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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by. I'm Haley, your Chorus Call operator. Welcome, and thanks for joining the conference call of Fraport AG. [Operator Instructions] May I now hand you over to your host today, Christoph Nanke, SVP, Head of Finance and IR? Please go ahead.
Thank you, Haley, and also welcome from my side. I have with me at the table, Dr. Matthias Zieschang, our CFO. He will guide you through the presentation. And then as always, there is time for your questions. So...
Yes. Thank you, Christoph. Good afternoon, ladies and gentlemen, to our presentation on the first half fiscal year 2020 here from Frankfurt. Today, we are looking at financial figures, which are, by far, not comparable to figures we have seen before. The coronavirus pandemic has impacted global air traffic and our group to an unprecedented extent. With the exception of Xi'an in China and St. Petersburg in Russia, all our group airports recorded passenger drops of more than 90% over the course of the second quarter. These days, we are seeing first signs of a recovery in Frankfurt and abroad. But as infection rates can spike again, this situation remains very fragile.An update on the situation of our group airports I will provide you in a minute, but let's focus on our current financial situation first. H1 group revenue, excluding for the effects of IFRIC 12, dropped by almost 50% to just under EUR 800 million. The Q2 stand-alone figure was down even steeper by roughly 75% to a level of EUR 200 million. On the other side, we showed stringent cost discipline not only in Frankfurt, but also abroad, which resulted in reduced staff and nonstaff costs during these challenging times. As a result of the short-time work in Frankfurt and a clear cost-cutting focus across the group, we were able to reduce our group OpEx by just under 40% in the second quarter despite our fixed cost business nature. Hence, we were able to keep EBITDA positive at EUR 23 million after the first half year of 2020, despite an underlying revenue reduction of some EUR 720 million. While depreciation and amortization remained unchanged, also our results from investments accounted for using the equity method was clearly impacted by the COVID-19 pandemic and turned negative from plus EUR 16 million in the past year to minus EUR 46 million in the period under review. Therefore, despite an improvement in our interest and other financial result, our total financial result was down from minus EUR 64 million to minus EUR 99 million. Our group EBT and group result thus performed clearly negative and stood at minus EUR 309 million and EUR 231 million respectively, after the first 6 months of the year. After consideration of the negative result from minorities, our attributable group result was at minus EUR 211 million, and our EPS stood at minus EUR 2.29.On Slide 5, you'll find a detailed look at the financials of our group segments. The drop in passenger traffic in Frankfurt of minus 63% also left its marks in the 3 Frankfurt segments. It becomes evident that all revenue streams and all operational results were clearly impacted. Still, what is also apparent is that not all revenue streams are declining in the same magnitude. Some revenues, especially in the Aviation and Ground Handling segments, are not only related to passengers, but also linked to movements and maximum takeoff weights which did not decline in the same magnitude as passenger numbers. Also in Retail & Real Estate, based on fixed rental contracts and the application of minimum annual guarantees, some revenue streams decoupled from the passenger performance and developed somewhat better. As a result of the MAGs applied, our retail revenue per passenger stood at EUR 4.36 in H1, an all-time high. However, as said, resulting from the application of the MAGs and comparably low passenger numbers. In Q2, thus, the result was even stronger at EUR 12.17, again, on the basis of only 1 million passengers have been handled.In total, revenue across the 3 Frankfurt segments was clearly down by about 45%. Despite the countermeasures initiated, this sharp loss in revenue was so high that we were not able to offset it. The EBITDA of the 3 segments, therefore, turned negative post the second quarter to minus EUR 30 million or to minus EUR 89 million for the second quarter stand-alone. In our operational -- international business, you see that the revenue decline turned out to be a bit steeper than in Frankfurt at minus 53% when adjusted for IFRIC 12. Despite this comparably steeper drop in revenue, lower OpEx in international activities due to countermeasures and less concession charges were sufficient to provide for positive H1 EBITDA of the segment. More details of the individual airport performances are shown on the next slide.On Slide 6, you see the performances of our major airport investments, with the exception of the highly seasonal airport investments in Bulgaria. So for Fraport Twin Star and in Greece, all investments recorded positive EBITDA figures after the first half of the year. Even during the trough in the second quarter and the fully consolidated airports of Lima and Slovenija remained almost entirely closed, the EBITDA loss of the International Activities segment was only minor at minus EUR 80 million, also helped by positive EBITDA contribution of the Frankfurt services that the segment is also accounting for. This figure compares to the EBITDA loss I just mentioned in Frankfurt of some EUR 89 million. Also, for the third quarter, the prospects for the International Activities segment looked attractive insofar that we expect the EBITDA to be positive here again. I will come back to the business and traffic update in a minute.With regard to our investments in Turkey and our minority-owned airports in St. Petersburg and Xi'an, we recorded negative net results weighing on our group financial results, while the EBITDA figures remained positive.Our group cash flow and indebtedness are shown on Slide #7. In line with our negative Q2 EBITDA performance, also, our group operational cash flow turned negative in the second quarter to a level of minus EUR 189 million or minus EUR 115 million when adjusted for working capital changes. This half drop also brought down our cumulated operational cash flow, leading to a total cash outflow from operations of some EUR 97 million in the first half of 2020. Due to continued cash outflows for our CapEx programs in Frankfurt as well as in Greece, Brazil and Lima, our free cash flow was negative in H1 at minus EUR 653 million.For the second quarter stand-alone, the negative free cash flow figure stood at minus EUR 457 million, very much in line with our guidance for the monthly cash burn of the group of about EUR 150 million per month we provided you a quarter ago. Going forward, we expect this cash burn situation to improve again as the traffic recovery will positively impact revenue and thus, operational cash flow, while we keep cash outflows at low levels. While the clearly negative free cash flow is, by far, not what we expected for the group at the beginning of the year, it is worth to highlight that we also expected negative free cash flow for this year even without the COVID-19 pandemic on the back of our 4 CapEx programs in the group. While the group net debt figure after the first half of the year stood at more than EUR 4.7 billion, we expect our net debt to increase to up to around EUR 5.5 billion by year-end or up to some EUR 500 million higher when compared to our pre-corona expectations. Please note here that the before-mentioned guidance as well as all other projections we are giving are always backed by our current traffic expectations for Frankfurt and our group airports. Here, we expect a conservative traffic recovery going forward rather than see world traffic disruptions from a big second COVID-19 wave and correlating travel restrictions. In line with the higher group, net debt and the decline in equity, also, our gearing ratio recorded a clear increase in H1, which we also expect to continue for the full year.On Slide 8, you can see the ingredients of our current group cash position. As we highlighted before, our net debt figures stood at about EUR 4.7 billion at the end of H1 this year. This figure was made up by a gross financial debt of EUR 6.3 billion and a group liquidity of roughly EUR 1.6 billion. The EUR 1.6 billion group liquidity can be found in our interim report as cash and cash equivalents of just under EUR 1.1 billion. And some EUR 500 million we invested in securities accounted as current and noncurrent financial asset.On top of those EUR 1.6 billion, we had unused credit lines of EUR 80 million from our project finance in Brazil and some EUR 500 million revolving credit facilities in Frankfurt. Adding those undrawn credit facilities to our current cash position, this sums up to a cash reserve of more than EUR 2.1 billion as at the reporting date on an increase of around EUR 450 million when compared to December 31, 2019, despite the current negative business environment. As we also highlighted during our Q1 presentation, we don't plan to stop our financing activities here in order to prepare the group for an even longer period of time. Therefore, at the start of July, we issued our second corporate bond in the history of Fraport at a nominal value of EUR 800 million. The bond placement has been the biggest issue of an unrated company in the past 2 years and was well oversubscribed. The terms and conditions of the new bond stood at a fixed rate of 1.6% for our 4 years tranche and 2.1% for our 7 years tranche. Including for the new bond, we have now secured some EUR 2.1 billion over the past couple of months, for which we pay an average interest rate of some 1.2%. Our current cash position, including for unused credit lines, thus, stands at a comfortable level of just under EUR 3 billion.Our repayment profile is shown on Slide #9. Here, you still need to add the new EUR 800 million bond and the corresponding EUR 300 million repayment in the fiscal year 2024 and another EUR 500 million repayment for the second tranche in the year 2027. For the current year, the repayment amount is split into around EUR 124 million scheduled repayments in Frankfurt and Greece and some EUR 77 million repayments of revolving credit facilities. Thus, the repayments for this and the next years are easily manageable, taking our current cash position into consideration. Even in a very negative traffic scenario, so no recovery at all, we feel well equipped now to bridge the financial year 2021 