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Edited Transcript of FLU.VA earnings conference call or presentation 20-Aug-19 10:59am GMT

Half Year 2019 Flughafen Wien AG Earnings Call

Vienna Airport Sep 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Flughafen Wien AG earnings conference call or presentation Tuesday, August 20, 2019 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Günther Ofner

Flughafen Wien Aktiengesellschaft - CFO & Member of the Management Board

* Judit Helenyi

Flughafen Wien Aktiengesellschaft - Head of IR

* Julian Jäger

Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board

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Conference Call Participants

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* Bernd Maurer

Raiffeisen CENTROBANK AG, Research Division - Head of Company Research & Chief Analyst

* Ruxandra Haradau-Doser

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Stephanie Fabienne D'Ath

RBC Capital Markets, LLC, Research Division - Analyst

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Presentation

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Operator [1]

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Good day, everyone, and welcome to the Vienna International Airport conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Judit Helenyi. Please go ahead.

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Judit Helenyi, Flughafen Wien Aktiengesellschaft - Head of IR [2]

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Thank you. Ladies and gentlemen, welcome to our conference call for the half year results of Vienna Airport. Today's presentation will be held, as usual, by our board members, Mr. Günther Ofner and Mr. Julian Jäger. The presentation will be followed by the Q&A session, where you will have the opportunity to pose your questions. The presentation will be recorded and most likely available on our homepage by tomorrow noon. The presentation slides are also available at our homepage right now. You can download it under Presentation.

And now I would like to hand over to Mr. Ofner. Please go ahead.

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Günther Ofner, Flughafen Wien Aktiengesellschaft - CFO & Member of the Management Board [3]

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Good afternoon from Vienna. I think it's a quite amazing year for Vienna International Airport, given the fact that we see a far outstanding growth rate this first 6 months. So at Vienna Airport, plus 23.9%, altogether in the group, 19.9%. So Malta had a growth of 5.9% and Kosice at 2.5%.

As you might be aware, these figures have to be seen on the background that several low-cost carriers after the bankruptcy of Air Berlin thought it would be a good idea to start or increase operations in Vienna. And so there is plenty of offers and also very favorable ticket prices, which attracted far more passengers than we saw in the years before.

What everybody has to understand and what we outlined all over the last year is that most of the new destinations and the airlines who started operation here in Vienna can refer to our incentive scheme. So there is a set on supportive measures that are available for the airlines and which contain of different elements. Some of them will mellow down further down the road, others are connected to the growth rate and future growth rates, and others are support for starting destinations. What you also should have in mind and remember is that we concluded a new agreement with Lufthansa Group just recently, which contained a lot of measures that are relevant financially and which provided far better conditions for Austrian airlines and the whole Lufthansa Group, not only in regard of aviation fees, but also on ramp handling fees, which clearly is visible in the figures we can present you today. And given all that, we think that our half year's result for 2019 are pretty fine.

So revenue is up to EUR 401.4 million, plus 7.5%. And there, you see the difference between the passenger growth rate and the overall revenue growth. EBITDA improved better by 9.3% to EUR 180.1 million (sic) [EUR 183.1 million], despite all the problems and difficulties we saw with air control, mismatch and delays and cancellations. And the real stress that was added to the system by growing at 24%, we could further improve our EBITDA margin in '19 compared to '18. So in the first 6 months, our EBITDA margin amounted to 45.6%, including the ramp handling business versus 44.9% in the same period 2018.

Our net profit climbed to EUR 82.9 million. So an increase by 14.6%, which is pretty closer to the passenger growth of 19.9% than the 7.5% of revenues. And as some of you already pointed at, a part of that improvement is ex correction that amounted to EUR 1.6 million -- EUR 1.7 million improvement for the result. And it's a one-off effect.

If we look now for the entire year 2019, it looks significantly better than we thought 6 months ago. So we expect the passenger numbers in Vienna Airport to end up above 31 million, which would equal to a growth rate of maybe 15%, even 60% -- 16%. And in the group, this should amount to an increase substantially above 10%, so that we can also improve our financial guidance. And the net profit for the period should stay significantly above the EUR 170 million we saw as minimum so far. We have not full visibility, how much significantly finally will be. But I would assume that plus of EUR 5 million or more is in any case possible. The same relates to revenue and EBITDA guidance for the full year. What has to be added is that the growth rates will go down now month-by-month as the basis effect of last autumn already are kicking in.

