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Edited Transcript of FRA.DE earnings conference call or presentation 8-May-19 12:00pm GMT

Q1 2019 Fraport AG Frankfurt Airport Services Worldwide Earnings Call

Frankfurt May 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Fraport AG Frankfurt Airport Services Worldwide earnings conference call or presentation Wednesday, May 8, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christoph Hans Nanke

Fraport AG - Senior VP, Head of Finance & IR

* Matthias Zieschang

Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board

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Conference Call Participants

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* Adrian Pehl

Commerzbank AG, Research Division - Analyst

* Andrew Lobbenberg

HSBC, Research Division - Head of the European Transport Team

* Arthur David Truslove

Crédit Suisse AG, Research Division - Research Analyst

* Charles Maynadier

Kempen & Co. N.V., Research Division - Analyst

* Christian Cohrs

Warburg Research GmbH - Analyst

* Cristian Nedelcu

UBS Investment Bank, Research Division - Associate Director and Aerospace & Defence Analyst

* Elodie Rall

JP Morgan Chase & Co, Research Division - Research Analyst

* James Edward Brazier Hollins

Exane BNP Paribas, Research Division - Senior Transport Analyst

* James Goodall

Redburn (Europe) Limited, Research Division - Analyst

* Johannes Braun

MainFirst Bank AG, Research Division - Director

* Nicolas J. Mora

Morgan Stanley, Research Division - Equity Analyst

* Ruxandra Haradau-Doser

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Samantha Jeary

ODDO BHF Corporate & Markets, Research Division - Analyst

* Stephanie Fabienne D'Ath

RBC Capital Markets, LLC, Research Division - Analyst

* Vittorio Carelli

Grupo Santander, Research Division - Equity Analyst

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Presentation

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Unidentified Company Representative, [1]

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Hello, everybody, and a warm welcome also from me for Fraport's presentation for the first quarter for financial year 2019. With me at the table, I have our CFO, Dr. Matthias Zieschang. He will guide you through the presentation. And after that, of course, there will be sufficient time for questions, and we will do our best to answer. So now let's start with the presentation.

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [2]

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Yes. Thank you very much. Good afternoon, ladies and gentlemen, and a warm welcome also from my side.

Let me start my presentation today with an overview on our financial highlights. Despite the shift of the Easter holiday season into April, the underlying group revenue without the application of IFRIC 12 grew by more than EUR 30 million to a value of EUR 679 million. The key drivers for the 5% increase in revenue were the good traffic performances, but also our retailer and parking activities in Frankfurt contributed well.

Within our International Activities, growth was mainly achieved in Lima and our U.S. subsidiary. I will provide more information on this in a few minutes, but let me focus on the group first. Thanks to the positive underlying developments, the disposal of our energy supply subsidiary and the new IFRS 16 accounting standard, our group EBITDA recorded a new Q1 all-time high of EUR 201 million. Also, the adjusted EBITDA figures are without IFRS 16 and the one-offs within Retail & Real Estate improved by some EUR 6 million compared to Q1 2018. As a result of the positive EBITDA development, our group EBITDA margin improved by more than 2 percentage points to 29%.

Despite the higher D&A burden from the first time application of IFRS 16 and the shorter assumed useful lifetimes of individual assets in Frankfurt, our group EBIT was up by some EUR 4 million to EUR 6 million. Thanks to a better financial result in Lima and Brazil as well as the absence of the Q1 loss-making Hanover investment, our Q1 financial result improved by more than EUR 6 million compared to the previous year. At a tax rate of around 24%, this meant that our group result improved by around EUR 8 million to a value of EUR 28 million.

Moving on to our group cash flow statement. On the one side, you can see that we recorded a strong 60% increase in our operating cash flow, while on the other side the adjusted value, so the operating cash flow without working capital changes increased by EUR 13 million. Within CapEx, you see that we speeded up our CapEx programs in line with our full year communication. In addition to the ongoing cash outflows, it is also worth noting that Frankfurt and our International investments are recording down payments with regard to the EPC contracts. In Frankfurt, we, in addition, made a down payment for the construction of Pier G in the amount of some EUR 112 million. As a result of the down payment, the values of the first quarter can simply be multiplied x4 to reach the full year value. So the best approach here is to broadly take our guidance for the full year, which is also shown in the appendix to the presentation, so up to EUR 1.2 billion CapEx for the full year.

Regarding our investment in Lima. Here, we are in the final phase to set up the framework agreement for the new runway, and we expect to sign the terminal agreement later this year or beginning of next year. We will provide you an update on the CapEx plans here later on in the course of the year once the contracts are signed.

On the back of the higher CapEx, our free cash flow turned clearly negatively and was in line with our expectations. The dividend you see on the chart is foremost the dividend we received from Antalya for the performance of the past year.

Moving on to our traffic numbers on Slide #7. Most of the numbers shown on the chart are not new as we released them already in April. Here, however, are the preliminary results for Frankfurt shown in the green box. As expected, traffic in April was showing the catch-up effect from the later Easter holidays, growing at 5.1% in April. In addition, we are also pleased by the favorable passenger mix. Here, intercontinental passengers growth at 6.2% outperformed continental passenger growth at 4.6%.

Key growing markets were Africa, the Americas and Middle East, while in Europe it was mainly Eastern Europe. For the remainder of the summer season, we expect growth rates in Frankfurt, however, to come down. This will be mainly due to us not offering additional slots to the market and the high slot utilization of the previous summer season.

Regarding of our international portfolio, we have not consolidated all of the passenger data yet, whereas, the preliminary data for Antalya are at plus 16% and for Greece are at plus 7%.

Coming to our business update on Slide #9. Last week, we celebrated the cornerstone laying of Terminal 3 in Frankfurt. The project, therefore, is in line with the time schedule. Looking ahead, also the general contractor for Pier G has been awarded and meanwhile begun the works on the outer shell of Pier G. Following this, we can now, in the course of the year, also begin the beauty contest to market the retail lots in the Pier.

For this purpose and to further improve our retail activities, we are also happy to announce a new hired Head of Retail and Multi-Channeling, Jan-Dieter Schaap. Mr. Schaap will assume responsibilities at the latest in November this year. Mr. Schaap used to work for the German retailers Douglas and Kaufhof before and has special knowledge within the field of e-commerce activities. So we are happy to receive and provide you and the market with fresh ideas here and to see our stationary and online marketplaces progressing.

A technical but also operational topic is shown on the Charts 10 and 11. On Chart 10, you can see the new security equipment which has finally be licensed -- in-license in Germany following the Frankfurt test runs. In general, we are not discussing rocket science here as the same technology can be found in London Heathrow or City Airport and most of the airports across Europe these days. New for us or for Germany, however, is a possibility that 3 to 5 passengers can queue next to each other and fill bins simultaneously allowing for an overtaking function.

New is also the quicker process regarding the automatic conveyor belt system, which doesn't stop during the x-ray process either. Thus, the security staff must decide within 10 seconds whether a bag is cleared or not. In case of any uncertainties, the bags will automatically be forwarded to the unclear section for a manual check. Those measures will help to improve the efficiency of the security checks and speed up the processes. For you, as you like numbers, the new lane can serve up to 250 passengers per hour while the old technology was good for some 80 people per hour. The only challenges of the new technology are the length and width of the new security lanes. In general, we can replace 4 old lanes by 2 new lanes. Having said this, we are discussing, for example, an increased throughput from 320 passengers per hour to 500 passengers per hour on the same ground space for a like-for-like comparison.

