Economic Report

Macroeconomic environment

  • Powerful economic growth thanks to strong domestic consumption
  • German aviation registers growth – but stays behind in an international comparison
  • Retail trade – benefits from a strong economic cycle
  • Catering and hotel industry – upturn continues
  • Advertising industry – digitalization as a driver of growth
  • Parking areas – dependence on customer structure
  • Munich office market exceeds all expectations

Macroeconomic environment

Both national and international economic growth are crucial for an international air traffic hub such as Munich Airport.

The growth of the global economy slightly exceeded expectations in 2017. Current projections suggest global gross domestic product (GDP) of between 3.0 percent (World Bank, Global Economic Prospects, January 2018) and 3.7 percent (International Monetary Fund, World Economic Outlook, January 2018). These figures are up to 0.3 percentage points higher than those in forecasts published at the beginning of the year.

A significant cause for the higher growth rate compared to the weak years of 2015 and 2016 is the positive economic performance in important emerging countries. For example, the situations in Russia and Brazil were largely defused in 2017. As exporters of commodities, both countries suffered a severe recession in the years 2015 and 2016, due among other factors to the price collapse on the oil market and other commodities markets in the fall of 2014. The oil and commodities prices have climbed again recently, which allowed the Russian and Brazilian economies to grow by 1.8 percent and 1.1 percent respectively in 2017. Moreover, the economy in the People’s Republic of China performed slightly better than expected. Current projections for the year 2017 stand at 6.8 percent, whereas a growth rate of only 6.5 percent had been assumed at the beginning of the year.

The positive development of the previous years continued even more strongly in the industrialized countries. In most cases, domestic economic forces provide important growth impulses. For example, a notable desire to spend and strong growth in investments in construction and plant and equipment have been observed among US consumers thanks to the low unemployment figures and solid increases in real wages. The Japanese economy grew more strongly than expected in 2017 due to an increase in private consumption, investments, and demand from abroad. In Great Britain, there was a rise in consumer prices because of the decline in the value of the pound sterling, ensuring that private consumption performed only moderately and tempering the economic performance which in itself was positive.

Economic growth in selected destinations worldwide

in %

Graphic: Economic growth in selected destinations worldwide
GDP growth in 2016 and 2017
(Source: IWF, World Economic Outlook, Januar 2018)

The upturn in the eurozone picked up pace in 2017. The current projection by the International Monetary Fund assumes growth of 2.4 percent for 2017 (IMF, World Economic Outlook, January 2018). The strongest growth driver was private consumption. In addition, a strong investment dynamic and a positive performance in exports contributed to this improved growth. The extraordinarily expansionary monetary policy of the European Central Bank also supported the upturn in the eurozone. The economic situation in southern European countries has consolidated further.

Economic growth in selected destinations troughhout Europe

in %

Graphic: Economic growth in selected destinations troughhout Europe
GDP growth in 2016 and 2017
Source: IWF, World Economic Outlook, Januar 2018)

At 2.5 percent, growth in the gross domestic product in the Federal Republic of Germany was much stronger in 2017 than in the previous year. As in the year 2016, private consumption and the above-average level of construction investments were significant growth drivers. However, thanks to the positive developments in the eurozone, foreign demand, investments in plant and equipment, and investments in research and development also contributed to the accelerated growth dynamic in 2017. The positive development in consumer spending was based on the favorable situation on the labor market (unemployment rate of 5.8 percent) and the rising wage levels. In 2017, private consumption posted a similar rate of growth of around 1.9 percent to that of the previous year. Construction investments, which are still being driven by low interest rates, recorded a growth rate of over 4 percent in 2017. German exports rose by 3.8 percent and so grew more strongly than in 2016 by more than a percentage point (2.5 percent). Investments in plant and equipment and investments in other equipment (mainly research and development) increased in 2017 by 2.3 percent and 4.2 percent respectively. The inflation rate was again far higher in 2017 than in the previous years, at 1.7 percent.

