Annual report
1999
Copenhagen Airports A/S
2
Supervisory Board
3
Executive Board
4
Financial highlights
5
Ratios
5
Definitions of ratios
6
Directors’ report
15
Accounting policies
17
Profit and loss account
18
Balance sheet
20
Cash flow statement
21
Notes to the accounts
27
Signatures and auditors’
report
28
Historic agreement on
airport charges
32
Several new retail features
36
International airport
consulting
41
An airport in continuous
growth
44
Preparations for Denmark’s
participation in Schengen
48
A historical night
– the relocation of the
Lauritzen Terminal
50
Bridge to Sweden:
new potential
Contents
Supervisory Board
Vagn Andersen, Chairman
Chairman of the Supervisory Board of Novo Nordisk A/S. Chairman of the Supervisory Board of Novo Nordisk Fonden.
John S. Andersen
Finance assistant.
Employee-elected representative.
Anita Doris Rasmussen
Assistant. Employee-elected representative.
Carsten Winther
Semi-skilled worker. Employee-elected representative.
Kurt Bligaard Pedersen
General Manager, the Muni-cipality of Copenhagen. Member of the Supervisory Board of Bella Center A/S. Member of the Supervisory Board of Novo Nordisk Fonden. Member of the Supervisory Board of Dansk Management Forum.
Inge Thygesen
Senior Adviser, Ministry of Finance.
Member of the Supervisory Board of Sund og Bælt Holding A/S.
Jette Wigand Knudsen
Director, Tuborg – Fredericia Brewery.
Ole Rendbæk, Deputy Chairman
Managing Director of Scand-lines Danmark A/S.
Deputy Chairman of the Super-visory Board of Molslinien A/S. Member of the Supervisory Board of Det Danske Europa Institut A/S. Member of the Supervisory Board of Danyard A/S and Danyard Aalborg A/S.
Executive Board
Niels Boserup, Chief Executive
Chairman of the Supervisory Board of Copenhagen Airport Development International A/S. Chairman of the Supervisory Board of Jyllands-Posten A/S. Chairman of the Supervisory Board of William Demant Holding A/S. Chairman of the Supervisory Board of Oticon A/S.
Søren Peter Thorning, Deputy Chief Executive
Chairman of the Supervisory Board of Airport Coordination Denmark A/S.
Peter Rasmussen, Vice President
Member of the Supervisory Board of Copenhagen Airports’ Hotel and Real Estate Company A/S. Member of the Supervisory Board of Copenhagen Airport Development International A/S. Member of the Supervisory Board of Airport Coordination Denmark A/S.
Poul Borreschmidt, Vice President Agneta Björkman,
Chief Financial Officer
Director of Copenhagen Airport Development International A/S. Member of the Supervisory Board of Copenhagen Airports’ Hotel and Real Estate Company A/S.
Kjeld Binger, Vice President
Chairman of the Supervisory Board of Copenhagen Airports’ Hotel and Real Estate Company A/S. Member of the Supervisory Board of Copenhagen Airport Development International A/S.
The Executive Board from right to left: Niels Boserup, Agneta Björkman, Kjeld Binger, Poul Borreschmidt, Søren
Shareholders’ equity Loans Provisions Other liabilities Other assets Fixed assets Debtors Liquid assets 0 300 600 900 1200 1500 1800 99 98 97 96 95 Net revenue (DKK million)
Profit and loss account(DKK million) 1999 1998 1997 1996 1995
Net revenue 1,733 1,605 1,499 1,395 1,201
Total net revenue 1,767 1,657 1,533 1,427 1,220
Depreciation and writedowns 356 305 286 268 207
Operating profit 637 626 561 485 453
Net financial expenses 106 92 71 63 77
Profit before tax 535 530 489 422 376
Net profit 372 389 323 279 247
Balance sheet(DKK million) 1999 1998 1997 1996 1995
Fixed assets 5,820 5,398 4,249 3,278 2,732
Current assets 437 404 257 451 275
Total assets 6,257 5,801 4,506 3,729 3,007
Shareholders’ equity 2,511 2,192 1,880 1,629 1,412
Capital investments 730 1,237 1,258 814 410
Long-term financial investments 15 218 - 0 0
Assets
Liabilities and equity
1999 1998 1997 1996 1995
Earnings per share of DKK 100 (EPS) 41.1 43.0 35.7 31.0 27.5
Return on equity 15.8 % 19.1 % 18.4 % 18.4 % 18.7 %
Operating margin 36.8 % 39.0 % 37.4 % 34.8 % 37.7 %
Return on assets 11.1 % 12.6 % 14.1 % 14.9 % 15.9 %
Equity ratio 40.1 % 37.8 % 41.7 % 43.7 % 47.0 %
Net asset value in DKK per share of DKK 100 277.5 242.3 207.7 180.0 156.9
Cash earnings per share of DKK 100 (CEPS) 80.4 76.6 67.3 60.6 50.5
Dividend in DKK per share of DKK 100 9.00 8.50 8.00 7.50 7.00
DEFINITIONS OF RATIOS
Earnings per share of DKK 100 (EPS) Net profit divided by average number of shares
Return on equity Net profit divided by average shareholders’ equity
Operating margin Operating profit before interest as a percentage of net revenue
Return on assets Operating profit before interest as a percentage of average
operational assets at year-end
Equity ratio Shareholders’ equity as a percentage of total assets at year-end
Net asset value per share Shareholders’ equity divided by number of shares at year-end
Cash earnings per share (CEPS) Net profit plus depreciation divided by average number of shares
CPH share price compared with the Copenhagen Stock Exchange KFX-group index*
*Group index: Trade and Service
CPH A/S KFX-Group
Ratios
300 280 260 240 220 200 180 160 140 120 100 80 08/04/94 23/09/94 08/03/95 30/08/95 15/02/96 06/08/96 23/01/97 18/07/97 08/01/98 02/07/98 08/12/98 31/05/99 10/11/99 29/02/00Profit
Copenhagen Airports A/S (CPH) posted a pre-tax profit of DKK 535.1 million in 1999, an 0.9% increase over the 1998 figure of DKK 530.1 million. Thus, the profit remained at approximately the same level as in 1998, as previously forecast. Profit after tax amounted to DKK 371.5 million in 1999, down 4.4% on the DKK 388.8 million recorded for 1998. This fall was primarily due to the favourable effect in 1998 on deferred tax of the reduction in the corporation tax rate from 34% to 32%.
The Supervisory Board considers the results satisfactory.
Business areas
The company’s activities can be divided into the following business areas:Traffic revenue, comprising take-off, passenger and aircraft-parking charges from the airlines using the airports. In addition, CPH provides a number of directly related services, such as special security services, bus transfers and service information. Finally, CPH supplies a number of services to the handling companies operating at the airport, most notably sorting of baggage. Traffic revenue and revenue from traffic-related activities accounted for 57% of total revenue. 0 100 200 300 400 500 99 98 97 96 95 0 400 800 1200 1600 2000 2400 99 98 97 96 95 Shareholders’ equity (DKK million) Pre-tax profit (DKK million)
report
Directors’
Shareholders’ equity
Shareholders’ equity stood at DKK 2,192.5 million at the beginning of the year. After giving effect to the year’s profit after tax and provision for the proposed dividend, share-holders’ equity stood at DKK 2,511.4 million at 31 December 1999. The year’s profit after tax represents a return on equity of 15.8% com-pared with 19.1% last year. The equity ratio was 40.1% at the end of 1999 compared with 37.8% at 31 December 1998.Dividend
The Supervisory Board proposes to the annual general meeting, in accordance with the previously announced dividend policy, that the dividend be increased from DKK 8.50 per share in 1998 to DKK 9.00 for 1999.
