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Thank you very much for the introduction and instructions. Hello, everyone, and welcome to the results presentation for the First Quarter of 2023 of Aena. We are going to cover some of the main topics explained in the results presentation that is already available at our website under the CNMB website. Jose Leo here with me, CFO of Aena. He'll will start, and I will follow up, and we'll finish with a Q&A session as explained by Gavin.
Good morning, everyone, and welcome to the Q1 2023 results presentation. We will be on Slide 5 very quickly, okay? I think we are closing the first quarter of 2023 in very good shape. I believe this is a very good set of results. driven by the traffic recovery. The traffic recovery is clearly consistent with the latest expectations we provided when we closed the 2022 accounts, and we discussed that we are expecting to as a sort of midpoint forecast to be very, very close to the 2019 traffic figures in 2023, which would be somehow tantamount to bringing forward our strategic plan expectations by roughly 1 year or 1 year-and-a-bit.
So this is really good news. The translation of that is in the first quarter of 2023 is very promising for the whole group -- Aena Group of airports. We are now above the 2019 traffic levels by a fraction of 0.6%. And when looking at the Spanish network, this performance is even better. We are 1.6% above the traffic level experienced in the first quarter of 2019. Obviously, on the back of this very good performance that I'm sure we will be discussing later about how we see the summer and things like that.
The revenues are growing very significantly to the tune of 35% year-on-year. I have to say that this is something you can see on one of the slides of the presentation. We are now comparing with the first quarter of '22, figures already amended so to take into account the change in accounting policy, we adopted at the end of 2022. So for sure, you won't recognize, or you won't be able to trace that back to the 2022 first quarter results, but they are already amended. So on that basis, the revenues are growing by 35%.
And I would say without, let's say, diminishing the relevance of the aeronautical revenues, which is obviously critical. I want to especially highlight the good performance in the commercial revenues. Commercial revenues are up 40% year-on-year when we look at the pure commercial revenues, with the real estate revenues growing by close to 12%. And later on in the presentation, when we look at the when we will be looking at it is usual over the last quarters. We will be looking at the revenues, not the accounting revenues, commercial revenues, but the revenues that are based on regular billing and collection of rents, disregarding for that purpose, the impact of the MAGs.
And you will see that there is also a very, very healthy, very strong trend continuing, let's say, confirming the very good expectations figures provided on this particular side of the business. In terms of the costs, clearly, there is an increase that I would say is meaningful, 11%. I'm sure you will have an interest in discussing this element of the equation as well with -- and we have been this time around, we have been helped by the evolution of the electricity costs that this year is clearly a very relevant tailwind. We will be discussing that later on.
But as a result of all of this, we are already, we are reaching a very relevant figure in terms of EBITDA. Now we are closing at EUR 369 million of EBITDA, which is not very far from the first quarter of 2019 figures, EUR 393 million, with the total revenues already exceeding the 2019 figures and the net profit equaling the first quarter of 2019 profit levels. So all in all, I believe this is a very good set of results. Once again, no doubt, this is mainly driven by traffic, as you may expect.
And this is somehow, as I said before, bringing forward our targets, our expectations in terms of the -- that we set ourselves in the strategic plan. Having said that, I remind you there is still a number of -- well, there is an element of uncertainty around us. We don't want to hide the fact that there are still a number of issues from the geopolitical standpoint from the macroeconomic standpoint, from a number of concerns that could potentially have an impact on this very good and very attractive, let's say, expectations for the year to come. Moving on to the next slide. In terms of OpEx, I will be dwelling on that very briefly because I'm sure you will have an interest in discussing this in more detail through the Q&A. I think that the cost increase is no doubt is meaningful. I don't want to hide the fact that cost pressures remain one of the main challenges for Aena. I would say, for the rest of the industry, we are working hard towards the, let's say, keeping this under control. But it is clear that this is a big challenge. Having said that, in this particular case, as you can see, the energy cost has been reduced vis-a-vis the previous year by EUR 27.5 million. This is helping. And we are also starting to deploy our long-term strategy or medium-term strategy in terms of electricity supply. We have already hedged part of the short-term electricity consumption, we will be discussing that later for sure in the Q&A.
We are working hard towards hedging medium term. And of course, that will be a bridge to our long-term strategic plan of deploying the solar panel plant that, as you know, are ultimately, the long-term goal for Aena in terms of energy provision. As you can see, excluding the impact of electricity, focusing on the other operating expenses line, which is that line that is capturing the cost of third-party service provision, this is, well, 12% up on 2022 in the first quarter. We will keep focusing on this. We will keep working hard.
But as I said before, a number of times running airports is more costly than it used to be. I come back here to my mantra of our objective is to be able to, at some point in time, at the end of this strategic plan or DORA period to be able to come back to the level of EBITDA that we achieved in 2019 and to be able to reach at 55% gross margin level. Not only I'm reiterating that. Not only I'm reaffirming this commitment, I would say that with the 2023 expectations, if nothing changes there were, this could be achieved early on in the process. That would be absolutely reasonable to expect. So my mantra is to come back to these 2 goals despite any particular, let's say, waves that we can face when dealing with our operating cost base on a quarterly basis. Moving on to the next slide. Obviously, not surprisingly, the business is back in a very strong generation -- cash generation mood in terms of the operating cash generated in the business before CapEx, obviously, we are not very far from the 2019 level. So this is very good news. And the amount of investment paid this quarter at the consolidated level is clearly significantly higher than the 2019 or indeed the 2022 levels. Because at consolidated level, obviously, we are including the payments made in Brazil to the Brazilian authorities to in connection with new concession awarded for 11 airports over there. So if we take this away, the level of his medicine now is not very far from the levels of previous years.
As you may expect, obviously, taking into account that the DORA is a plan that is more or less delivering a similar amount of investment on a per yearly basis, okay? We will discuss that later as well. I'm sure I would stop here. I would say that it is relevant to once again reiterate that the whole picture is very positive, is not only commensurate with the strategic plan goals is in somehow making those goals achievable earlier than originally planned. And now Nacho will spend some time on, let's say, providing more color on expenses, commercial revenues, those lines that, for sure, are the most eye catching of all the presentation. Thank you.
