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Good morning, and welcome to Corporación América Airports Second Quarter 2021 Earnings Conference Call. A slide presentation accompanies today's webcast and is available in the Investors section of Corporación América Airports' Investor Relations Web site [Operator Instructions].
At this time, I would like to turn the call over to Patricio Iñaki Esnaola, Head of Investor Relations. Go ahead.
Thank you. Good morning, everyone, and thank you for joining us today. Speaking during today's call will be Martin Eurnekian, our Chief Executive Officer; and Jorge Arruda, our Chief Financial Officer. Both will be available for the Q&A session.
Before we proceed, I would like to make the following Safe Harbor statement. Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of our earnings release and business filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Note that for comparison purposes and for a better understanding of the underlying performance in our presentation today, we will be discussing results, excluding hyperinflation accounting in Argentina, which became effective in July 2018. Additional information in connection with the application of Rule IAS 29 can be found in our earnings report.
Now, let me turn the call over to our CEO, Martin Eurnekian.
Thank you, Iñaki. Hello everyone, and welcome to today's call. Before we start, I wish to welcome Iñaki Esnaola as our new Head of Investor Relations. He comes to us with significant experience in investor relations for a multinational LatAm New York Stock Exchange listed company, and a strong background in credit as a former Moody's analyst. I also want to thank Gimena for her contributions in setting up and moving forward our Investor Relations program since our IPO, and for ensuring a smooth transition. Gimena has been promoted to Head of Financial Planning for Aeropuertos Argentina [2000] [Ph], our largest concession. I wish her great success in her new role.
Over the last year-and-a-half, we have been managing through an [indiscernible] global pandemic, which has significantly impacted our industry. I am extremely proud of how the entire team has pulled together to move us forward, and ensure that we are a stronger company coming out of the pandemic than we were going into it. Although we are experiencing different dynamics across our operations, we began to see a recovery in total traffic, starting in May, following the impact of the second wave of the pandemic that affected passenger traffic trends in our LatAm operations earlier in the year, particularly in Brazil.
Traffic reached nearly 6 million passengers in the second quarter, up over 11 times from the year-ago levels, but over three times below the 20 million passengers posted in the second quarter of 2019. Cargo activity, in turn, posted a strong recovery and reached volumes that were just 20% below pre-pandemic levels, with Uruguay and Italy outpacing 2019 levels. Back to passenger traffic, we are pleased with the significant recovery observed in Ecuador, Brazil, Armenia, and Italy this quarter. Activity in Argentina however remains heavily impacted by severe government travel restrictions. On a positive note, we are encouraged by the advance of the vaccination program in most countries of operations, particularly with the accelerated rollout in Argentina and continued pace in Brazil.
Moving on to our financial performance, revenues ex-IFRIC more than doubled year-on-year, to slightly over $120 million, although we still remain 60% below the second quarter of 2019 levels. This, together with our sustained focus on cash preservation and tight cost controls, contributed to a comparable adjusted EBITDA of $7 million, an improvement of $40 million from the adjusted EBITDA loss posted in the year-ago quarter. On the balance sheet front, net debt remained stable. Finally, we remain focused on advancing on the process of obtaining long-term economic [indiscernible] of our concession agreements in Brazil and Armenia, as well as in the revision of the concession agreements in Uruguay to drive long-term value creation. I will discuss this in more detail shortly.
Turning to slide four, we are seeing a gradual lifting of government travel bans, with commercial operations allowed across all countries of operation, although high restrictions for international travel remain in place in Argentina, Italy, and Uruguay, which I indicated in the yellow boxes in the slide. In Argentina, while domestic traffic remains open, borders remain closed to foreigners until October 1. In addition, since the end of March, and to contain the spike in COVID cases, the government has imposed limits on the number of international passengers' arrivals, which stood at 2,000 passengers per day during the most part of the quarter, and was stretched to 600 passengers per day by the end of June.
As a result, passenger traffic remains 84% below second quarter of 2019 levels, despite improving 19 times year-on-year. Following the acceleration in pace of vaccination, this daily limit was recently relaxed to 1,700 internationally-arriving passengers. Passenger traffic in Italy increased over three times sequentially. By contrast, traffic was still 86% below second of 2019 levels, reflecting restrictions for travelers coming from or that transited certain countries that apply until August 30. However, more recently, no restrictions apply to traffic from the [Schengen Area] [Ph] and traffic from the U.S.
Throughout the quarter, however, traffic improved from a 95% drop, in April, to a decline of 75% in June, both compared to respective months of 2019. In Uruguay, passenger traffic increased over five times year-on-year, but was 90% below second quarter of 2019 levels, reflecting the sustained closure of borders to nonresident foreigners with certain exemptions, and weak travel demand. Government has recently announced that, starting November 1, borders will reopen to foreigners presenting a full vaccination certification and a negative COVID test.
