Ladies and gentlemen, welcome to the Flughafen Zürich AG Full Year Results 2021 conference call and live webcast. I am Alice, the conference call operator. I would like to remind you that all participants will be listed in read-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone or click the HD Q&A button on the webcast. Webcast viewers may submit their questions or comments in writing by the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Stephan Widrig, CEO. Please go ahead, sir.
Thank you, ladies and gentlemen. Welcome to the presentation of our company's full year results, 2021. I would like to remind you that the presentation is available on our webpage, zurich-airport.com. My name is Stephan Widrig, I'm the CEO of Zurich Airport, and I will host this presentation together with Lukas Brosi, our company's CFO. Today's agenda is as follows. I will start with a short business update before our CEO will provide you with information on our financial performance, followed by the outlook. At the end, as always, we will have enough time to answer your questions. Stefan Weber, our head of financial services and investor relations, will moderate the Q&A session on our behalf. 2021 was a mixed year with some bright spots. Zurich Airport welcomed 10.2 million passengers, up 23% from the previous year.
However, this was still only around one-third of the volumes registered in the pre-crisis year 2019. It was a year of two different halves, with the first half still very much dominated by the impact of Corona and only about 2 million passengers in these six months. Thanks to the relaxation of restrictions and the boost from summer vacationers, passenger numbers then picked up strongly from July onwards. The emergence of the new Omicron virus variant resulted in a minor decrease in travel activity during December. This proved to be merely temporary, and passenger traffic already started picking up again towards the end of the year. The volume of air freight handled rose significantly and was back at pre-crisis levels towards the end of 2021. We summarized the full year 2021 with the following milestones. Travel restrictions were the key element around aviation.
Last month, the Swiss government lifted almost all restrictions, and travel has since become much easier. There is no proof of vaccination, recovery, or negative tests necessary anymore for traveling to Switzerland. Now we are regaining again our freedom of travel. Lukas will later outline the impact of the war in Ukraine. As tragic as this aggression is to the people of Ukraine and our world order, the business impact on our company in the short term will, in our assessment, be rather minor, and the recovery out of the pandemic will remain the dominant factor in our traffic recovery. Another key decision around aviation was the rejection of a new carbon legislation in Switzerland that wanted to impose a new climate tax for air travel passengers. A tax burden on aviation is off the table for now.
Switzerland plans now a similar approach as the European Union with quotas on sustainable fuels as the main element. We very much support this approach because it enables the transformation of aviation without taking additional tax money out of the industry. The commercial business shows promising signs of increasing turnover, with passengers, commuters, guests, and employees returning to Zurich Airport. On land side, we reach around 80% of pre-pandemic levels by now. The Circle is on a good track to become a popular destination, and the opening of the second Hyatt hotel in December marked the final completion of this major project. The international business is focusing on the two markets in Latin America and India. The biggest project abroad, the Noida International Airport in India, is making good progress. Financing was successfully secured, the project land handed over, and construction mobilization started during the year under review.
Due to tight cost management, we incurred again meaningfully lower costs last year than pre-crisis level. That being said, a major contributor to the cost savings, short time work in Switzerland, has ended last month and thus will increase the personnel expenses this year again. Nevertheless, we expect sustainable cost savings of around CHF 20 million-CHF 30 million in the future, despite additional infrastructures and revenue generators from The Circle and Priora buildings. We have also made solid progress on sustainability topics. Besides focusing on reducing the carbon footprint at our airports, we are also committed to the use of alternative sustainable aviation fuels. Together with various partners, we succeeded in developing a process for importing SAF into Switzerland, a major step forward in this regard. We take our government's environmental and social responsibilities seriously, both in Switzerland and in our projects abroad.
The most urgent task to be tackled is the reduction of CO2 emissions. We have set out our contribution to decarbonizing the aviation industry in our energy strategy for Zurich Airport. We have almost met the Paris Climate Agreement targets for 2030, and made a binding commitment to reduce our carbon emissions to net zero with trackable intermediate milestones. For the 2021 financial year, our company has written its first integrated report, prepared in accordance with the Global Reporting Initiative standards. Let's move to the financials. Looking at the industry, we are quite happy with what we can present you today, with slightly higher revenues and a substantial EBITDA increase of around CHF 100 million to roughly CHF 300 million, which is a plus of about 50%.
While the pandemic caused another loss in the first half of 2021, the continuing recovery enabled profits in the third and fourth quarter of the year. Over the financial year as a whole, this resulted in a consolidated loss of CHF 10 million only, compared to a loss of CHF 69 million in the previous year. CapEx also went substantially down and almost halved. Let's go through our main segments, starting with the aviation business. Low passenger volumes in the first half of the year, followed by an upturn in the summer, and constantly changing travel restrictions were the major impact. At barely 15% of pre-crisis levels, traffic volumes were extremely low during the first six months. Over the summer and during the fall break, passenger numbers picked up to around 50% compared to pre-crisis levels, occasionally even rising to 65% on individual days.