Thank you, Jose. And let me -- please let me start on Slide 14. That's where we are breaking down the fixed and variable rents for this quarter. As you know, we see these rents as basically the information that is very useful in order to understand what's happening on the underlying business. And as you can see and as stated by Jose earlier, fixed and variable rents have performed very well this quarter compared to 2022, growth of 33.5%. And they are really higher than 2019. We're already 16% higher in 2019. I would like to drill some time on the different categories included in these business areas because the performance of these categories has been very different through this quarter. So I think it would be used for sharing those thoughts with all of you. There are some capsules such as duty-free, F&B and car parks that have performed better than traffic. They are accretive on a per pax basis. And basically, the main drivers for that performance, of course, is traffic, but as we have seen through 2022, there is a higher average spend in spare parts, that's performing very well. We are seeing average transaction values also going up. The contribution from British passengers. British passengers have grown 55% this quarter compared to the average that is 41% for the network. So even contributing more to that growth. So in summary, very good performance of these categories. contributing to an increase incremental fixed and variable rents spare parts. With respect to other categories, I would like also to discuss with you. As you can see, car rental has performed very well. We have seen increase of 3.8% versus last year and 16.5% versus the previous year. In 2022, we saw material increases of this caption. One of the main reasons was the price of these services. As you know, there was a shortage of cars in the industry. And therefore, that contributed in the results of Aena in that caption. What we are seeing is that price per contracts are basically stabilizing, and we're going south. So that's a main driver for that more reduced growth than in the previous quarters than in the previous year. The other driver is what we are seeing is a number of transactions, contracts is very aligned with the traffic growth in the airports in which this service is demanding, basically, airports where they are in peak season, mainly in the Canary Islands.
However, other airports, such as, for example, Madrid and Barcelona, they have seen material growth rates in terms of traffic this quarter. And in those airports, we haven't seen car rental performing in a manner aligned with those traffic growth. Those would be the main drivers explaining the performance of car rental, sorry. Please let me finish with the item that we call other. You will see that has performed against the previous year at a growth rate of 16, that is negatively contributing EUR 0.33 against the fixed and variable rents per passenger. The main reason for that performance is that within that line, what we have is a set of different categories. Some of them are performing -- are growing, sorry, at a lower rate than traffic. For example, real estate, advertising, leases, other caption such as, for example, VIP services are performing much better than traffic. But the main driver for the performance of this quarter is basically 1 caption related to supplies that is within that other.
In supplies, that's aligned that we used to basically reflect the pass-through of, for example, power to our tenants. Because of the reduction in power prices in this quarter versus the quarter of 2022, that basically is a material reduction. What we have seen this quarter is a cost of the energy below EUR 100 , and in the quarter of 2022, that was north of EUR 200. So that's also impacting the performance of this line. All in all increase of 33% and the average or basically the fixed and bare rent per [ pax ] much higher than the levels of 2019. So completely recovered and outstanding the performance of that year.
If it's okay for everyone I would like to spend also some minutes on other operating expenses by -- especially or in particular, at the -- related to Aena network, I'm referring to Slide 23. Jose has referred to the increase in cost, he has referred to it as meaningful, and it's true. We can see increases in cost for this item, other operating expenses, excluding electricity in the north of 12%, 11%, if you compare it against 2022 or 2019, respectively. And basically, what you can see in this slide is that we have a number of captions that are following, especially when we compare against 2022 that are following the activity -- the higher activity levels that we have had in this quarter of 2023 compared to 2022.
Traffic has grown by around 40%. So we consider activities that are partially variable and impacted by the demand coming from those higher activity levels also been impacting. There are many other reasons that we have explained in many of our meetings with all of you basically related to salary minimum, basically, the increases in the minimum salaries, price effects. We are also have because of all the facilities are open. We are in -- or providing more maintenance to all that areas. So in summary, in this quarter, that those cost increases are resulting into double-digit increases at the very low teens. And as stated as committed by Jose, we'll monitor this caption very carefully in the future during this year. And finally, just a few seconds to highlight or basically to share with you basically as a result of the market conditions the increase in the financial cost for Aena are basically translating into an average cost of debt that has moved from 1.04% for the average cost in 2022 to a number of 1.81% for the first quarter of this year. Basically, this is a result of an increase of higher than 225 basis points of the base rates that Aena has the floating debt and also because we swapped some part of our floating debt to fix through 2022, and we are seeing the result of those swaps in this quarter. You will see basically the consequence of these cost increases in the average cost of debt in our P&L, very easy. And I think I'll stop there, and I think we can move into the Q&A if that's okay for everyone. Jose is that okay?
Yes, absolutely.
Gavin, do you mind moving to the Q&A. Thank you.
[Operator Instructions] And your first question comes from the line of Elodie Rall from JPMorgan.
I'll have 2, please. The first one is on the MAG we see a big increase in Q1 versus Q1 '19. Is this a one-off you think? Or is this more -- is it something we should expect to continue over the next few quarters? Is this more seasonal also maybe in Q1? If you could give us some color there. And second, on OpEx, obviously, I'm sure there will be more questions, but it's a bit surprising to see OpEx up that much double digits when we were expecting utility costs to decrease, which they have. But overall, I think we had in mind that OpEx could be flattish year-on-year increase in labor cost, a decrease in electricity costs again, so is Q1 again particularly outcomes as well? Or should we just normalize the trend that we see in Q1 for the rest of the year?
Thank you, Elodie. This is Nacho speaking. I'll address your first question, and Jose will comment on your second with respect to MAGs, basically what's -- the main driver is the different accounting adjustment with respect to MAGs in 2022 versus 2019. In 2019, the allocation of the MAGs for a specific year was based on the traffic on a monthly basis. However, in 2022, the location per MAG is done on a flat straight-line basis. Therefore, in the months in which traffic basically, the month in which the traffic is lower for January versus August, there is a higher accrual of MAG compared to other months. So it's just an accounting effect related to that accounting adjustment.
Hi, Elodie. Well -- first of all, let me -- I'm not correcting Nacho. But I want to make one point very clear. What Nacho described is, yes, it is the way you accrue the MAG inside one particular year, you can call it accounting, but it's not the same that we have been discussing for a long while, which is the accounting in different years. What I want to say is that I want to make this very clear. Any MAG which is accounted for in one particular year is a MAG that will be built and collected in the first weeks of the year after.
