- Economic upturn continues
- German air traffic registers growth – but falls short compared with other countries
- Retail trade – profits from strong economy
- Catering and hotel business – upswing continues
- Advertising business – decline in the area of out-of-home advertising
- Parking – dependency on the customer structure
- Office rental market in Munich continues at full steam
Both national and international economic growth are crucial for an international air traffic hub such as Munich Airport.
Growth in the global economy in 2018 corresponded largely to that forecast at the start of the year. Current projections from the International Monetary Fund (IMF) suggest an increase in global gross domestic product (GDP) of 3.7 percent 1). The growth rate in the global economy is thus slightly below the level for the previous year.
In the emerging markets, the picture was more heterogeneous compared to the previous year. In the commodity-exporting countries of Russia and Brazil, the economy continued to recover from the crises of 2015 and 2016. The increased oil and commodity prices have lead to the Russian and Brazilian economies growing by 1.7 percent and 1.3 percent respectively in 2018. Moreover, the economy of the People’s Republic of China also continued to perform well. The growth rate for 2018 was 6.6 percent. In contrast, Argentina and Turkey, in particular, contributed to the fears surrounding global economic growth. In both countries, the economic situation worsened appreciably in the past year. While economic output grew at a positive rate in both cases in 2018, their currencies depreciated strongly against the US dollar and inflation rates were high. Furthermore, the trade balances of both countries displayed a significant deficit. 2)
In industrialized countries, the upturn of recent years continued for the most part. In the United States, the economy gathered momentum again, while in Japan and Great Britain the growth dynamic slowed. The reason for the positive development in the United States continues to be the strong domestic economic forces. For example, private consumption and investments in equipment performed very positively as in the previous year; this was partly stimulated by fiscal measures (corporate tax reform). The Japanese economy grew less strongly in 2018 than in the previous year. The reason for this is primarily the poor performance of exports. Great Britain posted rather restrained growth of 1.4 percent. The Brexit vote in 2016 has lead to consumer prices rising comparatively strongly due to the decline in the value of the British pound sterling, which has lead to a subdued growth in private consumption. The inflation rate in Great Britain in 2018 was significantly above the inflation target of 2 percent. 2)
Economic growth in selected destinations worldwide
GDP growth in 2017 and 2018 3)
The upturn in the eurozone continued in 2018, but lost momentum compared to the previous year however. According to current forecasts from the IMF, the growth rate for 2018 was 1.8 percent. ¹) The growth is thus distributed heterogeneously across the countries of the eurozone. France and Italy posted comparatively low growth rates, while Spain displayed a significant positive development again.
The unemployment rate has fallen again in the eurozone and is thus almost back to the pre-crisis level. The monetary policy of the European Central Bank remained extraordinarily expansive in 2018 and thus supported the upturn in the eurozone. The reason for the waning growth dynamic in the eurozone was the less positive performance of the most important growth drivers compared to the previous year. For example, rising inflation (driven primarily by the increased price of crude oil) curbed the positive development in private consumption, looming trade conflicts deterred companies from investing and the strong development of the euro and the weaker growth in foreign demand hampered export growth. 2)
Economic growth in selected destinations throughout Europe
GDP growth in 2017 and 2018 3)
The Federal Republic of Germany is currently in a phase of strong economic growth. The upturn which has lasted for nine years already lost significant momentum in 2018. At 1.5 percent, growth in GDP in the Federal Republic of Germany in 2018 was weaker than in the previous year. The reasons for this included the significant production-side problems in the automotive industry, less favorable external economic framework conditions and worsening capacity bottlenecks. 2) The ongoing upturn was supported by private consumption that remained strong as well as above-average investment in construction and equipment. In contrast, German exports put in a significantly more restrained performance than in the previous year due to lower demand from other EU countries and export weaknesses in the automotive industry associated with the introduction of the new emissions testing procedure known as the «Worldwide Harmonized Light-Duty Vehicles Test Procedure» (WLTP). The positive development of consumer spending is sustained by the favorable situation on the labor market (unemployment rate of 5.2 percent) and rising wage levels. Private consumption, for example, recorded a growth rate of around 1.1 percent in 2018.
