First Quarter 2021: Revenue and Profit Still Severely Impacted by Covid-19 Pandemic

Fraport AG’s executive board chairman, Dr. Stefan Schulte, said: “The aviation industry still did not see any noticeable recovery during the first quarter of 2021. This was not unexpected considering the global pandemic situation. Nevertheless, we are confident that we are now reemerging from the bottom of the trough. Vaccination campaigns in Germany and many other countries are gaining momentum. Moreover, a number of Covid-19 testing options are now available. People still have a strong desire to travel and explore the world. Therefore, we are expecting passenger numbers to increase noticeably during the summer months – particularly on European routes at first, but also for intercontinental destinations over the long run. At the same time, we have leveraged the crisis to substantially reduce costs and realign our company to become leaner and more agile for the future.” 

Passenger traffic declines noticeably 

During the first three months of 2021, the Group’s Frankfurt Airport home base saw passenger traffic drop by 77.6 percent year-on-year to just under 2.5 million travelers. Compared to the first quarter of the 2019 pre-pandemic year, this represents an even stronger decline of 83.2 percent. In contrast, FRA’s cargo throughput in the first quarter grew by 21.6 percent year-on-year to 565,497 metric tons (up 7.3 percent compared to Q1/2019). At Fraport’s Group airports worldwide, traffic also dropped overall in the first quarter, with year-on-year declines ranging from about 50 percent to 90 percent at some airports. Supported by strong domestic traffic, only two gateways performed better: St. Petersburg’s Pulkovo Airport in Russia (down 18.3 percent) and Xi’an Airport in China (up 40.7 percent).

Balanced EBITDA achieved – Group result remains in negative territory

Reflecting the overall traffic development, Group revenue decreased by 41.8 percent in the first quarter of 2021 to €385.0 million. Adjusting for revenue from construction relating to capacitive capital expenditure at Fraport’s subsidiaries worldwide (based on IFRIC 12), Group revenue was down 41.9 percent to €344.7 million. An agreement reached in the reporting period between Fraport and the German Federal Police on the remuneration of aviation security services – provided by Fraport in the past – generated additional revenue of €57.8 million, which positively impacted EBITDA by the same amount.

Across its Group companies in Frankfurt, Fraport reduced operating expenses by around 28 percent – primarily achieved via strict cost management, the implementation of short-time work (under Germany’s Kurzarbeit program), and ongoing staff reductions through socially-responsible measures. At Fraport’s fully-consolidated Group companies worldwide, operating expenses could even be reduced by about 35 percent. Because of these cost-saving measures and the one-off effect resulting from the agreement with the German Federal Police, Fraport achieved a positive Group EBITDA or operating result of €40.2 million (down 68.9 percent year-on-year) in the first quarter (Q1) of 2021. Excluding the one-off effect from the agreement with the German Federal Police, Fraport still achieved an almost balanced Group EBITDA, as a result of the implemented cost-saving measures. Group EBIT fell markedly from €12.3 million in Q1/2020 to minus €70.2 million in Q1/2021. Group EBIT shrank to minus €116.0 million in the reporting period (from minus €47.6 million in Q1/2020). The Group result or net profit decreased noticeably from minus €35.7 million in Q1/2020 to minus €77.5 million in the first quarter of 2021.

Voluntary redundancy program almost completed

Fraport has launched various measures at all levels to counter the impact of the coronavirus pandemic, including an extensive cost-reduction program. By eliminating expenses not essential for operations, Fraport is saving costs of between €100 million and €150 million yearly. Simultaneously, Fraport scaled down or canceled a number of investments, particularly at its Frankfurt home base – thus reducing related capital expenditure by about €1 billion over the medium and long-term. 

Fraport has also started to adjust its overall business organization and administration to make the company leaner and more agile. The company will be able to reduce personnel costs in Frankfurt by up to €250 million yearly compared to 2019, by cutting about 4,000 jobs in a socially responsible manner. This goal has already been nearly achieved. As of April 1, 2021, Fraport reduced its staff in Frankfurt (compared to December 31, 2019) by some 3,900 employees – who left the company taking advantage of severance packages and other measures; or via regular staff attrition.

Fraport will continue to operate a short-time working scheme with the aim of temporarily reducing personnel costs. In the first quarter of 2021, about 80 percent of employees at the Fraport AG parent company and other major Group companies in Frankfurt continued to work on a short-time basis. This involves an average reduction in working time of about 50 percent measured in terms of available hours. 

Fraport’s liquidity reserves further increased 

Fraport raised about €1.9 billion overall in additional financing during the first quarter of 2021. Financing measures included the placement of a corporate bond, issued in two tranches with a total volume of €1.15 billion. Backed by these measures, Fraport’s liquid funds and secured credit lines amount to some €4.4 billion (as of March 31, 2021). Therefore, the company is well positioned to meet the ongoing crisis and make the necessary investments for the future. 

Outlook

After conclusion of the first quarter, the Fraport executive board is maintaining its outlook for the entire 2021 business year. Passenger traffic at Frankfurt Airport is forecast to range from under 20 million to 25 million. Group revenue is expected to reach approximately €2 billion in 2021. The company is forecasting Group EBITDA in the range of about €300 million to €450 million. Group EBIT is expected to be slightly negative, while the Group result (net profit) will also remain in negative territory. However, both of these key performance indicators will improve markedly compared to 2020.