So what we are discussing here is the distribution inside the year because with the former accounting policies that was, let's say, accounted on a monthly basis based on the, let's say, barely the traffic evolution. Now it is accounted on a straight-line basis inside the year. But ultimately, everything you account for in the year will be built and collected the year after, in the first weeks of the year after. So it's money, it's cash, it's at your fingertips.
This is different from the, let's say, the well-known IFRS 16 accounting vagaries impacting different years. For instance, the fact that you have to spread the max of, for instance, a 10-year contract across the 10 years on a straight-line basis. This is a different thing. So it is important for me to highlight this because these MAGs are not in any shape or form MAGs that are going to be collected in 5 years from now. They will be collected the year after. Sorry for this. This is not the correction. This is just a clarification. In terms of the operating costs. Clearly, 2023 quarter 1 is -- when you look at the headline, we are very close to the 2022 quarter 1 operating costs. Looking at the other operating expenses, as you know, because when you look at the rest of the OpEx lines, the dynamics are different.
But looking at the third-party service element of the operating costs, this is barely flat. But obviously, this has been well, the result mainly of the power and electricity cost performance. Excluding that, this is 12% up year-on-year. It is clear that we want to keep this under control. And we -- our commitment is to continue being the most efficient operator to be able to provide top, let's say, best-in-class EBITDA margins and to be able to achieve EBITDA levels that are consistent with our long-standing tradition before the COVID. But I have to recognize there is an element of tension in our operating cost bill, and we have to keep an eye. If you ask me whether this is going to be the dynamic of the rest of the year, that we will try hard to minimize the impact.
We are not particularly happy with the double-digit cost increases. But we know that we are operating as effectively and efficiently as ever. We are doing our best, and we have -- I think we have a reputation for being good managers. But frankly, the sign of the times is one-off operating cost pressures. And to be honest, there are also some elements of cost that are required to be incurred by organizations like towers because the world is changing. We are spending more on things like let's say, cybersecurity. We are spending more on things like obviously, environmental projects and plans we are spending more on things like innovation, digitalization, initiatives that are meant to be enhancing our long-term revenues, our long-term, let's say, plans. And sometimes when you are in the middle of this kind of, let's say, earlier stages of developing initiatives, the fruits are not -- cannot be collected yet.
But if you are not in that business, if you are not involved in that kind of initiatives, you might be in trouble in a number of years from now. So overall, there are a number of things that airports have to do today to -- that are expenditure, but are meant to be somehow an investment for your future. And at the same time, a number of standards and a number of quality requirements and a number of expectations that you have to meet that honestly are making our operating cost base more challenging. And I don't want to hide this fact.
Once again, the only thing I can tell you is I believe Aena has proven to be extremely effective and efficient in managing costs. We are committed to deliver certain levels of profitability and certain levels of in the horizon of this strategic plan. And if anything, the 2023 perspectives are leading us to believe that this could be achieved even earlier than expected. So this is not exactly a commitment on a particular percentage of operating cost growth for the coming 3 quarters, this is a commitment to deliver medium-term level of profitability, which is commensurate with -- once again with our commitment to be extremely efficient and effective [Technical Difficulty].
Your next question comes from the line of Cristian Nedelcu from UBS.
Maybe the first one on staff costs in the Spanish network, they were around 10% higher year-over-year. Could you elaborate the building blocks here what drove this increase? And if roughly a 10% increase year-over-year, we should expect also for the remainder of the year in staff cost in the Spanish network? The second one, just coming back a bit to the MAG revenue question from earlier. I think your MAG revenue recognized was EUR 78 million versus around EUR 30 million in the first quarter of '19. I appreciate the accounting change that you've explained earlier, but I was just wondering if that explains most of this increase? Or do you notice by any chance, any pockets of underperformance in some of your shops that are leading to higher MAG revenue or maybe some of the contracts that you have in place now have much higher MAG than before, if any of these elements contribute to the increase in MAGs that we saw in the first quarter? And maybe the last one, just on -- in terms of the retail spend per passenger double-digit higher than '19 levels in Q1. Do you have any comments or color on your expectations for the next few quarters, Q2, Q3 in terms of retail spend per pax evolution.
Apologies for the interruption that was a technological problem. So I understand we're addressing a question from the UBS analyst. He's not in the list any longer. Could you -- Gavin, could you please put him again? This Cristian.
[Operator Instructions]. While we wait for Cristian, the next question is from Louis Prieto from Kepler.
I have 2, if I can. The first one is the midpoint of your traffic guidance, which is 99% of COVID -- pre-COVID levels would imply that you expect the following 3 quarters of the year to be marginally below pre-COVID levels? But you pointed to in the statement, if I read correctly, you pointed to a 4% increase in airline capacity programming for Q2, Q3. Could you shed a bit of light on how you feel about that? Are you more conservative just for the sake of being conservative? Or any help would be welcome. And on the second question, my understanding is that you expect the company to be a yield dilution mode in future years. Could you please describe the key drivers of this?
Yes. Well, first of all, the guidance we provided back in February, this -- it was a range actually from -- so the 99% was the midpoint. So the you could say very fairly that this is the most likely scenario, and this is absolutely clear. But still, we were providing a range and the range is wide because there are a number of unknowns and uncertainties. But it's fair to say that today, we are above the 2019 levels of traffic. It's fair to say that the summer season looks good. really good. The declared capacity is today for the summer season is above 3%, 4% the actual number of seats that were available.
Actual -- not declared, I mean actual number of seats made available in the summer season of 2019 by the airlines. So obviously, subject to any further developments and attrition in the effective number of seats that will be made available. One could say that well, the risks of downside in the range we provided is lower than the risk of upside. But for the time being, we are not planning to come back to the market with any new range or indeed with any new indication of the most likely scenario, we will be waiting. But it's true, and it's fair to say that inside the range we provided, the upside risks now is weighting more than the downside risks. And this is your first question. Your second question...
It was on yield dilution.
