Financial reportOutlook, risks and opportunities report

Outlook report

Economic and industry-specific conditions

In 2019, the pace of global economic growth is set to lose momentum. The current IMF forecast assumes an increase in global GDP of 3.5 percent 17), which is slightly under the level of current calculations for 2018.

In the leading industrialized countries, the economy will grow at a somewhat weaker pace than in 2018. The dynamic growth in the USA looks set to continue; this was stimulated by, inter alia, the reduction in the effective corporate tax burden which came into effect in 2018. 18) In Japan, on the other hand, the upturn will continue but at a slower pace, which is due to, among other things, the already heavily utilized, macro-economic production capacities. 19) The Chinese economy will continue to expand with a strong, albeit slightly falling growth rate, which is supported by an expansive fiscal policy on the part of the government. Economic development in Great Britain will continue to be hampered by its planned exit from the European Union (known as Brexit), which represents a considerable risk to the British economy. Should a no-deal Brexit occur in 2019, the growth rate would fall even further than the currently forecast 1.5 percent. Since commodity prices stabilized in 2017 and 2018, the increase in economic output in the developing and emerging-market countries should, at 4.5 percent, be just as positive as in 2018. For Brazil and Russia, two countries included in this category which have been dealing with crises in recent years, continued solid economic growth is expected for 2019 following the recovery in the two previous years. 18)

In 2018, the price of oil fluctuated in a range between USD 52 and 86. For 2019, a stagnation compared to 2018 is forecast. The price of oil should remain at an annual average of just under USD 60 per barrel.17)

Forecast economic growth in selected destinations worldwide

In %

Graphic: Forecast economic growth in selected destinations worldwide

GDP growth in 2018 and 2019 21)

The long-standing upswing in the eurozone will probably continue in 2019. At 1.6 percent, however, lower economic growth is expected. On the labor market, a further positive performance is expected. Strong private consumption will therefore be a supporting pillar for the upturn. In contrast, the contribution of investments and exports to growth should fall. The economic performance of the eurozone is fraught with not inconsiderable risks due to the danger of a disorderly Brexit. The re-introduction of border controls and customs would have significant negative consequences on economic development in Great Britain and the eurozone, due to their impact on international production and supply chains. The current growth forecasts, however, assume an orderly Brexit. 18) 

The German economy also remains on a growth path for 2019. The economic performance of the Federal Republic of Germany is expected to cool further however. The increase in economic output for 2019 is forecast to be 1.3 percent. Early indicators for economic development in the Federal Republic of Germany are noticeably lower than they were a year ago. For example, the ifo Business Climate Index stands at 101.0 points and the ZEW Economic Sentiment Index at minus 17.5 points. 20)

Forecast economic growth in selected destinations throughout Europe

In %

Graphic: Forecast economic growth in selected destinations throughout Europe

GDP growth in 2018 and 2019 21)

The upturn in the Federal Republic of Germany had a broader base than at the beginning of 2018. Private consumption (2019: 1.2 percent) will contribute significantly to growth, as in previous years. This is also indicated by the solid level achieved on the Consumer Climate Index of the GfK market research institute. It is currently at 10.4 points. 22) The growth in construction investment will likewise continue to be dynamic in 2019 (2019: 3.1 percent) Investments in equipment (2019: 2.2 percent) and exports (2019: 3.0 percent) should develop more moderately however. 18)

The demographic and economic general conditions in Bavaria and, in particular, the airport catchment area mean that further strong growth in transportation demand can be expected at Munich Airport. According to the results of the regionalized population projection by the Bavarian State Office for Statistics, the number of people living in Bavaria, especially around Munich, will grow in the period up to 2037 and this growth is characterized as strong to very strong. The population of Upper Bavaria will increase by 9 percent, in the district of Munich by 12.1 percent, and in the city of Munich by 11.6 percent. 23) In the Prognos Zukunftsatlas, the district of Munich and the City of Munich, followed by the region of Ingolstadt, head the list of regions with the best future prospects. 24) Driven by growing prosperity and an increasing population, the trend in the volume from Munich Airport’s core catchment area was positive in the last two years in particular. This trend is expected to continue in future. These statements are supported by a study conducted by the business magazine «Focus Money», where all the regions in the top ten were in Bavaria or Baden-Württemberg. 25)

The global aviation market will continue to grow. The International Air Transport Association (IATA) is assuming an average annual growth rate in global passenger volumes for 2019 of 6.0 percent. The annual average growth rate for airfreight is 3.7 percent globally for the same period and is thus significantly below the previous year’s level, which reflects the weakening state of world trade. 26)

In the German aviation market, the German Airports Association (ADV) is likewise forecasting further growth. Passenger numbers are forecast to rise for 2019 by 2.7 percent. German domestic traffic will contribute growth of 1.0 percent. For intra- and inter-continental traffic, growth rates of 5.1 percent and 2.8 percent respectively are forecast. The number of aircraft movements should rise by 1.2 percent and freight volume should rise by 2.3 percent in the same period. 27)

Forecast course of business

The Executive Board of Munich Airport has positive expectations of traffic volumes in 2019. The number of passengers should increase again by a good 4 percent and therefore climb above 48 million. Aircraft movements will increase by around 1 percent.

