Operator: Ladies and gentlemen, thank you for standing by and welcome to our Aena Nine Months 2020 Results Presentation. [Operator Instructions] I must advise you that this conference is being recorded today and now I’d like to hand the conference over to your speaker today Emilio Rotondo, please go ahead.

Emilio Rotondo: Hi. Good morning to everyone, and welcome to this presentation of nine months 2020 Results. Here we’ve José Leo, CFO of Aena; and myself, Emilio Rotondo.

Well, I’ll leave the floor to José to start with the presentation. Thank you.

José Leo: Good morning, everyone and welcome to the quarter three 2020 results presentation. I’ll focus on the key highlights and then I’ll leave Emilio to deal with the business trends. As usual we’re showing the main parameters to show the performance over the quarter and till the end of September.

The passenger members fell by 68.7% and as you can see in the graph the size of the drop is different for the different airport senior group with Spanish network being the most severally affected with the fall close to 70%. Whilst the Brazilian group is the one which is facing the mildest decline that translates into revenue fall of close to 50%. As you will see later the relatively smaller decline in revenues is driven by the commercial revenue side of the business. In terms of EBITDA a very significant reduction, 75.9% but that is still healthy and positive €560 million EBITDA given the circumstances. The debt result level we ran losses with the nine month loss totaling €107.6 million.

Finally, the operating cash flow go down by 83% as well and the consequential debt is that the net financial debt to EBITDA reaches 5.5x which is more than double the usual level of this ratio. And we will comment on that later on as well. Moving onto slide number 5, I’ll talk you through the main highlights, the main topics for discussion this quarter. Starting with the traffic I won’t make any more comments on that this is just rated 18 what you’ve seen the previous graph. What probably is relevant to you is to understand what are the latest trends, what’s going on around us and how we see the future of evolution.

First of all, the expectation when submitting to the market the second quarter results was that this summer will show progressive, however, moderate but progressive recovery with every month showing better figures than the previous one. That was the case in July largely for August as well, but from the end of August onwards that trend was completely broken by the second wave of the pandemic and different restrictions, different actions taken by different governments particularly across Europe in response to that second wave. So, from the end of August what we’re seeing is worst performance in traffic done we expect it and a performance which is worse than the performance we experienced in August itself. We’re running now at around 17% to 20% of the traffic for the same months in 2019 and I’m not, let’s say sharing with you any insight of information, this is something that you can see almost with a naked eye. That means that we expect the rest of the 2020, the rest of the months of 2020 to show clearly underwhelming performance that will lead us to a year-end figure that probably will be not very far from the existing one.

So a total decline of around 70% give or take. Full or not that means that there is no sign of recovery in the short term and there is no visibility at all as to when we can expect that recovery to kick-off. It’s very dependent on health considerations on health and medical developments, vaccines availability, remedies availability and as a result of that we don’t feel as strong enough to anticipate when that recovery come and show up. In the meantime what is clear is that the international agencies that used to follow -- that are following this evolution are reviewing their expectations down for instance, the ACI Europe figures or expectations for 2021 that were recently reviewed I believe it was the 10 October are going solved [indiscernible] so they are now pointing out that there was case done – pessimistic case that could evolve potential declines in 2021 vis-a-vis 2019 of up to 63%, so 63% of course, not the pessimistic case, I’m sure hopefully that would be the case. But what I mean is that they’re stretching the range of the scenarios to a point that 2021 in some cases could be potentially as bad as 2020 has been.

Of course, on the optimistic side of the spectrum I think they’re mentioning something like from memory it’s 37%, 38% decline. So my point here is, the point we’re trying to make is that we don’t feel we can share with you any meaningful view of 2021 at this stage and we don’t see any visibility as to when the recovery can start. But of course, we will share with you any information we believe is credible or meaningful if and when we have that information available. The next relevant point here in this slide is the commercial revenue performance. The decrease in the commercial revenue is 19% year-on-year and that’s because we’re accounting for the minimal annual guarantee rent revenue in full.

That is the way it should be taking into account two things. First of all, the way that IFRS 16 leases apply as long as you have contractual commitments, contractual obligations with your commercial operators they have to honor those commitments and we’ve reviewed those contracts long and hard and very deeply. So that’s the right way of accounting for these revenues. Of course, there are two other considerations you have to make when accounting for those amounts. Consideration number one is, whether or not the application of different accounting standard which is the IFRS 9, financial assets that requires the assessment in terms of any receivables in terms of let’s say any impairment, any credit risks associated to that clearly you have to provide for that if and when you’re aware of that.

Frankly so far, the credit risks implications in terms of provisions to cover these revenues are relatively small. Of course, they’re higher than previous year and you can see that in the P&L, but they’re not material. So there is no reason to provide for those amounts, there is no reason to consider any material credit risks associated to that. Then second consideration is whether or not those minimal guarantee rents can be, might be affected by any commercial negotiation, any new commercial deal we can make with the operators. And of course that will be the case for -- in any case when we achieve an agreement when we close the deal.

But so far, no deal has been achieved with any of the operators. We’re in discussions, we’re in negotiations, negotiations are ongoing, I think they’re productive, I think in many cases the positions are increasingly closed, but so far we haven’t agreed or we haven’t signed any single commercial deal. So there is no reason to treat the annual guarantee rents, minimal annual guarantee rents in many of the way that we’ve to treat it then in this accounts we’re submitting today. Then we can move onto the next slide, in terms of cost savings I think we’ve been successful. We’re satisfied with the outcome of the cost cutting plan.

In the second quarter we’ve achieved savings of €127 million clearly less than the previous quarter for obvious reasons that we can discuss later on. But we’re keeping this plan in place clearly it is being adapted or is being adjusted as the traffic recover. But for the same token if there is any setback in terms of the recovery we will make sure that we keep the tension in the business and we keep saving to the extent that this is commensurate with the reality of the activity of the business on the ground. The investment plan as you know was restarted and is ongoing, we keep investing and we believe this is the right decision for the time being. In terms of financing liquidity just to let you know that we hold cash on credit facilities available for €2.4 billion.

Finally, for my section of the presentation, in terms of the debt covenants as we already announced back in July, we expect to breach the debt to EBITDA ratio at the end of the year and we’ve been in discussions with the banks and we’re making progress, over the coming weeks we’ve every expectation that we will get the temporary waiver from the banks. And we’ve no other comments, Emilio will deal with them.

