Business Risks and Opportunities

• Overall, global economic development may cool down more than expected and have a negative influence on passenger and air freight demand.
• High inflation rates may reduce the disposable income of private households. The reduced purchasing power, together with uncertainties about the future development of inflation rates, may have a negative impact on flight bookings.
• High interest rates intended to curb inflation may have a greater impact than expected on state and corporate refinancing and on global economic development. This would have a negative impact on planned traffic development.
• As a result of sustained high energy prices, the competitiveness of German industry may suffer and Germany’s position as an attractive hub for air traffic could be weakened.
• In world trade, the trend toward greater national protectionism and the associated increase in tariffs – particularly in light of announcements by the US government – may adversely impact the export-oriented German economy.
• Growth may be dampened by the weakening of the EU as a result of diverging interests among the Member States and the actions they take.
• Current and simmering geopolitical hotspots may put a strain on economic development.

• Strong geographic diversification and focus on various passenger groups at the Group airports to reduce individual macroeconomic risks.
• Geopolitical risks, restrictive political interventions, and saturation tendencies in air traffic demand in Western countries can be balanced out from regionally different growth potential among the Group airports.

Risk
evaluation:

substantial

• A clear decline in inflation and the recovery of the economy lead to growth of disposable income and a robust recovery in demand. Business travel and air freight may benefit from the upswing in the economy and, in particular, exports.
• A quicker end to the wars in Ukraine and the Middle East, with a sustained relaxation of geopolitical tensions, may stimulate the global economy and support air freight development.
• The rapid finalization of trade agreements with countries with high air freight potential may boost air freight development in Frankfurt.
• The further expansion of the e-commerce business may strengthen Frankfurt’s position as an air freight hub.

• Wars and geopolitical crises could result in rising energy costs and a sustained reduction in supply and demand, among other things.
• Rising crude oil and thus also kerosene prices could result in higher airfares and an associated dip in air travel demand. If competition is intense, rising crude oil prices could pose financial difficulties for less solvent airlines, with a resulting drop in supply.
• Further increases in air traffic control and aviation security charges and higher civil aviation tax increase the location risk and result in competitive disadvantages and financial losses. Supply is reduced or not created in Germany in the first place, and may be relocated to other hubs abroad.
• The measures planned/implemented in other European countries to reduce short-haul flights may mean a switch to alternative means of transport (rail and car) if implemented in Germany, reducing the demand for air travel. Passengers who cannot or do not want to use alternative transportation could switch to using foreign airports and Frankfurt Airport would subsequently lose such customers.
• Political and regulatory decisions at the regional, national and European levels will continue to affect the aviation sector. Climate protection and noise reduction requirements and associated taxes and charges could drive up the cost of air travel, and typically involve unilateral action on the market and on competition in international air traffic. Stronger targets under the European Union’s Green Deal (Fit for 55) and the associated review of the Emission Trading Directive, as well as the definition of binding sustainable aviation fuel (SAF) quotas from 2025, will place an increased burden on European sites compared to other sites. If the measures are not designed to be neutral in a competition context, there is a risk of structural competitive disadvantages for German and European air traffic.
• Broad debates about climate protection could produce a long-term shift in travel behavior and lead to a reduction in air travel.
• Stricter travel guidelines and the consolidation of business travel may also result in a decline in air travel demand.
• The increased use of digital communication media may lead to a stronger than expected decline in demand for business travel.
• Decisions on fleet locations, modified routes and fleet developments, as well as changing customer preferences for source and destination markets when choosing airlines and airports could have a detrimental effect on Fraport. Market access must also be ensured for airlines.
• Supply bottlenecks and quality defects reduce the global fleet capacity and may result in a drop in supply.
• The creation of new or further development of existing hub systems in the Middle East and at the new Istanbul Airport will increase supply and potentially result in a shift in global transfer passenger flows.
• Demographic change is leading to a substantial shortage of labor, including in the aviation sector. Staff shortages in the air transport industry can have a negative impact on operational service delivery and consequently on the expected business development.
• Terror attacks and hotspots of unrest could adversely affect demand for specific travel destinations.
• Loss of market shares, in particular due to the loss of ground handling customers to third-party ground handling companies, may result in revenue shortfalls in ground service charges.

