Where everything
takes off
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Message from the CEO
2014 was the best year ever for Budapest Airport in terms of passenger traffi c growth and improvement of service quality as well. This short sentence speaks for itself, but it does not refl ect the daily eff ort made by our people and our partners to turn Budapest Airport into the best airport in the CEE region. In fact this has also happened as Budapest Airport won the prestigious Skytrax ”Best Airport in Eastern Europe” title in 2014 and also 2015 awarded on the basis of feedback from our passengers.
These acknowledgements do not come by chance – they refl ect long years of focused performance. Of course, many other factors lie behind the record passen-ger traffi c of 9 155 961 (7.5 % growth over 2013) and 86 682 Air Traffi c Movements. The arrival of new airlines and the opening of many new destinations marked 2014 for us at the airport and by the same token for the Hungar-ian tourism industry. It would be highly unjust to pick out just a few as there were lots of newcomers and our existing partners have contributed to this growth too.
Air Serbia was amongst the fi rst with the start of daily service between Belgrade and Budapest, a route that was missing since 2012. Our largest airport partner Wizz Air brought an additional aircraft (their 8th) to increase frequency on high-density routes like London Luton, Moscow Vnukovo or Istanbul Sabiha Gökcen Airport. Turkish carrier Pegasus Airlines also launched its fl ight between Budapest and Istanbul as of mid-July, and Transavia France started its service to Paris Orly. By the end of October we had regular wide-body fl ights again with the arrival of Emirates of Dubai. Daily fl ights by their A 330-200 aircraft from the Persian Gulf region repre-sent another turning point in the history of Budapest Airport.
2014 was marked not only by increasing passenger traffi c but also by the arrival of a new cargo service provider from the beginning of the year. With the strongly increasing business ties of Hungary and the government’s Opening to the East policy, the arrival of Azerbaijan’s Silk Way West airlines to Budapest came as a natural development. The fi rst Boeing 767-300F freighter aircraft was greeted at the airport in early
March connecting Bu-dapest with Baku and further to the East with Central Asia and the Far East.
The impressive results and improvements mentioned above may also have con-tributed to the successful completion of the refi nancing of the loan facilities of Buda-pest Airport which has been completed in September 2014 and has won a series of fi nancial awards in the category of European transportrelated fi -nancing deals – a clear indicator of the stability, transparency, and the good prospects of the airport
operating company. We are de- termined to stay on track and follow the road leading to new achievements.
There is no better way to really see our performance than coming to Budapest as a passenger – and you are in-deed more than welcome to do so!
Jost Lammers, CEO Budapest Airport
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Moscow Vnukovo or Istanbul Sabiha Gökcen Airport. Turkish carrier Pegasus Airlines also launched its fl ight between Budapest and Istanbul as of mid-July, and Transavia France started its service to Paris Orly. By the
end of October we had regular wide-body fl ights again Jost Lammers,
July
Budapest Airport fi nished the reconstruc-tion of the General Aviareconstruc-tion Terminal (GAT) by the end of July and together with Celebi Ground Handling opened a new business lounge in it. The schedule was tight since all the works had to be completed in time before the Formula 1 team arrivals at the GAT by the end of July.
Highlights of 2014
January
A brand new 10-kV third power supply line and a transformer sub-station was inaugurated in the town of Vecsés neighboring the airport. The new sta-tion connecting the airport to a third, in-dependent power supply line increas-es operational safety of the airport and adds to the two existing electric power supplies from Budapest city.
February
BUD recognizes the performance of key airline and airport partners in 2013 for their role in keeping the airport on the right track. This is refl ected not only in increas-ing passenger numbers but also in con-stantly increasing quality standards of airport service recognized in the quar-terly ASQ survey results.
March
A new Azerbaijani cargo airline Silk Way West starts regular cargo fl ights between Baku and Budapest with Boeing 767-300F aircraft. The Azeri carrier operates regular fl ights between China, the Far East and Central Asia and connects these areas to Europe through Buda-pest, Frank-furt and London. By the end of the year Silk Way West changed its aircraft to larger Boeing 747-400 due to increased market demand.
May
Budapest Airport starts major refurbish-ment works on the airfi eld including both runways. The total cost of the project is EUR 2.7 million and the project was com-pleted before the main summer tourist season began. Both runway surfaces and lighting systems were repaired, and, as a consequence major reconstruction works are not necessary during the next ten years.