The reasons underlying passenger growth include the announcement of new connections, continued growth in transfer passengers and a rising seating capacity utilization. The major part of the growth was contributed by the Lufthansa Group. In inter-continental traffic, frequency expansion to Seoul, Singapore and Chicago as well as new connections to Bangkok and Osaka are planned. In addition, growth in traffic and an increase in capacity utilization are assumed for the main customer, Lufthansa. In addition, passenger number increases are also expected for other airlines.

In addition to the forecast positive traffic development, the 2.0 percent increase in air traffic charges, introduced on January 1, 2019 in accordance with the master agreement on charges, will lead to an increase in airport charges.

In the retail trade, Munich Airport expects further results-improving effects, quite apart from a traffic-determined growth in revenue. The product range is being streamlined in order to improve the margins continuously. Likewise, through the implementation of new retail concepts and the redesign of sales outlets, the growth in revenue should be stimulated further.

After a downturn in revenue from handling services as a result of the insolvency of Air Berlin in the past fiscal year, growth in revenue is expected again for 2019.

Revenue from the catering and hotel trade will grow more strongly in 2019 than passenger volumes. This is to be achieved, inter alia, through renovations and the establishment of new catering units. In the hotel trade, unchanged demand from large customers and improved capacity utilization overall is expected.

As a result of the planned renovation of the centrally located parking structures and the associated capacity bottlenecks, Munich Airport expects that parking transactions will not rise in line with passenger development. Therefore, parking revenue on a par with the previous year is expected.

The revenue from rental and leasing will rise, due among other things to the re-rental of spaces that were partially vacant in fiscal year 2018 and which in the past had been rented to Air Berlin.

Other revenue also performed well, due among other things to rising revenue in the international business.

In total, Munich Airport expects an increase in total income of approximately 4 percent.

The trend toward higher costs of materials due to increasing maintenance and conversion measures will continue in fiscal year 2019. Moreover, the Group expects an increase in third-party services in the context of the expansion of the international business.

The Executive Board expects an increase in personnel expenses as a consequence of increases in the collective pay rates. In addition, further staff capacities will be built up due to additional orders and the insourcing of previous external services.

Other expenses will fall in 2019 due, among other things, to fewer audit, consulting, and project services. Likewise, the expenses for rent and leasing will fall as part of the first-time application of IFRS 16. Various individual measures will have an inverse impact such that other expenses will remain unchanged overall in comparison to the fiscal year 2018.

In contrast to this, depreciation and amortization is expected to decrease as a whole in 2019, resulting in an improvement in earnings. The reason for this is that the special effect from 2018 arising from impairment losses is no longer included. This will be partially offset by higher depreciation and amortization due to the first-time application of IFRS 16.

In the financial result, an improvement is expected on balance. On the one hand, the interest expenses for loans will reduce due to repayments. On the other, Munich Airport is assuming that the other financial result (profit/loss from financial instruments) will improve. The interest expenses from the valuation of financial liabilities from interests in partnerships will reduce significantly. In contrast to this, the planning assumes a deterioration, largely due to higher interest for loans to shareholders. Munich Airport is expecting an increase in the underlying base rate due to the generally increasing market interest rates.

Overall, Munich Airport expects EBT to increase by between 11 percent and 17 percent.

Forecast financial and non-financial key performance indicators

  2018   2019  
  Actual   Forecast  
      from to
      % %
EBT in T€ 221,319 Increase 11.0 17.0
CO2 reductions in tonnes 22,031 Decrease -17.8 -12.8
Passenger experience index total satisfaction 1) 82.01 unchanged 0.0 0.0
1) The 2018 value was adjusted, as the overall satisfaction level from the Passenger Experience Index will be used from 2019 as a target value.

The PCA systems installed at Munich Airport will gradually be phased into normal operation. Their usage rate remains at a high level. A slight decline in target values for 2019 compared to the savings achieved in 2018 resulted from the considerable over-fulfillment of target values in 2018. For 2019, additional savings from efficiency measures of more than 2,900 tonnes CO2 will be aspired to. The planned measures should primarily reduce the energy requirement for lighting and for ventilation and air-conditioning technology.

Munich Airport will strengthen and expand Passenger Experience Management in 2019 and consequently further intensify the continuous improvement measures in the area of passenger satisfaction. Thus, for example, there are plans to commission further easy pass systems to optimize passenger processes and to expand and improve the catering offering. Furthermore, it is on the agenda to elaborate with airport management a comprehensive passenger experience management concept, in order to secure the high satisfaction levels in the long-term also. For 2019, a different indicator («total satisfaction») compared to 2018 is used for the target value assessment basis. As a result, the measurement instrument for customer satisfaction, the Passenger Experience Index, is to be further developed flexibly in accordance with the needs of the organization and as a response to changed customer requirements.

With respect to the net assets and financial position, Munich Airport expects a positive free cash flow for 2019, albeit lower in absolute terms compared to 2018, despite the planned high cash outflow for investments in major projects to expand the airport. Examples for these planned major projects are the new construction of a suburban train tunnel for the Erdinger Ringschluss, the expansion of Terminal 1 and the creation of additional aircraft parking position on the eastern apron.

On the assets side of the consolidated balance sheet, the planned investments will exceed ongoing depreciation and lead to an increase in non-current assets. Short-term deposits will fall as a result of the planned investment activity. The assumption that annual profit/loss will largely be retained in 2019 will result in an increase in equity: Debts should be reduced by

17) International Monetary Fund, World Economic Outlook, January 2019
18) Ifo Institute for Economic Research, economic forecast, December 2018
19) German Council of Economic Experts, Autumn Report 2018, November 2018
20) Center for European Economic Research (Zentrum für Europäische Wirtschaftsforschung; ZEW) website, December 2018
21) IMF, World Economic Outlook, January 2019
22) Growth from Knowledge (GfK), press release, November 2018
23) Bavarian State Office for Statistics and Data Management (Bayerisches Landesamt für Statistik), regionalized population projection for Bavaria up to 2037, December 2018
24) prognos, Prognos Zukunftsatlas 2016, May 2016
25) Focus, Large district ranking 2018, January 2019
26) IATA, press release, December 2018
27) ADV, ADV news: Traffic forecast of the ADV for 2019

Risks and opportunities report

Risk management system

The Executive Board of FMG and all subsidiaries and affiliated companies is responsible for the early detection and prevention of risks that jeopardize the continuity of Munich Airport and the investments. Group Management has overall responsibility for an effective risk management system and lays the essential foundation for it by communicating and defining corporate strategy and targets. It formulates specifications for the risk management process and the organizational structure of the risk management system.

The aim of the risk management system is to identify events and developments that may have a negative impact on the achievement of strategic and operational targets in good time and develop suitable countermeasures. It takes account of all aspects of entrepreneurial activity – economic as well as environmental and social.

The risk management guideline regulates the general principles of risk management in the Group as well as the tasks and responsibilities of the function holders involved in risk management. This is aligned in accordance with the internationally recognized framework model «COSO ERM» (Committee of Sponsoring Organisations of the Treadway Commission – Enterprise Risk Management).

The Risk Management Committee serves as an additional supporting management, control, and supervisory body within the risk management system. As the highest ranking risk management body, it is directly subordinate to the Executive Board and consists of the Chief Financial and Infrastructure Officer, the heads of the Aviation, Commercial Activities and Real Estate business divisions, the heads of corporate divisions Legal, Compliance, Enviromental Affairs and Committee Support, Corporate Development, Corporate Controlling and Investment Management, Corporate Security and Corporate Communications as well as, the head of the IT service area and the Risk Manager. The head of Compliance is involved in the Risk Management Committee as a guest. The task of the Risk Management Committee is to analyze the risks from a Group perspective and to monitor the effectiveness of countermeasures. It provides support with the development of the risk management system as well as with risk identification, assessment, and control. The Risk Management Committee meets quarterly and agrees the risk report, which is subsequently presented to the Executive Board and the shareholders.

The risk management process comprises the following steps. A coordination and communication platform has been established in the system to support this process.

Identification and communication of risks

All divisional managers and Chief Executive Officers of subsidiaries and shareholdings are responsible for the identification and assessment of risks. In the relevant divisions, all risk-relevant information is coordinated, administrated, documented, and passed on by the relevant risk managers. The risk manager checks the divisions’ risk reports for plausibility and compliance with the Group-wide standards for risk assessment. He combines the divisions’ individual reports in a risk report, taking account of materiality for the Group, and reports quarterly to the Executive Board and shareholders. Risks that jeopardize the Group’s existence that have been identified for the first time must also be reported to the Executive Board on an ad hoc basis.

As a basis for dealing with risks responsibly, each individual employee is involved in managing risks throughout the company. Each employee is responsible for eliminating risks in his area and reporting indications of existing risks to his manager without delay.

Assessment of risks

The systematic risk assessment allows the company to determine the extent to which individual risks jeopardize the fulfillment of Munich Airport’s corporate goals and strategies and which risks may possibly threaten its existence. The factors «expected loss» and «likelihood/frequency of occurrence» are presented in a two-dimensional risk matrix for this purpose. The expected loss describes the impact on profits that can be expected if the loss event occurs. The likelihood of occurrence indicates how reliably the loss event is expected to occure. In the case of events that recur over time, the company works with the frequency with which they occur. The assessment first takes place without measures to limit risk being considered (gross risks, see Section «Risks»). Subsequently, the risks are assessed after risk-minimizing measures are initiated or implemented (net risks, see Section «Risks»).

