Business Model
The Fraport Group (hereinafter also referred to as: Fraport) is one of the world’s leading companies in the airport business in terms of the number of passengers carried and metric tons of cargo handled. The main site of the Group is Frankfurt Airport, one of the most important passenger and cargo airports in the world, in respect of which the parent company of the Group, Fraport AG Frankfurt Airport Services Worldwide (abbreviated: Fraport AG), has an operating permit with no time limit.
Beyond the Frankfurt site, the Group operates on four continents, mainly on the basis of concession agreements at international airports. The main sites include 14 airports in Greece, Lima Airport in Peru, and two airports in Brazil (Porto Alegre and Fortaleza) as well as Antalya Airport in Türkiye (see also the “Key Sites” chapter).
As an airport operator, Fraport provides a wide range of operational and administrative services for airport and terminal operations. Within the framework of the concession agreements, the scope of the services offered varies from contractually binding construction and expansion activities, administration and control of airport processes, to the management of retail areas. The concession models also differ in terms of their term and the structure of the concession fees to be paid. The range of tasks of the Fraport Group also includes planning and consulting services as well as IT services and facility management. Fraport attaches great importance to ensuring that customers are the focus of all its company services. This applies both at the home site in Frankfurt and at the international Group sites. Fraport considers itself to be a learning organization that uses its know-how in a targeted and profitable way worldwide.
The Group generates the majority of its revenue and earnings from the passenger and freight business at each of its sites. Apart from passengers, its main customers include airlines, tenants of office and retail space, authorities and freight forwarders. Fraport primarily levies charges for the use of the airport infrastructure, generates income from the development of commercial areas, and offers additional operational services. Fraport reports the main revenue streams resulting from this as “airport charges,” “infrastructure charges,” “ground services and security services,” “retail,” “real estate,” and “parking.” In the area of airport concessions, revenue and expenses of the same amount from “construction and expansion services in connection with IFRIC 12” are also reported in the consolidated income statement. In its reporting, Fraport distinguishes between the following four segments:
- Aviation – holistic management of the terminal facilities and airport processes at Frankfurt Airport.
- Retail & Real Estate – development and renting of space at the airport and of space mainly near the airport in Frankfurt. This primarily includes the retail business, building and space leasing as well as parking management.
- Ground Handling – ground services such as loading, baggage, and passenger services, as well as the operation of the central infrastructure and baggage transfer system at Frankfurt Airport.
- International Activities & Services – international marketing of the Group’s expertise and airport operations as well as bundling central services in Frankfurt.
The Fraport business model creates value by participating in the international demand for air travel and flows of goods. Fraport is pursuing a clear growth strategy that also takes into consideration environmental and social aspects (see also the “Strategy” chapter). In addition to the broad portfolio of airport investments, which focuses on both business travel demand and tourism offerings, the employees form the basis of the company’s success. Together with its partners, Fraport is consistently developing the Group sites and achieving a broad revenue and earnings base.
External Influences
The main external factors influencing the business model of Fraport include disruptive events, such as extreme weather conditions, natural disasters, or pandemics, in addition to economic, (socio-)political, and regulatory factors. The influencing factors can both positively and negatively affect passenger and freight demand as well as the range of aircraft movements and passenger capacity at Group airports. At the same time, they can influence the purchasing behavior of passengers and thus the economic situation of the Fraport Group as a whole (see also the “Risk and Opportunities Report” chapter).
Economic growth and globalization generally favor the demand for air travel and freight transport. At the same time, economic prosperity and a globally growing middle class tend to lead to a higher number of air journeys. High inflation rates potentially reduce disposable income and can have a negative impact on business development. Exchange rates also affect the appeal of tourist destinations, travel and freight flows, and passengers’ booking behavior as well as their buying behavior in the retail area. Exchange rates also play an important role in the financial contribution of individual foreign Group companies, whose functional currencies are converted into the currency of the Group, the euro.
Price fluctuations on commodity markets, especially for crude oil and therefore jet fuel, also have an influence on air traffic and can have both a positive and negative impact on air traffic demand.
Politics affect air traffic at a national and international level. Operating restrictions, such as night flight bans and noise protection measures, as well as travel restrictions and taxes, can have a negative impact on airline offerings. This may also affect passenger and cargo volume at the affected sites and may contribute to the development of other airports. Environmental policy in particular can affect air traffic. A further political influencing factor is the possible liberalization of air traffic rights. This may result in the opening of new markets for air traffic or the expansion of already existing markets. By contrast, sanctions or tightly specified air traffic agreements lead to the closure of markets.
Geopolitical crises are leading to increasing global political and economic instability. They can influence air traffic development in many ways.
Fraport monitors various early warning indicators to identify trends in travel or freight flows at an early stage, and to derive appropriate countermeasures if necessary.