Thank you for the introduction. Welcome also from my side to the presentation of our company's full-year results 2023. My name is Lukas Brosi, and I will host this presentation together with Kevin Fleck, our company's CFO. I would like to remind you that the presentation is also available on our website. Today's agenda is as usual and as follows: I will start with a short business update before our group CFO will provide you with information on our financial performance, followed by the outlook. At the end, we will have enough time to answer your questions. Please submit your questions, if possible, already during the presentation, which helps us to cluster them. Marc Heinzer will moderate the Q&A session. Let me start with our milestones for 2023. There were a lot of highlights last year.
On the slide shown, you see a picture of the 75th anniversary of Zurich Airport, which was a great spectacle. Some of you may also remember our Investor Day that happened just one day after the anniversary weekend ended. On the next slide, we'll go through some other highlights in more granularity. The past year saw not only increasing flight frequency, but also additional direct services resumed. For instance, since the introduction of the 2023 summer timetable, our hub carrier, SWISS, has resumed services to Shanghai. Cathay Pacific now flies several times a week to Hong Kong. Korean Air offers seasonal direct flights to Seoul, and Edelweiss has introduced new flights from Zurich Airport to Bogota and Cartagena. The diversification of our company continued to prove fruitful in 2023.
For example, due to our expansion into The Circle and acquisition of the Priora portfolio, real estate revenues were significantly higher than pre-COVID levels, while our international subsidiaries also contributed higher revenues. The construction project for Noida Airport in India passed further milestones, while the letters of intent for operating routes from this airport were signed with IndiGo Airlines, India's largest airline, and Akasa Air. We also succeeded in further expanding our international presence over the past year, being awarded a concession to operate Natal Airport in northeastern Brazil. Following the 2023 decision by Zurich's Cantonal Parliament in favor of extending two of our runways, Zurich voters likewise approved this safety-related project at the beginning of March 2024. The citizens have once again confirmed their trust in Zurich Airport.
As a result, we can now go ahead and submit the planning application to the federal government. Zurich Airport operates with a very complex runway system, and extending these runways will ensure greater safety, improved punctuality, and less noise impact in the evening. The Zurich Airport Innovation Hub was created to strengthen the innovation power of Zurich Airport. The task of the innovation hub is to examine and prioritize the potential of new technologies, processes, and forms of cooperation for the airport system. It focuses on multi-partner improvements to the customer experience at Zurich Airport. Following new legislation on non-financial reporting and the regulations on transparency and due diligence with respect to child labor that entered into force in Switzerland in 2023, we undertook extensive work during the reporting period to extend previous instruments to prevent child labor in order to meet the requirement standards.
Lastly, our majority-owned subsidiaries in Brazil at Florianópolis, Vitória and Macaé, succeeded in advancing one ACA level and now have level 2 accreditation. This means they are continually reducing their greenhouse gas emissions every year. Zurich Airport continues to be accredited at ACA level 4. This puts Zurich Airport among the top 10% of airports worldwide that have received this accreditation for their efforts to tackle climate change. Let's have a brief outlook at some key figures. The further growing traffic volumes drove revenue and EBITDA to new record levels in the reporting period. The consolidated profit came to CHF 304 million, almost matching the 2019 figure. This is mainly due to investments in the real estate and international business during this period. CapEx increased significantly compared to last year, to more than CHF 400 million.
This is largely attributable to higher investments in Zurich as well as in India, of which I will talk later in depth. Distribution to shareholders is to be increased from CHF 3.50 per share to CHF 5.30 per share. Let's go through our main business segment, starting with the aviation business. Some highlights from the traffic developments in Zurich were as follows: Passenger volumes during the past year were a reflection of many people rediscovering the joy of travel and the high demand for international mobility. The number of passengers who have traveled via Zurich Airport rose to 28.9 million in 2023. This is equivalent to 91.7% of the level in 2019. The 19% increase in the number of scheduled and charter flight movements was slightly less dynamic than the rise in passenger numbers.
Owing to high demand, coupled with airline capacity constraints, the average annual seat load factor reached a record high of 80.4%. The volume of freight handled fell by 10% year on year. In general, freight demand was lower in 2023 due to a weaker global trade. As a result, the transport supply is greater than the demand. As long as there is no time pressure, cheaper means of transport such as ships or trucks are preferred. That being said, freight volumes for January and February of this year are already roughly 10% above last year's figure. Passenger numbers in 2023 saw a year-on-year increase of 28%, with several days peaking at over 100,000 passengers. Volumes recovered gradually over the course of the reporting year, close to pre-pandemic levels.