Dealing with risk

Starting from the risk analysis, appropriate countermeasures for dealing with risk are specified in line with corporate strategy and economic aspects. The strategies for managing risk include: controlling, insuring, minimizing, eliminating, and passing on. The risk officers have the task of specifying and implementing countermeasures to manage risks in the respective division affected.

Risk monitoring

The risk manager monitors the effectiveness of risk management continuously. Risks are also monitored separately by Internal Audit.

Compliance management system

Compliance covers compliance with all Munich Airport-related laws, specifications, and regulations, national and international rules and standards, as well as in-house rules and guidelines. Munich Airport has established a Group-wide compliance management system, which encompasses all organizational provisions ensuring compliance with the aforementioned rules.

The Compliance department submits reports on the current status of the compliance management system to the Executive Board on a regular basis and to the Supervisory Board on an annual basis.

Compliance risks are also communicated as part of the risk reporting to the Executive Board and shareholders if internal thresholds are exceeded. Regular dialog takes place between Risk Management and Compliance.

Identifying and minimizing compliance risks

The Compliance department prepares the compliance risk analysis with input from the divisions and combines it with the subsidiaries’ compliance risk analyses every year.

Compliance risks are assessed in the same way as the risk management process. Once the compliance risk analysis has been carried out, the Executive Board is notified of the results in a report. The compliance risk analysis was validated in 2018 by an external consultant.

The annual Compliance report to the Supervisory Board of FMG also includes the results of the compliance risk report. If there is an elevated loss potential and concomitant high likelihood of occurrence despite all the countermeasures taken, a detailed description is provided in the report.

In respect of 2018, there were no elevated compliance risks after the countermeasures taken were considered.

Preventing corruption

The compliance guidelines and the guidelines covering gifts and invitations support managers and employees in ensuring legally compliant and ethical behavior at the workplace. They are published on the Intranet and are therefore available to all employees. The guidelines also reference other guidelines with which employees must comply, thus for example ensuring compliance with public procurement law with regard to procurement and contracting processes, data protection, and information security. These ensure that processes and procedures are transparent and traceable, both internally and externally. In contracting and tendering procedures, Munich Airport requires bidders to submit a declaration of commitment stating that they will undertake everything necessary to preclude corruption. Compliance failures are liable to sanctions, such as exclusion from the contracting process.

The position of anti-corruption officer is exercised by the head of the Compliance department. There were no confirmed cases of corruption in 2018.

Communication and training

A key task of the Compliance department is to train and advise employees and managers in compliance matters as a preventative measure to stop compliance breaches from occurring.

Group compliance regularly provides training and publishes information to ensure that all employees and managers are familiar with the guidelines and any updates or amendments to them. Every year they must provide their signature to confirm that they have read the compliance documentation.

In 2018, some 45 managers of the Munich Airport Group took part in the three-hour training module on compliance as part of the Leadership Excellence Program. In addition to the legal fundamentals and the responsibilities of managers, this also covers Munich Airport Group’s specific guidelines on compliance and the prevention of corruption. A total of 524 people have received training since the module started at the end of 2013. Participation in compliance training is documented.

The Executive Board and Supervisory Board deal with compliance issues at regular intervals.

Electronic whistle-blower system

Through an electronic whistle-blower system, the Business Keeper Monitoring System (BKMS®), Group employees, business partners, and customers can report behavior potentially damaging to our organization. People inside the Group and outside can also contact the Compliance department by other means of communication (telephone, e-mail, face-to-face discussions) if they wish to draw attention to compliance infringements and need advice. Tender documents inform potential bidders of the possibility of using the BKMS® should compliance infringements be suspected.

Data protection

Munich Airport has initiated comprehensive measures in order to comply with the General Data Protection Regulation (GDPR) which came into effect on May 25, 2018 and with the new Federal Data Protection Act. The project to implement GDPR Group-wide was implemented according to plan, with individual subsidiaries handling the topic independently. Compliance with data protection is a line task from now on. Responsibility for it lies decentrally with the individual technical departments or subsidiaries for their processes.

An awareness campaign with face to face and online training courses for the Group employees as well as further, ongoing training measures for managers and employees in data privacy law and data security have contributed to the sensitization process. Specialized, individual advice is also available in instances where people are unsure how to comply properly with data protection regulations.

Where required, the Group companies have appointed data protection officers with consultancy and monitoring tasks in accordance with the GDPR. The data protection officer of FMG is simultaneously the data protection officer for most subsidiaries. He is also assigned organizationally to the Compliance department but conducts his job independently and reports directly to the Executive Board. The Compliance department has furthermore built up additional know-how with respect to data protection consulting in the Group.

There were no known instances of complaints regarding breaches of customer privacy and losses of customer data.


Risks that could have a material influence on the business activity or on the net assets, financial position, and results of operations as well as the reputation of Munich Airport are explained below. In each case, the risks are shown before (overview gross risks) and after consideration of suitable countermeasures (overview net risks).