with our existing cash results.Moving on from our group financials. I would like to come to our business update now, looking at the market environment first on Slide 11. With our last publication in May, we basically reported a full shutdown of all global flight activities. Fortunately, in the meantime, we have seen at least a partial lifting of travel restrictions and travel warnings. On June 15, the travel warnings for flights within the EU has been removed and shortly thereafter, all entry restrictions for Germany from EU, Schengen and associated countries as well as the U.K. have been removed. Since beginning of July, also the entry restrictions from a couple of third countries have been removed, so that's unrestricted travel is possible from Canada, New Zealand and Thailand, for example. Apart from those countries, there are still travel warnings and entry restrictions in place which still weigh heavily on the traffic recovery these days, especially to the U.S., China or Turkey. Not only the necessity to go into quarantine when coming back from countries designated as risk areas, but also the uncertainty about the development of infection rates and possible restrictions while traveling abroad are still hindering people from flying.In order to prevent people from going into quarantine when flying back to Germany from a third country with entry restrictions, we have opened a test center at Frankfurt Airport already end of June where people can be tested upon arrival. Now the tests may become mandatory in Germany for passengers arriving from designated risk areas. The capacities have been increased further since last week.Now looking at the situation at some of our group airports abroad, starting with Peru. Lima Airport was closed for around 4 months. This was, by far, the longest shutdown we saw in our portfolio. Only recently, on July 15, the airport has been reopened for domestic flights again. We expect international traffic to restart in September at the earliest or even in October.In Brazil, international flights are allowed to and from Porto Alegre again. In practice, however, international traffic continues to stand still due to entry restrictions for foreigners.Just before the start of the peak summer season, our touristic airports in Greece, Bulgaria and Antalya have opened up again for international traffic. However, Turkey is still designated as a risk area for Germany which is a key market for the Turkish tourism industry.You see despite some relief in European travel restrictions, overall, the environment is still tensed and there remains a high uncertainty about the shape of the recovery at the different sites we operate.On Slide 12, you find the traffic performances in June and the year-to-date figures for our group airports. After my introductory words on travel warnings, quarantine requirements and temporary airport closures, it is not surprising that passenger numbers at all airports were massively impacted in June and in Q2 as a whole. The only exception was Xi'an in China, again, which has been recovering from its trough in January and February, with latest data of around minus 30% over 2019.Looking at the accumulated figures, it becomes clear that the second quarter had an extremely negative impact on the year-to-date development. In Frankfurt, we recorded passenger figures which were down by around 64%. The international airport realized traffic declines between minus 50% and minus 84% after 6 months. In July, we saw a first improvement of our passenger figures on continental flights to and from Frankfurt, which were down by around 75%, while intercontinental traffic was still at less than 10% of 2019 levels. Overall, on the basis of our traffic results in the first half of the year, for the full year 2020, we expect low traffic levels to continue, reaching around 30% to 40% of 2019 levels in Frankfurt and up to around 40% at our major international airports. But to be clear again, this is our estimate as of today without any material impact from a second wave of infections.On my next slide, I would like to give you some more details about the recent developments at our Frankfurt site. On the upper chart, left-hand side, you find the supply side based on offered seats from and to Frankfurt Airport. You see that on continental routes, only around 29% of the previous year's levels is offered again. On intercontinental routes, the level has been even lower at only 21% recently. On the right-hand side, you see the analysis of the seat load factor which we divided again into continental and intercontinental seats. In light of the continued travel warnings and the entry restrictions in many third countries, it is no surprise that the load factors on continental routes are by far higher than those on intercontinental flights, reaching 71% last week. However, for some weeks now, overall, we have seen a positive trend in the development of the seat load factors.The lower chart on the left-hand side shows you the deviation in daily passengers compared to 2019. What you see is that, on the one hand, daily passengers have been increasing over the last weeks from basically 0 to around 50,000 passengers per day recently. On the other hand, also last year, over the summer season, passenger numbers were reaching an all-time high of up to 240,000 passengers per day. For this reason, compared to 2019 figures. We have still realized the decline of around 80% in July, which as discussed before, is mainly driven by the still very low demand for intercontinental flights. However, over the last weekend, we saw slightly accelerated developments with passenger numbers reaching more than 60,000 per day.Looking at the bar chart on the right-hand side, which is derived from the current summer flight schedule of our main carrier, Lufthansa, you see that compared to 2019, around 50% of the international and even 75% of continental destinations are restored again. Obviously, these routes are not as highly frequent as last year. But still, this development shows the important strength for the airport for Lufthansa to ramp up its global network and connectivity via Frankfurt Airport again. Following up on this point, I'm moving on to Slide 14. To further strengthen the position of Frankfurt Airport in the market, together with Lufthansa, we have decided to found a joint venture called FRA Alliance, which intensifies our strategic partnership. Taking this step, jointly, we will improve the operational procedures in Terminal 1, increase efficiencies and discuss potentials to adapt the infrastructure of the site. We are pleased that after a quite lengthy period of discussion, we have come to this agreement and are looking forward to get the joint venture started.On a second note, we're also pleased to see that Lufthansa has extended its partnership with Deutsche Bahn to offer more train to flight connections via Frankfurt Airport. This development once more underpins the unique strategic location of Frankfurt Airport in the middle of Germany and the importance of the airport for Lufthansa in the current situation. As some domestic feeder flights might not be profitable for a network carrier, the step taken is a financially as well as environmentally reasonable step. With more than 120 codeshare high-speed train services per day, Lufthansa and Deutsche Bahn are increasing the connectivity in the catchment area of Frankfurt Airport, including for passengers from Switzerland with a mean of a train service. Looking at this development, Frankfurt Airport is clearly benefiting from its central location, intermodal connectivity which is unique in Germany.On Slide 15, I would like to proceed to our international group airports and give you some more detailed insight into recent traffic developments here. Looking at the bar charts, you find the weekly traffic development separated into international and domestic passengers for most sites, and the respective relative deviation over the same calendar week in 2019. While unsurprisingly, the traffic numbers for Lima are still at a minimum level, given the fact that only domestic traffic has restarted recently, we are happy to see promising developments in Greece and Bulgaria in particular. Coming from around minus 90% and even higher declines before the summer season, we have now reached levels of minus 62% and minus 78%, respectively, here. In Greece, we even saw a higher level of average daily passengers than in Frankfurt over the last 2 weeks.Looking at the development in Antalya on the bottom of the slide, it becomes clear that traffic is still heavily impacted from the designation of Turkey as a risk area for German travelers. In Brazil, when following the news on infection rates, it is also not surprising that the traffic levels are still minimal on domestic routes. Also, they have slightly improved since mid of July. International flights are still nonexistent, as you can see on the slide. Quite encouraging are the developments in St. Petersburg, where domestic passenger numbers were previous year's levels in the last week, and in Xi'an, where overall traffic declined by minus 23% when compared to 2019, coming from minus 32% in June still.So taking a general look at all the recent developments in Frankfurt and abroad, we are confident to see some accelerated recovery at our group airports in Europe over the peak summer season.Moving on to the next slide and switching from the traffic development as our main revenue driver to our cost side to give you an update on the measures we are taking to preserve cash, not only these days, but also in the medium term. As you already know from our last publication, we have 2 main levers that we are working on, which is OpEx on the one side and CapEx on the other side.Starting with OpEx on Slide 17. What are we doing to save operational expenses these days? You already know that since the end of March, we have been applying short-time work for around 80% of our staff in Frankfurt. And based on our agreements with the unions, we will continue with this at least until the end of February next year to reduce our personnel expenses. Also, our international subsidiaries have materially reduced their cost for personnel, also because they are more flexible in hiring seasonal staff. So that in Q2, in total, we have realized a reduction of close to 40%, 4-0% within Fraport Group.In the medium term, there's no doubt that we need to restructure our organization and to reduce the number of staff significantly in order to make our business model as profitable as it was before the crisis. Therefore, over the next years, we will prepare our company