In the first three months of 2020, the business of airport operator Fraport was heavily impacted by the outbreak of the COVID-19 pandemic. For the first time since the Group’s IPO in 2001, its net profit (Group result) was in negative territory. Steps to reduce costs were only partly able to offset the decline in revenue resulting from a steep drop in passenger volumes in March. That month the total passenger count was down 62 per cent compared to March 2019, with the discrepancy increasing to 90 per cent in the final week of the quarter. This trend continued in April, when the shortfall widened to as much as 97 per cent on a week-to-week basis. At all of Fraport’s Group airports worldwide, traffic volumes also diminished in March 2020, with the decline accelerating in April.
CEO Schulte: “Global aviation’s worst-ever crisis”
Fraport AG’s executive board chairman, Dr. Stefan Schulte, said: “We’re experiencing global aviation’s worst-ever crisis. Despite timely and comprehensive action to reduce costs, the situation is severely impacting our company. It isn’t possible at this time to make an accurate forecast for the year as a whole, since we don’t yet know how long the travel restrictions will remain in place or how far the global economy is likely to contract. One thing is certain, however: the post-pandemic aviation industry won’t be the same. But we’re getting our airport and company ready to face the challenges.”
Revenue significantly declines – Group result in negative territory
Group revenue dropped 17.8 per cent to €661.1 million in the first quarter of 2020. Adjusting for revenue related to capital expenditures for expansion measures (based on IFRIC 12), Group revenue declined by 12.6 per cent to €593.2 million. Group EBITDA, at €129.1 million, was 35.6 per cent below the figure for the corresponding quarter of the previous year. Group EBIT amounted to €12.3 million, down 85.7 per cent. The EBT fell to minus €47.6 million (Q1 2019: €36.5 million). The Group result (net profit) was minus €35.7 million, compared to plus €28.0 million in the first quarter of 2019. All Group companies in Fraport’s international portfolio – the only exception being the one in Lima, Peru – also reported negative results in the first quarter of 2020.
Comprehensive measures taken to contain costs
To cushion the impact of the COVID-19 pandemic as far as possible, Fraport took steps at an early stage to pare costs and introduce short-time work for its employees. More than 18,000 of the approximately 22,000 Fraport employees in Frankfurt are now working reduced hours; the average for the overall workforce will be about 60 per cent below normal in April and May. In response to the new situation, the company has also consolidated both airside and landside operations. Frankfurt Airport’s Northwest Runway and Runway 18 West have been shut down for the time being. Passenger handling has been bundled in Concourses A and B of Terminal 1, and until further notice no more passenger flights will be processed at Terminal 2.
CEO Schulte: “We’re continually reassessing whether the steps now being taken to trim costs will be enough to safely pilot our enterprise though this crisis. Our personnel requirements also largely depend on air traffic volumes. Depending on how long the coronavirus crisis lasts or how deeply the global economy slips into recession, and how far the aviation market shrinks before it begins reviving, we too may need to appropriately reduce our expenditures for materials and staff.”
Long-term investment projects to be continued – Liquidity reserves bolstered
Fraport remains optimistic about the long-term prospects of the aviation market and will continue to forge ahead with its strategic projects to expand capacity. Foremost among these are the construction of Terminal 3 at Frankfurt Airport, as well as expansion projects in Greece and Brazil. Due to the reduced availability of some service providers and subcontractors, however, the duration of individual construction measures has been extended, also affecting parts of Terminal 3. The ongoing construction work at Lima Airport in Peru has been held up by the airport’s temporary closure. As a result of these developments, however, expenditures during the current fiscal year will be less than the previously projected volume.
Fraport obtained additional loans totaling nearly €900 million during the first quarter of this year. On March 31, 2020 the Group had more than €2.2 billion in liquid assets and committed credit lines, and since then these have been additionally bolstered by more than €300 million. These reserves will enable the company to weather the current situation for many more months if necessary.
Since there continues to be a high level of uncertainty, it is impossible to make any detailed forecasts at this time. However, the Executive Board confirms its outlook that all key performance indicators will decline significantly, and anticipates a negative Group result for the full 2020 fiscal year.
Fraport CEO Schulte: “There have hardly been any passengers at Frankfurt Airport during the past six weeks. But we’re keeping it open, since it’s a vital gateway for ensuring Germany’s supply of freight and merchandise. The economic impacts will be even more pronounced in the current quarter than during the reporting period, since in January and February passenger volumes were still at almost normal levels. Currently we’re focusing on determining how we, both as part of the aviation industry and as Frankfurt Airport, can reliably ramp up operations again when the time comes. In this globalized world, aviation will continue to be a major driver of economic growth and prosperity. We therefore remain confident that we will see sustained growth again over the long term. Nevertheless, it may take us quite a few years to climb back up to the passenger figures of 2019.”