The risk assessment relates to the economic impact in the assessment period quoted. As at December 31, 2018, the following material gross risks were identified for Munich Airport:

Overview of gross risks

Graphic: Overview of gross risks

Risks resulting from force majeure

Risk Description and analysis Countermeasure(s)
Natural disasters A breach of the Isar dams near Freising caused by heavy rain could lead to the terminals being flooded. Gradual upgrading of the Isar dams by the water authority. They have already been partially renovated. Insurance to cover earthquakes, storms, hail, and flooding has been arranged.
Attack on air traffic The risk of terrorist attacks on air traffic remains high. In addition to bodily injury and property damage, this would result, at least temporarily, in a decrease in the number of aircraft movements and passengers. To avert a terrorist attack, Group security is taking strategic, operative as well as technical & organizational measures: Provision of sufficient and well-trained personnel resources, construction measures to guarantee modern and approved security technology and infrastructure, monitoring of service quality through sustainable quality measures and through constant exchange with the responsible security authorities. Bodily injury and property damage as well as interruptions of operations are insured.
Terror at the airport Acts of terror on the airport campus can result in bodily injury and property damage. A further consequence of such events would be, at least temporarily, a decrease in the number of aircraft movements and passengers. To avert a terrorist attack, Group security is taking strategic, operative as well as technical & organizational measures: Provision of sufficient and well-trained personnel resources, construction measures to guarantee modern and approved security technology and infrastructure, monitoring of service quality through sustainable quality measures and through constant exchange with the responsible security authorities. Bodily injury and property damage as well as interruptions of operations are insured.
Fulfillment of security tasks The airline companies are responsible for security tasks in transferred areas. In these areas, airline companies fulfill the same task as airport operators but are not subject to the same supervisory authority. For Munich Airport, there is a risk that inspections will reveal defects in transferred areas and the airport as a whole will lose its security status as a result.
Defective controls could lead to property damage and bodily injury as well as reputational damage.
At present, a subsidiary of FMG is responsible for operational security tasks in the transferred areas; its services rendered are subject to regular monitoring by FMG. Furthermore, there follows a mutual, intensive exchange with the responsible government and supervisory authorities.
Market slump from epidemics/illness Epidemic/sickness outbreaks can result in market downturns with reduced aircraft movements and passenger numbers. Due to a relatively high fixed cost ratio, Munich Airport’s ability to react to market downturns is limited.
Large fire In the event of damage to or destruction of terminals or infrastructure systems caused by a large fire, property damage and bodily injury, as well as long-term interruptions of operations are to be expected. To minimize the risk of a large fire, Munich Airport takes all required preventive and defensive fire protection measures, and has its own Airport Rescue and Firefighting unit. The risk of a large fire is additionally minimized by a fire insurance policy (property and interruption of operations insurance) and public liability insurance (liability claims of third parties). After taking the countermeasures into consideration, the net risk is below the risk tolerance limit.
Aviation accidents Aviation accidents or damage to aircraft can result in bodily injury and property damage as well as interruptions of operations, and consequential damage. To minimize the risk, Munich Airport maintains an Airport Rescue and Firefighting service, a medical service, and a counseling team. The risk of aviation accidents is minimized through liability insurance and fully comprehensive insurance. After taking the countermeasures into consideration, the net risk is below the risk tolerance limit.

Market risks

Risk Description and analysis Countermeasure(s)
Loss of/adverse impact on hub If Deutsche Lufthansa amends its strategy of operating Munich Airport as a hub, this would result in dramatic falls in the number of passengers and aircraft movements.

In 2018, Deutsche Lufthansa further expanded its offering of flights in Munich. The hub was expanded in 2018 and the quality of Munich Airport as a hub was enhanced through the basing of five Airbus A380s here, the use of four additional aircraft from the Airbus A320 family for medium-haul routes, and the fleet renewal with modern long-haul Airbus A350 jets. The risk of the loss or impairment of the hub is therefore categorized as very low.
Munich Airport’s collaboration with Deutsche Lufthansa is based on joint investments and long-term cooperation agreements.
Economic cycle As a consequence of a weak economy, the growth parameters assumed in the planning process cannot be achieved, which has an adverse impact on profits.

During more significant economic crises, a collapse in loan finance markets may occur.

Increasingly protectionist political tendencies could prove a burden to global trade in general, but also to European-US trade and thus to the transatlantic aviation market. This could result in growth-inhibiting effects for Munich Airport.
Brexit is fraught with risks for economic development not just in Great Britain but in the EU also, and requires further observation.
A no-deal Brexit would also mean the departure of Great Britain from the European Common Aviation Area (ECAA). Due to the changes in aviation rights, this would have profound consequences for the structures in the European aviation market and could temporarily inhibit development in the aviation market.
Reducing expenses through cost monitoring, if necessary reducing staff numbers in a socially responsible manner plus a short-term cut in the investment budget in non-critical divisions aim to mitigate the consequences of economic slowdowns.

