Outlook, risks and opportunities report

Outlook report

Economic and industry-specific conditions

In 2017, the pace of global economic growth is set to pick up slightly. Current forecasts range from 2.7 percent (World Bank, Global Economic Prospects, January 2017) to 3.4 percent (International Monetary Fund, World Economic Outlook, January 2017), marginally above the projections for 2016.

In the leading industrialized countries, the economy will post similar growth to that of 2016. In developing and emerging markets, economic output is likely to pick up speed overall mainly thanks to rising commodity prices. Positive growth is again expected for next year in the crisis-stricken countries of recent years, Brazil and Russia.

Forecast economic growth in selected destinations worldwide

Chart: Forecast economic growth in selected destinations worldwide
GDP Growth in 2016 and 2017
Source: IMF, World Economic Outlook, January 2017

After the OPEC countries agreed to limit oil production in the second half of 2016, there was a moderate rise in the oil price. However, since oil exporting countries have not always complied with their quotas in the past, the crude oil price is expected to stagnate at around USD 55 per barrel (Brent Crude) this year.

For the eurozone, total growth of 1.6 percent is expected in 2017. The increase in economic output will be mainly supported by private consumption. However, a moderate increase in inflation means that the trend in consumer expenditure should not accelerate further. At the same time, the forecast for 2017 for the eurozone is subject to relatively substantial uncertainties. This is due to a continuing lack of clarity as far as the impact of Brexit is concerned as well as uncertainties regarding the future direction of economic policy because of imminent parliamentary elections in the four key member countries Germany, France, Italy and the Netherlands.

Forecast economic growth in selected destinations throughout Europe

Chart: Forecast economic growth in selected destinations throughout Europe
GDP Growth in 2016 and 2017
Source: IMF, World Economic Outlook, January 2017

In 2017, the increase in economic output in the Federal Republic of Germany will be somewhat lower, at 1.5 percent, than in the previous year. This is mainly due to the lower number of working days in 2017. The fundamental growth dynamic is unchanged. The early indicators for economic growth in the Federal Republic remain at a high level. The Ifo Business Expectations Index stands at 111.0 and the ZEW Economic Sentiment Index at 13.8 points.

The upturn is still supported by private consumption and construction investment. Exports are also expected to pick up speed over the coming year because the prospects for the global economy are more positive than in 2016. Consumer sentiment also offers hope that the positive trend in consumer expenditure will continue. GfK forecasted the Consumer Climate Index will reach 10.0 points in March 2017.

The general conditions in Bavaria and the region around the airport mean that further strong growth in transportation demand can be expected at Munich Airport. According to the results of the regionalized population projection by the Bavarian State Office for Statistics, the number of people living in Bavaria, especially around Munich, will grow in the period up to 2035. The population of Upper Bavaria will rise by 11.5 percent. The Prognos Future Atlas also shows optimum future opportunities for the regions mentioned. Driven by growing prosperity and increasing population, the trend in the volume from Munich Airport's core catchment area was positive in the last two years in particular. This trend is expected to continue in future.

The global aviation market will continue to grow. The IATA is forecasting growth in global air traffic volume of 5.1 percent for 2017. A slight fall in the growth rate compared with 2016 (5.9 percent) is therefore expected, as the moderate rise in the oil price will depress growth in demand somewhat. The indications for freight are also positive with an increase of 3.3 percent. The German Airports Association (ADV) is also optimistic about the future. With expected passenger growth of 3.1 percent, an increase in flight movements of 1.9 percent, and an increase in transported freight of 2.8 percent, it looks like another successful fiscal year for German commercial airports. According to ADV, growth will be mainly driven by the low-cost segment.

Forecast course of business

The Executive Board of Munich Airport also has positive expectations of traffic volume in 2017. The number of passengers should increase again by circa 3 percent and therefore reach 43.9 million. Due to numerous new connections in Terminal 1 and 2, the Executive Board also expects an increase in aircraft movements of circa 3 percent to 409,000. Growth in passengers and movements is to be significantly supported by the stationing of a total of seven new aircraft by the Lufthansa Group (Lufthansa three and Eurowings four aircraft). Further growth is also expected for existing network and low-cost airlines.

In addition to the forecast positive trend in traffic, the planned increase in charges of 3 percent envisaged by the master agreement on charges will lead to a sharp rise in Aviation proceeds in 2017.

Proceeds from Ground Handling will increase sharply in 2017 thanks to the acquisition of a new customer at the Berlin location.