In terms of construction investment, which continues to be driven by low interest rates, there was a growth rate of 3.2 percent in 2018. Investments in equipment and in other plant rose by 4.1 percent and 0.4 percent respectively. German exports, however, grew at a rate of only 2.0 percent. In the previous year, export growth was still at 4.6 percent. The annual average inflation rate in 2018 was, at 1.9 percent, still significantly higher than in previous years. 4)
In the previous year, the oil price (Brent) fluctuated between USD 45 and 67 per barrel. At the start of October 2018, it achieved a three-year high at just under USD 86, but finally fell in December 2018 to around USD 52. 5)
Economic environment Aviation
According to analyses conducted by the International Air Transport Association (IATA), global air traffic was once again setting records in 2018. In total, 4.3 billion take-offs in passenger traffic (+6.1 percent) and a significant increase in sold passenger kilometers (+6.5 percent) were recorded. With that, the performance was below that of the previous year (+7.3 percent and +8.0 percent respectively), but still displayed a stable growth trend. Airfreight also increased by 4.1 percent (freight tonne-kilometers) and was thus weaker year on year (+9.7 percent). 6)
The airports that are members of the German Airports Association (ADV) also achieved significantly positive growth rates on average in 2018. The commercial passenger volume rose overall by 4.0 percent. Aircraft movements increased by 3.9 percent, and cargo throughput (total of airmail and freight excluding transit) was up 1.4 percent. With that, Munich Airport recorded slightly below-average growth rates in 2018. 7) Further explanations on this are included in the section «Aviation business»
The changes in offering brought about by the insolvency of the Air Berlin/Niki Group have balanced out, in terms of Munich Airport, over the course of 2018. With the exception of the connection to Düsseldorf, all of Air Berlin’s former German domestic routes posted an increase in traffic. Intra-continental traffic was also up at Munich Airport, quickly compensating for the loss of Air Berlin’s services in this segment as well.
In the global comparison, measured according to sold passenger kilometers, the Asia/Pacific region was in first place with growth of 8.5 percent in 2018, followed by Europe (+6.4 percent) and Latin America (+6.0 percent). In general, according to initial estimates from the IATA, the still significant growth rates were in some cases considerably below the performances for the previous year; only North America, with +5.0 percent, grew stronger than in the previous year (+3.9 percent). The forecasts for 2019 continue to assume global growth, however the trend will only strengthen in the Gulf states and in Africa, which will recover after a poor year in 2018. Latin America will probably remain stable, Asia, North America, and Europe will register weaker growth rates. 6)
According to information from the German Aviation Association (BDL), the German airlines performed below average compared with the rest of Europe. While the traffic performance of European airlines (measured in sold passenger kilometers) was able to keep pace with the global average (+6.5 percent) with an increase of 6.6 percent, German airlines posted a negative result of –1.0 percent. The losses due to the insolvency of the Air Berlin/Niki Group (market share 2017: 10 percent) could not be completely compensated for by German airlines in 2018. These took over only five percent of the Air Berlin/Niki market share. Four percentage points was distributed between foreign companies such as easyJet and Ryanair/Laudamotion. Various other foreign airlines accounted for the remainder. Overall, the BDL considers the gap in the offering to be closed. 8)
Compared to the airlines, the passenger airports in Germany recorded a positive result according to the BDL. Their passenger figures rose by 4.1 percent, whereby the European and overseas traffic contributed particularly to growth. Domestic German traffic posted a slight decline. Across Europe, passenger figures at the airports grew by 6.2 percent, and were thus slightly above the global average of 6.0 percent. 8)
The IATA also pointed to the deficits in the European airspace infrastructure and determined a rise in the corresponding delay minutes by 61 percent. Monetary losses resulting from this were quantified by the IATA at over USD 2.2 billion for airlines and around USD 2.5 billion for passengers. 6) This assessment is shared by the BDL: The rising number of take-offs and landings (+4.0 percent) at German airports, which are controlled by Deutsche Flugsicherung GmbH (German air traffic control), and the number of overflights, which have increased by 13 percent in the past five years, represent a huge challenge for the existing infrastructure. 8)
Accordingly, in its current aviation concept, the Federal Ministry of Transport and Digital Infrastructure has examined 20 measures to deal with these requirements. It came to the conclusion that the objective (participation in global growth) could not be achieved in full, despite implementing all the proposals in the portfolio. Consequently a further delay in realizing these measures would fundamentally endanger the competitiveness of the German aviation industry. The main problem for German aviation is therefore not a lack of demand, but instead lies in being able to satisfy demand with an appropriate offering. 9)
Economic environment Commercial Activities
Thanks to higher incomes and record employment, German retailers also recorded growth in 2018 according to the Federal Statistical Office, with an increase in sales of 2.3 percent to € 525 billion. More and more bricks-and-mortar retailers profited from online growth (2018: +9.7 percent), by utilizing the opportunities of digitalization. 10)
According to the German Retail Association (HDE), the retail trade is still doing well. The favorable labor market situation and current wage development are however being dampened by the expectations of citizens with respect to the economy. Nonetheless, consumer confidence is still good. This is also confirmed by the ifo Business Climate Index: the majority of retail companies surveyed assessed the business climate for the next six months positively. 10)
According to the German Hotel and Catering Association (DEHOGA), the catering sector recorded a positive performance in 2018, for the ninth time in a row, and thus continued its upward trend. In the area of guest accommodation too, a sales increase of 3.7 percent was achieved, which when adjusted for price, represents a growth rate of 1.5 percent. With a nominal sales increase of 2.8 percent (real 0.6 percent), the restaurant trade also performed well. The catering sector was likewise able to increase sales by 3.0 percent (real 1.2 percent). 11)
In the fiscal year 2018, the gross advertising expenditure of the advertising companies was on a par with the previous year at € 31,862 million. The advertising category used primarily at Munich Airport is out-of-home advertising. The gross advertising expenditures in this area are down 2.8 percent compared to the previous year. 12)
Shifts in the modal split, which reflects the manner in which passengers who live in the catchment area of Munich Airport travel to the airport, as well as changes in the number of visitors relating to passengers from Germany and abroad had different impacts on the Parking business unit. In particular, the «Shared Mobility» business (rental cars and car sharing) profited from increased passenger volumes. Displacement effects to other methods of traveling to the airport, particularly to the S-Bahn railway network, were achieved in terms of sales by a price increase as well as through parking transactions in higher value product categories.
Economic environment Real Estate
The City of Munich remains an attractive market for office property. With a floor-space turnover of 979,300 square meters, the million mark may have been narrowly missed, but an extraordinarily high result was still achieved. The floor-space turnover is thus almost on a par with the previous year’s figure of 984,200 square meters. 13)
Market developments are still shaped by the limited space availability. The vacancy level fell year-on-year by 125,300 square meters to 410,600 square meters. The vacancy rate dropped 0.6 percentage points to 1.8 percent. 13)
The average rent for office property in Munich rose 10 percent to € 19.0/m². In comparison to this, the average rent in the region around Munich was € 12.8/m². The prime rent developed somewhat more moderately, rising 1 percent to € 36.0/m². 13)
In the real estate market, there was a tendency for large companies to rent more space than they need in order to cover their future growth. For the time being, space that is not required is being sub-let. In addition, there are indications that there will be more happening again on the project development side. For this, locations that were less in focus in the past will also become interesting. Given Munich’s role as an important office location, in a national and international context, growth in available space is also required in order to remain attractive for companies already located there and for new companies coming in. 13)
Course of business
- Start of the «LabCampus» project
- Start of construction of the Erdinger Ringschluss
- Moratorium on the «third runway»
- Approval for the expansion of Terminal 1
- New passenger record and increase in aircraft movements
- Ground handling services in a difficult economic environment
- Retail trade – growth in revenue not in line with passenger numbers
- Catering and hotel trade on the path to success
- Parking – demand increases with passenger volume
- Advertising – a challenging market environment
- Impetus for further location and real estate development
Key events in the past fiscal year
On March 8, 2018 the «LabCampus» project was launched. With this, Munich Airport plans to create a unique location for innovation and cross-sector cooperation. On the AirSite West area, a forward-oriented infrastructure will be created, which will bring together companies and research institutes, start-ups and global players, creatives and investors, in order to drive forward the development of new ideas and products. To realize the project, customer acquisition and the provision of all required innovation services on site, FMG established the LabCampus subsidiary in the fiscal year 2018, which was included in the group of consolidated companies.
In terms of improving the airport’s railway connection, the official start of the expansion of the railway tunnel on September 5, 2018 was an important event. With this building project, the realization of the Erdinger Ringschluss, i. e. the extension of the railway line from Freising via Munich Airport to Erding, is being driven forward.
The costs for the shell of the tunnel extension are being borne by Munich Airport, and pre-financed in the form of an interest-bearing repayable subsidy from the Free State of Bavaria. On commissioning of the tunnel extension, the payment of the investment costs will fall due for Munich Airport. In fiscal year 2018, T€ 13,674 was capitalized in relation to this construction measure as plants under construction.
After the state elections in October 2018, the coalition contract for the legislative period 2018 to 2023 between CSU and Freien Wählern (Free Voters) stipulated as follows: «The coalition partners have differing opinions regarding the need for a third runway at Munich Airport. The plans for its construction will therefore not be pursued during the current legislative period…» The stipulations, in particular the moratorium in relation to the third runway, is having profound repercussions for the Munich Airport Group. The effects of the moratorium were reflected in balance sheet in fiscal year 2018.
The government of Upper Bavaria issued the planning approval in November 2018 to expand Terminal 1 and add a new gate. The objective of this expansion project is to make the non-Schengen area fit for purpose and to enhance the quality of services and quality of stay in Terminal 1. Commissioning of the gate is planned for 2023. The total costs estimated for the expansion project are expected to be paid by Munich Airport from its own funds.
There were no other events that had a material impact or will have a material impact on the business development of Munich Airport in the fiscal year.
Traffic figures for Munich Airport 1)
|Passengers in millions||46.3||44.6||1.7||3.8%|
|Cargo in tonnes 2)||375,247||388,517||-13,270||-3.4%|
|1) Rounding differences are possible.
2) For better comparability with other passenger airports, the cargo throughput here is quoted inclusive of freight quantities that remain on board the airplane in transit at Munich Airport. The values may therefore differ from those in other publications, in which only freight or cargo throughput (without transit) are considered.
With an absolute increase of around 1.7 million passengers, Munich Airport again achieved positive growth and reached a new record result in the fiscal year 2018 with a total of 46.3 million passengers (+3.8 percent). A significant increase was also posted in terms of aircraft movements (+2.2 percent). With a total of 413,469 aircraft movements (take-offs and landings), Munich Airport approached its historic peak and the limits of its capacity. In contrast, the cargo throughput (result of airfreight and airmail including transit) fell by approximately -3.4 percent year on year to approximately 375,000 tonnes due to the decline in bellyhold cargo.
The development of traffic at Munich Airport shows that it has been possible to compensate for the decline in aircraft movements caused by the withdrawal of Transavia Airlines and the insolvency of Air Berlin, and indeed better than expected – further evidence of the consistently high demand at the Munich location. Despite this extremely difficult starting point, expectations regarding the development of traffic have been met and exceeded.
After a period of stagnation in the previous year, the average number of seats offered increased slightly to 154 seats per flight. While, with the Airbus A380, significantly larger aircraft were used, this was offset by the increased use of regional jets with below-average seat capacity, meaning that overall, there was only a slight increase in average aircraft size. In particularly good news, five Airbus A380s – the largest passenger aircraft in the world – were relocated to Munich and also at least 15 Airbus A350s – the most modern long-haul aircraft in the Deutsche Lufthansa fleet – are stationed in Munich. An essential target group in the long-haul business sector are the customers in the premium travel classes. Here too, Munich Airport is a world leader, particularly due the high number of business travelers. Passenger growth was therefore made possible through the better capacity utilization of 77.5 percent (+1.0 percentage points) and an increased flight offering.
Aircraft movements at Munich Airport
Both originating and transfer traffic were key growth factors in traffic development. With 28.9 million air passengers, Munich had more originating passengers (passengers who do not transfer) than in the previous year. The share of transfer passengers increased slightly to 37 percent.
Demand for German domestic flights was at 9.7 million passengers. This meant a reduction of around 140,000 passengers. In the cumulated net profit, the segment was thus just under the previous year’s figure (-1.4 percent), but displayed considerable recovery trends from the start of the winter timetable at the end of October for the period 2018/2019. The slight decline is primarily attributable to the absence of the Transavia Airlines flights to Berlin-Schönefeld with around 90,000 passengers, which were not replaced. The Air Berlin routes, which recently served almost exclusively domestic German destinations, have largely caught up with Eurowings and Deutsche Lufthansa – only the route to Düsseldorf has not yet completely exhausted its compensation potential. The route to Berlin-Tegel, on the other hand, is largely at the previous year’s level; significant negative impacts as a result of the new ICE link between Berlin and Munich were not observed. The number of German domestic aircraft movements even increased by 3.5 percent or around 3,000 to some 91,000 takeoffs and landings. The different development of aircraft movements and passengers in German domestic air traffic is due to the expected start-up difficulties with the marketing of new airline connections and routes.
Continental traffic posted significant growth: Aircraft movements increased to around 266,000 flights, which equates to a rise of some 5,000 flights or 1.8 percent. Approximately 1.3 million additional passengers (28.8 million passengers in total) were transported compared to the previous year. This equates to an increase of 4.8 percent. In this traffic segment, the losses, caused by the market exit of Air Berlin as well as the departure of Transavia Airlines, were more than compensated for.
Measured by the number of passengers, the long-haul traffic segment posted the highest growth rates. Just under 7.8 million passengers took intercontinental flights, around 500,000 more than in the previous year (+6.9 percent). The long-haul movements also increased by 1.6 percent (more than 400 additional flights) to around 31,900 long-haul flights.
Passenger numbers at Munich Airport
In fiscal year 2018, airfreight handling could not continue the success of the previous years and declined by approximately 3.1 percent to around 352,000 tonnes. Various special effects such as the reduced freight capacity due to changed aircraft types, for example the Deutsche Lufthansa Airbus A380, and technical, temporary load restrictions in the Boeing B787 led to a slight decline. Nonetheless, the second best result in the history of the airport was still achieved.
