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| Photo Fraport |
During fiscal year 2020 (ended Dec 31), the Covid-19 pandemic severely impacted financial performance of the Fraport airport company. Because of sharply falling passenger traffic, both at Frankfurt Airport and across the Group's airports worldwide, Group revenue declined by more than half in the reporting period. The Group result (net profit) dropped into negative territory for the first time in 20 years, reaching minus €690.4 million – despite extensive cost-saving measures.
Fraport AG's executive board chairman, Dr Stefan Schulte, said: "We are looking back on an extremely challenging year 2020. Unlike almost any other industry, aviation has been hit hard by the Covid-19 pandemic. Nevertheless, we are now seeing the light at the end of the tunnel. The rollout of vaccination programs and greater availability of testing options provide the prerequisites for air traffic to rebound – starting this summer at the latest. People want to finally travel again, while airlines are ready to ramp up their capacities. At the same time, we have realigned our company to become leaner and more agile. Therefore, we will emerge even stronger from this historic crisis. As the operator of the Frankfurt Airport global hub and thanks to our Group airports worldwide, we are well-positioned to fully benefit from the air travel relaunch, while our long-term growth perspectives remain intact."
Traffic slump leads to negative Group result
In 2020, passenger traffic at Frankfurt Airport (FRA) dropped by 73.4 percent year-on-year to 18.8 million travellers. Passenger numbers were also markedly down at Fraport's Group airports worldwide, with declines ranging from minus 34 percent at Xi'an Airport in China to minus 83 percent at Slovenia's Ljubljana Airport. Correspondingly, Group revenue decreased by 54.7 percent year-on-year to €1.68 billion. Adjusting for revenue from construction relating to capacitive capital expenditure at Fraport's subsidiaries worldwide (based on IFRIC 12), Group revenue was down 55.4 percent to €1.45 billion.
In response, Fraport noticeably reduced operating expenses (comprising cost of materials, personnel expenses and other operating expenses) by nearly a third, after adjusting for the additional expenses for personnel-reduction measures. This enabled Fraport to achieve a slightly positive EBITDA (before special items) of €48.4 million in fiscal 2020, down 95.9 percent year-on-year. When taking into account the extra expenses of €299 million for personnel-reduction measures, Group EBITDA in 2020 fell to minus €250.6 million (2019: €1.18 billion). Group EBIT slipped to minus €708.1 million (2019: €705.0 million), while the Group result (net profit) amounted to minus €690.4 million (2019: €454.3 million).
Costs and investments reduced markedly
Fraport has taken various measures at all levels to reduce costs amid the Covid-19 pandemic. By eliminating expenses not essential for operations, Fraport is saving non-staff costs (for materials and services) of between €100 million and €150 million yearly. Simultaneously, Fraport downsized or cancelled a number of investments, particularly at its Frankfurt home base – thus reducing related capital expenditure by €1 billion over the medium and long-term. Fraport is continuing construction of the new Terminal 3 at Frankfurt Airport to meet the anticipated long-term demand. However, the time frame for building the new terminal has been extended. Terminal 3 – comprising the main building with Piers G, H and J – is now scheduled to become operational in 2026.
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| Photo Fraport |
A leaner and more agile company
In addition to cost-saving measures with immediate effect, Fraport has started adjusting its overall business organization and structure to make the company leaner and more agile. This realignment comprises some 300 measures aimed at streamlining processes, bundling functions and creating a leaner and more flexible corporate structure. In a socially responsible manner, Fraport will be cutting about 4,000 jobs mainly by the end of 2021 – thus reducing personnel costs by up to €250 million compared to 2019. About 2,200 of planned staff reductions were already realized during 2020. In addition, some 1,600 employees have agreed to leave the company under a redundancy program consisting of severance packages, early-retirement schemes and other measures. Further personnel reduction will be achieved via regular staff fluctuation.
Fraport will continue to operate a short-time working scheme (Germany's Kurzarbeit program) with the aim of temporarily reducing personnel costs. Since the second half of fiscal 2020, about 80 percent of employees at the Fraport AG parent company and other major Group companies in Frankfurt have been working on a short-time basis. This involves an average reduction in working time of about 50 percent measured in terms of available hours. The short-time working scheme also provides Fraport with the necessary flexibility to raise staff levels quickly once air traffic rebounds.
Fraport's liquidity reserves increased
Fraport raised about €2.9 billion in additional financing during fiscal 2020. With over €3 billion in cash, committed credit lines and other financing available, the company is well-positioned to meet the current crisis and make the necessary investments for the future. Fraport will continue to take advantage of the capital market to maintain a high degree of liquidity.
Outlook
For the current business year, the Fraport executive board forecasts traffic at Frankfurt Airport to range from under 20 million up to 25 million passengers. Group revenue is expected to reach approximately €2 billion in 2021. The company is forecasting Group EBITDA to range between about €300 million and €450 million. Group EBIT is expected to be slightly negative, while the Group result (net profit) will also remain in negative territory. Both of these key performance indicators, however, will markedly improve compared to 2020. In view of the massive ongoing impact of the Covid-19 pandemic and the expected negative Group result, Fraport's executive board will propose to the Supervisory Board and the AGM, like in fiscal 2020, not to distribute a dividend for the current 2021 financial year.
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