The effects of the coronavirus pandemic have been felt across the entire aviation industry. Munich Airport, with structures designed to accommodate at least 50 million passengers a year, was especially hard hit. Amid this crisis, the biggest to ever strike the industry, Munich Airport continues to combine sustainable economic value creation with ecological and social responsibility. The business activities of Flughafen München GmbH (FMG) have a major impact on many different areas and stakeholders: on Munich, Bavaria, and Germany as business locations, on the region and its population, the airport staff and passengers, as well as on other companies in and around the second-largest German hub, plus other stakeholder groups. Taking their interests and concerns into account is a key factor in terms of strategic planning.
The Strategy 2025 guidelines outline the company’s medium-term development plans. The strategy describes five key fields of action for the successful operation of Munich Airport. The fields of action are the result of scenario analyses on the future of aviation and stem from talks with company stakeholders. The goals and measures from the sustainability program play a major role in implementing the strategy and thus in bringing about the further development of the airport. FMG measures the success of implementation using defined key performance indicators. Owing to the massive impact of the coronavirus pandemic on the Group’s business activities, the company is currently revising its strategy and reviewing the fields of action on an ongoing basis to see where adjustments are needed
Taking countermeasures and staying on track with «Restart»
Faced with this challenging situation and steep revenue losses across almost all business units, Munich Airport took action swiftly, implementing consistent crisis management practices. At the same time, medium-term and long-term changes will be needed to help the company stay on track. This was the impetus for the company’s «Restart» program. FMG’s aim with «Restart» is to pursue a holistic, sustainable approach with an eye to ensuring future viability. That makes this program much more than just a short-term crisis response. The company will be fundamentally realigning itself to adjust strategically to the changing situation in the aviation sector. Organizational structures need to be reconsidered, use of resources optimized, and existing business units examined. Material costs and capital expenditure will also come under scrutiny. For the first time in the company’s history, FMG needs to shrink.
The program encompasses three fields of action in which effective measures can be identified:
- Organization: Improving structures, streamlining management, creating synergies. Various reorganization projects will be tackling many areas within the company. Administration and management will come in for their share of scrutiny, just like operational areas. The goal of the reorganization is to establish leaner management and administrative structures, appropriate manager-to-employee ratios, and optimized interfaces in the years to come.
- Efficiency: Examining costs versus benefits. When it comes to efficiency, the focus is on reviewing the strategy and Group portfolio, optimizing service relationships within the Group, and analyzing personnel capacity at FMG.
- Personnel: Adjusting capacity with minimum adverse social impact and with a sense of proportion. Reducing personnel costs on a lasting basis and adjusting personnel capacity to changes in overall conditions are the goals of this field of action. Especially in the current crisis, FMG stands by its commitment to reliability as an employer. The company will meet this challenge with minimum adverse social impact, with a sense of responsibility, and through close collaboration with the employee representatives.
Lasting change can only be created if suitable overall conditions are met. That’s why shifting leadership and corporate culture toward more-efficient action, interdisciplinary thinking, and motivation and willingness to change across the workforce are another area of focus for the «Restart» program.
A team of external consultants is assisting FMG, especially with strategic issues and highly complex organizational projects. The field of action is clearly defined and delimited: The consultants’ external perspective and cross-company expertise are needed primarily for the purpose of strategically realigning the Group and its business units. Management responsibility for individual topics and projects will otherwise rest with project managers from within the company.
Long-term HR policy for a successful restart
Munich Airport believes in the importance of an HR policy that focuses both on people and on the company’s performance. That’s why the company’s long-term personnel concept is geared toward the current business situation and the company’s strategy. Trends seen across society in recent years, such as demographic change, the digital transformation, and the cultural change it has required within the Group, will continue to be important areas of focus for the company now and in the future.
Changes in the skills employees need to have also mean it is necessary to support the staff with personnel development concepts as they learn to work with new technologies and in more dynamic ways. But employees also have certain demands: Subsequent generations, for example, come to the company with different expectations around working with others and management structures, such as flat hierarchies or sustainable actions on the part of their employer. A contemporary HR policy has to reflect these principles as well.
