, which is imposed due to bilateral flight rights between the German state and China.
Latest, in the fourth quarter, we expect to see a much stronger traffic recovery to and from China. Turning now the page to our financial development on slide number seven. Thanks to the traffic recovery, but also price upward adjustments, we have meanwhile recovered about 80% of our pre-COVID EBITDA. In fact, only two years turned out to be stronger in terms of group's EBITDA in our history. As you will also see on my next slides, our international portfolio continues to see higher results than pre-COVID. At the same time, this means that Frankfurt Airport remains below this level. Part of the Frankfurt performance is linked to the fact that Q1 marks our low season quarter. During Q1, we usually handle less than 20% of our full year traffic at Frankfurt. Consequently, our fixed costs are covered to a lower degree during the first quarter.
Looking ahead, this should lead to a stronger traffic to EBITDA translation for Frankfurt in the next quarters. Bottom line, you still see the impacts of the pandemic and the negative Free Cash Flows. Here, the higher Net Debt led to a more negative financial result when compared to 2019. Consequently, the gap to our pre-COVID group results still amounts to about EUR 61 million, while the gap to EBITDA is at about EUR 43 million. Moving on to our segment reporting, starting as always with aviation on slide number eight . In the first quarter of fiscal year 2023, airport charges recovered to a rate of about 92% of the pre-COVID levels. This number is clearly higher than the passenger recovery of about 77% and reflects pricing growth in the meantime.
Here we applied the new airport charges as of January 1st and are also seeing catch-up effects from the reduced number of incentives compared to the previous year. In light of the takeover of the security responsibilities in Frankfurt, revenues from security management grew by about EUR 11 million compared to our benchmark year 2019. Here, please bear in mind that the security management doesn't come with a margin. Having said this, the security transitioning also led to higher costs and shifted staff costs into non-staff costs in the period under review. In addition to the higher revenues and OpEx from the security transition, the further reduction of our shareholding in FraSec and the fair value measurement of our remaining 49% stake led to a positive one-off effect in other operating income of about EUR 22 million.
Thanks to the positive underlying business development and the one-off effect, segment EBITDA reached the pre-COVID level and was clearly positive in the first quarter. Coming to our retail and real estate segment on slide nine. Segment revenues overall achieved 93% of the pre-crisis level. A strong recovery was especially due to real estate revenues, which were also driven by inflation-linked rent adjustments. Parking revenues developed fine and achieved a recovery rate of around 91%, outperforming the Frankfurt passenger recovery. Here, our yield pricing system proves highly efficient. Over the past two years, we successfully automated our system to incorporate real-time and predictive data to maximize the revenues depending on parking lot and time.
With regards retail, due to the refurbishment of one of our most attractive duty-free shops in Terminal 1, Concourse B, and continued low advertisement revenues, the spend per passenger stood at EUR 3.30. Therefore, a touch below the level of 2019. Adjusting for the advertising effect, which is not linked to passenger spending behavior, the revenue streams from shopping and services on a standalone basis would have meant an increase of about 3% compared to Q1 2019, despite the beforementioned duty-free refurbishment. Regarding the advertisement, here we are confronted with two negative effects. On the one side, we still miss our Chinese passengers as a major target group. On the other side, the reduced share of corporate travelers imposes a headwind for advertisement as well.
Despite the near-term headwinds due to the anticipated recovery of those traffic streams, we continue to expect further progress on advertisement over the course of the year. Bottom line, we still experience higher costs from energy. While the first quarter still compares with a lower inflation quarter in the previous year, we expect to see some moderating trend in energy costs over the next months. Here, our current hedging rate stands at about 80%. Bearing the development of the first quarter and the current forward levels in mind, we expect energy costs to rise by about EUR 20 million this year. Despite the OpEx headwind, the retail and real estate segment still yielded a highly attractive margin of about 73% in the first quarter. Turning now the page to our ground handling segment on slide number 10.
Segment revenues clearly increased to around 88% of the pre-COVID levels. This outperformance compared to the passenger recovery was again attributable to weight and movement-related charges as well as price effects. As you are aware from previous presentations, we hired close to 1,000 temporary external workers to stabilize operations in Frankfurt. The higher cost from external staff again increased other OpEx in the period under review. Here we expect to see positive base effects during the second and third quarter. On the other side, the new collective bargaining agreement for the public sector will impose further OpEx headwind. As a result of the increased cost, EBITDA was clearly negative at minus EUR 24 million in Q1 and even was below the previous year.
For the remainder of the year, we remain nonetheless optimistic to achieve a financial improvement, a clear financial improvement versus fiscal year 2022. Coming to our final segment, international activities and services on slide 11. As you can see on the chart, our international operations continued their outperformance against the 2019 benchmark year. Underlying revenues and EBITDA during the low season quarter stood above the pre-crisis level. Here, our business in North and South America, but also Fraport Greece and Twin Star in Bulgaria, achieved positive EBITDA momentum. Thanks to the EBITDA growth, the segment share and group EBITDA grew to a level of about 40%. The EBITDA margin developed fine and achieved 34% on an underlying basis, so excluding IFRIC 12 revenues and cost of materials.
Following the segment update, let me take a closer look at our cash flow and indebtedness situation on slide 12. Overall, the operating cash flow and capital expenditure developed in line with our expectations for Q1. Reflecting the traffic recovery of the first quarter, also our operating cash flow clearly increased over the previous year. While in Q1 2022, the operating cash flow was only break even, the operating cash flow reached a clearly positive level in the period under review. At EUR 84 million, the overall share of the cash flow remained low from a full year perspective. On the other side, CapEx is largely unimpacted by the seasonality in traffic.