Following the sharp fall in recent years, the oil price bottomed out at below USD 30 per barrel (Brent Crude) in January 2016. Following the announcement by OPEC that it wanted to curb oil production, the crude oil price rose in the fourth quarter of 2016, meaning that it reached USD 57 per barrel in mid-December 2016. During the course of 2017, the oil price (Brent Crude) fluctuated between USD 45 and 67 per barrel.

Sector-specific environment for Aviation

According to the analyses of the International Civil Aviation Organization (ICAO), global aviation set new records again in 2017. A total of 4.1 billion passengers (+7.1 percent) were transported and there was a significant rise in the total scheduled revenue passenger-kilometers (+7.6 percent). The performance therefore exceeded the growth of the previous year of +7.4 percent. Airfreight (freight tonne-kilometers) also increased considerably compared last year (9.5 percent compared to +3.8 percent).

The airports that are members of the German Airports Association (ADV) achieved extremely positive growth rates on average in 2017. The commercial passenger volume (arrival/departure) increased by 5.2 percent in total. Aircraft movements rose by 1.6 percent and cargo throughput (total of airmail and freight excluding transit items) was 6.7 percent up. As a result, Munich Airport registered higher growth rates in 2017 in all traffic segments than the average value for German passenger airports. Further details on this subject can be found in the section «Aviation».

The insolvency of Air Berlin led to a temporary reduction in the offering of German aviation. The number of seats available on these routes fell by 21 percent from October through December. This capacity gap has gradually been refilled since January 2018. The timetable dates for the winter timetable 2017/2018 show that 97 percent of the capacity gaps in German domestic air traffic will have been closed again already by March 2018.

In a global comparison based on total scheduled revenue passenger-kilometers, the Asia/Pacific region claimed first place with growth of 10.1 percent, followed by Europe (+8.2 percent). The performance in the Middle East was comparatively weak (+6.4 percent), losing market share for the first time since 1997. The reasons for this lower growth rate in the Middle East were particularly the low oil price and the high dollar exchange rate.

According to the details of the German Aviation Association (BDL), the German airlines and airports performed below average compared with their European counterparts. While air travel (measured by total scheduled revenue passenger-kilometers) in Europe grew more strongly than the global average at 8.2 percent, German airlines achieved only an increase of 3.1 percent (previous year: 1.4 percent). The performance at German passenger airports was similar: the number of arriving or departing air passengers rose in 2017 to about 235 million (+5.2 percent). The passenger figures at airports throughout Europe increased by 8.8 percent. The BDL regards the structural disadvantage of German aviation companies with regard to aviation tax and security fees in an international comparison as the main reason for this development.

The main problem for German air travel is therefore not a lack of demand, but rather the impossibility of satisfying the demand with a corresponding supply. In its latest Air Travel Concept, the Federal Ministry of Transport and Digital Infrastructure analyzed 20 measures for satisfying the requirements. It reached the conclusion that the objective (taking part in the global growth) will be achieved only in part despite implementing all of the proposals from the portfolio. A further delay in implementing these measures would therefore represent a fundamental risk to the competitiveness of the German air travel industry.

Sector-specific environment for Commercial Activities

Thanks to higher income and record levels of employment, German retailers again registered a total increase in sales in 2017 of 4.1 percent up to € 512.8 billion, according to the figures of the Federal Statistical Office. More and more shop-based retailers profited from online growth by exploiting the opportunity of digitalization. On a price-adjusted basis, their growth stood at 2.6 percent, as in the previous year.

According to the German Retail Association (HDE), the retail trade is still doing well, as the favorable situation on the labor market and the positive expectations of citizens with regard to the economy and their own wages are continuing to bolster consumer confidence. The ifo Business Climate Index also confirms this development: the majority of the surveyed retail companies assessed their business situation for the coming six months as positive.

According to the German Hotel and Catering Association (DEHOGA), the hotel and restaurant industry concluded 2017 with a gain for the eighth year in succession, so continuing its upward trend. The accommodation sector was also able to record an increase in sales of 2.9 percent, which represents a growth rate of 0.9 percent on a price-adjusted basis. Caterers performed slightly better with a nominal sales gain of 3.0 percent (gain of 0.9 percent in real terms). The catering sector grew by 2.0 percent (0.1 percent in real terms).