Retained profit Share capital
Commercial revenue, which consists of concession revenue, a turnover-related charge paid by the shops, restaurants, etc. located in the air-port’s areas, and rent from the use of land, offices, etc. Services generating commercial revenue include cleaning, leasing of IT facilities and distribution of energy. Revenue from commercial activities accounts for approximately 43% of total revenue.
Traffic revenue
Revenue from the company’s traffic charges amounted to DKK 938.5 million in 1999, corresponding to an increase of DKK 171.3 million or 22.3% over the 1998 level. In addi-tion to traffic growth, the increase was attributable to a 15% increase of the charges for using CPH’s airports effective 1 January 1999.
As expected, traffic in 1999 was af-fected by continued growth in inter-national traffic and a fall in domestic traffic. The number of take-offs and landings at Copenhagen Airport increased by 6.3% to 298,533 air transport movements compared with 280,788 in 1998. Passenger charges Rent Other charges Sale of services Concession revenue Take-off charges Revenue 0 50 100 150 200 250 300 350 400 450 99 98 97 96 95 0 50 100 150 200 250 300 350 400 450 99 98 97 96 95 Passenger charges (DKK million) Take-off charges (DKK million) 0 50 100 150 200 250 300 99 98 97 96 95
Air transport movements
(’000) 0 3 6 9 12 15 18 99 98 97 96 95 Number of passengers (million)
The total number of passengers at Copenhagen Airport was up 4.1% from 16.8 million in 1998 to 17.5 million in 1999. The volume of pas-sengers on scheduled international flights totalled 14.1 million passen-gers, representing an increase of 6.3% on the 1998 level. The volume of
Charter + other Domestic International Charter + other Domestic International Charter + other Domestic International Charter + other Domestic International
charter passengers and passengers on scheduled domestic flights fell by 0.9% and 5.8% to 1.4 million pas-sengers and 2.0 million paspas-sengers respectively.
The take-off weight for the airport’s cargo operations increased by 12.7% although the number of cargo ope-rations was down by 7.4% on the same period last year. The reason was that also in 1999 larger aircraft were used for the cargo operations.
Traffic developments from 1998 to 1999 were affected by a number of events in 1998, among them a general strike in April and May, the opening of the Great Belt Bridge and the introduction of a tax on domestic flights.
New baggage sorting facilities were brought into use in 1998 after negoti-ations with the handling companies operating at Copenhagen Airport; CPH built the facilities in cooperation with these companies, who were then to pay for using the facilities. As from 1 January 1999, the users were in-voiced for using the facilities, and these charges totalled DKK 61.5 million excluding VAT. One of the three handling companies decided not to pay the amount invoiced claiming that they had already paid for baggage sorting services through CPH’s traffic charges. CPH has there-fore brought an action against this handling company, and we believe that we will win the case before the courts. Effective 1 January 2000, the baggage sorting charge is included in a handling charge. See further details under “Outlook” below.
0 200 400 600 800 1000 1200 1400 99 98 97 96 95 Shopping centre turnover (DKK million) 0 100 200 300 400 500 600 700 99 98 97 96 95 Concession revenue (DKK million) 0 1000 2000 3000 4000 5000 6000 7000 8000 99 98 97 96 95
Maximum take-off mass
(’000 tonnes, take-offs only)
product groups at the level from before duty-free sales were abolished. Combined with efficient marketing efforts targeting intra-EU passengers, these measures helped mitigate the loss of revenue from duty-free sales. Other concession revenue, including revenue from banking, car hire, ad-vertising and restaurants, increased by 13.6% or DKK 7.8 million to DKK 65.0 million. Concession revenue from parking fell by 35.2% or DKK 11.7 million to DKK 21.6 million. This decline was attributable to the concession holder’s large investments in new parking facilities in recent years, which were not yet being exploited in full.
Rent from premises and land in-creased by 22.0% to DKK 171.2 million, which was primarily at-tributable to new leases in connection with the opening of Terminal 3 in September 1998.
Costs
External expenses
CPH’s external expenses for opera-tions, maintenance, energy, etc. increased by 7.7% from DKK 281.0 million in 1998 to DKK 302.8 million in 1999 as a result of recent years’ extensive expansion of the airport. Just over DKK 14.5 million of these expenses were non-recurring, e.g. to ensure Year 2000 compliance. Net of the non-recurring expenses, external expenses increased by 2.5%.
Staff costs
Staff costs were up by 5.5% from DKK 446.1 million in 1998 to DKK 470.8 million in 1999. CPH had an average of 1,449 employees in 1999 (full-time equivalents), this was 71 or 5.2% more than in 1998. The num-ber of staff, and thus also total staff costs for 1998, were affected by the general strike in April and May of 1998. Adjusted to eliminate these effects, the real increase in the number of employees was 3.4%.
Commercial revenue
Revenue from the airport shopping centre was DKK 420.1 million, which was 23.4% lower than in 1998. The reason for this significant drop was that duty-free sales to intra-EU passengers were abolished effective 1 July 1999. To compensate for this change, CPH, in a collaboration with the operator of the airport’s duty-free shops, kept the prices of certain
Depreciation and writedowns Staff costs
Maintenance
Tax on profit for the year Energy Other expenses Net interest Expenses Rent (DKK million) 0 25 50 75 100 125 150 175 99 98 97 96 95 Average number of employees 0 200 400 600 800 1000 1200 1400 99 98 97 96 95
May 1999. Along with a taxiway for the new pier, the Airport Boulevard connecting the domestic terminal and the international terminal were completed in 1999.
In 1999 we relocated the oldest ter-minal building at Copenhagen Air-port, the Lauritzen Terminal from 1939; its former location put it in the way of the planned expansion of the airport to the east. The Environment and Energy Ministry declared the Lauritzen Terminal worth preserving, so it was moved to the Maglebylille area in the autumn of 1999. We ex-pect to begin using the building again in July 2000, primarily for office and training purposes.
The assets brought into use during the year totalled DKK 970.8 million, which increased the total value of assets in use, net of depreciation for the year, to DKK 5,151.8 million as at 31 December 1999 from DKK 4,518.9 million at year-end 1998. Staff numbers were increased
prim-arily to operate and maintain new buildings brought into use during the period and to handle the current expansion activities at the airport. Thus, total space in airport terminals and other facilities, in terms of square metres, increased by 38% from 1 January 1998 to 31 December 1999. In addition, new jobs were added in connection with the new baggage sorting facilities.
Payroll costs of DKK 36.5 million were capitalised on the company’s capital investments in 1999 com-pared with DKK 41.7 million in 1998.
