Ladies and gentlemen, welcome to the Fluke Half Year Results 2020 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by a Q and A session. The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Mr. Stefan Friedrich, CEO. Please go ahead, sir.
Ladies and gentlemen, welcome to the presentation of our company's half year results 2020. My name is Stefan Wittrick. I'm the CEO of Zurich Airport, and I will host this presentation together with Lucas Brosi, our company's CFO. I will start with the business update before our CFO 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.
If you are using the webcast platform, it's also possible to submit questions already during the presentation. The first half of twenty twenty was dominated by the coronavirus crisis and nothing at Zurich Airport is business as usual. The coronavirus pandemic has a dramatic impact on all our business activities, except real estate. Passenger air traffic came to an almost complete standstill in spring. Sirica Airport always remained open to maintain Switzerland's aviation link to the world, mainly for repatriation, air freight and ambulance flights.
We have seen signs of a slow recovery since the gradual reopening of borders in June, as can be seen on the slide. Not part of the first half year figures are the traffic figures of July as published last week. Last month, we were back to approximately 40% of last year's capacity, while passenger numbers hovered around 30% of last year numbers. We expect leisure demand to recover faster than business traveling. Some setbacks in terms of new border restrictions as in these days will happen over the coming months, but the trend will go in a positive direction, especially for travel within Europe.
Intercontinental travel will recover only next year. We estimate in our base case to reach pre crisis traffic levels not before 2023. As soon as most travel restrictions will have been lifted, we believe that traffic will recover quicker in Zurich than on average, primarily due to the following two reasons. First, the Swiss economy tends to recover faster from this crisis due to a robust business environment. And second, we estimate that Swiss will only be touched marginally by the fleet reductions of its owner, the Lufthansa Group, since its fleet is relatively new with no B747 or A380s and the high profitability in the past year.
In the meantime, a new normal is becoming established at Zurich Airport as far as travel behavior and passenger processes are concerned. We had smooth operations this summer. Passengers could travel without problems and adequate hygiene measures could be ensured at all times. In the first half of twenty twenty, the number of flight movements declined by 55% to 60,000 takeoffs and landings. Flight movements declined at a slower pace than passenger numbers due in particular to additional freight flights.
The additional pure cargo flights could not compensate the belly freight volume, so the overall volume of cargo handled at Zurich Airport decreased by 36% compared with the first half of twenty nineteen, 245,000 tonnes. The current situation represents a major challenge for the whole aviation sector as well as ourselves. In spring, revenues collapsed almost entirely. We responded rapidly on the cost side, on investments and on liquidity management. This process will continue.
For 2020, we estimate cost savings in Zurich of around CHF 50,000,000 versus last year and the reduction of investments of approximately CHF 100,000,000. We also stabilized the situation abroad with significant cost cuts and relief on payments to governmental institutions. Furthermore, we are in a process with the Brazilian regulator to request for economic re equilibrium for our Brazilian entities, which could result in, for example, a reduction of concession payments or an extension of the concession term. In Chile, the concessions will automatically be extended proportionally to reduced traffic figures. In February, before the outbreak of the pandemic in Europe, we placed the CHF 15 year CHF 400,000,000 bond at a coupon of 0.2%.
After the outbreak of the crisis, we took further extensive measures to secure liquidity by suspending the dividend payment and fully drawing our existing credit facilities, of which a portion has already been repaid again. This was followed by a further placement of a 4 year CHF300 1,000,000 bond at the coupon of 0.7% in May. Beginning of July, we repaid a Swiss CHF 300,000,000 bond that fell due. The company's liquidity remains on a very solid footing during this crisis. The strong balance sheet of Flugga from Zurich AG helps us to pursue long term profitability and weather this crisis without government support.
Standard and Poor's confirmed an A plus rating down from AA rating, while the independent Swiss rating agency, Fedafin, continues to assign Fluhafen Zurich a double A rating. Further information on the liquidity and debt situation of the company can be found in the appendix of the shown presentation. Even though events were overshadowed by the pandemic, we have been able to make some progress on key topics as the following slide depicts. First, we could clarify the tariff situation for the years to come at current levels and with a weighted average cost of capital of 5%. We will talk more about this later in the presentation.