At about EUR 100 million spending in Lima, EUR 140 million for Terminal 3 and EUR 59 million for other CapEx, our spending showed a very linear performance compared to our full year guidance. Consequently, Q1 Free Cash Flow turned out to be negative at about EUR 240 million, and our group Net Debt increased to EUR 7.3 billion. Thanks to the increase in EBITDA, our Net Debt to last twelve months EBITDA ratio further improved to a level of 6.6x. This compares to a level of 9x a year ago, or 6.9x at year end 2022. On my next slide, I would like to show you an update on our cash situation for the group.
As described previously, we have meanwhile closed the project finance at Lima Airport and paid back the bridge loan. As a result, our available funds increased further by more than EUR 440 million, despite the negative Q1 Free Cash Flow of about EUR 240 million. The level of more than EUR 5 billion, we also expect to have reached the peak of the available funds and don't expect this number to increase meaningfully anymore. We continue to work on refinance measures. As a result, we have just recently secured the prolongation of another EUR 450 million Schuldscheindarlehen or promissory note loan. This means that our maturity profile this year is reduced to a residual level of less than EUR 420 million.
Bearing our significant cash position in mind, we expect now to be sufficiently funded until fiscal year 2026 on a groupwide basis. On slide 14, you see our group liquidity and repayment profile at the end of Q1. Here we haven't reflected the before mentioned prolongation yet. At the same time, our average group interest rate grew slightly due to the new Lima project finance and higher interest rates for Frankfurt debt. On the other side, we are also seeing a positive development in our conservative financial asset management. Compared to year end 2022, the higher interest rate level will increase our interest income. Coming now to the last slide of my presentation, our outlook on slide 15. On the back of the very broad guidance ranges which we presented you two months ago, there have been no changes in the meantime.
While we see ourselves at about the midpoint in terms of Frankfurt passengers, we continue to expect to be in the upper half of the financial ranges. Thank you, ladies and gentlemen, for your attention, and we can now open the Q&A session.
Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. The first question is from the line of Elodie Rall with JP Morgan Chase & Co.
Yeah. Hi, good afternoon. Thanks for taking my questions. My first one is on the aviation business. I think excluding the one-off income, EBITDA was around like EUR 20 million lower than 2019 level. And I think you had stated full year results that you would expect EBITDA to actually come back to 2019 level for the division. Where do we stand now following Q1 results? Is this still something you can achieve, or it has to include the positive one-off for that to be the case? That's my first question. And my second question is on energy costs. We're seeing here some increase in energy costs in Q1.
Can you give us the magnitude of these increases? What percentage of electricity costs do you have hedged, if you have hedged any? How much does that represent out of your total cost base? Lastly, on staff costs, you have achieved savings in labor expenses from your employee reduction program, but you still have more hiring to do in ground handling, so what is the expected step up in labor expenses this year? Thank you.
Yeah, thank you for your questions. Starting with the segment aviation and your question, what will be the EBITDA outcome for the full year? First of all, we are absolutely confident and optimistic to reach our guidance. As I mentioned, as of today, we have the clear confidence to end up in the second or in the upper half of the EBITDA range for the full group. Focusing on aviation, just to remember, we had, in 2019, this segment, an EBITDA of, as far as I remember, EUR 273 million. Including the one-off of EUR 22 million, I think we will end up at about EUR 300 million or even a little bit above EUR 300 million.
In the first quarter, yes, there was this positive impact of EUR 22 million, adjusted EUR 22 less, but you also have to see that we are starting with a new security agreement in a way that at the end of the day is, all the costs will be compensated and covered by the revenues. We are starting with a system that we are collecting 10, about EUR 10.70 per passenger. The higher the passengers, in the meantime, the higher the revenues. On the other side, we have calculated cost levels for the rest of the year.
We have, in our preliminary calculation, we have to assume a certain number of total passengers for the full year, then we are calculating the cost items, and then distributed by the expected numbers of passengers, we came to this number of EUR 10.70. This means in the meantime, there could be and there will be a mismatch between revenues and the costs because passengers are higher or lower. At the end of the day, it's nearly a wash, or even if there's a surplus or the deficit, this will be compensated then end of December when we have the final numbers.
To make the long story short, in the first quarter, there was a deficit of EUR 5 million, so the cost level on the security side was EUR 5 million higher than the revenue side, and this will be balanced out in Q1, Q2 or Q3. Nobody knows, but latest in Q4, there's a final compensation or total adjustment of this situation. With other words, EUR 22 million more from this one-off, EUR 5 million less from the security business during Q1. Energy cost, yes, we had last year, as far as I remember, about EUR 25 million more, always compared to 2029. For this year, first of all, we see in the market that maximum was reached and now more and more prices for energy are going down.
Nevertheless, we see in total another increase of energy cost of about EUR 20 million in this year. That's it, and then, à la longue, there's even a chance to have lower energy costs compared to just what we see in 2022 and what we will see in 2023. The hedge ratio in the moment is about 80%. Let me say the exposure is 20% of the total energy volumes. Again, in absolute numbers, we are talking about energy cost increase of EUR 20 million in this year. Third question was regarding staff. Now the tariff agreement is over. We think it's over. It's not finally signed, but let me say general market expectation is that it is like it is. It's a very complex one because it's over 24 months.
It consists one-off payments to employees in a, in a very complex structure as well as sustainable elements. Since weeks, so to say, we are working out what does it mean for us. We have in the meantime, we have finalized our calculations and for the three domestic segments here in Frankfurt, so aviation, retail, real estate, as well as ground handling, we have made a calculation that the price effect, including all tariff elements in 2023 is at a level of EUR 70 million. This is a huge increase. As you remember in the past, we had always EUR 25 million price increase. Now it's nearly three times more, but it is like it is.