With a share of over 80 percent, the quantity of freight loaded on and unloaded from passenger aircraft, known as belly-hold cargo, was the most important traffic segment. The bellyhold cargo declined – in parallel with the reduced freight capacity – in the previous year by approximately 5.5 percent to around 294,000 tonnes. The quantity transported on purely freight flights increased considerably, due to the additional Air Bridge Cargo connections (to Russia for example), by around 11.3 percent to some 58,000 tonnes.
The airmail throughput increased to approximately 16,800 tonnes. After airmail services were partially suspended in the previous year, there was an increased demand for airmail services again in 2018.
Airfreight and airmail (including transit items) at Munich Airport
Compared with the traffic results of the airports represented in the German Airports Association (ADV), Munich was unable to continue the above-average growth observed in the previous year. The cargo and movement figures remained below the average; in terms of passenger volumes, Munich was within the ADV average. It is worth noting that the high ADV growth rates are attributable to the strong growth in Frankfurt – by far the largest location. There, growth rates of around 8 percent in passenger traffic were recorded. In contrast, the situation in terms of airfreight is different: Airports with 24-hour operation such as Cologne/Bonn and Leipzig recorded strong growth. There, the package services – particularly the rapidly growing E-commerce segment – increased the freight volume, a traffic segment that Munich cannot serve appropriately due to the strict night flight curfew.
A comparison of traffic results for 2018 14)
|Movements (total traffic)||4.2||2.2|
|Passengers (commercial traffic)||4.0||3.8|
|Cargo (airfreight and airmail and transit)||1.8||-3.4|
Despite pleasing growth, Munich remained in eight place in the ranking of the busiest European airports by passenger numbers, according to the Airports Council International (ACI). In terms of aircraft movements, it was able to claim seventh place. 15)
There are two ground handling licenses at Munich Airport. One of these is permanently assigned to the subsidiary AeroGround Flughafen München GmbH (AE Munich). AE’s market share was 54.5 percent in the fiscal year 2018, a decline of 3.2 percentage points on the previous year’s figure. Despite the strong growth of Deutsche Lufthansa, AE Munich reported a handling volume decline of 3.5 percent overall. These negative changes are essentially the result of the insolvency of its second largest customer Air Berlin and the latter’s subsidiary Niki.
The sharply reduced market share in Terminal 1 was due, firstly, to market growth in the low-cost segment (inter alia Eurowings), in which AE Munich could not participate. Secondly, there were no further handling operations for Air Berlin and Niki in Terminal 1 after the suspension of air traffic in 2017.
AeroGround Berlin GmbH (AE Berlin) holds ground handling licenses at both Berlin airports. In fiscal year 2018, the market share was 24 percent at the Berlin-Tegel location and 17 percent at Berlin-Schönefeld. As a result of the insolvency of the largest customer, Air Berlin in fiscal year 2017, the ground handling volume declined by 40 percent in total compared to the previous year. Fiscal year 2018 posed a huge challenge in terms of consolidating the business and adjusting to the changed customer conditions.
Commercial Activities business
Compared to the previous year, revenue in the Commercial Activities business unit put in a positive performance overall. In this process, the relocation of passengers from Terminal 1 to Terminal 2 and the resultant commercial effects led to at times quite heterogeneous developments.
The retail trade at Munich Airport failed to continue the positive trend of the previous year into fiscal year 2018. Despite rising passenger figures, the retail trade reported declining revenue overall, with the result that the revenue per passenger did not reach the previous year’s figure. The relocation of passenger flows from Terminal 1 to Terminal 2 had a huge impact here, as they led to longer processing times at the security checks and thus to a shorter amount of time being spent by potential customers in the non-public area.
In particular, the previous year’s strong growth impetus in terms of passenger volumes for the destination, Russia, was not present this year. In contrast, revenue from passenger volumes for the more strongly demanded destinations of China and Hong Kong continued to be positive, though disproportionately lower with respect to the number of passengers.
Since Great Britain voted to leave the EU in 2016, the British pound sterling has lost considerable value, which has impacted directly on the consumer behavior of passengers from Great Britain. Despite rising passenger figures, revenue from this customer group remained in decline.
The passenger volumes flying to Turkey increased significantly compared to the previous year, however retail revenue for this customer group developed more slowly than average.
In fiscal year 2018, the restaurants and bars were able to profit from the rising passenger figures and revenue increased again, both in absolute terms and per passenger. This is because the trend among airlines to offer less food on board meant that passengers were availing more of the offering at Munich Airport, both as eat-in and take-away options. Newly opened or extended units thus contributed to the growth of catering-related revenue at Munich Airport.
