Long-term market development remains positive despite short-term volatility
After the worldwide traffic collapse caused by the coronavirus pandemic, traffic volume will recover in the coming years, according to forecasts by associations and aircraft manufacturers. Subsequently, the aviation market is again expected to show stable growth in the long term. Fraport aligns its strategy to the long-term forecasted development of the global aviation market and its trends. In particular, internationally assumed economic growth as well as a globally increasing and more strongly consuming middle class will positively influence the development. Further catch-up and growth effects will result from the global directing of business and education and the forecasted increasing traffic from migration and tourism. Disproportionate growth is still expected from and in the economic emerging markets.
With its five strategic objectives, the vision of the Fraport Group serves to implement the mission statement, and remains valid despite short-term volatility:
A description of the development of the key financial and non-financial indicators in the past fiscal year can be found in the “Economic Report” chapter. The associated forecast figures for the 2023 fiscal year can be found in the “Outlook Report” chapter. The key risks and opportunities associated with the expansion of airport infrastructure in and outside of Frankfurt can be found in the “Risk and Opportunities Report” chapter.
Growth in Frankfurt and internationally
The expected market development indicates that air traffic will remain a growth market. In light of this, Fraport is aligning the company to ensure competitiveness and to participate sustainably in this growth – both at the Frankfurt site and internationally.
Fraport is maintaining its long-term growth goals, despite the effects of the coronavirus pandemic. Traffic volume is expected to follow the general market trend; aviation value added will increase and sustainable EBITDA growth will be maintained in the non-aviation segment. The international business is also expected to continue to grow sustainably and contribute to the Group EBITDA and result.
At the Frankfurt site, the construction of Terminal 3 will secure the infrastructure required for growth in the long term. Construction is progressing largely according to plan, and the new terminal will open for the 2026 summer flight schedule. The resulting capacity of around 20 million passengers will make it possible to gradually modernize older terminal infrastructure.
The role of Frankfurt Airport as one of the leading cargo hubs in Europe will also be strengthened, and freight will be developed as a strategic mainstay. During the coronavirus crisis, the central location and the well-developed cargo facilities triggered strong growth in air cargo activities in Frankfurt. Subsequently, air freight came under pressure from geopolitical instability and operational challenges in the rebound of passenger traffic. Further infrastructural expansion areas at Frankfurt Airport, the steadily growing e-commerce segment, and the forecasted overall economic upswing are expected to contribute to growth in the coming years.
Fraport is continuing the expansion measures required to meet capacity that it has begun at international sites. In Peru, the construction plan for the new passenger terminal was concluded with the Peruvian government. The plan is to open the terminal in the first quarter of 2025. At the Group airports in Bulgaria, the commitment was extended for another five years until November 2046. In relation to this, the terminal at Varna Airport will be expanded in the coming years.
Fraport particularly uses the passenger numbers at Frankfurt Airport as well as at the Group airports as an indicator for the Group-wide growth in traffic. Fraport measures Group-wide growth in the result and controls this, among other things, by monitoring the development of Group EBITDA and the Group result, the ROFRA, net financial debt to EBITDA ratio, and free cash flow. In view of the dynamic economic environment, Fraport is also focusing on securing liquidity in the long term.
Service-oriented airport operator
The mission statement and the slogan “Gute Reise! We make it happen” underpins the claim of having a strong customer and service orientation at all sites. Group airports will reach a leading position in their respective aviation market through motivated employees, efficient processes, and infrastructure that meets current needs.
In Frankfurt, the control of aviation security checks was taken over on January 1, 2023. This is a significant milestone in optimizing control of the travel process. As the first major airport in Germany, it will now be Fraport's responsibility to select and manage the service providers for aviation security checks. In combination with the gradual roll-out of new computer tomography (CT) scanners, this will reduce queues at security checkpoints. Customer experience will improve clearly as a result.
In order to further strengthen the hub function of the Frankfurt site, the security checkpoint in Terminal 1 B will be relocated over the next few years. This will increase capacity for checks and create easier transfer processes as well as a new airside shopping area all around.
In addition to the passengers, airport business partners including airlines, retailers, and logistics specialists are of key importance to Fraport. Fraport provides its partners Group-wide with an optimum commercial basis, so that they can successfully compete. Processes and interfaces are technologically supported and thus continuously improved. This simplifies and accelerates processes. With the founding of FraAlliance GmbH, Fraport and Lufthansa have strengthened their strategic and operational cooperation. The goal is to jointly improve passenger processes and experiences, exploit efficiency potential, and further expand the central role of the Frankfurt hub in international competition.