The first big step ahead, here, we will make with our new secretary building next to Terminal 1, Concourse A, which is shown on Slide 11. This slide also shows you the progress of the hall. As you can see, that building is well underway to be opened mid-July, so being ready in the high summer season.

Following this amendment to Terminal 1, we are expecting a clear improvement with regard to the security check situation in Frankfurt. As we, however, operate multiple concourses, we also need to ramp up or replace the security lanes in the other parts of Terminals 1 and 2. Here, we are currently in the review phase to decide which terminal parts can accommodate for the new security lane technology and how much does it cost to adjust the terminal buildings for the new lanes. Certainly, we can present you an update on the security check situation together with our upcoming Q2 results. For the time being, we are fine with the progress we have achieved since the massive disruptions last summer season.

Moving on to an update on our Retail activities. Within our previous presentations, we were discussing the measures initiated in our stabilized recover and growth program. Slide 12 now shows you some examples we are pursuing here this year.

Please bear in mind that those shop openings and refurbishments are just some examples inside the terminal, and we spared out to put smaller or regular refurbishments on the slide. In addition, we are also going to launch further new test cases with regard to our e-commerce platform. Looking at the improving security check situation, the passenger mix and the cheaper euro together, we are absolutely confident to deliver on our target set at the full year presentation to grow retail spend per passenger in Frankfurt by around EUR 0.10 this year coming back to a level above EUR 3.20.

Taking now a more detailed look at our segment performances in the past quarter, starting with the segment Aviation on Slide #14. Revenue in the Aviation segment was up in the first quarter by EUR 6 million to EUR 225 million. Out of the revenue increase, EUR 5 million resulted from security services, which was balanced with cost in the amount. Aviation charges improved by EUR 1 million due to the anticipated incentives for the full year growth. Those EUR 1 million additional revenue then was compensated by the absence of EUR 1 million in other income and higher wages. As a result of those compensating effects, the segment EBITDA was slightly down in the first quarter to EUR 38 million.

On top to this, the segment's D&A reflected the shorter assumed lifetimes of some assets, which we started in Q3 last year. The higher D&A numbers then lead to a segment EBIT of minus EUR 1 million in the first quarter.

Our Retail & Real Estate segment is shown on Slide 15. As indicated during our full year presentation, our retail spend per passenger continued to recover in the first quarter 2019. In combination with higher parking volumes, our underlying business in Retail & Real Estate improved by some EUR 6 million or 5% compared to the previous year's quarter.

Due to disposing our energy supply subsidiary, we, however, recorded some EUR 7 million lower real estate revenue and cost in the same amount. Reported revenue of the segment thus was flat compared to Q1 2018. Selling our energy supply subsidiary meant, on the one side, a clear improvement in segment margin and, on the other side, a EUR 12 million book gain, which is shown in the column Other Income. Here, we recorded a EUR 5 million property sale in the past year, so in 2018, so that the delta of EUR 7 million is visible on the chart.

In total, segment EBITDA ended the first quarter at some EUR 101 million or EUR 89 million when adjusted for the book gain on Energi Air. Despite slightly elevated depreciation charges, our segment EBIT improved by EUR 11 million to EUR 79 million.

Some insight on the retail performance in the past quarter is provided on Slide 16. On the right hand, you can see the following effects. On the one side, we recorded a mild passenger drop in core spending countries, such as China, Russia, and Vietnam. Here, we need to track whether the source impacts were seasonal due to the shift of Easter traffic or not. The positive news, however, is that source passengers we welcomed -- we processed way better, as you can see in the shopping data of passengers to China and Vietnam. Please note here that the currency fluctuation to China in Q1 was marginal at 1.6%. So we are satisfied and we are also seeing this good performance in the first figures of April. Despite the usually lower [attractive] Easter holiday season, our retail spend per passenger further improved in April by more than 9% from EUR 2.85 to EUR 3.11 in total, so year-to-date our KPI improved by around 7% compared to the previous year value.

Eyeing on the retail split on the left-hand side, you can see that it was especially shopping revenue, so classical duty-free and convenience goods, and advertising revenue that provided growth.

Our Ground Handling segment is shown on Slide 17. As promised in our full year presentation, we are working on the productivity of the segment. As revenue grew by EUR 10 million, we were able to translate EUR 3 million into EBITDA growth.

Let me emphasize here that we are, by far, not satisfied with the performance of the segment. The topic, therefore, is clearly addressed internally, and we will show clearly better results going forward.

Our final segment, International Activities & Services, is shown on Slide 18. Key drivers for the financial growth in the low season quarter were our U.S. businesses and our investment in Lima, Peru. Besides a positive underlying development, both operations benefited from a favorable U.S. dollar-euro conversion rate. On the flip side, Fraport Brazil suffered from the devaluation of the Brazilian real compared to the first quarter 2018. The local results for Fortaleza and Porto Alegre were showing a 6% EBITDA growth, as you can also see on the chart. With regards to Fraport's Greece, Slovenija and Twin Star, basically nothing happened in the low season quarter. We are now excited to see the development in the summer season, and the first 3 airports in Greece will also operate on the elevated fee level. Net-net, we recorded a satisfying Q1 result of our International Activities segment, in line with our expectations.

So my last slide for today will also be my quickest one, our outlook for the full year 2019. Following the first quarter of '19, there is no need to adjust anything, and we are sticking to our guidance said 2 months ago for Frankfurt traffic and for the financials. As a final note, I would like to draw your attention also to our GRI report that we have published today together with our quarterly financials.

Having said this, I'd like to thank you for your attention, and we can start now the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from the line of Vittorio Carelli from Santander.

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Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst [2]

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Matthias, I have 3 questions on my side, and I will do them on a one-by-one basis. The first one is related to the coming agreement -- possible agreement with Lufthansa and the regulator on the next tariff. So let's imagine that Lufthansa calls you tomorrow, offering you stable tariff for the next 5 years, the extension of the current rebates, which amount to EUR 40 million, EUR 45 million per year, and the revenue sharing of the retail business, let's say, 10%, 15%, up to you. Which would be your answer to that?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [3]

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First of all, as you already always said, we are in discussions with Lufthansa. As of today, there is no agreement between them and us. And we are looking forward whether we can come together. At the end of the day, we have to -- what we always said is if we would or could come together, it must be a win-win situation for both of us. And let me say, in the moment, we are not together. And let me say, for the final round now, you have to see in the next 3 or 4 weeks, we have to bring forward or to deliver all the material to the regulator. So whenever something should happen, it must happen in the next 3 weeks because then everything is on the desk of the regulator. So time is running.

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Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst [4]

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Okay. The second question, Retail performance. So your spending per pax, if I'm not wrong, includes the duty-free stores, food and beverage, parking and advertising.

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [5]

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Not parking, parking is not inside.

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Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst [6]

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Not parking, sorry. And advertising. If I'm not wrong, the advertising is 40% up compared to Q1. So it seems that most of the Retail performance comes from advertising, which is not really, I would say, an underlying important driver of growth for Retail. Is that correct or am I wrong?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [7]

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Let me say, we didn't change anything with regards to our KPIs. So in the spend per pax, there are always several items which are mentioned on Slide #16, shopping services, services, food and beverage is included and advertising. And you can see the numbers and also the performance of the numbers, and it's clear. And let me say, the increase in advertising was extraordinary, while the increase in shopping was good. But altogether, that was a situation that the spend per pax increased by more than EUR 0.20 -- or exactly EUR 0.20 in Q1. And I already also mentioned now the preliminary April figures, where we again saw an increase of 26% compared to previous year April figures. And that's the reason, we are fully aware that this extraordinary increase was primarily driven by advertising, we are happy to have this. But for the full year, that's the reason why our guidance is more than 10% increase because otherwise, if you would make an extrapolation, you would end up at EUR 0.20. And that's the reason why we, based on the current information and the current trend and everything what we have in our calculation, we say we expect about 10% increase for the full year.