The individual market regions all showed positive annual growth. As Zurich Airport's main market, European destination accounted for more or for around 25% more passengers than in 2022. This was primarily driven by leisure demand for flights to southern countries such as Spain, Portugal, and Turkey. International travel accounted for a quarter of all intercontinental travel, sorry. Intercontinental travel accounted for a quarter of all passengers, reaching 88% of 2019 levels. While passenger volumes flying to and from destinations in North America recovered well, the Far East region reached only 72% of its pre-pandemic volume, owing to a sluggish recovery of China and Hong Kong. On the next slide, we will provide you with an overview of our commercial and real estate business. Some commercial figures have already been pre-published in January.
With a commercial turnover of CHF 609 million, our commercial partner set a new high. As a result, we generated CHF 139 million of commercial revenue, which is also above 2019. Good news also from our parking segment, which we operate and manage ourselves. Revenue, we are also exceeding 2019 levels. Our real estate division has proved to be a strong and important revenue stream, and in 2023, recorded the highest ever revenues of our company's history. The focus in 2023 was on portfolio management, restructuring contracts, and the strategic development of the hangar area. At The Circle, offices, hotels, convention, healthcare services have become very well established. New tenancies taken up during last year include a financial service company and IT businesses.
On the food and beverage side, there were three additions, and all the space earmarked for cafes and restaurants have now been let. The letting rate of The Circle is now above 90%, and the occupancy rate for office space is around 95%. As already indicated, our Investor Day in September, we plan to develop The Circle even more into a business and service hub. A more granular communication in this regard is planned in the next month. Let's have a closer look at the commercial business. The turnover generated on airside stood at already 96% of 2019 figures, and hence outperformed the passenger recovery compared to pre-COVID. In the publicly accessible area on landside, turnover even surpassed pre-pandemic levels.
Renovations in the northern section of airport shopping will result in some passengers rerouting and store closures from 2024, although this will be offset by other measures elsewhere as far as possible. The extensive remodeling plan includes a new food hall, creating more attractive space and providing better links to The Circle. What has been driving real estate revenue last year? In 2019, we purchased a portfolio of 33 properties from Priora Suisse AG here at Zurich Airport. The real estate portfolio on the southern part of the airport consists of a variety of subleases, and at the beginning of 2023, we were able to restructure them, and thus create a win-win situation for all parties involved. Basically, we split one large contract into several smaller ones and were in a position to renegotiate long-term leases.
On the other hand, since we have also entered into smaller investment commitments, we benefit from slightly higher rental income. This new structure is a great example of how, through active portfolio management, we are able to create value for our shareholders, but also for our tenants at the same time. Last but not least, let's look at our international businesses. With a year-on-year increase of 17%, passenger numbers at Florianópolis Airport surpassed the level of 2019. Among other things, this massive boost was driven by the strong growth in international travel. Regular international flights to Lima, Santiago de Chile, and Montevideo were successfully added. Traffic volumes at Vitória and Macaé airports increased 20% year-on-year. In 2023, the airports at Florianópolis and Vitória were recognized as the best airports in their size category.
The passenger survey was conducted by the Brazilian Ministry of Transport. Also, for the third time in a row, Florianópolis Airport was awarded a green airport by Airport Council International, ACI. In Chile, Antofagasta Airport, in particular, posted solid growth, which is attributable to the launch of new mining projects in the region. With an increase of just under 17% compared with the previous year, the airport set new passenger record. New destinations, such as Cali and Lima, were added to its international route network during the reporting year. Iquique Airport in Chile can likewise report a record-breaking year for passenger numbers. In Macaé, the runway is progressing well, according to plan. As a reminder, we were awarded the portfolio consisting of two airports in Vitória and Macaé in 2019. Of these two airports, Vitória is clearly the main asset.
This being said, the concession agreement includes an obligation to build a new runway in Macaé, which is the smaller airport. After we will have completed this new runway, there are no further expansion investment obligation for this concession. Hence, we expect to generate solid free cash flows from these concessions after 2025. The portfolio grew last year with the airport in Natal. In a public tendering process, we were awarded a 30-year concession for Natal Airport in northeastern Brazil in May 2023. In February this year, we assumed control of the airport. The newly acquired airport complements our existing portfolio in Brazil and will enable us to benefit even more from the growth of the Brazilian aviation market. In India, we are currently the largest Swiss investor with our Noida project. The construction work for the Greenfield Airport is proceeding rapidly.