June
Buda-pest Airport c e l e -brated the 10th anniversary of Wizz Air operations in Hungary with signing a lease agreement to build a line mainte-nance hangar for the low cost carrier. Wizz Air will take over the new facility in 2015. Wizz Air has increased its fl eet to eight air-craft in Budapest in June 2014.
August
Budapest Airport
started a commercial campaign series to promote Hungarian products in Sky-Court. The so-called trinity promotion where the airport, the Hungarian produc-er and Heinemann Duty Free join forces proved to be extremely successful and has led to double-digit increases in sales due to tasting and discounted price pro-motions in the given month. Diff erent Hungarian wines, spirits and sweets were promoted every month until November.
October
Budapest Airport created a strategic partnership with Future FM regarding its Airport Facility Management (AFM) subsidiary. The airport sold 75 percent of its share in AFM to Hungarian Future FM – a dedicated facility management provider. The new owner takes over operation as of 1st January 2015.
The fi rst direct Dubai-Budapest daily fl ight of Emirates was cel-ebrated at the end of the month. After long years of preparations, the Gulf carrier started daily service to Budapest with an Airbus A 330 wide body jet. The new fl ight is not only a connec- tion to
the Persian Gulf and
the Middle East but also signifi -cantly cuts fl ight time between Budapest and the Far East, China and Australia.
November
A brand new infl atable hangar was erected for Lufthansa Technik Buda-pest at the airport. The new facility enables Lufthansa Technik to service more aircraft during the winter peak months of maintenance. The EUR 2 million project helped Lufthansa Technik Budapest this winter to contract 12 Norwegian Boeing 737-800 aircraft to be refurbished with an in-fl ight Wi-Fi system.
December
The 9 millionth passenger was cele-brated on 17th December in SkyCourt with fl owers and a brass band orches-tra. The lucky winner was a young Hungarian family arriving with Brus-sels Airlines from BrusBrus-sels. This event also marked that Budapest Airport is in for a record-breaking year in 2014. By the end of the year the passenger number was best ever: 9,155,961.
Highlights
April A new airline, Air Serbia was cele-brated on the fi rst day of the month starting a daily service between the capital of Serbia and Hungary. After major reorganization and involvement of professional investor Etihad to Air Serbia the national carrier started fl ights to Belgrade with an ATR-42 aircraft. This new service off ers a series of transfer opportunities to important des-tinations in the Balkans.September
Budapest Airport hosted the Freight-ers and Belly Cargo World Conference in the Hungarian Capital. Conference delegates could convince themselves of the logistical advantages of the air-port and the development potential of Budapest Airport with regards to air cargo.
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Together with its financial advisor, Rothschild, BUD approached over 65 fi nancial institutions in the market-testing phase drilling it down to a final group of 19 senior and junior lenders. Headline terms for the market-based refinancing were:
• EUR 1.05 billion of 5.25 year senior bank facilities, maturing at the end of 2019
• EUR 300 million of 6.25 year junior debt, maturing at the end of 2020 and part of the junior debt originat-ing from shareholders
• Extension of EUR 1.1 billion interest rate swap arrange-ments, including a EUR 770 million off -market swap, a EUR 132 million reverse swap and a new EUR 142 million on-market swap
The stretched leverage refinancing represented senior leverage of 7.2 times EBITDA and 9.2 times incorporating the junior debt. The lending consor-tium includes existing lenders rolling or upsizing their participation in the senior loan like SMBC, Unicredit, Crédit Agricole, HSH Nordbank and ING as well as new senior lenders such as RBC, Natixis and Deutsche Bank. Out of the group of senior lend-ers several lendlend-ers acted also as swap counter par-ties. On the junior loan key investors were Park Square, Macquarie and Deutsche Bank, who partic-ipated both in the senior and junior financing as well as the swap.
The refi nancing was also recognized by the industry by winning a total of four internationally recognized deal of the year awards by specialist fi nance maga-zines Project Finance International, Global Transport Finance, IJ Global as well as emeafi nance.
As is typical with diversifi ed fi nancing structures, the rights and obligations of each specific group were integrated into the financing contracts and the in-tercreditor agreement. Budapest Airport, supported by their financial advisor Rothschild, worked with a total of six different law firms. One key challenge was the implementation of a completely new security structure that considers the diff erence in rankings be-tween Senior A and Senior B lenders. This requirement, from the lenders themselves, was fulfi lled via the
inte-gration of a new holding company into the existing shareholder structure of Budapest Airport. The shares of the new company were pledged to the new Senior B lenders.
A key element of the successful refi nancing was the cooperation with the Hungarian state. Budapest Air-port management approached the state-owned hold-ing company MNV quite early in the process and held various meetings with MNV and the ministries to keep them in the loop. Budapest Airport ensured that the fi nancing structure was in line with the privatization contracts, particularly with respect to leverage and interest service ratios. The Hungarian state was very cooperative throughout the lengthy process and in the end approved the transaction.
“The successful and oversubscribed refi nancing is of course a great acknowledgement of our work and the trust that the lenders place in the management of Budapest Airport,” summarized Ingo Ludwig. “But more importantly the new financing provide us with a stable platform to further drive the growth and profitability of the business.”
In spite of diffi cult conditions, Budapest Airport suc-cessfully achieved its market-based refi nancing at the end of September 2014. Budapest Airport could refi -nance all of its existing bank loans with new and exist-ing banks in the amount of EUR 1.1 billion senior debt and EUR 300 million junior debt. The refi nancing was well oversubscribed and the new loan agreements run for a period of more than fi ve years.
“This is really a great success for the Airport,” said Ingo Ludwig, Chief Financial Officer and Deputy CEO of the Airport and responsible for the refinanc-ing project. “Yet, when we started the project in late 2012, it seemed anything but certain that the exist-ing facilities could be refinanced” he adds, when re-membering initial considerations to refinance the loan package that was taken out in 2007 to finance the acquisition of the airport from the British BAA which had taken it over from the Hungarian govern-ment only one year before. Completed just before the 2008 financial crisis, the transaction was distin-guished by high leverage (with debt to EBITDA of more than 16 times) and optimistic passenger growth projections. At the end of 2012 the leverage was still 11 times, while the market level for financ-ing of comparable assets was between fi ve to seven times at this point. “This overleverage was a major
point of concern for all involved and many lenders were passing on the Budapest Airport loan to their restructuring teams,” explained Ingo Ludwig. Next to the high leverage, the refinancing process was also burdened by a long-term interest rate swap with a negative market value of around EUR 250 million.
The financial and economic crisis had hit Hungary hard. The country missed its original ambitious growth targets and on top of that in 2009 the Hun-garian GDP decreased by 6.7%. This also translated into more or less zero passenger growth for the air-port from 2007 to 2012 and, while the airair-port was nicely recovering in 2011, it was hit hard again by the collapse of national airline Malév in February 2012. These factors caused many lenders to lose confi-dence and become more cautious. Special bank tax-es and the forced currency exchange for loans made in Swiss Francs to Forint at a fixed rate implied huge losses for the banks, which added to the negative sentiment. Nevertheless, management worked in-tensively during this period to mitigate the lack of passenger growth and collapse of Malév, substan-tially improving the profitability and cash flow gen-eration of the company by increasing EBITDA from EUR 83 million in 2007 to EUR 115 million in 2012 (+39%).
Airport completes award-winning refinancing
While preparing for the refi nancing, it became quickly evident through discussions with the lend-ers that the thirty-strong bank consortium was quite polarized. Ingo Ludwig describes it as “While half of the bank consortium liked the asset and was very supportive of a refi nancing, the other half was very keen to exit rather sooner than later.” Many banks in the latter group had eff ectively left the project and in-frastructure fi nancing market for good, thus making discussions with the consortium quite challenging. As negotiations continued into late 2013, BUD’s trading continued to improve while at the same time the ju-nior debt market developed favorably enabling BUD
to consider it as part of an overall marketbased refi -nancing of the existing facilities. This structured solu-tion enabled BUD to:
• Provide an exit for some existing senior lenders while allowing others to participate in the new fi nancing • Signifi cantly delever the company allowing BUD to
achieve a market-based refi nancing of the senior debt • Restructure, roll and partially break the existing
inter-est rate swaps
• Get consent of the Hungarian State and an extension of the direct agreement between the Hungarian State and the lenders
“The successful refinancing is a great success for the airport and
provides a stable platform for future growth”
Ingo Ludwig (Chief Financial Officer and Deputy CEO)
Report 2014
Aviation business
The annual passenger traffi c hit a record high of 9.2 million passengers in 2014, which exceeded the 2013 fi gure by 7.5%. After the market consolidation during the past 2 years, 2014 saw a signifi cant ex-pansion of airline capacity and passen-ger traffi c. In comparison with Budapest Airport’s 7.5% traffi c growth the EU av-erage growth was only 5.3% in 2014. The Hungarian capital airport handled a total of 9,155,961 departing and arriv-ing passengers which was even
high-er than in the last year of Malév’ ophigh-eration. Howevhigh-er, the aircraft movements, i.e. the number of take off s and land-ings, did not show a similar recovery as it remained at the level of 86,682 movements, which is still an improvement compared with 2013 (+3.4%) but remained far below 2011 movements by 26.8%. This confi rms the trend of airlines’ eff orts to increase effi ciency via load factor improve-ments and deploying larger aircraft.