Investments during
the year
Tangible fixed assets
The company’s capital investments are made on the basis of a ten-year rolling investment plan, which is adjusted on a continuous basis. As assumed in the plan, the 1999 invest-ment level was significantly lower than in 1998. Capital investments during the year amounted to DKK 729.7 million compared with DKK 1,236.6 million in 1998. The largest individual project completed in 1999 was phase one of the coming Termi-nal 4, by way of a new pier opened in
Long-term financial/strategic assets
Interests in subsidiaries comprise all the shares in Copenhagen Airports’ Hotel and Real Estate Company A/S, Kastrup, and all shares in Copen-hagen Airport Development Inter-national A/S, Kastrup.
Copenhagen Airports’ Hotel and Real Estate Company began the construc-tion of an internaconstruc-tional hotel with 375 rooms in 1998; CPH also signed a 20-year hotel management agree-ment with Hilton International. The construction work continued throughout 1999, and we expect the hotel to be completed in the first quarter of 2001. Copenhagen Air-ports’ Hotel and Real Estate Company A/S posted a loss of DKK 3.4 million in 1999. By comparison, the loss post-ed in 1998 was DKK 2.2 million after tax. Management expects that the company will continue to generate a loss until the hotel is put into operation.
Copenhagen Airport Development International A/S handles the coor-dination of CPH’s consulting activities regarding the operation of nine air-ports in Mexico. Copenhagen Airport Development International A/S posted a profit after tax of DKK 0.6 million in 1999 compared with a loss of DKK 0.1 million in 1998.
CPH provides consultancy to ASUR, primarily by way of transfer of know-how and experience regarding effi-cient airport management, cost-effi-cient expansion of infrastructure, flexible capacity utilisation and op-timisation of commercial potential. Revenue from these consulting services amounted to DKK 7.3 million in 1999.
In addition, the company holds 50% of the shares in Airport Coordination Denmark A/S, Kastrup, which man-ages the allocation of slots to airlines. The group structure of Copenhagen Airports A/S is shown in the chart below:
[organisationsdiagram]
As there were no material activi-ties in the group companies, con-solidated accounts have not been prepared for 1999.
Interests in associated companies comprise a 25.5% equity stake in In-versiones y Tecnicas Aeroportuarias S.A. de C.V. (ITA), which holds 15% of the share capital in Aeropuertos Sureste (ASUR), the Mexican compa-ny holding the concession to operate nine airports on the Yucatan penin-sula in Mexico for 50 years. CPH recognised a profit of DKK 7.9 million in 1999 from this activity, represent-ing a proportional share of the profit of the company. CPH A/S ITA S.A. de C.V. 25.5% Airport Coordination Denmark A/S 50% Copenhagen Airport
Dev. Int. A/S 100% Copenhagen Airports’
Hotel and Real Estate Company A/S
100%
Depreciation
The buildings and plant that were brought into use in 1998 and 1999 caused depreciation to increase by DKK 51.2 million or 16.8% over the 1998 level. The main addition in 1999 was the new pier mentioned above.
Expansion plans
As stated above, capital investments are laid down in a rolling ten-year investment plan based on the re-quirement that investment, and thus the expansion of Copenhagen Air-port, must be made in pace with the growth in traffic. The existing invest-ment plan, of October 1999, includes investments for the period from 2000 to 2009. Inclusive of the Hilton Copenhagen Airport hotel, currently being built by the hotel and real es-tate company, the plan comprises in-vestments totalling DKK 5.0 billion in current prices. The investment plan was adjusted to reflect a new passen-ger forecast and related capacity requirements, which resulted in the postponement of a number of planned investments totalling just over DKK 2 billion until after the period covered by the plan.
The main investments planned for 2000-2001 are an expansion of the area where Pier C starts, to allow passport control in future of passen-gers from non-Schengen countries in connection with Denmark’s coming status as a Schengen country; a new landside shopping centre in Terminal 2; and the completion of the Hilton Copenhagen Airport.
Finance
Operating activities contributed DKK 554.4 million, which represented a significant share of the funding for the year’s investments.
In addition, CPH increased its debt to financial institutions by DKK 376.0 million to a total of DKK 2,630.7 million and reduced its liquid funds by DKK 28.1 million.
CPH has DKK 296.0 million of short-term facilities as a supplement to its day-to-day cash resources. In addi-tion, the company can draw on long-term facilities totalling approximately DKK 740 million.
Risk factors
The most significant risks can be divided into two groups: customer and economic risks and interest rate and exchange rate risks.
Customer and
economic risks
Owing to its large, irreversible capital expenditure, Copenhagen Airports is sensitive to factors which could have an adverse impact on traffic growth. SAS is Copenhagen Airports’ largest customer, contributing approximately 55% of traffic revenue. In the short term, Copenhagen Airport’s status as a Scandinavian hub is highly de-pendent on SAS’ finely meshed route network out of Copenhagen, prim-arily to European destinations. Any increased point-to-point traffic to and from other destinations in Scandinavia and the rest of Europe would, thus weaken the status of Copenhagen Airport as a Scandina-vian hub.
Developments in air traffic are closely related to the economy in general. Not only the Danish economy but also to some extent the Swedish econ-omy has an impact on the company, since some 16% of all passengers fly to and from Sweden. In addition to flight-related revenue, economic developments are also reflected in the concession revenue.
0 1000 2000 3000 4000 5000 6000 99 98 97 96 95 0 625 1250 1875 2500 99 98 97 96 95
Net liquidity from operations and net capital investments
(accumulated) (DKK million)
Net debt
(DKK million)
report
Directors’
Net liquidity from operations Net capital investments
Year 2000 compliance
CPH adjusted, replaced and tested major IT systems and other critical equipment during 1998 and 1999 to ensure that the systems and equip-ment were Year 2000 compliant. The transition to the year 2000 did not cause any problems.The costs to ensure Year 2000 com-pliance totalled DKK 13.2 million.
Environmental impact
The company has adopted the follow-ing environmental policy:“Being an environmentally conscious organisation, Copenhagen Airports A/S will ensure that the operation and expansion of the airports at Copenhagen and Roskilde will always take place in an environmentally sustainable manner.”
The total environmental impact for the year corresponded to expected developments. Efficiency improve-ments and more environmentally friendly aircraft types are expected to reduce the environmental impact relative to the activity level in the years to come.
Copenhagen Airports A/S has prepared a separate environmental report for 1999.
Ownership
No shareholder except for the King-dom of Denmark, LD Pensions and the Danish Labour Market Supple-mentary Capital Pension Fund (ATP) held more than 5% of the company’s shares at 31 December 1999.
Outlook
CPH expects an underlying growth rate of approximately 4% in the passenger volume for 2000, which will be reflected in traffic revenue. Only international traffic is projected to increase; domestic traffic is expect-ed to continue to fall moderately. The Øresund Bridge will open on 1 July 2000, which is expected to strengthen Copenhagen Airport’s position as the traffic hub of North-ern Europe.
Furthermore, the opening of the bridge will have the effect that some passengers previously included in the passenger statistics as transfer passen-gers, as they arrived to Copenhagen Airport by catamaran or by air, will use the bridge in future and thus no longer be included in the passenger statistics as arriving passengers. These passengers will be considered locally departing passengers in future. As the charge for locally departing passen-gers is twice as high as the charge for transfer passengers, this change will have no impact on revenue. However, the change will impact passenger statistics, which will not reflect the full growth.