for the new normal of around 15% to 20% lower passenger numbers in Frankfurt in 2022 or 2023, which means that we need to cut around 3,000 to 4,000 jobs at the site. Details of the job-cutting program are still under discussions with the Worker's Council, but the before-mentioned staff figure will mean the sustainable reduction of minimum EUR 200 million of staff cost per annum.In addition to that, we have been adopting the usage of our infrastructure in order to save costs for electricity, heating and cooling, maintenance, et cetera. In fact, we have closed Terminal 2 already for several months now and are currently only using 3 out of the 4 runways in Frankfurt these days. Also, in the future, we will strongly link the usage of our infrastructure to the actual traffic development so that we will keep all cost components at a minimum level. Last, but not least, we are cutting all costs that are not necessarily needed to keep the airport operational, and we have adopted our processes in a way that even the top management, so myself, needs to approve orders. The same is valid and true for our international subsidiaries that have also contributed a material portion to our cost savings in the last quarter. All in all, we saved more than 40% on the nonstaff items in Q2 and we will continue with our strict cost management. However, it is clear that once traffic is ramping up again, also, our cost base will increase incrementally again, while it is our clear target to improve our EBITDA margin when traffic increase is gathering pace again.Now coming to the investment programs in the group. On the left-hand side of Slide 18, you see our short-term outlook for our current CapEx programs. As we already cut the budgets with our Q1 publication, there's no material change in the outlook for 2020, which stands at roughly EUR 1.1 billion. This reflects our strategy not to interfere into any ongoing projects, but only to cancel or shift future projects that have not been started yet. Therefore, we still plan to decrease our maintenance level over the next decade to around EUR 200 million to EUR 250 million per annum, which will bring us total savings of around EUR 1 billion over the next 7 years compared to our previous midterm budget. The more stretched CapEx outlook for Terminal 3 is not coming from any cuts in the budget, but rather than from unavailability of workers at the site in times of corona and the shift of investments into coming years. Overall, this will lead to a postponement of the completion and opening of Terminal 3 into 2024 or 2025. Like this, remaining investments will be stretched over time, and the annual budgets will, therefore, decrease to a level of around EUR 400 million to EUR 500 million.In Lima, you know that the construction program consists of 2 projects: the construction of the second runway and a new terminal. While we continue to work on the runway construction, the terminal project has been put under review with the aim to postpone it into the future. As there's still uncertainty about possible down payments for the runway this year, we keep our budget for 2020 at EUR 100 million to EUR 200 million.The same is the case for Greece, where we stick to our budget of EUR 100 million in 2020. In Brazil, we now lowered our budget to EUR 100 million after the first half year. As of 2022 and the construction programs in Greece as well as in Brazil are completed, we will see reduced CapEx at maintenance levels of around EUR 10 million for each site. All in all, the new CapEx outlook significantly lowers our cash out profile next -- near term. Subject to the development and decision taking in Lima, this will mean cash outs of about EUR 1 billion in the year 2021 and less than EUR 1 billion thereafter, which will clearly improve our free cash flow profile.Having said this, I'd like to conclude my presentation with our outlook chart on Slide #20. The picture shown is more or less unchanged to our past presentation. The coronavirus will clearly impact our group-wide traffic and financial figures on a full year basis. For Frankfurt, you also know from our past publications and the shareholder meeting in May that we expect passenger traffic to be down in the area of minus 60% to minus 70% on a full year basis. The traffic visibility we are having is pointing towards a continued recovery of capacities over the third and fourth quarter of this year. The situation, however, remains to be characterized by an increased uncertainty in -- if those capacities will be fully utilized or whether we continue to see a high number of flight cancellations. The same uncertainty we are having when we go through our portfolio, as described before, international traffic at some airports is still very restricted and intercontinental traffic remains to be characterized by stringent bilateral travel restrictions. Having said this, we expect all financials to be clearly impacted by the downturn in traffic this year. And meanwhile, also expect our group EBIT to be negative on a full year basis. However, based on our current assumptions in Q3, we expect a positive EBITDA on the consolidated group level.Being conscious of time and knowing that you will also have good questions. I'd like to conclude my presentation here and switch over to the Q&A session. And so thank you, first of all, for your attention so far.
[Operator Instructions]And the first question is from Ruxandra Haradau-Doser.
Congratulations on the cost management during these difficult times. Three questions, please. First, we are seeing external activities with a solid performance during this crisis. CapEx programs in Greece and Brazil are now ending and the CapEx in Lima is under review. So when traffic noticeably recovers, do you consider a partial IPO of external activities as an option to reduce net debt and crystallize the value of the airport, but still keep the control over the assets? Second, what was the share of transfer traffic at Frankfurt Airport in June and July? And third, considering your expectations in terms of traffic breakdown and non-aviation performance, at what level of traffic in Frankfurt do you expect to reach breakeven on operating cash flow? [ Those are the questions ].
Mrs. Haradau-Doser, thank you very much for the questions. First question, partial IPO. This is not an issue for us because now in the current situation, to sell any assets just doesn't make sense. And so again, this is not an issue. Transfer share as of today is about 50%. So not different, more or less not different with the past. And third question was, what was the EBITDA breakeven? When do we achieve EBITDA breakeven? Was it correct?
Yes, when...
Let me say we made and make relatively precise calculation when do we achieve EBITDA breakeven. For example, at Frankfurt -- the Frankfurt site, including, of course, the 3 segments or Bulgaria or Greece and so on. And of course, we have different breakeven numbers, and we make the, let me say, the main driver, of course, are the number of passengers. And for example, in -- at Frankfurt Airport, we have calculated that at a daily number of about 60,000 passengers per day, we expect EBITDA breakeven. So we are now close to EBITDA. Let me say, in July, we are a little bit below EBITDA breakeven here at the Frankfurt side. And now in the first days of August, we -- last weekend, we showed more than 60,000 passengers per day. So I would expect that now because August is running better than July, that in Q3, for the Frankfurt side, there should be an EBITDA breakeven again. Let me say, all the fleet segments consolidated.Outside Frankfurt, it's different. Let me say, as a rough guess, you can say, roughly, we need 1/3 of the pre-corona passenger numbers per day or per month or per year. So to achieve and realize EBITDA breakeven, it's a little bit different because we have different business models. I can give you the numbers. So in Bulgaria, the breakeven due to very variable cost items is relatively low. Here, we expect at a level of 25% of the passengers on [ August ] compared to pre-corona basis breakeven. In Slovenija, it's higher. It's about 40% passenger numbers as EBITDA breakeven number. In Greece, it's between 25% and 30%, depending also a little bit from the spending behavior in the shops. In Brazil, it's 1/3. And in Lima, we already through because we have, let me say, in the first 2 quarters, the EBITDA was relatively so high that even if we now continue with -- or would continue, what we do not expect with 0 number of passengers, we would see a positive EBITDA for the full year. So as a rough number in, let me say, in the international portfolio, 1/3, with some deviations down or up. And in Frankfurt, it's roughly 60,000 per day times 365. So it's also, again, you can say it's coincidence, 1/3, 30% of the 2019 passenger numbers would lead to an EBITDA breakeven at Frankfurt. And again, what I said in my presentation, for the third quarter, now we expect the international activities, positive EBITDA numbers consolidated. And for the Frankfurt side, including the 3 segments, there should be also breakeven or even a positive EBITDA contribution. Always depending, of course, now from the ongoing future passenger performance.
The next question is from Cristian Nedelcu of UBS.
Three if I may. The first one, you've raised the bond recently, the EUR 800 million bond, that's 1.6% to 2.1% interest rates. These rates are slightly higher than the 0.8% that you raised debt a few months ago. So could you elaborate a little bit on that? Is it becoming a bit more expensive to get incremental debt? And also in that regard, how are you thinking in terms of adequate levels of cash going forward? So is your target to continue to issue debt over the next quarters? Secondly, if we take a conservative scenario, let's say, in 2022, 2023, the traffic in Frankfurt and globally remains at 50% of 2019 levels, what other ways or what are the means of raising money are on the table? Would you consider an equity issue at that stage? Or is that not really an option considering you're largest shareholder? Would you consider potentially selling assets? Or could you give us a bit of color there? And the last one, if I may, please, in terms of Fraport retail spend per passenger. I know you are tracking in the past how different -- how tourists from different countries were spending each quarter. Now based on July data, can you tell us is the intercontinental passenger still spending sort of the usual 4x the European one? Or is it lower spend in the context of social distancing?
You are ready with your questions?
Yes, yes. Those are my questions.
Okay. Thank you very much for the bunch of questions. You started with the bond issue, and your question was why the interest rates, what we now have to pay are higher than compared to our promissory notes and bilateral loans. What we did before, whether this is in general trend towards to higher interest rates. So the clear answer is no. We are talking here about 2 different markets. When we look on the bond market, we are talking about international investors, which are rating triggered. And you know we are an unrated company. So this is today's situation, it's a clear disadvantage. Nevertheless, we came with a bond issue also to open this second channel of financing instruments. And while when you look on the market for promissory notes, which is a typical German market, domestic market, where the investors are primarily German saving and loans, German banks, it's a different market. The German investors, they know us very well. They know the shareholder background, that more than 50% is owned by federal state of Hesse and the city of Frankfurt. So this implicit state guarantee, which is a strong support here in Germany, has not the -- let me say the value for international investors who not really understand this implicit guarantee, which we have. And second differentiation is that when you invest as a German bank into a promissory note, the accounting treatment is different insofar that when you have the promissory note in your balance sheet, there's no need for mark-to-market evaluation. So there's no risk that when interest rates go up, the value of your note goes down in the balance sheet. So it's a totally different market. There's no arbitrage between the 2 markets. And due to the fact that we are not rated, we always have -- always, as in the past, when we came with our first issue in 2009, we have to pay more in this market. We have been fully aware of this. But again, we tried to open this market as a second source. That's the reason why we also accepted higher interest rates. When we go back next time also to commercial note marked again, you will see lower interest rates.So also cash burn, I think before Q2 -- or in March, when we have been before this -- or when we thought corona is coming, and we were -- have to accept more or less a total lockdown situation, we made a quick calculation that the cash burn considering all the cost reducing measures will be at a level of about EUR 150 million per month. So the negative thing is it is a very high amount. The good thing is our calculation was absolutely precise. We ended up with EUR 457 million cash burn or increase in indebtedness in 3 months. So this was a very precise calculation. And this is now also the basis for looking forward. And now we see 2 elements. On one side, the ramp-up as expected on the passenger level, very slow, also as expected. But it's going up again. And now the first step was in July when all these travel -- or some of these travel restrictions have been lifted. We now see a second step now up from August since this weekend, when, for example, in Frankfurt, now we are going up to 60,000 passengers. Before it was always 50,000, or nearly 50,000. So now as expected, we are ramping up step by step. This brings us more revenue proceeds on the other side. We are continuing to working on the cost level. I think we made success in Q2. And now we are working on, let me say, the further instruments like a second step in bringing down the CapEx program. I think a big step we made telling you that year-by-year now, we are reducing on a sustainable basis the CapEx in Frankfurt on a level of EUR 150 million. And now we have initiated, again, a working group looking whether there is additional headroom for further reduction. So we are coming from the cost side and the CapEx side, again, to realize more, we see more proceeds from the revenue side and this will now reduce the cash burn, let me say, in the future quarters.The question is when do we think to achieve. Let me say, cash flow breakeven, again, it's clear this will not happen in 2021. But you know from our press releases and announcement that we are now -- now we are benefiting from the instrument of short-time work, but this is just a temporary instrument. So we are now preparing our measures to substitute in the future short-time work by the measures to reduce the workforce. We said up to 4,000 employees have to leave the company. I think the measures are also clearly known. So we are talking about voluntary severance payments or program, which we will launch in the next couple of weeks. We are talking about partial retirement. We are talking about early retirement. And last, but not least, we are also thinking about operational layoffs. So these are the modules, the edge, which all along will lead to a reduced workforce up to 4,000 employees, regardless how the recovery of passenger numbers will be. So also, when, as scheduled in the next 2 or 3 years, we have a recovery up to minus 15%, minus 20% in 2022, 2023, then we will operate our company with a significantly reduced number of employees. So -- and therefore, we have a relaxation also on the cash flow side. And this combination reduced CapEx, reduced personnel expenses, also sustainably reduced material expense reductions. This will lead to a situation that as of today, I would say, in 2022, there could be a free cash flow breakeven again.Third question was what is the performance of Frankfurt retail spending per passenger. Yes, in my presentation, I told you that we -- what we, since 10 years, told the market, we reached more than EUR 4. It was exactly EUR 4.36 in H1, an all-time high, but it's not a joke, but these are real numbers. But I also told you that this came from the application of the minimum annual guarantees. And -- but even if we would adjust these numbers by the MAG, the spend per pax, despite the fact that most of the shops have been closed, we reached nearly EUR 3.80. So this is a relatively good number. And so we are happy to see this number. But don't ask me why the number is so high. Perhaps people now have so much time to eat and drink. And I don't know. We have -- it's too early to have a precise analysis. Also having in mind, we don't see Chinese passengers at our airport. So the normal prospects for this high spending numbers are not there. Nevertheless, we have good numbers. And perhaps this has to do with corona and all the old metrics are changed now. But as a matter of fact, we see these good numbers. And also, when we look back into Q1, Q1 was not, more or less, not spoiled from corona. We just had a retail spend per pax of EUR 3.61. This was significantly higher than the Q1 number of 2019, where we saw EUR 3.46. So it seems to be that there's a general trend perhaps to spend more for F&B. And I think the problems of the people are not looking at the last year, or I think they are -- they have other problems at the moment. Perhaps their spending behavior is a little bit more relaxed than in the past. But again, there is no detailed precise analysis what are the reasons for the relatively comfortable higher spend per passenger numbers.So looking forward, I would say that as of today, we expect a continuation of these high numbers not above EUR 4, but we see now that it should go on with a number even adjusted by the minimum annual guarantee, which is close to EUR 4. But now we have to see what will happen in Q3 and Q4.
Next question is from Jenny Ping of Citi.
A couple of questions, please. Just following on from the last question in terms of the retail per pax and the MAG that you referred to. Can you give us a bit of a visibility as to the duration of those MAG? You've given us a hint of the size, but any commentary around whether retailers are now asking for renegotiations would also be helpful. And then secondly, in terms of the FRA Alliance JV that you've now set up with Lufthansa, are you able to quantify what is the target benefit from this? Or is it just more a PR exercise? And following on from that, what sort of conversation are you actually having with Lufthansa in terms of tariffs as we look out into the coming couple of years? And then the very last question, just in terms of the 3,000 to 4,000 head count reduction. Can you talk a little bit about the costs associated with these headcount reductions to achieve the cost saving booking?
Yes. Thank you for the questions. First question was as a situation with our retailers. So first of all, you can imagine that more or less each and everybody came to us and tried to renegotiate the MAG. So because it's a very, very difficult situation for all of us, for us as the landlord, but also for the tenants. So we said a contract is a contract. [Foreign Language] So more or less all of the tenants paid the MAG. But we are fully -- or we have been fully aware that this could be just a solution for some months. So if the lockdown would have been continued also in Q3, it was clear that we had to renegotiate. But now we see it. Traffic is ramping up. Shop after shop now is opening again. And this is relaxing the situation because when they open again, they can make revenues. And due to the fact that the MAG is relatively low and so the threshold, I think the situation now in Q3 is changing insofar that they are making, again, revenue and then they switch over to the old regime where they pay a percentage of the revenue. So with other words, I think now the negotiation about adjusting the MAGs is now ending because traffic is coming back, shops are opening again and revenue is also coming back. So I think this is a good information for all of us.Second, the JV with Lufthansa. I think on Slide 14 in the presentation, we have shown all the ingredients of this JV. So you ask whether there is a quantified benefit or target benefit. This is not the case. I think there was a difficult relationship between Lufthansa and us. And now we are happy that this is gone. We are back on the table. And we are now sitting together, working together, looking -- where could be now win-win situation, especially in this difficult corona times. And it's -- in the moment, it's a shell. So we, inside the shell, we have 2 managing directors, one from us and one from Lufthansa. Now we try to fill up this JV with activities, which really creates benefits for both of us, but there's no quantification of, let me say, potential benefits. Now we have tried to start this JV and to look whether something could be productive for both.And third question's head count. It's difficult because, as I mentioned, in the moment, we are designing the program. But I would say, if you see the target up to 4,000 employees, it's a lot of people. And therefore, there is the willingness from our side also to accelerate this with money on which are spending for this program, which we have to do. And everything -- well it's our clear target to reserve all the requested money in the balance sheet in this year in the form of provisions for the programs. And I would say yes, yes, it's EUR 100 million, I think, is a good number. Could be even a little bit more to have a quick reaction of this program that already in 2021, we see a significant impact from the program in our P&L and especially in the item personnel expenses.
Sorry, can I just follow-up on conversations with Lufthansa about tariffs as we look forward?
Tariffs. There are no conversations with Lufthansa with regards to tariffs because we have already forwarded the new tariff scheme, which is identical with the old, to the regulator. So it's -- what is on the table of the regulator is the scheme with the same fee level than in 2020, except -- with the exception that all the incentives has been skipped. So we are not willing to pay incentives in a situation where we come from 0 traffic. And with regards to the future, we also signal to the market that there's just room for higher fees and not lower fees because we have a fixed cost business. Nevertheless, we showed that we were able to reduce cost items. But when we run the airport in the next couple of years with numbers which are clearly below 2019 levels, so with regards to the fees, they should be higher, not lower. So -- but in the moment, there are no discussions with Lufthansa about fees.
