Course of business

Key events in the past fiscal year

Impact of the Corona pandemic on Munich Airport

The spread of the Corona pandemic had serious negative consequences for Munich Airport Group as an operator of an international commercial airport. The ongoing travel restrictions make a quick recovery of the industry impossible.

There was a massive drop in traffic from March 2020 – as a result of the travel and contact restrictions introduced worldwide. Numerous airlines ceased operations or reduced them to a minimum. After a slight recovery in the summer months, a renewed tightening of restrictions at the end of the third quarter of 2020 led to a renewed decline in traffic figures. This led to significant declines in sales and consequently to a massive drop in earnings. For further information on traffic development, please refer to the section Aviation business.

In addition, all retail and service units were closed as of March 17, 2020, due to a general order and the Bavarian Infection Control Measures Ordinance (BayIfSMV). A temporary opening then occurred during the year until December 16, 2020 (second lockdown). The open food service establishments were converted entirely to to-go operation to ensure general service. Table service was provided at times within the scope of the additional catering unit openings allowed under the BaylfSMV. For further explanations, please refer to the section Commercial Activities business.

In order to counteract the declining earnings and secure liquidity, drastic countermeasures were introduced in the Group both in terms of expenses and investments.

The satellite building has not been used for passenger handling since the end of March 2020. Terminal 1 was also completely closed from late April to early July 2020 and again from December 2020 to reduce costs. In addition, short-time work benefits were introduced for the majority of employees at the Munich location from mid-April 2020, and a hiring freeze was imposed. In addition, the parallel runway system was reduced to a single runway system by decommissioning one runway, and maintenance and reconstruction measures were postponed to a later date. All non-personnel expenses that were not operationally essential were eliminated.

Munich Airport set up the «Restart» change program to address the Corona pandemic. Organizational and efficiency-boosting measures are being developed here, and efforts are being made to adjust personnel capacity.

Many of the planned investment projects from the general expansion plan were examined, among other things, with regard to their operational necessity, their strategic importance and in the context of existing contracts. This review resulted in corresponding reductions or postponements (including the third runway). This did not affect projects with a high degree of completion.

In total, operating expenses were therefore significantly lower than in the 2020 fiscal year.

To further secure liquidity, the Group took out loans totaling EUR 480 million by the end of the year.

Construction progress on various building projects despite the Corona pandemic

The realization of the Erdinger ring connection, i.e. the continuation of the railway line from Freising via Munich Airport to Erding, has been consistently pushed forward since 2018. The costs for the shell of the tunnel extension are being borne by Munich Airport and pre-financed in the form of an interest-bearing repayable subsidy from the Free State of Bavaria. Payment of the investment costs will fall due for Munich Airport when the tunnel extension is commissioned.

In the Terminal 2 area, the eastern apron is currently being expanded by a total area of 180,000 square meters. As a result, 23 new parking slots are available.

The expansion of Terminal 1 to include a gate was also continued to a certain extent. The central objectives of this expansion measure are to accommodate the needs of the non-Schengen area and to enhance the quality of service and the quality of time spent in Terminal 1 for the future.

In addition, the «LabCampus» project is progressing on the AirSite West areal. As a result, construction of the first two office buildings commenced in fiscal 2020.

New logistics center goes into operation

On October 1, 2020, the subsidiary eurotrade took over the recently built logistics center on the campus. In the future, Munich Airport Group’s storage capacities will be combined there under one roof. The total area including outdoor storage is approximately 24,000 square meters. The building is 113 meters long and 76 meters wide with an area of approximately 15,000 square meters. It has a deep-freeze warehouse, a high-bay warehouse and an automated small parts warehouse.

AE Berlin becomes the largest ground handling service provider at Berlin Brandenburg Airport «Willy Brandt» (BER)

With the opening of the major airport in Berlin in November 2020, the subsidiary AE Berlin became the largest ground handling service provider at the Berlin location by securing two major customers and now has a market share of more than 50 percent.

Road construction work at Munich Airport opened to traffic

On December 10, 2020, the second construction phase for the eastern road link to Munich Airport was opened to traffic. This completes the multi-lane expansion of the southern ring road and its extension to the east in the direction of the eastern airport bypass, including the bridge structures.