There are revolving credit lines to ensure the company is solvent.

The European Commission submitted a proposal in December 2018, which provided for a freezing of the current traffic volume between Great Britain and the EU-27 for a transitional period of twelve months in the event of a disorderly Brexit.

In addition to the risks represented in the risk matrix, there was also a risk in the previous year referred to as «Commercial difficulties of airlines». With the insolvency of Air Berlin and Niki in fiscal year 2017, Munich Airport lost important customers. Within the shortest space of time, it proved possible for other airlines, including Lufthansa and Eurowings, to compensate for the hole created by this loss through strong demand in domestic German and tourist traffic. With the exception of Lufthansa, none of the airlines operating at Munich Airport extended into the traffic share of Air Berlin, meaning that there is currently no financial risk of further default and the risk has been removed from the risk reporting in 2018.

Operating risks

Risk Description and analysis Countermeasure(s)
IT failure Damage to the IT system can result from fire, water ingress, or sabotage. Failure of IT for traffic operations with the corresponding interruptions of operations would be the consequence.
Constant, new technological developments and the worldwide increasing risk of cyber attacks are also leading to risks in relation to the security of IT systems and networks as well as data security. In the area of cyber criminality, an increasing, abstract risk potential exists that requires constant observation and assessment.
Failure of IT for traffic operations can lead to interruptions in operations. This would result in financial losses and reputational damage.
Critical corporate IT systems are fully redundant with systems located in physically separate locations. Property damage and interruptions of operations are insured.

To avert a cyber crime attack at Munich Airport, a central information security management has been in place since 2004, which defines and monitors strategic, technical, and organizational measures to defend against cyber attacks. The awareness of cyber risks is increased through training courses for managers and employees. In addition, Munich Airport opened a center of competence to counter cyber criminality in 2018 (Information Security Hub). Here the airport’s IT specialists work together with experienced IT security companies under realistic conditions on various risk scenarios and test new methods for combating cyber criminality.
The risk is additionally minimized through insurance. After taking the countermeasures into consideration, the net risk is below the risk tolerance limit.
Water damage Water damage caused by a break in the main drinking water or fire extinguishing water pipelines could lead to the failure of infrastructure systems important for air traffic. Remotely controlled emergency shut-off equipment and additional protective devices in the pipeline connections limit the possible damage. Property damage and interruptions of operations are insured. After taking the countermeasures into consideration, the net risk is below the risk tolerance limit.
Change in national and EU-wide security requirements (formerly expansion of EU security requirements) Munich Airport is subject to national and EU-wide aviation security requirements encompassing the topics of airport security, air passenger and hand luggage checks, airfreight, airmail and goods controls, among others. Security requirements are adjusted continuously to the current circumstances. This can give rise to procedural and also infrastructural changes for Munich Airport. Corresponding financial burdens would then follow. Munich Airport attempts to minimize these consequences through work in associations and on committees. Early information relating to ongoing legislative procedures ensures the timely implementation of security regulations.
Additional expenses caused by infrastructural changes are dealt with in the master agreement on charges.
Failure to pass an EU safety inspection The EU’s aviation authorities conduct safety inspections at airports. Should it fail to comply with a safety standard and subsequently fail the follow-up audit, Munich Airport can lose its «Clean» status. The consequences would be a heightening of the safety regulations, considerable obstruction with operational processes, competitive disadvantages, and a loss of image. Munich Airport conducts thorough and strict quality controls to manage the quality of all safety aspects at the airport.
Utilities and waste disposal facilities The inadequate availability of substances necessary for operating activities, such as electricity, heat, cooling energy, drinking and extinguishing water, waste water, and waste, may result in property damage and interruptions of operations. The service and maintenance programs, network redundancies, and storage reduce the risk of gaps in supply. Property damage and interruptions of operations are insured. After taking the countermeasures into consideration, the net risk is below the risk tolerance limit.
Reorganization of ground handling The success of the reorganization of the former Ground Handling business unit could be put at risk by the following uncertainties and circumstances: sustained reductions in traffic from existing customers, ground handling losses due to the transfer of part fleets to third parties, aggressive pricing policies of competitors and increasing price decline at Munich Airport. In the negotiations to extend the long-term contract with an important customer of AeroGround, a new contract was concluded at the end of 2016. As a result, associated collective restructuring agreements could be extended.
To compensate for declining ground handling volumes, talks with potential new customers are ongoing. In the event of a loss of ground handling, capacities and associated costs will fall. Constant controlling and reporting of the renovation progress or renovation path.
Personnel procurement/recruitment Personnel procurement is proving increasingly difficult in the various professional groups. This is caused by, among other things, the overstretched labor market in the region, the high costs of accommodation, the increasing age of workforce, the high fluctuation in the area of ground handling service.

