Flughafen Zürich AG

Good morning, ladies and gentlemen. Welcome to the presentation of our Company's half-year results 2024.

My name is Lukas Brosi, and I will host this presentation together with Kevin Fleck, our company's CFO. I would like to remind you that the presentation is also available on our website.

Today's agenda is as follows: I will start with a short business update before our Group CFO will provide you with information on our financial performance followed by the outlook. At the end, we will answer your questions.

Please submit your questions already during the presentation, which helps us to cluster them. Stefan Weber will moderate the Q&A session.

Let me start with our milestones for the first half year 2024. The whole industry is facing a strong desire to travel with passenger volume recovering on a sustained basis.

Swiss and Edelweiss have added new routes to Eastern and Northern Europe as well as to North America and Asia. As a highlight for our network development, Air India started to offer additional connections to New Delhi.

Back in March, our Swiss regulator made the proposal of a roll-over mechanism of which I will talk about in more depth later in the presentation. Both our commercial as well as real estate business have shown a solid performance since the start of the year.

Internationally, we are awaiting, obviously, the commencement of operation at the airport in Noida with great excitement and anticipation. Construction work on our largest foreign project in the greater Delhi region is entering its final phase.

Noida International Airport will be ready to go into operation as Delhi's second capital airport at the end of April 2025. In Latin America, we took over the operations of our latest acquisition at Natal Airport in Brazil.

Coming back to Zurich and the major projects at the airport, the new package sorting technology ensures that package routing continues to operate reliably and that security checks comply with the new EU regulations. The main works of the new package sorting system have been completed.

The preliminary project planning phase for the New Dock A together with the tower and the dock base will be completed in the second half of 2024. Since July, we have been testing CT, computer tomography scanners at the passenger security checks.

Two security check lines have been fitted with the latest technology which will obviate the need to remove electronic devices and liquids from hand luggage during security checks. We expect the rollout for all security checkpoints within the next months.

In the first half of the year, our innovation hub put structures and processes in place and has already launched its first products. By leveraging the innovation hub, we want to utilize the advantages of the digital transformation for ourselves and for our partners, explore innovative approaches for fresh solutions, and implement new technologies at Zurich Airport to the benefit of the whole airport and its users.

Together with our largest carrier Swiss and the largest ground handler at Zurich, Swissport, we have recently signed the Memorandum of Understanding to jointly develop innovative solutions to enhance customer experience. Let's have a brief look at some key figures with traffic numbers slightly higher than expected, the overall result in the first half of the year exceeded the prior year period.

The first 6 months' revenue, EBITDA as well as the consolidated results improved over the prior year period, resulting in the best half-year result in the company's history. Our CapEx has been substantially higher as well, mainly driven by higher investments in Zurich, more money spent on Noida, and also includes the upfront payment for Natal.

Let's go through our main business segments, starting with the Aviation business. Some highlights from the traffic development in Zurich were as follows: Passenger volumes in the first half of 2024 is up 11% on the same period of the previous year reaching 97% of the figure for 2019.

The seat load factor continued to remain on high levels, albeit slightly lower than in the previous year period. Flight movements were also positive and climbed by 8%.

This number shows that the growing passenger volumes out-performed flight movements resulting in more passengers per movement. Freight has been volatile over the past years.

In total, however, around 15% more freight was handled in 2024 so far. In the first half of 2024, a total of 14.5 million passengers used Zurich Airport as departure, transfer, or destination airport.

On peak days, passenger volumes exceeded 100,000 persons. According to the 2024 summer timetable, 62 airlines are flying from Zurich Airport to a total of 200 destinations, making a slight increase over last year's summer timetable.

Let me provide you now with an update on regulation and the upcoming tariff-setting process. In 2020, it was agreed by the negotiation parties to jointly discuss with the Federal Office of Civil Aviation, the FOCA, our regulator, how to handle any future accessory turns or shortfalls of individual tariff period.