In fiscal year 2017, the gross advertising expenditure by advertisers rose by 1.9 percent to around € 31,867 millions. Some media groups posted substantial growth, including the Out-of-home advertising segment primarily used by the airport, which grew by 7 percent.

Shifts in the modal split, which reflects the manner in which passengers travel to the airport, as well as changes in the number of visitors had different impacts on the Parking business unit. The «Shared Mobility» business (hire cars and carsharing) benefited in particular from the increased passenger volume. It was possible to compensate in terms of sales for passengers switching to other incoming modes of transport, in particular to the S-Bahn railway, with a longer average stay in the parking facilities.

Sector-specific environment for Real Estate

The market for office real estate in the Munich area exceeded expectations in 2017 and achieved the highest floor-space turnover since 2000. According to the market report by Colliers International Deutschland Holding GmbH, the total turnover in 2017 increased by 26 percent to 984,200 square meters.

The vacancy rate for office real estate was also reduced further in 2017, falling by 0.6 percentage points in comparison to previous year to 2.4 percent. At the end of 2017, there was about 150,000 square meters less available to rent short-term than a year ago, with a total of 535,900 square meters.

The average rent for office real estate in Munich increased by 8 percent to € 17.30/m². The peak rent performed rather more moderately with a gain of 2 percent (€ 35.60/m²).

While tenants are finding it increasingly difficult to find suitable space and therefore have to compromise in terms of the location or amenities, landlords can impose higher rents and fewer incentives in many cases. The demand for office space remains high. However, the available space is becoming more and more scarce and has already reached critically low levels, particularly in the urban area. Large-scale users therefore prefer to secure their desired spaces through advance project tenancies. However, it must be noted here that a sufficiently long planning horizon is necessary, amounting to about three years on average.

Course of business

  • Outsourcing of the international consulting business
  • Opening of the extension to the five-star hotel
  • Insolvency of Air Berlin and Niki
  • New passenger record and increase in aircraft movements
  • Ground handling services in a difficult economic environment
  • Retail trade – recovery in important destination countries provides initial growth impulses
  • Catering and hotel – on the path to success
  • Parking areas – demand increases with passenger traffic
  • Advertising sector – challenging market environment
  • Impulses for further location and real estate development

Key events in the past fiscal year

With a notarial deed dated July 20, 2017, FMG transferred the «International Consulting Business» division to MAI by way of a spin-off against the granting of new shares in accordance with Section 123 (3) of the German Reorganisation Act (Umwandlungsgesetz - UmwG). The spin-off was carried out retrospectively as at January 1, 2017. MAI therefore started operating business and was incorporated in the scope of consolidation for the first time in 2017.

After a construction period of two years, the extension and the new conference area of the five-star hotel were completed on schedule and inaugurated at the end of March 2017. The hotel boasts 162 new rooms in a modern, Alpine look on seven floors with a total surface area of 8,800 square meters. The five-star hotel at the airport now has 551 rooms in total. In the fiscal year 2017, T€ 40,542 (of which T€ 9,664 acquisitions in 2017) were capitalized under property, plant and equipment for this purpose.

The insolvencies of Air Berlin and Niki led to a reorganization of the German aviation industry. The suspension of air traffic at the end of October caused a temporary reduction of the offering. From October through December, the number of seats available on domestic German routes fell by 21 percent. At Munich Airport, the insolvency had a considerable effect on the handling services in Terminal 1. To some extent, it was possible to compensate for the created gaps in air traffic with other airlines by increasing capacity and using larger aircraft. Balance-sheet risks arising from business relations with Air Berlin and Niki were taken into account accordingly.

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.