This is everything is included already in our guidance because if you translate this in a relative increase, this means 8%-9% expressed as a percentage. We are very carefully saying as a percentage, because again, when I talk about EUR 70 million cost increase, we have EUR 35 million thereof as a sustainable base effect and EUR 35 million as so-called inflation compensation, one-offs paid to the employees. For you, EUR 70 million personnel expense increase price driven in 2023. I hope I've covered all your questions.
Yes, very clear. Thank you.
Welcome.
The next question is from the line of Cristian Nedelcu with UBS. Your question, please.
Hi. Thank you very much for taking my questions. The first one on retail spend per passenger was very helpful, the incremental color you offered on Q1. Could you tell us a bit your expectations for the reminder of the year and where do you expect at the end of the year retail spend per passenger to be versus 2022? The second question, could you discuss a bit more in color about the cost savings levels in Frankfurt at the end of this year versus 2019 levels? Putting in balance all the moving parts and the wage agreement. Where do you expect the cost savings versus 2019 to be at the end of 2023?
If directionally you could give us some color for 2024, at least for the wage agreement part of cost. Maybe the last one, if I may, I appreciate your statement on the guidance and your confidence in the upper half. I guess versus two-three months ago, traffic was probably slightly weaker than I was expecting, at least. I think the wage agreement was also slightly higher. The wage inflation agreed is slightly higher than I thought. I guess I'm trying to better understand, are there moving parts in there? Any positives in particular that you would flag over the last few months or going forward that are offsetting maybe some of these incremental headwinds? Was there a meaningful buffer in your guidance in the first place?
Thank you very much.
Yeah, thank you for your questions or the bunch of questions. Let's start with retail. As I mentioned, retail performance was relatively weak in Q1. I think the explanation is, first of all, refurbishment in some important shops, which is now over. Up from April, everything is, let me say, is open. This is one element. The second element, which I mentioned, is the relatively weak media business. Let's first of all come back to retail and real estate. Not real estate, retail and services. We just to show you the numbers. We had always with reference to Q1 2019. We had in 2019, a shopping spend per passenger of EUR 1.89. Now we ended up in Q1 2023 with EUR 1.67.
It's EUR 0.20 less, a little bit disappointing. On the other side, we saw in services, so this is primarily food and beverage, an increase from EUR 0.86 in 2019 to EUR 1.17 in Q1 2023. Nearly EUR 0.30 more overcompensation. Putting these elements together, so shopping and services spent per pax, we had in 2019, EUR 2.76, and now we have EUR 2.84. EUR 0.08 more. Nevertheless, retail was and is relatively weak. Again, one reason is media or advertising, where we are lagging behind. Now looking forward, the question is what will happen up from now in Q1, Q3, and Q4? Here we are much more optimistic. Why? Because one stumbling block on the road, of course, is the absence of Chinese passengers in Germany.
This also makes a difference to other airports. If you would be on the high street in Vienna or Paris or everywhere, you can see again a lot of Chinese with the big bags of Louis Vuitton and Hermes and all this Gucci stuff. If you go to Germany, to the high streets in Berlin and Frankfurt as well as Munich, you don't see just a reduced number of Chinese. There's a mismatch between Germany, recovery of Chinese in Germany compared to other countries in the Eurozone. This has to do with the constrained slots between based on bilateral agreements between Germany and China. To give you a quantitative impression, in Q1 of this year, the number of flights between Germany and China had a level of about 20% compared to 2019, 20%.
This was artificially done to, let me say, to protect or to help competition, or especially the situation of German airlines or one German airline. This is now changing. Up from April now, the bilateral flight numbers between China and Germany are lifted up to a range of 45%-50%. Now it's in Q2 and Q3, we have twice as much capacity between the two countries as in Q1. This will help us. In Q4, the reopened flights will reach a level of more than 80%. Now we have a two-step ramp up from a very low Q1 now to the reopening of the market. This will bring us in the an intake of Chinese, and they have the deep pockets.
Just by the Chinese, you will see an improvement of the retail business and the spend per passenger. The numbers will be better. Finally, what is our expectation? We had in last year, 2022, you know the numbers for the full year, EUR 3.33 spend per passenger. Our expectation is clearly an improvement in this year compared to 2022. We are confident that up from now, we will see a good recovery. Again, the explanation between Paris and other cities with us in Germany has to do with the absence of Chinese people. Paris is, again, it's in the meantime, not totally full of Chinese, but you can see them on the streets while you don't see them here in the high streets in the German cities.
Second is cost increase. I told you the effect in 2022, EUR 70 million price effect, 50% of this is sustainable, 50% is one-off. The starting base point for 2024 is not 70, it's just 35%. We have made the calculation for 2024 based on the tariff agreement. There will be, of course, a sustainable price effect in 2024 of about EUR 70 million. Again, the sustainable effects are EUR 35 million in 2023 and EUR 70 million in 2024. On top comes one-off payments in 2023 of EUR 35 million. On average, when you look at the final personnel expenses end of 2024 and comparing this with the adjusted personnel base, adjusted means adjusted by the carve-out of the FraSec business, which totally changed the absolute numbers.
We have on an annual basis, a percentage increase in these two years between 8% and 9% per annum, which is significant and which is nearly three times higher than this what we had in the past. On the other side, you know our clear strategy that we have to accept this high inflation situation now in the Eurozone, in Germany, in this business, therefore we are going to compensate this on the revenue side by higher fees. We always said, looking forward into 2024, the fee increase, which in the next couple of, I don't know, weeks, perhaps, we are going to communicate, it will be an increase which is linked to the inflation rate as we always said. What do we have? What was guidance? No.
Traffic.
Traffic. Yeah, traffic. Upside, downsides in our guidance. Again, we have a clear confidence to reach what we have promised. Of course, some items can be higher, can be lower. What are the ups or the downs or the chances and the risks? In Frankfurt, as you mentioned, we said now in the middle of the range, this would translate into 60 million. Can be that at the end of the day, it's just 58. Nobody knows this is possible. There could be some downside in Frankfurt traffic-wise. On the other side, that's the reason why we showed you the chart with the international activities when you look to Greece, when you look to Bulgaria. There's a trend that, let me say, to summarize all these things that we see even more chances than risks in the international portfolio.