I remind you that in 2019, the regulated decree tariff reduction, which was ultimately not implemented but created a high level of uncertainty. This year, FOCA began considering a roll-over mechanism at Zurich Airport, which would allow any excess or shortfall in one tariff period to be carried over to the subsequent period.

This reduces the need for the regulator for interventions and encourages smoother negotiations. The final decision will be made by the Swiss Federal Council in Q4 2024 with the revised ordinance expected to take effect in January 2025.

The process for the adjustment of flight operation charges will begin in April 2025. The participants in the negotiations are then informed, among other things, about the process steps and the tariff proposal is made.

Negotiations will start in October 2025 and could last up to 6 months. If successful, we expect new charges will get introduced towards the end of 2026.

Otherwise, we will submit the tariff proposal to the regulator, which will delay the introduction of new fees until 2027 or even later. On the next slide, we will provide you with an overview of our commercial and real estate business.

Let's start with the commercial business. The positive trend continues, although construction work to develop the landside passenger areas necessitated the closure of the current link between airport shopping and Terminal 1 at the end of February.

Our real estate activities remain a solid pillar of our well-diversified business model. The portfolio consists of around 330 tenants, and we are renting out office properties in prime locations, logistic properties, and highly specialized buildings.

In the first few months of the year, the circle continued to prove itself as a popular business center for nationally and internationally successful companies. More than 90% is rented out.

Looking forward, new concepts such as Novu Campus, a provider of co-working space, the SAP Experience Center, our innovation hub, and local food and beverage partners will enhance the range of services available on the ground floor. A total of more than 50 companies with over 5,000 employees have now selected the Circle as the business location.

On this slide, we see that commercial turnover in total is trading above pre-crisis levels. High passenger volumes in the first half of the year had a favorable impact on airside turnover.

Attractive new brands and concepts such as Zegna, Hour passion, and Pre-Loved Luxury were gained for the airside center. Despite the reduced range of offerings as a result of construction work, partner turnover were higher in the public landside area as well.

Highlights such as public viewing events during Euro 2024 and the FOOD ZURICH festival attracted large numbers of visitors also contributing to revenue growth. Following the completion of construction to develop the landside passenger zones in 2027, airport shopping will provide more spacious passenger routes, new retail areas, and food hall.

Last but not least, let's look at our International business, where it has been a very successful first half year as well. For our airport in Florianopolis, an uptick compared to last year's period is visible in the passenger numbers.

This is largely attributable to the temporary closure of the airport in Porto Alegre nearby due to the flooding. Additionally, a new direct route to Panama was launched by Copa in June, helping us to increase the number of international passengers.

The tariff figures in Vitoria and Macae are trading in line with last year. Vitoria is suffering from flight restrictions imposed by Rio de Janeiro City Airport since the route Vitoria to and from Rio is frequently used.

We officially took over Natal Airport in February this year. Hence, the figures have been presented since March so far.

Our airports in Chile, Antofagasta and Iquique, showed a mixed picture, while Antofagasta was able to profit from the mining activities in the area, Iquique recorded a decline. On the next 2 slides, I will talk about our largest international project, a new Noida International Airport in India.

It has already been quite some time since we have signed a concession agreement in October 2020, where COVID was still prevailing. A lot has happened at the site since then.

In June 2022, we selected Tata Projects as the EPC contractor to actually build most of the airport for us. Tata is responsible for the construction of the terminal, runway, airside infrastructure, roads, utilities, landside facilities and other ancillary buildings at Noida International Airport.

Currently, there are over 10,000 Tata employees on our site. As indicated at our Investor Day in September 2023, we handed in the tariff proposal to the regulator at the end of last year.

We were also able to sign a memorandum of understanding with IndiGo in December 2023. Then with Akasa Air in January 2024 for their operation at the airport.

One of the next milestones will be the start of the public consultation period for Noida tariffs by the end of this year. These consultation papers will include our tariff proposal and an assessment of the regulator and hence show a lot of financial information for the next 5 to 10 years, allowing you a better financial assessment of our investment in Noida.

Finally, we estimate to start operations at Noida at the end of April 2025. Let's stay with Noida for another moment.