If we look at the financial results, you see a slight improvement also from EUR 6.3 million to EUR 6.1 million this year. And we just now in June repaid another portion of the EIB loan of EUR 25 million. So the effect of that interest savings for a half year will be visible then in full year's results, and on a yearly basis will amount to roughly EUR 1.2 million. And we are optimistic that we can also renegotiate the collaterals, which should also be a positive supportive of our financial results.

What we mentioned already after we agreed with Lufthansa Group for a new handling and security service agreement, we had an additional dampening effect in revenues from ramp handling because the second portion of the price adoption was now a part of '19. If we look at the expenses, you'll see that expenses for consumables and services used are more or less stable, personnel expense is on the rise, plus 6%. In that regard, we have to point to the fact that for the first time, our daughter company, GET2, which is providing cleaning services, is fully consolidated. And despite that, we see a growth in employee numbers because we cannot digest 24% more passengers without any additional workforce, but given the situation, I think we still keep a high discipline in regard of the costs.

Other operating expenses are higher with EUR 5.1 million, and this is by others also triggered by the environmental funds because the environmental fund payments are related to the number of passengers and through the noise related to the flight movements. So we see a substantial increase there for '19. 4.5% increase of depreciation and amortization, nothing strange behind that. It's partly an effect from IFRS 16 starting from 1st of January. And on the other hand, we have higher depreciation in our buildings.

Net debt. Despite IFRS 16, adjustment is at EUR 190.8 million and gearing at 0.147. Cash flow from operating activities is substantially higher, free cash flow slightly higher than last year. CapEx for the first 6 months was at EUR 63.5 million compared to last year. You should have in mind that we have had expenses for the runway activated, and therefore, the figures are not one-to-one comparable.

Equity, stable, equity ratio, slightly down. The maturity of our debt is dominated by the EIB loan, that's nothing new for you. It is as it is, and we are repaying it with EUR 25 million per year, which as I already explained, is giving us some relief further down the road. Free cash flow underlines our healthy financial situation. The cash flow from operating activities was EUR 156 million and free cash flow EUR 76 million. And as you might be aware, we are now starting the construction work for terminal improvement program and are already midterm the construction of Office Park 4 of 2 new hangars, one of them already has been put in operation and many other investment activities. So the payout for these investments will clearly rise in the second half of this year. Where we finally end with total CapEx, it's always a game against the time because what is really ready in December, what might belong to January and February will also decide how close we come to the expected EUR 220 million.

Share price was friendly lately, maybe also driven by the groundless fall of interest rates or negative interest rates, but also the overall performance of the company. And we are glad to see that the development of the company has also reflected share price, which is up roughly 20% compared with very low this year.

A lot of initiatives are improving our overall business footprint. A very important part of that is that the startup accelerator Plug&Play now is part of our Airport City. Plug&Play is one of the oldest and most successful startup accelerators. And there are 2 main programs that will be hosted here in Vienna. One is travel and hospitality, and the other one is smart cities, including Smart Airport cities. And we are very excited that one of the real global leaders in startup promotion now is also active here in our Airport City. And I think it will bring new perspectives for other companies who are looking for innovation to come to the airport.

What is also very important is that we are in the very final stage of the contractual negotiations for the third hotel. And as it looks now, it should start operation end of '21 -- sorry, '20. Office Park 1 will already start operation in May '20, and...

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Judit Helenyi, Flughafen Wien Aktiengesellschaft - Head of IR [4]

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Park 4.

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Günther Ofner, Flughafen Wien Aktiengesellschaft - CFO & Member of the Management Board [5]

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Yes?

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Judit Helenyi, Flughafen Wien Aktiengesellschaft - Head of IR [6]

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Office Park 4.

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Günther Ofner, Flughafen Wien Aktiengesellschaft - CFO & Member of the Management Board [7]

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Office Park 4, sorry. Operations in May '20, and we see still high interest rent office space in our Office Park 4. With the 1st of September, our co-working space offer starts with 900 square meter where also Plug&Play is located.

I already commented the outlook for 2019 and now hand over to Julian Jäger.

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [8]

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Good afternoon, ladies and gentlemen. I would like to continue with our segment results. And I think the segment results show some of the challenges we faced this year, despite the major increase in passenger numbers.

Starting with the Airport Segment. We can report an increase in revenue by roughly 8% and EBITDA growth by 5.5% and an EBIT growth by 7%, so up a bit more than EUR 3 million to EUR 49.2 million. This is -- compared to the 13% passenger number, this is not really exciting, but I can tell you that the second half of 2019 should be significantly better in terms of EBIT results than the first half. This is mainly due to the base effects we already saw last year, in H2 of last year. And in the first half of 2018, we didn't have significant growth. Now we had exceptional growth. So therefore, all the triggers for incentives and so on are higher, and the average revenue per passenger in this segment will be higher in the second half of this year. Overall, we will end up the year around EUR 13, as I already said in our call for Q1. What you should not forget is that the result in the Airport Segment is lower than it used to be due to the shift of the hospitality lounges, which used to be roughly EUR 0.50 per passenger. So comparing like-with-like, we would end up the year roughly with EUR 13.50 compared to EUR 14.50 revenue per passenger in 2018.

As I said, second half of this year will be significantly better than the increase of EUR 3 million EBIT in the first half and how much we will see, but there will be a significant increase over the EUR 3 million in H1.

The most challenging environment definitely is going on in the Handling & Security Services Segment. Here, we had 2 major negative impacts in H1. One is that we increased our staffing mainly in our security services subsidiary, VIAS. So most of the people, which increased -- you see here in the chart have increased overall by 187 people, most of it is coming from VIAS. So this had a negative impact on the EBIT of VIAS. And on the other hand, there is a major restructuring going on in our ground handling division, where we will see the major positive effect in H2 of this year. In the first 3, 4 months, we had the same operation as last year, but we expect that we will reduce variable costs in this segment for the full year by roughly 13%, 14%. Unfortunately, the average revenue decreases at the same time. I have to correct myself, it's not, in absolute terms, 13%, 14%. It's 13%, 14% for departing aircraft.

And the same applies to the revenue. You can see here that in H1, we had an insignificant increase of 0.1% in revenue. Unfortunately, we have to -- we have a much higher workload to make the same revenue as last year. And then this is what Günther already said, this is mainly due to the second part of the lowering of costs for Austrian Airlines in exchange for the extension of our contract in 2025. What is positive that we have Lauda and Wizz Air under contract. These are those low-cost carriers which seem to compete in the best way right now in Vienna airport. Those are the low-cost carriers which seem to grow. Very significantly, Qatar Airways is doubling their frequency. But overall, I have to say, with our [competitive agility], they started real price war. And this is what we see here that for the same amount of revenue, we have to work much harder, and the workload is much higher.

I told you at our last call that I would expect an increase of EUR 10 million on an EBIT basis for the full year. We won't manage this completely. I still would say that we will manage an increase for the full year of EBIT by EUR 7 million. If you remember, we had -- in 2018, we had an EBIT of EUR 3 million. So I would expect the EBIT for the full year at around EUR 10 million. The main reason is there that it was not as easy as we expected to implement our new system. Now everything is up and running. We produce lower delays than we used to in last summer. We had rocky April, May, June, but from the beginning of July, the whole system works now perfectly well. And we managed now to decrease our overtime very significantly since July.

Last year, in July, we had roughly 34,000 overtime hours. This July, we had roughly 14,000 hours. So it should continue like this. And therefore, I'm optimistic that we will, despite the decrease in EBIT in the first half of this year that we will see an increase in our EBIT by plus/minus EUR 7 million. What doesn't make it easier to get good results in this segment is obviously the cargo. Cargo is down by more than 4% until the end of June. July was even worse with minus 8%. We are not the only airport in Europe affected, essentially, cargo is down more or less everywhere. But I think the smaller hubs are hurt more than the bigger hubs because, obviously, the big cargo companies want to consolidate their business in their major hubs, and so I think we suffer a bit more than other airports.

Retail & Properties. I think there we can look at the excellent development. We always told you that it's our ambition to grow our revenue by roughly 50% of the passenger growth. The external revenue increased by 14.6% in this segment; EBITDA, plus 21%, EBIT, plus 25%. So overall, I think we are slightly above our targets and expectations. We -- there was a positive effect due to the extension of our Heinemann contract until 2030. You might remember -- you might recall that our contract is -- or was going until 2022. So we decided to extend this contract. So we've got our first partner already fixed for our terminal extension. And the positive news is that this will produce positive impact already from the 1st of January 2019. So we already see positive effects from this new contract with higher margins already from the start of this year.

What is very positive is that in the F&B business, we more or less managed to grow the revenue there in line with our passenger numbers growth, plus 22.6%. Retail revenue was up plus 16.5%. What you must not forget is that -- is specialty retail is hit very hard right now due to our construction work in Terminal 2. In the first 6 months of this year, we had taken out of operation more than 50% of our retail space in Terminal 2. We've taken out of operation, I think, 1,000 square meters F&B space because of the refurbishment of Terminal 2. And we just opened a few weeks ago, our new fashion gallery operated by Lagardère on 700 square meters. So we will see positive effects here in H2 as well. So overall, I think the growth of 16.5% from retail was pretty positive. And overall, to speak in old terms, the PRR in the old terms, which was just retail, insignificantly went down from EUR 190 million to EUR 183 million, this is a minus of 4.4%. I think the more correct and the figures which are easier comparable to other airports include advertising and hospitality and VIP services. There the revenue per passenger went down from EUR 272 million to EUR 265 million, again a decrease of roughly 4%. So overall, given the major growth from low-cost carrier passengers, I think this is an excellent result. And with -- I think even parking, in parking, we see the positive impact from low cost -- in general, from the growth in passenger numbers, plus 15.5% is visible as well. Rentals, where there's no connection essentially to passenger numbers is up 4.1%. Advertising is the only area where we lost a very lucrative contract, but still overall managed to regain this loss in revenue. It was up 1.5%. So therefore, I think, overall, the Retail & Properties Segment improved very significantly in H1. And there is no reason to believe that this should be significantly different in H2.

Malta Segment. Yes, Malta is, again, delivering excellent results, both revenue, EBITDA and EBIT above the increase in passenger numbers, passenger grew by 5.9% in H1. I think we see the positive effect now from the terminal extension we opened last year there. The terminal extension with a bigger duty-free shop, this is something you can see now in the Retail & Properties Segment in Malta, all the landside shopping is doing extremely well. And overall, yes, I think the development there is excellent. We are right now investing in a new parking garage, which is necessary to -- for the new office building, which we intend to build in the coming years and as well, there is -- there are plans for a terminal extension to get more check-in counters, more space for the gate areas and more specialty retail space and more F&B space. So overall, I think Malta is on an excellent course.

Kosice is okay. We expect probably a slight decrease in passenger numbers this year. First half was positive. But overall, the net profit should be, again, around EUR 2.5 million, EUR 2.6 million, EUR 2.7 million. Overall, good results for such a tiny airport.

Before I come to the traffic results and the traffic outlook, maybe just a few words on operations. In all over Europe, the delay situation and cancellations was a hot topic before the main summer season. I think we are doing fairly well in Vienna. We managed to improve punctuality slightly for the full year and as well in summer. What was reduced very significantly was the number of flight cancellations, which obviously helped a lot to have more satisfied passengers. As I said, we had slight problems from our Handling department in April, May, June. In terms of the delays we are producing now since July, we are significantly below the delays we produced last year. So essentially, the airlines, the airports are doing the utmost to reduce delays and improve punctuality. Unfortunately, the air navigation service providers in Germany, France, Hungary but as well in Austria have terrible performance this year, significantly worse than last year. And that's why, overall, the delays did not improve further. But I think here, we have an excellent cooperation with Austrian, and we will focus even next year on -- to improve punctuality here in Vienna Airport. And it's important for us that we are, so far this year, the most punctual hub in Lufthansa Group.

Yes, in the traffic results in H1, anyway, overall in the group, we had plus 19.9%, 18 million passengers; Vienna, 23.9%; Malta, plus 5.9%; and Kosice, plus 2.5%. Vienna, excellent with 24%. Seat load factor up 1.3 percentage points. The only downside was cargo. What was very positive as well is that, essentially, we had growth in all regions. We have a very significant growth to North America by more than 20%. We've got significant growth by 15% in H1 to East Asia. Europe is up 24%. So overall, an excellent development. And if you look at the individual airlines, Lufthansa is up 3.1%, market share of 50 -- nearly 55%, low-cost carriers' market share of 31%. They doubled more or less their presence, including Eurowings.

And so we think that, obviously, now in the remaining months of this year, traffic growth will decrease. So we -- in July, we had an increase of 16%. And now for August and the remaining months, yes, we will see growth, but in the second half of this year, overall, I don't think that we will have much more growth than of average, maybe 10%. So we will go down now until the end of this year. And overall, we will end the year with maybe a bit more than 31 million passengers and significantly more than 10% growth in Vienna and the same applies for the group.

What is very positive is the long-haul development. As I said, initially, we've got this year ANA, we've got Air Canada, we got Austrian moving from Toronto to Montréal. We got China Southern new. We will get now Air Arabia from Sharjah as of September. So overall, I think even the long-haul development is doing very well. And the number of airlines like China Southern or Hainan or Air China are so far not that big, but what is encouraging is that what people think of the Chinese is actually true. They're spending significantly more in the duty-free shops than other. So if you compare that we have an average of spend per passenger at the duty-free shop of roughly EUR 7. The passengers of airlines like Hainan, China Southern or Air China spend between EUR 30 and EUR 50 per passenger. So there's a very significant positive impact from these airlines. So this is one reason why we'll further focus on trying to attract Chinese airlines to Vienna, and I'm optimistic that we will see either one or other success here in the coming years.

Yes. That's it from our end, and now we are happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from Ruxandra Haradau-Doser from Kepler Cheuvreux.

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Ruxandra Haradau-Doser, Kepler Cheuvreux, Research Division - Equity Research Analyst [2]

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Congratulation on the impressive passenger growth this year. A few questions, please. Three questions, please. First, you mentioned that some incentives will decline over time. If passengers were to be flat at Vienna Airport next year, would you expect unit revenues in the Airport Segment to start to improve again? And in your internal medium-term planning, do you expect at certain point revenues per passenger in the Airport Segment to go back to around 2017 level? Second, the tax rate was relatively low in Q2. Could you please give us the guidance on tax rate for the full year? And third, could you please give us some indication on the CapEx in 2020 and 2021?

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [3]

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Let me start to answer your first question. I mean, first of all, whatever I tell you now is definitely wrong because I'm speculating now on future developments. And it's, unfortunately, not that easy to say if we have 0 development next year or plus 3% next year. And the outcome is clear because it depends a lot who is growing. If Austrian is growing, that's the kind of "worst-case scenario for us," obviously, because the additional revenue from Austrian is the lowest overall. So if airlines are growing who are full payers, obviously it's better than if airlines are growing, who have, for instance, the volume incentive or a growth incentive. So that's why there's not one answer to that question.

But if we don't have growth last year, I think we should be in line with this year's number of revenue per passenger, maybe a slight increase. But definitely, I am pretty convinced unless we have significant growth in the coming years that we will grow our revenue per passenger in the years until 2022, maybe not entirely to the level of 2017. But if you -- but into that region. And we always have to -- you mustn't forget the EUR 0.50 should be reduced from the 2017 numbers. So depending on the actual growth, I think we will not reduce the revenue per passenger significantly further. Although we will have to lower our charges from next year due to the major growth we saw this year. You know our formula. So overall net, there should not be a significant decrease anymore, even though if we should see a small increase in 2020. And then from 2021 and 2022, net revenue definitely should grow again.

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Günther Ofner, Flughafen Wien Aktiengesellschaft - CFO & Member of the Management Board [4]

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Yes. We have no exact visibility for CapEx 2021. But in general, you can assume that it will stay maybe around our guidance or slightly above our guidance of '19, but the definitive figures for '21, we will be able to provide once we have made our budget. The tax rate, as I said, includes a one-off of EUR 1.7 million. So overall, for full year, it will stay roughly stable or slightly above the last year. Midterm, we hope that the Austrian government will, once new government is in office, realize the plan that the corporate tax should be lowered from 25% to 20%. If this happens, it's a question who will stay in government, but I would say that the chances are not too bad that the initial plan for the tax reform will be put into the law. So maybe in '22, '23, this new tax rate could be applied.

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Operator [5]

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(Operator Instructions) Our next question comes from Stephanie D'Ath from RBC.

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Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst [6]

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I have 3, please. The first one is on aviation. Looking at the second quarter only, you had passengers up 23% (sic) [24%], sales up 2%, and EBITDA down 6%. So could you please explain why the deterioration compared to the first quarter? My second question is on investing cash flows. So your CapEx was down year-on-year from EUR 92 million to EUR 64 million, however, your net cash from investment outflow was up from EUR 57 million to EUR 90 million (sic) [EUR 80 million]. So could you please explain why CapEx is down but cash outflow from investment up? And I think the payments made for the purchase of assets and investment and security increased quite a bit so I want to understand what is behind that.

And then my third question here is on your guidance. So you forecast about 31 million passengers for the full year, which implies 6% to 8% volume growth in the second half. Could you give us some color on summer versus winter traffic and competitive pressure among the airlines and what triggered Level to cancel some routes in September to December? And then second part of that guidance question is, what do you mean by your "perceptibly higher than EUR 370 million (sic) [EUR 375 million]" EBITDA?

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [7]

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I'll take the second.

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Günther Ofner, Flughafen Wien Aktiengesellschaft - CFO & Member of the Management Board [8]

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Maybe I start with your last question. I would assume in regard of net income and also EBITDA that it could be in the range of EUR 5 million to EUR 10 million above the figures we saw so far is plausible. So this is a part or a level we think could be reachable. The payout versus investment is that not any account is immediately paid down. So there are some delays in liquidating invoices for investments, and in regard of the cash flow, you have to put in mind that we had a payment of EUR 41.7 million for the environmental fund last year, which is accounted through the third runway. So if you take that out, the real development is that EUR 31 million was invested in other items last year and EUR 63.5 million for this year. Where we finally end up is not easy to predict. It could be EUR 170 million, EUR 160 million, EUR 180 million, EUR 200 million, maybe slightly above EUR 200 million, it is related to the real progress that is made in all the building projects that are right now underway. And maybe it's somewhere in the same range then, as I said before for the years to come.

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [9]

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Regarding your first question, there were some extraordinary cost increases in Q2. So revenue was growing by actually [20%. We had] 6% in Q2, and there were some extraordinary increases in -- on the costs side. As I said before, the Airport Segment, overall, in H1, is not representative for the full year results. So we have to ask for a bit of patience. You will see, in Q3 and Q4, significantly better results. And for the full year, we will end up the year significantly above the EUR 3 million EBIT growth we had in H1. So please bear with us, you would see extraordinary positive effects in H2. And the full year results in the Airport Segment will be quite satisfactory.

Regarding traffic, I think, overall, we are in the good position that we do not really care if individual airlines reduce frequency or the number of aircraft here in Vienna at this point in time. I think a certain consolidation is necessary in the market. I think the level of ticket prices are not sustainable right now. Just a few days ago, there was the new inflation rate for Austria published, and it said that the ticket prices fell, on average, by 10%, which is one of the reasons why inflation is relatively low with 1.4% right now. So we think there will be a consolidation coming. From today's point of view, I don't really see it in 2020. So if I believe what most of the airlines are telling me, I'm not foreseeing a significant drop in passenger numbers for next year. I think the most likely outcome is that there will be a slight increase or a slight decrease, but not really a major development downwards.

But obviously, Ryanair is the only shareholder in Lauda, so you never know with Ryanair. They could decide to deploy significantly more capacity in Vienna to fight the competition out of the market, they could decide from one day to the other that they significantly reduce capacity. So it's still early to talk about 2019 -- or 2020. Personally, I think our 31 million passengers are pretty safe so -- if no other reduction by airlines will not alter that significantly next year. From today's point of view, I would see a slight increase, maybe a slight decrease. But my best guess would be plus/minus 0 for next year.

I think -- or I saw that OAG had a very significant increase forecasted as well for us in the next month. We checked in detail the OAG numbers versus reality in the last 3 years. And what we saw is that they are not bad, but they always are between 1% and 3%, too optimistic when you compare the winter schedule, summer schedule '18, winter '19. So overall, I think they are relatively good in terms of frequencies, but they are not that exact as our forecasting in terms of aircraft's size. And therefore, they usually get the seating wrong, and they are too optimistic on the seating. So as I said, we strongly believe we will manage 31 million passengers. If there's no further movement, it might be a bit more than that, 31.5 million, for instance. But I don't think that it will be less.

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Operator [10]

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(Operator Instructions) Our next question comes from Bernd Maurer with RCB.