Emilio Rotondo: Yes. Move to the next slide that would be the traffic data. Well, on top of what José has already mentioned maybe highlight that Luton airport has had up a four months quite similar to what we’ve seen in the Spain.

July and August was better than the Spanish network, but once this restrictions and new quarantines were announced in the U.K. the traffic went down and nowadays we’re in similar figures to what we’re seeing in the Spanish network. Meanwhile in Brazil the performance is better than in Luton and Spain, as you may see up to September the traffic went down just by 53% and in October traffic is performing better than that rate so believe that the traffic performance in Brazil would certainly be better than what we’ve seen in the Spanish network and Luton. Also highlight is, with regard to and we focus on the Spanish network highlight that the domestic traffic is performing better than international, I think that for obvious reasons – of the international traffic the European Union traffic is performing also better than long haul traffic due to all day, as I mentioned the restrictions and limitations we’re seeing from travelling from other countries outside the European Union. Moving to the next slide, slide 9, the performance by business lines.

The aeronautical P&L is showing the performance on traffic, if we in terms of revenue. Revenues fell by almost 64%, this was slightly lower than the traffic mainly due to a lower amount of incentives this year and also on higher amount in parking fees. In terms of expenses you see that the expense has gone down by just 6.6%. This is because we have almost €28 million, in fact €27.5 million of extraordinary expenses related to COVID-19. And we also have included the impairment test of a multi airport of roughly €48 million.

If we take out these two figures, the expenses would be down by 12% which is a figure similar to what we are seeing in the commercial line. And that's also the reason why we see EBITDA margin that goes down by 9% versus the EBITDA of commercial that keeps and remains 81% not only because of the cut of expenses but also because of the revenues coming from the accounting of the minimum annual guarantees that have been already mentioned by José. International area is also impacted by the traffic performance of Luton and Brazil and on the EBITDA level also by the €73 million impairment test impact on Brazil around last quarter that is impacted on the EBITDA values down to €-62.2 million. In fact Brazil during the last quarter had a very slight and small positive impact. Real estate services going down by 14% on revenues, 7% in expenses and 19% in EBITDA is an activity that is a lot less impacted by the traffic performance let's say is more independent on that part.

Moving to the slide number 10; the commercial business just highlights the two ideas here. First of all, the activities that have minimum annual guarantees namely the duty-free food and beverage specialty shops mainly have a lot lower impact in revenues than the rest of the activities just because these minimum annual guarantees that have been accounted during the period. That is you also see in this table that are in the amount of minimum guarantees is €456 million and also leads to an average commercial revenue per passenger of €11.72 per packs which clearly is impacted by these minimum annual guarantees and the lower number of passengers managed during the period versus last year. On the international holdings, I think the most important ideas have already been mentioned. Luton impacted by the traffic performance also the worst traffic performance we are seeing now in October and that has impacted both revenue and EBITDA.

In this case as you remember from June results, we don't have any impairment test impact. In the case of Brazil we have a lower impact coming from the traffic performance just minus 53% in terms of passengers as is clear last year, we didn't have any of these concessions we are not accounting in the revenues and EBITDA which is coming in this year 2020 and EBITDA being impacted by €73 million impairment tests running in June and instead of the Colombian assets and the Mexican assets all the main performance comes from the traffic revolution. And we end our presentation in this slide and we move now to the Q&A session. So please Operator if you can open the line. Thank you.

Operator: Thank you so much. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] And the first question comes from the line of Nicolo Pessina from Mediobanca. Please go ahead.

Nicolo Pessina: Yes.

Good afternoon. First question is on the regulation. I would like to know if you can give us an update on the talks with the regulator about ARPU, in particular will you discuss the review as panned maybe in the next month and if so what should we expect in terms of tariff and traffic evolution? Second question on the case factor. Looking at the reported per passenger numbers it seems like regulated aviation revenues are all performing, but stronger growth of [indiscernible] suggest the opposite. So can you give us an idea of the aviation in the regulated revenues and what should we expect for the K factor in 2022? And last question on the renegotiation of the commercial contracts.

I understand that you haven't reached any final agreement yet. I wonder if it's in-line with your expectations and if you can confirm that the renegotiation will be MPV neutral for the company? Thank you.

Operator: Please go ahead.

José Leo: Yes. Hi Nicolo.

Well starting with the question on the DORA 2. DORA 2 process is expected to be followed in accordance with the regulations and the law which means that we have to submit our proposal by the end of the year. There will be consultations over the first quarter of 2021. Consultations with the airlines supervised by the regulator and the supervisor of the CAAI, sorry DGA, the direction general and the commission, the competencia. And then there will be as you may expect let's say different views and discussions around it.

But I think it's premature to say where this discussion will lead us is premature first of all because if normally this is a process that requires a number of iterations. This year this is probably going to be more so, the starting point is always the passenger forecast and I'm sure that will be a key element for the discussion. So I would stop short of telling you where this can end up. What is true is that the passenger forecast will be in any case completely different and significantly lower in terms of passenger numbers than it would have been one year ago. Secondly that the investment plan is no doubt will be less ambitious, well ambitious is probably not the right word.

It will be commensurate with the reality of the traffic. So it's likely that the €1 billion per year plan that we had in mind and we discussed with yourselves a number of times won't be any more on the table. Some of the key projects that were contemplated in that plan will go ahead because the sooner or later they will be required, but probably the timing will be different, the phasing will be different. And very little else I can tell you because there is no even draft of any papers yet. So we are now in the process of pulling together information and submitting the plan by the end of the year.

In the meantime, what is ongoing is the discussion or the consultation on the 2021 tariffs and that's ongoing and progressing and with regard to the question on the K factor for 22 clearly the K factor in 2020 which is the relevant one for the 2022 tariff setting is going the other way around. Its showing concentration the yield in 2020 is being undergoing concentration rather than dilution. Until the end of September we have accumulated €95 million of yield concentration that we will have to return back. We will have to give back to the airlines through the tariffs in 2022 and that's not a surprise. When you have very little traffic the decrease in operations is less than the decline in traffic and there are some other elements of the airport charges that are still in place the consequence is that the revenue per passenger you achieve exceeds the one which is allowed by the regulation.