 Aviation

Munich Airport traffic figures 1)

      Increase
  2017 2016 Absolute Relative
Aircraft movements 404,505 394,430 10,075 2.6%
Passengers in millions 44.6 42.3 2.3 5.5%
Cargo handling in tonnes 2) 388,517 375,121 13,396 3.6%
1) Discrepancies possible due to rounding
2) To ensure greater comparability with other passenger airports, the cargo volume is specified here including freight volumes that remain on board the aircraft in transit through Munich Airport. The values may therefore differ from those in other publications where only the freight and/or cargo turnaround (excluding transit items) is analyzed

With an absolute increase of about 2.3 million passengers, Munich Airport again registered pleasing growth and set a new record in 2017 with a total of 44.6 million passengers (+5.5 percent). In addition, September 2017 set the record as the busiest month for traffic since the opening of the airport with a total of 4.4 million air passengers. The busiest day so far, when about 164,000 air passengers were handled, also came in 2017 – on September 29. The gaps caused by the partial withdrawal of Transavia Airlines and the insolvency of Air Berlin were compensated in part by other airlines through increased capacity and the use of larger aircraft.

Despite the insolvency of Air Berlin and Niki and the partial withdrawal of Transavia Airlines from Munich, the number of aircraft movements increased further in 2017. The increase by 2.6 percent to 404,505 aircraft movements exceeded the average for German passenger airports. Following a brief commitment in Munich, the low-cost carrier Transavia Airlines found itself forced to make a partial withdrawal because, among other factors, the necessary slot times that were needed for economic operation were often no longer available and therefore there would not realistically be any appropriate development options. Low-cost airlines need to run three to four turnarounds every day per stationed aircraft in order to survive on the market. This was often not possible for Transavia Airlines. On the other hand, the performance of Deutsche Lufthansa was most pleasing. After a strong year in 2017, five A380s will be stationed in Munich for the summer timetable 2018 as a replacement for the A340-600s. In 2017, Deutsche Lufthansa (including Cityline and Eurowings) stationed about 120 aircraft at Munich Airport, as well as a further four belonging to the partner bmi regional.

Aircraft movements at Munich Airport

In thousands

Graphic: Aircraft movements at Munich Airport

The number of seats offered remained unchanged at 153 seats per flight. The trend of the last few years toward larger aircraft was no longer evident in 2017. Passenger growth was therefore made possible by a better level of utilization of 76.5 percent (+1.4 percentage points) and an increased offering of flights.

Both originating and transfer traffic were key factors in traffic growth. At 28.3 million passengers, Munich now has more originating passengers (passengers who are not transferring) than Frankfurt Airport or all other airports in the German-speaking area. The proportion of transfer passengers remains unchanged, at 36 percent, on the previous year.

Demand for German domestic flights increased to 9.8 million passengers. This represented a slight increase of around 214,000 passengers (+2.2 percent). German domestic movements increased by 1.1 percent or around 980 to approximate 88,000 take-offs and landings. In light of the insolvency of Air Berlin, which was ultimately operating almost exclusively on domestic German routes out of Munich, this was a remarkable result. Continental traffic posted significant growth: Aircraft movements increased to around 261,000, which equates to a rise of about 9,000 flights or 3.6 percent. About 1.7 million more passengers were transported than in the previous year (27.4 million). This equates to an increase of 6.6 percent.

However, long-haul traffic grew most sharply in relative terms. Almost 7.3 million passengers took intercontinental flights, 476,000 more than in the previous year (+7.0 percent). Long-haul movements also rose by 1.8 percent (540 more flights) to reach a total of 31,400 long-haul flights.

Passenger numbers at Munich Airport

In millions

Graphic: Passenger numbers at Munich Airport

On the basis of growth rates, the airfreight turnaround was the most successful traffic segment in 2017. A new record result was achieved with an increase of 28,334 tonnes to 362,831 tonnes or 8.5 percent.

With a share of over 80 percent, the quantity of freight loaded and unloaded on passenger aircraft, known as bellyhold cargo, was the most important traffic segment. As in the previous year, the volume of transported bellyhold cargo increased dramatically by 38,419 tonnes or 14.1 percent to 310,863 tonnes. The volume transported on exclusive freight flights, so-called «cargo-only», fell year-on-year. However, this loss was more than compensated by the growth in bellyhold cargo. In total, 2017 saw the highest ever freight result registered for Munich Airport.

Airmail was suspended from March 26, 2017 through the end of the summer timetable and was resumed only at the start of the winter timetable on October 29, 2017. This resulted in a reduction of 16.6 percent to 15,972 tonnes.

In total, the cargo (total of airfreight and airmail including transit items) increased by 3.6 percent to 388,517 tonnes. 

