The business operations of the Fraport Group are presented in the four segments “ Aviation”, “Retail & Properties”, “Ground Handling” and “External Activities”. The strategic business divisions of Fraport AG in Frankfurt – Traffi c and Terminal Man- agement, Airport Expansion, Security, Retail & Properties and Ground Services – are assigned clearly to the Aviation, Retail & Properties and Ground Handling segments. These segments also include investments that are integrated in the business processes at the Frankfurt location. The internal service departments information and telecommunications as well as real estate and facility management are assigned to the “Retail & Properties” segment.
All the investments outside Frankfurt are assigned to the central global investments and management division at Fraport AG, meaning they are included in the “External Activities” segment and are controlled centrally. The same applies to three companies based in Frankfurt which have business operations that do not fi t in with any of the other segments. The profi t attributable to minority interest that are included in the investments accounted for using the equity method or with their acquisition costs are shown in the fi nancial result.
The Aviation segment of the Group made the largest contribution to Group revenue (about 33%), followed by Ground Handling (30%), External Activities (19%) and Retail & Properties (about 18%). These contributions were essentially the same as the comparable fi gures for the previous year.
The most profi table segment – Retail & Properties – accounted for about 53% of Group EBITDA. The Aviation segment increased its contribution to Group EBITDA by 1 percentage point to about 29%, while Ground Handling contributed 14% and therefore 4 percentage points more than in the previous year. The External Activities segment contributed 4%, representing a reduction of 2 percentage points.
Aviation
The Aviation segment of the Group is responsible for fl ight and terminal management as well as airport and aviation security at the Frankfurt location. It is also responsible for the airport expansion program.
Aviation
2004 in € million 2005 in € million Change in %
Revenue 626.2 688.9 10.0
EBITDA 144.8 158.1 9.2
EBIT 90.8 94.2 3.7
Employees 3,311 3,508 5.9
Aviation increased its revenue over the previous year by 10.0% to € 688.9 million in 2005. The airport fees – which are passenger, landing, take-off, security and slot fees in Frankfurt – were € 34.5 million higher than in the previous year. The increase was attributable to the positive traffi c development and to an average increase of 2.6% in passenger fees in 2005. The proceeds from military traffi c were lower than in the previous year due to the clearance of the US Air Base in mid-October 2005 and the discontinuation of military fl ights associated with this. The revenue from security services increased substantially by 22.5% to € 141.1 mil- lion. The security regulations, which were once again made considerably stricter, were the main reason for this.
Segment contributions to Group revenue (outside) and EBITDA (inside) % 33 18 External Activities Aviation Retail & Properties Ground Handling 30 19 29 53 14 4
Frankfurt Airport traffic figures
2004 2005 Change in % 1
Passengers (million) 51.1 52.2 2.2
Cargo (thousand tonnes) 2 1,839.1 1,963.1 6.7
Aircraft movements (thousand) 3 477.5 490.1 2.7
Maximum take off weight
(thousand tonnes) 3 27,229.6 28,160.3 3.4
1 Change rates are based on non-rounded fi gures. 2 Airfreight + airmail, excluding transit. 3 Excluding military fl ights.
The operating expenses were substantially higher than in the previous year. This was attributable in particular to the need for more security personnel, most of whom were provided by the second-tier subsidiary FIS, while the expenses were also increased by maintenance work in connection with the terminal modernization exercises and aircraft movement areas. The personnel expenses were 5.7% higher than in the previous year at € 178.9 million due to the larger number of employees and an increase in pay rates. As a result, the segment EBITDA went up by 9.2% to € 158.1 million. Higher deprecia- tion charges meant that EBIT increased to a disproportionately lower extent – by 3.7% to € 94.2 million.
Retail & Properties
The business operations in the areas of retailing, parking facility management, property rental and marketing at the Frankfurt location as well as CargoCity South are combined in the Retail & Properties segment of the Group.