From November, the U.S. and some Asian countries opening their borders to vaccinated travelers likewise had a positive effect. The resurgence in COVID infection rates with the emergence of the Omicron variant put a small damper on recovery at the end of the year, but marks probably also the beginning of the end of the pandemic phase. We are now on a clear upward trend on passenger figures also in these weeks. On the next slide, we'll provide you with an overview about our commercial and real estate business. The partial closures of shops and restaurants, coupled with working from home rules, had still a serious impact on the commercial business at the Zürich site. As well, we are also here happy to see that revenues are increasing again and are confident that this trend will continue, since the Swiss government lifted almost all restrictions.
You see the key figures on the slide. Our car parks are also in recovery mode, show an increase in revenues of around 26% compared to 2020. Also, there is a correlation to our traffic numbers. There are also some parking revenues with fixed tenants or airport staff, which provided additional stable returns. For the Swiss retailers, and especially for the hospitality sector, the restrictions imposed during the first half of 2021 had a drastic impact. While stores were able to reopen at the beginning of March, restaurants were not allowed to open their indoor areas until the beginning of June. Along with the drop in passenger numbers, various work from home rules also led to a fall in commuter footfall, which likewise negatively impacted our commercial business.
Thanks to the minimum annual guarantees, our revenues are protected to some extent, but still some rent concessions were given in the interest of to protect midterm business, and we are happy to confirm that we have no open discussions for the rents shown in 2021. What we show in our report is also agreed and paid by all partners. All key partners also are in a solid state, and the big contracts are not due to expire soon. Most of the rent concessions granted in this context were recognized as assets in accordance with IFRS 16 and will be amortized on a straight line basis over the term of the relevant contracts. In sum, the minimum annual guarantees were lowered by somewhat CHF 40 million in 2021, which compares to more than CHF 50 million in the previous year.
We do not expect significant rent reductions for 2022. Once again, our real estate revenues have proven very resilient and increased mainly as a result of additional contribution coming from The Circle. The Circle celebrated its first anniversary during the year under review, and this major project was brought to a successful conclusion with the opening of the two Hyatt hotels in April and December, along with numerous other new tenants. Despite the difficult situation, The Circle Convention Center already played host to several major events during 2021. The airport central location, good accessibility, and attractiveness of its surroundings meet the needs of event organizers. As can be seen on the right-hand side of the slide, The Circle is still ramping up, and we expect it to reach its full potential in the next two to three years.
The graph shows 100% of The Circle, of which we own 51%. In other words, the revenue contribution in 2021 from The Circle was approximately CHF 20 million. From a sustainability point of view, the Circle is certified with LEED Platinum and Minergie standards utilizing efficient alternative energy sources. For example, solar power or heat pumps with systematic heat recovery and underground terminal energy storage. Let's move to our international business. Corona was likewise the dominant story here. However, business in Brazil and Chile picked up strongly, primarily due to the high proportion of domestic flights here. In Brazil, owing to very high COVID case rates, the upturn in passenger numbers temporarily stalled in the first quarter of 2021. The situation then continually improved, and passenger volumes rose steadily until the end of the year.
Following the expansion of the domestic route network in the third quarter, the national airlines offered international flights again for the first time in the fourth quarter. Passenger volumes recovered to more than 85% of pre-crisis levels by the end of the year. In Chile, rising copper prices during the reporting year drove growth in the Chilean mining industry, which in turn resulted in large volume of business travel at our airports, reaching full 2019 levels at the end of the year. The airport project in Brazil and in Chile are robust, and we were able to weather the crisis. They were able to weather the crisis under their own steam. In order to increase efficiency, we merged the operational management of the majority-owned Brazilian airports, which generates additional sustainable cost savings.
Thanks to negotiation with the local bank on the credit facilities and government compensation for COVID-related loss of revenue, it was possible to safeguard the liquidity of our Latin American subsidiaries without any financial contributions of the parent company. Expansion of the terminal in Iquique is almost complete, as can be seen on the second picture, which will more than double the airport's capacity in this mining hotspot. In Macaé, plans for building a new terminal have been completed, and in Vitória, preliminary planning for a large-scale real estate development at the airport has reached an advanced stage. Investments on the existing assets will be low in the coming years. Last but not least, we are also proud to announce that Florianópolis and Vitória airports ranked consistently on top of the list in passenger satisfaction surveys in Brazil.