Interest rate and foreign
exchange risks
Both the company’s interest rate and exchange rate risks are managed cen-trally, and financial instruments are used solely to hedge foreign-exchange and interest rate risk.
The company’s interest rate risk is hedged by approximately 37% of the interest-bearing debt being at a fixed interest rate or the interest rate being locked in for more than a year through interest swaps. Approximate-ly 33% of CPH’s interest-bearing debt has been hedged by a cap of 6% or less.
A reduction in risk on financial in-struments is achieved by only enter-ing into loan agreements with large Danish or international financial institutions. Against the background of ongoing contact with sources of financing, it is expected that the company will continue to be able to obtain the necessary funds on the best terms in the market.
Under international agreements, the company’s traffic revenues are settled in Danish kroner only. As a result, the foreign exchange exposure is limited to purchases abroad denomi-nated in foreign currencies and to interests in, future dividends from, and accounts with associated com-panies abroad. This exposure will be hedged on a selective basis.
We expect concession revenues to rise as both passenger volume and the economy in general grow. A further drop is expected in concession revenue as the abolition of duty-free sales to intra-EU passengers only affected the figures for the second half of 1999, but it will affect all of 2000. A 13% increase in the charge for using CPH’s airports effective 1 January 2000 is expected to com-pensate in part for this decline in revenues. The increase in charges was agreed during negotiations between CPH and the airlines operating flights to and from the airport.
The agreement also includes a han-dling charge of DKK 10 per departing international passenger and DKK 5 per departing domestic passenger effective 1 January 2000, which covers such services as baggage sort-ing. On the same occasion, the parties agreed that these charges would not be adjusted for the next three years. Work on the large construction projects will continue in 2000. In accordance with the rolling ten-year investment plan, the company ex-pects to make investments in the region of DKK 0.9 billion during the year. The pace of the investments is managed carefully to ensure that the expansion is flexible and that it matches traffic growth.
The company’s depreciation charges and financial expenses will increase in the years to come as a result of recent years’ construction projects. In addi-tion, other expenses are expected to be affected by the forecast growth in traffic. CPH therefore intends to continue to prioritise close control of these costs.
In spite of the high investment level and related costs as well as the full effect of the abolition of duty-free sales within the European Union, we still expect the pre-tax profit for 2000 to be on a level with the pre-tax profit posted for 1999. This forecast is partly based on the mentioned agreement on higher charges and the introduction of a per-passenger handling charge effective 1 January 2000. Under the current dividend policy, dividends will continue to increase at an annual rate of 0.5%. The Danish government is expected to reduce its stake in CPH, currently 51%, to 34% in 2000. It is expected that the Copenhagen Airports Act will be amended in that connection to give CPH better opportunities to use its know-how in the growing international market for airport pri-vatisation and strategic advice. Against this background, we expect to be able to position CPH as a major player in this market.
In view of the expected changes to be made in the Copenhagen Airports Act, the Supervisory Board intends to
recommend to the annual general meeting that the objects clause of the articles of association be changed accordingly.
The Supervisory Board also intends to recommend to the annual general meeting that the company’s share capital be increased by up to 50,000 shares (DKK 5.0 million) to be offered to employees at DKK 105 per share. This will increase the share capital from DKK 905 million to DKK 910 million.
No events have occurred since the end of the financial year which significantly affect the company’s operations.
As mentioned in the interim report for the six months to 30 June 1999, we intend to publish quarterly reports as from the first quarter of 2000.
Anne Marie Nielsen, who was a member of the Supervisory Board from 1990, passed away on 9 October 1999, following which her seat on the Board has been vacant. The Super-visory Board remembers Anne Marie Nielsen’s work with gratitude and respect.
The Supervisory Board wishes to take this opportunity to thank all employees for their excellent work and commitment during the past year.
Production cost comprises costs which can be related directly or indirectly to the asset, including payroll costs. Financing costs during the period of construction are solely included in production costs for buildings not directly related to airport operations.
The depreciation base is historical cost or production cost, respectively.
Depreciation is charged on a straight-line basis over the estimated useful lives of the assets and begins when the assets are brought into use. For cer-tain assets, depreciation is charged on the basis of capacity utilisation during the year relative to total estimated capacity in order to match deprecia-tion to the directly related revenue. The estimated useful lives of the major asset categories are as follows:
Buildings . . . 30-40 years Runways . . . 10-40 years Plant and machinery . . . 10-15 years Large vehicles . . . 12-15 years Small vehicles . . . 3- 5 years Other equipment . . . 3- 5 years
Assets with an estimated useful life of less than three years and assets costing less than DKK 25,000 are expensed in the year of acquisition. The following accounting policies
have been applied in the preparation of the financial statements. The poli-cies are in accordance with the Dan-ish Company Accounts Act and the guidelines issued by the Copenhagen Stock Exchange for listed companies, including applicable Danish account-ing standards. The company’s accounting policies are unchanged from the 1998 financial statements.
Revenue recognition
Net revenue represents the value of the year’s traffic revenue, rent, con-cession revenue, and sale of services net of value added tax and price reductions directly related to sales.
Tax
The company is taxed jointly with its wholly-owned Danish subsidiaries.
The tax effect of the joint taxation with the Danish subsidiary takings is allocated to both under-takings generating a profit and undertakings generating a loss re-lative to their taxable income.
Tax on the profit for the year is cal-culated at the current corporation tax rate on the profit stated in the accounts adjusted for non-tax items.
The part of the tax on the year’s profit which has been deferred for payment in later years is stated as deferred tax under provisions. The liability method is applied in the calculation of deferred tax.
Tangible fixed assets Tangible fixed assets are stated at historical cost or, for assets produced by the company, at production cost less accumulated depreciation and writedowns.
Accounting
Long-term financial assets Interests in subsidiary and associated undertakings are valued according to the equity method.
The net revaluation of interests in subsidiary and associated undertak-ings is allocated to the “Reserve for net revaluation according to the equity method” under shareholders’ equity as part of the profit allocation.
Interests in other undertakings are stated at the lower of cost and their value at year-end.
Debtors
Provision is made for potential losses based on an evaluation of the individ-ual accounts.
Own shares
Own shares are stated at the lower of historic cost and their market price at year-end.
Foreign currency translation Transactions denominated in foreign currency are translated at the ex-change rate ruling on the transaction date. Assets and liabilities denominat-ed in foreign currency are translatdenominat-ed at the exchange rates ruling at year-end.
Financial instruments are solely used to hedge foreign-exchange and inter-est rate risk. Financial instruments used to hedge interest rate risk are included in “Other debtors” or “Other liabilities”.
Exchange differences arising from the translation of foreign undertakings’ shareholders’ equity at the beginning of the year are taken directly to share-holders’ equity.
Cash flow statement
The cash flow from operating activi-ties is presented directly and is calcu-lated as payments from customers less payments to employees and suppliers adjusted for financial items paid and corporation tax paid.
The cash flow from investing activities comprises the company’s payments in connection with the purchase and sale of tangible and long-term financial assets.
The cash flow from financing activities comprises the proceeds from short-term and long-short-term loans raised, instalments paid on short-term and long-term loans and dividends paid to shareholders.
