EuroBusiness Media (EBM): Hello Augustin de Romanet. You are the Chairman and CEO of the Aéroports de Paris Group, which manages the Paris airports, Paris-Charles de Gaulle, Paris-Orly, where you are talking with us practically on the edge of the runway, Paris-Le Bourget as well as several airfields in the Paris area. You also have equity investments in several airports throughout the world.
You are publishing today the press release on the strategic plan for 2016-2020 called “Connect 2020”. You will describe it tomorrow in a plenary session in front of the economic and financial community. Could you give us an overview of the main points?
Augustin de Romanet: “Connect 2020” is the name of our strategic plan in pursuit of a goal: becoming a leader in airport design, construction and operation. We see this as creating value. This is made possible by men and women joining forces, the driver of all growth since the beginning of time.
And in creating this value, we have 3 priorities. This first is optimise. Optimise means being the best possible at the lowest possible cost for our clients. We are in it to win. We need to have the best possible financial policy both in terms of our costs and our investment decisions. We are mindful of investing only when appropriate. Instead of building new terminals here and there, we are revamping our current terminals by linking satellites and terminals under one roof.
The second is attract. It’s a question of having the most airlines and passengers. To do this, we need to draw them in and be proactive to always be our clients' top choice. It also means attracting top employees. You know that a company cannot be successful without motivated, first-rate employees.
The third is expand. This growth that we are going to create must benefit everyone. It must also be propelled by international expansion. Therefore, expand means two things for us. Firstly, share our wealth creation with our host communities by generating jobs and design a CSR approach that makes us very attentive as to how we assimilate in our host communities.
Secondly, deploying our expertise abroad. Because air traffic growth across the world is so massive - did you know that it is going to be almost twice the size of global GDP - it is up to us at Aéroports de Paris to capture this growth throughout the world.
EBM: You just signed the Economic Regulation Agreement. How does your strategic plan fit in with this agreement with the French State?
Augustin de Romanet: Indeed we just signed the Economic Regulation Agreement for five years with the French State. This provides the basis of the industrial strategy under this strategic plan. Nevertheless, “Connect 2020” also includes components related to retail, real estate and international activities, all additional growth drivers for Aéroports de Paris.
Therefore with respect to regulated activities, our goal is first to improve the performance of the Paris-Charles de Gaulle Hub. To do this, we have amended the tariff structure to redistribute costs for airlines so that long haul flights are more competitive. Up until now, we put long haul flights in an unfair position which we are going to do away with.
Secondly, we are going to support high-performing airlines. An airline which has fast turnarounds, bases its aircraft at our airports and flies out early in the morning and returns early evening with more flight routes is going to get our support. We are also going to optimize the Paris-Charles de Gaulle Hub, as I pointed out, by investing in linking satellites and terminals under one roof.
And last but not least, the key element of quality of service. Under the “Connect 2020” plan, we have set for ourselves far-reaching quality of service goals to become a European hub frontrunner.
EBM: You are also going to speak about 2020 financial targets. Can you talk with us about them?
Augustin de Romanet: Yes. These 2020 financial targets are based on two objectives. The first one is converging the ROCE in the regulated scope with the average cost of capital. The second is to extract a maximum of capital from our non-regulated activities.First, the convergence of ROCE and WACC. Our WACC is estimated at 5.4%, and our target is to achieve an ROCE in the regulated scope of 5.4% at the end of the period. With respect to revenue per passenger in the restricted area, our goal is to reach €23 full-year 2020 after delivery of the equipment to be commissioned in 2020.
With respect to real estate, our goal is 10-15% growth in external rents, on top of all the investments which will deliver future performance.
And finally, I hope that international activities, with carefully-managed growth, become the Group's third business line.
Therefore assuming growth in passenger traffic of approximately 2.5% per year, we should reach EBITDA growth of 30-40% between 2014 and 2020. We should be able to maintain a dividend payout ratio of 60%. All of this will be backed by our €4.6 billion investment programme in the regulated scope as well in retail and real estate over the period.
EBM: With respect to retail, you have seen strong growth these past few years in your primary indicator, sales per passenger. Is there still growth potential in your retail activities?
Augustin de Romanet: Yes, there is still enormous growth potential in our retail activities. ADP is a retail success story. During our IPO in 2006, the average sales per passenger in airside area was €9.8 and is currently, or rather in 2014, it was €18.3.