The company's largest development project abroad is Noida International Airport, around 80 km southeast of Delhi in India's national capital region, an emerging economic region. The development of the new Noida Airport is of great economic significance in the whole Delhi metropolitan area. When it commences operation, the new airport will be able to handle 12 million passengers a year. With new freight and logistics infrastructures, the airport will also be a key driver for the industrial growth of the whole country. Last but not least, Noida International Airport will be the first airport of its size in India to deliver net zero carbon emissions, and consequently sets a new standard for sustainable airport operations in such regions. Last August, the master plan was approved by the authorities.
All relevant land for the project was handed over, and the financing agreements with the State Bank of India are signed. The official groundbreaking ceremony was held at the end of November in the presence of the Prime Minister of India and the Chief Minister of Uttar Pradesh, as you can see on the pictures, which shows the political importance also for India. Preliminary construction work has started. Negotiation of the major EPC contracts should be concluded soon. Further key contracts, such as freight, catering, solar power generation and a hotel, for example, will then be awarded over the course of this year. The airport is scheduled to commence operations towards the end of 2024. Development projects such as this have a great upside potential, but of course, also involve risks which we have to manage.
It is not our first greenfield project in India, and we realized also major construction projects in Latin America successfully before. Out of four key development challenges, there are three already solved. Agreements with the government are all signed, financing on a non-recourse basis is secured, and the evacuation and handover of land is completed. The last remaining key development challenge is the construction, which we will mitigate with EPC contracts. There is a certain pressure on price in the construction industry globally due to the current price increases in raw materials and energy, and constraints also in supply chains. Also foreign exchange rates will add some volatility to the CapEx. Let's keep in mind that first, we are here in a regulated business where we are confident to be able to adjust revenues based on CapEx figures.
Secondly, we speak here of a 40-year concession in India's economic area with the highest purchasing power. More important than the exact investment amount is that we always manage well the relationship between traffic, investments, costs, and revenues. That's our business expertise, which we will also transfer into shareholder value. In this case, I'm very confident. With this, I'm handing over to you, Lukas.
Thank you, Stephan. Good afternoon, ladies and gentlemen. Welcome also from my side. I will now give you an overview of the financial performance of the company. Aviation revenue came to CHF 241 million in the past financial year, which is 8.5% above the prior year period due to the increase in overall passenger numbers at Zurich Airport, including also the agreed 10% temporary reduction in flight operation charges. Compared with 2019, aviation revenue was still down by almost two-thirds in line with volumes. Non-aviation revenue increased by approximately 9% to CHF 439 million, which is roughly 80% of the 2019 figure. Due to a profitable second half of the year, the consolidated loss for the financial year just ended narrowed to CHF 10 million.
Total commercial and parking revenue rose by around 17% year-on-year to CHF 199 million. In the past financial year, rent concessions were once again agreed with commercial partners. These were capitalized in accordance with IFRS 16, and will be amortized over the remaining term of the respective contracts. It's also worth to mention that parking revenues performed better than passenger volumes, mainly because of a solid share of fixed parking tenants. Revenue from facility management remained solid, rising by roughly 9% to CHF 153 million. This rise is attributable primarily to additional rental income in connection with The Circle. Revenue from services climbed by around 13% to CHF 32 million. This increase is largely a result of additional service revenue for The Circle and our VIP services.
The decrease in revenue from international business to CHF 55 million is due to lower income from construction project. Factoring out the reduced investment activity, revenue rose by 24%, underscoring the more rapid recovery at foreign airport holdings in particular. On the cost side, numerous measures were already implemented at the beginning of the crisis. Owing to lower headcount and short time working payments, personal expenses were down to CHF 171 million. Further cost savings could be achieved also for police and security, despite higher passenger numbers than in the previous year overall. Lower costs are mainly attributable to operational improvements. While ongoing cost discipline also had a positive impact on administrative costs, energy and waste costs show the rise of CHF 4 million. This reflects higher raw material prices for heat generation and higher volumes of The Circle.
In total, operating expenses decreased by a further 11% year-on-year to CHF 381 million. Adjusted for expenses for construction projects, expenses fell by around 8% or 24% compared with 2019. I will now outline some key financial ratios. Net financial debt, excluding the Airport Zurich Noise Fund, decreased slightly, and net debt to EBITDA came down to 4.6 times. As a result of higher earnings before interest, our return on invested capital turned positive again. Thanks to an improved performance, our operating cash flow figure increased, which had a positive effect on our free cash flow generation. The next slide shows the largest project we have been working on in the last year.