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Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst [8]

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On the spending per pax?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [9]

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Yes. But you can see, when you look on the shopping numbers here on Slide 16, you can see Q1 '19, we realized EUR 28 million; in Q1 '18, this was EUR 26.7 million. I don’t know, I think this is up to 4% increase. And having in mind EUR 0.10 as an annual guidance based on the starting number of EUR 3.12 for the full year 2018, we need about 3% growth to achieve 10%. And when you just look on Retail, we are absolutely in line, and what comes on top and even more is a very positive contribution from advertisement.

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Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst [10]

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Okay. You changed the contract details, I mentioned, right, because advertising is not related to the Retail spending actually.

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [11]

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No. It was always. Let me say, advertisement was always part of the KPI. In the last 10 years, we never changed the definition of our spend per pax KPI.

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Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst [12]

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Okay. Last question is regarding the rebate. How much of rebates do you have in the Aviation section? Or is this...

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [13]

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As always, about -- it's in total less than 50%. When you look on the Q1 numbers, it's a little bit, let me say, overstating because, as you know, the final incentives are paid ex post when the whole year is through, when we have all the final numbers for the airlines. So during the year, we have, on the one side, let me say, the gross proceeds from the airlines, and on the other side, we have to build provisions anticipating the expected discounts. And here, we take the expected annual growth of passengers and make a linear building of provisions. And having in mind that, in Q1, the total -- the absolute number of passengers is always lower than in Q2 and Q3. And in Q1, then, again, it's lower than in the previous quarters. It's always so that, let me say, the amount of incentives is overstated in Q1 and Q4 and it's understated in Q2 and Q3. That's the reason why you see so little money in Q1. This will change in Q1 in the opposite and also then especially in Q3.

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Operator [14]

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The next question comes from the line of Elodie Rall from JPMorgan.

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Elodie Rall, JP Morgan Chase & Co, Research Division - Research Analyst [15]

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I have 3. First of all, on guidance, you haven't changed your guidance for the full year in terms of EBITDA and despite the fact that you reported EUR 12 million of positive one-offs in Q1. So does your guidance exclude that EUR 12 million or is it included? And would you be able to qualify a little bit where you think you're going to end up for the full year? Second question on Aviation. Revenues were in line, I think, with your expectations but EBITDA a bit lower. You mentioned some increased cost in personnel and materials and also, I think, last year Q1 EBITDA was maybe unusually strong. But where do you see evolution in cost for the year and therefore evolution of margin for Aviation? And last question on Ground Handling. So by opposition to Aviation, Ground Handling EBITDA did much better than expected. Do you think that is sustainable for the full year? And could you give us a bit of guidance for that?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [16]

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Starting with the last issue, with Ground Handling, you see a nice increase of EBITDA and this has to do a focus on productivity, also benefiting from higher market share, increased number of maximum takeoff weight, so volume wise also a positive contribution in this combination. Productivity and traffic numbers led to this increased EBITDA. And your question whether this is sustainable or not, clear answer, it is sustainable, and we even expect a little bit more in the upcoming quarters. More means even a higher EBITDA, positive to Aviation compared to the previous year quarters in Ground Handling. So second question, Aviation, as I already mentioned, we had a double effect. We have -- of course, we have more personnel cost, more personnel itself, higher wages. On the other side is, yes, the effect from the revenue side that by the, let me say, higher provisions for incentives compared to the revenues, the EBITDA performance in Q1 is a little bit disappointing, but this will change in Q1 (sic) [Q2] and Q3. So with regards to the full year, despite higher cost items, based on the assumed passenger growth, we also expect positive EBITDA contribution compared to previous year in Aviation segment. And first question, the guidance, the sale of energy was already in our guidance. So this comes not on top of it, so the EUR 12 million, because we made the contract last year, it was not closed. And that's the reason why we already put in this EUR 12 million purchase price in our guidance for 2019.

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Operator [17]

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Next question comes from the line of Cristian Nedelcu from UBS.

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Cristian Nedelcu, UBS Investment Bank, Research Division - Associate Director and Aerospace & Defence Analyst [18]

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I have 3, if I may, please. The first one in terms of traffic for Frankfurt. Could you tell us roughly what was the positive impact from Easter in the April traffic that you disclosed? And it looks like the load factors were the ones -- better load factors were explaining the April number. Do you have any have visibility into May and going forward how that will play out? Secondly, in terms of Brazil and Greece, could you give us an update in terms of the traffic trends that you expect going forward over the next few quarters? And lastly, on Lima, more a mid- to long-term question, in terms of your expectations for traffic growth and the margins evolution -- the EBITDA margins evolutions from here, how do you see the development going forward?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [19]

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Yes. Thanks for the questions. Starting with #1, traffic in Frankfurt. So as I mentioned in my presentation we have, in March, the traffic was down because Easter holidays happened in April. So therefore, then, we saw in April this 5.1% increase. So in average, taking March and April, we are talking about a little bit more than 3% growth in these 2 combined months. And looking forward, for example, what happened on the first day of May, we see a continuation of this path. So with regards to our guidance, 2% to 3% for the full year, in the moment, we are more at the higher, let me say, part of our range. But we have to see what will happen in the summer season. But in the moment, we are very positive with regards to traffic development in Frankfurt. Load factors are going up. This has to do that we -- in 2019, we couldn't increase the slots because we are now constrained from the terminal infrastructure on the apron side with 104 movements which we offer. This is a problem, and so far, in summer because there's a huge demand. And let me say, higher growth rates are realized by increasing the seat load factor on one side. And on the other side, that additional movements can be just realized by taking slots in the shoulder hours, so in beginning of the day and in the last hours as you end the day. So to make the long story short, we are absolutely optimistic with regards to our traffic guidance here in Frankfurt. Traffic in -- second question, traffic in Greece and Brazil, so we had, in Q1, in Greece, we showed a very positive growth number of 8% year-to-date, but here you have perhaps in mind that in the first 2 months in 2018, the runway in Thessaloniki was closed or more or less closed. So we have some positive basis effect. So please do not make the mistake to extrapolate the 8% in Q1 for the rest of the year. Nevertheless, when we look now on the preliminary figures, in April, we -- what I told you, it was about 7%, a little bit positive surprise for us. Nevertheless, we stick to our guidance set for the full year, traffic increase will be 3% up to a maximum 5%. Brazil, we have also fine growth rates. In total in Q1, 12%. When we drill deeper in the 2 airports, we can see that Fortaleza showed more than 20% growth in the first quarter, while Porto Alegre was a little bit modest with a little bit more than 2%. And we, more or less, expect a continuation of this path, so over-proportionately growth at Fortaleza, under-proportionately growth at Porto Alegre. This has do that, at Fortaleza, we created a regional hub and this hub function creates additional traffic. So but for the full year, let me say, our guidance is a solid or high single-digit growth rates both for airports in combination. And last question, with regards to Lima, despite the fact that we, more or less, have an exhausted capacity there, so the terminal is -- that terminal is full during the day, all the slots are utilized from the airlines. Nevertheless, Lima is showing nice growth, and we expect also for the rest of the year a continuation of the growth rates of Q1. So we had cumulated in Q1 about 4%. And this, I think, is also a good guidance for the full year, perhaps it can be 1% more or less, we have to see.