Yes, definitely, we are back in yield dilution mode. This is -- that was the case pre-COVID, pre-pandemic. It's usually the case when you have a very strong let's say, business in which the load factors are going up. Your aircraft are -- let's say, the aircraft are traveling full and these kind of things. And also many times, when you have the element of the touristic traffic, let's say, performing better and ahead of the rest of the traffic you end up with a certain element of dilution because the most yielding traffic is normally the long-haul traffic operating out of Madrid, Barcelona. So to the extent that the touristic traffic, the leisure traffic with operated by the airlines with very high load factors is, let's say, moving faster than the rest you could end up -- you normally end up in a yield dilution situation, which means that we will have to wait to collect those monies for 2 years. But as you know, they will be always collected incorporating the capitalization element. So we are back in dilution mode that was the case pre-pandemic.
As usual, super clear.
Going to the line of Cristian Nedelcu from UBS.
Maybe a few questions. First of all, on staff cost in the Spanish network. I think they were 10% higher year-over-year in Q1. You elaborate on the building blocks here how much of wage increase, number of employee increase and others? And if 10% is a ballpark good estimate for the full year 2023, 10% growth? The second one on the MAG, coming back to the earlier question. The MAG revenues, I think, in Q1, you had EUR 78 million versus Q1 '19, EUR 30 million. I appreciate that there has been a change in accounting throughout the year that explains some of it. Just wanted to check if by any chance you have more pockets of underperformance in some shops that explain the higher MAG revenue?
Or if your current contracts have much higher market in place. And this is the reason behind the higher MAG revenue? And the last one, just in terms of retail spend per packs, think you're already -- your 2026 target was 12% higher -- at least 12% higher than '19 levels, you're pretty much there. I guess if you can give us a bit of color into the next quarters in terms of retail spend per packs as well as going forward in the next couple of years of your expectations.
Thank you for the question. This is Nacho speaking. Yes, the increase in the staff you highlighted about around 10.5% increase for the Spanish network, that's accurate. Basically, the main drivers for that impact, as you were summarizing is basically salary increases that's something coming from the agreement between the unions and basically the government that's 3.5%, basically there's an agreement for 3 years. So that increase is there, and we'll see a lower increase according to that agreement in 2024. There are other items that are driving the increase in [Indiscernible] staff costs. There's increase in security costs that's coming from that's mandatory. That's coming because of also regulation.
And as you were highlighting, the staff numbers are going up. We are adding more staff in order to cope with increase in activity. And those are the main drivers that would explain that 10.5%. Happy to try to identify the specific allocations and have a chat with you. I'll try to get the info and give you a phone call. I don't have the specific weightings of those drivers in front of me.
Okay. On MAGs, the MAG solution on quarter 3 against 2019 is, I would say, is almost entirely, entirely driven by this accounting or profiling, I would say, more profiling than accounting. I would call accounting the allocation of MAGs between different years, I would call profiling the allocation of MAGs to a particular year. Why is this? Because inside the year, what we are doing is simply to spread it between the different months in a different way. But in summary, when you look at this -- let me check the number of the slides.
When you look at this slide number, sorry, I have to -- when you look at this Slide #13, okay, the what we call MAG revenue to be built, this is revenue that will be built and collected weeks after the closing of the year. So they are -- I would say they are closer to cash than any accounting adjustments any trade lining of revenues between years, any accounting adjustments are made in the third line. So what I mean by that is that what you can see there is just a different way of profiling inside the year because the trade lining element inside the year should apply, and that was not the case in 2019. In 2019, frankly, we updated the MAG distribution inside the year to the seasonality of the traffic.
Ultimately, those MAGs are in the contract to be paid on to be built weeks after the closing of the year. So I want to highlight this very clearly. Having said that, when comparing with 2019, the first quarter 2023 figures are different from 2019 only because of that or mainly maybe there is any other marginally important element. When comparing with 2022, we are talking about something different because in 2022, we are already applying the same, let's say, profiling methodology. But in 2022, you have the DF7 ruling, the level of the MAGs you can build and collect, okay? That means that, obviously, the figures are somehow impacted by the DF7 you have to accommodate the amount of MAGs that you can end up billing and collecting to the evolution of the traffic. This is not anymore the case -- well, it is in 2023. But effectively, we are so close to the to the pre-COVID traffic that is operating in a different way.
So this is the summary. So when come 2019, everything is about profiling. I hope this helps. On the other hand, you made a different question, which is the -- in terms of the retail per PAX Well, the retail per PAX, I think Nacho already described the different dynamics affecting the different lines. I would say that what we have today is a very good picture in 2023, which is a continuation of the 2022 trends in the underlying sales once again, I want to stress that we are now following and disclosing with this information based on real actual sales and actual variable elements of the revenues because we know the MAGs, which are legitimate are a little bit more difficult to understand.
While those underlying trends continue being very positive as they were in 2022. But we have different perspectives for different lines. Nacho mentioned some of them, the car rental element, for instance, might be running out of steam in terms of the per passenger revenue. The -- I would say, the food and beverage maybe is going to continue doing well. The specialty sub element, we believe, is going to continue improving because we are opening new spaces that were previously shut. Duty-free frankly is very dependent extremely or entirely depending on the outcome of this tender that is about to we are about to receive the economic element of the offers in the coming weeks. So there are different dynamics. So can I say or can I commit to deliver the target we set ourselves in the strategic plan ahead of the schedule. Well, it's too early to say.
I think there are reasons to be optimistic because we are well ahead of schedule in some -- in a number of very relevant commercial lines but really, really ahead of schedule, but we need to understand to what extent some of those trends are sustainable long term and some of those trends might or might not be sustainable long term. And this is promising. It's promising, it's looking good. It's looking much better than, let's say, 6 months ago when we put together the strategic plan. I don't know if I'm answering your question as you expected, but this is...
That was helpful. Maybe just a short follow-up on the staff cost. The 10% increase is relevant for the rest of the year? Or are the comps a bit easier? I don't know the number of employees in the second half have easier comps.
We are not providing specific guidance on OpEx, but it is part of the -- it is -- I would say that the current figures are not going to be very far from what we expect for the whole year. The current trends, the current trends, so to speak. Hopefully, they will be better because -- but I'm not going to be very far from the current trends on the start.
Your next question comes from the line of Graham Hunt of Jefferies.