In the Hotel sector, there was increased demand from guests and conference participants for rooms and the new conference center respectively. At the Skytrax Awards 2018, the five-star hotel in the central area of Munich Airport was named best airport hotel in Europe for the fourth time in a row. 16)
The growth in passenger figures in originating traffic had only a limited impact on the parking business. Despite a slight decline in demand for parking spaces, it was possible to increase revenue overall in face of the changed parking behavior through a further development of product categories and the increasing popularity of «shared mobility» (rental cars and car sharing).
The decline in the «out-of-home» advertising category was also reflected at Munich Airport in fiscal year 2018. While advertising revenue were on a level with the previous year, this was however due to special and/or one-off effects. In the terminals, advertising revenue continued to develop heterogeneously. In Terminal 2 and the satellite building, significant growth was recorded due to the relocation of traffic there and the greater appeal of the advertising spaces. In Terminal 1, in particular, the marketing situation remains challenging due to the largely analog advertising options there.
Real Estate business
Munich Airport’s real estate business is developing only a little at the existing high level. The difficult competitive situation facing airlines, in particular, meant that the Group was unable to increase rental income on existing properties over and above indexing. Renovations and the fixed-term re-rental of a hanger lead to slight increases in revenue.
One important future project is the AirSite West area, on which the cross-sector innovation location, LabCampus and numerous new buildings will be constructed in the coming years.
The development measures for AirSite West are progressing well. A traffic circle with bypass was already completed in the previous year as a traffic easing measure at the Nordallee/Novotel crossroad. For the further accessibility of this area, another traffic circle was built at the western end of the Nordallee in fiscal year 2018. In addition, Munich Airport started on the construction of a traffic link via the Zentralallee (traffic node, West 0). Here, a bridge structure will be constructed from the western end of the Nordallee over the Zentralallee and railway line to the airport maintenance area. In addition, Munich Airport conducted further sewer works in the area of AirSite West and tore down some buildings, in order to free sites for future construction.
The office building constructed on this area using a modular system had already been procured by the Real Estate business division in fiscal year 2018. In line with the real estate and parking strategy, the parking facility P51 with around 2,000 parking places was built next to the Visitors Park.
In the eastern area of the airport, Munich Airport started tunnel works related to the Erdinger Ringschluss project. The existing tunnel, which currently ends at the level of the satellite building of Terminal 2, will be extended eastwards. The tunnel extension is around 1.5 kilometers long and will be supplemented by a 300 meter long access ramp, via which the trains will return to the surface. Munich Airport plans to have the tunnel shell completed by 2021. Then this will be fitted out by DB Netz AG with the technical equipment required for railway traffic.
Furthermore, the construction works for the multi-lane expansion of the south ring and its extension eastwards in the direction of the East airport bypass started in 2018 in order to improve the eastern road link.
To enhance the quality of Terminal 1, Munich Airport is planning to optimize handling of non-Schengen passengers by building a new gate. With the extension, the airport is responding to the changing traffic structure and improving the handling of wide-bodied aircraft. In addition, the requirements on the security checks have increased constantly since 1992. In contrast to earlier, when numerous transfer passengers used this terminal without having to go through security, now almost all passengers in Terminal 1 including their luggage must be checked – just the simple addition of a new gate would make it possible to re-attain former handling capacities.
The total concept for the extension includes a structure on three levels, comprising a core building adjacent to Terminal 1 and a gate. This will be connected with the existing Modules A and B and extend more than 320 meters into the western apron of Munich Airport. Up to twelve aircraft will then be able to dock at the gate. The total area of the extension including renovations in the existing arrivals area B is around 95,000 square meters. In fiscal year 2018, Munich Airport started on the initial preparatory works on the apron and on the planned construction site areas.
For the further development of air traffic, Munich Airport has constructed and commissioned a new ramp equipment station for de-icing and towing aircraft.
The first contracts were concluded in fiscal year 2018 to create living space for employees. In München-Bogenhausen, Munich Airport has rented a newly built residential facility. These furnished apartments will be sub-let on fixed term contracts to new applicants and employees. In Attaching, apartment buildings owned by the airport have been renovated. They are now also available for fixed-term rental to employees. Further collaborative projects with external partners are being negotiated.
Net assets, financial position, and results of operations
- Earnings after taxes decreased slightly
- Assets – Munich Airport is building up liquidity reserves
Results of operations
In fiscal year 2018, Munich Airport’s earnings after taxes (EAT) fell by T€ 10,067 to T€ 148,733. The causes of this decrease are explained in detail below.
Results of operations
|T€||2018||2017||Absolute||Relative in %|
|Cost of materials||-393,602||-398,988||5,386||-1.3|
|Depreciation and amortization||-215,862||-217,617||1,755||-0.8|
|Financial result 1)||-100,897||-73,130||-27,767||38.0|
|1) This also includes income from companies valued using the equity method.|
In fiscal year 2018, the revenue of Munich Airport rose by T€ 40,082 or 2.7 percent to T€ 1,508,817.