Yes. Then was -- also with regards to financials at Lima, here, we expect an increased EBITDA. We have there a U.S. dollar exposure. Last year, we had, on a U.S. dollar basis, a 10% EBITDA increase, translated into euro, then, it was last year flat because we had the problem -- not the problem that the U.S. dollar was strong -- was weak. And in this year, we expect a more stable situation, so that again the U.S. dollar EBITDA increase will be translated also into a euro EBITDA increase.

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Operator [20]

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(Operator Instructions) Next question comes from the line of Arthur Truslove from Crédit Suisse.

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Arthur David Truslove, Crédit Suisse AG, Research Division - Research Analyst [21]

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Arthur Truslove from Credit Suisse. So first and foremost on the Retail. What sort of change in square footage should we expect to see over the next 2 or 3 years in terms of what's incorporated for shops there? Secondly, you mentioned in 2018 releases that even though traffic growth was very strong in the first 3 quarters, the number of passengers actually making it to the shops was actually down. I just wondered whether, in the first quarter of this year, you had any color on the change -- the percentage change in number of passengers actually making it into the shops. And the final one from me, just on the advertising. Can you just remind us of exactly when that contract entered force? And is it reasonable to expect strong momentum to continue through the rest of the year?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [22]

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Thank you for the questions. First question, regarding Retail space, so in the existing terminals 1 and 2, we cannot expand the retail space, but the next step forward will be the opening of Pier G end of 2021. And in combination -- or inside Pier G, then you will see a new and additional retail space of about 2,500 square meters. With regards to Retail, we had -- in last year, we had a huge increase of passengers, extraordinary growth rates and, on the other side, a very modest and weak retail business, and there's a clear, let me say, link between these 2 things, because the growth in last year came, say, 80% from continental traffic and everybody knows that, let me say, the spending behavior of passengers on the continent, especially in the Schengen Area, is very poor. And so we -- let me say, we systematically changed a little bit the structure of our passengers before these 2 extraordinary years. We had always, in steady-state, actually beyond -- between Continental and Intercontinental passengers in a way that 60% of our passengers always have been Continental passengers and 40% Intercontinental. And then in last year, it went up to 64% on the Continental side and just 36% on the Intercontinental side. Now in 2019, based on the available numbers, and you also see in the charts in the appendix, in the first quarter, the traffic allocation between Continental and Intercontinental with regards to the growth was 2% growth on the Continental side and 2.3% on the Intercontinental side. And during my presentation, I also gave you the actual numbers for April, where we have now an overproportionately increase of the Intercontinental passengers. And the exact number was, I have to go through my slides, say -- we had Intercontinental passengers grew in April at a rate of 6.2%, while the growth on the Continental side was 4.6%. So with other words, in the first 4 months of 2019, the growth was balanced between Continental passengers and Intercontinental. And this negative impact from the structural change is more or less gone. And we expect a continuation of this situation for the rest of the year. And this is one of the main drivers for the good retail recovery. On the other side, let me say, stabilization of the currency. So we suffered from a strong euro. This is over now, what we think, and so we've also a positive currency impact. And on the other side, we already realized some of our intended measures to improve the retail business. And this combination, let me say, supported the performance. But the main driver, again, was a new structure, again, between Continental and Intercontinental traffic. Yes. So for the advertising -- yes, in advertising, it's not a business where you have long-term contracts. It's not like shopping, where you have a tenant and the tenant has a 10- or 5-year lease contract. You have -- let me say, the companies are coming and having some campaigns and, let me say, the campaigns run for 2, 3, 6 months. So what we see in the market that especially the -- let me say, the brand industry, in the moment, is willing, or is going to spend more money for advertisement. And due to the fact that we have, on one side, highfrequencies and the frequencies of the passengers itself have -- yes, these are not low-income people. So let me say, there is a strong focus now from these brand companies on our passengers. And they have, you can say, have reidentified the value of our passengers, and so we see more or less a relatively stable trend to bring up the sustainable level of advertisement expenses.

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Operator [23]

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The next question comes from the line of Adrian Pehl from Commerzbank.

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Adrian Pehl, Commerzbank AG, Research Division - Analyst [24]

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Two questions from my side. First of all, a little bit of housekeeping questions on your minority holdings. I saw that Xi‘an and also Pulkovo looked a little bit soft in terms of profits in Q1. I was just wondering whether you could give us some additional information on the background here and what should we think of it going forward? And also a little bit coming back to Brazil again, you were obviously referring to the weak real already, but given that the trends also look a little bit soft, I was wondering whether there is more to that in terms of spending behavior or anything that we should take into account on the fee side of things? And lastly, a question, a bit hypothetical actually, but given that there are currently obviously bids for Condor out in the market and that Lufthansa was obviously rumored to bid for the assets. Given they were finally successful, would that alter their bargaining power versus you guys in Frankfurt? Do you see any change in dynamics on the negotiations there? And if so, would this have an influence on the discounts that you pay -- on the discount scheme in general?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [25]

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Thank you for the questions. First of all, your question with regard to our monitories at Xi‘an, I think Xi‘an is performing, let me say, very positive like in the past. So there is nothing new. We have, as always, a high single-digit growth rate. This is translated into the numbers. So nothing new. No change. No extraordinary topic. When you look at St. Petersburg, you can see that the EBITDA improved, the EBIT improved and we have also now a situation where the net income is positive. This has primarily to do also with the exchange rate with the, let me say, ruble versus euro exchange rate. And here, let me say, some years before, we had always some problems, some negative translation effects, now the opposite happens. We benefited from a stable ruble exchange rate and this translated directly into also a positive net income number with regards to St. Petersburg. And assuming that the ruble is now relatively stable, we expect, first of all, as always in the past, a strong increase with regards to the EBITDA numbers, but also now that the net income comes into the positive numbers on a sustainable level. With regards to Brazil, I mentioned in my presentation the impact of the weak real. Otherwise, the EBITDA contribution in the first quarter would have been positive, so this cost us some euros. Nevertheless, when you look on the passenger numbers, traffic is very good, a little bit above our internal plan and expectation. On the other side, which we already communicated to the market, we are now in the main phase of the reconstruction of both terminals. So both terminals will be refurbished, will be expanded. We will also bring in a significant increase of the retail space. Everything will be ready end of the year. We are based on 2 EPC contracts, which we have for the 2 airports, everything is in time, is on budget. And latest in December, you will see 2 brand new totally refurbished and expanded terminals, including a nice -- or nice marketplaces. But in the meantime, we have closed -- or we had to close about 50% of the existing retail areas and this costs us temporarily a positive contribution from the Retail business, but this is a temporary phenomenon. That's the reason why we expect and guided for this year no EBITDA increase at Brazil, but this will change significantly next year because, in next year, then we have higher fees based on the inflation rate. Second, we have then also the impact that there is not any longer the closure of the retail market. We have, again, the contribution from the retail market -- not just from the old retail marketplace but also the contribution from new shops. And this will, let me say, bring up the EBITDA numbers again in 2020 at both airports. With regards to Condor, you know Condor is a good customer of us. The same applies for Lufthansa. So please understand that we are not going to comment these things which have now happened in the market.

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Operator [26]

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Next question comes from the line of Johannes Braun from MainFirst Bank.