Aviation business

Historic slump in traffic numbers due to the Corona pandemic

Traffic figures for Munich Airport1

 

 

 

 

 

 

Change

 

 

2020

 

2019

 

Absolute

 

Relative in %

Aircraft movements

 

146,833

 

417,138

 

-270,305

 

-64.8

Passengers (in millions)

 

11.1

 

48.0

 

-36.9

 

-76.8

Cargo1 (in tonnes)

 

158,456

 

356,970

 

-198,514

 

-55.6

1

For better comparability with other commercial airports, cargo throughput is shown here including the mail and freight volumes that remain on board the aircraft in transit at Munich Airport. Therefore, the values may differ from those in other publications, which only consider freight or cargo throughput (without transit).

With only 11.1 million passengers and 146,833 aircraft movements, Munich Airport recorded a history-worst traffic volume. The various lockdowns during 2020 combined with wide-ranging, international travel restrictions made it impossible to achieve the traffic growth originally anticipated for 2020. The number of aircraft movements fell to levels last seen in the mid-1980s. Passenger numbers were just above those of the last full year of operation at Riem in 1991.

Aircraft movements at Munich Airport during the year

Aircraft movements at Munich Airport during the year (bar chart (horizontal))

The first lockdown in the spring temporarily brought air traffic at Munich Airport to an almost complete standstill. The situation improved slightly in the summer months, but utilization remained at a low level and only demand for airfreight slightly improved the economic situation of long-haul traffic with high freight rates. However, the increase in supply on the part of the airlines in the summer was already canceled out by the next lockdown in the winter flight schedule.

Long-haul traffic fell by approximately 80 percent compared to the previous year to 1.7 million passengers, mainly due to the lack of corresponding shuttle services; aircraft movements fell by 69 percent to 10,591. Extremely low utilization rates during the lockdowns in long-haul traffic of approximately 20 percent made profitable operations difficult. However, in some cases higher freight rates and more freight tonnage made it possible to cover costs even at a significant reduction in supply.

Both originating and connecting traffic declined during the crisis. Connectivity was significantly reduced due to the very low supply. As a result, the number of connecting passengers fell significantly, while their share of total traffic remained comparatively stable at 34 percent (previous year: 38 percent).

Domestic traffic also contracted significantly, but to a lesser extent than the other traffic segments. Approximately 2.6 million passengers (-73 percent) were carried on 44,127 aircraft movements (-54 percent).

Passenger development at Munich Airport during the year

Passenger development at Munich Airport during the year (bar chart (horizontal))

With 92,115 movements (-65 percent) and approximately 6.9 million passengers (-77 percent), intercontinental traffic recorded a sharper decline than domestic air travel. This was also affected by travel restrictions, which vary from destination to destination, and uncertainty among passengers. During the summer vacation period, despite unfavorable conditions, there was a moderately positive trend, indicating an unabated desire to travel, at least among parts of the population.

Cargo development (-54.9 percent, 152,636 metric tonnes) at Munich Airport consisted of two main parts in 2020. The passenger aircraft bellyhold cargo business, which had been particularly important in previous years with a share of over 80 percent, slumped by -66.8 percent due to the loss of long-haul traffic and only handled 94,860 metric tonnes. By contrast, the volume of all-cargo transported on freight-only aircraft increased (+9.2 percent), but was far from able to compensate for the loss of bellyhold cargo due to the short supply and the unfavorable conditions for this segment at Munich Airport. An annual total of 50,253 tonnes was achieved. In addition, there were 7,523 tonnes of freight in transit (air freight that was neither loaded nor unloaded, but only made a stopover in Munich).

Airmail handling decreased to approximately 5,815 tonnes (-68.5 percent) due to the absence of airmail flights from April to November 2020.

Munich Airport’s performance was below average compared with the traffic results of the airports represented in the German Airports Association (ADV). Munich Airport was below the German average in terms of aircraft movements and passengers, due to the concentration of hub traffic at Frankfurt and the temporary suspension of hub traffic in Munich, which was hit particularly hard. Frankfurt Airport benefited here from its very good long-distance rail connections. The above-average proportion of business travelers before the crisis, which has declined sharply due to business travel restrictions and home office obligations, were also a contributing factor. Cargo handling fell slightly throughout ADV, with an above-average decline in Munich due to the reduction in hub traffic and the associated slump in long-haul traffic. On the cargo side, only the major cargo hubs of Leipzig and Cologne/Bonn, as well as Hahn, recorded a significant increase, driven by all-cargo and e-commerce.