In terms of revenue from airport charges (T€ 626,726; previous year: T€ 589,510), the largest contributor to growth was passenger and landing charges.
In comparison with growth in MTOM (Maximum Take-Off Mass) and passenger figures, revenue from landing and passenger charges increased disproportionately, driven by price.
Revenue and volume growth in passenger and landing charges
The decline in revenue from handling services of T€ 13,822 (-7.3 percent), in total, resulted primarily in the area of ground handling services from the insolvency of Air Berlin and Niki.
The revenue in other divisions was broken down as follows in fiscal year 2018:
Breakdown of revenues of other areas
After 25 years of being in operation, there is an ever pressing need to upgrade the buildings from the first stage of expansion at Munich Airport. Consequently, the expenses for refurbishment and optimization and reconstruction measures are rising constantly. In contrast, the cost of purchased services fell in connection with the commissioning of sub-contractors in the area of ground handling services at the Berlin-Tegel location. Overall, the cost of materials reduced by T€ 5,386 or 1.3 percent.
Munich Airport’s personnel expenses are largely determined by the number of employees and the amount of remuneration paid to employees employed under the collective pay scale agreement for public sector employees (TVöD). The collective payment under this agreement was increased by 3.19 percent effective March 1, 2018. The Group again created new jobs in the fiscal year. The average number of employees increased from 9,316 to 9,521 year on year. In total, personnel expenses rose by 5.3 percent to T€ 507,713.
At T€ 114,318 other expenses were slightly higher than in the previous year. This is primarily attributable to higher project costs and other taxes. Conversely, the rental and leasing expenses, were reduced among other things.
In fiscal year 2018, depreciation and amortization (T€ 215,862) include impairment losses of T€ 16,408, which mainly relate to planning services performed and construction period interest (T€ 12,849) and must presumable be performed again due to the delay in building the third runway, most recently as a result of the postponement of the decision as a part of the moratorium. Overall, the scheduled depreciation reduced by T€ 18,163 or 8.3 percent. This is attributable, inter alia, to the fact that during the course of the previous year individual components of buildings were omitted from depreciation and amortization. Fiscal year 2018 was the first year in which this affected the entire year.
The financial result decreased by T€ 27,767 to T€ -100,897. This was due to the non-cash revaluation losses arising from the valuation of financial liabilities from interests in partnerships in Other financial result. At T€ -84,257, the net interest was slightly above the previous year’s level, due to the recognized interest expense on financial liabilities from interests in partnerships. The interest actually paid was, in contrast, reduced further through debt repayments.
The tax expense was T€ 72,586, and thus on a par with the previous year’s level. This includes current taxes in the amount of T€ 83,645 (previous year: T€ 76,887) as well as deferred tax income of T€ 11,059 (previous year: T€ 6,447).
Net assets and financial position
|T€||Dec. 31, 2018||Dec. 31, 2017||Absolute||Relative in %|
|Current assets 1)||357,327||306,516||50,811||16.6|
|thereof cash and cash equivalents||12,377||6,625||5,752||86.8|
|Other non-current liabilities 2)||2,220,855||2,292,898||-72,043||-3.1|
|Other current liabilities 2)||917,426||927,132||-9,706||-1.0|
|1) Including assets classified as held for sale.
2) Including financial liabilities resulting from partnerships.
In fiscal year 2018, Munich Airport invested cash with a total value of T€ 210,000 (previous year: T€ 158,000) in short-term money market transactions and term deposits. As a result of this, non-current assets increased by T€ 50,811 to T€ 357,327. Furthermore, a commercial paper program was launched for the first time in the previous year (without trading on the stock exchange) in the amount of T€ 100,000, which was available for short-term financing. Munich Airport issued several tranches within this program in fiscal year 2018, which were repaid in full on the balance sheet date.
The previous year’s consolidated profit (T€ 158,800) was reduced by the distribution of T€ 30,000 to shareholders. The remaining amount was retained in fiscal year 2018.
The changes in other liabilities were mainly due to the financing area. The decline is primarily attributable to repayments of loans in the amount of T€ 125,713. Conversely, financial liabilities from interests in partnerships increased by T€ 30,683.
