Aeroports de Paris SA (OTCPK:AEOXF) Q2 2023 Earnings Conference Call July 27, 2023 12:00 PM ET
Company Participants
Cecile Combeau – Head, IR
Augustin de Romanet – Chairman and CEO
Edward Arkwright – Deputy CEO
Philippe Pascal – CFO
Conference Call Participants
Elodie Rall – JPMorgan
Cristian Nedelcu – UBS
Andrew Lobbenberg – Barclays
Dario Maglione – BNP Paribas Exane
Ashish Khetan – Citigroup
Achal Kumar – HSBC
Eric Lemarié – CIC
Manish Beria – Societe Generale
Operator
Hello, and welcome to the Group ADP 2023 Half Year Presentation. My name is Holly, and I will be your coordinator for today’s event. Please note this call is being recorded. For the duration of the call, your lines will be on listen-only, however, you will have the opportunity to ask questions at end. [Operator Instructions]
I will now hand you over to your host to begin today’s conference. Thank you.
Cecile Combeau
Thank you, and good evening, everyone. I am Cecile Combeau, Head of Investor Relations at Group ADP, and with me are Augustin de Romanet, Chairman and CEO; Edward Arkwright, Deputy CEO; and Philippe Pascal, CFO.
After going through some prepared remarks about our first half results, we will open the line to Q&A and in order to allow a greater number of you dialogue with the management, I would like to kindly ask you please to limit your questions to one or two each time you get the line.
As a reminder, certain information to be discussed on today’s call is forward-looking and is subject to risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the disclaimer statement included in our press release and on slide 42 of our presentation.
And with that, let me hand it over to our Chairman and CEO, Augustin de Romanet.
Augustin de Romanet
Good evening, ladies and gentlemen. Hello, guys. Thank you, Cecile and good evening. Thank you for joining us to talk about our first half results.
Let’s move directly to slide three with the highlights. So, the half year performance is in line with our expectations. We are posting €2.5 billion revenue, up to 26.9% compared to last year. EBITDA is up to 22.9% to €863 million, representing a margin of 33.9% of revenues, in line with our forecast.
Net result is up plus 31.8% to €211 million and we’ve improved our net debt to EBITDA ratio to 4.3 times EBITDA. All of our traffic assumptions, forecasts, and financial targets for 2023-2025 are confirmed.
We’re keeping a strong focus on deploying our 2025 Pioneer Strategic roadmap, acting to decarbonize our industry and prepare for the upcoming sports events organized in Paris later this year. I want to speak about Rugby World Cup, mainly and next year.
Looking at traffic in the first half on slide four, we see traffic developing just in line with our assumptions, both in Paris and internationally. Recovery rate against 2029 — 2019, sorry, stands at 97.3% for the group, representing a growth of 30.3% against the first half of 2022.
In Paris, traffic grew plus 25.7% compared to the first half 2022. We welcome more than 47 million passengers in the last six months, representing 90% of 2019 level. Travelers are floating to our airport this summer and on certain peaks day, we will have exceeded 2019 traffic in Paris only, and we will be getting close to 2019 record levels at Paris À L’égout as well. Everybody can count on all group ADP employees and the entire airport community who are fully mobilized to welcome passengers in the best conditions possible.
This leads me to slide 5, with a focus on the initiatives deployed in Paris for this summer. As you know, hospitality is very important for us, it’s our priority. Our airports need to be efficient at every stage of checks and formalities and present in terms of contact with reception staff, and while you wait in the boarding lounge.
At the same time, we have a wonderful challenge with the upcoming major sport events, I’ve already talked about the Rugby World Cup in 2023, and for sure [ph], the Olympics next year. They provide a unique opportunity to showcase our expertise in terms of performance of our operations and infrastructure for peak management.
Therefore, to meet these challenges, we are putting in place additional resources, human, organizational, and equipment. I will just give you two examples. First, we’ve redesigned the queues, especially the queues for the control of passports and deployed additional workers to better support and guide passengers to the queues dedicated to them.
Second, we’ve carried out preventive maintenance on our luggage systems and asked our service providers to increase the number of maintenance technicians, especially during the weekends.
Moving on slide six with some example of projects commissioned in the last few months and ongoing. I will highlight, in particular, the work that is underway in Orly to build the future multimodal station, which will notably accommodate the extension of Metro Line, Line 14 and the future Line 18.
With Line 14 operational in June 2024, it will take only 25 minutes to travel to the center of Paris from Paris-Orly. We consider that this will be a game-changer to access to Orly, which is currently 80% by road.
Within this future multimodal station, we opened in April 2023, a new car park with more than 2,000 parking spots and the former underground car park has been closed in the same time.
All-in-all, more than half of our capital expenditure program is devoted to maintaining our assets and ensuring regulatory compliance. Recent examples of that, first, the upgrade of the luggage sorting system for the Terminal 1 in Paris À L’égout that started operations at the reopening of the terminal. Second, the new firefighter station in Paris Le Bourget airport, you can see that on the right of the slide number six.
Last highlights, I would like just to tell few words tonight about the launch of our new employee shareholding plan called Abelia. Following the authorization of shareholders, we have launched in June a new employee shareholding operation. It’s rollout will be phased in 2023 and 2024, and Abelia is a two steps operation.
First step, a free allocation of shares for each employee of the company. Second step, an offer to acquire shares on preferential terms for employees who are subscribed to the Group Saving Plan. It means everybody will be able to do that. This operation is fully part of 2025 Pioneers roadmap in which we have set an objective to carry out at least one employee shareholding operation by 2025. Our objective for sure is indeed to develop a new culture of value sharing involving employees in the company’s performance.
Talking about performance, it’s now the time to give the floor to Philippe Pascal, who will comment more in detail our first half financial results.
Philippe Pascal
Thank you. Thank you, Augustin, and evening everyone. Let’s move on to slide nine, focusing on traffic in Paris. Traffic continue to recover in line with our assumption. Traffic with mainland France show lower recovery, mainly due to closure of several domestic routes compared to before COVID crisis.
Traffic stood at 76% of 2019 in the first half, 74% recovery in Q1 and 76% in Q2. Traffic with Europe has recovered very well to 93% of 2019 traffic in the first half. We saw an acceleration in the second quarter and traffic with [Indiscernible] was nearly at full recovery in Q2 with 99%.
For international traffic, this traffic stand at 92% of 2019. North America have reached 101% in Q1, but weakened a bit in Q2. It stands at 99% overall in the first half.
Traffic recovery with Asia-Pacific is gradual as expected, mainly due to the slow recovery of traffic with China, which is at 15% of 29%. There are currently 34 flights per week compared to 93 flights per week in 2019. We continue to expect an acceleration in recovery of China traffic from the end of the year, but probably more in 2024.
Slide 10. Now, if we look at how this traffic translates into our retail business in Paris, we see that performance continued to be strong. Sales per pax reached €29. 6 in the first half, confirming the structural improvement driven by the deployment of Extime. Stretching that, the sales per pax in the new international area of Terminal 1 is now greater than that of Terminal 2e [ph], which is also reaching record level.
So, in fact, in the second quarter, both they’re well above €60 per departing passenger, €64 in Terminal 2e, and €69 in Terminal 1.
On the right side of this slide, you can also see the latest developments regarding the rollout of Extime, notably with the launch of the new Extime.com. Digital shopping included Click-and-Collect and the new Extime Rewards Program. We can also see Extime Media, now operational and launch the operation for 11 years until December 2034 under the new brand name that is Extime JCDecaux Airports.
Lagardère was selected as a partner of ADP in the JV that is will operate Travel Essential business for 10 years starting in 2024.
Moving on to slide 11 for our two main international assets. On the left of this slide, overall recovery of TAV airports stand at 95.8% of 2019 level. With this remarkably strong passenger profit at Almaty, this reflects an increase in both outbound and inbound tourism and business in Kazakhstan.
On the right side, GMR Airports stand at 108.4% recovery. In Indian airport, the strong recovery continued to be driven by domestic traffic standing at 114% of 2019 level. Goa airport opened on January 5th, 2023 and welcome more than 1.6 million passenger in the first half.
Moving on to slide 12. By nature, our activities are seasonal with stronger H2, that is very important to understand. As you can see on the left hand graph, in Paris, we historically welcome [Indiscernible] around 48% of the passenger in the first half and 52% in the second half. This seasonal effect is even stronger in Turkey, in line with [Indiscernible] season.
On the right of this slide, you can see that retail activities are also subject to seasonality with 53% of the volume of sales in Airside Shops made in the second half of the year.
Post-COVID, as activity recovers, we see in the airlines offering trends that concern the seasonality effect, which could further improve performance in the second part of this year.
Now, slide 13, getting back to our financial performance. In the first half, we have a solid growth in all P&L indicators and expected move down in EBITDA margin and control net debt to 4.3 times EBITDA.
I propose to move directly to slide 14, for more details on our revenue first. So, slide 14, revenue reached €1.2 billion in the first half of this year, up 27% versus last year, which was still affected by restriction to COVID in the first quarter of 2022, driven by the traffic recovery in Paris, the Aviation segment revenue is up 24% year-on-year.
The Retail and Services segment is up 31% versus H1 2022 and provides a strong sales per pax in addition to traffic. Real estate segment is up 8% versus H1 2022 with additional rents from assets taken overall in full ownership last year.
Abroad, the growth of TAV Airport has been strong, driven by both its airport assets and its services company Almaty Airport in Kazakhstan grew €53 million, driven by the strong profit momentum as mentioned earlier.
Moving on to slide 15, with EBITDA funding at €863 million, up 23% compared to H1 2022. EBITDA growth is driven by the recovery of traffic impacting positively our revenue. At the same time and in line with our previous comments, we are seeing an increase in our OpEx basis. Expenses linked to consumable are up €93 million. Nearly half of this increase in due to Almaty, where the cost of purchasing of fuel grew massively compared to last year.
External Services. For the External Services, costs evolution remain commensurate with traffic growth up for €124 million. Going forward as some of our contracts are being renewed this year, and we expect to see some pressure on this side of the P&L for the next month or the next year.
Staff costs increased by €112 million versus H1 2022, reflecting the first effects of the recruitment made in 2022 and ongoing in 2023 as well as salary measure in Paris and at TAV. TAV as well in the inflationary context. We expect pressure on our OpEx continue in 2024 and 2025, notably due to the renewal of some of our purchasing contracts from 2024, including new energy contracts.
And we expect to also in reassessment of our staff days of hospitality and operational resilience purpose. In-all, EBITDA margin for the first half 2023 stand at 33.9%, reflecting the combined effect of business seasonality, but also the trends in OpEx and a normalization of Almaty’s performance after a particularly strong year in 2022.
Below EBITDA on slide 16, amortization and impairment increased by €30 million, driven by the increase in amortization of airport operating rights for similar airport at TAV as they are amortized according to the level of traffic.
Our share of result is JVs & Associates [ph] is down €12 million, mainly due to the deterioration of the contribution for GMR Airport, reflecting the reinstatement of concession fees payment for Delhi Airport after two years’ force majeure period during this payment has been stopped.
Financial result is down for €18 million compared to H1 2022, including an increase of gross cost of debt of TAV Airport for €17 million. Income tax increased by €51 million, including a €28 million increase in unrecognized deferred tax asset, resulting in effective tax rate of 33% in H1. We paid more tax because of better result. The share of net income attributable to minority shareholders had an impact of €24 million. In-all, net income stand at €211 million, up 41.8% versus H1 2022.
Moving on to slide 17, you can see on this bridge, the main items explaining the evolution in our net debt. In addition the usual cash outflows with our dividend payments for €309 million and CapEx for €353 million.
This semester we add two specific cash flow — cash outflow. First, one is the subscription of FCCB, foreign currency convertible bonds for €331 million issued by our Indian partner. This loan is part of the merger project announced in March between GIL & GAL and we get at 6.76% interest from this loan.
Distributable cash outflows is €119 million upfront payment made by TAV to the Turkish Airport Authority, representing 25% of the rent for on Ankara concession. As of 30 June, net debt is just above €8 billion, showing good control with a ratio of 4.3 times EBITDA.
And with that, I will hand Augustin de Romanet. Thank you.
Augustin de Romanet
Thank you very much, Philippe. So to close this presentation, I would like to give you a few comments on our outlook starting with our guidance. So, slide 19, you see that our traffic assumptions and financial guidances for 2023 are unchanged.
First, we continue to expect traffic in Paris up to 93% of 2019 and for the group at a level close to 2019 traffic. Second, EBITDA guidance, it is still between 32% and 37% of revenue, reflecting seasonality of the business with EBITDA margin in the second half of the year expected to be higher than the first half.
Third, dividend policy of 60% payout with a minimum of €3 per share. Fourth, our guidance for CapEx is around €1.3 billion per year on average, between 2023 and 2025, of which €900 million for ADP SA only. These CapEx tend to be back-end loaded, and we expect CapEx to remain below this average this year with the ramp up in the following year. All other financial objectives for 2023-2025 are maintained.
Last, I would like to highlight our continued focus on acting for low-carbon aviation on slide 20. As you know, the decarbonation of aviation is our license to grow. At the Paris Air Show, we presented several experiments currently underway, some of which we hope to deploy before the Paris Olympics.
The 2024 Paris Olympics is indeed a wonderful opportunity for Group ADP to accelerate actions, contributing to its long-term vision not only in terms of quality of service and passenger experience, as we’ve seen earlier, but also in terms of decarbonization of the sector.
To illustrate that, I will mention two things. First, the launch of Hydrogen Airport, the engineering and consulting joint venture we launched with Air Liquide to help airports all around the world integrate hydrogen projects within their infrastructures.
Second illustration is the operational progress towards the launch of eVTOL services by summer 2024. eVTOL are electric aircraft with vertical takeoff and landing, which will allow new uses, especially for medical purposes.
Now, with that, Philippe, Edward, and myself, we’ll be happy to answer your questions. Now, you can open the line for Q&A.
Question-and-Answer Session
Operator
[Operator Instructions] And our first question comes from Elodie Rall with JPMorgan.
Elodie Rall
Hi. Good evening. Thanks for taking my questions. So, I’ll limit them to two. First of all, in terms of the fact that you’re seeing some increasing cost pressure from upcoming renewals of contract. Does that mean that you’d consider increasing tariffs again in 2024 and 2025 to offset the cost pressure? That’s my first question.
And my second question now is on the outlook for traffic. I mean, we’ve seen some weakness in June across the space, mostly because of airlines, I think, focusing on yield and cutting capacity. So, I was wondering what your views are about the structural impact from the airline’s position and if you think that could alter traffic recovery in the mid-term? Thank you.
Augustin de Romanet
So, thank you, Elodie, for these two questions. So, your first question about the increase in cost and the consequences about the tariff. So, as you know, in the regulated scope, we have a cap in term of value creation. The cap is the level of regulated work. But we don’t know exactly the level because it’s a decision of the regulator.
So, the question, it’s not just the fact that we have an increasing cost and we create some room of maneuver to have a tariff increase. The question is the comparison between the regulated road share and road work [ph]. As you know, we have a strong recovery. And all-in-all, we have to check before to say if it’s possible to increase the tariff or not. What is a good level of our regulated road share for the next year and the year after? And what is the level of the regulated work, what we can try to estimate from the French regulator.
So, the increase of cost, it’s not a guarantee to increase the tariff. It’s more complex due to the other factors like CapEx level, like treasury position and so on. So, it’s not mechanics.
For your second question about traffic, for the moment, we don’t see any structural impact in Paris. We have a good dynamic and we can see that. For the moment, we expect a very good summer and in line with our assumption and in line with our guidance. Thank you for this question.
Elodie Rall
Thank you.
Operator
And our next question comes from Cristian Nedelcu with UBS.
Cristian Nedelcu
Hi. Thank you for taking my questions. Maybe the first one on the OpEx in Paris, it seems that in the first half it came a bit higher than the consensus’ expectations. And maybe can you help us simplify a little bit what’s the sort of delta in OpEx in Paris this year versus last year or next year versus 2023? Could you give us a bit of a range once you add up together all the headwinds, what are we talking about just to sort of in in the interest of transparency and simplifying a bit the big–?
And then secondly, maybe, I think this cost allocation regulatory review and I believe a decision from the regulator is expected in January 2024. Could you elaborate a little bit on your expectations at this stage? Is it reasonable to assume there may be some regulated cost move to the non-regulated perimeter? Thank you.
Philippe Pascal
Thank you, Cristian. So, two questions. First about OpEx. So, in fact, we have higher OpEx, that is due to several factors. First, it’s — what we have to in mind. It’s a fact that before this year, we don’t have any impact about inflation. And now we can observe a good dynamic in our — in term when you have a renewal in term of contracts, but I explained during the presentation, which is very important for that.
Second point is the fact that we have a kind of normalization now due to the fact that we have higher performance in 2022 due to the fact that we have a strong recovery, but not a stronger recruitment plan in 2022. But we recruit a lot in 2022 and during the year 2022 and we continue to recruit in 2023 that we have also an impact in the full year’s basis.
In term of staff costs to give you more color about that, so we have a recruitment in 2022 for around 530 people. Around 100 people have also retired of resign, natural attrition. So, — and we have to replace that.
We have also implemented salary increase in — as explained in previous quarter. We — for around in the first step, €14 million impact in the first half of our ADP merger company.
And we continue to have a normal increase, a mechanic increase due to our rules in our company. Measure implemented in July represent around €4 million impact in H2. So, in full year basis, around €8 million.
This year, we continue to recruit and our recruitment trajectory is exceeding our initial expectation, notably because we see the need to reinforce the staffing in preparation of the big sport event, and we need some to reinforce our operational teams to travel more resilience.
So, this will impact our staff cost base, but I can confirm our guidance. I mean, our guidance in term of OpEx per pax for 2024 and 2025 and I can also confirm the guidance of margin for 2024 and 2025 — 2023, 2024 and 2025, obviously.
Having main — but at TAV, we have also staff cost increase, driven by salary increase, linked by the strong inflation and the salary increase for TAV is around €65 million. And we have also increased in term of staff in TAV for €11 million.
So, all-in-all, clearly we have a dynamic in term of OpEx. We confirm that. We can see for the time this dynamic, but we confirm at the same time our guidance for the first allocation system. So, as I explained previously, we have a workshop with all the airlines and this workshop provide an opportunity to make sure that each allocation can factually be explained or justified by one operational basis. So, we have 10 workshop with all the airlines to explain allocation key by allocation key, that is a huge work.
Now, we have to put on the table a proposal for our tariff homologation and in this proposal, we include in the overall tariff homologation, our correction in term of cost allocation. For the moment, we don’t expect a huge impact. We have some correction, obviously, to try to check. But for the month, we don’t expect a huge change. But remember that it’s not a decision of the French regulator to accept or to refuse our cost allocation system. It’s a global decision about our tariff homologation. So, globally, in this time, we can we have to wait also a few months, but we don’t — we are globally confident.
Cristian Nedelcu
Excellent. Thank you very much.
Philippe Pascal
Thank you.
Operator
And our next question is from Andrew Lobbenberg with Barclays.
Andrew Lobbenberg
Hi there. Can I ask about the recovery of the Chinese traffic, which is obviously important for retail? And I think that becomes a bit political because the Air France are trying to manage the pace of the recovery of traffic rights for the Chinese. So, how do you see this thing playing out? And how hungry are you? How confident are you that you’ll get back the high standing Chinese passengers?
And then can I ask just more broadly about the Olympics? And, obviously, you spoke about needing to employ staff and undertake some costs. But, obviously, it’s extremely prestigious for you guys to handle the Olympic traffic. But will it be profitable?
Augustin de Romanet
So, thank you for your question. So, first question on the China traffic. So, traffic with China is developing in line with our expectation. We expect an acceleration in the few months. We are currently, as I said, only 34 flights per week. But until 10th June, it was only 75 per week, load factor is just below 80%.
Philippe Pascal
It was on the 16 flights per week.
Augustin de Romanet
16 flights, excuse me, 16 flights. So, going forward, Chinese airlines may open additional routes and we expect Air France to progressively ramp up its capacity if it’s possible for our efforts.
Nevertheless, we still do not expect a full recovery in 2023 but also in 2024, notably because of a continuing constraint on demand. So, tourism industry has been massively stripped and it takes time for Chinese people to renew their passport and obtain a visa. And the hotel price — and travel package have also been subject to inflation, which will take — somewhat on demand.
But we hope the Paris Olympics will help accelerating the return of Chinese passenger. For the traffic of Olympic Games, we don’t expect a huge rebound in term of traffic during this event.
When you check the — historically as the former Olympics Games, we can see that we have kind of substitution. So, we have a good international traffic, but we have less over traffic due to the fact that the downtown is very crowded.
The impact of Chinese traffic with sales per pax. For the moment, we can see the strong dynamic in term of sales per pax. And — but we — a strong dynamic in terms of sales per pax without Chinese traffic. So, what we know and when you see our guidance in term of sales per pax, we can see a target in 2025, we expect some bad impact. For example, the works in Terminal 3 and the reopening of Terminal 2e and 2c. But also, we expect some offset of this impact by the favorable impact that is recovery of the Chinese traffic.
But all-in-all, for some amount, we can make the proof that without Chinese traffic, we have a strong performance. So Chinese traffic, it just left side.
In terms of cost, due to the Olympics, we need some additional CapEx, but we have in our guidance and in the envelope of the CapEx disclosed previously, we have enough element to implement our plan. We can confirm our guidance about that.
In terms of OpEx level, we can confirm that we — our guidance in term of OpEx per pax with the impact of Olympic Games and obviously, we have some impact due to the fact that we have to welcome also the guide to — for Olympic Games with a specific measure. Thank you for your question.
Operator
And our next question comes from Dario Maglione with BNP Paribas Exane.
Dario Maglione
Hi. Good afternoon. Two questions. One on GMR, you mentioned the airport the concession payments that made will start. Can you tell us a bit more about what’s going on and the regulation there?
And second question on cost. Sorry to ask you again about this topic, just as a simple kind of rule of thumb, OpEx in Paris for H2, should be similar to H1, or is there, like, any significant increase that we should keep in mind apart from the increase in salary that you may around the €8 million from 1st July? Thanks.
Philippe Pascal
So, thank you for this two questions. So, about GMR, so as you know, during the COVID crisis, GMR stopped to pay the concession in the Delhi airport. And now after the end of this crisis, we repaid — paid the concession of this year. And we have a bad impact for around €40 million, showing it’s not a bad really bad impact. We have a favorable impact before during the crisis. And now we restart the concession fees.
For the question, so in fact, we have a dynamic in term of recruitment and when we recruit, we recruit for a long time. So, mechanically, the recruitment in 2022 and obviously, the additional recruitment in 2023 have an impact for the next months. And we can have a full year basis, we have this impact.
We — a part of the Accelerating Pioneer plan, it’s due to the — our need in term of hospitality and our needs in term of vigilant [ph] measure. We have to assume the fact that we have to increase the month’s staffing and we have also to delivering our CapEx plan.
And this element plus the fact that we have to improve strongly our hospitality due to the recurrent event — all recent events have consequence in term of staff cost.
Dario Maglione
Sorry. Quick one. On the concession payment in Delhi, do you also need to pay the concession payment during COVID, period?
Philippe Pascal
So, we have a claim for doing COVID period, and we expect favorable decision. But for the month, the litigation, it’s ongoing.
Dario Maglione
Okay. Thanks.
Operator
Our next question is from Ashish Khetan with Citigroup.
Ashish Khetan
Hello, everyone. Thanks for taking my question. I just wanted to understand the key drivers for the increase in SSP. It has increased to €29.60 for the first half? And what are your expectations going into the second half?
And my second question related to that is given that we are already at €29.6 this first half, why are we not planning to increase the guidance for 2025? Thank you.
Augustin de Romanet
So thank you for your question. The main explanation of the good performance of the SPP is obviously the implementation of Extime, also, the good performance in the beauty goods. But also, we have some small impact in terms of inflation. But it’s not a huge impact. And for the moment, we have a good organic performance. Remind that the good performance, it’s for a large part in Terminal 2E, but also in Terminal 1, that is a new terminal. But at the same moment, Terminal 2E and 2C are closed.
So we merge all the quality of the traffic in the better place in terms of retail performance. For the second half, globally, we can assume the fact that we can stabilize this good performance for all the years. And for the next year, as I said, we have some works in Terminal 2E.
We have also to reopen the Terminal 2e and 2c — 2a and 2c in the second half of 2024. So, and we have a favorable impact if we have a good recovery in terms of Chinese traffic, progressive recovery during 2023 and 2024. So, for the moment, we don’t change our guidance due to the fact that we have to check this specific element in a volatile macroeconomic context.
Ashish Khetan
Thank you.
Operator
And our next question is from Achal Kumar with HSBC.
Achal Kumar
Yeah. Hi. Thanks for taking my question. Wanted to understand two questions, actually. First of all, in terms of traffic, how do you see — I mean, so the connecting traffic I can see has gone down recently? And then, of course, we see ETA is going to Lufthansa. So, what kind of impact do you see? I mean, I’m sure ETA must have been flying connecting traffic to your Paris airports. But now, of course, that could shift once Lufthansa takes over to German airports.
So, how do you see the connecting traffic? And then, recently, of course, you know, the Paris government has banned all the very short-haul flights. So, what kind of impact do you see on the traffic from that side? And my second question is about the retail spend per passenger. I mean, how do you see the growth? I mean, is the growth coming from inflation? Or is there a support from the currency? So, if you could break your growth in retail spend per tax that would be very helpful. Thank you.
Augustin de Romanet
So, thank you for your question. So, in fact, a reminder that in terms of connecting traffic, we are in a different position compared to Fraport. So, it’s difficult to compare the Air France hub with the Lufthansa hub. The fact is, in Paris, we have just, in Paris-Charles de Gaulle, a third of the traffic that is connecting traffic, compared to Fraport that is more than 70%.
So, in fact, we have, for the moment, not recovered all the connecting traffic compared to 2019, mainly due to the fact that all the airlines tried to concentrate all the planes in the most lucrative flight, and not to reopen all the possibility to connect in several destinations.
So, it’s quite a good thing, because we have a strength airlines, and we have a strength destination. In fact, in the next year, we have probably bad consequences about the modernization of traffic management that is a traffic management system that is for flight. It’s a new system for ATC, and to implement this new system, we probably, the authority, have to cut, for several days, a part of the traffic. But we don’t know exactly what is the level of this element and we see that perhaps, we can concentrate this element not in the most contributive destination, but concentrate in domestic flight, for example.
So, globally, for the moment, we have some assumption in terms of traffic, and we don’t change this assumption, because all in all, we can see that, for the moment, with the element that we have from the CVD evasion, we can assume our assumption.
Achal Kumar
Okay. And in terms of retail spend for passengers, if you could give a comment on that?
Augustin de Romanet
Yes, excuse me for your second question. So, the part of inflation, or the part of FX, it’s not a huge part. It’s difficult to modelize, but in fact, a part of the increase of SPP is probably due to this effect, but clearly, we can see a strong organic effect due to the inflation of Extime, but also due to the quality of our offerings. So, yes, we have, but it’s difficult to quantify that. The problem is not so huge.
Achal Kumar
Okay, thank you.
Operator
And our next question is from Eric Lemarié with CIC.
Eric Lemarié
Yes, hi, thanks for taking my question. I got two, actually. The first one, well, you mentioned the efforts in terms of hospitality for the Olympic Games in 2024, with some impact, if I understood properly, on OpEx, but should we expect some reversal effect after the Olympic Games? I mean, H2 2024 or in 2025, so positive impact on OpEx after the Olympic Games?
And my second question on real estate, should we expect the fair value of investment properties that you disclosed to decline in 2003 due to the current yield un-run, you know, the rate increasing?
Augustin de Romanet
So, thank you for these two questions. So, to start with the second question, I remind that in our real estate, we have offices, but we have also cargo. And when you see the demand in terms of hangar, we can see that you have a strong demand with a strong revenue at the end of the day. So, a very favorable impact in terms of fair value, and more than the bad impact in terms of offices. So, globally, we expect a stable or a slight increase in terms of fair value. But as you know, it’s difficult to model live and to have a forecast about that.
In terms of Olympic Games, so in terms of CapEx, it’s a heritage CapEx. So, it’s not we just accelerate part of investment plan, we disclose that it’s in our guidance. So, no issue. In terms of OpEx, in fact, we have a one-off effect.
For the moment, we don’t disclose the figures, but we have a one-off effect due to the fact that we have to rent part of equipment, we have to staff for a specific infrastructure, and we have a one-off due just to the operational needs. But in this element, we have also a structural effect, not due to the Olympic Games, but with the fact that we want to improve strongly our hospitality in our airport.
At the same moment, it’s not linked by the Olympic Games. When we speak about queuing, we speak about specific passenger experience, but all in all, we try to accelerate this improvement after the Olympic Games. But this part, that is a small part of the total of our OpEx, it’s structural. So, sorry, I can give you some figures, but globally, the huge part of the impact of OpEx for the Olympic Games, it’s a one-off.
Eric Lemarié
Okay. That’s very clear. Thank you.
Operator
And our next question is from Manish Beria with Societe Generale.
Manish Beria
Yeah. Hello. Hi. Thanks for giving me the opportunity. So, one question could be the international assets that we build. So, we have never talked about, so what is our hurdle rate? I mean, because some of the companies in the sector, say it’s like Fraport or FH Zurich, like they have an internal target of like double-digit IRR from these international investments.
So, I was just wondering if internally also ADP has some sort of target, internal targets of return like that. And the second is also on the international asset. So, how do we try to monetize this? It’s like more collecting dividends over the years, or at some point, we could also look to sell some of the assets, I mean, if you get a good price.
Augustin de Romanet
So, thank you for this question. So, globally, when we go to the international development, it’s to create value more than impact, first point. Second point, we don’t disclose all order, but what we can say is the fact that we have two very good investments, that is TAV, all in all, but also with the new prolongation of concession in Antalya, in Ankara, and so on.
So, a good perspective for a long time in TAV with a very good IRR compared to the global performance of the company. We have a relative impact in terms of profitability due to the TAV. It’s also the case in our business plan, not for the moment, but in our business plan for the GMR, for GMR Airport.
Globally, for the moment, we expect, we have a strong CapEx plan in Delhi and in Hyderabad, but all in all, we know that at the end of the day, we have a very favorable impact and a good contribution.
For the other assets, in fact, when you see the year before, we can see that we stopped some development. We stopped, for example, in Mauritius, we sell in Conakry, and so we managed our portfolio to have better performance. And so, that is our policy.
We are not a firm, so we are not here to create a huge capital gain to the fact that we buy and after we sell the airport, we have an industrial partner, and we try to create value for the long time in our asset. So, for the moment, what is very clear and what we can see also in our communication is the fact that both platforms, TAV and GMR, are key points for the international development.
Manish Beria
Just on India, I mean, like if you see the Delhi airport, I mean, the way it is designed, I mean, the 75% of non-commercial revenue goes away because you have a concession fee that is 45%, then 30% goes to calculation of the regulated asset base. I mean, so it is very difficult to create value. I mean, that could be very good growth, but in terms of cash flow, I mean, it’s very difficult, even if you have very strong traffic there. And if you see the listed entity that creates a very, very high multiple, it can even get higher at some point in time. So, why not sell it, I mean, when the dividend collection will be very less, I mean.
So, I’m just trying to see, I mean, if you get a good opportunity, let’s say, at some point in time, will you look into this factor of monetizing it if the dividends will not be enough, let’s say, or will not satisfy the required returns?
Augustin de Romanet
So, just to remind that we have both Delhi and Hyderabad. In Hyderabad, we have a strong regulation framework and we can create value. In fact, for the moment, we invest a lot to expand the airport and in terms of cash flow, it’s not so good. And also in Delhi, we expand a lot. In fact, in Delhi, the regulation is different and it’s difficult to, at the end of the day, to create value, but we have the real estate. And real estate, it’s very performance activities in Delhi.
So, all in all, for the moment, we are very confident with our partner, JMR family, that we can create value in these both assets. In fact, you’re right. For the moment, we have a CapEx plan, we have a good perspective, but we are not here to buy and to sell.
Manish Beria
Okay. Thanks. Thanks for your answers.
Operator
And our next question is from Cristian Nedelcu with UBS.
Cristian Nedelcu
Hi. Thank you for allowing me to ask one more question. Just doing the back of the envelope map, for the second half of the year, it looks like consensus is putting in 94% traffic recovery versus 19% with a 37% EBITDA margin. Do you feel comfortable with this type of scenario or do you think it’s reasonable to be a bit conservative for the second half, having in mind the way that the first half turned out? Thank you.
Augustin de Romanet
So, to be clear, we have a specific slide about seasonality. It’s a good answer for your question. So, the fact that it’s difficult to appreciate the full year performance just with the H1, first point. The second point, in fact, we have some elements in terms of OpEx, but we confirm at the same time our guidance. We confirm our guidance in terms of sales per pax, in terms of OpEx per pax and in terms of margin.
And all-in-all, in terms of traffic, we also confirm our guidance that is up to 93%. So, globally, we can see a good trend and we can see that when we confirm our guidance, it’s the reason why we believe in terms of performance for this year.
Cristian Nedelcu
Understood. Yeah. Thank you.
Operator
And there are no further questions, so I’ll hand you back to your host to conclude today’s conference.
Cecile Combeau
Okay. It’s getting late and we are aware it’s an extremely busy period for all of you with all the results publication. So, thank you everyone for having logged to our conference. Our next quarterly publication will be on October 25th with a nine-month revenue. And in the meantime, we will be attending several conferences to meet you and we are looking forward to that. So, feel free as well to get in touch with us, Investor Relations team, Elliot and myself, for any follow-up questions.
So, I wish you a good evening, everyone, and a beautiful summer. Thank you.
Operator
Thank you for joining today’s call. You may now disconnect.