The next question is from Stephanie D'Ath of RBC.
The first one is following up on the commentary just made on the potential EUR 100 million cost savings from headcount. If I remember well, in your first quarter results, you mentioned that staff costs savings were up to EUR 30 million per month. And you also said earlier that you were expecting to save up to EUR 200 million staff costs per year. So I guess the difference comes from the fact that the EUR 30 million per month include the temporary measures linked to the coronavirus complete lockdown, because that would have been EUR 360 million per year, I guess. But as you ramp up and start to get back to work, is the EUR 200 million you mentioned earlier kind of the highest number you could reach? And then what is -- where is the difference coming from then if the EUR 100 million of headcount reduction to get to the EUR 200 million, I guess? My second question is regarding traffic. So you said the new normal in 2022, '23 of between 50 million and 60 million passengers. If we compare it to the 71 million from last year, could you maybe explain where you don't expect traffic recovery, and how long you would expect it to take -- to get back to the 2019 level? And then finally, on the improvement on the cash and EBITDA. Would it be fair to say that you expect Q3, in terms of EBITDA, to be better than Q2 and Q4 to be better than Q3? And looking more in the medium, long term, you mentioned, I believe, the EUR 1 billion CapEx saving over 7 years. But you mentioned also earlier that you were doing some work through additional CapEx savings. So are those already included in the EUR 1 billion over the next 7 years?
Thank you for your questions. First question was regarding all these issue, personnel and personnel reductions. So I think we have to be careful not to mix the elements. So in the moment, we brought down the personnel expenses here at the site of Frankfurt, down by a little more than EUR 30 million per month, primarily by short-time work. So this is one. Again, a little bit more than EUR 30 million per month here in the 3 segments. The driver is short-time work. So this is one number. The second number is what we are doing to -- what we have to pay now as provisions to realize the reductions of up to 4,000 employees up from 2021. So we are now -- now means in Q3 or Q4, we built provisions of, let's say, roughly EUR 100 million, could even be a little bit more, for these instruments like early partial retirement, early retirement, voluntary severance payments and provisions for operational layoffs. So this is in the balance sheet. And then, of course, we are benefiting year-by-year. So let me say this because -- let me say, the mix and the allocation of the instruments is not finally done. So we have to see when does it work, so when do we see the impact. Of course, a lot of things we should already see already in 2021. But it's a clear target that end of 2022, let me say, most of the 4,000 people should be laid off. And so the question is what is the new lower sustainable level of personnel expenses? And of course, it depends how many people we have from the administration side with a higher annual salary or, let me say, OpEx guys, which are lower paid. But as of today, I would say the sustainable annual reduction of our personnel cost level here at the site, Frankfurt, will be, I would say, EUR 250 million lower compared to 2019 levels. Could be more, could be less, but my expectation should be even a little bit more. So this is -- covers now all this, let me say, personnel items. Traffic. So we said we had this lockdown more or less in Q2. Now we are ramping up. So we have some scenarios. One is that we now we go up. If you look today at the Frankfurt numbers, we are -- yes, what do we have now? Minus 75 million, roughly, and if this trend continues for -- or at December, end of the year, we expect minus 60 -- or a range between minus 60 million, minus 70 million. Then let me say, we look forward, and then up from '21, '22, we have a ramp up, as you mentioned, to this new normal of 60 million, roughly 60 million passengers in '22 or '23, depending from the ramp up of the recovery. And this then is a new normal, which is a little bit lower than the 2019 numbers. Why is the new normal lower? Because we say we expect a more or less full recovery on the leisure side. But we expect not 100% recovery on the business side because now the people, let me say, the controllers, they are bringing down the travel budgets. We know or we have learned that Microsoft Teams is working. So the necessity to meet other people is reduced. So with other words, we do not expect a full recovery of the businessman in these times then. And from this new normal, again, about 60 million in 2022, '23, then again, we expect a normal annual growth, like in the past, in a range, let's say, 2% to 3%. This is today's expectation. I wouldn't say it's a crystal ball, but it's our best guess. And perhaps in 4 months, we have a different view. Third question...
I'm sorry, just -- so that kind of implies a 15% lower traffic overall numbers. So is that all coming from business? Can you remind us of your mix of leisure against business?
Yes. Again, this expectation, this guidance is just for Frankfurt where we have, in the past, had a relatively higher share of business traffic. When we -- it's about 35% share of business traffic. And this will show underperformance or recovery which is not 100% correlated to the recovery of the leisure traffic. It's just Frankfurt. So you can say that's the reason why we have a disadvantage due to our mixed customer base. When we look on our international activities, where we have more or less a pure leisure traffic, here, we assume a much faster recovery. So in other words, when you go ahead, when we're thinking about P&L in 1 or in 2 years, '21, '22, the old allocation of financial contribution, that 60% came from Frankfurt, EBITDA-wise, and 40% from international activities. This will change. It can be that in '21, the EBITDA contribution from our international portfolio is higher compared to Frankfurt because they do not have business traffic. And here, we, especially for summer '21, we expect much better and faster recovery compared to Frankfurt. Again, reason is lagging behind of recovery of business traffic. Third question, EBITDA. I said what we expect now for Q3 is that in Frankfurt, as of today, I would say, EBITDA breakeven will be given in Q3. When we look on the international activities, here, I would say it's not expectation, it's more conviction that EBITDA is clearly positive in Q3. Based on numbers, for example, when you look at Greece and all the other ones and how they ramp up, we expect clear positive EBITDA number. So that, all in all, the group EBITDA will be positive again in Q3 and also in Q4. But then, of course, the switch in Q4 in these high seasonal airports, like airport groups, like Greece and so on, EBITDA will go down as in the past. This has nothing to do with corona. But then on the other side, we -- as of today, we expect this ongoing ramp up at Frankfurt airport. And then we have the compensation of higher contributions from Frankfurt. So then the Frankfurt EBITDA is driving the group P&L and not the international assets like now in Q3.
And sorry, just to come back as around the last part of the question, which was related to CapEx and the EUR 1 billion saving you intend to do in the next 7 years. Is that -- could there be upside to that based on the fact you said earlier, you still had a team working on bringing CapEx further down?
What did you say? Upside in a way that the CapEx will go up again or upside in the second half -- have potential to reduce it...
Reduced budget.
Yes. Let me say, I think, first of all, let me say, the 2 good information, this is not new, is that Greece is absolutely in line with our expectations on time and in the budget. So end of the year, latest in Q1, we are -- now we have just 3 airports which have to be fixed. Corfu is now already done. And so we -- the latest airport, which is fixed is Thessaloniki with the opening of the new second terminal. So again, in Q1, Thessaloniki will be -- the new terminal will be opened and Greece is done. And the same applies for Brazil. So that in '21 and also the following years, you don't hear about CapEx from these 2 countries. So the remaining CapEx programs are Lima. In Lima, we -- in this month, we -- in August, we restart the construction of the runway because here we are obliged to do it. And this is one thing. Of course, this is a burden for CapEx. But on the other side, also, we clearly said we are going to delay the construction, the start of the construction of the new midfield terminal. Here, we are in good discussions with the government in Lima. And I'm relatively optimistic that we were able to delay this terminal in the future in a time period where this is not any longer a burden for us. So then I come back to Frankfurt. To Frankfurt is twofold, on one side, the Terminal 3. Here, we delayed the opening, which is also relaxing the cash outflow on an annual basis. In total, it's the same. And second, what I said, we -- let me say, during our Q1 conversation, we said that in the first step, we achieved a reduction of EUR 150 million on the maintenance CapEx here for Frankfurt. So in EUR 150 million per year, times 7, so more -- roughly EUR 1 billion in the next 7 years. And now we are sitting together and trying to elaborate whether we can even increase this EUR 150 million target. So the EUR 150 million is through, because this is based on real on projects which we canceled, and now we are looking for further headroom in a second wave and a second step with regards to maintenance CapEx for Frankfurt. So with other words, the CapEx peak, you will see despite the already realized reductions in 2020. And in 2021, CapEx will be lower than '20, and then '22 will be lower than in '21. So year-by-year now it's going down.
The next question is from Johannes Braun of MainFirst.