So it is the matter of consequence of that. So there is no surprise on that. With regard to the commercial discussions they are progressing, but clearly they are not easy. The conversations are difficult and there is a need to settle the dust and that takes time. But I feel that both sides generally speaking because this is a case-by-case situation.

You cannot take a general view on that. Every operator is different and every one of them have their own interests and their own views. But generally speaking, the discussions are productive and I expect over the coming weeks but frankly it's difficult to commit because you have, it takes two to tango. You have to I expect that we will be reaching in agreement. And of course as a result of those agreements some of the elements of the contracts will be tweaked.

Whether or not we will achieve the MPV neutral objective? Well this is a tough. It's a tough thing. It's a very tough thing particularly when you have today the situation has deteriorated further. So the expectations today are not the expectations three months ago because the pandemic evolution is worse than we expected and the traffic evolution is worse than we expected. So that's a challenge to say the least.

Nicolo Pessina: I totally agree. Thanks a lot for all the explanations. Very much appreciated. Thank you.

Operator: Thank you so much.

And the next question comes from the line of Elodie Rall from JPMorgan. Please go ahead.

Elodie Rall: Hi, good afternoon and thanks for taking my questions. First of all on the MAG quarterly reporting, you have already reported about I mean accounted for €456 million and I think you guided for €800 million for the year. So can you help us understand what we should expect for the last quarter of this year if it's €200 million or €400 million providing that traffic stays as it is now? I think a little bit of explanation on the quarterly reporting would be helpful.

So that's my first question. Second I'm not sure, I got cut a little bit, but I think you talked about tariff from 22 but what about tariff discussions for 21? Last time I think you said you expected flat tariffs for next year. Is it still your base case? And last question on testing. What is your view basically on implementing the pre-departure COVID test given that it's being adopted at other airports at the moment? Do you think it could make a difference on traffic? Thanks very much.

José Leo: Okay.

Well, starting with the MAGs the €800 million, well €800 and something million MAG figure was meant to be the 100% of the MAG for the 2020, for the year as a whole. Clearly you only account for MAG to the extent that they are not somehow replaced by actual sales, by the variable element of the royalty of the fee. Clearly, in quarter one, we had significant revenues coming from the underlying sale activity. So there is no need to account for the MAG for that particular period of the year. Well, there is an element of MAG but this is quite limited.

So the bulk of the MAG revenue accounting is driven by the quarter two and quarter three lack of activity so to speak. If you look at the 20, at the quarter four without giving you any particular figure that we can give you later on if you wish in a more precise way. You can give or take, you can look at the same figure that in quarter two more or less. So clearly you can reach something in the range of €600 million, but the precise figure can be given to you by the IR team later on. Let's say €600 plus million and that's the amount of MAG that we are likely to end up accounting for recording.

And then invoicing and collecting unless there is an agreement with the different operators to rearrange the contractual distances. With regard to 2021, yes, the discussions are ongoing and I still believe there will be a flat tariff on that. That's my expectation. We need to wait and see because ultimately that's the regulator's call. It's not ours but that's my expectation.

And then with regard to the pre-departure COVID test, honestly I will stop short of making comments on health processes and procedures or health decisions. Of course we have our view, but the most important part of our view is that we believe they should be consistent and common procedures applied at least by the different European Union countries. That's what exactly is the solution in medical terms, I'm not going to comment on that. I might have my own view but that's not relevant to this. But what is important is to make sure that we contribute to build the confidence of the passenger and we contribute to show the passengers that he or she travels across Europe in particular, they will find the same rules and the same routines.

I know there is a recently the European, the Council of the European Union released the paper recommending exactly the same and we are waiting for some instructions that my understanding is that they have been, they should be developed by EASA and the European body in charge of the pandemics and I don't remember now the precise name but, so they will be, supposedly they will be issuing more detailed instructions, but we keep waiting for that.

Elodie Rall: Okay. Thanks very much.

Operator: Thank you so much. And the next question comes from the line of Cristian Nedelcu from UBS.

Please go ahead.

Cristian Nedelcu: Thank you very much. Thank you for taking my questions. Two from my side if I may. So first of all, you are positive on an operating cash flow level in Q3 and this is before any cashing flows from MAGs, but could you help us understand at what level of traffic you would expect to reach free cash flow breakeven having in mind your current CapEx plans for 2021.

So any type of indication there that could help us better measure that? And secondly, a technical question on the MAGs. Some of your terminals are closed. Is it fair to assume that in this case you are not entitled to receive any MAGs related to the shops in these terminals and if that is the case out of the €600 million of MAGs for this year how much is related to shops in close terminals? Thank you.

José Leo: Okay. Christian with regard to the first question no matter how easy you think the mathematics are, I would ask you to wait and the IR team will give you the the precise numbers that I don't have in my memory now.

What is clear is that we are at very low level of traffic. We are able to generate positive cash from the operations standpoint clearly and that that means that let me dwell on that. That means that if the traffic levels remain really subdued over the coming months, the cash burn will entirely driven by CapEx. That's I don't mean that we are minded to stop investing, but what I mean is that can give us much more flexibility than we would have otherwise. And then the answer to your question on those MAGs that were accrued over the period of time in which the facilities were shutdown.

We have reviewed our contract in detail and our conclusion is that we are entitled to invoice and to charge and to collect all the monies regardless of the closure. So that's a contractual right. On the back of that we are accounting for those revenues and believe me that's the discussion, a very, very deep internal discussion and a discussion with the auditors and so that we are doing what is meant to be the right thing under the accounting rules. But of course that doesn't mean we are, I would say, people minded to ruin the life of our operators. We are discussing with them different avenues.

So we are minded to help them to help us. But in the meantime those revenues are legitimately recorded and we are entitled to recover them in full.

Cristian Nedelcu: Understood. Thank you very much.

Operator: Thank you very much.

And the next question comes from the line of Siobhan Lynch from Deutsche Bank. Please go ahead.

José Leo: Hi good afternoon. Thank you for taking my questions. Just a couple from me please.