Note Traffic revenue . . . 938,512 767,172 Concession revenue . . . 506,753 639,178 Rent . . . 171,199 140,293 Sale of services . . . 116,686 58,839 ——————— ——————— 1 Net revenue . . . 1,733,150 1,605,482 Other operating revenue. . . 33,847 51,988
——————— ———————
Total net revenue. . . 1,766,997 1,657,470
2 External expenses . . . 302,745 280,995
3 Staff costs . . . 470,754 446,071
8 Deprecation and writedowns of tangible fixed assets . . . 356,042 304,826
——————— ———————
Operating profit. . . 637,456 625,578
——————— ———————
4 Income from interests in subsidiary undertakings . . . (4,088) (3,217)
9 Income from interests in associated undertakings . . . 7,914 36
5 Interest receivable and similar income . . . 9,883 6,575
6 Interest payable and similar expenses . . . 116,092 98,873
——————— ———————
Profit before tax . . . 535,073 530,099
7 Tax on the profit for the year . . . 163,568 141,289
——————— ———————
Net profit . . . 371,505 388,810
——————— ———————
Proposed allocation:
Transfer to retained profit . . . 367,986 388,810 Transfer to reserve for net revaluation . . . 3,519
-——————— ———————
371,505 388,810
——————— ———————
1999 1998
DKK ’000 DKK ’000
Profit and loss account
Assets
Note
FIXED ASSETS
8 Tangible fixed assets
Land and buildings . . . 2,619,494 2,216,781 Plant and machinery . . . 2,200,050 1,974,883 Other equipment . . . 332,223 327,201 Assets under construction . . . 402,772 662,047
——————— ———————
Total tangible fixed assets. . . 5,554,539 5,180,912
——————— ———————
9 Long-term financial assets
Interests in subsidiary undertakings . . . 10,947 13,728 Interests in associated undertakings . . . 254,710 203,067 Other interests . . . 83 83
——————— ———————
Total long-term financial assets. . . 265,740 216,878
——————— ———————
Total fixed assets . . . 5,820,279 5,397,790
——————— ———————
CURRENT ASSETS Debtors
Trade debtors. . . 249,535 222,320 Amounts owing by subsidiary undertakings . . . 384 77,787 Other debtors . . . 144,964 37,621 Prepayments and accrued income . . . 31,027 26,597
——————— ———————
Total debtors . . . 425,910 364,325
——————— ———————
Securities and other interests
Own shares . . . 587 587
——————— ———————
10 Cash at bank and in hand . . . 10,707 38,762
——————— ———————
Total current assets . . . 437,204 403,674
——————— ———————
Total assets . . . 6,257,483 5,801,464
——————— ———————
1999 1998
DKK ’000 DKK ’000
Liabilites 1999 1998 DKK ’000 DKK ’000 Note SHAREHOLDERS’ EQUITY 11 Share capital . . . 905,000 905,000
13 Reserve for net revaluation according to the equity method . . . 32,407 -Reserve for own shares . . . 587 587
12 Retained profit . . . 1,573,408 1,286,872
——————— ———————
Total shareholders’ equity . . . 2,511,402 2,192,459
——————— ——————— PROVISIONS 7 Deferred tax . . . 660,438 601,612 ——————— ——————— LONG-TERM LIABILITIES 14 Financial institutions . . . 2,518,881 2,036,889 ——————— ——————— CURRENT LIABILITIES 14 Financial institutions . . . 111,857 217,857 Trade creditors . . . 136,445 261,204 Amounts owing to subsidiary undertakings. . . 26,117 -Amounts owing to associated undertakings. . . - 154,743
15 Other liabilities. . . 141,848 152,926 Accruals and deferred income . . . 69,045 106,849 Dividend for the year . . . 81,450 76,925
——————— ———————
Total current liabilities . . . 566,762 970,504
——————— ———————
Total liabilities . . . 3,085,643 3,007,393
——————— ———————
Total liabilities and shareholders’ equity . . . 6,257,483 5,801,464
——————— ———————
Cash flow statement
1 January to 31 December
1999 1998
DKK ’000 DKK ’000
Note
CASH FLOW FROM OPERATING ACTIVITIES
17 Received from customers . . . 1,739,782 1,566,068
18 Paid to staff and suppliers . . . (948,048) (718,355)
——————— ———————
Cash flow from operating activities before financial items . . . 791,734 847,713
Interest received . . . 5,278 5,207
19 Interest paid . . . (116,962) (92,999)
——————— ———————
Cash flow from ordinary activities . . . 680,050 759,921 Corporation tax paid . . . (125,616) (74,336)
——————— ———————
Cash flow from operating activities. . . 554,434 685,585
——————— ———————
CASH FLOW FROM INVESTING ACTIVITIES
Net payments for tangible fixed assets . . . (819,496) (1,162,890) Net payments for long-term financial assets . . . (169,584) (63,416)
——————— ———————
Cash flow from investing activities. . . (989,080) (1,226,306)
——————— ———————
CASH FLOW FROM FINANCING ACTIVITIES
Repayments of long-term loans . . . (17,857) (17,857) New long-term loans . . . 500,000 700,000 Repayments of short-term loans . . . (200,000) -New short-term loans . . . 94,000 -Changes in loans to subsidiary undertakings . . . 82,008 (76,419) Changes in debt to subsidiary undertakings . . . 25,365 -Dividends paid . . . (76,925) (72,400)
——————— ———————
Cash flow from financing activities . . . 406,591 533,324
——————— ———————
Net change in cash at bank and in hand . . . (28,055) (7,397) Cash at bank and in hand at beginning of year . . . 38,762 46,159
——————— ———————
Cash at bank and in hand at year-end . . . 10,707 38,762
Notes
1 Net revenueNet revenue is composed as follows:
(DKK ’000) _________1999 _________1998 TRAFFIC REVENUE Take-off charges . . . 433,623 354,891 Passenger charges . . . 492,086 404,064 Other charges . . . 12,803 8,217 _________ _________
Total traffic revenue . . . 938,512 767,172 CONCESSION REVENUE
Shopping centre . . . 420,148 548,902 Other. . . _________86,605 _________90,276 Total concession income . . . 506,753 639,178 Rent from premises and land . . . 171,199 140,293 Sale of services, including baggage sorting, security services, bus transport and
leasing of computer equipment. . . _________116,686 _________58,839 Total . . . 1,733,150_________ 1,605,482_________ 2 External expenses
External expenses comprise:
(DKK ’000) _________1999 _________1998
Operation and maintenance . . . 194,209 173,033 Energy. . . 40,253 40,914 Other expenses. . . _________68,283 _________67,048 Total . . . _________302,745 _________280,995 Of which, fees to the auditors elected at the annual general meeting:
(DKK ’000) _________1999 _________1998
Audit :
Grothen & Perregaard
State-Authorised Audit Company . . . 168 162 PricewaterhouseCoopers . . . _________672 _________648 Total audit fees . . . 840 810
_________ _________
Fees for non-audit services: Grothen & Perregaard
State-Authorised Audit Company. . . 393 881 PricewaterhouseCoopers . . . _________1,264 _________580 Total fees for non-audit services . . . _________1,657 _________1,461 Total . . . _________2,497 _________2,271
3 Staff costs Staff costs comprise:
(DKK ’000) _________1999 _________1998
Salaries and wages . . . 448,847 413,683 Pensions . . . 26,566 24,380 Other social-security costs . . . 4,112 4,220 Other staff costs . . . _________27,705 _________45,477 507,230 487,760 Less amount capitalised as fixed assets . . . _________36,476 _________41,689 Total . . . _________470,754 _________446,071 Emoluments to Executive Board . . . 3,806 3,698 Emoluments to Supervisory Board . . . 1,027 1,050 The average number of people employed by the company during the financial year was 1,449 full-time employees, against 1,378 in 1998. This figure includes 173 civil servants who, pursuant to the Copenhagen Airports Act, have retained their employment with the State. The corresponding figure for 1998 was 183. The company makes annual pension contributions to the State. The contributions are paid for employees who, under their contracts of employment, are entitled to pensions from the State. The rate of pension contributions is fixed by the Minister of Finance and is 19.7%.