To operate the airport, we have tendered certain sub-concessions to appropriate partners. The commercial terms of these sub-concessions can have a variety of structures.

Some of them consists of an upfront payment to us. Others have investment commitments.

Some have fixed fees or revenue share and still others have a mix of the named components. I will not go into the contracts in detail, but I would like to emphasize that the most important contracts have been signed and that our partners are working in parallel on the inauguration of the airport.

Moving on to Brazil. We took over the operation of Natal Airport in February this year.

As a reminder, we were awarded this 30-year concession in May 2023 by way of a public tender. Although the airport is smaller in size with a bit more than 2 million passengers, it fits all our investment criteria, and we are able to integrate this airport into our existing Brazilian portfolio in Italy.

In Q1 2024, we made the upfront payment to the former operator, and this amount is included in our cash flow statement. In roughly five years, we will also have to pay a yearly revenue-based fee to the government.

As can be seen on the slide, we have implemented around 40 improvements in the first 100 days of operation, and there are further projects in the pipeline. As you may be aware, our airport in Florianopolis and Vitoria win regularly prices for being the best airports in Brazil.

I intend to position Natal also as a leading airport in the country. Speaking of Vitoria Airport.

This airport has a remarkable strategic location close to the surrounding cities. The land made available to us under the concession offers great potential for real estate development.

In the recent months, we have been able to tender out some of the plots and sign first land lease contracts. However, there is still more land to be developed in the future.

Consistent with the strategy at our home base in Zurich, we aim to diversify our revenue streams away from the aviation business and hence, reduce the dependency on passenger volumes. This combines both of our core discipline, the operation and commercializing of airports.

With this, I'm handing over to Kevin for the financial part of the presentation.

Thank you, Lukas. Good morning, ladies and gentlemen, a warm welcome from my side.

I will now outline the financial performance of the company. Let me start with a financial overview where our total revenue grew by 9%.

Aviation revenue increased by 13%, slightly more quickly than passenger numbers. Among other things, this is due to higher user fees for the new baggage sorting system.

Aviation revenue was 99% of the figure reported in the first half of 2019. Non-aviation revenue increased by 7% in the reporting period, equivalent to around 117% of the figure achieved in the first half of 2019.

Earnings before interest, tax, depreciation and amortization, EBITDA, increased by 7% over the prior year period. The EBITDA margin came to roughly 55%.

Compared with the first half of 2019, EBITDA was up by 14%. The consolidated result for the first half of the year rose by 10% to CHF 152 million.

This is roughly 6% higher than the consolidated result recorded in the first half of 2019 and marks a new record. Let's have a closer look at the non-aviation figures.

Total commercial and parking revenue increased over the prior year period to CHF 134 million. The highest relative growth was achieved with advertising media and promotion reflecting, among other things, higher passenger volumes.

In our Real Estate segment, revenue from rental agreements continue to rise along with lower energy and utility cost allocations. The anticipated decline in energy and utility cost allocations is mainly due to lower energy and waste costs that are passed on to our tenants.

Despite this, real estate revenue rose by a total of 1% in the first half of this year to a new record figure. Revenue from services has grown by 14% to CHF 25 million in the reporting period, primarily as a result of higher passenger volumes.

The substantial increase in revenue from international business from CHF 51 million to CHF 61 million is mainly due to higher revenue from international airport concessions. For the most part, this reflects the integration of the new airport in Natal, Brazil, as well as the above average development of Florianopolis airport in Brazil.

Factoring out the income statement neutral revenue from construction projects, the so-called concession accounting, revenue from international business has grown by 20%. There was a substantial cost pressure in the first half of 2024.

All in all, operating expenses rose by 12% over the prior year period to CHF 284 million. Adjusted operating expenses, meaning excluding expenses from construction projects were around 14% up compared to the first half of 2019.

We go into more details in the outlook in terms of the future development of the costs. Personnel expenses increased by 15% to CHF 119 million in the reporting period, reflecting the increase in head count and the inflation adjustment.