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Johannes Braun, MainFirst Bank AG, Research Division - Director [27]

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I have 2, one on Retail, again, and the other one on Ground Handling. Firstly, on Retail, we already discussed, I think, the support from the advertising revenue. But also if I look more broadly at your 5.8% increase in retail sales per passenger in Q1 and I compare this with your peers, it seems that Aéroports de Paris and also Aena posted similar improvements, but there was one exception which is Zurich Airport, which posted actually minus 5%. And obviously Zurich Airport is the only one in that group that does not have the euro, it has Swiss franc as reported currency. So from that perspective, it seems to me that the strong Q1 retail performance actually is driven by the weaker euro rather than any underlying operational improvement. So I guess my question is how comfortable are you that we have actually seen any real underlying improvement in retail trends apart from just currency? And then secondly on Ground Handling. There were some EUR 8 million other revenues in Ground Handling in Q1, which is I think EUR 5 million more than last year, seems to be -- or looks to me a little bit like a one-off. Could you explain what that is?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [28]

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Yes. First of all, with regards to Retail, I fully agree with you. First of all, there's the currency supported all the business and you see, let me say, a general trend in Europe that also most of our peers performed very well, driven by the currency impact. But again, we have a second impact, and this is a structural effect, what I mentioned. So again, more growth on the Intercontinental side, and here you have the big spenders, and so it's a double effect. On the other side, I also mentioned the measures which we initiated. Some of them are already rolled out. But let me say, most of -- all these measures, you will see end of this year, but most of it in 2020 and '21. So let me say, our pipeline of new ideas is filled up. And this gives us, let me say, a strong confidence that now the ramp-up of the spend per pax is not just an annual phenomenon, so that this will, first of all, will be sustainable and will also happen in 2020 and '21. So with regards to Ground Handling, other revenue went up. Let me look in -- you referred to the Chart #17...

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Johannes Braun, MainFirst Bank AG, Research Division - Director [29]

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Yes. The plus EUR 3 million on that chart.

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [30]

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EUR 3 million other revenue, is it -- can it be...

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Johannes Braun, MainFirst Bank AG, Research Division - Director [31]

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[27.8%].

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [32]

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And you know we have a joint venture -- not joint venture company. We had -- in former times, we had a company, a subsidiary called Fraport Cargo Services, which was 100% subsidiary, and then we sold 51% to WFS. Now then, we deconsolidated this company out of our balance sheet, but there are still some Fraport employees working for -- not any longer Fraport Cargo Service, but now named Frankfurt Cargo Services on -- you can say, on a lease contract. And let me say these contributions, which we now get from WFS, is treated as income from associated companies, and it's treated under other revenues.

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Johannes Braun, MainFirst Bank AG, Research Division - Director [33]

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So that will continue. That's not the...

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [34]

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This will continue. That's the reason when you look on staff costs went down, this went up. So it's is a little bit a change between these 2 P&L items.

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Operator [35]

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Next call is from the line of Samantha Jeary from ODDO BHF.

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Samantha Jeary, ODDO BHF Corporate & Markets, Research Division - Analyst [36]

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I've got 2 questions on my side, if I may. The first one is on the commercial rebates. Could you maybe quantify the impact that they're going to have on the full year 2019 results? And how are they going to evolve in the years to come? And second, regarding the Aviation segment, if the tariffs are to stay stable until 2023, when and how do you expect to reach your cost of capital?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [37]

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The incentives which we are paying in this year are less than 50% of the gross proceeds. And if you, let me say, translate this in absolute numbers, we are talking about EUR 10 million incentives, which we are paying to the airlines, not at the end of the year, in the beginning of January next year. And second question in Aviation. So as of today, we would say in the next years before the opening -- or not before the opening of T3, we expect more or less flat fees at Frankfurt Airport. So nevertheless, you will see increased revenues by the expected passenger growth. And so the return on Fraport assets will go up continuously and we are assuming that we are coming closer and closer to the allowed and approved cost of capital which we have. Don't ask me exactly in which and when year we will achieve this, but let me say the gap will become closer and closer year by year.

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Operator [38]

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Next question is from the line from of Andrew Lobbenberg from HSBC.

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Andrew Lobbenberg, HSBC, Research Division - Head of the European Transport Team [39]

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Can I go back to, I think, it was the very first question that you took about Lufthansa talks and how you said the talks were ongoing, but that there were only 3 weeks before you have to deliver your proposal to the regulator. So can you perhaps explain, if you haven't reached a deal, what are the consequences of that? Does that mean, we can only have a 1-year deal and that takes away a potential longer-term deal? Or what is at stake in not reaching a deal? And then separately, reverting to, I think, one of the more recent questions around the potential combination with Condor. Does that, swinging in the uncertainty, does -- how does that interact with your discussions with Lufthansa? Surely, it does complicate it and, particularly, make it harder to do it on that timescale? And a second or maybe it's the third question, cargo generally in the industry is proving a bit weak. Is that an issue for you guys? Or insofar as the cargo pilots don't spend very much money in your shops, it doesn't really matter a great deal?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [40]

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Starting with the last issue. Cargo is not a deal. Of course, we are happy when the numbers are going up, but the financial importance of cargo is not relevant for us. So it looks nice, brings more traffic and -- but, let me say, the financial impact, perhaps, we are talking about a single-digit million amount per year, positive or negative. So with regards to Condor, this has no impact on the discussions with Lufthansa. So again, we don't know what is going on. There are a lot of rumors and talks behind the curtain. So the only thing which we know is what we can read in the newspapers, and we don't have any, let me say, special information with regards to this transaction. So your first question with regards to the Lufthansa talks. We are talking to them since the last 2 years, and what we try -- or when Ryanair came, it was a little bit difficult emotional partnership between them and us. And so we tried to come together again and to find ways to work in favor of a strategic partnership, so to say. And again, I can repeat what I always say, a strategic partnership means to work out and to elaborate where there are fields where you can create win-win situations. And I think, in the discussions, we identified a lot of items where we can work closer together in the favor of both companies. But it takes 2 to tango, everything now since months is on the table, so it's up to Lufthansa to come together or not. And yes, that's what I can tell you. With regards to the regulation now. One thing is for sure regardless whether the talks with Lufthansa continue or doesn't continue, we are going for a 1-year period, which means for 2020. And in the moment, I don't see any chance to go for a longer-term agreement with the airlines. To have a longer-term agreement, you have to have approval from all of the airlines not just 1 or 2. And in the moment, I don't see a realistic chance to go in this direction.

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Operator [41]

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Next call is from the line of Stephanie D'Ath from RBC.