Compared with the traffic results of the airports represented in the German Airports Association (ADV), aircraft movements and passenger volume posted above-average growth at Munich. In the case of cargo volume (airfreight and airmail including transit items), on the other hand, Munich fell behind the ADV average.

Airfreight and airmail (including transit items) at Munich airport

In tonnes

Graphic: Airfreight and airmail (including transit items) at Munich airport

Despite pleasing growth, Munich remained in ninth place in the ranking of the busiest European airports according to passenger numbers. It ranked seventh in aircraft movements (Airports Council International, as of January 2018).

Traffic figures for 2017 as a comparsion

Aircraft movements (total traffic) 1.6 2.6
Passengers (commercial traffic) 5.1 5.5
Cargo (airfreight and airmail and transit items) 6.4 3.6

Despite pleasing growth, Munich remained in ninth place in the ranking of the busiest European airports according to passenger numbers. It ranked seventh in aircraft movements (Airports Council International, as of January 2018).

There are two ground handling licenses at Munich Airport. One of them is awarded permanently to the subsidiary AeroGround Flughafen München GmbH (AE Munich). In 2017, the market share of AE Munich stood at 57.7 percent, and increased by almost 0.7 percentage points year-on-year. In total, AE Munich was able to achieve a considerable growth in handling volumes of 3.9 percent. The positive changes are essentially the result of the fleet growth implemented by Deutsche Lufthansa, in part relating to the A350 in Terminal 2.

The declining market share in Terminal 1 is based on growth in the low-cost segment, in which AE Munich was not able to participate. In addition, the insolvency of Air Berlin and Niki had a major impact on the handling services in Terminal 1, which was already notable as from August 2017.

In Berlin-Tegel, AeroGround Berlin GmbH took over the ground handling services for Air Berlin as from the summer timetable 2017, and so became the market leader. In the first few weeks, this change of supplier was a big challenge, but it was possible to gradually stabilize the performance over the following months. The ground handling in Berlin-Tegel fell significantly upon the declaration of insolvency of Air Berlin and the related suspension of air traffic at the end of October.

Commercial Activities

The growth in revenue in the Commercial Activities unit was positive overall year-on-year, but grew at a slightly slower rate compared to the dynamic increase in the passenger volume. Among other factors, passenger relocations from Terminal 1 to Terminal 2 and the related economic effects led in some cases to a range of varied developments.

In contrast to the previous year, it was possible to increase the revenue in the retail trade. The destination countries China and Russia, in particular, provided strong growth impulse. The revenue with both countries increased disproportionately to the number of passengers. The average revenue also increased in this area year-on-year. The first signs of a recovery seem to have petered out, as revenue with both destination countries had declined dramatically in some cases in recent years.

The value of the pound sterling has declined considerably since the 2016 Brexit referendum in Great Britain, which has had a direct impact on the consumption behavior of passengers from Great Britain. Despite increasing passenger figures, the revenue from this customer group continued to fall.

The continuing political unrest in Turkey led, as in the previous year, to a much lower passenger volume traveling there, which was reflected in turn in correspondingly low revenue in the retail trade.

Thanks to dynamically increasing passenger figures and the new opening of two catering units, it was possible to increase the revenue from the restaurants and bars once again in both absolute and per-passenger terms. The airport more than compensated for the restrictions due to the conversion measures and the renovations of several restaurants.

In the hotel division, the extension with 162 additional rooms and the new conference center were put into operation successfully. At the Skytrax Awards 2017, the five-star hotel in the central area of Munich Airport was honored as the best airport hotel in Europe for the third time in succession.

The growth in passenger figures in originating traffic had a slightly disproportionately small impact on the parking business. Despite a slight decrease in parking transactions, revenue increased overall with changes in parking behavior and enhanced product categories.

The growth in the Out-of-home advertising segment was not as significant as expected at Munich Airport. The advertising revenue reached the same level as the previous year. In the terminals, however, performance was mixed. The satellite building registered considerable growth thanks to modern, digital advertising media, but in Terminal 1, on the other hand, the marketing situation was challenging due to the largely analog advertising scenarios there.