So firstly the winter season is now due to be, I guess weaker than was expected back at the half year. In terms of kind of cost savings and the opening and closing of infrastructure, traffic at some of I guess the smaller airports in winter is usually low but probably going to be much much lower this time around. Could we see any closure of some of the smaller assets in Spain? And then, I guess similar on the bigger airports in Madrid and Barcelona could you just run us through the kinds of operations you have currently and if you're channeling passengers through kind of only one or two terminals and just kind of your flex from that perspective on cost savings? And then kind of next question on cost savings, in Q3 I think we can see that you've made some good progress. I think specifically on other operating expenses they seem to be down quite a lot for Q3. We don't get the split at the nine months in terms of what's driving that.

So any kind of color you could give on that would be great? And then just finally on MAG. Is there anything you'd be able to comment on whether the movement towards a kind of per passenger basis of MAGs is something that you're considering? Are you negotiating that at all at the moment? And what could that mean in terms of your ability to kind of collect the MAGs that you've recognized? Thanks very much.

José Leo: Well, starting with different actions we are taking or we could potentially take on the cost saving side. Clearly, we don't rule out anything without commenting on any particular measure, any particular decision. We remain vigilant if there is a need to tackle a really poor scenario such as the existing traffic levels remaining in place for many months to come.

We don't rule out anything at all from closing facilities to clearly addressing again our suppliers to move backwards. And I believe that we have proven that we are able to achieve the savings we target. As you are mentioning in your second part of the question particularly in terms of the other expenses, the other general expenses which is the universe of costs that we are targeting, we have been targeting mainly more than internal costs or staff costs as you know. So, we have been able to deliver that. So, we remain absolutely confident that we will be able to do it again.

On the other hand I want to mention that in some of the contractual, in some of the new tender processes that we are now conducting, we are introducing in the tenders conditions, new features, new conditions along the lines of being able to suspend partially or totally the services provided by any particular supplier when the traffic goes down by a certain amount. So we are introducing elements of viability. Of course that will come with the cost because nobody will take more risks for free. But that will help us going forward because some of those contracts are being awarded as we speak. Some of them are very, very big ones like the security contracts.

So as a combination of our let's say pre-tested cost cutting experience plus the new features in the contracts, we believe that we will be in good shape to deal with a very protracted let's say worst case scenario. That hopefully won't be the case. I don't know if I'm missing something else on that let me know otherwise and then on the MAG. The MAG, the discussions on the contractual terms and conditions are dealing with everything. We are not closing the door to anything that can help the operator to commit long-term and to make sure that long-term the conditions are not impacted and they really keep committed to the contract.

So short term we can contemplate all sort of solutions including, I don't deny that. Potentially the application of per passenger MAGs on the short term, only in the short term.

Siobhan Lynch: Brilliant. Thank you very much.

Operator: Thank you.

Emilio Rotondo: Sorry Siobhan, just to highlight that in the report, we publish the management report on page 28. You have the detail on the evolution of the different lines under the other operating expenses. In any case that if after reading that that part if you have any other doubt or additional doubt please contact us.

Siobhan Lynch: Brilliant. Thank you very much.

Operator: Thank you very much. And the next question comes from the line of Arthur Truslove from Credit Suisse. Please go ahead.

Arthur Truslove: Hi there Arthur Truslove from Credit Suisse. First question from me, just on the debt covenants.

Obviously, you've been sort of consistently optimistic that you will achieve a temporary waiver on those and I guess my question is really at what point would you become more concerned if you are unable to reach agreement? And second question on the minimum annual guarantee revenues gain. You clearly had €456 million of revenues year-to-date and are you able to give us any idea sort of how much cash you are actually expecting to receive in respect of that and if you do reach agreement with your concessioners, is it realistic to believe that you then would be impairing the receivables that you have put on your balance sheet so far? And then third one from me, I think from your management report that you have incurred €28 million of COVID specific sort of safety and security cost and at what point you are able to start adding those back to the tariffs? Thank you.

José Leo: With regard to the waiver I have every confidence that we will get waiver in place. Simply this thing take time. Believe me I don't have any concern about it.

It's clear that banks are now dealing with waiver requests let's say in every corner of the globe, I will say. So they are busy, but there is no doubt that Aena, if they are agreeing to waivers with much more complicated animals, you can imagine that Aena that will have no trouble at all in dealing with the maturities and debt service won't be an exception. So I am absolutely confident that we will achieve that over the coming weeks. In terms of the MAGs, let me tell you because probably the terminology here is relevant particularly from the accounting point of view. We are accounting for the MAGs and we expect to collect them in full and when we expect to face any problem with collections, any credit risks in that case we will impair that particular amount which is what we have done in quarter three already.

But if you look at the figures, the total provisions in the P&L are €15.2 million. That means that the result of that impairment exercise is not very material. We will do the same again at the end of the year with any minimum guarantee rent which is about to be invoiced collected. So that will be what you call impairing the receivables. Different story is in those cases we reach a commercial agreement, a commercial deal.

I wouldn't call that impairment that will be restructuring of the contract and as a result of that there will be a need to rearrange the accounting of the revenues. And under IFRS 16 that can be relatively complicated in the sense that let's say for the sake of argument, if we agree as part of the particular deal to waive a certain amount of minimum guarantee rents that won't be hitting 100% 2019, sorry 2020 that will probably, probably and I don't want to anticipate any particular information that could be probably spread across the life of the contract. That won't be an impairment. That would be contractual restructuring and as a result of that let's say the accounting will be adjusted accordingly. But this is just once again academic.

The important point though is we have the right to collect those minimum guarantee rents. And every month we will be accessing whether there is a need to impair any of those amounts. So far, the conclusion is that the need for impairment is limited to relatively minor amount of rents. And then I'm sure I'm missing something.

Emilio Rotondo: COVID expense.

José Leo: The COVID expenses, my understanding is that they will start being, clearly as they are incurred in 2020, clearly they will be affecting the tariffs of the second next year that will be 2022. So certainly that will mean that those costs will be contemplated in the DORA 2 discussions, but we are protected by a law in that regard. So we are absolutely relaxed and confident.

Arthur Truslove: Great, thanks. Just following up very quickly on the MAG again so what you're really saying is that there might be a period of time in subsequent years for which the amount of revenue accrued could be less than the cash that you receive on the basis that you've already accrued some of the revenue in 2020, but you're probably not going to get paid for it for a little while.

Is that fair?

José Leo: No. Well, you mean after a commercial agreement has been reached or just as -- because any minimum guarantee rent.

Arthur Truslove: I mean after a commercial agreement is reached. So let's say recognize the revenue in the second and third quarter you then reach commercial agreement which brings that sort of down if you like. My question then is, given that you're not writing that revenue off does that then mean that you'll sort of recognize less revenue in respect of 2021 or 2022 or whichever year and then receive more cash for that fund?

José Leo: Yes.

Certainly, this accounting will give rise to a divergence, I don't know whether that will be material or not, but the divergence between revenues and cash definitely. You know, what I mean.

Arthur Truslove: Yes. Absolutely. Yes.

Thank you.

José Leo: Thank you. That's not helpful obviously from an intuitive point of view.

Operator: Thank you so much. And the next question comes from the line of Martin [indiscernible] from Bank of America.

Please go ahead.

Unidentified Analyst: Yes. Thank you. So firstly, since the last conference call in Q2 have there been perhaps any discussions with airlines in terms of potentially granting further commercial discounts or incentives to airlines given the deterioration in traffic outlook and do you think it could be in the interest of the company to perhaps incentivize traffic in the recovery phase? Number two is on CapEx. It looks like CapEx is now much more normalized.

So do you expect traffic for Q4 and for 2021 to be roughly in-line with what was in the DORA 1 determination? And thirdly apologies, just following up on MAGs. My understanding was that you receive a significant amount of cash typically for MAGs for your partners in Q1. So is that the case and on that basis would you expect to have some progress in those negotiations about MAGs so that there is better clarity on cash to be received by 2020-2021?

José Leo: Okay. Thank you, Martin. Well, your first question is absolutely on time because yesterday the Board of Directors approved and I think today has been published in a number of papers a change in our incentive scheme.

I don't know if you are familiar with the scheme, we approved some three months ago, two months ago where what we were trying clearly the previous incentive schemes made no sense in the COVID environment. So we approved this scheme involving incentives to operations. Regardless the number of passengers, we were incentivizing the airlines to add capacity, to add aircraft in operation with the number of thresholds. So, we were committing incentives provided they reach a number of thresholds. Okay.

That scheme has been in place what's meant to be in place until the 31 March 2021 covering both the summer 2020 and winter 2020, the reality is that we have realized that in the current circumstances that the scheme would be completely useless. While they managed to earn some €50 million in incentives until the end of August, in September and within October where we were heading for close to nothing. So we changed this scheme and yesterday we approved a new scheme in which we are providing incentives to operations regardless with no thresholds at all to the extent that they get over the 20%. So they put in place more than 20% of the operations of the same month in 2019. They will start earning the incentive.

The incentive roughly means that if they any airline operating 30% of the total number of operations they run in the same month of 2019 will earn 30% of incentive then if they operate 40% they will earn 40% of the incentive and then so on and so forth up to 100% of the incentive always applying on the landing element of the airport charge. The landing element of the airport charge is roughly 25% of the total airport charges. And we believe that's much more consistent with the reality we are living through and that will be a good help to the airlines and we are very pleased to announce that. Clearly, we didn't include it in the presentation today because it came at the same time and honestly speaking we don't expect that to have a material impact. But if it has a very material impact for instance if they reach 100% of the operations of 2019, we will be more than happy to celebrate that.

But we are helping in a way that we believe is meeting the needs of the airlines at this moment in time. Then CapEx. Well, CapEx you mentioned something that confused me a little bit. You said that whether we expect traffic in Q4 and 2021 to be.

Unidentified Analyst: The question is just what do you expect for CapEx, for maintenance CapEx for Q4 and 2021.

Is it in line with your original projections from the DORA document?

José Leo: Exactly. Remember back in July we said that we were restarting the investment plan and clearly we wanted to catch up because the plan was halted for three months. So our intention is to catch up and to deliver the entire CapEx commitment for DORA 1. Clearly, we keep an eye on that as you can imagine we need to monitor what's the situation of the traffic. I don't mean we are going to be, I don't know if you like coming hello or hi, we are going to keep the same position.

If the poor traffic figures remain in place for many, many months we will see. But for the time being that's our commitment and our objective. And then in terms of the MAGs. We can think of two different scenarios. Scenario number one with any operator that by the end of this year or by the time we are due to invoice and charge the MAGs, with any operator we haven't reached an agreement we will send the bill.

We will send the invoice and we will charge the MAGs and we expect to collect them in full. For any operator with which we have achieved an agreement, the agreement will apply and as part of that agreement, I'm pretty sure at least partially the MAGs that were due for January next year won't be due anymore. But that will be on a case-by-case basis.

Unidentified Analyst: Very clear. Thank you.

Operator: Thank you so much. And the next question comes from the line of Patrick Creuset from Goldman Sachs. Please go ahead.

Patrick Creuset: Hi, good afternoon. Just one question for me if we can come back to your thinking on the DORA.

So to just have your thoughts basically on some of the parameters I mean, do you for example see K to argue for higher costs of capital in the current contract type of stuff equity and do you actually see a way to possibly even ask for higher aviation fees in the next DORA despite the cap you have in place until 2026? And do you see potentially also a mechanism to reclaim some of the losses or under during the COVID period 2020/21 basically for the next DORA system for credit?

José Leo: Okay. You want me to show the cards. Well, I am being serious. I don't think it would be sensible and indeed clever or smart to discuss some of these things because we will need to submit our proposal in due course. Until then we have time to run scenarios, to review figures, to update our position with the latest information particularly now that things are evolving very, very rapidly.

And so I'm afraid, I won't be able to answer any of your questions. But at the same time I won't rule out anything. What is true in my view and this is a general comment is that the level of risks that this business carries is higher than many people thought one year ago. So these things should be reflected in the right way. I'm sorry.

Patrick Creuset: I understand. Simply in terms of mechanics do you actually see a procedural way to get around the cap on raising tabs in the next DORA because I think the cap for 2026 specific procedure, do you see a way to for example get a credit under or to raise the fees apart from the negotiations?

José Leo: Well I think, initially the only element of cost that could support any scenario of let's say exceeding the cap would be the COVID related costs by the legislation approved some months ago, stated very clearly that the cap won't apply to any COVID related cost recovery process. Beyond that I've frankly struggled to see that change. But I don't think we will need it. Honestly I don't think we will need it.

Because the driver for everything will be the passenger forecast and if the passenger forecast is really, really awful, the investment plan should be commensurate with that pretty bad scenario. So I believe it would be probably wrong to preempt that we will need to exceed the cap.

Patrick Creuset: Okay. Thanks very much.

Operator: Thank you very much.

[Operator Instructions] And the next question comes from the lines of José Arroyas from Santander. Please go ahead.

José Arroyas: Just a couple of questions. First one is on taxation. The Spanish government announced for 2021 yesterday and there appears to be some confusion on whether there will be new taxation Spanish corporate particularly on dividends.

Does Aena have assessment of what these might mean for the company? That's question number one. And question number two on the MAGs. If you can give us some flavor as to what categories of retailers are being harder to negotiate with, is it the food and beverage retailers, is it specialty shops I mean if you can qualify that that would be helpful? Thank you.

José Leo: Okay. Our understanding, our assessment of the changes in taxation is that there will be close to nothing, there will be close to no impact on us.

The point you mentioned on the taxation on dividends from subsidiaries, we understand that in practical terms what will happen is that they will, there won't be any more, there will be no 100% relief on that. There will be 95% relief on that. So in practical terms the impact is not material at all. And the rest of the changes in the taxation landscape are not very relevant to us. So no, the answer is, we don't expect at this stage any relevant impact to come up.

With regard to retailers yes there are some people more difficult than others, but I am not going to share that with you. I am afraid José.

José Arroyas: Alright, thank you.

Operator: Thank you so much. And the next question comes from the line of Stephanie D’Ath from RBC.

Please go ahead. Stephanie D’Ath: Hi, good afternoon and thanks for answering my question. The first one is on retail outcome. You remind us of the average length of the contract and how big the biggest retailer is and am I right to understand that your negotiation on commercial agreement would therefore cover the remainder of the contract probably the years to come? And the question to that is how long the retailers has to pay MAG between the moment it's built and is it the quarter and how long, what's the time line between I guess the quarter receivables and the payment? And certainly in terms of 2021, would you see to expect to be able to breakeven or book positive operating cash flow and what about free cash flow? And then last question is could you please give us bit more of understanding on the third party contractors to which extent can you flex those contracts today and I remember well this quarter high number of people working at the airport within the infrastructure which are not contracted by Aena but those third party contracts and to which extent can you just get those on because my understanding was that you had been negotiated a lot of third party contractors for the years to come and I would have thought that those contracts right therefore will not really negotiable in the near term? Thank you so much.

José Leo: Sorry Stephanie, but I am likely to ask you refresh some of your questions because I was unable to, I couldn't cope with the speed.

I am afraid. But anyway starting with maybe Emilio can you remind me some. Okay the length of the contract. Well, I cannot tell you about any average length of the contract clearly there are contracts that are still running for five years. Some others for three years, for two years.

There is a variety of them. So there is no such a thing as an average. For instance, we’re duty free or free contract we run till for five years. Then what I can tell you is that the most important retailers in this business are in no particular order other than the first one that I am sure it is in the right place which is duty free group but then you have RAS, SSP, [indiscernible] so those are the outer [indiscernible], so those are the main retailers, the main commercial operators. And indeed they represent a very material, very significant chunk of the total minimum guarantee rent revenues that you are seeing today in our accounts.

So with no more than 10-15 retailers or operators you can cover well in excess of 85% of the minimum guarantees. So those are the most critical ones, but each and every one of them have different views, different interests, different lengths of contracts. So it would be misleading probably to give you a one-size-fits-all answer to that. Then the next one is?

Emilio Rotondo: The second one was related to the MAGs and the timeline, but I didn't get exactly what you meant. So maybe you can.

José Leo: Yes. You mean from billing to collection is what you mean. Stephanie D’Ath: Yes. That's right.

José Leo: Well, 30 days.

Then which else 2021 cash flow break even. Okay. The cash flow, free cash flow break-even levels is something that you mean in terms of traffic I suppose is something that it was asked already before and I committed to provide you with some more color. I don't want to get it wrong but rest assured we will share that information with you. Obviously subject to, because one thing is traffic and the second point is costs so by sharing that information with you we will give you a proviso, we will make a proviso as to what is the level of operating cost savings we are contemplating otherwise the scenario would be different for different levels of cost savings.

So I would like you to take it as a sort of academic helpful exercise rather than a forecast of anything.

Emilio Rotondo: Flexibility of the contract to the suppliers.

José Leo: With regard to the suppliers definitely it has been a very challenging process. We have been in tough discussions with them, but I believe that overall has been successful. We have no, to put that way we haven't faced any legal action, any issue of this kind.

So everybody has been very, very committed. Of course the air test, the furlough scheme in Spain is always helpful to today, but I think there is, my feeling is that we have been working relatively well together. Everybody has suffered the fair share of pain, but I don't feel there are major issues. Some of the contractual agreements that we will be entering into in the future as part of the new tender model will incorporate provisions for this kind of situations and that will also be helpful and that will add flexibility to our ability to manage the costs. Stephanie D’Ath: Thank you and maybe just following up on that last point please the follow scheme so that basically means that your third-party contractors were able to use the furlough scheme in order to still survive I guess.

How long is that stage furlough in place and once it stopped would you then expect other operating expenses to increase?

José Leo: Well, definitely that helped a great deal. This is coming to an end I believe some of the businesses in the first quarter of 2021, first quarter I was being held by Emilio. So by the end of the first quarter of 2021. Hopefully by that time we won't need it, but is true without that instrument in place things will get more complicated. I cannot deny that.

Stephanie D’Ath: Thank you very much.

Operator: Thank you very much. And the next question comes from the line of Andrew Lobbenberg from HSBC. Please go ahead.

Andrew Lobbenberg: Hi it's Andrew.

Hi, sorry. I did come late into the call. So you may have answered this already but what's the status of the MAG revenues that relate to the period of emergency which I think is €196 million because I think earlier question you spoke with confidence that other than some very modest impairment you didn’t to have, you expected to claim and get paid all of the revenue for the negotiation. What is the status with that [indiscernible] please?

José Leo: Well, the strategy that we accounted for them as probably you Andrew managed to listen before because the contractual rights are there for everything, for every element of the MAGs including the €198 million of MAGs over the state of alarm. So our plan is for every operator that by the end the year or by the time we are due to charge or to send the invoice, for any operator we haven't reached an agreement we will send the bill, we will collect the monies.

That's the plan. As I said before the impairment element of that won't stop us from claiming from, from invoicing and from claiming that. Simply the impairment element of that will be the way we are due to treat any credit risks in accounting terms. That's all. So we feel, we should provide for something because there is a risk, there is a credit risk associated.

We will provide but that will mean we are not going to send the invoice to pursue the collection. We will do it. Different things is when we have reached an agreement with the particular operator in that case the agreement will supersede the previous contract and will amend the previous contract, potentially will waive part of those minimum guarantees and then of course we won't send the invoice. We won't try to collect that particular element.

Andrew Lobbenberg: Thanks.

Does that mean if we got an agreement with people and you end up waiving a portion of those fees I know you spoke earlier about moving that impact over the remaining life of the contract and indeed if you send the contract which is part of your goal that will make it smaller. But does that mean that we are going, I mean is there risk of right size of that one 196 in the fiscal 20 results or no, you will stand by that and you will revert it out over the remaining five years, seven years whatever your fee?

José Leo: Well, there will be a write back for sure. For every particular contract this is not the general solution. It's just for every particular contract when you reach an agreement I am pretty sure that there will be a restructuring of the contract. You will need to account for that and there is will be a write back for sure.

Also importantly the cash that would otherwise be received in January, February time won't be received anymore.

Andrew Lobbenberg: Yes.

José Leo: But that will be on a case-by-case basis and I cannot anticipate. I understand that this can be a little bit confusing, but believe me there is no other way around. We cannot account, we have been discussing that long and hard and you probably know that three months ago I was myself still trying to get my head around.

But the reality is that this is the way we should account for that. There is no other way around.

Andrew Lobbenberg: And in terms of the adjustments being made and you spoke of the impairment previously. Would they be excluded from an EBITDA and would drive back excluded from EBITDA would they be in EBITDA and I am just wondering about sensitivity around the covenants or do you think by the year end it’s all irrelevant that’s the way it is, so it doesn't matter?

José Leo: No. It will impact the EBITDA for sure.

Emilio Rotondo: Andrew let me clarify in terms of this impairment, I think it's important to know that when you have any collection pending the first analysis you do is compare it with guarantees that we have. That's the reason why maybe in terms of the numbers or the risk that we have in order to -- of that impairment would be the amount or the difference between the amount pending and the guarantees. Not the whole amount pending. That's the reason why numbers we are talking about are maybe lower or it's more than you could expect.

José Leo: That's a very good point Emilio.

Exactly yes.

Andrew Lobbenberg: Okay guys thanks for your attempt to explain it. I know it's been complicated.

Operator: Thank you so much. And the next question comes from line of Arthur Truslove from Credit Suisse.

Please go ahead.

Arthur Truslove: Hi there. Just a quick follow-up from me, I mean obviously in Q3 you limit cost savings of just over €40 billion a month once again. Is that something that we sort of assume you are going to achieve through the winter as well? Is that a reasonable assumption and if not then what would be more sensible? Thank you.

José Leo: Well, I believe what we can tell you is that if the traffic levels don't recover beyond the point we are today that's our target to be able to save no less than this amount or something in the region, yes.

Different thing is if there is a ramp up, if there is a recovery I always said that it will be harder to commit to any particular level of cost. Obviously, committing to be extremely, extremely focused on cost but it's much more difficult to anticipate how costs will evolve in response to a particular percentage of traffic recovery. But to the extent that we remain at the current levels which as you know are really, really poor of course we will work hard to get at least that level of savings.

Arthur Truslove: Thank you.

Operator: Thank you so much, and the next question comes from the line of Nicola Mora from Morgan Stanley.

Please go ahead.

Nicola Mora: Yes. Good afternoon gentlemen. Just a few follow-ups. First one on OpEx, I mean so far you have done great on the third party services cost and staff cost that remain a bit [indiscernible].

I mean how long do you see that continuing basically flat year-to-date? Second one, sorry to come back to the MAGs but just considering the different environments where your clients or the travel retailers, food and beverage concessioners are, some have done a couple of right issues already, some just one, some not at all. I mean are they more interested in cash rebates or on lower fees just for us to understand maybe the risk on basically the cash collection in 21 and 22? And on follow-up on that just noticing that the working cap for the first time is a bit unusually high in terms of outflow in Q3. What is the expectations for the full year and into next year? Can you give us a ballpark figure of the risk around not collecting the MAGs? Are we talking about 100 million shortfall, 400 million I mean the whole 800 million? What's your gut feeling from here? Thank you.

José Leo: Well, you are right that so far the staff cost or the staff element of your cost to base has been [indiscernible] and I don't think there is need to change that approach now. I share with you some time ago that well there were a number of reasons for that.

Of course, some of them have to do with a very limited amount of savings that you can reach through that unless you disband the significant part of the organization. But also the fact that at the point in time it was the right approach to be able to deal with the rest of them of the challenges in terms of cost savings coming from third parties. So far, no change in our mind. We need to keep vigilant because we don’t know where we will be in one year from now. Hopefully we will be celebrating the recovery and also the return of the healthy war.

With regard to whether I understand that your question about whether they prefer cash or lower fees you mean from the point of view of the operators our customers not ourselves.

Nicola Mora: Exactly yes.

José Leo: Yes. Well, I think probably they have, I think it's a case-by-case basis and I guess what really matters to them is cash. I guess but don't forget that this accounting standards that apply to us they also apply to them.

IFRS 16 for instance can be terribly complicated for some of them and that can only be cured through fees adjustments. You know what I mean because they don't follow cash or the cash don't follow the accounting rule as we have been discussing before and probably that generates confusion. But that means that for some of them adjustments to the fee regime can be very, very relevant in terms of how that will impact the level of debt in their balance sheets and the ratios and so on and so forth. But I guess I might be wrong honestly that for them the cash is king. And then, yes.

Nicola Mora: On the working cap just for us to fine tune a bit expectation?