This could lead to a qualitative deterioration or delay in the performance of services and to breaches of contract for ground handling services.
To counteract this, a working group was installed. The aim of this group is to develop a Group-wide coordinated approach as well as target-group-specific HR marketing and procurement concepts.
Further measures include the intensification of training activities, the promotion of marketing at universities, and a presence at trade fairs and job fairs. In addition, projects were initiated to procure affordable living space for Group employees.

After taking the countermeasures into consideration, the net risk is below the risk tolerance limit.
Drones In addition to the operational risks represented in the risk matrix, there is a risk, arising from the increasing number of drones in the sky, that drones can enter into the controlled space of Munich Airport without authorization, and disrupt or endanger flight operations.
In 2017 with the regulation concerning the operation of unmanned aircraft, the Federal Government adopted tightened rules for the use of drones, including the obligation to register aircraft and a ban on operation within the controlled space of airports. In addition, the European Aviation Safety Agency (EASA) elaborated a draft law on harmonizing the regulations governing drone operation in the EU. This requires, inter alia, that drones with defined characteristics to be registered in national databases so that they can be precisely traced to their operators. In 2018, the European Parliament issued its consent. The law is scheduled to come into effect in 2019.
Together with the airport associations ADV, ACI, and the German Aviation Association (BDL), Munich Airport is working on a harmonized regulation for drone traffic at national and European level. In addition, the Aviation and Group security divisions are working on a study on the topic of drone protection, with the objective of obtaining manufacturer-independent valuations of the technologies available on the market for the selection of drone detection systems. The gross risk here is under the risk tolerance limit and is therefore not represented in the risk matrix.
Third runway As a result of the postponement of the decision to realize the third runway project, all previously incurred planning and land acquisition costs must be checked in respect of their recoverability and depreciated if necessary.
The consequences arising from the current moratorium were recognized in the balance sheet.

There could be a significant loss of corporate value unless capacity is expanded through the construction of the third runway. This will be influenced primarily by a stagnation of or a decline in traffic volumes and the associated lower revenues in the Aviation and Non-Aviation divisions.
The expansion project will have to be discussed further after the current legislative period and a decision as to the further procedure will have to be made.
The legal confirmation of the planning approval notice by the Bavarian Higher Administrative Court (BayVGH) of February 19, 2014, and in the following year by the German Federal Administrative Court was an important milestone with respect to the limitation of the legal risks for the project realization.
As further countermeasures, the diversification of the product range and the expansion of international business are planned.

Despite the moratorium, Munich Airport is holding firm on its future project.
Products used for de-icing There is a suspicion that the formates in the products currently used for de-icing paved areas and runways accelerate the oxidation of aircraft brakes. There are discussions about banning formate de-icing products ongoing at the SAE (Society of Automobile Engineers) international standardization committee. As an alternative, there are currently only glycol-based de-icers on the market, the use of which is not permitted at Munich Airport by the Ministry of the Environment. If they are banned, Munich Airport would have to invest substantial sums in the waste water systems to comply with the requirements of water management legislation. The German passenger airports within the ADV and BDL associations are together opposing the ban on formate-based de-icers. They are also aiming to influence the SAE via ACI Europe.
In discussions with the Bavarian water management authorities, ACI Europe, and the responsible SAE working group, it was shown that as little de-icer as possible is used in order to minimize the environmental impact. In addition, the products used for de-icing paved areas and runways at Munich Airport are published in the Notice to Airmen (NOTAM).

The manufacturers of the de-icer are to be involved in the future in order to find a solution to this problem.
EU General Data Protection Regulation In addition to the legal risks listed in the risk matrix, there are also risks in connection with the EU General Data Protection Regulation (GDPR) which came into effect in 2018. The GDPR expands the existing obligations arising from the Federal Data Protection Act (BDSG) and increases the legal, operational, and technical/organizational requirements for data protection. An infringement of these rights and obligations could incur high fines, claims for damages, reprimands, and reputational damage.

Currently, there are questions being raised at Munich Airport in connection with the use of video surveillance through the CCTV system (Closed Circuit Television).
At Munich Airport, the project to implement the requirements of GDPR has been successfully completed. As part of this, organizational structures and processes, as well as the documentation of same were adjusted and the awareness of data protection was raised within the Group.

In particular, as countermeasures for data protection risks arising from CCTV the following measures were taken: Role use concept, new signage indicating the video surveillance, re-negotiation of the works agreement on CCTV. The gross risk here is under the risk tolerance set limit by FMG and is therefore not represented in the risk matrix.

As is customary in the normal course of business, Munich Airport is faced with various legal disputes. These can lead, in particular, to the payment of compensation claims or, in the case of construction projects, to changes in the remuneration of services. Moreover, other legal disputes can be initiated and existing legal disputes can be expanded. Apart from matters for which provisions have already been made in the balance sheet, Munich Airport is not currently anticipating any material negative impacts for the net assets, financial position, and operating results from other known cases at the present time.