Bavaria and Southern Germany will develop positively after the crisis as well.
The company had to take swift, consistent action in response to the plunge in air traffic starting in March 2020. To cut personnel costs, short-time work was introduced across large portions of the Group. Other ad-hoc measures included a hiring freeze, interruption or termination of projects that were not absolutely necessary for operational reasons, and drawing down overtime accounts. The biggest HR policy challenges in the years to come will be the reduction in personnel capacity necessitated by this crisis and adjusting the leadership and organizational structure to the expected medium-term development of traffic.
Facts and Figures
Transport network & destinations
Aviation business unit
The coronavirus pandemic caused the biggest crisis ever in the history of commercial aviation. Munich Airport had been operating close to the limit of its capacity up to the start of 2020. After that, overall traffic figures plunged to less than a quarter of the previous year’s volume. As a result, the focus of traffic development now lies on restoring a large portion of the lost connections as soon as possible so that Munich Airport can continue to play its role as Bavaria’s gateway to the world even after the crisis.
Safeguarding connectivity into the future is important to the people who live in the area as well as the companies based here. Because of its economic power and year-round attractiveness as an incoming destination, it is to be expected that Bavaria and Southern Germany will develop positively after the crisis as well. Munich Airport is crucial as a gateway for this region. The goal is to achieve lasting stability in its position as one of the leading hubs in the European aviation market, which is experiencing further consolidation. Long-haul and transfer traffic will therefore be an essential cornerstone of the aviation strategy in the medium to long term, too. Beyond that, more point-to-point connections are to be introduced to boost the diversity and appeal of the company’s offerings. One crucial aspect here will be keeping infrastructure and process quality at a high level and thereby strengthening the company’s position as it competes with other airports.
Commercial Activities business unit
The pandemic had a heavy impact on the commercial segment of Munich Airport. In the areas of advertising, commerce, and food service, the decline in passenger figures brought significantly lower demand, and consequently higher vacancies as providers went out of business or terminated their leases. Parking was also down about 68 percent year over year. The company held in-depth discussions with all tenants, both subsidiaries and third-party providers, in 2020 to safeguard existing contracts and develop a path forward for the time after COVID-19. Solidifying existing brand partnerships with automotive groups and major customers from the telecommunications sector was a particular area of emphasis.
Once the coronavirus crisis subsides, the airport will continue to work on optimizing the portfolio of what it offers, as outlined in the vision for 2025. The goal of new store concepts such as pop-up, concept, or flagship stores is to offer an innovative, modern, and emotionally appealing shopping experience. In these efforts, the airport is partnering with prominent brands – which are expected to continue to be in high demand not only now, but into the future – and with Bavarian companies that will offer local products with an eye to a company philosophy that focuses on sustainability. The customer experience at Munich Airport will continue to take center stage. Stagings in the terminal areas, live presentations of strong brands, and attractive events in the München Airport Center (MAC) forum are sure to draw customers. The dining experience at Munich Airport will also expand again.
Beyond that, retailers will have to adjust to new customer demands as well as to changes in customer behavior: The various customer groups at Munich Airport are increasingly turning to digital channels, and the products and services offered will need to follow suit. In the area of parking too, the percentage of online bookings continues to grow. Integrating «PayPal» as a payment method was another step in digitalizing the airport’s business processes. Munich Airport will increasingly provide digital platforms for its commercial offerings in order to benefit from these developments and enhance systematic trend and market research activities.
Real Estate business unit
The airport’s development as a real estate location is highly important to Munich Airport. The strategy of the Real Estate business division has four material objectives:
Using real estate as a means of securing the core business of aviation
Munich Airport aims to be an attractive and sustainable location. The airport is actively using the pause in growth brought on by the pandemic to modernize the existing infrastructure, some of which dates back to when the airport was first commissioned, and meet passenger and visitor expectations in terms of amenities. To be able to return to growth in its role as a hub in the future, Munich Airport is investing – in line with its aviation strategy – in a new aviation infrastructure, such as the new pier at Terminal 1.
