Fraport Group still in trouble. Cargo cushioned the downturn

Fraport and its subsidiaries report dire mid-year results. The airport Group’s revenues declined sharply during the first half of 2020, passenger numbers plummeted, operational losses
keep mounting. Thousands of jobs are at stake, particularly at Frankfurt Rhine-Main. In contrast, the cargo business was less hit by the pandemic yet announces major structural changes.

Cargo Center at Fraport’s Cargo City South – company courtesy
Cargo Center at Fraport’s Cargo City South – company courtesy

//

Fraport AG’s CEO, Stefan Schulte, is used to announcing positive news about Frankfurt Airport and the development of the numerous group members every  6 months. However, in 2020, with
Covid-19 paralyzing private and business travel, everything is different. Therefore, in his first half-year 2020 review, the Fraport boss  hardly had anything positive to report, but a
multitude of massive problems instead.
Passenger numbers down
Such as the passenger numbers, for instance: At Rhine-Main Airport, passenger traffic fell 63.8% during the first half of this year. This was also the case at Fraport’s Group subsidiaries such as
Antalya, Fortaleza, Xi’an, St. Petersburg, or Porto Alegre, to name but a few, as passenger traffic came to a virtual standstill, particularly during the second quarter.

Sharp drop in EBITDA
With the absence of travelers, the Group’s revenue went south, plummeting by almost 50%, and reaching €910.6 million year-on-year. Group EBITDA declined by an alarming 95.6% to €22.6 million,
while Group EBIT fell to minus €210.2 million (first half 2019: €279.1 million). This caused the Group‘s result (net profit) to drop to minus €231.4 million year-on-year, compared to a profit of
€165 million achieved in the first half of 2019. With the exception of Lima, Perú, all of Fraport’s international airport subsidiaries also contributed negatively to the Group’s financial
performance.

Tentative traffic recovery has begun
And the valley of tears has not been yet crossed, although the Group’s recovery has tentatively begun. According to CEO Schulte, there are first signs that the crisis has bottomed out.
“Traffic started to recover with the partial lifting of travel restrictions since mid-June. Meanwhile, we are again offering numerous attractive destinations and connections via our FRA
hub,“
the executive stated. However, passenger numbers are still only increasing at a very slow pace, he added. “At our home base in Frankfurt, weekly passenger figures are currently
still around 79% below the previous year’s level. Uncertainty in the aviation sector remains high due to ongoing travel restrictions and infection rates rising again in some places. This
situation poses major challenges to our company and the entire industry.”

According to Mr. Schulte, Rhine-Main in particular is hit hard by the crisis that will endure in 2021 and beyond, he estimates. Even in 2023, passenger numbers at FRA are likely to be 15% to 20%
below the 2019 figures, with correspondingly less work for the employees, he predicts. As a consequence of the slow recovery of traveler numbers, the management considers not only prolonging
short-time working agreements, but also axing up to 4,000 jobs at FRA which currently has a total staff of 22,000. 
A look at the European neighbors shows that Covid-19 had similar effects on them, evidenced by mid-year passenger figures presented by AMS, down 62.1%, and 62.2% reported by Aeroports de Paris
(CDG, Orly).   

Cargo resists FRA’s downward trend
Hit by the loss of lower deck capacity caused by the near standstill in passenger aviation, tonnage at FRA declined by 20% from mid-March to mid-April. At the beginning of May, the figure even
briefly approached the 2019 level. Towards the middle of the year, freight development entered a stable phase, although still well below the previous year’s figures, with tonnage in June down
16.5% on the same month of the previous year.
The “wave of imports” in April/May was carried by a large number of additional cargo charters and passenger aircraft transformed to so called “preighters”, FRA’s Head of Cargo,
Max Philipp Conrady, reports. This has never been seen in FRA in this form or to this extent before, he says. During this period, FRA handled about 3.5 billion respirators, 22,000 consignments of
protective equipment, but also medical equipment, pharmaceuticals, and food for the German and European markets. The number of packages to be handled increased by approx. 30% compared to the
usual freight operation in 2019. In this phase, an almost complete decrease of transfer freight could be observed. Instead of the usual import/export ratio of 50:50, import freight had reached a
share of up to 56% of flown volume. These developments have now also tended to normalize, although flights with FRA medical protective equipment are still taking place.
The pandemic evoked remarkable structural changes in cargo operations at FRA:
– freight carried in freighter aircraft reached 75%, vs. 60% in 2019
– belly cargo contracted sharply, reaching a meager 5% compared to 40% in pre-corona times
– so called Preighter freight amounted to a stunning 20%, vs. 0% a year before
– finally, FRA enjoyed a boom of freighter flights in recent months, averaging over 150 per day, which is 90 more in comparison to 2019 operations. This sharp increase was mainly triggered by
charter traffic, transporting PPE from the Far East to Frankfurt.

WHO sends positive signal to air travelers
Meanwhile, the prospect for an increase in passenger traffic, which automatically ups the availability of lower deck capacity for transporting cargo, is brightening again, after the WHO
recommended the gradual easing of travel restrictions, as announced in “Schengenvisainfo news” of 04AUG20. However, the organization warns that ”the gradual lifting of travel should be based
on a thorough risk assessment.”

During an online news announcement, the WHO’s Director-General, Tedros Adhanom Ghebreyesus took Canada, China, Germany, and South Korea, as commendable examples of countries having managed to
control the outbreaks and reduce the cases of infection by following health measures such as wearing masks in public, avoiding crowds, maintaining good hygiene, avoiding touching the face, etc.
If more states would follow these examples, the world will beat the coronavirus pandemic, the WHO Director advised.
A recommendation that is certainly shared by the international aviation industry and airport operators as well.

Heiner Siegmund

We always welcome your comments to our articles. However, we can only publish them when the sender name is authentic.

Source: Cargoforwarder

Be the first to comment on "Fraport Group still in trouble. Cargo cushioned the downturn"

Geef een reactie

Het e-mailadres wordt niet gepubliceerd. Vereiste velden zijn gemarkeerd met *

*