For the case that we do not meet the EUR 60 million, but perhaps EUR 58 million, we also see with a good probability passenger numbers in the international portfolio, which are higher than this what we included in our guidance. That it's an up and down at the end of the day. The positive and the negative things will compensate each other. That's the reason why the confidence is given. The very expensive tariff agreement, which is really expensive, was already known, not known, but when you ask us some months ago, and there have been a lot of questions already months ago, what do we expect? We said, yeah, it can be that the tariff agreement could be 8%-9%.
This is coincidence that now the outcome is more or less exactly in line with this, what we expected months ago. We have put all this already in our guidance calculation so that from the, Of course, we hope perhaps some upside from the tariff agreement, but now it's not an upside, it's just a confirmation of this what we put in our calculation. This is a long story. To end the story, again, we are confident to end up in the upper end of the EBITDA range, and I hope everything is now answered.
Yeah. Thank you very much for the detailed answer. Very clear. Thank you.
The next question is from the line of Marcin Wojtal with Bank of America.
Yes, thank you very much. My first question is on tariffs in Frankfurt for 2024. Is there any update? Can you shed some color on your thinking? Do you think you will be able to maybe request an even higher tariff increase next year versus the current year? My second question, if I may, on your Latin American assets, Brazil and Peru, at the moment, traffic is underperforming Europe in Latam. Could you explain why? What types of traffic are proving slow to recover? Do you see the situation changing at some point?
Maybe lastly, this new runway in Lima, is it actually, some, a project that will be generating additional traffic, and therefore it's EBITDA accretive, or it's actually generating initially mostly, additional costs and it could be a bit dilutive? Thank you.
First question, tariffs. Based on the tariff agreement, which is now on the table, again, it's not signed, but I think everybody, the unions as well as the government agreed for it, includes and covers the year 2024. As I mentioned, it's a 24-month tariff agreement, starting with the 1st of January this year, ending up December 31st next year. Again, very complex items. As I told you, the outcome for us are EUR 70 million personal cost increase in this year, 50% sustainable, 50% one-off. In 2024, we already know what will come because it's part of the tariff agreement. Again, this is another EUR 70 million but sustainable. What sustainable means, tariff effects which go into the tariff list of another EUR 70 million in 2024.
Sorry, I think the question was more related to the charges.
Yeah, to the charges. Again, we are in this year, it's, we have now this 4.9% increase as of January 1st in this year. In the next couple of weeks, you will hear what will come for 2024. I mentioned the impact of the wage tariff agreement, 8%-9%. I'm not willing to give you now an exact number, but based on the philosophy that we are going and have to pass through these inflation-driven wage increases, this is determining how to say the level of the price in the fee increase in 2024. Your fantasy is open. It will be not more than 10%.
It will be a single-digit number, much higher than the 4.9%, which you saw and see in 2023. Regarding Latin America, it's twofold. First of all, if you look to Lima Airport, you know there have been some political hiccups with the president, which is now put into prison, and now the situation is calming down. This means on the other side, especially international traffic is coming back. The trend, the very positive growth trend in Lima is unbroken. It was interrupted by the political disturbances, so to say, which are now going back on a normal base. We see already a very good recovery coming from the international traffic using Lima in Peru as a regional hub, servicing for South American destinations. Very optimistic regarding Peru.
Again, it has to do with the past, not with the future. In Brazil, it's also we have the two airports, Porto Alegre and Fortaleza. Porto Alegre is pure domestic airport. We, it's a domestic play, so to say. Nevertheless, in the meantime, the numbers are good. In Fortaleza has some international exposure, to also to tourists going to Fortaleza due to the beaches and surfing activities, et cetera. Here we are now looking forward, expecting also a good recovery and strong inflow of international tourists coming long haul to Fortaleza. Again, optimistic regarding Lima as well as for the two Brazilian airports, but due to different drivers of the optimism.
The Lima runway itself, first of all, it was part of the concession agreement, so we have been sincere. We have been forced to build a second one, but it's not just to the obligation of the concession agreement, it's also due to the expected traffic growth for the remaining time of our concession. We need the second runway and the capacity to achieve these growth numbers, which are based on the correlation between GDP growth and passenger growth. It's now opening the way for further growth at Lima Airport. Okay, Marcin, further questions?
Yes. Thank you so much.
The next question is from the line, Sathish Sivakumar with Citi. Your question please.
Yeah. Thank you. I've got two questions here. Firstly, on the potential to ramp up the slot allocation from 90- 104, how much of it is actually going to go to the Chinese carrier, say, rather than Lufthansa? Any split on that, how much of those slots would be more geared towards Chinese? We know that Lufthansa has capacity limitation in terms of ramp up. Any color on that would be helpful. What will be the cost impact as you ramp up this daily slot increase towards the summer? The second one, just to follow up on the tariff. Obviously for Frankfurt, you did mention that in the next couple of weeks, we should have an update. What about Greece?
It's obviously, it is an automatic pass-through with inflation linked, but where do you think that would pan out for 2024?
First question, slot situation. The constraint of 92 slots or movements per hour is an artificial constraint, which we set. Why? Because we had the problems with the ramp up regarding ground handling. Our problem was that in the peak hours during last summer, so we had a full recovery in the peaks, while on the resource side, this means the number of employees and qualified employees in ground handling, we just had maximum 80% of the people. With 80% of the staff, you cannot cover 100% of the traffic because there was a mismatch between peak hours and so to say, low utilization hours. This was our problem, the high volatility during the daily operation.