Maybe just coming back again on commercial. I appreciate Q1 is just 1 quarter and a smaller one at that. But given that we're back now basically to pre-COVID traffic, commercial seems to be running to take a step back. Commercial seems to be running a much larger sales footprint and achieving similar profitability, of course, than what it was in 2019. Is that when we think about the rest of the year, is that the right way to think about that business going forward? Obviously, barring any kind of consumer slowdown, but we're running strong double digit ahead of 2019 in terms of sales and profits from commercial at the moment. How you see the rest of the year panning out?
Once again, coming back to my previous comment. There are different dynamics here. And it's difficult to answer. So 2022 and 1st quarter of 2023 performance in the commercial business overall has been really, really good. surprising us, let's say massively against the original expectations. And there are different drivers behind each and every one of the lines. So you cannot apply a one size fits all to the different lines. So our expectations of continuing enjoying this very good trend are, let's say, moderated. We are optimistic because I think definitely there are drivers that will persist over time, but some of them can be temporary. And this is the gist of the question you are making. So we are optimistic, but we need to really get under the skin of these trends.
And once again, sorry to bother you again with my repetitive mantra. The duty-free business is totally dependent on the outcome of this coming tender process. Are we positive? Yes, very positive because we have been working hard to stimulate the competition. And we think the process will be competitive. But till the [Indiscernible] these things, we don't know. Shops, definitely, we expect the shops to carry on growing on a per passenger basis, revenue per passenger because we are opening spaces that were previously shut. Food and beverage. Well, I would say you have to be more positive than the other way you're around. But then you have car rental that was a fantastic performer in 2022. But that was entirely based on particular circumstances that Nacho described before. You have car parks, which have been dominated by the influence of the higher weight of the domestic traffic so on and so forth. VIP services, which are not singled out in the slide that they are part of the other VIP business, the VIP service business is doing extremely well with double-digit growth well ahead of 20%, 30%. So there are different dynamics, and we need to see whether all of them or some of them are resilient enough to let us to change our goals for the coming years.
Still, I think for this particular year, 2023, I'm very positive. I think overall, this -- we have to be optimistic about the ability of carrying on delivering this good performance. And deliberately you can see, I'm joking. What I mean is that further than that, it's difficult to commit to any particular trend remaining long term. And once again, the single most important thing here is the outcome of the duty-free tender.
Your next question comes from the line of Sathish Sivakumar of Citigroup.
Can you hear me? Yes. Sathish from Citigroup. So I've got 2 questions here. So firstly, on the retail revenue per PAX, commercial revenue per PAX. If I look at the food and beverage, it's up 3% year-on-year, which is well below the inflation, whereas the specialty shops are up actually the 16%, which is, again, well above the inflation. Can you help us understand, is it that food and beverage -- are you starting to see actually the passengers are buying less? And basically, the price mix impact here? And on specialty shops, what's actually driving that year-on-year unit spend increase there.
And then the second one is around the electricity cost trend. Should I like, let's say, we should we assume that Q1 '22 last year and to Q3 around 27.5 million step down. Would that be a similar run rate into second quarter? Or should we see more steeper decline? Those are my 2 questions.
Thank you very much for the question. This is [Indiscernible]. Jose will jump in later on. With respect to specialty ops, I think we have seen an outstanding performance this quarter compared to traffic growth, as you can see in the presentation in the slide you were referring. It's true that specialty ops has been the, I would say, one of the worst performers through the recovery in terms of coming back to average basically expenditure per PAX and also in terms of updated value per transaction. I think those numbers when we compare those numbers were 2019 levels, we are still lagging a bit. When we look at this quarter, suddenly, one of the main reasons explaining that, that performance outperforming traffic, as I was saying before, is basically we are -- we have managed to add more space compared to 2022 first quarter.
Finally, as we have discussed in a number of conference calls, there has been some of the units, one of the shops that have remained close through COVID.The speed of reopening of those shops in the case of specialty ops have been a bit slower. And in this past quarter compared to previous year, basically, the increase has been in the north of 10,000 meters new surface being opened. So that's one of the main drivers. With respect to energy cost that I think was your second question. As Jose was explaining earlier, of course, the company is taking advantage of the more reduced cost levels of energy that we are seeing in this spring and at the beginning of the year.
The main reason is because basically, we were almost 100% open, given that we hedge a very small and minor portion of our consumption. So that's a trend that we have enjoyed this quarter, the company will be enjoyed in April, May, but Jose was referring to an initiative that we have launched by which we have managed to basically close some hedges for the rest of the year, especially the second and the third quarter and the month of June. Well, we basically we have hedged around I would say, 22% of our energy consumptions for the year. So we will continue taking advantage of the cost levels of energy that you can see in the market, they are public, given our exposure, but it's also that are given how the price was evolving, we thought that was the right decision in order to hedge that percentage of consumption in order to basically anchor our budget. Jose, you want to add any?
No, I think it's good.
Just a follow-up, actually, sorry, on the food and beverage, it's up 3% year-on-year basis, which is again trending well below inflation. So are we seeing signs of passengers buying less.
No. Well, actually, it's not 3%, it's 0.03%, which means roughly 5%, I would say. Yes. Well, I think there is an element that clearly inflation is kicking, but at the same time, as we incorporate nationals from other, let's say, the international traffic has been catching up for whatever reasons, the propensity to spend of the Spaniards in the first quarter of 2022. That was the -- definitely the traffic predominating at the earlier stages of the pandemic, probably has been giving rise -- has given rise to a certain dilution of the yield per passenger. I would say that this is one of the elements of the equation that I mentioned before, we need to understand because overall, the picture is very positive.
I think growing the, let's say, the total revenues or sales underlying sales by 33% against 2022, close to 16% against 2019 is really good. Looking at some particular lines, the performance on a per passenger basis is very good. But this is a dynamic that somehow is driven by things that are not -- were -- those things were not the usual ones driving the business maybe in the past. The [Indiscernible] example is the car rental. So we need to understand whether those trends, specific trends are leading us in a particular direction, whether this is sustainable or not.