Customer and service orientation will be continually improved at all Group airports. Understanding customer needs and obtaining feedback is essential for this. This is why customer surveys are regularly conducted in Frankfurt and at the Group airports. The global passenger satisfaction reflects the effectiveness and success of the passenger-oriented processes and service offers that aim to increase passenger satisfaction. Also, baggage connectivity is an essential measure for performance of the Frankfurt hub airport. The punctuality rate is another quality indicator for Frankfurt as a hub airport.
Economically successful through optimal cooperation
All Group companies, business fields, and services within the Fraport Group provide their services under quality and cost structures that can keep pace with specialized air traffic service providers. Optimized collaboration within the Group enables the operating cost to be reduced further and made more flexible.
In order to support the restart of air traffic and ensure Fraport's long-term success, the focus is currently on adapting the organization and its processes. Among other things, the plan is to bundle the ground services within the framework of a joint operation with a stringent focus on ground handling as the sole core business. This should improve the quality and profitability of the business model.
Learning organization & digitalization
Flexible and fast response is part of everyday operations for Fraport as a service provider. Risks and opportunities are recognized at an early stage, and changes in the market are anticipated. Learning takes place every day and everywhere, both in terms of leadership and in the area of expertise. This also includes the regular exchange of technical experts from the Fraport Group on specific airport management issues. One example of this is the “Sustainability X-Change” introduced in 2022, in which sustainability experts and managing directors of the international Group companies and Fraport AG regularly exchange ideas and drive forward joint projects.
The volatile overall environment continues to require a high level of adaptability from the organization and its staff. Fraport is increasingly building on digital solutions for collaborative value creation and is thus consistently implementing its digitalization and innovation strategy. Thus, in 2022, further projects were identified within the framework of a "Digital Factory” and implemented within a very short time. The topic of robotic process automation also became more widespread in the company. In addition, a first use case for the use of artificial intelligence in the control of apron processes was successfully piloted. In this context, Fraport considers digitalization and innovation to be a lever to improve customer satisfaction and financial performance indicators in the near term, where relevant. All the projects listed above aim to open up earnings potential or reduce costs, and thus increase competitiveness.
Fairness and recognition for partners and neighbors
One focus of the Fraport Group's sustainability activities is to treat partners, neighbors, and natural resources respectfully and appreciatively throughout the Group.
Being a good neighbor means communal, cultural, and social engagement in the respective regions. At the sites of the international Group companies, regions close to the airport also benefit from the economic performance, such as through donations or sponsorship activities. These are implemented by each Group company on its own responsibility.
Active and passive noise abatement serves to limit the negative effects of aviation traffic on its environment. Emission-related airport charges at the Frankfurt site provide financial incentives for airlines to use aircraft with low pollutant and noise emissions. Noise protection measures in accordance with national and local noise protection regulations have been applied and monitoring systems implemented at Group airports as well.
In addition, Fraport feels responsible for meeting ecological requirements. In the area of climate protection, Fraport has set the goal of reducing Group-wide CO2 emissions to a total of 95,000 tons by 2030 and to be completely CO2 neutral by 2045. No emissions will be compensated. As a policy paper for decarbonization, the “Decarbonization Master Plan” was developed in 2022. It derives an overall concept for reducing CO2 emissions from the scientific and legal framework conditions as well as the technical possibilities and provides a comprehensive view and structuring of the measures to reduce Fraport's CO2 emissions. The master plan will be taken into account by all divisions of Fraport AG and all relevant Group companies in further technical and economic planning.
With regard to social sustainability aspects, Fraport also retains qualified and motivated employees as an attractive and responsible employer, among other things with systematic further development offers and talent management programs. The company secures its own competitiveness like this. Fraport respects and promotes personal diversity and attaches great importance to ensuring that this is reflected in the way employees interact with each other. The Group agreement “Conduct of Partnership, Diversity, and Equality in the Workplace” formed the platform for principles such as freedom from discrimination and equal opportunities. Fraport places particular emphasis on development measures aimed at increasing the proportion of women in management positions. This applies to management positions at levels 1 and 2 below the Executive Board, as well as the respective management boards and the management level below them at the German Group companies.
Comprehensive, integrated occupational health and safety is also an important component of the Fraport Group's understanding of sustainability. Coronavirus protection measures were implemented both at the Frankfurt site and internationally. Work processes were also adapted to make everyday operations as safe as possible for employees in observance of legally prescribed measures.
Fraport uses the key indicators of employee satisfaction, the proportion of women in management positions, the sickness rate, and the level of CO2 emissions to monitor its sustainability activities.
Strategic consideration of current market developments
The ongoing global political conflicts, economic developments, and adjustments to the legal framework are currently shaping a large number of the markets in which Fraport operates as a global airport operator.
The resulting uncertainties as well as strong price pressure from the airlines require high-quality services and significant flexibility at the same time. To meet these requirements, the process optimization program @FRA will continue to be pursued consistently. The program includes the following four directions: