[UPDATE] Dufry/Aena on Spain concessions change

By Luke Barras-hill |

Dufry Group is assessing the extent of the financial boost to its Spanish airports business after a legal change linking concession fees to actual passenger numbers.

As reported, Spain’s Congress of Deputies passed a *law on Thursday (23 September) modifying how minimum annual guarantees (MAGs) are calculated across all of the country’s airports by linking them to actual passenger numbers.

MAGs have been waived for a certain period and *proportionally reduced from 21 June 2020 until pax restores to 2019 levels.

The move affects Dufry’s duty free and duty paid store contracts at Spain’s airports operated by Aena. Agreements were renewed in 2019.

Eugenio Andrades, Chief Executive Officer Operations, Dufry Group.

‘FEES BASED ON VARIABLE ELEMENTS’

Eugenio Andrades, Chief Executive Officer Operations, Dufry told TRBusiness: “We are currently assessing the impact on financials and on the accounting treatment from an IFRS16 perspective and we will provide an update as soon as possible.

“We welcome the decision taken. More than an expectation, the decision confirms our long-term view that concession fees should be based on variable elements, thus reflecting a realistic performance potential at any point in time.”

The new law is expected to ‘materially reduce’ the MAG claimed by AENA.

Passenger numbers at Spanish airports dropped by around 72% in 2020 and by around 68% in August year-to-date in 2021.

The P&L impact in 2021 and going forward will depend on the recovery of the passenger numbers at the Spanish airports, Dufry previously stated.

MAG HIT ‘PEGGED TO TRAFFIC RECOVERY’

A statement supplied by AENA to TRBusiness read: “Given that the approval of this law affects the revenue of commercial contracts with guaranteed minimum revenue for each airport considered individually, from 15 March 2020 until the number of passengers for the financial year 2019 is once again reached, a date that cannot currently be determined, the final impact of this measure on the amounts to be collected as minimum annual guaranteed rent will depend on the evolution of passenger traffic in the coming years.

“Taking into account the actual 2020 passenger traffic, the current passenger traffic forecast for 2021 and the traffic evolution foreseen in the DORA II proposal from 2022 to 2026, when the 2019 traffic is expected to be once again reached, the company estimates a reduction in commercial revenue collections of approximately €1,500 million over the 2020-2025 period.

“This estimation includes the rent reductions already offered to tenants on 18 January 2021 for the period from 15 March 2020 to 8 September 2021.

“The accounting treatment of this impact and, consequently, its effect on the commercial income to be recognised in each year in the profit and loss statement is subject to analysis based on the application of International Financial Reporting Standards (IFRS), that the company is currently carrying out and that will be submitted to its auditors for consideration.

“Aena is also analysing the legal implications of this regulation and will take all appropriate actions in defence of the company’s corporate interest.”

Main image: Barcelona-El Prat Airport. Source: AENA.

*The Congreso de los Diputados (Lower House of the Spanish Parliament) approved an amendment to the Law on Inland Transport, which incorporates a provision that alters the contracts for leasing or assignment of business premises for food and beverage and retail activities at the airports managed by Aena.

**The modification will not affect AENA’s right to demand payment of the variable rent established in the contracts based on the income from sales across different premises.

 

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