José Leo: The expectation is that we will be collecting the MAGs, we will get all the money back and then the working capital will evolve accordingly. I cannot tell you. Well honestly, if we feel at any point in time that there is a risk of collection we will need to reflect that in the accounts through providing for that. There is no -- that IFRS 9 will be, will force us to provide for that to create provisions and then to show that openly to yourselves. So far we don't believe there is such a risk so far.

Nicola Mora: No. I understand the nuance, but I was more talking about within agreements you might be, I mean -- aggressively enticed to sign before you invoice anything by the end of the year. I mean there is going to be a big part of that focused on cash collection whether or not they pay 0%, 50%, 100% of what they own?

José Leo: It will depend on the number of agreements, but you are right if we agree let's assume that we agree with everybody before the end of the year that well in that case there will be a significant impact on those collections. I don't deny that. That's exactly what we have been discussing for months already and I know that can give you some degree of, I don't know can generate confusion but that it is what it is.

If the agreements take place we will be waiving part of that cash in exchange for longer term commitments. That's the approach because we are conscious of the difficulties for the end of the current times. We don't ignore that situation.

Nicola Mora: All right. Thanks a lot.

Operator: Thank you so much and the next question comes from the line of Charles [indiscernible] please go ahead.

Unidentified Analyst: Hi good afternoon. This is Charles [indiscernible] just actually one last one on my end and it's not about the MAGs don't worry more a boring topic. I'll say on real estate if you can give us an update on the project? Is everything on hold now and if you expect to resume the process, you expect to make any changes to your initial plans? So just maybe a quick update on that business segment?

José Leo: Hi Charles. I really appreciate you changing directions.

Thank you very much. Well, the real estate plan on one side it was halted for obvious reasons and we are now thinking and I'm not telling you that decision has been made finally. But what we see is that the logistics markets are very, very active and there is, if you like is a market that is still strong and we have premium locations available. So we may well reactivate the plan in 2021 and when I say we may well I don't mean the decision has been made, but clearly focusing on the logistics. That would make a great deal of difference to the original plans because frankly in the first stage of that plan, the offices and hotels played a part but still it was relatively minor.

So that would make a big change to the original plan. But yes, we believe that ironically so the logistics business is benefiting from the current situation.

Unidentified Analyst: Yes. Thanks. And maybe on the follow-up on that logistics, I mean you expect to actually be in the operations as well or just rather lease the land so what's the risk profile you want to take there?

José Leo: No the base case model that doesn't mean we can't take a different role on a case-by-case basis, but the base case model is we would contribute, we will create a JV vehicle with a partner whichever partner wins any particular tender process and then we will contribute the right to use the land over a number of years.

Let's say 75 years or whatever or 50 or 25 depending on the nature of the business that is meant to be run on that line. And we won't contribute any Euro at all. The partner will be taking care of the rest of the development investment. Then we will be collecting, well we will be getting the return out of the global business not only out of the right to use rent element but beyond that we will be hopefully collecting dividends as a result of the global business, the whole business. Okay, we are running out of time probably if well we have two more people queuing but let's deal with those two individuals and we will close the call if you don't mind.

Operator: Absolutely. So the next question comes from the line of [indiscernible] from BNP Paribas. Please go ahead.

Unidentified Analyst: Hi good afternoon everyone. A question for me on contract, you mentioned you negotiated some of the contracts.

What percentage of these contracts are under renegotiation especially I guess with the third party suppliers? And can we expect this to last for the rest remaining of the contract or is a temporary effect? And also what rate, what cost savings or increase are you seeing as you renegotiate this contract? Thank you.

José Leo: Sorry, maybe there is some confusion. One side we have been in discussions and in some cases we have been making decisions with very little discussion with the existing contracts and the existing suppliers over the second quarter if you remember. March, April we were imposing so to speak or making decisions to reduce the level of service, the level of resources and obviously the cost associated to that with every single third-party supplier of the main services we are provided with and that will be the case going forward. We will be adjusting the level of service and the costs to the traffic conditions.

That will be it across the board and then what I said before and as a result of that we have achieved the savings that you can see today. The savings that over the quarter three has been 127 million in the previous quarter was something close to 160 million. And then on the other hand with new tenders that will take place over the number of months and potentially years, we are adjusting some of the terms and conditions of the contractual arrangements including provisions to deal with significant reductions in traffic. So to be able from day one from the outset of any problem to be able to just adjust the contract down to the new reality without the need to run any discussions. But that will be the case from now on.

What is true is that the security contract that we tender some weeks ago and that are now about to be awarded they already incorporate that provisions and that's important because those contracts represent no less than well €400 million cost over three years. So they are very significant ones.

Operator: Thank you so much and the last question comes from the line of Stephanie D’Ath from RBC. Please go ahead. Stephanie D’Ath: Yes.

Thank you. Just a quick follow-up, I understood that from billing to collection there is 30 days for the retail operators. But what I still didn't get is the time between you recognize MAG in your P&L and the time to send the invoice because I understand some of the invoice related to the state of alarm has not been sent yet. So could you please help me understand how long that takes and then you were mentioning that you have guarantees from your retailers. I guess those might be depleted over time.

So could you be specified in more detail how those work. Thank you so much.

José Leo: Well all the MAGs are built in January, February the year after they are accrued. So any MAG accrued in 2020 being that in January, February, March whatever will be billed in January 2021 and then collected one month later. That's the approach.

And clearly in previous years the amount of MAGs to be billed and collected next year was significantly lower than now for. And that's the challenge if you like. And then with regard to the guarantees they remain in place for the entire life of the contract and they only decay when the contract comes to an end and all the obligations have been fulfilled. So they are in place all the time. Obviously they are not protecting you against everything because if you accumulate that what you have to do is just to execute the guarantee and to move on.

But for the time being they are extremely helpful because when providing for the impairment -- of any potential impairment they are there to protect us. Thank you.

Operator: Thank you so much that does conclude the Q&A. Sir, please go ahead.

Emilio Rotondo: Thank you everybody for joining us today.

Hopefully you have a well Merry Christmas and we get back in February with full year 20 results. Thank you. Bye.

Operator: Thank you so much. That does conclude our conference for today.

Thank you for participating. You may all disconnect.