The forecast growth in passengers has a positive impact on non-aviation proceeds as a rule. Accordingly, revenues from retail and catering, as well as the Services and Parking core business, will rise compared with 2016. In retail, apart from traffic-related growth in revenues, positive effects are also expected because of refurbishment measures and the expansion in the sales space in Terminal 2.

The commissioning of the new satellite building at the end of April 2016 significantly improved handling capacity in Terminal 2 and created the preconditions for long-term growth. Above all, this should have a positive impact on the trend in revenue from catering, since the catering services are largely, at circa 70 percent, operated by the Group in the satellite building. Use of the additional advertising space created in the satellite building and commercial space let to third parties for the entire year should also lead to an increase in revenues in 2017.

The Executive Board expects further growth from the commissioning of the hotel extension in the first half of 2017 as well as the conversion and construction of the new conference center.

Other operating income will fall sharply in 2017 because of the extraordinarily high earnings generated from the sale of real estate in the past fiscal year. The Real Estate business unit expects far lower earnings from the sale of real estate in 2017.

The trend toward higher cost of materials due to the increasing need for upgrading, converting and optimizing existing real estate will continue in fiscal year 2017. The cost of materials will also rise sharply because of the acquisition of a new customer at the Berlin location.

In 2017, Munich Airport will press ahead with its projects to develop real estate.

The Executive Board also expects an increase in personnel expenses as a consequence of increases in the collective pay rates in the TVöD collective pay scale agreement for public sector employees. New jobs will be created due to growth in traffic and the expansion in ground handling services as well as to improve the quality of passenger handling services.

Other operating expenses will increase in 2017 due, among other things, to the expansion in the budget for unforeseen measures and planned communication projects.

In contrast to this, planned amortisation and depreciation will decline sharply in 2017. This is due to the fact that in the upcoming fiscal year, individual components of buildings – including Terminal 1 – will no longer be depreciated. However, this effect will be slightly mitigated by a full year’s depreciation being applied to the satellite building for the first time.

The current low interest rate policy pursued by the European Central Bank will also have a positive impact on Munich Airport's financial result in 2017. The Executive Board also expects a considerable reduction in interest rate costs from the follow-up financing for the syndicated loan concluded at the end of 2016.

Overall, Munich Airport expects EBT to increase slightly by between 1.0 percent and 5.0 percent.

Forecast financial and non-financial key performance indicators

  2016 2016
  Actual   Forecast
      from to
      % %
EBT in T€ 209,873 Increase 1.0 5.0
CO2 reductions in tonnes 5,324 Increase 228.1 233.1
Passenger experience index departure 1) 82.02 Increase 0.5 1.0
Passenger experience index arrival 1) 79.85 Increase 0.5 1.0
Employee retention index 2) in % 73 Unchanged    
1) The passenger experience index replaces the ASQ Overall Index. It has been compiled since March 9, 2016.
2) The employee retention index is compiled every three years. The figure quoted results from the last survey in 2013.

The PCA systems installed at Munich Airport will gradually be phased into normal operation. This will lead to significant reductions in CO2. Additional efficiency measures to reduce energy consumption, especially for lighting, air conditioning, in IT and in buildings and facilities are also to be implemented.

In future, Munich Airport will maintain the ASQ Overall Index at the benchmark set by other European hub airports. However, it is to be replaced by the passenger experience index (PEI) as a non-financial target. The PEI will allow Munich Airport to derive location-specific targets adjusted to the needs of target groups and assign the fields of action to improve service to existing customer contact points. The continuous measures to improve customer satisfaction will include, among others, improvements in accessing free wi-fi, boosting the airport's role as a host through more service-focused training as well as improvements along the passenger process in 2017. In total an improvement of between 0.5 percent and 1.0 percent is expected for satisfaction among both outgoing and incoming passengers.

All employees throughout the Group will be asked to complete a questionnaire to determine employee satisfaction in 2017. It is currently difficult because of various influencing factors to obtain a reliable assessment of the trend in this indicator. However, Munich Airport expects the trend to be unchanged for the 2017 survey. Current plans are that the employee retention index will be replaced by a new Group-wide key performance indicator following this survey.

With regard to net assets and financial position, the Executive Board expects a positive free cash flow for 2017 despite the planned substantial investment in the expansion and modernization of Terminal 1, the construction of the new parking facility P51 as well as the start of LabCampus. On the assets side, the planned investments will exceed ongoing depreciation and lead to an increase in non-current assets. On the liabilities side, other financial liabilities remain virtually constant compared with 2016. Current liabilities, which were built up for the construction of the satellite building, will fall sharply in 2017 and have an adverse impact on operating cash flow.