2nd, the Swiss government acted fast to help bridge funding key aviation players in Switzerland landed in severe liquidity problems. It enables that Swiss and Edelweiss can resume operations fast when markets recover and borders open and also reduces debt to risk for us mainly on the real estate side. Commercial activities were equally affected by the lockdown situation. Currently, land side commercial revenues recover faster, while on the air side, almost all shops have opened again in June. As we will elaborate later, we waived the minimum annual guarantees during the lockdown when the shops had to be closed and have reached agreement with most partners for the remaining period where most of the minimum annual guarantee is due.
In spite of COVID-nineteen, the Circle project progressed well with construction only slightly affected and further rental agreement signed with key office tenants. The pre letting rate stands now well above 80%. The opening of the public areas is planned for November with slight delay of 2 months. The university hospital will go public already a month earlier. Also, the Priora assets have contributed to the revenues this year according to plan.
Internationally, preparation works in India are progressing well. It is still expected to sign the concession agreement for Delinoida this year. Let's quickly talk about the current situation in our Aviation business. First half year will go down in history books. Our average number of passengers in April May was as low as almost 70 years ago, shortly after Zurich Airport started its operations.
Between January June, 5,300,000 passengers used Zurich airport as their departure transfer or destination airport, a decrease of 64.3% on the prior year period. The drop in cargo was less than in our other segments, which is attributable to additional freight flights, especially in the difficult months April May to make sure the population gets all its necessities. In spite of depressed traffic figures, there are good news in terms of airport charges where we were able to conclude a deal with the airlines. An extension of the current charges period was agreed with the negotiating parties Swiss, Easyjet and representative of other commercial airlines, light aviation and sport flying, business Aviation and Freight Companies. It was also agreed that the next round of negotiation on flight operation charges would commence by the beginning of 2025 at the latest.
A temporary 10% cut in flight operation charges, excluding emission and noise charges, was also agreed for 2021 in order to help the airlines ramp up their operations. This temporary cut will automatically end by the end of 2021 and will have no impact on the agreed WACC for the full period. The duration of the extension of the charges period is flexible. The next cycle for adjusting the flight operation charges will be initiated as soon as the expected cumulative result, the economic added value since September 2016 in the regulated segment will be 0 or positive, but no later than January 1, 2025. The WACC or reasonable interest on the capital invested applied to determine the cumulative result will be reduced from 5.9% to 5.0% as of January 1, 2021.
This flexible length of the charges period allows an adequate consideration of the high uncertainties about the future development of the aviation industry and also enables Fluhafen Sudesharket to compensate for the ramp up discount granted for 2021 in the following years. If, among others, the traffic figures recover faster than expected, the charges will be adjusted earlier. And if the recovery develops more slowly than expected, the charges period will be extended accordingly. The agreement has helped establish some planning certainty and stability in the current climate. It is expected that the agreed charges will apply from January 2021.
On the next slides, we will provide you with an overview about our commercial and real estate business. Most shops and restaurants were shut down by the federal government in mid March for roughly 2 months. As a result, most landside shops and restaurants have been operating again since mid May. As the land side commercial facilities are publicly accessible, for example, by commuters, shoppers and other visitors, the turnover decline was significantly lower compared to airside. For the commercial platform on airside, which is for passengers only, the situation takes longer to recover.
At the end of June, most shops and restaurants are open again, however, still at reduced opening hours. Commercial revenue is impacted heavily by the current crisis. Instead of the usual revenue share payment, most rents are now based on the agreed minimum annual guarantees. The latter was not charged during the lockdown period. For airside shops and restaurants, a partnership based approach for the time with low passenger volumes has to be found case by case, where we aim for entrepreneurial solutions with mutual benefits for the partners and ourselves.
Otherwise, the minimum annual guarantees will be charged fully for the rest of the year. Revenues from property management proved to be the most resilient line item in our P and L. In spite of COVID-nineteen, the recently acquired real estate portfolio from Priora is performing according to our expectations and the increased exposure to real estate is now paying off. Construction progress of the circle was only slightly impacted by the corona situation. Handovers are ongoing and we are expecting only slight delays before this process is complete.
Opening of public facing areas such as the Congress Center, restaurants and shops is planned for November this year. Most office tenants are not impacted negatively and new major agreements could be signed in the first half of twenty twenty as well. We now have a very strong cluster with technology firms led by the Swiss headquarters of Microsoft, SAP and Oracle, global pharmaceutical companies, Merckx and Novo Nordisk, as well as financial institutions such as all Zurich based operations of Raiffeisen. The pre letting rate is currently running at over 80% and we haven't seen any cancellations or bigger adjustments to our contract so far and we feel comfortable with the existing and solid set of tenants. The opening of the circle also takes us a major step closer to our carbon free future.
The complex is LEED Platinum compliant and MINA G certified, utilizing efficient alternative energy sources, for example, solar power or heat pumps with systematic heat recovery and underground terminal energy storage. On the next slide, an update from our international holdings is provided. At the beginning of 2020, we took over operational management of 2 Brazilian airports in Victoria and Macae. All 8 Latin American airports we are involved in likewise saw a massive drop in traffic as a result of the travel restrictions imposed during the coronavirus pandemic. Despite minimum operations, immediate measures taken helped to secure liquidity.
Since the travel restrictions were imposed by official order, the airports in Brazil may be entitled to authorities. These compensation packages are to be negotiated in detail in the coming months. In Chile, as already mentioned earlier in the presentation, the lower than expected passenger numbers will possibly extend the concession period in order to compensate for the lost revenues. The development work for the new Delinoida International Airport, for which we were awarded the operating license at the end of 2019, is proceeding as well. The concession agreement is due to be signed in the second half of this year and construction work is scheduled to commence in the Q1 of 2021.
Following the award of the new airport operating licenses in Brazil and India, the focus of our international business in the near future will be on consolidation in these two key markets. With this, I'm handing over to Lukas for the financial update and the outlook.
Thank you, Stefan. Good morning, ladies and gentlemen. Welcome also from my side. I will now give you an overview of the financial performance of the company. Obviously, the pandemic had a significant impact on our numbers.
Revenue dropped by almost 50% compared with the first half of twenty nineteen to CHF 310,000,000 Aviation revenue was down by 58.6 percent to CHF 130,000,000. This decline was slightly lower than passenger numbers due to the fact that not all charges depend on passenger volumes. Landing charges are determined by the number of flight movements, for example, and aircraft parking charges were affected by the many parked aircraft. Non aviation revenue was down by 34% in the same period to CHF180 1,000,000. As the cost reduction did not offset the lower revenue figures, earnings before interest, tax, depreciation and amortization fell by 65.5 percent to CHF 105,000,000.
The bottom line result for first half of twenty twenty was a loss of CHF 28,000,000. In the prior year period, Fluhoeuf and Surigakay was able to post a profit of CHF 143,000,000. Let's have a closer look at our non aviation figures, which were slightly less affected from the pandemic. In the case of commercial revenue, the minimum annual guarantees do provide a certain level of protection. Whilst parking revenue and revenue from international business also suffered as a result of the crisis, revenue from facility management was up by 10.4% to CHF 69,000,000.
This rise is mainly due to the purchase of a total of 36 buildings and plots of land from Priora at the end of 2019, although the first rental income from the circle also contributed to the positive trend. The crisis shows that the increasingly important real estate business has a stabilizing effect on non aviation revenues. As mentioned before, we have been able to cut our operating costs considerably. Personal expenses were reduced, thanks to short time working and the significantly lower passenger numbers led to reduced orders for police and security services. Furthermore, the closure of all parts of the airport also decreased maintenance and material costs.
And last but not least, all administrative budgets are subject to cost cut. In total, operating expenses decreased by 27.7 percent year on year to CHF 206,000,000. Although last year's cost base was negatively impacted in particular by an amount of CHF 45,000,000 for the development of the infrastructure in and operating expenses were down by 15.5 percent or CHF 37,000,000. I will now outline some key ratios. Net financial debt, excluding the airport Zurich noise fund, stands at CHF 1,200,000,000 more than doubling the net debt to rolling EBITDA ratio to 2.8 times.
This ratio will peak at the year end, but going forward, we clearly aim to reduce debt to levels prevailing before COVID-nineteen. The return on invested capital stands at 4%, down by 5.3 percentage points compared to the prior year period and will further deteriorate until the end of 2020. The operating and free cash flow figures were also lower compared to prior year compared to the prior year period. Obviously, the focus over the last weeks was on the liquidity situation of the company. During a month like April, with virtually no traffic and commercial centers in lockdown, the total cash burn, which includes CapEx in Zurich amounted to roughly CHF 45,000,000.
This figure then fell down to around CHF 30,000,000 in June July. We will likely start to reach positive free cash flow once traffic volumes are above 50% of pre crisis levels. The next slide shows the largest project we worked on in the first half year. Besides finishing the circle, the package system is currently being upgraded. Despite interruptions in some foreign supply chains during recent months, the overall timetable has not been affected.
The first new part of the system, a new package transport line commenced operation back in February. Works on the new building will be completed by the end of the year followed by the gradual installation of the new central area for the baggage sorting system along with the renewal of other parts of the system at the airport. The project is expected to be completed by 2025. The civil engineering works for extending the landside passenger areas are also on track. The passage to the circle will be finished on time this fall.
The above groundwork will commence slightly later than planned. The new landside passenger areas are scheduled to come on stream in stages from 2025. This will include new retail outlets, underground logistics and the foothold above the ground. With this, let's move on to the outlook. As there continues to be major uncertainty for the future course of the coronavirus crisis, it remains difficult to issue a reliable forecast for the current financial year.
Since the current situation is very fluid, we internally plan with different scenarios, not only for 2020, but also for the years to come. The trend in passenger numbers depends to a significant extent on the pace of the recovery in international tourist traffic in light of border openings and travel restrictions in the Q4. Assuming a slow but steady recovery, passenger volumes for the financial year 2020 are currently expected to be around 10,000,000 passengers. This does not take into account any adverse developments such as border closures or additional travel restrictions. Intra European traffic is expected to be higher than in the previous year.
On the non aviation side, commercial revenue for 2020 is based mostly on the minimum annual guarantees, which won't be charged during the lockdown period. Further, for the time with low passenger volumes, solution are assessed with our commercial partners on air side as heard before. Whilst real estate revenue is very stable in spite of the crisis, parking revenue and revenue from international business remain under pressure. A large portion of Fluke oven Zurich Aker's costs are linked to fixed infrastructure and can therefore only be lowered to a certain extent. In the case of operating expenses from today's perspective, the cost base can be reduced by 10% to 15% year on year due to short time working and other saving, excluding expenses from construction projects.
Despite the measures taken, the loss will be inevitable in the current financial year. Capital expenditure is expected to be in the region of CHF 250,000,000 to CHF 300,000,000 at the Zurich site, added to which there will be expenditures of around CHF 20,000,000 at the subsidiaries abroad. To finish my part of the presentation, I would like to provide you with an updated overview of our estimated CapEx in Zurich and internationally over the next few years. We have reduced our CapEx plans as much as possible, especially where CapEx is capacity driven. Seen as a rule of thumb, we believe a good adjusted proxy for our CapEx in Zurich is now between €250,000,000 €300,000,000 per year.
This figure includes expansion as well as maintenance CapEx. Internationally, CapEx is based on a project basis and is typically front loaded over the concession period. In Brazil, after having successfully built the new terminal in Florianopolis, there is only limited CapEx needed for this airport going forward. For the 2 new airports in Victoria and Marche, we currently expect CapEx of approximately CHF 80,000,000 until 2024. In Chile, the main CapEx items will come from the airport in Ithike with estimated investments of roughly CHF 40,000,000 in 2020 to 2021.
In India, preliminary works will start after the concession agreement is signed. We estimate the total CapEx for these greenfield airports to amount to around CHF 650,000,000 which is spread over the next 4 years. With this, we are at the end of the presentation. And I hand over back to Stefan.
Thank you, Lucas. Thank you all for listening. We now open the Q and A part of this presentation. First, we'd like to invite the questions asked on our webcast platform and then entering the question raised by phone. Stephan Weber, our Head of Investor Relations, will moderate the Q and A session for the webcast platform.