Passenger traffic in Brazil increased sequentially as the sanitary situation improved, and reached 47% of the second quarter of 2019, pre-pandemic levels. Domestic travel is not restricted, while the main requirement for non-resident foreigners entering the country is a negative PCR test. International travel is also open with limited exceptions. In Armenia, traffic continued to show a positive sequential trend, reaching 67% of second quarter of 2019 levels, reflecting the opening of Russian borders to foreigners earlier in the year, and benefiting from travel restrictions in countries where Armenia competes for tourism.
Finally, in Ecuador, traffic improved sequentially and reached 45% of the second quarter of 2019 levels, with routes to the U.S. and Panama with higher traffic levels than in 2019. No restrictions apply to domestic nor to international travel though subject to certain requirements upon arrival.
Please turn to slide five, where we show the monthly passenger traffic trends since January 2019. As anticipated, passenger traffic began to recover in May, this year, following the contraction that had started in February as the second COVID-19 wave hit our operations in LatAm. The positive trends of February and May continued into June and July as the vaccination rollout advances across our market and travel demand recovers. Traffic in May, June, and July improved gradually to 74%, 69%, and 60% below their respective month of 2019. Armenia, Brazil, Ecuador, and Italy were the strongest performers driving this gradual recovery. We expect this momentum to strengthen towards the second-half of the year in our main LatAm markets as the vaccination rollout continues to advance and governments relax travel bans.
Turning to slide six, cargo operations posted a strong performance, with volumes reaching nearly 80% of pre-pandemic levels in the second quarter of 2019. While growth was driven by all countries of operation, we saw a particularly strong recovery in Uruguay with cargo volumes dipping the second quarter of 2019 levels. Argentina also stands out with cargo volumes just 20% below the levels achieved in the second quarter of 2019. The good performance in cargo activity in Argentina and Uruguay helped mitigate the impact from weaker passenger traffic in both countries.
Let's turn to our financial results, on slide seven. Starting with our top line, aeronautical revenues increased over four times in the quarter, but remain significantly below pre-pandemic levels. Compared to the first quarter of this year, aeronautical revenues were 6% higher, reflecting improved operations in Armenia, Italy, and Ecuador. Commercial revenues achieved over 60% of 2019 levels, mainly driven by higher cargo activity which continues to recover at a faster pace. Notably, consolidated cargo revenues beat second quarter of 2019 levels by nearly 4% driven by stronger volumes, as discussed above, together with tariff increases in Argentina.
Now, moving down to P&L, as we show on slide eight, we continue to deliver significant savings in our cost structure as a result of the cost control and cash preservation initiatives implemented at the beginning of this crisis. When compared to 2019, cash operating costs declined this quarter by 34%, equivalent to savings of $52 million. Remember, this excludes concession fees, and construction costs. Year-on-year cost increases below revenue growth led to a positive adjusted EBITDA of $7 million, compared to negative adjusted EBITDA of $33 million in the second quarter of 2020.
Looking into the coming quarters, while cost controls remain a key priority, we expect to continue benefiting from a leaner operation. We also anticipate to see some increases in certain coastline as traffic and operations continue to recover.
Now, turning to slide nine, we continue to advance in the process of obtaining economic re-equilibrium of our concession agreements. A new milestone on this trend was successfully obtaining. Last July, the economic re-equilibrium for the Guayaquill concession in Ecuador; this includes a long-term compensation mechanism, a two-year concession extension, and a reduction in the concession fee.
In Brazil, we remain focused on two fronts, starting with Brasilia Airport, last May we filed out our request for a long-term economic re-equilibrium beyond the compensation already obtained for 2020. We are also advancing on the process to return our Natal concession, and expect to receive the correspondent indemnification payment during 2022. We also remain in active discussions with the government of Armenia. Remember, this concession agreement includes a contractor internal rate of return of 20% in U.S. dollars. In Uruguay, we continue to advance negotiations with the government to review the concession agreements.
Finally, in Italy, we expect the concession to obtain additional resources from the fund established by the Italian State Budget Law to support the entire Italian airport sector in this year. Note that this fund, which has not been allocated yet, was recently expanded to €800 million from the original €500 million amount.
Moving on to our debt and liquidity on slide 10, we ended the quarter with a total liquidity position of $287 million, while our total debt remained stable at $1.3 billion. Our net debt to last 12 months adjusted EBITDA ratio remains above historical levels, solely driven by the impact of the pandemic on adjusted EBITDA, while net debt has remained fairly stable over the past quarters. All of our subsidiaries remain in compliance with debt covenants. And remember, that CAAP itself has no direct indebtedness.
Turning to our debt management initiatives, from April to July, we refinanced a total of $50 million in principal late payments in our Argentine operations, and we obtained a $10 million loan in Uruguay.
Finally, I am very proud of the cost control and cash preservation initiatives executed since day one that allows us to deliver three consecutive quarters of positive operating cash flow across most of our operations.
Please turn to slide 11. For our closing remarks, over a year and a half into a dynamic, we have demonstrated our flexibility to rapidly respond to the changing market conditions. We remain fully focused on consistently advancing in the execution of the litigation plan established at the start of the crisis, which includes three key objectives.