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Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst [42]

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The first one is on CapEx. And if I look at what you spent last year in the first quarter, out of the total amount it was about a bit less than 20%. And if I look at your spend in Q1 versus your full year guidance, it's more than 30%. So just wanted to check that you were expecting this spend to be front-loaded and that your EUR 1.2 billion CapEx guidance for the full year is not too conservative? And second question is on resolution of the bottleneck issues. What percentage would you estimate as the progress made, and I believe that in June, we should get back to full fluidity. So to which extent did the improvement so far might also have helped your retail spend ahead, in particular, in April? And obviously, when you mention the 10% increase in the retail spend per head for the full year, I guess you do take into account fluidity. And then my third question is on union agreements. Could you please let us know when the next one is due and to which extent you have factored in a potential rise in OpEx related to that in your full year outlook?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [43]

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Thank you for your questions. Starting with the CapEx issue. So in the beginning of the year, we made the guidance EUR 1.2 billion for the group. In our presentation in the appendix, you can see how we allocate this guidance up to EUR 650 million for our Frankfurt expansion and, in the existing infrastructure, EUR 200 million -- up to EUR 200 million in Greece, up to EUR 200 million in Brazil and up to EUR 150 million for Lima. So when you go through the 4 items, starting with Frankfurt, we are confident to meet the EUR 650 million. When you look on Q1, this is absolutely overstated, as I already mentioned, because we made a pre-payment for Pier G to the general constructor of this pier in an amount of exactly EUR 112 million. So and this will not happen again in Q1 and the residual quarters, that's the reason why you saw EUR 400 million CapEx in Q1 and that's also why I mentioned please do not take this 4x and then you would end up at EUR 1.6 billion. So first of all, from the EUR 400 million you have to deduct the annual concession payment for Greece, which we always pay for the year 2018 of about EUR 23 million, which is inside the CapEx amount and then the EUR 112 million, which you have to deduct and some other prepayments in Brazil and also in Greece. So to make the long story short, for the full year we feel very confident with our guidance of EUR 1.2 billion and not expect much more. So second question on...

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Unidentified Company Representative, [44]

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On bottleneck, retail.

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [45]

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Yes, bottleneck -- let me say, we have here some infrastructure bottlenecks and the main bottleneck is the security process, and I think we have a strong focus on it. We have 2 measures to solve this problem. First of all to bring up the number of employees at the security lines and second to have a higher productivity, and the higher productivity we make with the new lines. And let me say the most important step forward is the opening of the new hall and also, to translate this into numbers, we have, in the moment, in Terminal 1 at this Concourse A, we have 17 security lines, each of them can make 80 passengers per hour. So we talk about 17 x 80, I think it's 1,350, today's annual -- today's hourly capacity. And with the new hall on top of this, we bring in 7 new lines with 250 passengers per hour. So from now 1,360 passengers per hour, we bring in additionally 1,750. So it's more than doubling, so with other words. I assume and we assume that this problem then is really solved by this massive increase of security infrastructure, which we bring in, in July. And this was also the bottleneck for retail in a way that the waiting times for the passengers have increased last year. And now we feel very confident that, with the inauguration of the new hall and the new security lines, then we can bring down waiting times, and this, on the other side, will increase the dwell time so that we have then for us a positive impact on the Retail business for the second half of the year.

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Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst [46]

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Could you maybe give us an indication of to which extent it already improved, so the average waiting time improvement maybe over the last 2 months?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [47]

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Yes, let me say we have, so far, a phenomenon that in average the waiting times are very low, but in peak times they can be immediately relatively high and this creates uncertainty for the passengers when to come to the airport. And so, let me say, the peak times are the problem. For example, Monday morning or Friday afternoon, and so on. And we have to bring down the waiting times in the peaks. During the day, it's absolute -- it's normal, it's just a small increase or deviation from the long-term level which we always had at the security lines. So but again, then the final impact will be, so far, significant because then, after the opening, we do not expect any longer significant waiting times at this Terminal 1 A Concourse even in peak times. So then the problem must be over. And third, collective unions, the major contract runs till October 2020. And inside this contract, we have wage increases. It's a very complicated not formula but contract, but in average it's an annual increase of a little bit more than 3% of the wages.

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Stephanie Fabienne D'Ath, RBC Capital Markets, LLC, Research Division - Analyst [48]

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And that increase starts at the year -- at the beginning of the year?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [49]

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Yes. Yes.

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Operator [50]

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Next question comes from the line of James Hollins from Exane.

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James Edward Brazier Hollins, Exane BNP Paribas, Research Division - Senior Transport Analyst [51]

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Just coming back on Condor, I know there's lots of questions you haven't been able to answer, maybe try a couple you could. Given it's your second largest operator by seat count at Frankfurt, I think it's relevant. Are you seeing an indication from them they may be reducing that capacity plans given what's going on? More importantly, you know the regulator better than any of us. I was wondering if you would imagine that Lufthansa could actually buy Condor and more importantly keep it slots at Frankfurt if it were to, just your opinion on that? And then also on the Greek, 23 smaller airports that I think are coming up for potential concessions. I was wondering if you had a strong interest in those or if you are fully covered on your Greek interests?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [52]

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Perhaps some words about Condor. Condor, is a -- it's a good customer of our airport. Market share is more than 4%. So they have really a significant impact on our business. We are very happy with Condor because also the service level, quality levels are high, are good, reputation of the company is excellent. And they have a really unique position with also long-haul flights to warm-water destinations. And having this special USP based on a very favorable cost basis, this is really an extremely good asset with a very good reputation and a good brand. That's the reason why I think there are a lot of potential investors willing and keen to take over Condor. So -- but given the fact that Condor is an absolutely healthy airline with a good product and a niche which is protected by their USP, so I think everybody who will take over Condor will be happy with this product and this route network. With other words, we do not expect any change in the case that there will be a new owner behind Condor. First of all, in the moment, we are not working on this issue. We have to see whether this is interesting for us or not. In the moment, we are waiting for the result of Sofia Airport. I think tomorrow we will get that first indication. They will open the envelopes, and then we have to see whether we have a chance there or not. And perhaps this also, then, can have some impact on further considerations with regards to other assets in the European market. Now we still wait for the final outcome of this privatization in Bulgaria.

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Operator [53]

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Next question comes from Christian Cohrs from Warburg Research.

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Christian Cohrs, Warburg Research GmbH - Analyst [54]

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Just 2 left. First, you said that you expect that airport fees in Frankfurt will remain flat over the next few years. Nevertheless, you will handle -- and you're collecting your papers for the regulator. So what is actually the key objective you are striving and for a regulatory decision for next year given the fact that you haven't done so in the past 2 years? And that brings me to my second question. Your current terminal capacity is fully booked. Are you going to prolong the incentive scheme? Or is the incentive scheme set to expire as of the end of 2019? And lastly, just a technical question. Tax rate was very low in the first quarter. So what should we expect for 2019 and the years to come?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [55]

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Thank you for the questions. Starting with the tax rate. We have now about 24%, 25%, and we think that this is now a new sustainable level also for the upcoming years, too, much lower than in the past because now the contribution from assets outside Germany, they are overproportionately growing. And in average, the tax rates outside Germany are significantly lower. That's the reason why this -- let me say, this share of financial contribution is growing overproportionately. That's the reason why also our tax rate which came -- some years ago came down from 32%. Now find a new, let me say, sustainable base level of about 24%, 25%. With first question, with regards to -- first of all, we have 3 weeks ahead of us to think and consider what we are presenting to the regulator but the best guess and the highest probability, as of today, is to expect a continuation of the existing fee regime. This means flat fees, including a continuation of the incentive scheme. So no change compared to 2019 in 2020.

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Christian Cohrs, Warburg Research GmbH - Analyst [56]

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Okay. And -- but if I may, why do you prolong the incentive scheme given that you are, yes, fully utilized? I mean, your current terminal capacity is, in peak times, starting to become inconvenient and why are you -- and you're annoying your main customer Lufthansa by giving an incentive scheme to rather low-cost carriers. So why are you prolonging it actually without any need for passengers until the opening of the low-cost peer in '21?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [57]

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First of all, it's not true that we are offering incentives to -- no we are offering incentives to each and everybody who is growing. And also Lufthansa is really a very -- Lufthansa is also benefiting from this system. Whenever you bring growth to Frankfurt, you get incentives, the existing ones and the new ones. But you mentioned growth, and this is exactly the point. We have a situation that we are -- that our capacity is fully exhausted during the peak hours and, you can say, during the day. We -- of course, we have some available slots in the beginning and at the end of the day, but these are not the most attractive slots. And second, you always need a slot pair. When you come in for example, you are a new entrant. You come in and you get a slot at 7:00, it doesn't make sense to give you the second slot as a slot pair, where you can take off again at 3:00 in the afternoon. So you also need an attractive slot pair, which, in the moment, is I wouldn't say impossible but very difficult. But nevertheless, our intention is also to grow in the next couple of years before we have Pier G and then an increase of the slots again. And to give some attractivity for new entrants to come in, that's the reason why we're still offering incentives because otherwise it's not so attractive to take a slot in the morning and then at 12:00 and you have a turnaround time or perhaps 3 or 4 hours, which is not attractive for the airlines, which this situation now is -- creates. Let me say, important to continue with the incentive program because still, despite the fact that we are more or less exhausted, we expect and assume a growth range of passengers between 2% and 3% even before the opening of the Pier G.

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Operator [58]

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Next question comes from Nicolas Mora from Morgan Stanley.

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Nicolas J. Mora, Morgan Stanley, Research Division - Equity Analyst [59]

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So a few questions from me. Starting on traffic, either at Frankfurt, in Brazil, in Greece. I mean, we're kind of seeing a seat capacity tapering off over the next few months. So [share] your comments on very satisfactory trends into summer a little bit at odds with the seat capacity data we're tracking, especially in Greece, in Brazil. So just wanted to get your -- a bit of color on this. Second, just to clarify on advertising. So a stellar first quarter, you get the new contracts. But what are we targeting just for the full year in terms of basis of revenue? Are we talking about EUR 40 million, EUR 45 million and you also have the Frankfurt Motor Show in September, which should provide a boost. So could we aim for, let's say, the high end of that EUR 40 million, EUR 45 million range? And last part on -- coming back on your comment on Aviation. It's a two-part question. First one is you still expect to grow EBITDA modestly, but D&A was up sharply in the first quarter. Can you confirm that you expect as well EBIT to be flat and not down, let's say, mid- to high single-digits? And second part, if you do not get tariff increases over the next 2, 3 years, which is likely for next year, then how can you be so sure that you will hit or get closer to your cost of capital since basically your returns and EBIT is going to be increasingly under pressure?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [60]

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So a lot of questions, but everything is fine. So starting with advertising. So when you look on the full year numbers of advertising, for example, in 2017, we collected for the full year EUR 36 million. Also for 2018, we collected for the full year EUR 36 million. So we are absolutely confident that for 2019, it will be more than EUR 40 million. And you already mentioned this, we had the fantastic Q1. And then also with regards to Q3, we have -- every 2 years, we have this international automotive fair at Frankfurt, which also creates a special demand and this will bring a second, let me say, tailwind for advertisement. So above EUR 40 million is the best guess for the full year. So with regards to Aviation, again, we expect a small increase with regards to EBITDA. On the other side, we have higher D&A, especially in Q1. Also, the D&A in Q2 will be much higher and then in Q3 and Q4 will be more or less flat because then you'll feel or see the basis effect because we initiated the, let me say, the decreased useful lifetimes in Q3 last year. And yes, that's the reason why you have a different situation between H1 and H2. So with regards, then to the EBIT, it will be an EBIT, let me say, around the previous year number. Don't ask me whether it is EUR 1 million or EUR 2 million above or below, but it will be, let me say, the EBITDA increase will be compensated by the D&A increase. So and the first question, what was it?

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Nicolas J. Mora, Morgan Stanley, Research Division - Equity Analyst [61]

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The first was on traffic, just confronting a little bit your opportunistic view getting into summer whilst, actually, most of the seat capacity data either at Frankfurt, either at Porto Alegre, Fortaleza, then Greece actually getting weaker quite markedly?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [62]

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Yes, sure. That is the reason why I said we have, in the first 4 months in Greece, we had about 8% and I said please do not continue with this number for the rest of the year. And because we had already in last year -- in the last 2, 3 years we had fantastic summer seasons and at the end of the day, it's not the, let me say, the capacity of the airlines, which is constraining the market because you can shift overnight the aircraft from left to right, but the problem is, in the meantime, that the capacity in the hotels and the tourism industry increase in the meantime is in the peak season more or less exhausted. That's the reason why I said we will come down with the growth rates. And growth will be 3% for the full year, perhaps up to 5%, it depends a little bit from now the final summer season, also from the Brexit discussions because people from U.K. are -- have a big market share in Greece, and there's some uncertainty about this. That's the reason, again, 3%, but definitely not more than 5% for the full year with regards to Greece. On the other side, we have Antalya. With regards to Antalya, we are very optimistic, up to 35 million passengers. So the show goes on because the Turkish lira is very weak and will, based on the current political situation, will continue their weak performance, which is good for the tourism industry. And in Brazil, yes, we're also very optimistic. For both airports, in average very solid single-digit growth rates, having in mind that Fortaleza will show an overproportionately growth compared to Porto Alegre.

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Nicolas J. Mora, Morgan Stanley, Research Division - Equity Analyst [63]

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Okay. And, if I may, on the last question just on Aviation. I mean talking about closing the gap in terms of your returns versus regulated return. Without tariff increases that looks highly unlikely. So are we talking about the returns coming down markedly or some other tricks being -- playing out for the next few years?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [64]

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So as long as we expect an increased EBITDA, we have now in this year a special situation because we have this shift in the sustainable level of D&A. But again, this was a onetime effect because we changed the depreciation period, so we shortened them. And this had the significant impact on the EBIT, but this ended now because we are not doing this a second time because we have done our housekeeping and everything now is in line with these realistic depreciation periods. So in the next coming years, whenever EBITDA goes up, let me say, EBIT goes up in the same amount.

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Nicolas J. Mora, Morgan Stanley, Research Division - Equity Analyst [65]

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Okay. And, if I may, very last one. You talked on Retail about all the revamping, the refurbishment which is going on. This is significantly back-end loaded to 2019. Is it to -- even know the full ramp-up of the MS, the [Igoba] stores, and so on? We are not going to see much until basically the fourth quarter, which is a key period.

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [66]

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Let me say, this year, it's back-end loaded for '19, but if you look on the whole number of measures, it's back-end loaded in end of '20 and '21 because we were going to do a lot of the food courts. The food courts, we have to do massive things in the infrastructure. And let me say, the total change of food courts you will see not in '19 but also some small shops. But let me say, yes, the full load of all these things which we have to do you will see in 2021.

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Nicolas J. Mora, Morgan Stanley, Research Division - Equity Analyst [67]

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Okay. And so on that basis, why aren't you confident enough to provide a new target for spending per pax by 2021 as some of your peers, especially around Paris, have done in the past, just for the market to start embracing basically your -- these targets? I mean, putting aside the EUR 4, which was a little bit dramatic.

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [68]

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Yes, I've -- let me say, forget the target, EUR 4, in the moment. But we're talking about EUR 0.10, in the moment, per annum. This means, if you translate this in a percentage number, we are talking about 3% to 4%. And I think this is -- it's a modest increase. And that's the reason why we are very confident. Then I would tell you to the market we expect 10% increase, and this would be very ambitious and a real challenge. But I mean, now having in mind that the structures now, and again, in a balance between Continental and Intercontinental traffic, having in mind that the currency effect we do not see any further risks or just small deviations. So that's the reason. And then we -- let me say, the rollout of our measures and that's the reason why this was a 10% increase now year-by-year. Not as a final guidance, guidance for '20 and '21, I feel absolutely relaxed and confident.