• Continuous market monitoring and analysis of early warning indicators to identify and address potential changes and trends in travel and cargo flows in a timely manner
• Targeted sales activities to increase air freight supply and demand
• Balanced, demand-oriented expansion planning at Group airports in order to remain competitive in the long term
• Attractive remuneration structures
• Strengthening cooperation with key customers at Group airports
• Strengthening cooperation with Deutsche Bahn and Lufthansa to ensure an attractive intermodality offer at Frankfurt Airport
• Dialog with politicians on the consequences for the air traffic hub
• Implementation of climate protection measures and sustainability programs
• Active participation in industry-related associations

Risk
evaluation:

substantial

• Holiday travel and thus tourist air travel are top consumer priorities for Germans. Even in a difficult economic climate, savings are more likely to be made in other consumer sectors. Recovery in the business travel segment could also be stronger than expected.
• Previous development cycles in air traffic show that market turbulence only temporarily burdens the upward development of global air traffic. Long-term forecasts continue to assume growing demand in global air traffic.
• Market exits of airlines lead to a concentration of established airlines at the larger German airports, from which transfer traffic at Frankfurt Airport may benefit.
• The larger ranges of smaller aircraft provide an opportunity for new decentralized intercontinental routes from Frankfurt.
• High-quality connections to the Deutsche Bahn rail network at the Frankfurt site ensure demand from transfer traffic within Germany even if air traffic is shifted to rail, and this is a major competitive advantage. Improvements to the intermodal product such as end-to-end ticketing and end-to-end baggage transport can strengthen rail feeder traffic and have a positive impact on Frankfurt Airport’s catchment area.
• Capacity increases at the Group airports are being implemented or have been completed, which will result in improved quality for airlines and greater passenger satisfaction. This may enable Fraport to benefit more than expected from long-term growth in the air traffic market.
• A liberalization of air traffic rights may open up new markets for air traffic and expand existing markets.
• International harmonization of regulatory measures that distorted competition in the past may make global competition fairer and reduce the risk of business moving elsewhere. There is a chance that airlines will further expand their intercontinental fleet in Frankfurt due to the excellent existing feeder service, intermodality, and cargo demand, thereby strengthening passenger and cargo traffic.
• Digitalization and innovations offer new opportunities to improve processes, raise efficiency, and increase customer satisfaction.

Capital expenditure on construction at Frankfurt Airport is divided into two separate programs: “FRA-Nord” for projects in existing infrastructure and “Ausbau Süd” for projects to expand or create capacity. The “Ausbau Süd” project, in particular the construction of the new Terminal 3, continues to progress stably within the schedule despite a challenging market situation for construction services (see also the “Key Sites” chapter). Strained supply chains, limited material availability, and high cost increases can partly be countered with a forward-looking procurement strategy. Due to the current construction progress, the risks have reduced compared to the previous year. Nevertheless, the following risks exist:

• Increase in construction costs
• Supplier bankruptcies
• A decline in new construction activity due to the change in interest rate levels coupled with sustained high material and labor costs increases the risk of the parties involved in construction projects on site becoming insolvent
• Scheduling delays
• External influences from the public, the environment, politics, technological changes, engineering practices, alternative engineering methods within the scope of building permits, or other requirements
• A lack of skilled workers and limited resources result in weaker negotiating positions

• Monitoring measures to enable timely countermeasures
• Active market development and consistent change management to counter increases in costs

Risk
evaluation:

substantial

• Greater competition in the procurement market due to weakening demand could dampen price increases
• Capacity expansion to ensure the ability to cope with the expected long-term growth of the air traffic market

Drainage for the parallel runway system

• In the event of evidence of de-icing substances in the groundwater, the upper water authority could impose a requirement for a qualified drainage system for the parallel runway system at Frankfurt Airport and issue a corresponding water law order.