Once again, I think we have to be very optimistic and positive, but frankly, some of those drivers might last months or 1 year, some of them might perpetuate for 3, 4, 5 years, and we need to understand that. But overall, the picture is really good. I mean the reality is the commercial business is now well ahead of the 2019 level. So I mean, what else we can say. So in 2023, the total revenues or the total rents based on the underlying sales reached a level which is close to 16% above 2019. So for me, this is the big headline. And the important headline, this is good news, regardless whether for every individual and particular business line, the dynamics can be more or less, let's say, long-lasting.
Next question comes from the line of Dario Magnani from Exane.
Four questions, quick for me. One is, again, sorry about that. On the MAG build for Q1. What should we expect in Q2? Second question for the DF7, has this ended since traffic is now back to 2019 levels? Third question is a previous comment in Ignacio made on the contribution from the brits. Can you maybe elaborate on that 55% contribution, I think, you mentioned? And the fourth question, the aeronautical revenue per passenger was lower than the margin Q1. So how much revenue would you need to recover for Q1 in future tariff for the K factor?
Dario, this is Nacho speaking. With respect to your question on the brits. My point was related to basically the change versus the passenger levels quarter 2023 versus 2022. The speed of the change, the increase for the brits have been around 55% and However, for the average of the company of the Spanish network, sorry, is 41%. So what we have is a higher increase that change coming from the U.K. than from other nationalities and also from the average. I wonder if that is clear now, Dario.
That increase in spend on passenger.
Sorry?
So is that increase in spend we're talking about or spend on passenger?
No. What I refer is that that's adding more brits to the comment was made in the context of the duty free. So that's adding more passengers contributing to the duty-free business as foreign passengers. So therefore, the royalties are higher from a variable rent standpoint. That was the context for the comment. Is that now clear?
Yes.
Okay. Excellent. I think with respect to DF7, that I think was your second question. Basically, for the airports that have reached the passenger levels or reach or are beyond the passenger levels before COVID, DF7 has stopped being applicable. Therefore, we would come back to the regime established in the context. You made a question in a very general manner. So I don't know I'm addressing your point, Dario?
Yes, that's fine.
And I think there was another question related to dilution in this quarter, and what we might happen -- what we might see in the future. Basically, the main reason for the dilution this quarter because as you know, Dario, for the months of Jan and Feb, the tariffs or the prices that remain applicable for Aena are the ones related to the previous year. The previous year, prices were 9.14. So those are the -- basically the prices or the public prices, the tariffs that have informed the policy from a pricing standpoint for Aena. Therefore, that has been the main reason to generate dilution compared to the MAG for year 2023. That, as you know, is 9.77%.
So that has been the main driver from Jan and Feb from the first -- from the very first day of March, we will start applying the new pricing. And basically, there will be there a change for sure because our pricing will be based on that MAG that is the one now applicable. And very likely, there will be some consequences. But as Jose was explaining earlier, highly likely what we will see a structural dilution for Aena. Jose don't know if you want to elaborate?
Yes. No, I would like to, let's say, clarify that, obviously, one thing is the fact that what we can call dilution in a general sense, which is the fact that our revenue per aeronautical revenue per passenger in Q1 2023 is lower than our aeronautical revenue per passenger in Q1 2022. That's one thing, okay? And this is -- you can call it dilution, but this is a different dilution. It's not the dilution we normally used to discuss the K factor. This is simply our revenue per passenger is going down. And it's going down for the reasons that Nacho was mentioning.
Reason number 1 is the charges, the airport charges went down in 2022 by [ 3.6% ] to [ 17% ] on the previous year. And you know the charges apply from the first of March of 1 year to the 28th of February the year after. So we have in Q1 2022, 2 months of a higher charge than we have in Q1 2023. So this is a given. So this is one of the reasons for this reduction in the in the revenue -- aeronautical revenue per passenger. The second reason is that in 2022, you have an element of COVID costs recovery that you don't have any more in Q1 2023? Or you have -- well, frankly, I think we have EUR 3 million, EUR 4 million more than that. So it's just a tiny amount. So this is the second reason for the headline for the revenue per passenger in the IDO business to go down. And then, of course, you have the dilution. The dilution is the fact that what we used to call dilution in terms of the K factor calculation, which is on top of that, we are running below the allowed revenue per passenger for research, which has nothing to do with my previous comments. But this is also adding to the -- because in the COVID and during the lingering months of the COVID, we were in concentration mode for reasons that you understand. And now we are back on dilution mode as we used to be permanently before the commit. Well, I don't know if this clarifies a little bit because I don't want to mix the idea of dilution as a general term with the idea of dilution driven by the different traffic mix, which is relevant for the calculation of the K factor.
So my question was on the second point. So how much million euros you need to report...
Apologies. Well, the total amount was -- I think in Q1 2023, you said already, EUR 23.6 million of dilution in Q1 2023, accumulated. And sorry for my long answer that definitely was not pertinent at all.
Question comes from the line of Marcin Wojtal of Bank of America.
So 2 questions quickly. Firstly, on duty-free contract retendering, do you expect to have the new tender completed before the summer of 2023. And do you expect a handover to new operators to be smooth? Or could we perhaps see some disruption when they arrive. And question number 2, could you comment a little bit on operating costs, but in your Commercial segment? I think from what we see, cost inflation is a little bit more, let's say, under control, a little bit more limited in commercial compared to aeronautical. Is it just because this business is less labor intensive as that many subcontractors, if you could provide maybe a little bit of color on commercial operating expenses.
Thank you for the question. This is Nacho speaking. I'll address your first question, and Jose will jump in to answer your second one, if that's okay. On the UTP tender, basically the time line is the one that we made public some months ago. We are expecting to receive the bids, the financial bids in May, late May to late May, going through those offers through you, so that there could be -- or there might be sorry, formal decision being made right before August. That's the plan. That has not changed. And basically, that's what we are following from a time and standpoint.
You were making a comment with respect to the potential [Indiscernible] disruption, you're making a comment with respect to potential interaction. Basically, we are moving from a situation or we might be moving from a situation with just one company operating all our units to a potential situation with new companies, that perhaps are entering into a new market. So there will be new concepts, there will be new products. So yes, there will be some time from the decision until the new shops are up and running that we'll try to minimize as much as possible. But I think there will be some months that basically Aena will have to cope with those new concepts, new shops from a supply standpoint and the new relationships with the potential bidders with assisting one with different concepts.