Making optimal use of capacity in space already used for commercial purposes
At the heart of this strategic objective is the München Airport Center (MAC). This is the most important commercially used space, and plans call for investments in development and modernization here. The effects of the pandemic will be taken into account in the process.
Generating substantial contributions to profits by developing real estate
In terms of real estate development, FMG is focusing on developing and building an innovation center as part of the LabCampus major project. The first two buildings are under construction and being marketed now. With the LabCampus and associated new revenue streams outside of the existing portfolio, FMG wants to further diversify its business interests.
Taking account of regional interests
The real estate strategy is carefully calibrated to accommodate the interests and concerns of the airport area in terms of both development of Munich Airport as a whole and the many construction projects that are planned. To this end, FMG engages in extensive dialog with local stakeholders and focuses on target groups and companies that are looking for close proximity to the airport and an international environment as they consider establishing sites in the area.
External Business and Services business unit
Munich Airport International GmbH (MAI) offers management, consulting, and training services for the aviation industry worldwide. Over the past 30 years, Munich Airport has gone from being a leading provider of consulting services for airport commissioning projects to an international airport operator. Today, MAI is a reliable partner to strategic investors and emerging airlines all over the world. For 2021, the focus is on continuing and realizing existing projects in locations such as Sofia Airport, in Bulgaria.
Munich Airport has become an international airport operator.
Beyond that, experts from MAI worked in Singapore, Japan, Nigeria, Togo, and Iceland as well as their home airport in Munich in 2020 and were able to bring projects in Uzbekistan and Nepal on board for 2021.
Climate protection strategy
In 2016, Munich Airport set itself an ambitious goal: to achieve carbon-neutral operation of the airport starting in 2030. To do this, the airport is reducing the greenhouse gas emissions that can be attributed directly to its operations by at least 60 percent using various technical measures. The remaining 40 percent of emissions are to be balanced out by suitable compensation measures, preferably within the region. Flughafen München GmbH will be investing 150 million euros to accomplish this by 2030. Beyond that, Munich Airport has also committed to another ambitious climate action goal as part of the «Net Zero Carbon Initiative»: reducing the CO2 emissions that the airport can influence in its operations to net zero by the year 2050 at the latest. The idea is to keep emissions from arising in the first place through actions such as switching to renewable energy sources. More than 200 European airports have signed on to this initiative, with Munich Airport being one of the first signatories.
Planning and expanding in line with requirements
Prompted by the global aviation crisis, all construction projects at the airport were reviewed, with lower-priority activities being postponed. The projects with the greatest strategic importance, such as the expansion of Terminal 1 and improving access and traffic development at the airport, are being continued. FMG is expanding the airport infrastructure in line with requirements and the current situation, connecting transportation operators, and promoting optimized landside access and traffic development – focusing at all times on quality and the changing needs of customers. Negative effects on the environment and the airport area will be kept to a minimum, for example by applying extensive compensating and noise protection measures. The goal is to minimize the adverse impact of contaminants or resource and energy consumption on the environment by adopting sustainable building concepts, and then afterwards through sustainable operation of the buildings.
Upgrade for Terminal 1
Terminal 1 can no longer fully meet passengers’ quality expectations. The building is therefore being expanded to include a new pier with needs-based passenger handling facilities. The T1 extension is among FMG’s strategically important construction projects, which are continuing despite the effects of the coronavirus pandemic. Docking points for up to twelve aircraft will be available at the pier, which is about 360 meters long. Covering an area of around 90,000 square meters, this extension, which started in late 2018, is also creating new retail and food service spaces as well as two large airline lounges, while simultaneously improving passenger handling processes through centralized security zones; the intention is to make the area significantly more appealing to passengers and airlines in the non-Schengen zone. The total cost of the expansion plan is estimated to be around 455 million euros.
