Ladies and gentlemen, welcome to the Flughafen Zürich AG half year results 2020 conference call and live webcast. I am Sandra, the conference call operator. I would like to remind you that all participants will be in listen only mode. 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. Webcast viewers may submit their questions in writing via 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.
Ladies and gentlemen, welcome to the presentation of our company's half year results 2020. 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. 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 2020 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.
Zurich 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. 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 a 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 2020, 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 2019, 245,000 tons. 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 million versus last year, and a reduction of investments of approximately CHF 100 million. 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 a 15-year CHF 400 million bond at the 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 four-year CHF 300 million bond at the coupon of 0.7% in May. Beginning of July, we repaid the CHF 300 million bond that fell due.
The company's liquidity remains on a very solid footing during this crisis. The strong balance sheet of Flughafen Zürich AG helps us to pursue long-term profitability and weather this crisis without government support. Standard & Poor's confirmed an A+ rating down from AA- rating, while the independent Swiss rating agency, fedafin, continues to assign Flughafen Zürich AG a AA 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.
Second, the Swiss government acted fast to help bridge funding key aviation players in Switzerland that landed in severe liquidity problems. It enables that Swiss and Edelweiss can resume operations fast when markets recover and borders open. Also reduces debt 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-19, The Circle project progressed well with construction only slightly affected and further rental agreements signed with key office tenants.
The pre-letting rate stands now well above 80%. The opening of the public areas is planned for November, a slight delay of two months. The university hospital will go public already a month earlier. The Priora assets have contributed to the revenues this year according to plan. Internationally, we successfully took over the new concession in Brazil at the beginning of the year, and preparation works in India are progressing well. It is still expected to sign the concession agreement for Delhi Noida this year. Let's quickly talk about the current situation in our aviation business. The first half year will go down in history books. Our average number of passengers in April and May was as low as almost 70 years ago, shortly after Zurich Airport started its operations.
Between January and June, 5.3 million 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 and 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 zero or positive, but no later than January 1st, 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 1st, 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 Flughafen Zürich AG 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 two months. As a result, most landside shops and restaurants have been operating again since mid-May.
As the landside 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 prove to be the most resilient line item in our P&L. In spite of COVID-19, 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 2020 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, Merck 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 Minergie certified, utilizing efficient alternative energy sources. For example, solar power or heat pumps with systematic heat recovery and underground thermal 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 two Brazilian airports in Vitória and Macaé.
All eight 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 compensations from the respective 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 Delhi Noida 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 first quarter 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, Stephan. 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 2019 to CHF 310 million. Aviation revenue was down by 58.6% to CHF 130 million. 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 CHF 180 million. As the cost reduction did not offset the lower revenue figures, earnings before interest, tax, depreciation, and amortization fell by 65.5% to CHF 105 million.
The bottom line result for the first half of 2020 was a loss of CHF 28 million. In the prior year period, Flughafen Zürich AG was able to post a profit of CHF 143 million. 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 million. 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. Last but not least, all administrative budgets are subject to cost cut. In total, operating expenses decreased by 27.7% year-on-year to CHF 206 million. Although last year's cost base was negatively impacted, in particular by an amount of CHF 45 million for the development of the infrastructure in Florianópolis, the so-called concession accounting. After adjusting for expenses from construction projects, operating expenses were down by 15.5% or CHF 37 million.
I will now outline some key ratios. Net financial debt, excluding the Airport Zurich Noise Fund, stands at CHF 1.2 billion , more than doubling the net debt to rolling EBITDA ratio to 2.8x. Going forward, we clearly aim to reduce debts to levels prevailing before COVID-19. The return on investor 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 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 million. This figure fell down to around CHF 30 million in June and 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 baggage 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 baggage 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-ground work 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 a food hall 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 fourth quarter. Assuming a slow but steady recovery, passenger volumes for the financial year 2020 are currently expected to be around 10 million 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, solutions are assessed with our commercial partners on the airside, as heard before. While 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 Flughafen Zürich AG'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%-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 million-CHF 300 million at the Zürich site, added to which there will be expenditure of around CHF 20 million 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 Zürich 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 Zürich is now between CHF 250 million and CHF 300 million 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 Florianópolis, there is only limited CapEx needed for this airport going forward. For the two new airports in Vitória and Macae, we currently expect CapEx of approximately CHF 80 million until 2024. In Chile, the main CapEx items will come from the airport in Iquique, with estimated investments of roughly CHF 40 million in 2020-2021. 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 million, which is spread over the next four years. With this, we are at the end of the presentation, and I hand over back to Stephan.
Thank you, Lukas. Thank you all for listening. 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 question raised by phone. Stefan Weber, our Head of Investor Relations, will moderate the Q&A session for the webcast platform.
Yes. Thank you and welcome everybody on today's call. We have first questions coming from Pascal Furrer 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.
To an extent that we have explained in the presentation. I think one has to distinguish between the two half years as we had the lockdown situation in the first half year fully. What we said during the presentation is also true partly for the second half as we are in negotiation with our partners on our side to find individual solution for the time with low passengers.
His second question is around the pre-letting of The Circle. He is interested in knowing how much of the retail space, so the Brands & 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. All the key retail tenants, example given, Jil Sander, Omega, will deliver perfect product from the opening onwards. 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 right from the beginning onwards.
Thank you. 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 recovery 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 IATA, 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 recover faster than other, let's say, European economies. We have also a high portion of European traffic. Three quarters of our traffic is European traffic, which we, in general, expect to recover faster than long haul flights.
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.