Besides completing The Circle, CapEx in Zurich resulted primarily from projects that were already being implemented when the crisis broke out, and on which work was being continued. For upgrading and expanding the baggage sorting system, the core infrastructure was installed on schedule. Although scheduled for completion in 2025, some parts of the project will come to operation sooner. As outlined before, earthworks also have started for the Noida International Airport. The expansion of the landside passenger area project is pivotal for the use of all landside zones. The opening is scheduled for the end of 2026. This will include retail outlets, underground logistics, and a ground level food hall. With this, let's move on to the outlook. First of all, I'd like to show you what we currently expect for this year's summer timetable. As always, this is subject to changes.
We have seen that traffic figures recovered well in the second half of 2021, and we are also optimistic for the upcoming summer schedule, and the route network comprises of almost the same number of direct connections to and from Zurich as of 2019. Before I come to the outlook, let me provide an initial assessment of the shocking and sad war in Ukraine. Passengers to Ukraine and Russia amount to around 1.5% of total passengers, or roughly 150,000 in 2021. There are different impacts on the aviation market in Western Europe. Higher kerosene prices will likely increase ticket and freight prices. Due to the closure of airspace, planes will need longer to reach their destinations in Asia, which also increases the cost of the flights.
Depending on further developments, an impact on the demand for air travel to Europe cannot be ruled out, although this cannot be quantified right now. Furthermore, we also expect to be confronted by higher energy costs and potentially rising inflation or interest rates. Oil and gas expenses account only for a small share of our OPEX, a mid-single-digit million amount. Furthermore, more than 50% of energy costs are passed through to tenants. So far, inflation in Switzerland has been moderate, and we are relatively well protected with our different revenue streams and long-term fixed rate financing. Despite these uncertain times, I'll try to outline our guidance for the current year on the following slide. The start of 2022 was characterized by the Omicron virus variant and the outbreak of the war in Ukraine. The war in Ukraine generated additional uncertainty.
Whereas the impact of the war in Ukraine on the aviation industry is still unclear, we assume that the pandemic related travel restrictions will be eased further. We assume that passenger numbers at the Zurich site will rise to around 20 million passengers this year, corresponding to roughly two-thirds of the 2019 level. Aviation revenue will mirror traffic volumes, and non-aviation revenues are also expected to be on a positive trend. Firstly, due to additional revenue at The Circle, and secondly, thanks to international business activities where growth momentum is expected to be stronger. While we continue to focus on cost discipline, we anticipate a year-on-year rise in costs in 2022. Firstly, the short time working that protected us from extensive personnel adjustment during the crisis came to an end in February.
Secondly, the expected growth in passenger numbers will result in higher security and infrastructure cost. Overall, however, operating expenses, excluding expenses from construction project, can be kept well below the 2019 levels. Due to the continuing recovery, we expect to return to a profit this year in the order of a low three-digit million CHF. The profit 2022 is the basis for the resumption of dividend payments to our shareholders in 2023. Speaking of dividend payments, I can confirm that there are no restrictions from the government in terms of possible payments since we have not incurred any governmental loans or the like. Investments at the Zurich site will amount to approximately CHF 250 million in 2022.
Investments at our subsidiaries abroad are likely to amount to around CHF 200 million, driven in particular by the start of construction work in Noida. Let me go a little deeper into our CapEx plans. In Zurich, as explained on the previous slide, we estimate CapEx of around CHF 250 million in 2022, which also includes our share of the final payment for The Circle. Midterm, we believe the CapEx should hover around these same levels. In Brazil, we expect to see investments of around CHF 80 million over the next three years, mainly in Vitória and Macaé. In Chile, the new terminal in Iquique is already 90% completed. The commissioning will happen in the second half of this year. In India, earthworks in Noida have already started at the end of 2021.
We estimate to announce the signing of the EPC contracts within the next weeks and start building the infrastructure shortly thereafter. Compared to our first guidance set at the end of 2019, we have updated our CapEx guidance for Noida to around CHF 750 million. The main reason, as Stephan has explained, is that pricing, especially for commodities and construction material, has increased over the planning period. However, we expect to finance these additional costs locally and compensate the increased CapEx with higher regulated charges. Therefore, we expect no change in the equity required from Zurich. In summary, while securing liquidity was the focus in 2020, reaching profitability threshold was the milestone in 2021, and achieving a positive result will be the target for 2022 from a financial point of view.
In the short to medium term view, we'll have to strike a balance between the reduction of leverage, resumption of dividend payments, and investment projects in Zurich and abroad. Whereas the break-even point for free cash flow generation was reached in 2021, we also expect the free cash flow to remain neutral to slightly positive in 2022, although international CapEx will be higher. As of 2023, the company is expected to generate solid free cash flows again. As indicated in the past, we expect that once we reach again 2019 traffic levels, we should be in a stronger position financially due to the additional EBITDA contributions from The Circle, the Priora real estate acquisition, our international business, and of course, sustainable cost optimization.
