Flughafen Zürich AG: Financial Year 2020
The coronavirus pandemic represents a major challenge for the entire aviation industry as well as for Flughafen Zürich AG and is impacting all areas of the business. Following very successful years with a series of record figures, Zurich Airport experienced a historic slump in traffic in 2020. Stephan Widrig, CEO of Flughafen Zürich AG, comments as follows: “Flughafen Zürich AG is a company geared to the long term and has in the past been careful to ensure a low level of debt, allowing it to master this unique historic crisis under its own steam. We have decided on comprehensive cost-cutting measures, adjusted our investment planning, raised additional capital on the bond market and waived the dividend payment.”
Significant events in 2020
Key projects were implemented in 2020 despite the pandemic. Stephan Widrig: “The opening of the Circle in November was a major milestone in the development of Zurich Airport as an attractive location. The broad-based tenant mix and high occupancy rate of around 85% make the Circle a successful investment.” The large airport park, spanning 80,000 m2, also opened to visitors in the autumn.
In January, the first business jet was fuelled at Zurich Airport with a mixture of conventional kerosene and sustainable aircraft fuel, which reduces greenhouse gas emissions by up to 80% compared with fossil kerosene. In future, sustainable aircraft fuels will play a key role in reducing CO2 emissions in aviation.
In July, the negotiations on flight operation charges were concluded with an agreement, creating planning certainty for all involved. In October, the concession agreement for the construction and operation of the new airport in Noida, near Delhi, India, with a term of 40 years was signed.
In 2020, Zurich Airport was host to a total of 8,341,047 passengers, representing a year-on-year decrease of 73.5%. The number of local passengers declined during this period by 71.7% to 6.3 million, while the number of transfer passengers fell by 78.2% to 2.0 million.
Overall, there were 111,328 flight movements at Zurich Airport in 2020, corresponding to a decrease of 59.6% compared with 2019. Swiss International Air Lines’ share of air traffic amounted to 50.4%, followed by Edelweiss Air (10.4%), Deutsche Lufthansa AG (2.7%) and Eurowings GmbH as well as easyJet (each 2.5%).
Freight volume dropped by 35.6% in 2020 compared with 2019. A total of 291,163 tons of freight were transported during the reporting period. The decline in freight volumes was much less than the number of passengers and flight movements. In addition, the number of freight-only flights at Zurich Airport increased by 2,130 flight movements compared with 2019. Never before have there been so many freight-only flights at Zurich Airport. This again clearly shows how heavily dependent on foreign trade the Swiss economy is and the key role that aviation plays, especially in terms of high-quality goods.
In the 2020 financial year, Flughafen Zürich AG's revenue fell from CHF 1,210.1 million to CHF 624.0 million (-48.4%). Aviation accounts for CHF 221.7 million, a decrease of 66.5%. Non-aviation revenue declined by a total of 26.7% to CHF 402.3 million.
In commercial operations, the commercial partners generated turnover of CHF 237.2 million
(-60.5%) in the past year. Flughafen Zürich AG hence posted commercial revenue amounting to CHF 104.4 million (-22.3%).
While parking revenue also suffered significantly as a result of the crisis, earnings from facility management grew by 12.5% to CHF 140.9 million. This increase is due primarily to the purchase of a total of 36 buildings and land from Priora Suisse AG at the end of 2019. The first rental income from the Circle also contributed to this positive trend.
The drop in revenue from international airport business to CHF 63.4 million was due in particular to a fall in revenue from construction projects (concession accounting), which correlates with the reduced investment activity. The takeover of the Brazilian airports in Vitória and Macaé at the beginning of 2020 went some way towards offsetting the decline in international earnings.
Compared with the previous year, operating expenses declined by 24.7% to CHF 428.0 million. Last year’s cost basis was affected in particular by the expansion of the airport in Florianópolis, Brazil, at a cost of CHF 83.4 million. After adjustment for expenses for construction projects, operating expenses fell by 17.3% or CHF 84.0 million. Operating expenses in Zurich declined by 17.9%.
Operating result and consolidated profit/loss
As an infrastructure company, Flughafen Zürich AG has high fixed costs. Despite considerable efforts, it is therefore not possible to reduce costs in line with the fall in revenue.
Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by CHF 445.8 million to CHF 196.0 million (-69.5%).
As a result of additional depreciation for the property acquired from Priora Suisse AG, along with the first depreciation posted for the Circle, total depreciation and amortization was at CHF 252.6 million and thus above the prior-year figure of CHF 238.7 million.
The net finance result deteriorated by CHF 10.8 million compared with the previous year, amounting to CHF –24.8 million. This is due especially to higher interest payments of the subsidiaries abroad.
The consolidated loss for the financial year just ended amounted to CHF 69.1 million.
In the year under review, Flughafen Zürich AG’s investment in ongoing projects amounted to CHF 398.5 million (2019: CHF 773.2 million), of which CHF 367.6 million (2019: CHF 537.9 million) was invested at its Zurich base. The biggest single project was again the proportional investment in the Circle. Other major investment projects were the refurbishment and expansion of the baggage sorting system, the restoration of the maintenance area and the expansion of the landside passenger areas.
The forecast for the current financial year is still surrounded by a great deal of uncertainty, with passenger volumes in 2021 being primarily dependent on the point in time when the current travel restrictions are eased. Flughafen Zürich AG CEO Stephan Widrig: “Anyone who provides proof of vaccination or a negative Covid test should be able to travel without restrictions and also be exempt from quarantine rules. We will continue to place great importance on hygiene and protective measures in future to ensure that air travel from Zurich Airport is safe. But we urgently need conditions that allow travel to be planned again.” Flughafen Zürich AG is well placed to take advantage of the recovery: an advantageous passenger mix with a high proportion of travellers flying within Europe and to tourist destinations, as well as a robust Swiss economy, provide favourable conditions.
Investments at the Zurich base will amount to approximately CHF 200-220 million this year. As regards investments at subsidiaries abroad, the project in Noida, India is the most significant. If construction starts this year as scheduled, this will add up to about CHF 100 million to the total.
International airport business to be an independent division
Given its growing importance, the international business will be concentrated in a separate “International” division within Flughafen Zürich AG from 1 May 2021. The Board of Directors has appointed Daniel Bircher to head up this new division; he will thus be a member of the Management Board of Flughafen Zürich AG. Mr Bircher has worked for Flughafen Zürich AG since 2006 and is very familiar with the international business through his many years of working in various countries. From 2011 he was Operations Director at Bangalore International Airport in India, from 2015 COO of Belo Horizonte Airport in Brazil and since 2019 CEO Zurich Airport Asia in Kuala Lumpur, Malaysia. Daniel Bircher is 52 years old and holds a lic. phil. degree from the University of Zurich.
The focus of the international business is on India and Brazil. The largest project is currently the construction of a greenfield airport for the metropolitan region of Delhi in Noida. Besides its activities in Switzerland and the project in India, Flughafen Zürich AG is currently involved in the operation of eight airports in Latin America. These include four airports in Brazil, two in Chile and airports in Bogotá and Curaçao.
The 2020 Full Year Report of Flughafen Zürich AG is available under https://report.flughafen-zuerich.ch/2020/ar/en.