The structure of the terminal is already in place, and building work on the control tower has reached the top level. We are aiming for completion by end of the year. Construction of the runway is well advanced. The new airport aims to meet high standards, not only in terms of quality, but also in sustainability. For instance, power will be supplied mostly from photovoltaic solar panels and wind turbines, rainwater will be collected, graywater is to be recycled, and the vehicle fleet will be equipped with electric vehicles. Shortly before the end of 2023, a declaration of intent was signed with India's largest airline, IndiGo Airlines, for stationing part of their fleet at Noida International Airport. IndiGo is one of the fastest growing airlines in the world and will offer an extensive route network from Noida, focusing on domestic flights at the beginning.
A further declaration of intent was recently also signed with Akasa Air. Discussions with further airlines operating in India, Southeast Asia, and Middle East are ongoing. The majority of sub-concessions, such as food and beverage, ground handling, have also been awarded. With this, I'm handing over to Kevin for the financial part of the presentation.
Thank you, Lukas. Good afternoon, ladies and gentlemen. A warm welcome to the presentation of our full year results. I will now give you an overview of the financial performance of the company. Total revenue increased by 21% year-over-year, marking figures which are above pre-COVID levels. Aviation revenue grew at a slightly slower pace than passenger numbers. Compared with 2019, aviation revenue stood at 92%. Non-aviation revenue climbed by 18% to CHF 626 million in the reporting period, around 14% higher than the non-aviation revenue achieved in 2019. EBITDA increased to CHF 677 million, a plus of 22%, setting a new record with 5% above the 2019 levels. The EBITDA margin was at a high 55%.
The consolidated result for the past year rose to CHF 304 million, which was almost as high as the record profit achieved in 2019. All in all, we are happy to present you a successful financial year. Let's have a closer look at the non-aviation figures. Total commercial and parking revenue increased by 10%, with parking revenue showing the highest growth, mainly due to a better product differentiation. Real estate revenue reached a new all-time high, rising by 17% to CHF 196 million in the reporting period. This rise is because of, among other factors, the restructuring of agreements from the real estate portfolio purchased from Priora in 2019, higher energy and utility cost allocations, as well as inflation adjustments.
Primarily as a result of higher passenger volumes, revenue from services rose by 9%. The sharp rise in revenue from international airport business to CHF 118 million is mainly attributable to higher revenues from construction projects, to so-called concession accounting. Factoring out the income-statement-neutral revenue from construction projects, the international airport business climbed by 24% or CHF 15 million. Despite cost pressures, operating expenses rose at a slower pace than revenue. Personnel expenses were up by 12% to CHF 220 million, and reflect the increase in headcount and inflation adjustment. Costs for police and security rose by 11% year-on-year to CHF 117 million, due to higher passenger volumes as well as inflation adjustments.
As expected, at the beginning of the reporting period, energy and waste costs once again showed a sharp rise of CHF 15 million to CHF 49 million, mainly due to higher electricity prices. Overall, operating expenses increased by 20% year on year to CHF 560 million. Adjusted operating expenses, meaning excluding the expenses from construction projects, were around 7% up compared to 2019. I will now outline some key financial ratios. Net financial debt decreased, and net debt to EBITDA came down to a ratio of 1.6. The higher earnings also had a positive impact on our return on investor capital, which increased to 7%. The solid business performance also affected our cash generation positively, with operating cash flow up to pre-COVID levels. Likewise, we experienced a decent positive free cash flow generation last year.
Our cash position, excluding noise-related funds, amounted to CHF 483 million, with the Zurich side accounting for the majority. Among other things, the liquidity will be used to repay the CHF 300 million bond maturing in May 2024, and to distribute the dividend. As shown in earlier presentations, we have definitely entered the phase where the leverage in Zurich will be on the lower end, while leverage for our international holdings, mainly due to loans in Noida, is increasing. This slide shows the largest projects we have been working on in the last year. The biggest building project at Zurich Airport, the new baggage sorting system, is currently underway. Following extensive trials and ongoing adjustments, integration of the new system and the phased transition from the old baggage sorting system to the new one began in 2023.