We count on capitalising on three components. The first is continuing to cultivate the ultimate passenger experience by improving the offering, expanding the surface and selecting the products that we sell on each transport network. Secondly, we need to build up the reputation of ADP pre-boarding retail shops. This means attracting clients from their departure hall. Finally, by optimising our management practices such as creating joint ventures, we are better positioned to oversee the management and ensure consistent quality of service. We have already done so for newsagents with Relay@ADP and for advertising with JC Decaux. We are going to enter into one with SSP for bars and restaurants. It's a model that will continue to deliver results.
EBM: Let's talk real estate at Aéroports de Paris. What's your action plan to develop this business that risks being impacted by the current economy?
Augustin de Romanet: Yes. Real estate is a medium- and long-term growth driver for Aéroports de Paris. It is especially so in light of the impressive public transportation offering that will be commissioned right after this “Connect 2020” plan. However, we must prepare ourselves for it. A few highlights are the Grand Paris lines, metro line 17’s Roissy-Charles de Gaulle stop, metro line 14’s Paris-Orly stop and, of course, the CDG Express.
However, real estate has been in the past a growth driver for Aéroports de Paris. We have doubled the hotel offering. We have laid the foundation of the airport city. Under this plan in five years' time, we are going to both upgrade the portfolio and expand the offering, particularly with respect to cargoes.
This means refurbishing facilities, some of which date back to the 1950s. We are forecasting growth of 10-15% in external rents over the period.
EBM: ADP operates on an international scale via its engineering and management subsidiaries as well as through its equity investment in the Turkish airport operator, TAV Airports. Could you describe to us your international development plan and your potential targets?
Augustin de Romanet: Yes. ADP's development platform is first and foremost Paris. Our goal is to upgrade as much as possible the quality of service of our Parisian airports to become a benchmark for all global players.
So ADP is effectively involved in each stage of the value chain: design with ADPI, construction with TAV Construction and airport operation. We are also equity investors in concessions such as the one we just did with Santiago de Chile.
What is our goal then? Our goal is to export the expertise of French engineers and export French capital under the best risk control conditions. As you know, expanding internationally can be a sure-fire way to lose a lot of money. We are moving ahead with a policy based on 4 criteria being met for our international expansion.
First, complexity. We are taking on first and foremost projects in which we can leverage all of the skills of our engineers, architects and operators. Second, growth. We are entering markets with growth at least twice as fast as Paris. Third, control. It means our having control over our operations so as not to misuse management time. And lastly, profitability. This must exceed that of our Parisian activities.
My goal is for international activities to gradually become the third business line for Aéroports de Paris. However in order to do so, we have to build up human resources and design HR policies. This is why we are working on creating an employee base that will help ADP achieve its international goals. But as our Italian peers are fond of saying, “chi va piano va sano.”
EBM: You just mentioned your employees. What will be the changes for them?
Augustin de Romanet: “Connect 2020” is a strategic plan as well as a business plan that naturally includes employee development. A company is first and foremost the joining of forces between men and women to work on a shared project. Therefore our goal is to first live up to the values that were identified by all Group employees: trust, commitment, boldness and openness. I am not going to explain each of these words in detail as they are quite meaningful.
I need to ensure that these values are embraced at all operating levels, starting with the enforcement agents. I hope that when you begin working in enforcement, which you know you will not be doing for forty years, you have from the onset professional training and a career outlook. These keep you motivated in jobs that are not very rewarding day to day if we think they are forever.
For executives, we launched an Attitude Manager project to hone their skills, broaden their horizons and ensure positive interactions with their employees, peers and superiors. We have a slightly old-school sense of authority in this Group that needs changing.
And lastly, the Executive Committee shall be personally involved in this employee development program.
EBM: Lastly, can you tell us what ADP will be like in 2020 for your passengers, airlines and employees?
Augustin de Romanet: I hope that ADP in 2020 will be a well-established brand recognized for its quality of service. A brand is promise: I promise you a level of service and I deliver it. I hope that this promise is embodied at Paris-Charles de Gaulle, Paris-Le Bourget and Paris-Orly, marked by outstanding quality of service. I hope that it also reflected abroad in our airport design, construction and operation. I want a French Touch or a Paris Airport Touch in everything we do.
EBM: Augustin de Romanet, you are the Chairman and CEO of the Aéroports de Paris Group. Thank you very much for answering our questions.
Augustin de Romanet: Thank you.