Yes. Thank you, and welcome everybody on today's call. We have
first questions coming from Pascal Forker from Bank Vontobel. First, he would like to know if the commercial revenues in H2 will still be supported by the minimum annual guarantees or if we see any risk of contract renegotiations, which would lower the revenues accordingly?
Well, to an extent that we have explained in the presentation. So I think one has to distinguish between the 2 half years as we have the lockdown situation in the first half year fully. And what we said during the presentation is also true for partly for the second half as we are in negotiation with our partners on air side to find individual solution for the time with low passengers.
And then his second question is around the pre letting of the circle. He is interested in knowing how much of the retail space, so the brand and dialogue module at the circle is currently pre let and what we intend to do in order to boost this particular segment going forward?
I would say the retail pre letting quota is slightly below the pre letting quota in the rest of the circle due to, of course, also quite challenging situation of most of the retailers. But all the key retail tenants, example given, Jelmori, Omega, will deliver perfect product from the opening onwards. And for the part of brands and dialogue, as we call it, or the retail part, where we could not secure long term contracts yet, We will make sure with pop up brands that we have also a vivid product from right from the beginning onwards.
We have some more questions coming from Marcin, Bank of America. First question is on traffic. In our update call in June, we said that we expect traffic in Zurich for 2021 to be approximately 20% below 2019 levels and a full recover by 2023. Do we still maintain this view?
That's a good question. No one really can answer in terms of the development very precisely. I think the point we wanted to be stated back in June was that we consider Zurich to be in a favorable situation when we look at the global forecast, for example, issued by JAPTA, expecting still a 30% drop compared to 2019 in the next year. The point here is that we want to say that Zurich is well prepared for recovery for the reasons we have heard during the presentation, which is that simply historically, Switzerland proved to be recover faster than other, let's say, European economies. We have also a high portion of European traffic.
3 quarters of our traffic is European traffic, which we, in general, expect to be recovered faster than long haul flights. And last but not least, also important to say is we are not on the capacity side expecting significant cuts for the fleet of Swiss. All in all, one can say that when the recovery takes place in Europe, we expect to be in a more favorable situation here in Switzerland.
Then he would like to know how much of the 10% to 15% cost reductions this year will be sustainable for 2021?
Well, that's also a very good question, and I'm personally convinced that the operating expenses remain below the pre crisis level during the ramp up phase, and we also use this crisis to become more efficient as a company. The cost in the regulated segment should develop according to the passenger volumes. But as we are not providing a guidance on the full financial impact of the crisis neither for this year nor for next year. We are not providing more detail on the impact of operating expenses at this stage.
The third question is on the expected net profit for the second half of 2020, whether or not we do expect to see it positive already in H2 this year?
Depends on the recovery. In our guidance, we say that we expect a loss in the second for the full year, which also includes a loss then, therefore, in the second half year. One has to see that we also started with positive numbers into the year until mid of March. Since then, we are having a cash drain and losses in our P and L. It mainly depends on the recovery, as a rule of thumb, not in terms of profit, but in terms of cash flow.
As we have mentioned, the 50% volume number is what we need to at least generate positive free cash flows.
And the last question coming from Bank of America is on the commercial business on the minimum annual guarantees. The analysts would like to know if the payments related to the guarantees are on time or if there are any delays? And secondly, he's asking also on the frequency, how often such payments are invoiced? Yes. We do not comment on individual contracts or individual partnerships in that question.
But in very general, one can say
we are charging during the don't see, let's say, a decrease in terms of payment behavior of our partners.
Then we move on with the next question coming from Ritu Portman from Z Capital. He says that our outlook is still pretty subdued. And he's wondering why no
I would say we are in constant restructuring on the cost base as well as on the investment base as we mentioned earlier and if the question specifically focuses on the personnel costs, also there we have clear targets how we will reduce our headcounts and personal costs. We have made sharp stop of all new employments already in March, which is a decrease of the cost base, but we do not plan, as we call it in Switzerland, the Maassen and Plaszung, which then triggers negotiations with employee bodies, meaning that in terms of layoffs, we will not go above the figure of 30 FTEs.
There is a follow-up question on costs. Alexandre Bostert from UBS would like to know how much of our costs are actually fixed.