Traffic results 2020 in comparison1

In %

 

ADV

 

Munich

Movements (total traffic)

 

-54.9

 

-64.8

Passengers (commercial traffic)

 

-74.6

 

-76.8

Cargo (airfreight and airmail and transit)

 

-3.9

 

-55.6

1

ADV monthly statistics 12/2020, February 2021

In a European comparison, Munich Airport also fell behind and was no longer in the top ten of the airports with the highest number of passengers. In general, German airports underperformed due to particularly stringent travel restrictions. Germany’s largest airport, Frankfurt, ranks only sixth.20

Ground handling services in a difficult economic environment

For the two subsidiaries AE Munich and AE Berlin, as for the entire German aviation industry, 2020 was marked by an extreme decline in the number of handling operations as a result of the global Corona pandemic.

There are two ground handling licenses at Munich Airport. One of these is permanently assigned to the subsidiary AeroGround Flughafen München GmbH (AE Munich). In 2020, AE Munich recorded a 69.2 percent decline in handling operation volumes. The market share decreased by 3.8 percentage points to an average of 51.2 percent in 2020. This can be attributed, among other things, to a shift in market share at Deutsche Lufthansa, which also resulted in a decline in market share at Terminal 2.

By contrast, Terminal 1 saw an increase in market share due to cargo handling operations, which remained constant even during the flight cancellations.

In 2020, AE Berlin recorded a decline in handling operation volumes of 65.7 percent. Business activities were also shaped by the relocation of the Tegel Airport operations to the new BER Airport and the acquisition of two major customers. Overall, the market share at the Berlin location rose to more than 50 percent. The average market share in passenger traffic in 2020 was 24 percent (previous year: 20 percent) and in freight traffic 3 percent (previous year: 0 percent).

Commercial Activities business

Compared with the previous year, revenue in the Commercial Activities business unit fell sharply due to the Corona virus pandemic, due to the small number of passengers boarding flights. As a result of these passenger incursions, terminal areas at Munich Airport were gradually closed. The satellite building and Module A in Terminal 1 were closed on March 24, 2020. One month later, on April 29, 2020, Terminal 1 was then completely closed until July 8, 2020. From December 1, 2020, there was another complete closure.

Furthermore, due to a general order and the Bavarian Infection Control Measures Ordinance (BayIfSMV), all retail and food service units were closed between March 17 and April 27, 2020. Basic supply and gastronomy as take-away or drive-in as well as deliveries were excluded. Since then, it has been up to tenants to decide for themselves whether to open their units based on projected passenger traffic.

In order to reduce the burden on the tenants and to keep them at the Munich location in the long-term, rents or rental agreements were adjusted in individual cases, primarily for passenger-dependent retail and catering and differentiated according to the type and scope of the restrictions, as far as legally permissible and required.

Retail – sales performance reflects slump in passenger numbers

Retail sales have plummeted as a result of the crisis and the associated lower passenger numbers and the closures of terminal areas described above, as well as the restrictions resulting from the general order and the BayIfSMV.

Gastronomy and hotels are suffering under the pandemic

In absolute terms, sales in restaurants and bars also fell sharply compared with the previous year due to the pandemic and the accompanying restrictions. However, in relative terms per guest, revenue increased, reflecting continued employee catering as passenger numbers declined.

Hotels also experienced declines in revenue from demand for overnight stays and conferences. At the Skytrax Awards 2020, the five-star hotel in the central area of Munich Airport was again named the second-best airport hotel in Europe.21

Parking – demand decreases with passenger volume

The decline in passenger numbers at Munich Airport has had a severe impact on the parking business. The proportion of trips made by car or car sharing has increased compared with previous years, but only by a very small amount in absolute terms. The only business unit to record just a slight decline in sales was tenant parking, which is not directly dependent on passenger numbers.

Advertising – a challenging market environment

The advertising market has also suffered under the pandemic. However, sales fell disproportionately to the decline in passengers. This was because the majority of advertising contracts were concluded before the outbreak of the pandemic in Germany and these were honored. By contrast, the number of long-term contracts (including passenger boarding bridges, smoking lounges) decreased due to the terminal closings.

Real Estate business

Momentum for additional location and real estate development

The effects of the Corona pandemic were also felt in the real estate sector. Various planned construction projects were halted or postponed, and in ongoing projects, the companies carrying out the work reported additional costs and disruptions. Overall, however, the result is roughly at the level of the previous year and therefore within the range of the 2020 plan: while rental income remained almost constant, it was possible to reduce costs by shifting and prioritizing measures for renovation and maintenance. Nonetheless, numerous tenants from all sectors have requested rent reductions and payment deferrals, but FMG has so far failed to implement them.

The development of the future LabCampus project on the AirSite West site is making progress. In the year under review, construction work began on the first two office buildings, which are scheduled for completion in 2022/2023.

Extensive development measures are required to improve connections to AirSite West. The construction measures for this are expected to run until mid-2021. In addition, the bridge structure over Zentralallee (traffic junction West 0), which connects the western end of Nordallee via Zentralallee and the railway tracks with the maintenance area of the airport, was completed at the end of 2020.

In the eastern area of the airport, Munich Airport continued the tunnel works related to the Erding ring closure to improve rail access to the airport. The existing tunnel, which currently ends at the level of the satellite building of Terminal 2, will be extended eastwards. The tunnel extension is around 1.5 kilometers long and will be supplemented by a 300 meter long access ramp, via which the trains will return to the surface. Munich Airport plans to complete the tunnel shell in 2021. Thereafter, it will be fitted out by DB Netz AG with the technical equipment required for railway traffic.

Construction work was also completed on the multi-lane widening of the southern ring road and its extension eastward toward the eastern airport bypass to improve road access to and from Munich Airport. The first construction phase was completed on schedule in September 2020, and the second construction phase was put into operation at the end of 2020.

Munich Airport is currently in the implementation phase of the large-scale Terminal 1 gate project. The extension will help to improve the handling of wide-bodied aircraft and non-Schengen passengers, which was urgently needed due to the changing traffic structure. In addition, because the requirements for security checks have increased constantly since Terminal 1 was opened in 1992, checks on persons and luggage must be expanded. Only with the addition of this gate can the handling quality in Terminal 1 meet the demands of passengers, airlines and authorities again.

The overall concept for the extension includes a structure on three levels, comprising a core building adjacent to Terminal 1 and a gate. This will be connected with the existing Modules A and B and extend more than 320 meters into the western apron of Munich Airport. Up to twelve aircraft will then be able to dock at the gate. The total area of the extension including renovations in the existing arrivals area B is around 95,000 square meters. The construction permit for the gate was issued in January 2020. Construction work in the apron area is proceeding according to plan, and concrete will start to be poured as early as 2021. The excavation pit was also completed on time, and the shell of the building has been under construction since the spring of 2020 and is now at level 04. There has been a delay of a few months due to the Corona pandemic. Contracts for the façade and roof are scheduled to be awarded in the coming months.

Residential properties of various types have been rented since 2019 in order to provide suitable living accommodations for employees already working at Munich Airport as well as for new employees. Apartment buildings owned by the airport have also been renovated and converted into residential facilities. The 196-bed hotel for employees which opened in Hallbergmoos at the end of 2019 will continue to be available.

Demand for office and logistics space within the Group has grown in previous years. For this reason, a central logistics center was built in the area of AirSite West at the beginning of the previous year, and has since been handed over to the operating subsidiary eurotrade in October 2020. Construction work on the West 2 office building, to the north of the office building used by the Real Estate business unit, was completed in 2020 with the building already being handed over to its first occupants.

20 Airports Council International, December 2020

21 SKYTRAX, World’s Best Airport Hotels 2020, December 2020

Airports Council International (ACI)
An international organization, headquartered in Montreal, which represents airport operators. More than 1,900 airports in almost all of the countries in the world are ACI members, including more than 500 airports in 46 European countries.
German Airports Association (ADV)
The umbrella organization of all passenger airports in Germany, Switzerland, and Austria. The organization works to promote Germany as a strong and competitive center of aviation.
Schengen/non-Schengen
Departures and arrivals areas for passengers from member states that have signed up to the Schengen Agreement; these passengers have either arrived directly from one of these states or want to travel to one. No border or passport controls are needed. Non-Schengen refers to areas for passengers who have arrived from countries that are not party to the Schengen Agreement. Passports and customs checks are required in this case.

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