I think I have 2 or 3. Firstly, on retail. You previously said that you expect improvement there, but you also obviously expect traffic volumes to remain 15%, 20% lower by 2023, as you said. And you also expect to change passenger structure. So corporate travel and long-haul travel probably lower, while short-haul leisure should fully recover. So isn't there a negative mix effect in that for retail sales per passenger? And then secondly, just a clarification. You mentioned you expect 30% to 40% of pre-COVID-19 passenger levels. Just not sure whether this was for H2 or for the full year. And then also can you probably say what your expectation is for next year? Yes. And that's it for me.
First question, the passenger mix will change. So as you mentioned, what you said, less businessman, more in favor of leisure traffic. But as of today, we do not think that this will be a general disadvantage because when you look what have been the big spenders, the high spenders in the past, we are talking or we talked about Chinese passengers, Vietnamese passengers and Russians, and these have not been the business guys. So -- and when I said less businessmen, we are talking about primarily also about Germans, which are going to reduce their traveling behavior, but the German businessman, they have not been the big spenders. So to make the long story short, by the change of the passenger structure, as of today, we do not expect, let me say, spoiled spend per pax numbers. So because -- let me say, the positive contribution of the Chinese when they will come back, and we are convinced and if and when the corona numbers in Europe are going down, the Chinese will come back. These are the dominating passengers. They bring the high revenues. Second, what was the second question, Mr. Braun?
Just a clarification on your -- because you said you expect 30% to 40% of pre-COVID-19 passenger levels, and I was not sure whether it's for H2 or for...
End of '20. So we came -- the question is are we talking about the minus numbers or the plus numbers. So we, today, we have -- let's express it in a way. Today or during the lockdown, we had minus 95% to minus 98%. So then, let me say, last month, we had minus 80. And in August, we expect minus 75. And let me say, in December this year, we expect a range between minus 70 to minus 60, or plus 30 or plus 40.
And any expectation for the next year?
'21 is really difficult. As of today, it is not a -- I would say, 50%. But again, it's my best guess as of today, depending from corona numbers and the performance.
[Operator Instructions] The next question is from Elodie Rall of JPMorgan.
So I have maybe a couple remaining. Just to come back maybe on the traffic guidance. So you said you expect around 2% to 3% maybe after the 2022 or '23 level that you expect to be already 15% to 20% below '19. So if I'm not mistaken, that assumes recovery taking place basically at the end of the decade by 2030. So is that your current expectation? That's my first question. My second question is on Terminal 3. Would you expect any additional costs linked to the delayed opening? And if not, why not consider delaying the opening of T3 even later than '24 and '24, '25, then given your expectation for full traffic recovery? And my last question is really on real estate revenues. We haven't discussed that a lot in this call. We have been resilient so far. Would we -- should we expect that to continue? Or do you expect some cash -- some pressure? And maybe can you give us some understanding whether account like the P&L and the cash flow will be similar on this division?
Last question is very simple to answer. In real estate, we have long-term contracts. And we are continuing with the contract so we don't see any downside risk on the real estate side. So what you see now in the P&L, you will also see in the next couple of quarters and years.
And how long are the contracts?
It depends when we sign the contracts, but I would say the average duration is 5 -- even more than 5 years. Some are expiring, but again, there -- the demand is given. Even if a contract is expiring, we are not willing to go down with the prices. And there's no necessity because, let me say, in real estate, we are talking about, in most cases, about cargo business, and cargo business is running very well. So the forwarding companies, they make money. And so they are not in this desperate situation like the airlines. So that's the reason why from their side, it's not such so much pressure, like on the side from the retailers and the airlines. So again, no downside risk on the real estate side.Traffic guidance. Of course, let me say, from a mathematical perspective, full recovery, if you take my numbers, I didn't make -- I didn't use Excel, but it can be that it would be 2030. But frankly spoken, in the moment, everything is moving. I think perhaps in 3 years, the world is different. But I think what is our responsibility? We see we have corona now. It's a difficult situation. And we, on one side, we are not happy to have corona, but now we have to live with corona, and one advantage is that we do our own work, which you cannot do in good times. So we have to prepare our ship or our airport now for a conservative scenario. If and when at the end of the day, we have in 3 year, a full recovery, I would be happy. But we cannot, let me say, continue with our business on the base of hope. And that's the reason why now everybody in the market is conservative. You have to be conservative because, otherwise, you would gamble with your company. And we are doing it conservatively, it's also okay because then we are back in a financial balance. And if it would be better, fine, we are happy. But nobody seriously can tell you what will be the traffic in 2, 3 or 4 years. We have here so many question marks, and -- but I think a good management is correct around cost. I have Terminal 3. So you said, does it make sense to even to have a longer delay? So you have, in principle, you have 2 things, which if you stretch the construction time or when you minimize the construction, normally, the longer you construct, the more expensive a building will be. So the delaying, theoretically, is always not in favor of us. But in the moment, or if you look back in the last 2, 3 years, the construction mark was characterized by an excess demand. So the construction prices in the last 3 years went up like hell. And this was a clear disadvantage of us. Now by delaying the construction a little bit, we create an advantage in so far that you can really see now month-by-month construction prices are going down. And now we have 2 elements: a negative element to extend the construction time; and the positive element, because 50% of the outstanding works are not today fixed, so we are waiting for this is, it's creating chances to realize lower prices. Now we have really to make a fine-tuning between these 2 elements and to find the sweet spot where the higher cost by delaying will be overcompensated by more attractive prices for the outstanding parts of the construction. And as of today, I would say, with the new inauguration date, we feel very comfortable. Whether at the end of the day, it's 1 year quicker -- no, not quicker, but perhaps it will be exactly at that point of time or perhaps even 1 year longer, we have to see. We make the calculation internally. We are really testing the market, how is the price level for construction units are developing. And that's how we manage this issue at the moment to exactly find this optimal price for us in relation to the inauguration date.
Okay. And just your best guess about the overall budget now for Terminal 3 exactly?
EUR 4 billion, EUR 4 billion.
EUR 4 billion.
There's no change. There's no change. Let me say, one effect we will definitely see this is that this for -- let me say, the allocation of the rest of the EUR 4 billion, because a huge part is already spent, is now allocated for more years. So the annual burden is lower by delaying or slowing down the construction progress -- process.
The next question is from Arthur Truslove of Crédit Suisse.
So question one, 3 questions, if I may. So question one. Just on the cost cuts from a labor perspective. Obviously, you've talked about EUR 200 million cost to the business on a sustainable basis. How does that develop as traffic increases going forward? And also, are you expecting to take any cost out from a nonlabor perspective? And how much do you expect that to be in both Frankfurt and, indeed, outside of Frankfurt as well?Secondly, in terms of maintenance CapEx, clearly, you're talking about significantly lower numbers than you were talking about previously. Are you able to give any color on what capability you may miss out on as a result of that? And then finally, just on the minimum annual guarantees again. Obviously, we all heard from one of your competitors last week about how it was, like, difficult to ensure that they receive the minimum annual guarantees for terminals that were closed. Is that something that's likely to be a problem for you? Or not?
Thank you for the question. First of all, personnel expenses. I think the numbers are now very transparent. And you asked what is the dependency from traffic? Clear answer is we -- regardless what will happen on the traffic side, we are going for this program. There's just 1 scenario, let me say, possible that if corona would come back, let me say, a second or third or fourth wave, which would again would lead to a total lockdown, then we have to consider whether this 4,000 is enough, but we are going for this up to 4,000 reductions. So this is what we are going to do, regardless how the recovery is. That's just 1 theoretical scenario. If everything is going down or going bust then, of course, we have to rethink whether this is the right and appropriate target. So maintenance CapEx, what is the philosophy? I think when you look on the technical situation of our existing infrastructure, so I talk about T1 and T2. When you look back in the last couple of years, we invested about EUR 300 billion per annum in this existing infrastructure. This is a lot of money. And to bring up the quality of the infrastructure, to reduce the number of things which have to be fixed, and now you can say after these years where we invested a lot of money, the quality of the existing infrastructure is very good. That's the reason why our consideration is we have a very good existing infrastructure. And now we are using a philosophy in a way that when something is goes -- is out of order, we have to repair it, but we are not investing additional things in improving quality, et cetera. So it's just -- it's a pure replacement of things which go -- is out of order. And of course, we have to fulfill all legal things. And what is requested, we are doing, but not more. So a pure approach to run the infrastructure as it is now. And that's the -- let me say, the level to bring down also and, in the second step, the maintenance levels to a minimum, which is not spoiling the infrastructure. We keep it in the current situation. But on the other side, not more. There's no room for any fancy things. And that's the reason why this is a pure approach for the next couple of years. Not for eternity, this is what's clear, but for the next couple of years. Third question, the MAG. Yes, it's difficult to protect them, as I mentioned. And the pressure from the retailers is huge. But we -- yes, we withdraw. We had a wall. We created a wall. And now again, we are looking forward because day-by-day, the passenger numbers are going up again in T1. You can say shop-after-shop is now opening again. And this is relaxing the whole relationship between us and the retailers. And we have just 1 open issue in Terminal 2, where we really have a problem. But T2 is not the shopping paradise, when you look the total square meters of this terminal in relation to retailers. So it's not the retail one now which we have in our portfolio. And now we have to survive the next couple of months because, end of the day, we assume we have to reopen Terminal 2 again. Of course, this depends from the ramp up. But at the moment, it seems to be -- it runs good, the ramp-up and so we have to open again. And then also this last and final part of the infrastructure is opened again. And then the situation, with the retailers also in Terminal 2, will be then relaxed. So we -- I just received here the number. The MAG in Q2 was about EUR 7 million. This is a relatively low number, of course. For the retailer itself, it can be decisive for the -- to survive or not to survive. But let me say, for us, of course, we are looking for each and every euro. But again, we think in Q3, everything is going in the right direction.