Real Estate

Munich Airport’s real estate business is continuing to stagnate at a high level. In fiscal year 2017, there were no new properties generating significant revenue. 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.

In the context of the development of AirSite West, the first traffic-relieving measure was completed at the Nordallee/Novotel junction in the form of a traffic circle with bypass. The former construction head office 2 and other ancillary buildings were demolished to free up future building sites. Moreover, sewage construction measures were also carried out in the area of AirSite West.

In conjunction with the real estate strategy, the new P51 parking area with about 1,400 parking spaces is being built in this area close to the Visitors Park.

With regard to the future developments in air traffic, a new ramp equipment station is being built in the east for de-icing and towing aircraft.

Result of operations, net assets, and financial position

Results of operations

      Change
T€ 2017 2016 Absolute Relative in %
Revenue Aviation 798,541 719,742 78,799 10.9
Revenue Non-Aviation 670,194 644,380 25,814 4.0
Total revenue 1,468,735 1,364,122 104,613 7.7
Other income 44,057 66,573 -22,516 -33.8
Operating income 1,512,792 1,430,695 82,097 5.7
Cost of materials -398,988 -352,085 -46,903 13.3
Personnel expenses -482,081 -452,515 -29,566 6.5
Other expenses -111,736 -97,092 -14,644 15.1
EBITDA 519,987 529,003 -9,016 -1.7
Depreciation and amortization -217,617 -239,071 21,454 -9.0
EBIT 302,370 289,932 12,438 4.3
Financial result 1) -73,130 -80,059 6,929 -8.7
EBT 229,240 209,873 19,367 9.2
Income taxes -70,440 -58,242 -12,198 20.9
EAT 158,800 151,631 7,169 4.7
1) This also includes income from companies valued using the equity method.
  • Earnings after taxes rise again
  • Net assets and financial position – Munich Airport builds up its liquidity reserves
  • Capital structure – reserves built up despite repayment of loans
  • Operating cash flow is basis of outstanding liquidity
  • Investments – opening of the extension to the five-star hotel

Results of operations

In fiscal year 2017, Munich Airport’s earnings after taxes (EAT) rose by T€ 7,169 to T€ 158,800. The causes of this increase are explained in detail below.

In fiscal year 2017, the revenue of Munich Airport rose by T€ 104,613 or 7.7 percent to T€ 1,468,735. The largest pro rata growth in revenue, at 75.4 percent (T€ 78,799), was attributable to the Aviation business unit (including ground traffic). In terms of non-aviation revenue, the increase (+4.0 percent) can be attributed fully to the Commercial Activities business unit. The revenue from the Real Estate business unit stood at the same level as the previous year at T€ 126,918.

The largest contribution to the growth in revenue in the Aviation business unit came from the passenger and landing charges.

In comparison with growth in MTOM (Maximum Take-Off Mass) and passenger numbers, revenue from landing and passenger charges increased at a faster rate. 

Revenue and volume growth Passenger and landing charges

In %

Graphic: Revenue and volume growth Passenger and landing charges

Despite the insolvency of Air Berlin and Niki, the airport managed to increase revenue in both ground handling and in passenger and cargo handling by T€ 24,096 (+15.7 percent) in total. The crucial factor here was above all a higher ground handling volume, new customers (such as Air Berlin in Berlin-Tegel for the period from March through October 2017), and an increased order volume from existing customers.

Revenue from the Commercial Activities business unit rose across all fields of activity. Catering and hotels (+14.0 percent) and Parking (+6.9 percent) registered the strongest growth.

Revenue (Commercial Activities)

In T€

Graphic: Revenue (Commercial Activities)

The cause for the decline in other income (including own work capitalized) (T€ -22,516) was above all the lower income from the sale of spare properties (T€ 3,209; previous year: T€ 27,264).

After 25 years of operations, there is a growing need to upgrade the buildings from the first stage of expansion at Munich Airport. The expenses for refurbishment, optimization and reconstruction measures are therefore constantly increasing. The expenses for purchased services in connection with the commissioning of subcontractors for ground handling at Berlin-Tegel also increased. In total, the cost of materials increased by T€ 46,903 or 13.3 percent.

Munich Airport’s personnel expenses are largely driven 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 2.35 percent effective February 1, 2017. The Group again created new jobs in the fiscal year. The average number of employees increased from 8,891 to 9,316 year-on-year. In total, personnel expenses rose by 6.5 percent to T€ 482,081.

Other expenses rose to T€ 111,736. The causes for this increase included higher rental and leasing expenses and increased costs for advertising and public relations.

The decline in depreciation and amortization (9.0 percent or T€ 21,454) was partly due to the fact that individual components of buildings were fully amortized during fiscal year 2017.

The financial result improved by 8.7 percent to T€ -73,130. The causes for this were the non-cash revaluation gain from the valuation of the derivatives and the financial debts arising from shares in partnerships in the other financial result. At T€ -83,605, net interest income rose slightly above the level of the previous year because of the registered interest expenses due to the financial interests in partnerships. The actually paid interest could be reduced further, on the other hand, through repayments of debt and low interest.

Income taxes rose by a fifth to T€ 70,440 compared with the previous year. This was primarily due to the lower deferred tax income (T€ 6,447; previous year: T€ 18,921). Due to the positive tax results, the current income taxes remained at the same level as the previous year.

Net assets and financial position

The decline in non-current assets was due to the lower investments at Munich Airport. In the previous year, the non-current assets were characterized by the completion of the satellite building.

Net assets and financial position

T€ Dec. 31, 2017 Dec. 31, 2016 Absolute Relative in %
Non-current assets 4,999,768 5,100,966 -101,198 -2.0
Current assets 1) 306,516 142,895 163,621 >+100.0
thereof cash and cash equivalents 6,625 6,034 591 9.8
Assets 5,306,284 5,243,861 62,423 1.2
Equity 2,086,254 1,942,907 143,347 7.4
Other non-current liabilities 2) 2,292,898 2,444,537 -151,639 -6.2
Other current liabilities 927,132 856,417 70,715 8.3
Liabilities 5,306,284 5,243,861 62,423 1.2
1) Including assets classified as held for sale
2) Including financial liabilities resulting from partnerships

The decline in non-current assets was due to the lower investments at Munich Airport. In the previous year, the non-current assets were characterized by the completion of the satellite building.

In fiscal year 2017, Munich Airport invested a total amount of cash of T€ 158,000 in current money market transactions and fixed term deposits. As a result of this, the current assets increased by T€ 163,621 to T€ 306,516. In addition, FMG set up a commercial paper program (without trading on the stock exchange) in the amount of T€ 100,000 for the first time in 2017, which is available for short-term financing. No issues took place during the reporting year in the context of this program.

The company paid out T€ 30,000 from the previous year’s consolidated profit of T€ 151,631 to the shareholders. The remaining amount was retained in fiscal year 2017.

The changes in other liabilities were mainly due to the financing area. The decline was mainly due to repayments of loans in the amount of T€ 69,175. In contrast, the exploitation of credit lines increased by T€ 32,600.

The improvement in the equity ratio was largely due to the income in the fiscal year.

Capital structure

      Change
T€ Dec. 31, 2017 Dec. 31, 2016 Absolute Relative in %
Issued capital 306,776 306,776 0 0.0
Reserves 150,767 150,993 -226 -0.1
Other equity 1,628,698 1,485,125 143,573 9.7
of which net profit 158,800 146,736 12,064 8.2
Non-controlling interests 13 13 0 0.0
of which net profit 0 4,895 -4,895 -100.0
Equity 2,086,254 1,942,907 143,347 7.4
         
Financial liabilities resulting from interests in partnerships 315,375 293,561 21,814 7.4
         
Shareholder loans 491,913 491,913 0 0.0
         
Fixed-rate loans 687,535 704,843 -17,308 -2.5
Floating-rate loans 829,527 839,602 -10,075 -1.2
Loans 1,517,062 1,544,445 -27,383 -1.8
         