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Operator [69]

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(Operator Instructions) The next question comes from the line of Ruxandra Haradau-Doser from Kepler.

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Ruxandra Haradau-Doser, Kepler Cheuvreux, Research Division - Equity Research Analyst [70]

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Yes, can you hear me now?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [71]

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Yes, perfect.

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Ruxandra Haradau-Doser, Kepler Cheuvreux, Research Division - Equity Research Analyst [72]

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Okay. Two questions, please. First historically, during periods of weak demand, network airlines have generally restructured networks in favor of their main hub, where they generate the highest profit. Do you see reasons to believe, at least, we [web] -- experience a period of demand weakness, the reaction of airlines will be different this time? And second, coming back to the measures in the Retail business, could you please elaborate on the main measures implemented in the Retail business so far? And what are the main measures still to be done? Which piers in Terminal 1 will be impacted? And is my understanding correct that you expect the implementation of the measures adopted last year to be finalized in 2021?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [73]

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First question, growth, network airlines. It's -- I try to translate the question with regards to Lufthansa because this is a network airline we have here at our hub. When you look -- and you mentioned a weakness. When you compare, let me say, or when you analyze the growth numbers in 2017, 2018 year at Frankfurt Airport, you see these really outstanding growth numbers. And when you look who brought the growth, it was, on one side, new entrants like Ryanair, with, et cetera, some of these low-cost carriers but also the existing carriers, and the biggest existing carrier is Lufthansa. Lufthansa brought a very solid growth at Frankfurt. And so we couldn't -- in '17 and '18, we couldn't see any weakness of Lufthansa with regards to growth at Frankfurt. So what they are doing outside Frankfurt I do not know, and it's not important for us. So we -- as long as they bring growth at Frankfurt, we are happy. And yes, and the last years have been very -- have been fantastic for us, and I hope also for Lufthansa. And yes, I think the measures which we are going to roll out, we have the most relevant ones. We have shown in the presentation on the chart what we are doing in 2019 and what, perhaps, we take this really as a -- what was it -- what will happen later on? First of all, you see each and everything what will happen in 2019. This is on the Chart #12. What we can do and what we say with Q2 or Q3 numbers also showing what is the schedule for '20 and '21 to bring in -- or to give you more transparency about the intended measures. But, again, food courts, they are backloaded because this needs massive things in the infrastructure. And now you can see the quick wins, the quick measures which we can realize in 2019. I hope that your questions are now answered.

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Operator [74]

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The next question comes from the line of James Goodall from Redburn.

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James Goodall, Redburn (Europe) Limited, Research Division - Analyst [75]

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I have just one quickly on Greece. I was just hoping if you could give us a bit more color on Greek OpEx in the quarter. Looking at EBITDA, it was effectively flat year-on-year, but revenues, when you adjust them for IFRIC 12, were up by around 75%. So I was just wondering why -- well, I guess, wondering why you have no operational gearing on the additional revenue that you generated in the quarter?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [76]

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You have to see that increase. We have an extremely seasonal business. So the operational leverage you always see in Q1 and especially in Q3 because we have just some good growth in Q1, but this is based on very low absolute numbers passenger-wise. On the other side, we also have some, let me say, additional cost items with regards to our CapEx program, which compensates a little bit the revenue increase. But now the expected significant increase in the -- with regards to the EBITDA at Greece, you will see then in Q2 and Q3 a double effect. The volume impact on one side and then the elevated fee increase at 3 airports Chania, Zakynthos and Kavala will be increased from before EUR 13 per departing international passenger up to EUR 18.50. It's always -- so also in the future that you will see the same phenomenon that, in Q1, you don't see any significant change with regards to the EBITDA and then the increase in Q2 and Q3.

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Operator [77]

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Next question comes from the line of Charles Maynadier from Kempen.

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Charles Maynadier, Kempen & Co. N.V., Research Division - Analyst [78]

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[Off] the tax guidance for 2018. Just going back on Q1, so you had EUR 0.20 more. And as you said, throughout the rest of the year, some factors such as a favorable currency and traffic mix will remain. You will get less but still some support from advertising in the coming quarters, and you will benefit from your various measures on the retail side. So I mean, what makes you not confident that the EUR 0.20 cannot be achieved on a full year basis?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [79]

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To say, at the end of the day, if it would be more, I'm happy, everybody would be happy. But you are asking for a guidance and then a guidance means that we have a high confidence and a high probability that we also will achieve our guidance, and with EUR 0.10 increase we feel comfortable. If it would be [20%], but again I do not expect EUR 0.20, but if it would be EUR 0.20 fine. So we like it very much also to hear now the actual April numbers because they are going in the right direction. Perhaps there is some upside potential for more than EUR 0.10. But again, we will not change our guidance. We will stick to the [10%]. And if we can create some -- in the meantime, some reserve positional upside, we feel comfortable and happy. And you have to have in mind we have this extraordinary impact from advertisement. Of course, it will be a second boost, but this boost will happen in Q3. It can be that, in Q2, advertisement goes back a little bit because these are temporary campaigns, which will be run by the, let me say, the companies, so we have to see what will happen.

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Charles Maynadier, Kempen & Co. N.V., Research Division - Analyst [80]

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Okay. And then just one -- another one on the April 9.1% increase. So could you give a rough estimate of how much is driven by FX or favorable FX and traffic mix and how much is driven by your own, let's say, measures?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [81]

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In the moment, we -- today, we received this preliminary figure. So as of today, we don't have, let me say, more analytical data to drill down. So it's too early to tell you what is really, let me say, the ingredients of this increase.

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Operator [82]

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We have a follow-up question from the line of Vittorio Carelli from Santander.

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Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst [83]

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Matthias, apologies, be patient with me. I'm not still very excited about the spending per pax. I'll tell you why. Because, let's exclude for a while advertising, which has nothing to do with the spending, right, of the passengers. Let's focus on the rest of the business lines. It means that the revenues in first quarter grew by EUR 1 million, right? So 2.5% growth, which is in line with traffic. So it means that spending per pax -- real spending per pax is flat, is 0 growth. Am I wrong or what I'm missing here?

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [84]

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This is wrong. The exact number is -- no, we have to take the calculator. Just a minute, we have yet to take -- you have to divide EUR 28 million by EUR 26.7 million. So this is the unadjusted percentage increase of shopping revenues per quarter. If you do this, it's 4.9%. So absolutely, we increased the shopping revenue by 4.9%. If you deduct 2.5%, which is equivalent to the passenger growth, so the residual increase would be 2.4%, coming just from shopping. To achieve EUR 0.10, we need about 3%, 3.1% or 3.2%. So we are -- with regards to shopping, we are a little bit below. This is more than overcompensated by the overproportionately increase of advertising.

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Vittorio Carelli, Grupo Santander, Research Division - Equity Analyst [85]

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I was including services in that calculation, in case -- [in real case]..

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Matthias Zieschang, Fraport AG - Executive Director of Finance & Controlling, CFO and Member of the Executive Board [86]

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Yes. Yes. That's right.

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Operator [87]

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(Operator Instructions)

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Christoph Hans Nanke, Fraport AG - Senior VP, Head of Finance & IR [88]

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Okay. Looks like there are no additional questions. And I think, we already received a lot of questions, but if you have more, please give us a call in IR, we are happy to have a follow-up. And happy to see you in the next weeks or days some other places. And thank you for your attendance today.