«T-Stiel» for the Terminal 2 satellite
FMG and Lufthansa most recently affirmed their strategic cooperation at the Munich location in a joint letter of intent signed in December 2019. In light of the dramatic effects of the coronavirus pandemic, both sides reached an additional agreement in the fall of 2020 that expressly affirms the long-term further development of Munich Airport as a hub for intercontinental aviation. This means the planned expansion of the satellite terminal by adding a «T-Stiel» remains in effect as an aim of the cooperation.
Construction work is ongoing: A new pier that will extend about 360 meters into the western apron is being built onto Terminal 1.
Progressing according to schedule: The railway tunnel under the airport will be extended 1.8 kilometers eastward by mid-2021. This section of railway is due to open at the end of 2025.
The hub of innovation is taking shape: The first office building is stated to open in early 2022, with the new Airport Academy planned as the second building.
Future project: The Terminal 2 satellite is to be extended in the long term by a new building structure to the east, which will be adjoined at right angles.
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Third runway remains a key long-term project
After the Bavarian state parliamentary elections in October 2018, the coalition agreement for the legislative period from 2018 to 2023 between the CSU and Freie Wähler stipulated that plans for the construction of the third runway at Munich Airport would not be continued. According to a judgment issued by the Bavarian Higher Administrative Court in February 2014, there is a right to build. The third runway remains a key long-term strategic project for Munich Airport for the future.
«Connect. Create. Collaborate.»
The LabCampus is a cross-sector innovation hub being developed in the northwest of the airport property. Knowledge workers, global players, start-ups, and creatives working in areas such as mobility, digitalization, and security will find the workspaces, showrooms, and project and conference spaces here that they need for systematic and networked research and development work. The LabCampus, as a meeting point for international innovators, will derive particular benefits from its proximity to the airport. The shell of the first office building was largely completed in late 2020. The building is set to open in the first quarter of 2022. At the same time, construction work on the new Airport Academy began in the fall of 2020. This site is to open up opportunities for networking, featuring seminar rooms with high-quality furnishings and amenities, stylish quiet areas, and a spacious and versatile dining area. LabCampus GmbH and the Accor Group plan to open a hotel by the end of 2023 to offer a range of accommodation options for guests who are working on projects at the campus. The general planning services contract was awarded and the preliminary planning completed in 2020. The Terminal Testlab launched in February 2020 is intended to actively support companies through processes of innovation. It will be an important platform in the marketing of the LabCampus concept.
Logistics with optimum connections
DHL Express Germany and Flughafen München GmbH signed an agreement in June 2020 for the realization of a new freight building at Munich Airport. The new building will be erected where the P80 and P80 West parking lots currently stand. When complete, it will have gross floor area of more than 8,000 square meters. DHL Express will be responsible for planning, building, and operating the new building, for which it will rent the land from FMG. DHL Express has seen a sharp increase in import and export volumes at its Munich gateway in recent years. This new area is scheduled to go into operation in 2022.
Progress in connecting the airport
Munich Airport is hard at work improving its road and rail connections. Construction of the eastward extension of the railway tunnel required for the Erding ring closure is progressing according to schedule. The tunnel itself is to be completed in the second half of 2021, and will then be fitted out by DB Netz AG with the required technical equipment for train services. The study of the options for connecting the airport to cross-regional passenger rail that was commissioned in cooperation with the Bavarian State Ministry for Housing, Building and Transport is currently being evaluated, and an initial target concept has already been drafted. At the same time, extensive efforts are under way between the airport and the Federal Ministry of Transport and Digital Infrastructure to integrate the airport into the «Deutschlandtakt» destination schedule, securing its place in long-distance passenger rail. In terms of road projects, the newly constructed Freising northeastern bypass on federal highway 301 opened to traffic in November 2020. Construction of the Freising west expressway has advanced, with plans to open in fall 2021. The summer of 2020 also marked the start of the three- to four-lane expansion of the airport’s east expressway. In the airport area, the new connection between the South Ring and the east airport feeder road was also approved for traffic in September. This was followed in October 2020 by the new bridge over Zentralallee, which connects the LabCampus to the road network.
Target for 2021
Erdinger Ringschluss: completion of first subproject – Munich Airport tunnel