Retail & Properties
2004 in € million 2005 in € million Change in %
Revenue 373.9 374.0 0.0
EBITDA 285.8 292.1 2.2
EBIT 174.5 182.2 4.4
Employees 3,050 2,996 – 1.8
Segment revenue remained at the same level as in the previous year at € 374.0 million. The revenue generated in parking facility management were higher than in 2005 because of the increase in passenger volume as well as retail business revenue. In spite of the reduction in the shopping areas available temporarily because of the terminal remodel- ling and modernization activities, the “retail revenue per passenger” key fi gure could be increased from € 2.22 26 to € 2.26. The revenue recorded in the real estate business was considerably lower than in the previous year. The main reason for this was the switch from revenue-based airport access fees, especially those charged to fuelling companies, to cost- related compensation fees.
The operating expenses increased in the period under review, primarily because of the spin-off of the computer center operations, the only consequence of which is, however, a shift in the revenue and cost structure, so there is no overall effect on earnings.
EBITDA increased by 2.2% to € 292.1 million. Because of a reduction in depreciation, in particular due to the partial elimination of impairment from 2004, EBIT increased to a disproportionately large extent, by 4.4% to € 182.2 million.
26 There has been a change in accounting advertising revenue by comparison with 2004. If this change is taken into account, the comparative fi gure for the previous year is € 2.18.
117.9 133.3 € 2.22/ PAX € 2.26/ PAX 20.6 26 .4 20.4 24 .1 Retail revenue € million Advertising Service Shopping 70 .9 68.8
Ground Handling
The Ground Handling segment includes such ground services as aircraft handling, pas- senger and cargo services, the infrastructure for the ground services and the investments involved in these operations at the Frankfurt location.
Ground Handling
2004 in € million 2005 in € million Change in %
Revenue 608.1 632.1 3.9
EBITDA 53.3 74.9 40.5
EBIT 31.1 52.1 67.5
Employees 7,042 7,111 1.0
The increase of 3.9% in revenue in the Ground Handling segment to € 632.1 million es- sentially refl ects the traffi c growth at Frankfurt Airport. Both the infrastructure and ground service fees are linked closely to the development of the maximum take off weights (MTOWs), which are based on the number and size of the aircraft handled in Frankfurt. This revenue growth more than made up for shortfalls attributable to the small market share loss of 0.2 percentage point to 88.6%.
The personnel expenses – the biggest item in the operating expenses of this labour-in- tensive segment – increased slightly because of traffi c growth. Productivity was improved while maintaining the high quality of the services provided. A slightly larger number of employees managed to cope with the substantially higher traffi c volume. The action taken to increase effi ciency therefore continued to be successful.
The traffi c growth and the improvement in productivity were the reasons for the increase in segment EBITDA of € 21.6 million to € 74.9 million. EBIT were € 21.0 million or 67.5% higher at € 52.1 million.
External Activities
The External Activities segment of the Group basically covers the investments that carry out their business operations outside Frankfurt or are not involved in the business pro- cesses at the Frankfurt location.
External Activities
2004 in € million 2005 in € million Change in %
Revenue 389.9 394.8 1.3
EBITDA 32.3 22.4 – 30.7
EBIT – 15.3 – 16.9 – 10.5
Employees 10,779 12,166 12.9
The revenue increase of 1.3% in the External Activities segment to € 394.8 million is attributable to different opposite developments. The revenue from airport fees at the An- talya location decreased because of the substantial reduction in the number of passengers allocated to the terminal operated by Fraport following the opening of a rival terminal. These revenue shortfalls were more than compensated for by positive developments at other investments: at ICTS Europe due to the increase in security services, at the Frankfurt- Hahn location due to the larger traffi c volume and at TCR due to the increase in the rental business.
The expansion of the security business was the most important reason for the increase in the operating expenses. ICTS Europe deployed an average of 1,246 or 13% more employees in the year under review than in the previous year. In spite of higher non-staff costs at the Hahn location and at TCR due to business developments there, the total non- staff costs decreased because of lower revenue-based payments at the Antalya location.
EBITDA were down € 9.9 million at € 22.4 million. Since the depreciation and amortization charges decreased considerably – primarily because of the elimination of impaired good- will at ICTS – EBIT only decreased by € 1.6 million to € – 16.9 million.
Additionally to the earnings of the External Activities segment, also income from invest- ments and some of the results from investments accounting for using the equity method were generated by the external business. These items are shown in the Group fi nancial result. In 2005, they amounted to € 6.3 million and € 8.2 million respectively.