Equipped with state-of-the-art technology costing approximately CHF 450 million, this new infrastructure at Zurich Airport is significantly more energy efficient than the existing systems. Project planning for replacing the existing Dock A, Dock B, and tower commenced during the year under review. Despite having a larger volume, the new building will also require much less heat, and thanks to solar panels, consumption of grid electricity will be cut around 60%. Retail and hospitality offerings will also be optimized. Building work for the tower is planned to start in 2027, and for Dock A from 2030 onwards. Following a two year pandemic-related suspension, construction work for Zone West has been resumed. A total of 14 stands for scheduled and charter aircrafts, plus a parking area for business jets, will be built on the western side of the airport.
We have already outlined the progress made at our largest international project, the development of Noida Airport in India. Noida will remain a project, also a major project, also for the current year. If you're looking for more details regarding CapEx accounting, this can be found in the annex of our presentation. So let's turn to the outlook. Let me start with our midterm traffic guidance. Historically, we have guided to be back at 2019 traffic levels in 2025. We are still expecting to have full traffic recovery by then. In 2024, we still see some issues that will make it difficult to handle pre-COVID traffic. Some of the airlines, for example, SWISS, also using A220 with engine problems. As compensation, SWISS is using the wet lease market. We hope these issues will be solved in due course.
In the long term, we expect similar growth rates as in the past, which were typically around 2% to 3% per year. So let's now focus on our expectation for the current year. Traffic volumes at the Zurich side are predicted to rise to approximately 30 million passengers. That's roughly 95% of the number reached in 2019. Aviation revenue will slightly outperform traffic volumes. This is primarily due to the increase in user fees introduced at the beginning of the year in connection with the refurbishment of the baggage sorting system. Non-aviation revenue is also expected to be higher. At the Zurich side, rising passenger numbers will have a positive impact on parking revenue, whereas the remaining commercial revenue will grow at a slower pace, also due to accounting effects such as IFRS 16.
Real estate revenue will be roughly in line with prior year figure. Revenue from international business will show above average growth, thanks to the integration of the newly acquired airport in Natal, Brazil, as well as the general growth momentum in the international business. Despite lower entry prices, operating expenses, in particular personnel and security-related costs, are expected to be driven by inflation and higher volumes in the current financial year. Overall, we expect to realize both a higher EBITDA and consolidated profit for full year 2024 than in the past financial year. Investment at the Zurich site will amount to CHF 250 million to CHF 300 million. Investments abroad will likely be around CHF 400 million, with the construction of the new airport in Noida making up the majority.
I'm also happy to share some guidance for our pathway to Net Zero by 2040. One promising project could be the use of a subglacial aquifer 300 meters below the airport surface. This channel, filled with water-bearing gravel, would serve as a heat and cold storage to heat and cool a significant proportion of the airport buildings without emitting any CO2. Heating and cooling the airport's infrastructure accounts for by far the largest proportion of our own CO2 emissions. The next step is to construct a test well, and among other things, it will show what quantities of water can be pumped and what the flow rate and chemical composition of the water are. We are positive to realize this project, and the results of the exploration to date are promising. Thank you very much, and I will now hand over to Lukas again.
Thank you, Kevin. So my summary would be there are no breaking news today, but a very solid result that we are presenting, mainly driven by record numbers in commercial business, real estate, and international business. You've also seen our guidance, which you may consider a little bit conservative, but as Kevin has explained, there is somehow a limited visibility on the engine issue, how this will affect the summer period. Nevertheless, you are all aware that our culture is rather to underpromise and overperform, rather this way than the other way around. With this, we are at the end of our result presentation, and I'll start the Q&A session, and I'm happy to hand over to Marc Heinzer, who will moderate the Q&A.
Thank you, Lukas. There have been quite a few questions coming in, and I've tried to put them a bit together, and the first one is regarding the aviation or the regulated business and is coming from Andrew Lobbenberg from Barclays. He's asking: Why is the 30 million traffic guide so low in the context of strong general traffic and high capacity growth filings?
It's regarding the... Sorry, the fees, or could you please repeat the question?
The traffic in general. Why is the 30 million traffic guidance so low in the context of a strong January guidance?
I mean, regarding the traffic, there are two things which we need to take into consideration. It's, one, the supply side, so the engine problems we mentioned, and also we see some limitations on the demand side. For instance, flights to Israel, to LEVAnon, which have been significantly lower over the past couple of months, unfortunately. So that's what we have taken into account in doing those forecasts for our passenger growth for the year 2024. We would be lucky if things would turn out better, but that's the latest forecast we can confirm.