Well, as a rule of thumb, I can say, 80% to 85% is fixed.
Then we have a next question from Johannes Braun, MainFirst. He would like to receive an update on the situation around Swissport and the remaining risk for us that we would need to help financially or take some of the operations from Swissport.
Swissport just announced an hour ago that they will receive another CHF 300,000,000 liquidity from the bank, including a comprehensive restructuring on group level. So it seems that in terms restructuring of Swissport, an important milestone has been reached just today, which reduces considerably the risk that we would have to have a role ourselves in ensuring operations on that context.
And then his second question is on the cash flow. So based on our assumption that 50% of passenger volumes are needed to deliver breakeven cash flow, Do we expect to see positive free cash flow in the coming years despite the investments in India?
On a consolidated base, India will trigger the free cash flow numbers negatively. India, the investment of the SEK 650,000,000 is mainly end loaded over the construction period of 4 year, but will negatively affect the free cash flow numbers.
There are no additional questions on the platform. Do we have questions on the phone?
We will now begin the question and answer session on the phone. The first question comes from Lynn Seyobart from Deutsche Bank. Please go ahead.
Hi, good morning. Thank you very much for taking my questions. Just a couple for me, please. Firstly, we know that Mags contracts during lockdown have been waived, and we know that you're conducting negotiations on MAGs on a case by case basis for
the rest of
2020. But has there been any discussions on MAGs contracts in relation to 2021 and going forward as early traffic is still going to be impacted? And then in terms of the kinds of solutions that you've been reaching with retailers, could you give us any color on that? And then secondly, staying on the Mags point, how are you thinking about the recovery in land side commercial activity? Obviously, we know it's performing better than air side.
Are there any negotiations or MAX on the land side as well? And then I guess my final question is just on the circle. So you said that you're now above 80% preletting. How do you see the timeline on progressing the final 20% of rental capacity? Obviously, you have 85 percent by the year end.
But how long until you think you get to the 100% mark? And then on that, do you think you'll need to provide any kinds of discounts to this remaining space given the COVID situation? Thank you very much.
Thank you. I first comment on your question with regard to MEG negotiations for 2021. We do not have such negotiations currently, and I personally believe we will not take up any such talks neither in the future since we still expect on a full year basis in 2021 a considerable recovery, which then is exactly the amount that is covered by the MEG and also in this year. We had a very special situation with the government lockdown this year and near to 0 traffic also in May June and that needed extraordinary measures including a renegotiation of the mag, but we will not be in such an extraordinary situation next year anymore, why I do not see the need for renegotiating existing contracts. However, of course, on contracts that expire on new contracts that will be signed next year, pressure will be high.
And I'm not sure there yet whether we could reach similarly good agreements as in the past under the current situation. This has to be seen, but there are no major contracts expiring in the coming 2 or 3 years. Same applies for the minimum annual guarantee for the land side. As Lucas mentioned, the turnovers also recovered faster on the land side since we are also close to the city. But of course, with the still home office rules of many companies, less traffic on public transport.
The revenues on the land side will also be affected this year and part of next year. So also on the land side, a considerable amount of our contracts will run on the minimum guarantees. With regard to your last question, how the pre or the letting quota of the circle will develop after opening. Of course, we will always have certain structural vacancy as we have generally in real estate and anticipating a certain impact also on the Swiss economy. The overall office rental quotas might will slightly become worse than they were in the past.
But we have seen clearly also in this corona time that the circle is a very strong product at a very good location and we could sign large deals even during corona all on the rental levels that we have anticipated in our cockpit. So no major compromises had to be made on the level of the rents. And therefore, I'm very confident that within next year, Circle will be let out to the full at full capacity, of course, with a certain structural vacancy. We have also as part of the Circle revenues, 2 hotels of Hyatt, including the convention, which is partially revenue based. And there, of course, in terms of the revenues from the hotel, we have to anticipate next year still also a certain impact of corona.
But overall, I'm very confident that by the end of next year, there will be no major spaces to be rented out in the circle anymore.