First, compute the economic re-equilibrium processes to restore the value of our business. Second, keep our focus on preserving liquidity and strengthening our balance sheet. And finally, maintain a lean cost structure and strict cost controls at the level of activity continues to gradually increase.
Looking at travel demand, we expect that the continued recovery trend in passenger traffic, posted in July, will further strengthen towards the end of the year as the summer season approaches in our LatAm markets, and the vaccination rollout further accelerates in Argentina and continues in Brazil, as well as in the majority of countries of operations. Governments are anticipated to gradually lift travel bans and restrictions as sanitary conditions continue to improve. While we remain vigilant of the new virus strains, we are confident that local and global travel is [sustained] [Ph] part of the future.
With pent up demand and the desire to travel unchanged, we expect sustained travel growth in the long-run. The future of our business remains strong. And while the pace of recovery is still nonlinear, our near-term goals include building a leaner and stronger company. Finally, I wish to thank our teams for their continued commitment through the execution of our strategic initiatives.
We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Alex Demichelis with NAU Securities. Please go ahead.
Yes, good morning. Thank you very much for taking my question. The question relates to your option to buyout the preferred shares from the government, how you're thinking about that? How that could impact your cash flow, so trying to think how you are approaching that?
Thank you very much for your question. Martin here. Well, this option of buying the preferred share has been there for quite a while. And it's now in the overall negotiations we have done with the government because the proceeds of buying the preferred shares are counted as CapEx and would go into the CapEx plan of the company. So, we are now in conversations with the government given the current restrictions on traffic, on the timing of the CapEx program, and, of course, at the same time the preferred shares redemption. So, in the near-future we will present the market with our financial strategy for AA2000, and that will probably include the redemption of the preferred shares and the timing of the execution of our CapEx.
Okay, thank you. And just as a follow-up, so when you're talking about these discussions with the government, are you also including the amount owed by Aerolíneas Argentinas or is that separate?
That is a separate discussion with Aerolíneas Argentinas, but that we're doing -- we're having very productive discussions with them as well.
Okay, thank you very much.
Our next question will come from Peter Bowley with Bank of America. Please go ahead.
Martin, Jorge, Patricio, thank you for the call and taking my questions, I have two. On the cost side, could you share an update on the status of the government support for salary, social security payments, and what we could expect for second-half 2021. And just as a follow-up, do you have any expectations for CapEx that would be funded by AA2000 as opposed to the [trust] [Ph] for strengthening for the second-half of 2021 given the works at Ezeiza and Bariloche? Thank you.
Can you please repeat the last part of the question, which the sound was not good?
Sorry, yes. I was just wondering if there was an expectation for CapEx in the second-half of 2021.
So, regarding CapEx, as we've mentioned in the last question, it seems the severe restrictions of international traffic in Argentina we have been having discussions with the government in terms of reestablishing the CapEx [indiscernible] timing. So, beyond the [indiscernible] that we just mentioned, we will probably -- the rest of the CapEx put it in these discussions to come up with the new schedule for that.
And regarding the government support; give me one second, but in Italy, we still have, let's call it, Cassa Integrazione, which is the government taking part of the salaries of the employees of the company. In Argentina, there was a program to support part of the salaries during 2020, which was called ADB, which were received, that program is finished, and now it's been replaced by another one called [Revno] [Ph] which is smaller in size, probably around the quarter a third, but we're still receiving that as well. And in Uruguay, with the lifting of the restrictions, they were lifting also what they call [indiscernible] by the end of September.
Thank you.
[Operator Instructions] Our next question today will come from Nicolas Fabiancic with Jefferies. Please go ahead.
Hi, good morning. Thanks for the call. It's encouraging to see improvement here across most segments. Just a question on the Argentine segment, where we still see a bit of pressure, when I'm looking at the liquidity and debt maturity profile, at the consolidated level, it looks healthy, but we have started to see some concerns around the OpCos, in particularly Argentina, where the reported cash and cash equivalents number from last week is now below the next 12 months amortizations. Could you please give us your perspective, from the HoldCo CAAP level on liquidity management at the OpCos potential parent support and any additional levers you can pull that would maybe leave us a little bit more comfortable? Thank you.
Okay. Thank you. This is Jorge. Thanks for your question. We're working in a financial plan for a 2000 -- we expect to be able to make certain announcements in the next 45 to 60 days, but it is definitely something that we're working on in connection with our maturity profile. What I want and can highlight at this point in time is that we continue to have strong support from our lenders. Take into consideration the characteristics, the strong characteristics of this concession, we have the [whole airport] [Ph] system, is a single regime, we have the cargo revenues, we basically control close to 100% of international investors into the country. That's our process infrastructure. Given these characteristics and the importance of this concession, we continue to have very strong support from our lenders, and again in approximately 45, 60 days we expect to make some announcements.
Ladies and gentlemen, this will conclude our question-and-answer session. I'd like to turn the conference back over to Martin Eurnekian for any closing remarks.
I would like to thank everybody for joining us today. We really appreciate your interest in our company. We look forward to providing updates on our business initiatives as they become available. In the meantime, the team remains available to answer any questions that you may have. Thank you everybody.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.