To have a balanced operation during the day, we fixed this artificial constraint of 92 slots to avoid this over peaking during the day. This was the reason why we brought down the capacity in peak times. Now, we made very good progress in ground handling regarding resources also, which is much more important regarding the qualification of personnel. On the other side, also, the airlines worked on their punctuality items. On both sides, the home-homework was made. Today, I can say that since the last four weeks, we have a very stable operation, thanks to ground handling improvement, but also thanks to all the efforts on the airline side. This combination worked very well, so that we are now also when we saw the performance at the Easter holidays.
This was a very good performance, and this was a good test for the summer season. This gives us the confidence that we are right on track. That's also the reason why we now are ramping up with the slots back to the old level of 104 slots, which we had in 2019. This has nothing to do with the situation of the Chinese flights. This is just an artificial cap, but set and fixed by the German government in combination with the Chinese government. They reduced to have a parity between China inbound, outbound, and Germany. They reduced the flights to about 20% of the former number of flights in 2019. Now step by step, this artificial constraint is lifted. Again, this has nothing to do with the 92.
Even today, the Chinese could go back to the old level. This would not create a conflict between the current artificial 92 slots constraint. These are two totally independent topics. As I mentioned, we came from 20% flights in Q1 this year, China, Germany, to 40%-50% of the old flight level in Q2 and Q3. The next big step take place in Q1 when we go up to 80%-85% of the 2019 level. This is a way and based on the fact that the demand for Chinese inbound flights, the passenger numbers are inbound driven and not outbound driven.
We also have the clear expectation that and today we see up from April 40%-50% that the seat load factor will be good. We are more or less overnight can welcome more Chinese, and this is good for the numbers in aviation, but it's even more important for the spend per passenger in the retail business. Cost increase in combination with the slot increase, it's fixed cost business, so nothing will happen. This is without any additional cost. What was the third question?
Agree. Agree with inflation in aviation.
We have an increase. It's relatively in the fees. It's a simple mechanism. In the concession agreements is fixed that we always have to take the official Greek inflation rate from the last year. This inflation rate is multiplied with 0.9, and this is automatically up from the April 1st of the following year, the fee increase for the 14 airports. We had in, for 2022, Greek inflation rate was about 9%, close to 9% times 0.9. That also now from the April 1st, beginning with Q2, all the fees in Greece will be higher with 8%. This is not in Q1, but that's the reason now why Q1 is a little bit underperforming.
You will see now a strong Q1. Why? Because further ramp up of passenger numbers as well as price increases. In absolute, it's about in per departing passenger in Greece, we are talking now about EUR 20 fees per departing guest travel. So far the answers.
Thank you.
Welcome.
The next question is from the line of Dario Maglione with BNP Paribas. Your question, please.
Hi. Three questions from me. The first one on staff expense for the three Frankfurt segments. How much will this cost increase in 2023 relative to last year? You mentioned the EUR 70 million increase in wage, also you have more people you are hiring, external staff and so on. Just if you would summarize in one number. Same question for other costs, excluding energy. The third question is on employee, the number of employees in ground handling division in Q1. I think they went up by only 60 employees, my understanding was that you're planning to hire 700-800 people more by the end of the year. I'm just wondering why the hiring process is so slow in Q1, if there is a specific problem or nothing to be concerned. Thanks.
Thanks for your question. First answer, what is the increase of personnel expenses? As I mentioned, in 2023, we have EUR 70 million price effect, and on top of this, we have the volume effect, and this is about EUR 30 million. In total, personnel expenses will increase EUR 100 million for the three segments, EUR 70 million price, EUR 30 million volume. The volume you can translate in minimum 500 FTEs, which will be net recruited in this year, primarily in ground handling. This is directly the spillover to your second question, why is the net effect that has been so slow in Q1? Are there problems with the recruitment? We have not problems with the recruitment.
We are recruiting a lot of people, but at the same time, we have a high fluctuation rate. On the growth side, so to say, we have a lot of intake of people, but on the other side, we have a high fluctuation rate, and we have to work. We have to continue with the recruitment, and we have to do or to trying to bring down retention management, et cetera, to bring down the fluctuation rate. That's the reason why the increase was relatively slow in Q1. I cannot promise what will be the fluctuation rate up from Q2, but we are continuing on the recruiting side, and we have to work hard on the, let me say, with retention measures to bring down the fluctuation.
In other words, the target nevertheless will be about 500 FTE to be on a level which is sufficient then to cover all these fully recovered traffic, what we expect in, not in this year, but then also in 2024.
Maybe the follow-up, the same question on the cost increase for this time not for staff, but for other costs, excluding energy.
Okay. The total OpEx. Again, in to sum up personal expense is EUR 100 million. In this year, 70 price, 30 volumes. We have energy cost, as I mentioned, +20. We have other things on the material expense side, spare parts, all the stuff which we have on the material expense side. In total, about, could be about EUR 40 million. That we have a net saving, so we come just to summarize also the history of our cost reduction program we had in 2021. We had total OpEx savings of about EUR 400 million, primarily based on the personnel reduction. In last year, we ended up on adjusted basis of EUR 200 million remaining cost savings, always compared to 2019.
From these, adjusted by the carve-out of FraSec, of course, because this is spoiling the whole story. We have from the EUR 200 million cost savings as of December 31st last year. Now we have minus EUR 100 for personnel, EUR 70 price, 30 more employees, minus EUR 20 energy, minus EUR 40 all the other nitty-gritty material expenses. If I make the math, then we have 100, 120. The remaining cost reduction to 2019 is or would be 40, about EUR 40 million.
Okay. That's very clear.
Of course, we have the other thing. We have the carve-out of FraSec, which has an impact on personnel costs. We have an overcompensation by, so to say, taken in material expenses because all the security costs in the future are going through our P&L as material expenses. On the other side of the P&L, you will see it, 100% covered by revenues. That's the reason why the absolute numbers are now relatively difficult to compare.
Just to confirm this carve-out and change in accounting of the security business, net effect is only EUR 10 million additional OpEx, like, on a full year, or is it more?
No, no. The additional Let me say, additional OpEx means that the reductions coming from the last year, so always compared to 2019, are significantly reduced. When I have reduced savings, I have higher absolute cost items. Everything adjusted by the FraSec security carve-out, we had an absolute cost level, again, starting in the beginning of this year, which has been EUR 200 million less adjusted compared to 2019. From these EUR 200 million savings, now we are going to lose EUR 100 million by increased personnel costs, EUR 70 million price, EUR 30 million more employees, another EUR 20 million coming from energy and another EUR 40 million, about EUR 40 million coming from higher prices, inflation-driven on the material expense side.
We have a remaining cost reduction to 2019 on an adjusted basis of about EUR 40 million.
Okay. Thanks, Matthias.
Thank you. Welcome.
The next question is from the line of Graham Hunt with Jefferies. Your question, please.
Thanks for the questions. Maybe just coming back to this, EUR 70 million of price effect in staff costs, especially given all you just said about net retention, do you think there's upside risk to that number if you're seeing further outflows, I suppose, of staff? You know, are there other ways that you can improve retention which aren't financial, let's say? What other levers are there at your disposal to help with that recruitment, which I guess ultimately underpins your capacity for the summer? Second question, maybe just on an update on Terminal 3. Perhaps I missed it in the presentation remarks, but I didn't hear, you know, what's the latest on that project? Thanks very much.
Regarding fluctuation rate, this is, I think it's a phenomenon of the German labor market. Each and every company has the same problems. Fluctuation rates are going up. We have this strong pressure from wages, which has to do with, of course, with the inflation. It's primarily driver, and we have to live with this. To bring in more money, this is not the way how it would like to work. We have to, let me say in the last three or two and a half years, the aviation industry suffered of course from the COVID pandemic. The mood was difficult also. All future options, future expectations have been very negative. In former times, it was very attractive to work for an airport as well as for an airline.
This changed totally during the pandemic. In the meantime, we see really month by month, the attractivity of the aviation industry is coming back because pandemic is over. Also people have a short memory. We see also a comeback of the attractivity of jobs in the airline industry, as well as for airports. That's the reason why, again, the recruitment is working and we have now to focus on what can we do to bring down fluctuation rates. Also here we are confident, and we are doing a lot of because now jobs are, you know, in the last two years they have not been secured. Now we can say, look at the future. All growth rates are fine. We are expanding and everything is going up.
This gives co-confidence to the workers, to the employees. These are very positive signals, and that's the reason why we expect that we can now follow our plan to ramp up the people, to bring up the qualifications in, in ground handling. Again, in the last four weeks, the operation was very, very smooth. No complaints, no waiting times. I think this is a very strong positive indication now for the summer season. We, we are monitoring very closely the level of qualifications, what is changing month by month. Our efforts, they are successfully. Again, we follow our plan. Our plan is working, quality is back on track. This gives us the confidence for the rest of the year.
Terminal three is also in time, on budgets, no hiccups. You see that in Germany itself, driven by the strong increase of interest rates. The big problem in the construction industry for big projects, there was more or less overnight, there's a stop of all new projects in Germany, in housing, but all in other big investments. The market has totally changed. Now we the last two, three years, we have been running after the construction companies asking them to work for us, now the market changed totally and companies now are asking for jobs, and this is good for the price level. We do not see any longer a strong increase on the construction price side.
Also availability of material as well as personnel regarding the construction industry is big on track. This also gives us the confidence that everything is running like planned. We don't see any hiccups on the budget side as well as on the milestone side. Looks good. Everybody who has time to visit us can see the site. We making site tours with a lot of investors as well as analysts. We are showing the progress which is planned in our plans. Here I also received now the numbers, personnel numbers in Q1. We recruited just in Q1, nearly 1,000 people. But on the other side, we had a fluctuation of more than 600. This is defining then the net number.
You see the recruiting machine is working very well. Now we have to bring up retention management on the same level to bring down the fluctuation numbers.
Very clear. Thank you very much.
Welcome.
The next question is from the line of Manish Beria with Société Générale .
Yes. Hi there. I will take question one by one, no? My first question is just trying to understand what sort of financial returns do you seek when you do a international investment? Let's take an example of the Antalya, the new concession. Just wanted to understand like what in your Excel sheet, what sort of return, I mean, do you get the IRR on this project, no?
This is always relatively simple, because when we, when we look on IRRs, our base is always the WACC for Frankfurt, so the weighted average cost of capital. Of course, carved out the expected return on equity. Then, of course, we have to put on top project risks, including political risks. Of course, everybody knows Turkey is not risk-free. This means that not giving you the exact number, but the IRR is above 10%. It's in all our international activities, it's always a double-digit IRR number.
Just to clarify, this double-digit IRR is on Turkey's cashflow or is on the euro cashflows? This is the one and this is all based on the euro cashflow, guys, I guess. Yeah?
Good question. Thank you very much.
Yeah.
We cannot calculating in Brazilian real or Turkish lira. Of course, we have it. It's of course, at the end of the day, we are focusing what comes over to us in euros. The return is always return on invested, our invested capital in euro terms based on a net tax base.
And, and this is on equity-
They are not the same after tax base.
This is on the equity invested, not the total CapEx like that is debt finance. Just on the equity that Fraport put, you expect more double digit IRR return on euro terms, no?
Exactly.
This is just-.
Always-
Okay.
What we invest, this is our equity, and we always see IRRs calculated in return on equity based on after tax basis in euro denominated double digit.