For the company’s other employees, pension contributions are paid to private pension companies pursuant to individual or collective agreements.
4 Income from interests in subsidiary undertakings
(DKK ’000) _________1999 _________1998
Profit from Copenhagen Airports’ Hotel and Real Estate Company A/S
before tax. . . (5,019) (3,111) Profit from Copenhagen Airport Development International A/S before tax . . 920 (106) Prior year adjustments for
Copenhagen Airport Development International A/S . . . _________11 _________ -Total . . . -4,088 -3,217
_________ _________
5 Interest receivable and similar income Interest receivable and similar income comprise:
(DKK ’000) _________1999 _________1998
Interest on balances with banks. . . 880 2,852 Interest on accounts with subsidiary undertakings . . . 5,973 1,368 Interest from other debtors . . . 1,152 211 Other interest receivable . . . _________1,878 _________2,144 Total . . . 9,883 6,575
_________ _________
6 Interest payable and similar expenses Interest payable and similar expenses comprise:
(DKK ’000) _________1999 _________1998
Interest payable to financial institutions . . . 113,355 96,377 Interest on accounts with subsidiary undertakings . . . 752 -Other financial expenses . . . _________1,985 _________2,496 Total . . . _________116,092 _________98,873
Notes
7 Tax
(DKK ’000) As stated in
Corporation- Deferred profit & loss tax tax account
_________ _________ _________
Balance at 1 January 1999 . . . (25,463) 601,612
Prior year adjustments . . . (2,365) 3,164 799 Instalment tax paid for current year . . . (153,000)
Reimbursement of tax overpaid in previous year . . . 27,828
Tax on profit for the period in subsidiary undertakings . . . (1,310) Prior year adjustment relating to subsidiary undertakings . . . 3 Tax receivable relating to associated undertaking. . . (444)
Tax on income for the year . . . 108,414 55,662 164,076
_________ _________ _________
Total . . . (45,030) 660,438 163,568
_________ _________ _________
Current tax is charged at the rate of 32% of taxable income as the company has registered for payment of tax on account. Tax overpaid on account is stated under “Other debtors”. Additional charges, deductions and refunds relating to tax payments are stated under “Net financial expenses”.
Together with the ordinary payment of tax on account of DKK 21,460 a voluntary payment of DKK 131,540 was made.
Deferred tax is calculated using the liability method and comprises all timing differences between accounting and tax values, primarily relating to fixed assets. Deferred tax is charged at the rate of 32%.
8 Tangible fixed assets Tangible
(DKK ’000) Land and Plant and Other assetsunder
building machinery equipment construction
__________ __________ __________ __________
COST
Cost at 1 January 1999. . . 2,631,752 2,873,987 663,817 662,047 Additions . . . - 44 18,621 711,483 Disposals . . . 18,678 2,635 10,297
Completion of assets under construction . . . __________515,063 __________ __________ __________393,116 62,579 (970,758) Cost at 31 December 1999 . . . __________3,128,137 __________ __________ __________3,264,512 734,720 402,772 DEPRECIATION
Accumulated depreciation and writedowns
at 1 January 1999 . . . 414,971 899,104 336,616 Depreciation . . . 112,350 167,993 75,699 Depreciation and writedowns on disposals . . . __________18,678 __________ __________2,635 9,818 Accumulated depreciation at 31 December 1999 . . . __________508,643 __________ __________1,064,462 402,497
Net book value at 31 December 1999 . . . __________2,619,494 __________ __________ __________2,200,050 332,223 402,772 The aggregate airport facilities are not subject to public property valuation.
9 Long-term financial assets (DKK ’000) COST Cost at 1 January 1999 . . . 16,000 202,409 Additions . . . - 15,151 Disposals . . . _________- _________-310 Cost at 31 December 1999 . . . _________16,000 _________217,250 REVALUATION AND WRITEDOWNS
Total revaluation and writedowns at 1 January 1999 . . . (2,272) 658 Exchange differences . . . - 28,888 Net revenue . . . _________(2,781) _________7,914 Total revaluation and writedowns at 31 December 1999 . . . _________(5,053) _________37,460 Book value at 31 December 1999 . . . _________10,947 _________254,710 Participating interests in subsidiary undertakings consist of all the shares in Copenhagen Airports’ Hotel and Real Estate Company A/S, Kastrup, and all the shares in Copenhagen Airport Development Interna-tional A/S, Kastrup. In reliance on section 2 (b) of the Danish Company Accounts Act, consolidated accounts have not been prepared as at 31 December 1999 as the activities of the subsidiary undertakings have so far been insignificant.
The accounts of Copenhagen Airports’ Hotel and Real Estate Company A/S consist of work in progress regarding the Hilton Copenhagen Airport hotel totalling DKK 237.40 million, including DKK 14.5 million of financial expenses capitalised during the construction period. The hotel is scheduled to open in 2001. The capital investment at 31 December 1999 had been financed by mortgage loans, for which Copen-hagen Airports A/S has issued a letter of comfort. See note 16.
Interests in associated undertakings comprise a 25.5% equity stake in Inversiones y Tecnicas Aeroportu-arias S.A. de C.V., Mexico, which holds 15% of the share capital in the Mexican company holding the con-cession to operate nine airports on the Yucatan peninsula in Mexico for 50 years.
Interests in associated undertakings further include a 50% interest in Airport Coordination Denmark A/S, Kastrup.
Interests in other companies, DKK 83,000, consist of shares in the Copenhagen Stock Exchange A/S. 10 Cash at bank and in hand
Cash at bank and in hand comprises: 1999 1998
(DKK ’000) _________ _________
Cash in hand . . . 325 264 Current accounts . . . 10,372 38,498 Short-term bank deposits . . . _________10 _________ -Total . . . 10,707 38,762
_________ _________
11 Share capital
The share capital consists of 9,050,000 shares of DDK 100 each. 12 Retained profit
Retained profit comprises: 1999 1998
(DKK ’000) _________ _________
Brought forward from previous years . . . 1,286,872 974,365 Allocated from net profit for the year . . . 367,986 388,810 Currency translation concerning associated undertaking . . . - 622 Dividends . . . _________(81,450) ________(76,925) Total . . . 1,573,408 1,286,872 _________ _________ Subsidiary Associated under- under-takings takings _________ _________
Notes
to the accounts13 Reserve for revaluation according to the equity method
(DKK ’000) 1999 1998
_________ _________
Exchange difference relating to associated undertaking . . . 28,888 - Transfer of profit for the year . . . _________3,519 ________-
32,407 -
_________ ________
14 Financial institutions Remaining
Principal debt 1999 Remaining Remaining in foreign in foreign debt 1999 debt 1998 currency currency DKK ’000 DKK ’000 _________ _________ _________ _________ 1) tDKK . . . 0 0 0 200,000 2) tDKK . . . 625,000 589,286 589,286 607,143 3) tDEM . . . 51,885 51,885 197,452 197,603 4) tDKK . . . 550,000 550,000 550,000 550,000 5) tDKK . . . 500,000 500,000 500,000 500,000 6) tDKK . . . 594,000 594,000 594,000 200,000 7) tDKK . . . 200,000 200,000 200,000 - _________ _________ _________ _________
Total financial institutions . . . 2,630,738 2,254,746 Of which, long-term portion . . . 2,518,881_________ 2,036,889_________ Of which, short-term portion . . . _________111,857 _________217,857 1) The loan was repaid in 1999.
2) The loan is denominated in DKK at a floating rate.
3) The liability has been swapped through a currency swap to a DKK-denominated loan at a floating rate.
4) The loans were raised in DKK at fixed rates of 4.10% and 5.34% p.a. for part of the terms of the loans.
5) The loans are denominated in DKK at fixed rates of between 4.71% and 5.74% p.a. 6) An additional DKK 394 million was drawn on floating rate credit facilities in 1999. 7) The loan was raised in 1999 at a floating rate.
An interest cap has been entered into for part of the term of the loans at 6.00% for DKK 550 million and at 5.00% for DKK 300 million of the floating rate debt. No swap agreements or forward contracts have been entered into except as set out above. Management believes that the swap agreements entered into do not involve any credit risk.
As long as the above loans exist, CPH has undertaken not to mortgage its assets to other lenders. However, mortgages on new assets in security of the purchase sum are not subject to this undertaking.
Of the long-term debt, DKK 500 million is due for repayment after five years.
CPH has available short-term facilities in the amount of DKK 296 million as a supplement to daily cash and cash equivalents. In addition, CPH has unused available long-term facilities of approximately DKK 740 million.
15 Other liabilities Other liabilities comprise:
(DKK ’000) _________1999 _________1998
Holiday pay and other items related to salaries and wages. . . 77,104 72,859 Interest payable. . . 25,771 27,393 Other costs payable . . . _________38,973 _________52,674 Total. . . _________141,848 _________152,926
16 Financial commitments
CPH has entered into concession agreements under which the concession holders have invested in buildings and other fixed assets. The assets will be transferred to Copenhagen Airports A/S at net book value on ter-mination of the agreements. The agreements are irrevocable by Copenhagen Airports A/S until 31 December 2008 when the last agreement expires without notice. The concession holders can terminate the agreements at six months’ notice. If the concession agreements had been terminated on 31 December 1999, the purchase commitment would have amounted to DKK 370.0 million. The corresponding amount for 1998 was DKK 287.3 million.
Pursuant to the rules set out in the Civil Servants Act, the company is committed to provide redundancy pay to the civil servants.
CPH has entered into contracts to build facilities and other commitments totalling DKK 272,5 million as at 31 December 1999, of which DKK 129,9, on behalf of subsidiary undertakings as at 31 December 1999. The corresponding amounts for 1998 were DKK 479,7 million and DKK 290, respectively.
CPH invoiced DKK 61.5 million excluding VAT in baggage sorting charges in 1999. An action is pending regarding the company’s right to charge separately for this service. Management believes that the out-come of the action will be favourable to CPH. See discussion in Directors’ report.
Copenhagen Airports A/S has issued a comfort letter for a guarantee facility for DKK 276,0 million regarding Copenhagen Airports’ Hotel and Real Estate Company A/S.
17 Payments by customers Payments made by customers comprise:
(DKK ’000) _________1999 _________1998
Net revenue . . . 1,733,150 1,605,482 Other operating revenue . . . 33,847 51,988 Change in trade debtors . . . _________(27,215) _________(91,402) Total . . . 1,739,782 1,566,068
_________ _________
18 Payments to staff and suppliers Payments made to staff and suppliers comprise:
(DKK ’000) _________1999 _________1998
Operating cost . . . (773,499) (727,066 ) Change in other liabilities . . . (92,206) 13,915 Change in trade creditors. . . _________(82,343) _________(5,204) Total . . . (948,048) (718,355)
_________ _________
19 Interest paid Interest paid comprises:
(DKK ’000) _________1999 _________1998
Interest paid . . . (116,092) (98,873) Interest paid on accounts with subsidiary undertakings . . . 752 -Change in interest due . . . _________(1,622) _________5,874 Total . . . (116,962) (92,999)
_________ _________
Notes
The financial statements are submitted for approval at the company’s annual general meeting Copenhagen, 2 March 2000
Executive Board
Niels Boserup Søren Peter Thorning Chief Executive Deputy Chief Executive
/ Agneta Björkman Chief Financial Officer
Supervisory Board
Vagn Andersen Ole Rendbæk John S. Andersen Chairman Deputy Chairman
Jette Wigand Knudsen Kurt Bligaard Pedersen
Anita Doris Rasmussen Inge Thygesen Carsten Winther
Auditors’ report
We have audited the annual accounts of Copenhagen Airports A/S for 1999 as presented by management.
BASIS OF OPINION
We planned and performed our audit in accordance with generally accepted auditing standards to obtain
reasonable assurance that the annual accounts are free of material errors or
Copenhagen, 2 March 2000
PricewaterhouseCoopers Grothen & Perregaard State-Authorised Audit Company
Morten Iversen Jørgen Torp Jørgen Frank Jakobsen Christian Fredensborg Jakobsen State-Authorised State-Authorised State-Authorised State-Authorised Public Accountant Public Accountant Public Accountant Public Accountant
omissions. Our audit included, based on an assessment of materiality and risk, an examination of the basis and evidence supporting the amounts and other disclosures in the annual accounts. Furthermore, we assessed the accounting policies used and estimates made by management as well as evaluating the overall adequacy of the presentation of information in the annual accounts.
Signatures
Our audit did not give rise to any qualifications.
OPINION
In our opinion, the annual accounts have been prepared in accordance with the accounting requirements of Danish legislation and give a true and fair view of the company’s assets and liabilities, financial position and result for the year.
expanding Copenhagen Airport – costs which were not passed on to users in the form of increased charges. However, it was apparent for some time that the abolition of duty free sales in 1999 would cause a significant decline in our revenue base. When the charges were frozen in the early 1990s, we forecast a major increase as of 1 January 1999; that increase turned out to be 15%.
Future charges structure After extensive negotiations, CPH and the airlines agreed on a 13% increase in charges effective 1 January 2000. These airport charges cover the use of a number of facilities at Copenhagen Airport, including buildings, passen-ger facilities and the aircraft operating area – i.e. runways, taxiways and sim-ilar facilities. Moreover it was agreed
airport charges
In the spring of 1999, Copenhagen Airports A/S (CPH) initiated negotia-tions with the airlines on the future charges structure for Copenhagen Airport.
Charges unchanged 1992-1999
The charges for using Copenhagen Airport’s facilities were previously regulated by an agreement between the airport and the Danish Ministry of Transport. CPH did not make any changes to its charges between 1992 and 1999, a period during which the airport enjoyed substantial commer-cial revenues. We were therefore able to offer the airlines a stable price level for services during a time of keen competition among the various airlines. During this time, CPH spent billions of Danish kroner
Historic
who would then pay for the system through charges for using the facili-ties. The handling charge introduced effective 1 January 2000 covers the airport services and facilities available to the handling companies, including the use of the baggage sorting system.
Service level agreements Negotiations on a future charges structure are part of an intensified collaboration between CPH, the airlines and the handling companies.
As the organisation with overall responsibility for the airport, CPH considers it vital that passengers perceive the airport as a single unit, although what passengers experience at the airport is actually a jigsaw puzzle of many different services supplied by a wide variety of different companies.
CPH wishes to continue this close working relationship with its collaboration partners by setting up service level agreements on a com-mercial basis. The idea behind these service level agreements is for the airport’s activities to be more trans-parent, thus allowing greater under-standing between the parties to the agreements. The overall aim is to ensure that all parties contribute to the general quality concept of maintaining Copenhagen Airport’s position as one of the best airports in the world. One of the elements in achieving this will be mutually bind-ing agreements to meet a number of uniform quality targets.
that a per-passenger handling charge would be introduced on 1 January 2000: DKK 10 per international passenger and DKK 5 per domestic passenger. On the same occasion, the parties agreed that these charges would not be adjusted for the next three years. The Ministry of Trans-port, the regulatory authority under the Danish Air Transport Act, approved the increase in charges, which then went into effect on 1 January 2000. The negotiations form the basis for further collabora-tion between the parties on the future structure of Copenhagen Airport’s charges.
Handling charges
A new automatic baggage sorting system began service in 1998, in-stalled at the request of the users of Copenhagen Airport, in this case the companies responsible for baggage handling. It was agreed that CPH would design and build the facilities together with the future system users,
adjusting the terms of the contract between CPH and Nuance Global Traders, the operator of the duty free shops.
Confusion among EU passengers
CPH launched an advertising cam-paign directed at intra-EU passengers who could no longer buy duty free products. The objective of the cam-paign was to inform these customers that certain goods were still available at low prices even though duty
free sales within the EU had been abolished. The ads were brought in dailies and magazines to ensure that passengers were apprised of the new shopping situation before their departure. The advertising campaign was followed up in the airport by signs and brochures.
Duty free sales to passengers on in-tra-EU flights were abolished on 1 July 1999. As expected, the decline in revenue was considerable. However, thorough preparation for the new situation enabled quick implementa-tion of a number of strategic counter-moves to compensate for some of the revenue loss. Like a number of other major European airports, CPH de-cided to maintain the low prices of perfume, cosmetics, wines, fortified wines, beer and chocolate. It was possible to maintain the low prices by
new retail
Several
It soon turned out that, in spite of the targeted marketing effort, there was a great deal of confusion among passengers, not only in Copenhagen but throughout Europe. Sales of the low priced products ini-tially fell more than expected. A slow increase in sales to passengers travel-ling within the EU towards the end of
the year showed, however, the effect of the intensive marketing campaign, which will be continued in 2000.
Buy on arrival
Passengers will now have an even greater opportunity to buy certain products at low prices with the open-ing in the spropen-ing of 2000 of a new
shop in the arrivals area. The shop, which sells perfume, cosmetics, beer, wine, fortified wines and chocolate, has been opened in the baggage reclaim area.
Each passenger buys more Sales of liquor and tobacco have fallen significantly, as was expected.
However, at Copenhagen Airport, we are seeing a trend different from most other European airports: duty free sales to passengers travelling outside the EU are increasing in terms of sales per departing passenger.
Following the abolition of intra-EU duty free sales, sales at the air-port’s many specialty shops have increased more than could normally be expected from the rise in the num-ber of passengers. This upward trend is presumably due to EU passengers compensating for the lack of duty free by purchasing from the specialty shops instead. On top of this is a tendency for each passenger to buy more than before.
Landside shopping
CPH plans to expand its retail busi-ness in future to include shopping outside the transit area. All major European airports have established major landside shopping areas in recent years. They all report good on the success of the establishment of these shopping areas, which primarily target arriving passengers, people dropping off and picking up passen-gers, and – not least – the thousands of people who work at the airport. A project to establish a real shopping
operates the airport restaurants and bars on a concession basis. Located in Terminal 3 and featuring 14 exclusive conference rooms of different sizes with all modern technical facilities, the Centre was a success beyond all expectations right from the start. Many of Copenhagen Airport’s customers had indicated a need for an exclusive conference centre: the Business Centre now allows Copen-hagen Airport to meet the rapidly growing demand for airport facilities for meetings and small conferences across national borders.
area in the former arrivals area of Terminal 2 is currently being pre-pared. Over the next couple of years the area will see the addition of shops, a café, a post office, a bank, a visitors’ centre and other facilities, as well as office space for rent.
A service centre by the Øresund motorway
Shopping facilities for the public are also in focus with the opening of a new service centre featuring a petrol station, a supermarket and a fast-food restaurant by the Øresund motorway in late September 2000. The service centre will be built by CPH, and the individual facilities will be leased on a concession basis like the other shops and restaurants at the airport. We believe that the service centre – whose principal customers we expect will be users of the motorway, arriv-ing passengers and airport staff – has significant commercial potential.
Copenhagen Airport Business Centre
– an immediate success The Copenhagen Airport Business Centre opened in September 1999, owned by CPH and operated by Select Service Partner, which also
airport
consulting
International
Copenhagen Airport is known world-wide as one of the world’s best and most well-managed airports. Copen-hagen Airports A/S (CPH) wishes to retain this position and to exploit the potential of providing consulting services to other airports.
An attractive partner
In 1998, CPH formed a subsidiary, Copenhagen Airport Development
International A/S (CADI), to form the basis for the company’s partici-pation in the new, global compe-tition for providing consulting services to airports. CPH intends to support its business development and expand its consulting activities through this subsidiary. The basic elements of these services will be created in the parent company in connection with its management
and development of Copenhagen Airport.
CPH possesses considerable expertise in airport operations and in the expansion and development of airport commercial activities. This is an expertise which has already proved to be in demand abroad, making CPH an attractive business partner in providing consultancy to foreign airports.
Nine airports in Mexico In 1998, CPH signed an agreement to provide consulting services to nine airports in the Yucatan peninsula of Mexico. In the Mexico project, CPH is part of a consortium which owns 15% of the partially privatised Aeropuertos Sureste (ASUR), which took over the operation of the nine airports on 19 April 1999 for a 50-year concession period. The
remain-ing 85% stake in ASUR is owned by the Mexican state.
The consulting services provided in Mexico in 1999 were primarily in three key areas: traffic operations, expansion and retail. A master plan has been developed for each of the nine airports based on expected traffic growth at each airport 15 years into the future. In the operational area, a number of procedures have been improved, including utilisation of capacity on the runways, at aircraft stands and on taxiways. Moreover, CPH provided advice in areas such as access control (security) and main-tenance.
Commercial potential is high A master plan and strategy will be prepared for the commercial utilisa-tion of the nine airports, an area which CPH expects holds great