The increase in head count was necessary to take on new projects for instance in ICT with the goal to reduce resilience and improve efficiency. The start-up of the Innovation hub as well as investments in our workforce such as an agile lead team or leadership programs.

Costs for police and security increased by 13% due to high passenger volumes and additional costs associated with quality to reduce the waiting time at security control. As expected at the beginning of the year, energy and waste costs declined to CHF 21 million, mainly due to lower heating, ventilation, and air conditioning costs.

I will now outline some key financial ratios. Net financial debt increased slightly.

However, net debt-to-EBITDA came down to 1.8x due to a higher EBITDA. The higher earnings also had a positive impact on our return on invested capital, which rose to 7.8%, mainly as a result of working capital changes and higher income taxes paid.

The operating cash flow decreased to CHF274 million. Higher investments, coupled with the upfront payment for the new airport in Natal depressed our free cash flow generation.

If we exclude the upfront payment for Natal, which could be treated as an M&A payment, free cash flow would have been around CHF 58 million. With the completion of Noida and in absence of new additional projects at large scale, we expect that free cash flow generation for the group to increase significantly.

The next slide shows the largest projects we have been working on in the last half year. 7 years after the launch of the project, principal work on the new baggage sorting system at Zurich Airport was successfully completed in June.

Following an intensive construction phase and the changeover to the new baggage sorting system, the most critical parts of the old system were deactivated. The old system will be fully replaced by 2027.

The preliminary project for the New Dock A together with the tower and the dock base will be completed in the second half of 2024. Various interim solutions required to maintain operations during the construction phase will be implemented in the near future.

Thus, for example, construction of the module with provisional bus gates and lounge areas will commence in spring next year. Work on the development of landside passenger areas is in full swing and will expand retail and dining offerings through the addition of numerous attractive shops, restaurants, and bar zones by 2027.

For our largest foreign project, Noida International Airport, various milestones have been passed ahead of full operability. Construction work on the runway, passenger terminal, and control tower has reached an advanced stage.

In the first half of 2024, the sub-concessions for ground handling, the operation of the commercial areas, and important maintenance contracts were awarded. The new airport is set to go into operation at the end of April next year.

With this, let's move on to the outlook. As mentioned before, operating expenses are currently growing faster than usual.

As a result of fast traffic development last year, we restarted projects, had to hire additional staff, and were also somewhat affected by inflation. Furthermore, our portfolio in Zurich and internationally has grown considerably with the addition of the Priora real estate and the opening of the Circle.

Internationally, we integrated Vitoria, Macae and recently also Natal in Brazil. As part of the employer branding program, the company is also investing in the existing workforce in order to remain an attractive employer, given the difficult environment in the labor market.

The structural cost increase will be mainly reflected in 2024 numbers, but to some extent also in 2025. But not only the costs are increasing; we are also reporting decent growth in revenues.

All in all, we are confident to reach our EBITDA target plus CHF 100 million compared to 2019 earlier than expected and without the initial contribution of Noida. With this, I will conclude my part of the presentation with the updated guidance for 2024.

The development of air traffic volumes to date at the Zurich side is slightly above the expectations we expressed at the beginning of this year. For this reason, around 31 million passengers are now expected, which is close to the numbers of 2019.

Aviation revenue has slightly outperformed traffic volumes. This is mainly due to the increase in user fees at the beginning of the year in connection with the refurbishment of the baggage sorting and handling system.

Non-aviation revenue is also expected to be higher. At the Zurich side, rising traffic volumes will have a positive impact on parking revenue, whereas the remaining commercial revenue will grow at a slower pace.

This is due in part to accounting effects such as IFRS 16 and construction work in connection with the development of landside passenger areas. Real estate revenue will be roughly in line with the prior year figure.

Revenue from international business will show above-average growth, thanks to the integration of the newly acquired airport in Natal, Brazil and the general growth momentum of the international business. Operating expenses, particularly personnel and security-related expenses are expected to be driven by inflation, higher volumes, and the aforementioned structural cost effects in the financial year 2024.