• Continuous groundwater monitoring and regular measurements to verify compliance with limit values
• Regular review of the composition of the de-icing agents used as well as the operational processes

Risk
evaluation:

substantial

• Unforeseen official intervention in local tariff, tax, and levy structure
• Environmental requirements and social conditions
• Country, market, political, and foreign exchange risks which can lead to a significant impairment of the future earnings outlook or increase expenses up to a total loss of the investment
• Economic sanctions in response to political conflicts with financial implications for investments
• Political instability in the respective concession countries
• Exceeding construction budgets for airport expansion programs and/or failure to meet completion dates under the corresponding concession agreements

• Collaboration with experienced local partners
• Non- or limited-recourse project financing
• Investment protection insurance
• Monitoring measures to enable timely countermeasures

Risk
evaluation:

substantial

• Fraport achieves growth in international business through the profitable development of existing sites and the acquisition of new investments and concessions. In this process, Fraport aims to contribute its expertise in the long term wherever growth and/or optimization potential with good business opportunities is detected. The broad diversification of the investments creates opportunities compared to focusing on one site.
• Implementation of infrastructure programs at multiple Group sites to boost capacity and quality of service

In the expansion project at Jorge Chávez Airport in Lima (Peru) operated by Lima Airport Partners (LAP), the construction measures for the new passenger terminal have largely been completed. The inauguration of the new passenger terminal is scheduled for the end of March 2025. Potential risks remain due to the size and complexity of the expansion project. However, as in the previous year, these are assessed as “moderate” as at the balance sheet date.

The recovery measures following the flooding at the Group airport Porto Alegre in Brazil in May 2024 have largely been completed. The runway has been fully operational again as of December 16, 2024. The airport also resumed 24-hour operation seven days a week in December 2024. By the end of 2024, the concession provider had paid out insurance benefits and provisional compensation totaling around BRL 550 million to Fraport Brasil Porto Alegre. The final amount of the compensation will likely only be confirmed by the concession provider after the completion of all recovery measures in 2025.

At the end of March 2024, the existing bridge loan for the expansion project being undertaken by Group company Antalya II at Antalya Airport was extended and increased until September 2025. Work is currently underway to arrange follow-up financing. To this end, the company has already instigated talks with the banking market, which are at an advanced stage. The probability of occurrence of a failure to secure follow-up financing is therefore assessed to be low.

The following risk occurred after the balance sheet date:

The previous operator of the duty-free areas at Antalya Airport has filed a request for arbitration against the Group company Antalya I and Fraport AG in connection with the termination of the duty-free concession agreement as of December 31, 2024. A decision in these proceedings is expected in 2026. The previous operator has not yet ceased operating the duty-free shops in the existing infrastructure at the time of preparing the annual report. This is delaying the takeover of the existing duty-free areas by the designated new operator. This new operator is expanding the duty-free areas in the new infrastructure as planned and expects to take over the operation of all duty-free areas at Antalya Airport when the new infrastructure opens. However, if this is delayed, there is a risk that there may be deviations from the plan, particularly in relation to the planned revenue, and consequently a negative effect on the result and liquidity.

• Increased employee turnover due to a more attractive labor market and higher internal workload
• More difficult recruitment due to current labor market conditions
• Training periods for the recruitment of less qualified workers and thus later availability
• Staff shortages in the air transport industry can have a negative impact on operational service delivery and consequently on the expected business development.

• Reorganizing Human Resources as part of the HRneo strategic program
• Improving IT support for HR processes
• Realigning recruitment processes and training measures
• Temporary granting of labor market allowances for staff recruitment, incentives through above-tariff remuneration schemes
• Improving appeal as an employer through modern work formats

Risk
evaluation:

moderate

• Increased appeal through remuneration schemes and working time models (e.g. mobile working)

Funding risk ZVK

For the purpose of granting a company pension under the mandatory insurance scheme based on collective bargaining agreement, Fraport AG is a member of the “Zusatzversorgungskasse Wiesbaden (ZVK).” The current allocations and restructuring funds are used for the current pension payments (solidarity model). If the requirement for work performance declines, in addition to the demographic development, the number of employees for whom levies and restructuring charges are paid will decrease. Thus, the funding shortfall will grow continuously in the company pension plan.

This increases the risk that the ZVK will demand compensation payments from Fraport to make up for the gaps in coverage.

• Discussions with the ZVK about different solution approaches
• An agreement has been reached with the ZVK for Ground Services employees at Fraport AG in the context of the introduction of the sectorial collective agreement. Funding risk for these staff has been resolved definitively.