All in all, this should increase EBITDA by around CHF 100 million compared to 2019, once reaching pre-crisis passenger numbers. Our efforts were also recognized by our rater, our rating agency, Standard & Poor's. Last month, they affirmed our A+ rating. Zurich Airport still has a very compelling story to tell. Thanks to favorable traffic mix and a strong local demand, the recovery in Zurich will continue and is expected to meet pre-crisis levels by 2025. The regulatory framework is set, and this allows the aeronautical revenue to grow in line with traffic volumes. Medium to long term, the growing population, economic growth, and the continued globalization will further push demand for air traffic.
In combination with a steady increase in number of non-airline passengers, also thanks to additional footfall from The Circle, frequencies at the airport will lead to a solid performance in the commercial and parking business. Real estate is one of the main drivers to further diversify our revenue base, and especially during the crisis, it proved to be the most resilient part of our business model. Also, the international business helps to further diversify and secure long-term growth. From the financial point of view, the company is well-financed, and an adequate shareholder remuneration is planned for the financial year 2022. In conclusion, our airport is a long-term and robust infrastructure investment, providing additional upside, especially in the non-regulated business. With this, I am at the end of my part of the presentation, and hand back to Stephan.
Thank you, Lukas. That was all from our side, and we now open the Q&A part of this presentation. First, we'd like to invite the questions asked on our webcast platform, and then answering the questions raised by phone.
Okay. Thank you. Welcome also from my side. We received a couple of questions on the webcast. The first ones are from Dario, from BNP. First, he has a question on the dividend for 2022. Lukas, can you give us some guidance on size, payout, and a potential additional dividend?
Well, I can confirm that the existing dividend policy is still in place and valid, so the dividend is set on the consolidated profit, whereas we target a payout of 40% of profit as the ordinary dividend. On top of that, there is possibility to increase the potential payout by an extraordinary dividend out of the capital contribution reserve as we did four times pre-crisis. There's nothing yet decided. There are around CHF 120 million in that dedicated reserve. I think that is something that the board has to address given the momentum next year, and address this to the AGM.
What I can confirm is the dividend policy, 40%, and that there is a possibility to increase that maximum, double it with an extraordinary dividend. I think we are one year away from a concrete decision on the payout 2022.
The next question is on tariffs. They are flat for the next few years, but are they adjusted for inflation?
The tariffs we have agreed with our partners in the summer 2020 are nominal, so therefore there's no automatic inflation adjustment on that set tariff until 2025. Inflation will then be recognized and brought into calculation for the next tariff period.
The next one is on the oil price or energy costs in general. What have you assumed in your 2022 guidance? How do you think about the impact of fuel price on the number of passengers? Is there a particular segment that might be more affected than others?
What I can say is, first of all, whatever is like the basis for our financial guidance, recognizes the increasing energy costs based on our forecast. We have protected ourselves so far that we also have increased the oil reserve for the heating of, for example, our infrastructure. We bought all the oil below $100 per barrel. I think for the time being, one should not overestimate the impact on us. As outlined before, oil and gas costs represents about CHF 5 million-CHF 6 million last year, 50% is passed through to our tenants. I think we are well protected for the course of the year. Also, this is not like a significant number in terms of our total operating expenses.
The next question is from Pascal Furger, from Bank Vontobel, probably for Stephan. It's on the passenger guidance. Why is your guidance for recovery to two-thirds of pre-pandemic level in this year rather conservative as compared to Swiss, which expect to return to around 76% of pre-pandemic level? Related to this first question, Swiss is about to reduce their capacity by 15%. Is this included in your midterm guidance, to reach pre-crisis levels by 2025? Or which other airline could take over the capacity?
Yeah, the last question is a clear yes, and of course, we have modeled in the assumption of Swiss fleet planning also in our models. Swiss also sees a growth story. Swiss also sees an addition to the fleet in the midterm, and so do other airlines on the North American route. For example, United Airlines is increasing its network to Zurich. We also see other carriers, such as Air Canada, in North America or also in Asia, increasing their fleets from summer timetable onwards. You mentioned in your first question that we have a different assumption on the traffic this year for Zurich than Swiss. I'm not so sure whether there is really a difference. Our two-thirds of the traffic cover the full year, while I assume Swiss has commented also where they will be at the end of the year.
We started with some of 50%, roughly pre-pandemic levels, and we will end the year somewhere at 75%, can be 80% of pre-pandemic levels. On average, we will be somewhere at the 20 million as outlined. Swiss covers approximately 50% of the traffic. Of course, it will be interesting to see whether we have change in patterns between leisure and business, also between low cost and network carriers. For us, the partnership with Swiss is a very important one to have a successful long-distance network out of Zurich. Destinations Swiss is not covering or where we do see potential for additional competition, of course, should be served also by other carriers, which we will make sure they also include Zurich in their network.