Sure. Just sorry, one thing I may have missed in your response. Just in terms of cost, cost takeout, outside of labor in Frankfurt, was there anything there as well?
I think we have now this good track record of Q2, where we brought down the material expenses to the absolute minimum. So you can say the bad information is we don't see further headroom to reduce it in the second step. But on the other side, we have the clear conviction and also commitment that when we look ahead when now the traffic is ramping up again, we are not willing to correlate again directly the material or the development of the material expenses with the passenger numbers. So we try to keep it on this level which we have now. Of course, there are some items which have to go up. But in total, we -- there's a ratchet effect in a way that we -- the new normal of our material expense base will be significantly lower than before.
The next question is from Charles Maynadier of Kempen.
I just have 2 questions left on Greece. And so you're getting a -- quite a big step-up in tariffs post the CapEx completion. So would that still go through this year, if you could confirm that? And do you have any opposition from airlines against these tariff increases? And then more generally, on the international portfolio, were there any incremental regulatory developments triggered by COVID-19 that we are not aware of? And then maybe on the positive side, such as any sort of traffic protection mechanism that you could benefit from? That's it.
First of all, Greece, yes, I can agree. So we -- as of today, 11 airports are fixed. So the last one was Corfu. And now 3 of the 14 will be fixed now in the next couple of months. And the last one will be, as I mentioned, Thessaloniki end of this year or latest in Q1 '21. And for these already fixed airports, we have already increased the fees per departing passenger to a level of EUR 18.50. And let me say, in the first month of this year, we didn't see anything because a number of passengers was nearly close to 0. But now you see when you look also here on Slide #15, in the presentation, you can see that in the calendar or in the last 2 calendar weeks, so the daily passenger numbers in -- at our airports in Greece have been higher than in Frankfurt. So in calendar week 31, we welcomed nearly 500,000 passengers in 1 week. So from this I dream here in Frankfurt. And this is then always times EUR 18, not for all of them, but for the 11 airports which are fixed, it's times EUR 18.50. This now helps us in Q3. That's the reason why you will see a good EBITDA number in Q3 from Greece, but not just from Greece, also from most of the other airports in our portfolio. And as I said, departing passengers, EUR 18 per departing passenger. So this is in line what we all -- there's no impact from corona on this situation. So what -- but what we are doing is that we are in discussion, more or less, with all or most of the governments in which our airports are located. I already told you that we are discussing the issue to delay the terminal with the Peruvian government. We have addressed force majeure to the government in Greece and we are in good discussions. So we discussed in Greece. We discussed in Brazil for -- to achieve the so-called financial equilibrium, which is part of the concession agreement. And we have to see. So this will last some months. And then we have to see what can we realize based on this discussion. So there's just an upside potential for us. But today, we don't address anything because we have to see whether they are willing. But all of these discussions in the moment are -- they are very friendly, but friendly is one thing. At the end of the day, it's relevant what -- whether we get something on the table or not. But we have addressed all the issues, and we have to see what will be the outcome. But this would come on top, and we have nothing included in our expectations.
Maybe 1 follow-up on the -- also on the international portfolio. On the financing side, is there any risk on bridging covenants this year?
Yes, we have -- there could be a covenant issue in Greece with the so-called reserve accounts with the international banks. So we have to see whether there's a breach of the covenants or whether we can go for a waiver. And with regard to this, we are also in good discussions with the refinancing banks. And I would say there's a good probability that we will get a waiver and, therefore, there's no need to inject additional equity into Greece. So I'm very optimistic that we will find a good solution with the banks because it's just temporary negative phenomenon. And that's the reason why we are optimistic. And the project itself, it's a very solid and good project.
The next question is from Christian Cohrs of Warburg Research.
Yes. Just maybe first on the clarification one. Based on the EUR 250 million sustainable annual cost reduction you envisaged for 2022, if we add that to the expectation that passenger numbers will be roughly at 60 million, that's -- so if I've done my math correct and maybe you might confirm it, that should actually mean that for the Frankfurt-based division, you expect then -- or that profits in 2022 for Frankfurt should be more or less back at precrisis levels. Is that correct? Secondly, before, the good old pre-COVID-19 days, you said that you will not touch airport charges before the inauguration of Terminal 3. Now that is postponed to 2025, maybe 2024. So there's an increase in airport charges in 2022 or before the inauguration of Terminal 3 an option. I mean you haven't earned the -- your ROFRA and adequate return on your assets on -- in the precrisis year, you're not going to earn it this year or next year. So I think you have all arguments, what stops you to ask for more money. And then thirdly, more a strategic question. It seems that the eras of the superwide-body 747, A380, you name it, are coming to an end. Does this actually question your hub status, your positioning as a hub? And how do you see it? And what do you think also that -- you mentioned the intermodal connectivity of Frankfurt airport, you think you will remain a hub but the characteristics will simply change. Maybe you can shed some light on that.
Yes. First question, financial scenario 2022. So we have, in total, we have 4 theoretical levels. What we do not -- can't influence is the number of passengers. So we just can work with some assumptions or hypothesis. So -- but again, we said minus 15%, minus 20% in '22, '23. So this is, let me say, on the revenue side. As you mentioned, the -- in the old world, we said, old world, excess utilization of the airport, 70 million-plus passengers, what we expected for the next couple of years. Now it's gone. And in combination with this, we said we are not going for higher fees. Now the world is different. And we clearly said we have to go for higher fees, in which and what extent this is open. But the direction of the fees must go up and not go down in the next couple of years. So with clear words, before Terminal 3. This is one, but this is the smallest lever. The other 3 levers, we have directly in our hand. One thing is CapEx down. I think I elaborated what we are doing to bring it down. And the other 2 levers are material expenses, with other words, of continuation of this very low level which we have today, also in the next couple of years. And the third level, as you mentioned, these are the intended personnel expenses, so 4,000 employees less. And therefore, EUR 250 million up to EUR 300 million less personnel expenses compared to 2019. This combination, a significant reduction of personnel expenses, a sustainable solid reduction of material expenses, CapEx, sustainable CapEx reduction, plus higher fees, these are the 4 items, the 4 levers to bring us back to a financial equilibrium in 2022. And financial equilibrium means free cash flow, which is about 0. So this is our program, and we are working on this. The other question, yes, with regards to, let me say the wide-bodies, 747-800 or A380. So in the moment, it's not an issue because everybody has grounded these fantastic aircraft because you cannot run them with a seat load of 80%, 85% in the moment. But again, this is in the moment. Now they are flying 777s. They are flying A330s. Because in the moment, nobody is able to fill up an A380 with a seat load of 85%. And as long as this is given, they will be grounded. This can change again. So I never would say never again. But in the moment, they're flying with smaller aircraft, but this has no influence on the hub functionality of Frankfurt because if you look now, even, of course, they have 777 or an Airbus A330. But even to fill up these aircraft, you can't do it in a regional airport. So you still have to use this hub-and-spoke, this team to use the feeder traffic even to fill up a smaller long-haul aircraft. And that's the reason why -- and so far, we are confident that the hub functionality will continue. So this is not the end of the hubs. And when you look back in Q2, where intercontinental traffic still happened, it was Frankfurt. We have, in Europe, the highest connectivity. Why? Because we are in the middle of Germany and have -- we see a huge catchment area. And we have, let me say, a good airport partner like Lufthansa, who is able to utilize a network to fill up intercontinental aircraft. So that's the reason, again, the hub functionality is also in the future given and a guarantee for us that our future is secured.