Risk
evaluation:

substantial

• Business interruptions due to exceptional local events such as terrorist attacks, accidents, fires, drone flights, technical malfunctions, actions by climate activists and other criminal acts, or strikes
• Impact on national and international air traffic caused by natural disasters, (climate-related) extreme weather conditions, armed conflicts, and pandemics
• The emergence of epidemics and pandemics may lead to travel restrictions, local restrictions on public life, production limitations, and supply chain bottlenecks, which would also have a direct impact on traffic at Group airports

• Implementation of a local central crisis team
• Local plans to maintain critical business and operating processes and provide emergency procedures
• Safety management system
• Implementation and operational support of drone detection technology and drone defense systems
• Property and business interruption insurance
• Monitoring of news and estimates of global infection rates
• Where necessary, close coordination with health authorities, airports, and aviation associations
• Close cooperation with airlines and authorities to secure and strengthen air traffic including safeguarding provisions

Risk
evaluation:

considerable

• Serious business disruption due to a severe IT system failure or substantial loss of data as a result of cyberattacks, computer viruses, or hacker attacks
• Rise in threat level according to increased number of warnings from the German Federal Office for Information Security

• Redundant implementation of relevant IT infrastructure
• Preventative IT security management to protect business-critical IT systems
• IT security policy and IT security guidelines
• Established emergency process with defined roles and competencies
• Interregional collaboration to develop uniform security standards for IT environments
• Compliance with IT security requirements is checked regularly by Internal Auditing, IT security management, or external advisors

Risk
evaluation:

substantial

• In particular occurring from the capital requirements for capital expenditure and from existing floating interest rate financial liabilities and assets
• Future interest rate increases may have a greater impact than expected on the planned refinancing measures
• Increased interest expenses from the valuation of long-term provisions
• Risk of a negative market value of the interest rate hedging instruments due to a decline in market interest rate, if interest rate derivatives are concluded to hedge interest rates where, in exceptional cases, the underlying transaction failed to materialize or has ceased to exist

• Fixed interest rate agreements for most financial debt
• Monitoring: quarterly performance of simulations of interest rate risk

Risk
evaluation:

considerable

• Planned revenue not covered by expenses in matching currencies
• Change compared to previous year due to compensatory effects on cash flows at foreign Group companies

• Ongoing sale of currencies not covered by matching currencies or conclusion of forward (exchange) transactions
• Close monitoring of risk positions and risk limits

Risk
evaluation:

low

• Primary and derivative financial instruments with a positive fair value and the risk that the counterparty will be unable to meet the obligations that are advantageous for Fraport
• In addition to rated investments, investments in unrated bonds are possible in individual cases within strictly defined limits

• Acquisition of financial assets and conclusion of derivatives only with issuers and counterparties rated at least “BBB–”
• Issuer ratings are regularly reviewed to enable any necessary decisions on further dealings with the financial asset or derivative
• Investments in unrated bonds are continuously indicated in the reporting
• Limit caps are adjusted, if necessary, to reflect changes in creditworthiness

Risk
evaluation:

low

• The market valuation of financial assets is subject to market fluctuations that do not affect cash flow
• The market valuation of derivative financial instruments at fair value is subject to fluctuations

• Financial assets with a fixed term are assumed to be subject only to temporary market fluctuations that reverse automatically by the end of the product terms because the full nominal amount is repaid

Risk
evaluation:

low

• Risks for the asset, financial, and earnings position of Fraport may arise from the current financial market situation and its effects on the overall economy, particularly on liquidity and other bank lending practices

• “Reserve financing” strategy to guarantee financing, such as for upcoming capital expenditure and repayments
• The amount of funds from the strategic liquidity reserve is continuously monitored and, if necessary, replenished in the event of reduction

Risk
evaluation:

low

• Favorable exchange rate and interest rate developments could improve the Group’s financial result.
• Overall, Fraport expects to be able to take advantage of favorable developments in the financial markets.

• Changes in aviation law, the German Federal Police Act, planning and environmental law, security-related regulations, general regulations under capital market law, antitrust law, data protection law, and labor law as well as any legal restrictions under sanctions
• Corruption, fraud, or financial manipulation
• Antitrust violations
• Changes to tax regulations, case law, and different interpretations of existing tax regulations with an adverse impact on the tax positions on the statement of financial position and the income statement

• Continuous analysis of legal changes for timely identification of and response to potential negative changes
• Implementation and expansion of a Group-wide compliance organization
• Group guideline on the Compliance Management System
• Further development of the centralized ICS
• Code of Conduct
• Whistleblower system
• Continuous monitoring of tax changes
• Regular dialog with tax authorities

Risk
evaluation:

considerable

• Legal or tax-related changes or court decisions with positive effects on the operations and financial indicators of the Fraport Group