Maybe if I may add, when we look back into 2023, we also have seen during the peaks in the summer, during the summer break, that we were very close already to the historic peaks of 2019. So this is also something that we considered. It's maybe not that well balanced as in the high volume months, we already have seen numbers close to the peaks. And once we have more visibility of the progress during the year, we are certainly updating the guidance if there is a need for.
Okay, so let's turn to the next question regarding regulation. Cristian Nedelcu from UBS is asking: in financial year 2024, is there any update you're waiting from the regulator regarding the WACC or any other updates? And in this sense, is there any chance to pull forward the negotiations with the airlines about the midterm tariff?
Actually, I don't see a need for. The mechanism is that we are now within the tariff period with a situation that we are allowed to over earn the agreed returns, which are 5%, for this tariff period. We have to start negotiations latest by April 2025. That's the start point of the negotiation, not an implementation of new tariffs, and therefore, you could not expect much in 2024. Obviously, we are preparing ourselves with the necessary materials, such as WACC, traffic outlook, et cetera, but the negotiation from today's point of view will start in 2025, with the major airlines and partners here in Zurich.
Maybe, maybe to add, there is no update expected regarding the WACC from the regulator this year, and when we start negotiation in 2025, we do not expect new tariffs before 2026. Depending on negotiation, might be even later in 2027.
Okay. Next question is from Carlos, from Kepler, regarding the baggage handling. He's asking: Could you walk us through the increase in baggage sorting and handling system fees? How was the negotiation process with the airlines, and what should we expect in terms of aviation revenue per passenger in 2024?
Yeah, as we mentioned, we heavily invested in the infrastructure of the baggage sorting system, and there is a different kind of procedure for those charges, so-called Entgelte in German. There is a simple mechanism which allows us to adjust those tariffs on a yearly basis, and since we invested over the last two years, we reached a point where we had a negative return on it, and therefore, we could increase the tariffs as per January 1, 2024.
Okay. Then again, from Carlos regarding the EVA. So he's saying that he's calculated a regulated EVA of around CHF 45 million for 2023. But he sees that to close the gap, we'll need significant increases in 2024, 2025, and 2026 in the regulated business. Is it clear that the increase in baggage handling fees is going to have a positive impact on this year's EVA? But should we expect more increases in fees for 2025 and 2026?
Yeah, that depends on the baggage sorting system. All the works have not been finished yet, so over the next 18 months, we are still working on the baggage sorting system, maybe even a bit more. And that could also lead to higher fees for the baggage sorting system, which would then also affect the EVA.
But the baggage sorting is somehow independent from the overall tariff regime, as this is really a dedicated fee for a dedicated infrastructure. And since this is the largest project under construction right now, we decided not to wait until the end of the completion of the baggage sorting, but have like an interim adoption of this tariff, which is kind of unique. You could not expect that we are doing this on three, four other line items of the tariff income. All together, comes into the negotiation starting in a year from now, roughly.
I can probably add on the cumulated EVA, there we made decent progress now in 2023, by approximately CHF 50 million. Now, we have this fee increase on top, and traffic is obviously further recovering, and also time will help. As, as indicated before, we will unlikely see charges changing before 2026 or even 2027. So we're still, optimistic to really compensate for the losses made during the crisis.
Another question related to the regulated business is from Satish, from Citi. So he's asking: Does the performance in real estate impact the tariff proposal for the next regulatory period?
No. No, short answer will be no. We have a hybrid component in the tariff regulation, which includes, car parking and airside retail activities, but not real estate. It's completely unregulated.
Okay, then we turn to some OpEx related questions. The first one from Daniel Bürki and Dario. So Daniel Bürki is asking: Which cost increase do you expect for 2024? He's mentioning personnel, security, energy, as a percentage to 2023. And also, Dario from BNP Paribas is asking: OpEx seems to be a bit higher than what was expected. Were there any significant one-offs in 2023?
There were no significant one-offs. We had volumes effect, obviously. We had 3 million, almost 3 million more passengers in Zurich. We had to staff our organization in 2023, welcomed a lot of new people at Zurich Airport. Although Switzerland inflation doesn't seem to be a hot topic, we do have inflation, so prices are increasing at our partners, but also within our organization with respect to the salaries. So we also expect this year to have increasing costs.
Maybe if I can add here, I don't see that so dramatic, honestly. I mean, when we look back, then very early in the crisis, we guided for a full recovery of passengers, presumably by 2025. This is now, it looks like now that we had a little bit more passenger last year than we have anticipated, but overall, we remain within that picture of a full recovery in 2025. And the next thing we also guided early in the crisis is that once we have fully recovered passenger volumes, we will be able to contribute about CHF 100 million more of EBITDA. And this goal was achieved already, despite having 8% lower passengers compared to 2019.
What we said is also that this CHF 100 million more of EBITDA is a mix of more real estate, more international returns, and cost savings, and this has slightly shifted, as we honestly have not assumed the inflation impact to be that heavy. Nevertheless, the overall picture in terms of recovery of passenger volumes, in terms of value contribution linked to this CHF 100 million EBITDA is, in my view, very very intact and we have rather reached this value contribution, this CHF 100 million EBITDA earlier than what we have expected when we guided for this number.
Probably to add on the last part of the question regarding energy costs, there we clearly see that those costs have now peaked in 2023, and we expect slightly lower costs now for this year. So mainly electricity, which we typically buy in advance. There, we do see lower prices at the moment.
Turning to some commercial questions, first one being from Manish, from Société Générale. He's asking: on the commercial division, i.e., all non-aviation activities in Zurich, the IFRS-related amortization, I think, was CHF 11 million for the full year. Do you have a split of this amortization in H1 and H2 of 2023? And it seems like that this division has been as if a bit of a soft margin in the second half of this year. And then how do you see this amortization expenses panning out in 2024 and 2025?
That's for the CFO. I'm happy that you're taking the complicated questions now.
Thanks. If I understood it correctly, what was negative effects of those amortizations due to the concessions we made for our commercial partners, right? Those have a negative effect. That's what we mentioned as well during the presentation. That's why the growth in 2024 won't be as heavy as we might could expect. So there is a negative effect. Still, we expect growing commercial numbers also this year. One thing which we also need to take into consideration, we are building the landside food hall, and this will also affect some of our commercial customers, and that's also taken into account in our forecast of 2024.
I can probably add on the IFRS 16 topic. There are other questions related to this as well. So IFRS 16 led to a negative revenue or a minus revenue of approximately CHF 11 million, and this will continue until the last contract has matured. So presumably for the next 4 to 5 years, it will be hovering somewhere around the CHF 10 million for those special amortizations. And regarding the weaker performance of the commercial division in H2, I guess that's mainly because of how the costs are split between H1 and H2. So a good part of cost increase, mainly related to staff, actually happened in the second half of the year due to hiring additional employees, and also last year's salary increase kicked in as of May and is therefore more in H2 than in H1.
Thank you. This already answered some further questions that were in the pipeline, so we can now turn to the international business, where we have a question also from Daniel Bürki, from ZKB. Will Noida be completed on time, and when do we expect a reply from the government regarding your tariff proposal?
Yeah, the work on Noida International Airport is running very intensively. We currently have more than 8,000 specialists on site, trying to finish the airport on time. We still aim for completion by the end of this year.
... and on the tariff, we expect the outcome of our tariff proposal within the next months. Summer, I would say.
Then there's another question from Manuel Lang, from Vontobel. You mentioned that the CMD last year, that international CapEx will probably be higher than in Zurich. Now, I'm wondering why they came in lower than anticipated.
We had maybe some delays in capital expenditures last year. That doesn't need to have a direct interlinkage with the progress on site. So therefore, we expect to have a bit higher CapEx this year, with a total of CHF 400 million in the international business. And we do also expect some expenditures on CapEx in 2025, which is not unusual for such a large project, that not all money is spent until the airport is finished.
Another CapEx-related question coming from Luca, from Intesa, regarding Noida. So the financial year 2024 CapEx guidance looks a bit high. Is there any inflation-driven impact, or is it an acceleration of construction works in Noida or elsewhere abroad?
It's primarily due to Noida. There we have an inflation protection in our contract for the construction of the airport. We're also spending money in Brazil for the runway in Macaé. So it's not only Noida, but the majority of the investments will be in India.
Okay, next question is from Satish, from Citi. He's asking: What triggers the CapEx for the second phase in Noida? Do you have to reach certain percentage of capacity utilization?
Yeah. The Phase I is 12 million passengers, and at the moment we reach 80%, we need to start with the planning. And as we already mentioned at the Capital Market Day, there is a high demand, higher than we actually planned in our business plan initially. So there is the positive potential that we will reach that point earlier than initially planned, and then also we'll start to invest further. But this has not yet been decided in which way we are going to do that.
Next one is from José, from Santander. In Noida airport traffic outlook, do you still maintain the outlook for the first year of operations that you provided in September last year?
Yeah, we stick to the guidance we gave during the Capital Market Day. Also with respect to the financials.
Question from Marcin, from Bank of America: Where do you expect international CapEx to be in 2025, once the Noida airport is opened to traffic? Will it be at very low levels?
Yeah. CapEx in international business will definitely be lower compared to this year, and the majority will then, for the next couple of years, be invested here in Zurich.
Another question from Martin is: Are you exploring any further international growth opportunities, i.e., acquisitions?
Honestly, given the strategy and focusing on these two regions in Latin America, mainly Brazil and India, the focus clearly is on the completion of the project in India, which I strongly believe that it's the highest potential of value creating for you as shareholders, rather than going into other projects in India within the next months. So there's a clear focus on completion and inauguration of that airport in India. In Brazil, we have Natal as an addition to the portfolio, and the strategy there is also that if we see in the primary market or secondary market transaction that would be a good add-on to our portfolio that fits into our strategy, we certainly will have a look at.
But from, let's say, a conservative point of view, there is no need to invest. If we find a good asset, such as Natal, then we will have a look at it.
Another set of question is coming from Ruxandra, from HSBC. First one being: When do you expect, when do you expect slots at Noida Airport to be allocated?
I don't know when this will exactly happen. Do you know that, Stefan?
I don't know precisely, but that will happen closer to the opening, so we are not yet there at the moment.
Another question from Ruxandra is: Are you concerned by the current delivery delays of airplanes, which are impacting also the Indian market?
It's actually an issue, so, IndiGo, for example, if I'm not mistaken, I think they have about 70-80 aircraft grounded. What we see that there is now this problem getting solved step by step. These spare parts are now available. Now you need a slot with the MRO facilities to change the aircraft parts, et cetera. This is something that step by step going to be resolved. I don't see, honestly, an material impact for Noida.
Okay, then we turn to some other questions. One is from Johannes Braun, from Stifel, about Priora. He's asking: Can you explain the restructuring of the Priora real rental agreements and the financial impact? Does it, for example, involve an increase of rents?
Yes, that's the answer to the last part of the question. It's basically something that we just wanna show you as an example of how portfolio optimization can be done in the existing layout of the airport. The area we are talking about is the home base of SR Technics, which is a major tenant here at Zurich. And for us, this restructuring of the contracts is basically something that we have agreed to further invest in this area, given a new long-term contract with SR Technics. That also, which is also a strong sign for SR Technics to Zurich Airport, which also creates quite interesting jobs at the airport.
This at the end, a win-win situation in a way that we have now SR Technics as a major tenant in this area. We are going to invest, and at the end, this results also in optimization, i.e., higher returns for that area.
Okay. Staying in the real estate business, Jose from Santander is asking: the real estate in Zurich, is there potential for further revenue optimization of the portfolio?
Well, that's our job. Actually, yes, step by step. Once contracts are maturing, then we always have an analysis of who will be, like, the best tenants. Can we adopt the portfolio? Can we adopt this region where we have vacancies, et cetera? But it's a clear strategy, really stick to the airport footprint. We are not going to be like a real estate owner or operator downtown Zurich, so the strategy is clearly on optimizing the portfolio step by step. What we have done now in the southern part of the airport, what I have explained to be like a good example.
The next question is from Dario, from BNP. He's asking: the transfer payment from commercial side to the aviation business was CHF 23 million, almost double versus 2019. Why such an increase? Will this be rediscussed for the next regulatory period?
The main driver was the parking business, which was running higher and produced good results. As Lukas also mentioned, the second one is the commercial activities on the air side, which also contributed to the transfer payment we had there. In the negotiation, this might be a topic, not from our side, but this might also be discussed, but
It's actually a good thing. If the transfer payment increases, it means that the value contribution of those segments is higher.
Next one is from Manish, from Société Générale, regarding the dividend. So is your prospective dividend policy or what's your prospective dividend policy in financial year 2025? What would be the basis of the dividend? Will the cash generation at home or will you look at cash generated at consolidated levels? So kind of do we split Zurich with international or put it all together? He says that this distinction seems to be important, mainly because of the Noida project. So basically, what is the future dividend policy after 2025?
As we said, also on the Capital Market Day, we have not yet decided. For next year, it will be again that 40% of net profit adjusted, plus the rest of the capital contribution reserve, and then this will be discussed in due course, what changes we might make at the dividend policy going forward.
Christian from UBS is asking: What are you seeing in terms of summer capacity, so for April until October, versus 2019?