He would like to know how much of the 10%-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. 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. As we are not providing a guidance on the full financial impact of the crisis needed 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 for the full year, which also includes a loss 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&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.
The last question coming from Bank of America is on the commercial business, on the minimum annual guarantees. The analyst would like to know if the payments related to the guarantees are on time, or if there are any delays. Secondly, he's asking also on the frequency, how often such payments are invoiced.
Yeah, we do not comment on individual contracts or individual partnerships in the question. In very general, one can say we are charging during the year on a monthly base. Payments are on track. We don't see, let's say, a decrease in terms of payment behavior of our partners.
We move on with the next question coming from Reto Portmann from zCapital. He says that our outlook is still pretty subdued, and he's wondering why no restructuring program has been announced so far, or if we plan to do so in the near future.
I would say we are in constant restructuring on the cost base as well as on the investment base, as we mentioned earlier. If the question specifically focuses on the personal costs, also there we have clear targets how we will reduce our headcounts and personal costs. We have made a sharp stop of all new employments already in March, which is a decrease of the cost base. We do not plan, as we call it in Switzerland, the Massenentlassung, 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. Alexandra Bossert from UBS would like to know how much of our costs are actually fixed.
Well, as a rule of thumb, one can say 80%-85% is fixed.
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 million liquidity from the bank, including a comprehensive restructuring on group level. It seems that in terms of the financial restructuring of Swissport, an important milestone has been reached just today, which reduces considerably the risk that we would have to cover all ourselves in ensuring operations on that context.
His second question is on the cash flow. 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 CHF 650 million is mainly end-loaded over the construction period of four years, 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. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star one at this time. The first question comes from Nicola Sherbatoff from Deutsche Bank. Please go ahead.
Hi, good morning. Thank you very much for taking my questions. Just a couple from me, please. Firstly, we know that MAG 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. Has there been any discussions on MAG contracts in relation to 2021 and going forward, as clearly traffic is still going to be impacted? In terms of the kinds of solutions that you've been reaching with retailers, could you give us any color on that? Secondly, staying on the MAG point, how are you thinking about the recovery in landside commercial activity? Obviously, we know it's performing worse than airside. Are there any negotiations for MAGs on the landside as well? I guess my final question is just on The Circle.
You said that you're now above 80% pre-letting. How do you see the timeline on progressing the final 20% of rental capacity? Obviously, you have 85% by the year-end, but how long until you think you get to the 100% mark? On that, do you think you'll need to provide any kind of discount to this remaining space given the COVID situation? Thank you very much.
Thank you. I first comment on your question with regard to MAG negotiations for 2021. 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 MAG then also in this year. We had a very special situation with the government lockdown this year and near to zero traffic also in May and June. That needed extraordinary measures, including a renegotiation of the MAG. We will not be in such an extraordinary situation next year anymore while I do not see the need for renegotiating existing contracts.
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 and the current situation. This has to be seen, there are no major contracts expiring in the coming two or three years. Same applies for the minimum annual guarantee for the landside. As Lukas mentioned, the turnovers also recovered faster on the landside since we are also close to the city. Of course, with the still home office rules of many companies, less traffic on public transport, the revenues on the landside will also be affected this year and part of next year. Also on the landside, 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 a 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 will slightly become worse than they were in the past. 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. No major compromises had to be made on the level of the rents. Therefore, I'm very confident that within next year, The Circle will be let out at full capacity, of course, with a certain structural vacancy.
We have also as part of The Circle revenues, two hotels of Hyatt, including the convention, which is partially revenue-based. 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.
Two comments from myside, On the recovery on landside. 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, et cetera. That's, I think, an important trigger in the near term for the recovery of the landside commercial area. In terms of the pre-letting 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.
As a reminder, if you wish to register for a question, please press star and one. The next question comes from Stéphanie D'Ath from RBC. Please go ahead.
Good morning. My first question, please, is regarding your full year 2020 traffic outlook of about 10 million passengers. Given the traffic decline 64% 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%. Do you expect a deterioration from current levels? My second question is regarding your OpEx outlook for the full year of a decline of between 10% and 15%. As you said earlier, you delivered 28% decline in the first half. Excluding the concession accounting, that would be 15.5%. Would you basically expect the second half savings to be similar to the first half? My last question is on the concession rates.
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 savings. The savings in the first half were disproportionately higher, that's correct. We also had an accounting effect in the 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, have to be recognized as revenue and cost. As we have constructed the terminal in Florianópolis last year, which was completed by end of last year, we had positive accounting effects. Also on an organic base, the cost savings were higher in the first half of the year.
The two main reasons are that short time working, 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 time working. 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. 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. This is, for me, it's reasonable why we have 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, I've explained before, are currently on minimum annual guarantee level. That's the main reason why I have not disclosed in detail. The first question will be answered by Stephan.
With regard to your question to the traffic, as you rightly mentioned, spring was quite okay. Now we have some setbacks in terms of travel restrictions, again, quarantines, et cetera. 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. You see also, for example, Singapore, the Emirates, have been opened in Switzerland now again. While traffic restrictions are implemented fast, they are also lifted fast again, and specifically if you look at the situation in China, where within 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, we have to anticipate.
Thank you very much.
This will only recover next year. Sorry for being so long.
No, sorry. I 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.
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&A platform. Patrick Creuset from Goldman Sachs is asking on the revenue contribution coming from The Circle in H2 compared to H1.
Well, my first question on this is tend to be higher. We have expected revenues of about CHF 10 million at the beginning of the year from The Circle, where 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, the revenues will be higher than obviously in the first half.
There are no more questions on the web platform. Any last question on the phone?
Not so far, sir.
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. 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.