Overall, we expect to realize both higher EBITDA and consolidated profit for full year 2024 than in the past financial year. Investments at the Zurich side will amount to CHF 250 million to CHF 300 million in 2024.

Investment at subsidiaries abroad should come close to CHF 350 million with the construction of the new airport in Noida accounting for most of this. I will now hand over to Lukas again for the Q&A session.

Thank you, Kevin. We are at the end of the results presentation.

I'll now start with questions and answer. I hereby hand over to Stefan, who will moderate the Q&A session.

Are there any questions?

Yes, there are. Good morning also from my side.

We have received a number of questions also quite a lot on costs. I tried to cluster them also a bit.

We start with a few questions from Carlos from Kepler. The first one is on Noida.

In last year's Capital Markets Day, we were mentioning tariffs between INR 700 up to INR 1,000. Can we share some more details at this stage and what are the current traffic assumptions?

Well, as mentioned in the presentation, it needs a little bit more of patient from your side. We expect that the tariff outcome will be published towards the end of the year where you can see the precise numbers of tariffs.

You can see the estimates on the traffic volumes, et cetera. But until then, we are not able to disclose further details.

Then the second question is on retail and real estate. What would you do to unlock faster growth rates in both segments?

I think the retail as it is today, it's mainly driven by a good portfolio management over the next years. We have to distinguish between airside retail, where we are able also, as mentioned, to attract new tenants also always like looking in the overall mix of tenants on a given footprint.

I think that's our main core competence to have an ideal mix of tenants that at the end will also increase the attractiveness for passengers to spend money in either food or beverage or in the commercial areas. On landside, it's a little bit different as there will be a large construction work, the expansion of the landside areas over the next year.

It has already started. We don't see a meaningful negative impact.

But with the completion, we expect by 2027, I would say we really have a brilliant offering of attractive new retail space, not only to our passengers, but also to the public, to the community seven days open, which is not the case in downtown Zurich. I think in the long term, this investment will pay out in terms of increasing the attractiveness for shoppers, commuters, the public as a commercial destination in Zurich.

And same is true for real estate. There is now a significant next step of second Circle or whatever.

It's more about optimizing the portfolio, attracting new tenants, closing the gap also of the Circle to get to 100% occupancy rate, et cetera. So it's more about optimizing rather than heavily investing in expansions over the next year.

Then let's tackle the issue of the operating costs, especially the personnel expenses. They have increased by 15%.

Could you tell us how much is headcount and how much is salary increase? And on top of this, when looking a bit into the future, will this start to normalize already in the second half of the year?

Or is this really a structural change for the time to come?

Before I happily hand over this question to the CFO, I would just emphasize 2 things. First of all, when I was the CFO responsible to manage the pandemic situation, we very early set a target of CHF 100 million plus EBITDA given the same number of passenger.

And certainly, we assess the cost development differently mainly because of inflation and higher energy prices as it has materialized over the last years. But I would also emphasize in terms of the first 6 months of the financial year 2024.

I really think we have to look at the cost development in a broader period of time. Last year, we had a strong revenue growth given by significantly larger number of passengers, which basically went straight through the P&L, the cost base was not affected by this at the end, plus 3 million passengers compared to our initial assumptions.

So this comes with a time lag, and this is what happened in the first half year 2024. So we now see increasing operating costs, driven by higher volumes in combined with the flattening of the revenues, which is nothing that came to us a surprise and nothing that changes like the long-term view, especially in terms of our ambition to increase the profitability on this EBITDA target.

And now you can go into the details, Kevin.

Yes. Thank you, Lukas.

Maybe to go back to the specific question, it's approximately 3%, which was the inflation adjustment. So the majority was additional staff.

It's approximately 150 FTEs compared to the first half of 2023. And as mentioned in the presentation, there are several reasons why we had to staff up.

It's the volumes. It's projects.

We restarted -- we initiated new projects with the goal to improve efficiency, with the goal to be more innovative, but also with the goal to be more attractive towards future employees. And the sum of this has added to this structural cost increase, as Lukas mentioned, fast growth in revenue last year, not a very strong growth in personnel costs.