The next question is from Andrew Lobbenberg of HSBC.
I do want to talk about handling actually. When you're looking at such a reduction in traffic and the reduction in headcount on your side, is there any prospect that you can get the EU to reconsider the requirement for competitive handling market? And equally, in this environment with traffic and headcount coming down, I mean, is it right or sensible that you persist in being the handling operator?
Let me say, due to the corona crisis, we don't see any reason why there should be a change of the situation in ground handling. We have, at Frankfurt airport, we have 2 concessions. One, we have, 1 as friendly competitor. And I think I interpret your question a way that you are asking whether there's room for a third concession.
No, I'm thinking the other way. Whether there's room of anyone, or whether you can justify only having 1 or whether it's an opportunity for you to exit.
So let me divide this question into the 2 parts. So first of all, we do not believe that there will be -- that there will be room for a third concession. We also do not think that we -- I mean, never will go back to 1 because then this would create a monopoly, and the EU is not willing to accept monopolies. And the second part of your question or the second question, whether this is a chance for us to separate ground handling, clear answer. Even if this would be a consideration, you have to see how many -- you see what we have to pay now to reduce. This will be a 3-digit million amount for payment packages. We have thousands of people in Ground Handling. And this would be very expensive. At the end of the day, we just do this, what creates value for the company, and to wind up ground clearly doesn't make sense. So it's not -- it wouldn't be a feasible -- economically feasible consideration. So we look ahead and we try again. But what we are doing is we have to fix ground, and that's for sure, with a clear target to bring it back into the black number. This is our task. This is also our ambition. And we do all to reach it. And you can say that corona is -- gives us also the power now to regain or to gain efficiency in a way that, let me say, after these programs, also Ground Handling is benefiting from these programs we are now initiating. So clear target at the end of the day, all the segments must be profitable, and we are working that they will be profitable.
[Operator Instructions] The next question is from Nicolas Mora of Morgan Stanley.
Yes. Just a few quick ones. First one, I joined the call a bit late, but did you confirm the new raised guidance for net debt of EUR 5.5 billion? I was just wondering if this includes the compensation payments for layoffs of EUR 400 million, EUR 110 million you mentioned. Second one on Lima. I was a bit surprised to see 0 EBITDA in Q2 with 0 traffic. Is there room then to trade EBITDA out of thin air in the third quarter as well? And 2 last points, one on retail. Just -- I mean, my colleagues were talking about the MAGs and the pushback against the MAGs. I was more focused on the pushback against the overall level of concession fees, not just the MAGs. Is there one as well? Is there a room with 10%, 15% traffic lower than 2019 by 2022 to just overwhelmingly reconsider the level of your concession fees? And very last one. You talked about tariffs. You want tariff increases in aviation, I think, you said by 2022. But I mean, historically, you've never had large tariff increases, not related to opening of major infrastructure. I mean how will airlines swallow that in a post-COVID world where they're still struggling?
Thank you for the question. First of all, provisions. So I said 3-digit million amount, which we are going to build. Here, you have to see -- I already mentioned the programs: partial retirement, early retirement, voluntary severance payments, and provisions for operational layoffs. So if you go through, for example, for me, for us, the most important level instruments will be voluntary severance payments. They -- we build a provision perhaps already in Q3. But the target is to spend the money then in Q4. So you see both. You will see both probably provisions in Q3, in combination with cash out in Q4. So a part of this total provision, you -- will be used or spent in Q4. The other provision is a carryforward into '21. The provisions for the partial and early retirement and also for potential or theoretical operational layoffs because our target is to realize as many as possible reductions via voluntary severance payments and these partial early retirements. And this -- if this would not be sufficient, then, of course, we have to use the instrument of operational layoffs. But the target is to do as much as possible with the first 3 mentioned instruments. So we have -- you will see the provisions in Q3 and Q4. You will see some cash out in this year, we hope, that it is as much as possible. Why? Because -- and this is a good signal, because the first lever which we are using, the voluntary severance payments are very successful. And then we spend the money now, and we see the direct reduction of personnel expenses already in the beginning of 2021. The rest is a provision then when we have to use it for, for example, partial retirement over the next 2, 3 years.
Okay. And if I may, just say on the split of these cost reductions, I mean your 2 large pockets of staff, aviation -- and so you got more than 6,000 people, and then Ground Handling, more than 9,000. I mean is it a split over these lines?
It will be a split. But now we are -- what I already said, we are now -- we are starting now the negotiation with the unions or the labor representatives. And we have to see what is the outcome of these negotiations. Again, target is to do as much as possible with voluntary severance payments in the beginning. But at the end of the day, you need a double voluntary behavior of the people. So we have to agree and the employees or the individuals have to agree. Then we are fine, and we can fix it. If not, at the end of the day, if nobody is willing to accept these programs, then we have to switch over to the final program or to the final level, which means operational layoffs. This is not our target, but it's -- you can say, [Foreign Language] so to say, if the first 3 elements are not working or not 100% working. So at the end of the day, we have these 4 instruments. This is the theoretical number of instruments we have. We have a clear target. But at the end of the day, you have to have the unions or the labor representative, and you have to have the employees. And we have to convince them to sign the contract. This is, let me say, the housekeeping and homework of our management teams to make the discussions. These are not very relaxing and amusing discussions. It's clear, but we have to do it now. And then we have to see what is the outcome.What was Lima? Yes, Lima, I said the breakeven in Lima is fine, and everything depends now from the ramp-up. The domestic traffic is open again. When I look now on what the management team in Lima is expected, yet, in 2019, we realized 23.6 million passengers there. As of today, the projection for the full year 2020 is roughly 7 million passengers. And so this means minus 70%. And this is so far okay, that we expect a positive EBITDA for the full year. So this is your question regarding Lima. Then you ask of the concession fees. I told you, it was not easy to defend the MAGs. And so -- and -- but I said, we have been relatively robust, and now it's improving. But on the other side, now to use this, to increase the concession, this would be an absolutely unfair treatment of the retailers. I think both of us, we went to a very difficult time. We have to survive. They have to survive. And now to misuse, let me say, in a recovery, this would not be fair. And we -- again, [Foreign Language] from both sides. Tariffs with the airlines. First of all, we have a clear regulatory approach, and we have here the rep where we have the WACC. And if you look now, the numbers are, in the segment aviation, they are clearly red. It's a deep red. And to discuss about profitability in this segment is like a joke. So with other words, there's a clear headroom to go for higher fees, so that from a regulatory point of view, there isn't any hurdle or no stumbling block on the road. But on the other side, if you ask what -- how will the airlines will comment this? The answer is clear there. I never have seen that the airlines given applause when you are going for higher fees. So I think this is part of the business. They're always complaining about fees. Even if fees would be 0, there would be complaints. But again, this is part of our challenge.
Okay. But I mean, one of your competitors, to name it, so ADP, said the same thing. You're entitled to large tariff increases just based on regulation, but this is not a satisfactory outcome or a realistic outcome. And again, you have all justification to push for tariff increases linked to infrastructure opening. With T3 delayed, I mean either the local sphere or the major T3, this is -- you are basically taking away some of that opportunity.
Let me -- no, the approach is totally different. In the past, we said, let me say, the story pre-corona was we have a high utilization or excess utilization of the infrastructure. We talk about 70 million and more passengers. We had, let me say, quality levels, which haven't been -- think about the waiting times at the security lines. So that's the reason why we said we cannot increase in a difficult operational situation for the airlines, also for us. We cannot increase -- we had a relatively high-return on assets. We talked about EUR 1.2 billion EBITDA for the group, everything was fine. And so we clearly said we keep the fees flat as long as the airlines bring us growth of 2% until the opening of Terminal 3. This was the rationale and the reasoning for going for higher fees with the beginning of the inauguration. Now we have a new scenario. We have a new world. Everything is -- was locked down. We -- our numbers are deeply red. We are not talking about any longer on return on assets. We have return on assets with the wrong -- minus before the number. And that's the reason why it's clear. We have an expensive infrastructure. We invested billions of euros on infrastructure in favor of the airlines. Now it's tough luck, we have corona. And so there is a clear reason to go for higher fees, like our colleagues in Paris. And as I said, you will see higher fees in a moderate way in the future because this is without any alternative.
And there are no more questions at this time. I hand back to the presenters for closing comments.
So thank you, everybody, for being part of this call. If you have later other questions, please call us in the IR team. And I wish you all the best for the rest of the summer. Thank you.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.