The equity ratio increased primarily due to the income in the fiscal year.
|T€||Dec. 31, 2018||Dec. 31, 2017||Absolute||Relative in %|
|of which annual profit/loss||148,733||158,800||-10,067||-6.3|
|of which annual profit/loss||1||0||1||100.0|
|Financial liabilities resulting from interests in partnerships||346,058||315,375||30,683||9.7|
The main terms of Munich Airport’s current and non-current financial liabilities can be found in the table below:
Non-current loans conditions
|Interest rate in %|
|Method of funding||Currency||Interest rate||Residual debt in T€||from||to|
|Financial liabilities resulting from interests in partnerships||€||Earnings-based||346,058||–||-|
|Shareholder loans||€||Variable/earnings-based||491,913||Base rate plus margin|
|Loans||€||Floating-rate||734,404||3M and 6M EURIBOR
|(As at December 31, 2018)|
The shareholder loans are available indefinitely and interest is charged on the basis of the base rate plus a margin, if the results and anticipated economic development allow this.
The loans bear usual non-financial covenants, including negative pledge and pari passu clauses. In addition, there are other general conventional agreements concerning repayment in the event of changes in shareholder structure. There are no financial covenants.
Munich Airport uses payer interest rate swaps and currency forwards to hedge against risks arising from interest rate and exchange rate fluctuations. Interest rate hedges are accounted for as a valuation unit.
Hedging transaction conditions
|Fixed rate in %||Forward rate in EUR/USD|
|Hedge transactions||Notional amount||Currency||from||to||from||to||Underlying transactions|
|Interest payer swaps||644,000||T€||0.28||2.92||-||-||Syndicated loans|
|Foreign currency forwards 1)||1,391||T€||-||-||1.17||1.21||Expected transactions|
|1) These hedges are not recognized.
Sufficient funds were available from the net cash flow from operating activities in 2018 to ensure the liquidity of the company in operations. Cash outflows from investing activities mainly arose from the acquisition and production of property, plant, and equipment and short-term time deposits. A negative cash flow arose from financing activities due to distributions to shareholders, loan repayments, and interest repayments.
Cash flow statement
In fiscal year 2018, investments in property, plant, and equipment for own use at Munich Airport was T€ 191,146 in total. This was offset by depreciation and amortization in the amount of T€ 190,101.
In fiscal year 2018, Munich Airport opened the P51 parking facility. The five-story parking structure at the Visitors Park offers a total capacity of 2,000 parking spaces and was built in accordance with Munich Airport’s climate protection strategy using a resource-conserving system design. Overall, Munich Airport invested T€ 14,095 in the new building. In fiscal year 2018, T€ 12,547 has been added to property, plant, and equipment for this purpose.
In addition, a large number of ongoing investment projects were implemented and continued in fiscal year 2018. This included, inter alia, investments in relation to the development of AirSite West, the expansion and modernization of Terminal 1, the expansion of the railway tunnel for the Erdinger Ringschluss and numerous replacement purchases in the area of IT and technology.
Target achievement and overall assessment
Year on year and in comparison with the forecast development, these performance indicators have trended as follows:
|EBT in T€||229,240||Decrease||-4.0||-10.0||221,319||Exceeded|
|CO2 reductions in tonnes||14,367||Increase||22.1||27.1||22,031||Exceeded|
|Passenger Experience Index||78.53||Increase||0.0||0.5||79.16||Exceeded|
Earnings before taxes (EBT)
Munich Airport’s EBT for fiscal year 2018 fell by 3.5 percent to T€ 221,319, a decrease of T€ 7,921 which was slightly less than expected. The anticipated result was thus exceeded.
To achieve the long-term climate protection goals, binding targets are agreed annually for divisions and subsidiaries of the Group. These include stipulations regarding the implementation and recognition of efficiency measures, and special targets for the establishment of CO2-reducing technologies. One example of this is the first photo voltaic system operated by Munich Airport on the P51 parking structure, which has an output of more than 749 kWPeak. With a total amount of 22,031 tonnes of saved CO2 emissions from efficiency and special targets, it was possible to exceed the target for 2018.
Passenger Experience Index (PEI)
In fiscal year 2018, Munich Airport was able to increase the satisfaction levels of passengers disembarking in Munich by 0.8 percent, compared with 2017 measured by PEI. This rise resulted, on the one hand, from the relocation of traffic portions from Terminal 1 to Terminal 2, where the passenger satisfaction level is empirically higher. On the other, the satisfaction levels improved due to the implementation of optimization measures, such as the installation of an automatic boarding pass check and a passenger-friendly queuing system in front of the central security check in Terminal 2 and the expansion of the security check lanes there. In Terminal 1, the C-West hall was updated including a fully fledged special security control for departing US flights. This took the burden off the security checks at the access points to areas B and C. Furthermore, measures such as the installation of a queuing system in front of the entry passport check in Module C of Terminal 1 and the completion of the structural restoration work on the toilets had a positive impact on customer satisfaction in both terminals. In addition, service training courses were performed across the campus in 2018, in order to improve the customer experience.