As part of the planned establishment of foreign subsidiaries in the area of operation and consulting other airports and terminals, risks can arise from the first time assumption of operational responsibility abroad. In particular, airport operator projects are subject, just as at the Munich location itself, to general economic and company-specific risks. In order to reduce these risks, Munich Airport cooperates with local partners who have a great deal of experience with respect to the respective country-specific conditions and circumstances. In order to counteract liability risks in particular, local companies will be established in 2019 for the beginning projects.

Tax (operational) audits by the tax authorities are also considered a general risk.

With the exception of the interest rate risks, the expected financial liabilities for the listed gross financial risks were under the reporting limit as at December 31, 2018. Therefore they were not included in the risk reporting.

Financial risks

Risk Description and analysis Countermeasure(s)
Currency risks Currency risks arise insofar as planned sales in foreign currencies are not balanced by any corresponding expenses or outgoings in the same currency. Munich Airport hedges currency risks using currency forwards.
Credit and credit rating risks Credit and credit rating risks primarily arise from short-term deposits as well as trade receivables. Deposits are (generally) only made with (German) banks with deposit protection.

The management of credit risks includes the constant monitoring of debtors’ creditworthiness, overdue invoices, and stringent collections management. Dependent on the credit rating, certain services are only performed against prepayment or provision of collateral in the form of guarantees.
Interest rate risks Interest-rate risks largely arise from floating-rate financial liabilities from loans and financial liabilities to shareholders. Interest-rate risks from floating-rate financial liabilities from loans are countered by Munich Airport by hedging with interest rate swaps.

After considering countermeasures, the following nets risks remain:

Overview of net risks

Graphic: Overview of net risks


The divisions and investments identify, assess, and manage opportunities on a decentralized basis with support from Corporate Development, Corporate Controlling, and Investment Management.

The report shows below the developments and events that could lead to a positive deviation from planning. The presentation is based on the risk report with the difference that the horizontal axis shows the time of occurrence – that is the time until opportunities are expected to occur – and not the frequency with which they occur. Opportunities are not mentioned more than once where their influence remains constant in the period of time. In the event of a changed economic advantage, multiple mentions are made. The economic advantage takes effect in the short, medium, long or very long term, and is considered periodically.


Opportunities Description and analysis
Consumption Overcoming the current geopolitical and economic crises could lead to an increase in the propensity to consume of passengers from regions outside Europe above the planned level.
Economic cycle Global economic growth above planned levels could boost revenues further.
Traffic An increase in air traffic growth above the expected level could increase revenues in all corporate divisions.
Hub development The important partner airline, Deutsche Lufthansa could strengthen the expansion of the hub at the Munich Airport location on the basis of a further improvement of its market position, which would lead to passenger development exceeding the plans.
Digitalization Munich Airport is pursuing a strategy of better adapting its business model to the structural change resulting from digitalization. From this strategy, medium to very long-term growth effects could occur, which are not completely taken into consideration in the previous plans.
Off-campus The off-campus business of Munich Airport (services and retail) might develop better than expected, with corresponding growth in the company results.
Real Estate The innovative real estate concept being implemented within the framework of LabCampus, could lead to a greater demand for real estate in the long term than assumed in the plan. This would result in an increase in revenue in this and, potentially, in other business units.
CO2 strategy The continuing increase in efficiency in energy-saving technologies and an associated improvement in the price-performance ratio of low emissions energy generation could lead to the costs of Munich Airport’s new CO2 strategy being lower than expected.
Rail access Better than expected improvements to rail access could lead to an expansion in the passenger catchment area and consequently to increased revenue in all business units.

Overview of opportunities

Graphic: Overview of opportunities

Overall assessment of the opportunities and risk situation

For Munich Airport as the second largest passenger airport in Germany and one of the largest airports in Europe, it is important to actively exploit any opportunities that arise and to improve its position on the market still further through constant growth. However, it is also a key objective of Munich Airport to recognize risks in good time and to counter them systematically.

Accordingly, the currently anticipated impact of possible events and developments is taken into consideration in business planning every year. The reported opportunities and risks are defined as potential deviations going beyond the forecast corporate result. Munich Airport consolidates and aggregates the risks reported by the corporate divisions and Group companies, and reports quarterly to the Executive Board and shareholders. Opportunities are identified and managed with the involvement of the corporate divisions, Corporate Development as well as Corporate Controlling and Investment Management.

Taking account of the current business plan, the opportunities and risk situation has scarcely changed year on year. No new risks were identified that might potentially have a critical impact on income.

No risks were foreseeable from the Group-wide risk management system or in the assessment of the Executive Board during the current forecast period, which individually or in their entirety could jeopardize the continued existence of Munich Airport.

Munich Airport points out that various known or unknown risks, uncertainties and other factors may lead to actual events, the financial position, the business development or the performance of the company deviating significantly from the estimates provided here.

Munich, April 11, 2019

Dr. Michael Kerkloh Andrea Gebbeken Thomas Weyer