If I may add one sentence here in terms of, the -15% of capacity at Swiss level. This was a target set at the beginning of the crisis for the year 2023. Other way around, meaning that the capacity next year will be around 85%. That's perfectly in line with our recovery path, assuming full recovery by 2025. We don't expect like a capacity constraint or similar out of this reduced capacity Swiss currently flies.
Next question is from Daniel Bürki, from ZKB. He asks whether we expect airlines to struggle due to higher fuel prices, and what would be the impact on Flughafen Zürich.
With regard to the key airlines serving Zurich, I do not see a case where an airline will have a serious problem. I mean, the fuel price will have an impact on the tickets prices on the one hand, which can also have some impact on demand, but never in the amount like the pandemic had, will be limited changes in demand. Secondly, I mean, everyone also is of the opinion that the airline industry will further consolidate. This may be through the pandemic has been stalled a little bit more than usual because of government support, and some consolidation will happen in the years to come. I do not believe in the traffic pattern we have in Zurich, that this consolidation would have a major impact on our traffic.
Next question is from Andrew Lobbenberg from HSBC. He asks if we can help understand the duration over which the minimum annual guarantee concessions will be amortized. How should he sensibly model the scale and duration of the unwind?
Well, the mechanism is that this is individually capitalized and amortized over the remaining duration of the contract. To give you like an idea here, the average duration of let's say a normal commercial or food and beverage contract is between five to seven years. If you assume like four to five years would be a fair assumption.
We have some more question from José Manuel from Santander. What was the benefit of short working hours in H2 2021 and in the full year 2021 as a whole.
2021 was CHF 29 million in total. The total for the first half year was around CHF 20 million. In the second half, it was around the remaining CHF 9 million.
Next question is on the commercial business in Zurich. Has there been any meaningful reduction in the number of tenants operating at the airport?
No. There was no meaningful reduction. There were two tenants selling mainly souvenirs to Asian tourists and of course they left, but all other key tenants have remained. We have also no core commercial contracts expiring soon.
We received several questions on the investment in India. Lukas, could you please elaborate a bit on the reason why costs are about to increase, and whether or not we face a risk of having to increase again in the future?
Well, first of all, I think we're just mirroring the reality. I think, as I've outlined during the presentation, when we set the first business plan in 2019, there was completely other level in terms of raw material cost, in terms of the supply that has also partly driven prices on raw material costs. I think in my view, we now have managed, in terms of preparing the construction so far, quite well in terms of what we have achieved as milestone. We are in a regulated business, so it's also always a balance between what we are investing, what operating expenses are, what the revenues are. We, as I've assumed, is we...
What I said was we assume that there is like a high likelihood that we can refinance the additional costs by tariff. I don't hope that there will not a negative surprises during construction, but as on the greenfield project, there is always like a likelihood of maneuvers that we have to manage during the construction. At the end, I think we have also proven abroad and in Switzerland, and once we start construction, we are able to manage construction costs also in very complex construction projects such as The Circle, for example, in Switzerland.
We cannot 100% rule out that there will be negative surprises, but I think now we set the line at CHF 750 million Swiss franc as new reality.
There is another question on the international business, the higher interest costs in Brazil. Are these interest costs on the P&L due to inflation? Are they non-cash or will they actually increase the cash outflows?
In the financial result, it's basically both. There is a direct inflation-linked for interest rates, which is a cash out. In the financial result, we also have a valuation effect of future liabilities in terms of the concession payment, which is a non-cash item in the financial result as well. Keep in mind that abroad, it's particularly in Brazil, we have a yearly adjustment to inflation on revenues, on tariffs.
Next questions are from Martin from Bank of America, and we continue with questions on the international business. What's the regulatory framework for the Noida project? Is there a RAB-based system? Are tariffs inflation-linked?
In India, you have a tariff regulation that started in 2008, so it's more than 10 years of concrete experience with the tariff legislation. It's, for us, a very robust framework. We know how it works. The authorities have proven to be very reliable, and it's very transparent the way it is. With us, probably the most important thing is which is in the aviation segment, which cost and revenue position is covered in the non-aviation segment. Then the main issue, which cost of the investments and CapEx can you recover through tariffs. As we, I mean, we have known the situation from the Bangalore project, but we follow also all other private airport concessions in India on their regulatory framework, which is the same for the whole country.
In that context, we do not see any change to what we assumed in our business plan in terms of the profitability of the project and the tariff collection we can make. If CapEx increases on the aviation side, which is the main case here, based on cost positions that we can't influence, and this is the case in raw materials or energy prices also, it's for us also clear that we can recover these costs through the tariffs than in the project.