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Bernd Maurer, Raiffeisen CENTROBANK AG, Research Division - Head of Company Research & Chief Analyst [11]

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One clarification, Mr. Ofner, regarding your comments on the agreement with Austrian Airlines. Am I right to assume you talked about the agreement which took effect with January this year? Or was there something signed in addition in the last month?

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [12]

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Last year.

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Bernd Maurer, Raiffeisen CENTROBANK AG, Research Division - Head of Company Research & Chief Analyst [13]

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Last year. Okay. I understand. Anything on the horizon, given the fact that Austrian Airlines is behind plans that this agreement reached last year should be unbundled further adjustments? Or does this look safe for the time being?

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [14]

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This is not our intention, if I may jump in here. And I think what is clear is we have got the handling contract until 2025. We've got the contract in terms of all other conditions until the end of 2022. I think what is the major goal of Austrian Airlines to get funding for a renewal of at least -- for the renewal of part of the long-haul fleet. I think it's very good what they are doing now to talk to all stakeholders in Austria, to talk to the government and to promote an aviation-friendly environment, politically aviation-friendly environment here. They've got our full support on that, but we definitely don't have the intention to change anything in the contracts which are applicable now until the end of '22, respectively, until 2025. Obviously, I mean, 2023 is relatively long in the future. And definitely, we will do our utmost to support them to get a new long-haul fleet here to Vienna.

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Günther Ofner, Flughafen Wien Aktiengesellschaft - CFO & Member of the Management Board [15]

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I mean the duration of the agreement is '18 the 1st of January to December 31 of '22. And I would comment that pacta sunt servanda is maybe the best rule in business relations. So -- and we will stay to what we promised, but no new match.

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Bernd Maurer, Raiffeisen CENTROBANK AG, Research Division - Head of Company Research & Chief Analyst [16]

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Our second question. When it comes to the renovation of Terminal 2 and the increase of shopping areas, which was once in a slide that you target to increase shopping space by some 12,000 square meters. So is it still correct to assume that this additional capacity will be revenue generating some time in 2023? Or did plans change in the meantime?

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [17]

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No, this did not change. To be very specific, there will not be an increase in space in Terminal 2 or Pier East. So we will refurbish the space...

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Bernd Maurer, Raiffeisen CENTROBANK AG, Research Division - Head of Company Research & Chief Analyst [18]

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Or rental...

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [19]

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No -- so right now, we took some space in Terminal 2 out of operation, and it came online -- or it will come again in the next few months. Then from 2021 to 2023, we will take out of operation Pier East. So we will lose some retail and F&B space there. The major increase in space will come with the south extension of Terminal 3. There should be an additional 11,000 square meters coming on the market by mid-'23, so we should see the first positive result in 2023. We see...

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Bernd Maurer, Raiffeisen CENTROBANK AG, Research Division - Head of Company Research & Chief Analyst [20]

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[East, I mean] -- sorry.

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Julian Jäger, Flughafen Wien Aktiengesellschaft - COO & Member of the Management Board [21]

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Yes. So yes, there should be a positive impact in 2023. The major impact I would foresee in 2024 then when we have the full year to operate it. And we still stick to our target that we should increase our revenue per passenger by roughly EUR 0.60 compared to today by 2024 when all this new space is available.

And secondly, we should see some first positive steps with the completion of Terminal 2 and the finalization of the refurbishment of Terminal 2 because by January 2021, we will have the security area in Terminal 2 before the duty-free shop. Right now, it is after the duty-free shop. So we should see some positive impact from this measure as well. And then we will have -- obviously, right now, the retail environment in Terminal 2 is not really great with all the construction going on and the dust and the noise. So overall, in stages, you should see a positive impact on PRR in the next 3 years, but the major impact will be in 2024.

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Operator [22]

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(Operator Instructions) And we have no further questions in the queue at this time. I would like to turn the conference back over to our speakers for any concluding remarks.

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Judit Helenyi, Flughafen Wien Aktiengesellschaft - Head of IR [23]

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Thank you very much. Ladies and gentlemen, thank you very much for your interest. Should you have any further questions later on, please feel free and get back to me. As I said, the replay will be available probably tomorrow by noon. And I'm happy to answer your questions if some other new topics arise. Thank you very much. Bye-bye.

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Operator [24]

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And once again, ladies and gentlemen, that concludes today's conference. We appreciate your participation today.