Well, with regard to the operating costs of the commercial side of the business, of course, they have a different, let's say, relevance for a number of reasons. First of all, there is an element of cost allocation which is roughly overall around -- for regulatory purposes, around 15% of the cost goes into the commercial revenue business and 85% of the cost goes into the IDOS side of the business. But frankly, this is all driven by the same, let's say, drivers, and they are managed by the same people, not necessarily the commercial side of the business people. So the comments we made on our cost bill, generally speaking, applies to the commercial side of the business.
And then you have specific costs on the commercial side of the business. The 3 more relevant ones are the costs of running the VIP services in general, which are -- these services are provided and run in-house normally, what we do is to obviously hire third parties to provide the services, but ultimately, we are managing the service. The same applies to the car park business. And then you have the -- so you have third-party providers, obviously, operating or helping you to manage -- to operate the car parks, but you are the manager. Aena is managing the car parks. And then well, there is an element of marketing and advertising as you may expect in every commercial business.
All that together I mean I'm excluding in this particular case, the total -- well, the allocated costs. All that together is something that for a year normally is no more than EUR 60 million, EUR 70 million per year, all those points I mentioned before. And I have to say they are subject to the same let's say, cost tensions, they are subject to the same inflation tensions. But the good news is that they are contributing to businesses, which are also moving very healthily in terms of passing through the inflation. The VIP lounges, the car parkings are obviously managing to transfer the -- or to pass through the inflation. So the outcome of that is that the business -- the commercial business overall is operating with gross margins, which exceed 8 -- 70%. And in the past, they were in excess of 80%.
I hope this answers your question. But clearly, all those costs are subject to the same pressures, but they are not, in any way, shape or form as relevant as the rest of the costs. And ultimately, they are contributing to businesses which are in a much better position to pass the inflation through to the customer. And actually, the VIP services are now really booming. There is a huge demand for this kind of services these days.
Question comes from the line of Achal Kumar from HSBC.
I have 2 questions, please. Sorry, going back to your traffic guidance. I mean you said that you have not changed guidance, while the number of seats you're seeing is up in summer year-on-year. while I speak to also airlines, including RAN, [Indiscernible] everyone, I mean everybody is expecting a sort of increase in the load factor as well. So does this guidance, I mean, if you really re-base your assumptions incorporating Q1 numbers and incorporating your summer trust according to the schedule filed.
I mean do you -- what do you see exactly? I mean is it like -- is it closer to the upper end of your guidance? Or is it even rather beating your current guidance. So basically, I just want to understand what is the kind of a realistic picture in terms of your traffic guidance.
And secondly, you spoke about brit passengers increasing as a proportion. But basically, I mean, I just want to understand because I think Britain is facing high inflation rates and it looks like passengers, although people are still pressing to travel, but I mean high inflation is sort of has increased the cost of living and then hence, they remain cautious in terms of spending. So I mean how do you see that? I mean, do you see a potential concern about retail spend per passenger? Or do you see it sounds addressed to that, how do you see the situation given that you are saying that the proportion of Brits is increasing.
Okay. Well, I'm not sure I understood your first question because there was a huge background noise or a very bad signal. But -- so I may need you to a, I don't know, Nacho, did you manage to understand question number one. Something about traffic guidance, but let me -- maybe I would just repeat what I said before. The summer is looking good. The capacity that the airlines, the seat capacity that the airlines are declaring to be meant to be using this summer is slightly over the 2019 actual effective capacity used in that summer, something like 3% and 4%. Obviously, there will be an element of attrition or there will be some capacity pull potentially. That happened all the time in the past. But this is really positive.
And well, clearly, giving us an indication that the trends that we are experiencing today will be sustainable over the summer. Having said that, we are not revisiting our guidance. We provided a range, which was wide enough to accommodate bad news coming from, I don't know, the Ukrainian war or coming from the monetary policy side and the macroeconomic conditions or whatever, but also to accommodate positive trends as the ones we are witnessing today.
So if we finally let's say, get into the upper side or upper level of the upper end of the range, that would be good news. So far, we cannot anticipate that yet, but clearly, I would say there is more upside risk than downside risks. I don't know if that was your question, but let's say, I'm setting with my template. And then with regard to the brits in particular. What we have seen is the brits spending more, particularly because they are non-EU passengers, and also, this is also helping us because the variable element, the variable fee that we are collecting from the duty-free shops when they are selling to non-EU passengers, is higher than the one we are collecting when they are selling to EU passengers. So this is helping these revenues.
On the other hand, more and more brits have been incorporating to our traveler, let's say numbers, and they have been catching up. So this has been helping us. To what extent that will be sustainable? Well, to the extent that the -- I suppose there will be an element of the stabilization of the number of British travelers or moderation in the growth, I don't know, potentially because of the economic conditions or the inflation conditions, so that will come to an end at some point in time. But on the other hand, I don't expect any, let's say, I don't have any reason to think that they will be going backwards.
And if there is any risk of that is the same risk that you can apply to German, Spanish, or in any other European nationality because I think that, that would be driven by worsening conditions, that's my view. So I wouldn't place more risks on the United Kingdom traveler, let's say, deciding to stop traveling than or spending that I would place in the Spanish traveler or the German traveler because indeed, the macroeconomic risks element of any expectation is still lingering there. That's the reason why we have a range because those uncertainties are not gone. They are there. Whether or not they will crystallize, we don't know. We expect them not to crystallize, but it's not at all clear.
Your next question comes from the line of Jose Arroyas from Santander.
Just 2 questions. Number one is on the solar PV strategy. You mentioned before that Aena has continued to hedge the costs in Q1, but could you give us an update on the progress made on the solar PV and in particular, finals on track or ahead of the plan in terms of permits and the projects that need to be developed at the various airports. And question #2 is on the third-party supplier costs, but the outlook what are the most significant tenders that Aena plans to launch in coming months and in particular, for security, what is the strategy? How do you plan to attract enough competition in the upcoming bid that the press has been talking about recently.