Now there is kind of a re-shifting, but going forward, we do expect that this is flattening out. We still have some open vacancies for this year.

So there will be some initiatives ongoing. But going forward, over the next 2 to 3 years, we still expect decent economies of scale.

So after this detailed look on the costs, we now switch to regulation, a question from Manish from Bernstein. It's on the rollover mechanism, which is not yet approved, and there still is quite a shortfall in terms of EVA.

But in a nutshell, what could be the best and worst case scenario of the tariff negotiations and what's our view there?

Well, especially from a tactical point of view, you have to understand that looking into the upcoming negotiations, we are not sharing a scenario, but as a general remark on that I think based on the current parameters, 5% WACC, et cetera, basically a reduction is calculated due to the over coverage in the current financial year, just from a mechanical point of view, but this is really too simple to assume a tariff cut out of the current situation. We look in the future, I think that we rather see than kind of a normalized growth compared to the high growth we had in the last 2 or 3 years out of the pandemic.

And in particular, we have a number of large investments ahead of us into the regulated segment and also capital cost in general specially in Switzerland having historically the negative interest environment. Also capital costs are generally rising, and we are putting this all together when it comes to the negotiation.

But from today's perspective, you cannot expect the guidance for us ahead of the negotiations, you have to make your own guess, but we really believe that this will be a fair outcome.

Maybe also coming back on the question, we do clearly assess this as a positive thing in the roll-over. Right now, we were restricted to over earn, but there was no mechanism that could help us if we have under earnings.

And right now, on a cumulative basis, at the end of 2023, we have an EVA of minus approximately CHF 300 million. We do still believe there is a chance to go back to 0 over the next 2 to 3 years until we have new tariffs in place.

And the roll-over mechanism won't work for the next period. It will be the period after the one we are going to negotiate, but it will clearly help that we also have some coverage when it goes below the 5% WACC we can earn.

It should stabilize also the negotiation, volatility should be lower. So overall, we assessed this positive.

We do not have green light yet. We are positive that we get positive feedback by the end of this year.

We then have a few questions from Johannes from Stifel. The first one is a short one.

The CapEx guidance for international activities has been reduced by CHF 50 million. Is this due to the delays in Noida?

Yes. That's correct.

That was in the chart. Then the next one is on the spend per passenger.

So the airside retail spending, which was down 2% compared to H1 last year, will this decline stop? Or is there any particular pattern we are observing?

During the COVID times, we had quite an increase with above average and we see now a normalization. We expect that this will remain on the level we do currently see.

What we do expect is as soon as we open up the New Dock A, this will take a couple of years. But this could give a boost since we are increasing the offerings to our passengers.

But up till then, we do expect it will grow with inflation.

Then there is a question on the real estate projects in Vitoria, whether or not we can share any more details, how much this does contribute to our P&L?

The detailed figures are not disclosed. I think it's important to mention that these are all land lease contracts, so we are not investing ourselves.

All projects are in a very early stage, just from taking over the concession, it was important to focus mainly on the aviation setup. Now as this is done and the terminal is also now for a certain period in operation, we now focus on the commercialization in terms of additional revenues.

It's not that material, but it's a good starting point with a lot of additional potential going forward.

The next questions are from Marcin from Bank of America. The first one is on the dividend.

So when should the market expect to hear about the dividend policy for the years 2025 and later? And are there any first thoughts you could share?

There are no first thoughts to be shared, to be honest. We are discussing several different scenarios, but we will communicate this in March next year when we are communicating also the year-end results.

Until then, we stick to the current dividend policy, the 40% of net profit adjusted plus the remaining in the capital contribution reserve.

The next one is on Noida again. What are the reasons for the delay that the airport is now expected to open by end of April next year?

Well, I could easily say it was always a very tight schedule. I think we now see rather the realistic schedule in a way of this delay by 4 months.

It's mainly due to a delay in construction. Simply needs more time in -- but not a significant -- not in significant way, but we do need this additional 4 months to complete the terminals.