Just two comments from my side. First on the recovery on land side, always keep in mind that with the opening of the circle, there will be up to 6,000 more employees at the airport, also generating more frequency to the landside area, generating business meeting traffic, etcetera. That's, I think, an important trigger in the near term for the recovery of the Landsat commercial area. And in terms of the pre lighting of the circle, also keep in mind that it was never the intention to quickly reach 100% pre letting. It's a combination of pre letting and the quality of tenant, which was always important to us and which we have proven to be able to deliver with the tenants we currently have.
And same is true for the last 20%.
Okay, brilliant. Thanks very much.
The next question comes from Stephanie Dart from RBC. Please go ahead.
Good morning. My first question please is regarding your full year 2020 traffic outlook of about 10,000,000 passengers. Given the traffic declined 60 4% in the first half that would assume a 75% decline in the second half. I believe you said earlier you were currently at about 60%. So do you expect the deterioration from current levels?
My second question is regarding your OpEx outlook for the full year of a decline of between 10% 15%. As you said earlier, you delivered 28% decline in the first half, but excluding the consolidation accounting that would be 15.5%. So would you basically expect the second half savings to be similar to the first half? And then my last question is on the concession rate. Could you please specify what the concession rate was in the first half?
If you expect the second half to be above 22% like you achieved? And if you expect 2021 to also remain above that level? Thank you.
Well, I would start with your question on the operating expenses saving. The savings in the first half was disproportionately higher. That's correct. We also had like an international business on a consolidated base because of the concession accounting. To remind you that we have all the investments we do in the infrastructure abroad has to be recognized as revenue and costs.
And as we have But like also on an organic base, the cost savings were higher in the first half of the year. And the two main reasons are that short time working was especially during the lockdown situation was on a higher level than what we expect for the second half of the year as volumes are coming back and people reduce their short working. And the second reason is also linked to the lockdown situation where part of the infrastructure was out of operation, especially during the lockdown, especially then after lockdown when we had very low passenger numbers. And basically, in the second half of this year, we are expecting that the infrastructure to a very large extent is open and this triggers then utility and maintenance costs. So this is for me, it's reasonable why we have like this disproportionately lower cost saving effect in the second half of the year.
On the concession rate in terms of the commercial contracts, to be very honest, I don't think that's a representative number for the time being as the contracts, as explained before, are currently on minimum annual guarantee level. That's the main reason why I have not disclosed in that in detail. And the first question will be answered by Stefan.
With regard to your question to the traffic, as you rightly mentioned, spring was quite okay and now we have some setbacks in terms of travel restrictions again, quarantines, etcetera. And it's very difficult to predict now the coming weeks. We nevertheless believe that over the coming months as travel restrictions and quarantines will be eased again. We see also that for the autumn bookings, the leisure traffic is not really taking up because people are unsure whether they can travel or not for the business travel. Quarantine rules definitely make it almost impossible to travel on business.
But you see also, for example, Singapore, the Emirates have been opened in Switzerland now again. So while traffic restrictions are implemented fast, they are also lifted fast again. And specifically, if you look at the situation in China, where we see in China, domestic travel more or less has recovered. We believe that in the coming months that travel restrictions within the European Union will not be there in a considerable way. However, on the long distance intercontinental flights, when we have to anticipate this will only cover next year.
Sorry for being so long.
No, no, no, sorry. I just wanted to follow-up on what you just said. On the business side, can you please remind us what percentage of your traffic was made up of business travel before the pandemic, please? Thank you.
Business pure business travel is about 26% on the last number that we have released. Thank you very
much. Next one.
So far, there are no more questions from the phone, sir.
In the meantime, we have one more question on the Q and A platform. Patrick Kruse from Goldman Sachs is asking on the revenue
Well
Well, my first question on this is tend to be higher. We have expected revenues of about €10,000,000 at the beginning of the year from the circle. Obviously, we are now at the stage where tenants move in, which then starts triggering the revenues. With the slight delay we have seen in the project because of the crisis, this number will be lower, but can be expected for the second half of the year that the revenues will be higher than in, obviously, in the first half.
There are no more questions on the web platform. Any last question on the phone?
Not so far, sir.
So I thank you very much for attending, covering us. We hope life gets normal again soon and people will be able to travel again as we all are longing for. So have a good day and goodbye.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.