The above record traffi c was achieved by attracting new airlines to BUD, such as Emirates fl ying to Dubai from October 2014 or new fl ights by Pegasus, Transavia France
and Vueling. In addition, existing airlines’ development was driven by either frequency or capacity increases or launch of new routes. The most important development was demonstrated by Wizz Air with their 8th based aircraft starting to operate from April 2014 and providing addition-al capacity either to new destinations such as Kutaisi, and Alicante or increasing frequencies on existing routes such as Barcelona, Moscow or Istanbul. In the meantime many other airlines increased traffi c e.g. Norwegian (new fl ight to London Gatwick), Turkish Airlines (frequency increase), Jet2.com (new fl ight to Leeds) and El-Al through the launch of its own low-cost subsidiary UP.
Consumer and landside business
Revenues in the consumer and landside business improved by 2.7% compared with 2014. The consum-er business continued to benefit from the increased retail and food & beverage offering after completion of SkyCourt and the refurbishment of the terminal areas T2A and T2B in 2012. Altogether, the airport currently offers more than 50 stores and catering outlets on a total area of around 6,300 square meters. In 2014 additional new outlets were opened, such as Victoria`s Secret and Vodafone. 2014 saw the fi rst full year of operation of the improved curbside and car park access system as well as the online booking sys-tem contributing to a substantial increase of landside business revenues. 2014 2013 2012 2011 9,155,961 8,520,880 8,504,020 8,920,653Passengers
2014 2013 2012 2011 86,682 83,830 87,560 109,949Aircraft Movements
Air traffi
c performance
Airlines: 38 scheduled airlines operated in 2014
Destinations: 88
88 airports 74 cities 35 countries
2014 88 2014 74 2014 35 7 Low-cost 31 Full-service 7 31 2014 2013 2012 2011 89,987 92,112 93,123 106,595
Cargo Volume
Business Unit Property
Property revenues increased by 2.9% in 2014 driven by new tenants as well as new facilities built and rented at the airport. These include the new DHL logistics center (new facility and new tenant) as well as a spare parts facility and infl atable hangar for Lufthansa Technik (new facilities). The DHL logis-tics center is also the fi rst development of the Airport Business Park on the southern edge of the airport. The new building comprises 3,000 square meters of offi ce space, 7,800 square meters of warehouse space and 5,700 square meters of maneuvering space.
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Financial Highlights
Consolidated statement of financial position
(in EUR `000) 31 December 2014 31 December 2013 ASSETS
Non-current assets
Property, plant and equipment 27,911 32,663
Intangible assets 2,176,314 2,169,931
Derivative financial instruments 49,091
-Other non-current assets 50,408 62,076
Total non-current assets 2,303,928 2,275,404
Current assets
Inventories 1,710 2,496
Trade receivables 17,400 20,163
Cash and cash equivalents 112,241 131,285
Other receivables 8,601 8,106
Total current assets 139,952 162,050
Total assets 2,443,880 2,437,454
EQUITY 28,311 159,684
LIABILITIES
Non-current liabilities
Borrowings 1,968,503 672,330
Derivative financial instruments 256,698 200,170
Other non-current liabilities 82,163 74,767
Total non-current liabilities 2,307,364 947,267
Current liabilities
Trade payables 8,769 8,339
Borrowings 73,432 1,278,753
Derivative financial instruments - 15,985
Other current assets 26,004 27,426
Total current liabilities 108,205 1,330,503
Total liabilities 2,415,569 2,277,770
Total equity and liabilities 2,443,880 2,437,454
Statement of financial position notes
Borrowings
The Group refinanced its bank loans with expiration date of end of 2014 on 25 September 2014. As of 31 December 2014 the total amount of borrowings (both short and long term) consisted of EUR 765 million shareholder loans, EUR 1,100 million bank borrowings and EUR 177 million other borrowings.