And also, as I have mentioned in my presentation, it's also like combined work together with all the partners, staffing has to be recruited. Shops have to be fitted in the commercial area.

That's nothing honestly that really concerns us. It's a 40-year concession.

We still believe in the growth potential of the airport. It's rather a more realistic view on the final stage of the construction.

The next questions are from Andrew from Barclays. Another one on Noida.

Due to the delay, are there any fines for opening late? And if yes, can they be brought forward to, for example, the EPC?

Yes. And yes, there are fines, but they are rather low in the 6-digit, low 6-digit figures per month.

We have some grace periods. So when we look at April, it will theoretically hit us by 4 months, but we can also pass that on to the EPC contractor.

Then the next one is on the expansion of the landside area. So this construction site currently has an impact on the retail business.

By when should those works ease? And by when do we expect the food court to open?

We decided really to have like a rather short but an intense construction period. So the other thing would be that you have like half open scenarios and the construction that takes more time.

So we expect that the project, including the full hotel will be completed by 2027. Retailer on landside is still -- there also during the construction with reduced offering, but whatever belongs to supermarket, pharmacies, et cetera, will be also opened during the construction.

So therefore, we do not expect a significant financial impact, but a nice upside.

And then another one on India. Are there any new opportunities we are following in Noida?

In India?

India in Noida.

In India. Honestly, the focus clearly for the whole team in India is currently on the completion of the construction, the inauguration of the terminal, we are not following in parallel, additional project.

But once Noida is in operation, India remains an attractive market to us. And we will obviously look if we find the next opportunity that matches our investment criteria.

Maybe as a side note that we have decided for Noida itself is that we are constructing additional aircraft stands at the airport, which was foreseen as part of the second expansion phase. But as we see a strong demand in the market from the airlines, we decided to invest a little part from the second expansion phase already today, which allows us also to answer this demand we see.

But the focus clearly is now proper delivery of Noida and then we will have a look at other opportunities.

Okay. Then let's move to the question from Manuel from Bank Vontobel.

He's wondering whether the assumptions that were disclosed during last year's CMD. So, the roughly 6.5 million passengers in year 1 and also the guidance for top line revenues and EBITDA contribution, whether this still holds true?

Yes. The business plan is still valid.

As Lukas mentioned, we see some positive sign towards further growth for faster growth. That's why we are investing in those airport stands in order to cope with this.

But overall, with respect to the construction costs and also the overall business plan, that's still valid. It will be simply shifted by 4 months since we are going to start in April 2025.

Then we have a question from Jose Manuel from Santander. It's on Circle.

What level of revenues and EBITDA did the Circle generate in H1 2024 or probably to frame it a little bit different, what's the revenue potential on a full year basis. This is likely quite equally spread over the year?

The total revenue per year is approximately CHF 70 million, whereas 51% remains with us. The EBITDA margin is 85%, so quite profitable.

Then we have a question from Patrick from Goldman Sachs, which is probably indirectly related also a bit to the dividend policy, whether or not we might deploy additional equity to international projects, probably in the future. So once we have delivered on Noida or if the idea is more to rotate existing assets and to finance this with the existing cash flow?

Well, both is actually an option depending on the opportunities. I think when we look into the international business, then the value obviously comes from the dividend that those assets paid to us as the parent company as a shareholder.

But also going forward, as an option, we would not rule out to also downsell part of our international portfolio. This is nothing actually that we are actively looking at to be honest, simply because when it comes to Noida and the expansion phase that we expect also to happen after the certain time after the inauguration.

It's always a question, should we do this by 100%? Or are we open for an additional investor as, for example, at the Circle, where we are the 51% shareholder together with Swiss Life.

So, it needs to have a good governance, a clear understanding of the roles as we have in the Circle. And personally, I really believe that the market today still is looking at Noida as a construction project, what it actually is, but also as a construction risk.

And once Noida is in operation, the value of this asset will be definitely higher. So, at the right time, with the right partner, I will not rule out that we can also downsell a certain part for Noida or the international business in general to generate the additional equity that we could invest in further opportunities in the international context.

Then the next question is from Cristian from UBS. It's on traffic outlook.

So, we have now updated our guidance, and we expect nearly a full recovery this year in Zurich. So far, the 100% target was for 2025.

Now reaching this earlier, what's the outlook beyond?

We do expect that we will reach '19 levels next year. And from then on, we do expect that we will grow between 2% to 3% per year.

So the growth rate we used to have before the pandemic in line with economic and population growth in Switzerland.

Then the next one is on the increased package handling fees. So this generates around CHF 20 million of additional revenues.

What's the outlook there? Is there more to come after 2024?

We have not yet decided. I mean we are going into the Phase II.

So that's the link between Dock E and the airside center, the central baggage sorting system. So this will be replaced in the upcoming years.

And theoretically, this will allow also to increase the user fees. But it will all be combined when we are talking about negotiation with our partners.

So we are confident to find a good solution for partners involved with respect to potential increases in the user fees and also the charges negotiation we are going to have over the next 12 to 18 months.

I would also agree to say that the next increase of tariff as user fees should go into the overall negotiation of tariff. It was rather an exceptional situation as the package sorting system is the largest project under construction, where we have like also the regulatory base for refinancing of cumulated CapEx, but the next step should go into the full bundle of tariff negotiation.

Then we have a combined question on upcoming CapEx for 2025 and later. So what do you expect there for Zurich on the one hand and international on the other?

And then related to the Zurich investments, are there any investments that might result in lower costs to the airlines that would potentially help us in the tariff negotiation?

Maybe the first question first, we do expect approximately CHF300 million CapEx in Zurich per year over the upcoming years. Internationally, we will see a peak with respect to Noida.

And after we have finished Phase I in Noida, CapEx will come down significantly. The second largest project international is currently the runway, Macae, but this will potentially be finished this year.

And then we do not see major CapEx investments in our international business. And the second question, could you please repeat that again?

The question is, are there any investments that we do in Zurich that might help airlines reducing their cost, which could be a potential upside for the tariff negotiations?

I mean maybe I can start and you can add. That's also one of the core reasons why we founded this innovation hub.

There are several projects in there, which should not simply help us to be more innovative and to gain efficiency, but also our partner, specifically Swiss, and Swissport that, for instance, be in AOP planning, that's a digital platform where we can see patterns, when should the airplane arrive, which staff needs to be there. We're installing CVs at the cameras at the dock stands in order to use artificial intelligence to make anticipation which staff needs to be where we are talking about remote jetties.

So that's all investments we are looking in or already rolling out or already in place like AOP, which would also help the airlines and our partners to be more efficient. And this could be a potential upside, yes, for chargers negotiation.

If I may ask in a broader sense, I personally strongly believe that doing the airport better as an ecosystem, it absolutely needs aligned set of targets amongst the major player at the airport, and those are the major airlines and major ground handlers, et cetera. And this is true for quality.

We have to work on the same things with the same targets. This is true, for example, also on punctuality, how to ensure that we have a high punctuality amongst also the other airports in the benchmarking.

And the last thing is really on innovation. It's not about -- also based on this memorandum of understanding, we have signed with Swiss and Swissport, the approach is rather looking into how we do the whole airport better than optimizing us individually.

And that's relatively new approach one can say. But in my view, it's really the essence of doing the ecosystem of an airport doing better in the future.

I think that's all, should have answered most of the questions. There are some smaller rather technical questions on cash flow and the like.

We will come back on this via e-mail. And if you have any further questions, then just reach out in the afternoon.

So then I will come to the closing remark. Thank you very much for your interest, your trust in us.

Thank you very much also for the interesting questions. I really want to close with the remark on the OpEx development.

I hope we had built some trust or give you more comfort on this particular situation in the first half year of 2024. Really, one can say we are still very well on the recovering path in terms of our business and financial planning.

And also, this increase in cost is nothing that came as a surprise to us, but has to be seen in the right light. Thank you very much.

Have a good day.

Thank you.