Revenue and Results at Fraport Decline Sharply Due to Corona

Fraport AG must report sharply declining figures for revenue and results in its interim report for the first nine months of 2020 due to Corona. In Frankfurt, the largest German airport, passenger numbers have dropped by more than 70%.

(Frankfurt) – The COVID-19 pandemic has severely impacted the business figures of the airport operator Fraport in the first nine months of the year. The group revenue fell by more than half. Despite extensive cost-cutting measures, the company recorded a net loss of 537.2 million euros. This includes expenses for personnel management measures amounting to 280 million euros. The passenger volume in Frankfurt decreased by 70.2 percent compared to the previous year, down to 16.2 million travelers during the reporting period.

Dr. Stefan Schulte, CEO of Fraport AG: “The situation in the industry remains very tense. With the renewed rise in infection rates across Europe in recent weeks, travel restrictions have also significantly increased again. Airlines are further reducing their already limited offerings. We expect a recovery at the earliest in the upcoming summer flight schedule. Accordingly, we are making our company significantly leaner and more efficient to sustainably reduce the cost base. We are on a good path here – the measures implemented at the Frankfurt location will lead to a medium-term effective reduction of personnel and operating expenses by up to 400 million euros annually. This corresponds to about 25 percent of the operating expenses at the Frankfurt location in the 2019 financial year.”

Significantly Negative Group Result Despite Countermeasures

Group revenue fell by 53.8 percent to 1.32 billion euros in the first nine months of 2020 compared to the previous year. Adjusted for revenues related to expansion investments in international subsidiaries (according to IFRIC 12), revenue decreased by 53.9 percent to 1.15 billion euros.

Although operating expenses (material and personnel expenses as well as other operating expenses) were reduced by about one third when adjusted for expenses related to personnel management measures, the group EBITDA before special effects decreased by 94.5 percent to 51.8 million euros. Additionally, the result was burdened by expenses for personnel management measures amounting to 280 million euros. Taking these expenses into account, the group EBITDA for the first nine months was –227.7 million euros (9M 2019: 948.2 million euros). EBIT was –571.0 million euros (9M 2019: 595.3 million euros) and the group result amounted to –537.2 million euros (9M 2019: 413.5 million euros).

Looking at the third quarter shows that the initiated cost-cutting measures are taking effect: While the group EBITDA in the second quarter was still at –107 million euros, a positive group EBITDA before special effects of 29.2 million euros was achieved in the third quarter. The interim recovery of passenger numbers also contributed to this development. Taking into account the expenses for personnel management measures, the group result in the third quarter was –305.8 million euros.

Significant Reduction in Operating Costs and Investments

By canceling or postponing non-essential operational investments, corresponding expenditures (Capital Expenditure) will be reduced by one billion euros in the medium to long term. This particularly affects the existing terminals and apron areas at the Frankfurt location. Regarding Terminal 3, the current demand situation offers the opportunity to stretch individual measures and awards over time. From today’s perspective, the company expects Terminal 3 with gates H & J as well as G to be operational by the summer flight schedule of 2025. Ultimately, however, the development of demand will be decisive for completion and commissioning.

Similarly, operating costs are being significantly reduced, and non-essential operational expenditures are being eliminated. This will result in annual savings of up to 150 million euros starting immediately.

Progress in Job Reductions

Through the reduction of up to 4,000 jobs, primarily by the end of 2021, personnel costs will be reduced by 250 million euros annually. This is to be done as socially responsibly as possible: As part of a voluntary program, around 1,600 employees will leave the company through severance payments, partial retirement, and other measures. Additionally, around 800 employees will exit the company through retirements and other termination agreements. In the current year, about 1,300 positions have already been eliminated through turnover and expiring fixed-term contracts.

At the same time, short-time work will continue. Since the second quarter, depending on current needs, up to 18,000 of the approximately 22,000 employees of the group companies at the Frankfurt location have been on short-time work at an average of about 50 percent. After a slight reduction in the short-time work rate during the summer travel season, short-time work is now being increased again due to low demand.

Liquidity Reserves Increased

Fraport has raised approximately 2.7 billion euros in additional financing this year. Among other things, a bond of 800 million euros was issued in July, and a promissory note with a total volume of 250 million euros was placed in October. With liquid funds and secured credit lines of over three billion euros, the company is well-positioned to manage the current crisis while also investing in the future to the necessary, reduced extent.

Outlook

For the current year, the management board expects a significant decline in passenger numbers at Frankfurt Airport of over 70 percent to around 18 to 19 million passengers. For the group revenue adjusted for IFRIC 12, a decline of up to 60 percent compared to the previous year is expected. Due to the already implemented and planned savings measures, the management board expects a significantly declining but slightly positive group EBITDA before special effects. After taking into account the expenses for personnel management measures, the group EBITDA for the entire year 2020 will be significantly negative. The management board also expects a strongly negative group EBIT and a strongly negative group result.

Schulte: “We currently expect that next year in Frankfurt we will only reach about 35 to 45 percent of the passenger volume of 2019, not least due to the expectation of a very weak first quarter of 2021. Even in the years 2023/24, we will likely only reach 80 to 90 percent. There is still a long way to go. But we are confident that with the measures now initiated, we can successfully realign our company and will see sustainable growth again in the long term.”

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Image: © Fraport AG