Consolidated income statement
(in EUR `000) for the period ended 31 December 2014 for the period ended 31 December 2013
Revenue 265,658 246,818
Raw materials and consumables used
(72,711) (64,741)
Utility expenses (6,231) (7,683)
Employee benefit expense (19,038) (17,936)
Depreciation and amortization (18,681) (20,594)
Other income, costs and expenses (25,325) (25,929)
Operating profit 123,672 109,935
Finance income 527 1,066
Finance costs (180,272) (121,249)
Loss before income tax (56,073) (10,248)
Income tax expense (31,917) (8,315)
Loss for the period (87,990) (18,563)
Income statement notes
Revenues (in EUR `000)
2014 2013
Aviation revenues 130,171 121,721
Fuel supply revenues 75,730 66,503
Rental revenues 52,169 51,657
Other 7,588 6,937
Total 265,658 246,818
Finance costs
Income tax expense(in EUR `000)
2014 2013
Current tax (4,358) (4,575)
Deferred tax (27,559) (3,740)
Total (31,917) (8,315)
The main reason of the increase in the accounted borrowing costs related to the refi nancing of the senior bank borrowings of the Group.
Key figures
2014 2013
Revenue (EUR `000) 265,658 246,818
Revenue excluding fuel supply (EUR `000) 189,928 180,315
EBITDA (EUR m) 142,583 130,709
Capex (EUR m) 10.9 19.1
Debt (EUR m) 1,358 1,282
Cash (EUR m) 112 131
Net debt (EUR m) 1,246 1,151
Key fi gures
Budapest Airport foresees for 2015 the traffi c to reach 10.1 million (+10.7 percent), with a moderate growth of movements by 5.7 percent. This growth will be driven among other things by the fi rst full year of operation
Outlook for 2015
Raw materials and consumables used (in EUR `000)
2014 2013
Cost of fuel sale (70,542) (62,025)
Other (2,169) (2,716)
Total (72,711) (64,741)
The main reason of the increase in income tax expense is that in 2014 the Group realized a one-off eff ect on the revaluation of the deferred taxes due to the tax law change.
Top 10
destinations
of Emirates, Wizz Air basing its ninth aircraft, and new airlines, for instance Iberia, Air Transat and Air China. Frequency increases are also expected (Pegasus to Istanbul, Transavia France to Paris).
Top 10
airlines
Wizz Air
Ryanair
Lufthansa
easyJet
KLM
Norwegian
British Airways
Air France
Germanwings
Travel Service
London
Paris
Brussels
Frankfurt
Amsterdam
Munich
Istanbul
Rome
Moscow
Milan
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Budapest Airport at a glance
Budapest Airport is Hungary’s largest international airport.
Passengers (in million)
2014 2013 89,987 92,112 Cargo Volume (in tons)
Publisher: Budapest Airport Zrt., Communication, Tel.: + 36 1 296-6753, E-mail: [email protected] Status: October 2015 Aircraft Movements
2014 2013 86,682 83,830
2014 2013 267 248
Revenues (in EUR m incl. fueling) Operations
Terms of concession 100 percent privatization, duration until 2080, contract concluded 22 December 2005
Ownership structure Ownership structure: 52.666 % AviAlliance, 22.167 % Malton Investment Pte Ltd, 20.167 % Caisse de dépôt et placement du Québec, 5 % KfW IPEX-Bank
Technical Data
Total area of airport 1,515 hectares
Location Budapest Ferihegy, 16 kilometers south-east of Budapest’s city center Geographical coordinates 47° 26’ 22” N, 19° 15’ 43” O
Airport codes BUD (IATA), LHBP (ICAO)
Terminal 1 T1 (opened 1950, reconstructed 2005, but temporarily closed)
Terminal 2 2A (opened 1985)
2B (opened 1998)
SkyCourt (opened 2011 between 2A and 2B, the new large Terminal 2) Runways Runway 1 (13R-31L) 3,010 m Runway 2 (13L-31R) 3,707 m
2014 2013 9.2 8.5