A question related to the war in the Ukraine. Do you expect any adverse impact on traffic in Zurich due to closures of airspace over Eastern Europe and rerouting of flights to and from Asia?
In terms of the rerouting, we mainly have three. I mean, we don't have full cargo carriers. Of course, they also have a rerouting, but this doesn't impact Zurich. On the passenger flights, we have three routes that are affected. That's Tokyo, and then Shanghai and Beijing can make two to three hours of additional time. Because this year anyway, this is covered by Swiss Airlines, and their long-distance fleet is not at full capacity working anyway this year, so they can manage the situation. It has a certain cost impact on the ticket price. In terms of overall passenger numbers affecting Zurich, this is very limited. Of course, we have the direct connections to Ukraine and Russia out of Zurich. There's 1.5% of the overall traffic that is covered, and Lukas has mentioned.
It doesn't mean that there is no travel now of such passengers. From St. Petersburg, you go by train maybe to Helsinki and fly to Zurich if you want to visit your relatives or have a reason to travel, or you can also fly via Istanbul, via Middle East from Russia to Switzerland if you come here for tourism or for other reasons. At the end, we will not lose all traffic due to no direct flights. Of course, it has a wider impact on the economy, on the international exchange between these two countries, which will be felt slightly also.
We then have more questions from Charles from Kempen. First one is on tariffs. Assuming a traffic recovery to pre-crisis levels by 2025 and new tariffs by 2026, together with cost savings and CapEx as guided, does a tariff decline ranging from a high single-digit to low double-digit % seem reasonable to you?
Well, you will understand that there are so many variables that we are not guiding this at that point. You have to do like an educated guess on that.
On the investments, could you give more color on the midterm investment project in Zürich, both in regulated and non-regulated?
Obviously, with the completion of The Circle, package sorting comes to an end, which is a regulated project, and we have the expansion of the landside passenger area, which is mainly non-regulated. The next big CapEx project toward the end of the decade is the renewal of the terminal and pier infrastructure here at the core of the airport. Also, keep in mind that CHF 120 million ± is also maintenance CapEx, which is also a mix of regulated and non-regulated. Overall, I would assume medium term 50-50.
We have a next question from Johannes, from Stifel. With investments in Zurich now expected at CHF 250 up from CHF 200-CHF 220 before, and CHF 750 in Noida up from CHF 650, can you please comment on the return on invested capital trends in the coming years given fees are flat? Is it fair to assume for the ROIC to remain below 2019 levels?
Well, on that detail, we have no guidance yet. I think I can follow your calculation, but also keep in mind that we expect a stronger and faster recovery from non-regulated revenues, such as the commercial business in Zurich and international activity. We might follow up in detail on that after the call.
The next question is from Nicholas from Morgan Stanley. First, on costs, so how do you plan to manage staff costs post short-time working?
What I can say is that we have reduced overall FTEs by about 10% in passenger and project related units. This can be considered also as a sustainable cost saving medium term.
The next one, it's on the minimum guarantees for 2022. Despite traffic still only expected at two-thirds of 2019, do you expect ongoing pressure on the concession fees?
No, we don't think that we have to provide meaningful concessions on the minimum guarantees for different reasons. First of all, on land side, we are currently not on a full year pace, but given, for example, end of Q4 compared to 2019, we are at 80% levels, which is also like more or less the floor of the guarantees. When we look into the development, the two-thirds is a blended number of increasing from 50% to 75% volumes compared to 2019 over the year. Therefore, we will be close to a level where we are convinced that if this materializes, we don't have to provide additional incentives or concession to our commercial partners.
We have another question from Steven from Deutsche Bank. Could you please elaborate a bit more into detail on the two-thirds of 2019 traffic guidance? How do you think about the level of intra-EU recovery, North America, Asia, et cetera?
There is not much I can add to what I already said. That, of course, this year we plan very conservatively with regard to Chinese traffic. We believe Chinese tourists will only come back next year. Some Asian countries that have been very restrictive on corona regimes, it'll also take longer. You have other Southeast Asian countries like Singapore, Thailand, important Swiss destinations that have fully opened, Australia that has opened. At the end, the main recovery will happen on the European traffic and with North America, where also freedom of traffic is fully restored. Also the flight capacity from Swiss, Edelweiss, as well as U.S. and Canadian carriers are expected to grow substantially this summer.
On the long distance there is more from the West coming this year than from the East, and next year then Asia will also recover faster. Within Europe, we believe that leisure traffic outbound from Switzerland will be very strong this year after two years of not much travel possible. Incoming traffic will also happen, but might be slightly reduced due to the war in Ukraine. Then the business traffic, European as well as intercontinental traffic, we also believe there will be a strong recovery this year just because you have to visit your sites after so much time not having been there. You have to sell your products. Leisure business equal, West more than East, and strong intra-European traffic, I would summarize. Anything to add, Lukas?
