Most airports owned and managed by the Fraport Group reported traffic growth within the company’s Q1 fiscal quarter, but retail business has come under serious pressure.

 

Fraport says this is due to an unhealthy cocktail of passenger structure changes, decreased expenditure by Chinese and Russian passengers and generally ’more restrained spending behaviour per passenger’ across the board.

 

Detailed Q1 passenger traffic figures were reported by TRBusiness last month [click here: http://www.trbusiness.com/regional-news/international/fraport-hits-new-13m-passenger-record-in-q1/104040-Ed], but Fraport has only just released news that group revenue in the first quarter was €3.4m down on the previous comparable period.

 

 

However, the airports company also reports that once adjusted for ‘changes’, overall revenue in the first quarter 2016 actually increased by €14.7m to €572.5m (+2.6%), even though higher expenses from non-capitalizable capital expenditure in Frankfurt Airport and lower retail revenue translated into a -4.9% decline in Q1 group EBITDA to €145.6m.

 

FRANKFURT NET RETAIL PER PAX DOWN

As reported, around 13m passengers passed through Frankfurt Airport in Q1 (+3.3%) as the airport achieved higher revenues from airport and infrastructure charges, plus aircraft handling.  Simultaneously, net retail revenue per passenger declined from €3.93 to €3.62 on the previous year due to particularly high non-recurring income gained in the first quarter of 2015.

 

Other reasons included a changed passenger structure and a decline in the average retail spending of Chinese and Russian passengers, reflecting the loss of purchasing power of their respective currencies.

 

In terms of Q1 results by airport using Fraport’s ‘equity method’, Antalya Airport generated revenue of €17.6m (-16.2%), while Pulkovo/Thalita returned €35.5m (-27.9%) followed by Hanover with $31.8m (+2.6%) and Xi’an in China €51.2m (+16.6%).

 

 

Turning to fully consolidated airport companies, Ljubljana returned €7.4m (+8.8%); Lima €71.5m (+12.6%); and the Twin Star Bulgarian airports of Burgas and Varna came in with €2.3m (+2.1%).

 

EXCHANGE RATE DAMPENER

Turning to the Retail & Real Estate division, Fraport management said: “The drop in revenue in this segment (-€0.7m to €112.7m) was due in particular to weaker retail business (-€2.8m), caused by a changed passenger mix and lower average spending per passenger, which was, among others, due to exchange rate effects.

 

“Net retail revenue per passenger was €3.62 compared to the previous year’s high value of €3.93 (-7.9%). Reduced passenger numbers to China, Russia, and Vietnam down 5.3% on the previous year, corresponded to a decline per passenger of some €0.05.

 

“Higher revenue resulted from the changed presentation of rental income due to changes in the scope of consolidation concerning the group company FCS (+€1.7m).

 

This did not affect EBITDA, however. Revenue from parking was at a similar level to the previous year.”

 

 

RISK AND OPPORTUNITIES…

Fraport also reported higher expenses due to the start-up costs for the online shopping platform of some €1m, non-capitalizable capital expenditure (+€0.9m) and staff number and price effects (+€0.8m).

 

Additional expenses also came from the allocation of infrastructure costs of the Aviation segment.

 

Meanwhile, Fraport has already commented on potential future concerns in its ‘Risk and Opportunities Report’ contained in the Group Management Report 2015. Here it mentions potential risks for the Antalya group company resulting from terrorist attacks, political unrest, and conflicts on the border between Iraq and Syria.

 

It also points to possible negative effects from the recent tensions between Russia and Turkey that resulted in Russia imposing sanctions and a suspension of charter traffic from January 1, 2016.

 

Fraport says candidly that this is likely to result in a very high level of damage based on its interim assessment of the situation on March 31, 2016. At this time it noted ‘an almost complete loss of Russian passengers’, which has now been factored into the company’s forecast results for this year.