Derivatives 51,255 70,293 -19,038 -27.1
         
Other liabilities 844,425 900,742 -56,317 -6.3
         
Financial liabilities 3,220,030 3,300,954 -80,924 -2.5
         
Equity ratio 39% 37% - -

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 EUR Earnings-based 315,375 -
Shareholder loans EUR Variable/earnings-based 491,913 Base rate plus margin
Loans EUR Floating-rate 836,260 3M and 6M EURIBOR plus margin
Loans EUR Fixed-rate 695,879 0.48 4.05
(As of December 31, 2017)

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 customary non-financial covenants, including negative pledges and pari passu clauses. In addition, there are other general conventional agreements concerning interest rate adjustment and 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 724,000 T€ 0.28 2.92 Syndicated loans
Foreign currency forwards 1) 4,626 T€ 1.09 1.20 Expected transactions
1) These hedges are not recognized.

Investments

In the fiscal year 2017, the investments in property, plant, and equipment at Munich Airport stood at T€ 125,851 in total. They were offset by scheduled depreciation and amortization in the amount of T€ 205,322.

Liquidity

Cash flow statement

Graphic: Cash flow statement

Sufficient funds were available from the net cash flow from operating activities in fiscal year 2017 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 current time deposits. A negative cash flow arose from financing activities due to distributions to shareholders, loan repayments, and interest payments.

The past fiscal year was characterized above all by the opening of the extension in the five-star hotel. After two years of construction, the extension was put into operation in March 2017. In total, Munich Airport invested T€ 40,542 in the conference center and the 162 new rooms. For this purpose, T€ 9,664 was capitalized to property, plant, and equipment in fiscal year 2017. The remaining amount was transfered from property under construction.

In addition, a large number of ongoing investment projects were implemented and continued in fiscal year 2017. These projects include investments relating to the expansion and modernization of Terminal 1, the planning of construction projects in multi-storey car parks, the development of AirSite West, 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:

Forecast/actual comparison

  2016 2017 2017  
  Actual Forecast Actual  
      from to    
      % %    
EBT in T€ 209,873 Increase 1.0 5.0 229,240 Exceeded
CO2 reductions in tonnes 5,324 Increase 228.1 233.1 14,367 Achieved
Passenger experience index, departure 82.02 Increase 0.5 1.0 80.94 Not achieved
Passenger experience index, arrival 79.85 Increase 0.5 1.0 81.00 Exceeded
Employee retention index 1) 73 Unchanged     86.6 Exceeded
1) The employee retention index relates to FMG, as this ensures that the results can be easily compared across all the surveys carried out. The figure quoted results from the last survey in 2017.

Earnings before taxes (EBT)

At T€ 19,367, Munich Airport’s EBT for fiscal year 2017 grew by 9.2 percent, considerably exceeding all expectations. The main reasons for this were the higher sales revenue in the Aviation and the Catering and Hotel divisions and also the lower expenditure for external services relating to maintenance measures.

CO₂ reductions

In order to achieve the long-term climate protection targets, binding targets are agreed each year for the various divisions and subsidiaries of the Group. They include specifications for the implementation and crediting of efficiency measures and special targets regarding the development of CO₂-reducing technologies – for example, the gradual commissioning of the Pre-Conditioned Air (PCA) systems from 2016 through 2019. The airport surpassed the aggregate of the efficiency and special targets in 2017 with a total of 14,367 tonnes.

Passenger Experience Index (PEI)

In fiscal year 2017, Munich Airport was able to raise the satisfaction of arriving passengers in Munich by 1.44 percent compared to 2016. This was achieved partly by optimizing the information systems at the baggage claim area in Terminal 2 and by increasing the traffic in the satellite building at Terminal 2. Among departing passengers, on the other hand, the passenger satisfaction fell by 1.32 percent, which was primarily due to the strong growth in traffic in various terminal areas and the related longer waiting times for the individual process steps along the passenger experience chain.

Employee retention

The employee retention index is compiled every three years as part of an employee survey. The most recent full data collection regarding this indicator took place in 2017 on a one-off basis in a four-year data collection cycle. The employee retention index improved by 13.6 percentage points to 86.6 percent in comparison with 2013. A subsequent process, which will be put into action in the first quarter of 2018, is aimed at analyzing the results of the employee survey in the individual divisions. Division-specific measures will then be developed that should lead to improvements.

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