Thank you very much, Jose, for your questions. This is Nacho. I'll address your first question, and Jose will comment on the on the feature tenders or procurement. With respect to the solar IV, basically, as we -- I think we discussed when we published the strategic plan and later on at the annual results presentation basically, our plans have moved a bit to the right versus the original plans. The main reason is not lack of execution from the side of Aena with respect to design and construction. Basically, the main reason for that delay is coming from lack of -- basically, the permitting process. It's lack of permits in order to have most of those farms or plants connected to the grid. As you know, there is a high fever with respect to renewable projects in Spain, and therefore, connections are becoming a very scarce resource. So we continue making progress. That's why some of, for example, of our cost, as Jose was explaining earlier, are increasing because we are spending money in many of those fronts in order to be ready, but it's true that we don't expect having more than around 30% of that project being done in the mid-20s, 25%, 26%, that's the current -- the current goal.
And 100% of the project is likely to be to be in the late 20s. That's where we are at this moment in time. With respect to the hedges that I was referring earlier, those are only hedged for this year, Jose. So only for 2023, what the company is also exploring is given this delay with respect to the solar farm developments, what we are exploring right now is potential hedges for the short to medium term, so 2023. So that period of time between this year. And when we have the solar farms completely deployed, we also have some of our consumption covered with fixed prices. I hope that answered your first question.
Well, the most relevant third-party service that will be out in the market for tender is by a country mile security services. The current contracts come to an end at the end of 2023, we will be tendering out the security contracts for substantially all the network for the coming 5 years, 2024 to 2028 and that will be work done over the coming months. The way we are planning to approach this. Well, this process is going to be slightly more, let's say, complex than previous ones because at the same time, in the security or in airports, there are a number of, say, technical changes, technological progress made that will require in some cases, different ways of operating.
So because of that and because we are very willing to attract competition, we are going to do something I would say, similar, not exactly the same that we have done in the duty free tender, which is to develop the process in a number of stages in a number of phases. And the first of them will be a dialogue, a competitive dialogue would be to get in touch with different players, some of them already present in the Spanish market, some of them are not present in the Spanish market, they were or they might be, but they are definitely in other airports across the world. So contacting them, talking to them engaging in the dialogue, trying to shape the contract and to shape the process in a way that they feel attracted.
So in summary, we will be stimulating the competition and shaping the tender to make sure that we don't have only the usual suspects. It's fair to say that even for the usual suspects, things are more difficult and more challenging and more costly to do. So there is no -- is not that we say that they are not performing well. They are performing well. So that will be taking place over the coming months. The plan is to be awarding the new contracts at the end of November, at the end of the year. And this is by far the most significant one. I mean, over 5 years, that would be probably the budget of all those services over 5 years will be in the region of EUR 1.5 billion or low.
Your next question comes from the line of Nicholas Mora from Morgan Stanley.
Just 2 very quick ones. On -- just on the [ COVID ] compensation in aviation, you were entitled to [ EUR 0.80 ] per PAX in Jan and Feb, falling down to EUR 0.18. So where is that revenue gone? Because as you said, you only booked EUR 3 million to EUR 4 million in the first quarter. that's question one. Question number 2, just when we look at commercial revenues, we now have 3 or 4 different numbers for what you mean similar revenue line. we understand your fixed and variable rate.
That's the underlying revenue. Then we had the MAGs, then why can we get to the revenue you actually report for the division? What still makes up the difference? Because we're really getting, especially from investors, a lot of pushback on that revenue and that commercial revenue cleaning, I let's say. And very lastly, if I may, you've talked 2, 3x about the hedges for '23. You said 22% hedged, can you give us a price level, at least a ballpark figure where you hedge for the year at that level?
Thank you, Nicolas. I think with respect to the levels, I think that if you go to the public info with respect to the [Indiscernible] website. There you can see contracts for that part of the year. I think you can take those levels as a reference. That would be the best, I think, my suggested approach. Do you have any difficulties, give me a phone call? But that's -- that would be my suggestive course of action, Nicolas.
Okay. With regard to the other 2 questions. On coverage costs, we were charging in 2022 as per the -- obviously, the Competition Commission determination, but when we run out of cost to recharge, we have to stop charging COVID cost. We cannot recover 1 single euro more than we incur. This is not the case for the rest of the components of the airport charges, you keep obviously charging a particular airport charge per passenger. But with -- when coming to COVID costs, we cannot charge and we cannot recover more than we incurred. So barely or roughly over December, January and February, we have been charging nothing on COVID costs.
And then it was only in March with the new tariff becoming effective than we charge, obviously, now a smaller amount because the costs that we have to recover are now of a completely different scale. We are not incurring any more meaningful significant costs. And with regard to -- okay, first of all, thank you for raising the point on the -- I recognize challenges to reconcile some of the commercial revenue information we are providing. And we are taking note of that and we, for sure, will amend some of this because this is a legacy, is legacy of us trying to provide information from different angles, being transparent and ending up in a sort of, let's say, messy situation.
But just for the sake of closing the discussion today very briefly, we have a headline revenue -- commercial revenue figure in the P&L in the profit and loss account. That's it and the headline revenue figure for the real estate services. That's it. okay, then we have that both of them are separated in the P&L. Then when coming to the Slide #12, which used to be the information we were providing traditionally for Aegis before the COVID and the, let's say, the accounting consequences of the COVID created some trouble. Those are not including the real estate revenues. They are also only included in the commercial revenues, but they are adding all the activities in the Spanish network, including the [ Murphia ] International Airport which is a tiny bit, but is obviously contributing to the to the picture, which is treated separately in the P&L account. Then on Slide 13, we try to provide a completely different angle. What we were trying to achieve when the COVID situation was created was -- and the DF7 was approved was to provide information over the whole thing the commercial -- the purely commercial revenue and the real estate revenue.
That is not included, by the way, the [ Murphia ] International Airport commercial revenues. So rest assured that everything is providing a slightly different picture of the same reality. If -- and we take onboard your comment, and I commit personally to rearrange these tables to provide the information that is easily reconciled. In the meantime, if you want to be provided with the detail and the reconciliation, happy to help you.
I think we'll get there. At least the cash is there.
Well, I think we have -- we are down. So thank you very much, everyone, for joining us today. Have a good rest of the day. Bye.