No.
We have a follow-up question from HSBC. We've disclosed that approximately 1.5% of traffic is coming from Russia or Ukraine. Is there a meaningful share of connecting passenger that would potentially increase the traffic impact from this region?
Out of this 150,000 passengers, about one-third is transfers, about 50,000.
Next questions are from Oriana from Kairos. The application of IFRS 16 that relates to the minimum annual guarantees, will this have an impact on the dividend policy going forward?
Yeah, as long as this impacts the P&L, and therefore profit, this will have an impact. The dividend policy's based on the consolidated net result, net profit, and therefore, yes.
The next question is on the incremental roughly CHF 100 million of EBITDA in 2025 compared to 2019. How much of this will be roughly coming from India?
It's not disclosed, no further breakdown of it, at that stage. Imagine that this is the first year of operation in 2025 when we compare 2025 to 2019, but no further breakdown on that 100 million EBITDA.
The last question from the webcast. It is believed that the market is a bit behind with respect to the evolution of the international business. Are you planning an investor day to improve communication on this side?
That's a good question. For the last two years, it was simply not possible to have an investor day on site. If I remember correctly, we planned one for 2020, which then was not going to materialize. We should plan one. That's my answer.
With this, I'm handing back to the operator for questions asked on the phone.
We have a question from the phone coming from the line of Cristian Nedelcu with UBS. Please go ahead.
Thank you very much. Could I please ask you three things? First of all, your traffic guidance for 2022, how would that be impacted by a recession in Europe? I remember last time around, the impact was quite moderate, but any comments there? Secondly, to allow us to be more precise in valuing your real estate business, could you offer us a bit more color there? Could you tell us more about the split of the real estate space between offices, logistics or others? Anything on average rates that you are charging or the sort of the type of growth you're expecting there for the next few years? The last one, on regulation, how should we think midterm about the regulatory framework in Zurich?
We have the U.K. regulator, for example, is looking at traffic risk-sharing mechanisms. Would something like that be feasible for Zurich midterm or not really? Any other changes you would try to push in the discussions with the regulator or with the airline for the mid and long term? Thank you.
Well, starting with the regulatory framework question, given the situation we faced at the beginning of the crisis, it was the goal of the company to find a solution of how to refinance the losses of the pandemic over the next years. That was the main purpose, within the existing framework of the ordinance. Keep in mind that in Switzerland, we have these two steps. Basically, first is an agreement with the partners, and second, only if we don't find an agreement, the regulator jumps in. Whatever we agree with the partner could involve other mechanisms than we have implemented right now, as long as this is within the existing framework.
As on the other question before, I think it's too early to really think about the future regulatory framework of the next tariff period, but it's not ruled out that this is also involving an element as you have described. In terms of recession in Europe as part of the traffic guidance, also there, I mean, we are today in a situation of high level of uncertainty compared to the multiple years we used to guide before the crisis. The 20 million, that's not like science. I mean, this is also involving a ±10% guidance on what we can best guess today.
I think the main driver, the dominant driver behind this, the recovery of the pandemic situation, then we have the uncertainties around the war in Ukraine, which also might have an impact on the economic development in Europe. All in all, we think it's a fair assumption that somewhere around 20 million we end this year. I cannot give you more details on how and potential recession in Europe has been-
Technology firms like SAP, Microsoft, Oracle, all with their Swiss headquarters here. Finance with Raiffeisen head office here. We have health with the university hospital making about 7% of the Circle portfolio. With the Priora portfolio also, we grew substantially in logistics, maintenance, catering, such facilities. We have, I think, a very broad, balanced portfolio, not depending too much on aviation volatility. More or less in all segments that you usually have in real estate, and especially the three industries where Zurich will grow over the next 10 years with technology, pharma, and finance. Very broad, balanced portfolio, not depending too much on aviation volatility.
More or less in all segments that you usually have in real estate, and especially the three industries where Zurich will grow over the next 10 years with technology, pharma, and finance are with top firms present in our portfolio. We think we have a very good balanced real estate portfolio here.
Understood. Thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your telephone. Star followed by one.
Any further questions, Stefan?
We have no further questions on the phone, correct?
There are no questions from the phone.
Good. I thank you very much for following our presentation, for following our company. We have two rough years behind us, but these two rough years have shown us that our business model is very resilient, even in such a crisis. We believe with the recovery, we will even be better positioned than we were before, also in terms of profitability and business model. Despite, of course, the difficult situation with Ukraine, we are looking ahead quite optimistically on this year and on the next few years to come with regard to Zurich Airport. Thank you for being with us, and have a good day. I close the session here then.
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