Correct. Perfect. The second question, I wanted to ask that is slightly more longer term rather than very short term is here, is that if you see the ROFRA, no, the return on your assets in the regulated aviation business, I mean, I understand now with inflation, maybe it is a little bit impacted, but still much lower than the WACC that you present for your Frankfurt, no? For the Germany, I mean, the WACC that is required WACC. Just trying to understand, can we go back to something like more than 7% pre-tax returns there in the aviation business?
Not now, but at some point, I mean, when things are more cooler, let's say when the traffic is back, when the inflation is more controlled or something like that, at some point in the medium term.
Yeah, sure. First of all, we have the, we have always official WACC. Officially means because the WACC has been approved by the regulator because it's also defining the maximum return in the aviation segment. That's the reason because it's double and triple-checked. We had in 2021, the WACC was 6.1%. We have the phenomenon that interest rates went up, beta factor went up, equity to debt ratio changed. That in 2022, the WACC increased from 6.1%- 7.3%.
Don't ask me what will be the WACC in the next couple of years, but having in mind that the interest rates for the indebtedness is even, let me say, on a higher level, perhaps increasing or for the next couple of years on a relatively high level. There's some impact to go for higher WACCs in the next couple of years. Of course, we have to look then the impact of inflation of the whole WACC calculation. With other words, the probability that the WACC numbers in the next two, three years will be higher than in the past is relatively high. I don't also have not the crystal ball. Yes.
the-
Of course, in aviation, the relatively return or the ROFRA on aviation was negatively impacted from the pandemic. Now you see already last year improvement and this year further improvement. Next year there will be a very nice increase to the positive side. We are going up step by step, year by year to achieve the allowed return on assets.
What I see, like if I do the historical, no. Even if I go back five, seven years, 10 years, it's rare that, I mean, you reach the WACC that you present in the annual report, no. Like, it's never been the case. Like, at some point in the history, it was like, of course, you met the WACC, the ROFRA met the WACC, but in general, like you never meet it. I mean, what's the reason? I mean, if it is allowed, everything is possible. Why it is lagging, I mean, year after year?
First of all, you know, the WACC, let me say the return on asset depends of the development of EBITDA, which is linked to prices/volumes. Now we see year by year, we cannot. Of course, theoretically, we could say, okay, we are increasing the fees, fully compensating the volume effect, but this is just a theoretical approach. In reality, it must be step by step. You see the good volume increase, recovery of the pandemic, and you see price increases. Please go back, let me say in the years before the pandemic, nobody thought that we would bring through 4.3, 4.9, next year a much higher number. We of course reflected the pandemic as well as the inflation.
Now we are coming with fee increases, which are much higher than ever thought, and we are continuing with them. That's the reason why we are again confident in some years, don't ask me exactly in what year, to also reach the constraint given by the official WACC.
Okay. Makes sense. Yeah. Thanks a lot. Really appreciate it.
Welcome.
The next question is from the line of José Arroyas with Santander. Your question please.
Good afternoon, gentlemen. Just a couple very quick ones, both on costs. Since the salary agreement at the federal level has not been signed, just wanted to clarify if the Q1 2023 expenses at Frankfurt reflect the higher salary levels that we will see, or will Frankfurt need to retrospectively make an adjustment to reflect the outcome? That's question number one. Question number two, I'm a bit unclear, Matthias. You have been very clear saying that salary increases will be +8%- +9% year-on-year in 2023. Did you say that there will be another +8%- +9% in 2024? Is that what you wanted to say? Thank you.
Regarding the personnel cost increases. The first payment of this agreement. If it is signed, and everybody assumes that it will be signed from all the parties, first payment will be in June. In the meantime, we already paid higher. This is a internal agreement which we did with the unions. We already now paying higher wages, which will be compensated against the outcome of this tariff agreement. It's a very complicated internal agreement which we have. With other words, in these numbers, which are now on the table in Q1, you already see this high increase, so there's no step up when the first payment kicked in because we have already anticipated this, which will be compensated against. This was in the agreement.
As a smooth, continuous and sustainable personnel payment month by month, and not that you have in your calculation to put in a huge step in some, in the future. What was second? What was, tariff agreement?
8%-9% also 2024.
Yeah, yeah. We are talking about 23 is already fixed. In 23, we realized a fee increase of 4.9 up from the 1st of January this year. This is gone. We're just talking about 24.
On the labor side, on the labor contract.
No, Matthias, labor. I mean.
Labor side is, as I said, 8%-9%. This is for us. We have in total, if you take the OpEx allocation, we have always about 70% of the OpEx at Frankfurt Airport is personnel cost and the remaining 30% is material expenses. With other words, inflation is a key for us, but especially the wage increase because we are dominated by personnel costs. This means the orientation, it's of course it's your official inflation rate in Germany, but in our case it's also more the focus on the impact coming from tariff increases. Again, 8%-9%, this is the indication also then for the expected fee increase in 2024. Okay, José?
All right. Thank you.
Perfect.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star followed by one at this time. The next question is from the line of Achal Kumar with HSBC. Your question please.
Yeah. Hi. Sorry, three for me, if I may. Kindly excuse me if I'm repeating because my line was bad and I could not hear many of the questions. First of all, just wanted to understand about the tariff and the capacity. I mean, you know, Lufthansa has already started shifting capacity to Munich, and those kind of things are happening. I mean, what are your views? What are your thoughts there? I mean, are you thinking about offering some discounts in order to get the capacity back or, you know, how do you see that?
If that is the case, do you see a further risk to the capacity? That is my first question. Secondly, in terms of your retail spend per passenger, I mean, what is the reason of you underperforming in terms of retail spend per passenger as compared to your peers? I mean, most of the other airports, airport operators have reported strong retail spend per passenger higher than pre-COVID, in your case it was still lower.
What is it that is driving and what kind of what kind of upside or positive you see, positive do you see from recovery from Asian recovery, Asian traffic recovery, which is still lagging especially for European carriers, although Chinese have started flying much more. That is my second question. Finally, in terms of your balance sheet, what sort of plans do you have to improve your balance sheet? I mean, the leverage has further increased. Now, are you sort of would you prefer for the balance sheet to improve gradually, automatically as the trading improves? Do you have any specific plans to improve your balance sheet? That's my last question. Thank you so much.
Go ahead.
Yeah, thank you for the questions. Munich topic. Just to clarify the situation, Lufthansa is not shifting traffic from Frankfurt to Munich. If you go back in the, in the last, you can say since the pandemic, if you look first of all in the reduction of passengers as well as flights in Munich versus Frankfurt and now the recovery, you can see we have this data history that the percentage reduction in Munich was always stronger than in Frankfurt. When we are looking on the recovery rates, the recovery rates in Frankfurt have been better than in Munich. Based on all numbers, there is no shift from traffic from Frankfurt to Munich, and the reason is relatively simple.
Yes, the argument always saying that Munich is more expensive than Frankfurt and so far is correct, that you have a difference regarding the passenger fees of about 10% per passenger. If you always bring the example, if you take an intercontinental aircraft, assuming 300, 400 passengers sitting inside the aircraft, having in mind that the fees per departing passenger is in average EUR 24, having a price difference of 10%, this means two and a half euro difference times 300 passengers. The cost disadvantage per flight from Frankfurt to, for example, JFK versus Munich to JFK is EUR 2 times 300, 400. We are talking about EUR 600, EUR 800 cost disadvantage of Frankfurt.
If you look on the revenue side, ticket prices are comparable. It's the same level in Munich as well as in Frankfurt. The difference makes the belly. In the belly of long-haul aircraft in Frankfurt, the belly is full of luggage of the passengers, the rest is filled up by cargo. In Munich, the belly is empty of cargo. This means if you take an average flight from Frankfurt to the U.S., including the belly freight, you have proceeds of, depending of course, from the cargo fees, EUR 30,000-EUR 50,000 per flight.
The revenue advantage out of Frankfurt for each and every long-haul carrier, having in mind that you can fill up the belly with cargo, you have EUR 30,000-EUR 50,000 per flight revenue advantage, versus a cost disadvantage of EUR 600-EUR 800. That's the reason why it's so attractive to fly via Frankfurt, not from our destinations, because we are multi-hub. We have a strong catchment area as well as the cargo hub functionality. this is the big disadvantage. And often in the press you can, read, yes, the A380 is allocated to Munich. That's true, but we are talking about six A380s and former before COVID, it was been 11 or 12. But why the A380? Because it's relatively simple.
It's a double-decker, and if you look in the belly, there's just place for the luggage of the people. With other words, the disadvantage of the A380, you cannot fill in cargo, is not relevant when you bring the A380 to Munich. In Frankfurt you cannot make additional money because in the belly there's no space for tons of cargo. That's the reason why the A380 is in Munich, because you don't have the cargo business and not in Frankfurt, where you need classical long-haul aircraft with a lot of belly capacity for the cargo business. This is the whole story. Frankfurt is a very attractive hub. Even in the pandemic, there was a proof, if you look, there was a concentration of traffic at Frankfurt Airport.
If you compare the relatively number of Frankfurt and Munich, you can't see any shift from Frankfurt to Munich. Spend per passenger, before you came into the conference call, we had an intensive discussion about the reasons to, again, to summarize, the low performance was due to the fact that in the other European capitals you have still a strong recovery of Chinese. In Germany, not this has to do with the artificial constraint of slots. In the moment, in Q1, we just had about 20% of the former Chinese flights, while in other countries it's already much more. Now the good story is that up from April, we are going back from a 20% capacity level for China, Germany to a 40-50% slot level.
In Q4, there's a further recovery of 80%-85%. This means up from now, you will see more Chinese passengers in Germany, in Frankfurt, and these are the big spenders. This is one reason or the main reason why the spend per passenger will go up. Second, we had a refurbishment of a very, very important duty-free shop as well as other ones. This is through. Now all the shops are back on track. This is also giving a tailwind. The third topic is that in Q1, already or also in the last full last year, 2022, the advertisement revenues have been relatively slow. Here with the, in combination with the recovery of the businessmen, there's more power for the companies to make, to spend more money for advertisement inside Frankfurt terminal.
In other words, these are the reasons for the poor performance in Q1 and the reasons which will give us, it gives us confidence that the situation will be better. To that we, in for the full year 2023, we expect a spend per passenger, which is higher than the EUR 3.33, which you saw in last year. Balance sheet, yeah. Are there special plans? No. No, the plan is to fulfill our financial targets, and this means to bring up the EBITDA year by year, and it's expressed in the guidance for this year and 2024, which will be much higher EBITDA on the other side.
The most important number is Free Cash Flow, which is still negative due to the two expansion programs running in Germany for T3 and in Lima for second runway, which is over now, and the new terminal. Here, the good story is that in beginning of 2025, Lima is inaugurated, and in summer 2026, Terminal 3 will be inaugurated. We are over with these big cash burners, so to say, and overnight or in two steps, CapEx will drop significantly on one side, and we have this linear and permanent EBITDA increase on the other side. The Free Cash Flow turns into the black numbers in 2025.
We have on one side then a reduction of the absolute indebtedness, and on the other side, an ongoing EBITDA increase, so that we come back to our maximum five times Net Debt to EBITDA ratio, which is a key parameter expressing our financial equilibrium.
Thank you.
There are no further questions, and I hand back to Christoph Nanke for closing comments.
Thanks, everybody, for your good questions, for your attention and participation. If you have further question, please contact us in IR. I wish you good rest of the day, and we stay in touch. Thank you.