Well, I would say that what I said before is that within these months of high volume summer vacation, we will be probably achieving 2019 levels, as we closely did already last year.
Then the next one is coming from Nicolas Mora regarding CapEx guidance. What are the building blocks again, and is there room to revise lower CapEx on Noida?
Yeah, I mean, in Zurich, we guided that we will approximately invest CHF 300 million over the next couple of years. We also highlighted some of the projects ahead of us. Noida, it's CHF 400 million this year, and that should be sufficient to finish the project. Then we also have some investments in the international business, but on a much lower scale, at least as of today.
The guidance, the CapEx guidance for Noida is unchanged, CHF 750 million. It's important to mention, and again, there is a total turnkey contract, which includes no inflation risk to us. Therefore, the CapEx for phase one is unchanged.
The next question is from Luca, again, touching on the OpEx. So you mentioned inflation on staff costs and security. Could you please elaborate a little bit more on that? Is the increase related to more hiring, contract renewals, or both? And then should we expect those cost line moving with inflation from 2026 onward?
I mean, it's both is correct. We staffed, we also increase our salaries or the staff salaries this year. Security costs are linked to volume, but also tariff adjustments we have from the police. On the long term, we expect that those will flow with the inflation we see in Switzerland, which will be rather on the lower end, at least in our perspective, as of today. But, as mentioned also in the beginning, costs will be increasing also this year.
Especially as you are asking for a longer-term development of those cost items, whatever belongs to volume-driven increase in OpEx, in terms of more passenger and whatever belongs to, inflation component for the regulated businesses, all goes into calculation of the new tariff period. There's, I would say, a rather perfect inflation and volume, compensation within, the next tariff period.
Maybe to add, the same goes for commercial. Most of our contracts are linked to the revenue, so if prices are increasing, we will also have a higher rental income. And same goes for the rental agreements we have with our tenants. They are also linked to an index, which is increasing if we do have inflation. So there is an inflation protection on the revenue side, as well.
Turning back again to the baggage handling system. So Andy Jones is asking: What has been the total investment in the baggage system you made until adjusting the fees, i.e., not just 2023 CapEx, but across the whole project?
Like, until the end of 2023, we invested approximately CHF 330 million so far in the baggage sorting system, and we do expect to invest over the next 2 years, the remaining CHF 120 million to be up to the approximately CHF 450 million we mentioned during the presentation.
I think this question is also aiming towards the financial impact of this change in the fees. So we will increase the baggage sorting fees by approximately 40%, which translate into additional revenues of approximately CHF 20 million a year.
Next question is from Reto Portmann. Can you please give us an update on air traffic to China, also compared to 2019?
China is maybe one of the reasons, so definitely the market that is lagging behind in terms of the overall recovery. I'd say it's about 70% of 2019 numbers.
Next question is from Manuel Lang, regarding inventory. So he's saying that they have doubled the inventories. Where do they come from, and what can be expected for the future development? And also on free cash flow, what was the main driver to keep it stable despite increased CapEx?
Yeah, the increase of inventory is mainly due to higher oil inventory in the reporting period, compared to the previous years, in quantity, but also in high average prices. And the second one was? Excuse me, could you please repeat?
Free cash flow.
The free cash flow. Yeah, the free cash flow was steady because we did have some lower CapEx, as we initially planned for the year 2023, so that had a positive impact on our free cash flow generation last year.
Okay, so we are coming already to the last question from Satish. He's asking: Where are we on corporate travel recovery?
It's a tricky one as a last question. I would say it really depends on market. So, in the intercontinental segment, I would rather say we are close to recovery, especially in the North American market, U.S., Canada. Asian, same is true. What I mentioned before, I would say probably 70%, and Europe has not fully recovered, especially what belongs to, like, daily trips to London, et cetera, which probably never will fully recover as there is, like, the most structural change in the travel behavior. I would say it's probably overall 80% to 90%. Yeah, that would confirm the data that we have from the surveys we run with our passengers. So for the full year 2023, the share of business travelers was estimated 22%, which compares to approximately 26%, which we had pre-COVID.
Okay, with this, we are at the end of the Q&A sessions. If a question shouldn't have been answered to the satisfaction, please reach out, and we'll follow up. With this, I will hand back to Lukas.
Thank you. Nothing more to add from my side. Thank you very much for the interest in our company. We are here for any further questions. Please reach out if there were questions we have not answered during the call. Thank you very much.