Risks and opportunities report

Risk management system

The Executive Board of FMG and all subsidiaries and affiliated companies is responsible for the early detection and prevention of risks that jeopardize the continuity of Munich Airport and the investments. Group Management has overall responsibility for an effective risk management system and lays the essential foundation for it by communicating and defining corporate strategy and targets. It formulates specifications for the risk management process and the organizational structure of the risk management system.

The aim of the risk management system is to identify events and developments that may have a negative impact on the achievement of strategic and operational targets in good time and develop suitable countermeasures. It takes account of all aspects of entrepreneurial activity – economic as well as environmental and social.

The Risk Management Committee was established in 2016 as an additional supporting management, control and supervisory body within the risk management system. As the highest ranking risk management body, it is directly subordinate to the Executive Board and consists of the Chief Financial Officer and Chief Infrastructure Officer, the heads of the Aviation, Commercial Activities and Real Estate business divisions, the heads of the Legal Affairs, Committees, Compliance and Environment, Corporate Development, Group Controlling and Corporate Investment Management, Corporate Communications corporate divisions and the risk manager. The head of Compliance is involved in the Risk Management Committee as a guest. The task of the Risk Management Committee is to analyse the risks from a Group perspective and to monitor the effectiveness of countermeasures. It provides support with the development of the risk management system as well as risk identification, assessment and control. The Risk Management Committee meets quarterly and resolves upon the risk report, which is subsequently presented to the Executive Board.

The risk management guideline was revised in 2016 on the basis of the development of risk management and focusing risk management on the internationally recognized framework model «COSO ERM» (Committee of Sponsoring Organizations of the Treadway Commission – Enterprise Risk Management). The new risk management guideline for the Munich Airport Group came into effect as of April 1, 2016. The guideline specifies the general principles of risk management in the Group as well as the tasks and responsibilities of the function holders involved in risk management.

The risk management process comprises the following steps. A coordination and communication platform has been established to support the risk management process.

Identification and communication of risks

All divisional managers and Chief Executive Officers of subsidiaries and affiliated companies are responsible for the identification and assessment of risks. The risk officer defines risk managers in the respective divisions, who will ensure that all risk-relevant information in the respective division is coordinated, managed, documented and passed on. The central coordination of risk management activities in the Group is the task of the risk manager. He checks the divisions’ risk reports for plausibility and compliance with the Group-wide standards for risk assessment. The risk manager combines the divisions’ individual reports in a risk report, taking account of materiality for the Group, and reports quarterly to the Executive Board and shareholders. Risks that jeopardize the Group’s existence that have been identified for the first time must also be reported to the Executive Board on an ad hoc basis.

As a basis for dealing with risks responsibly, each individual employee is involved in managing risks throughout the company. Each employee is responsible for eliminating risks in his area and reporting indications of existing risks to his manager without delay.

Assessment of risks

Systematic risk assessment allows the company to determine the extent to which individual risks jeopardize the fulfillment of Munich Airport's corporate goals and strategies and which risks may possibly threaten its existence. The factors «expected loss» and «likelihood of occurrence» are presented in a two-dimensional risk matrix for this purpose. The expected loss describes the impact on profits that can be expected if the loss event occurs. Here, Munich Airport distinguishes between the four categories of loss «low», «medium», «high» and «very high». The likelihood of occurrence is divided into four categories «low (5–10 percent)», «moderate (10–25 percent)», «significant (25–50 percent)» and «acute (>50 percent)». In the case of events that recur over time, the company works with the frequency with which they occur. A significant frequency of occurrence means that a loss must be expected to occur within two fiscal years. The assessment first takes place without measures to limit risk being considered (gross risks). Subsequently, the risks are assessed after risk-minimizing measures are initiated or implemented (net risks).

Dealing with risk

Starting from the risk analysis, appropriate countermeasures for dealing with risks are specified in line with corporate strategy and economic aspects. The strategies for managing risks include: controlling, insuring, minimizing, eliminating and passing on. The risk officers have the task of specifying and implementing countermeasures to manage risks in the respective division affected.

Risk monitoring

The risk manager monitors the effectiveness of risk management continuously. Risks are also monitored separately by Internal Audit.

Compliance management system

Compliance covers compliance with all airport-related laws, specifications and regulations, national and international rules and standards as well as in-house rules and guidelines. Munich Airport has established a Group-wide compliance management system, which encompasses all organizational provisions ensuring compliance with the aforementioned rules.

The Compliance department submits reports on the current status of the compliance management system to the Executive Board on a regular basis and to the Supervisory Board on an annual basis.

Compliance risks are also communicated as part of the risk reporting to the Executive Board and shareholders if internal thresholds are exceeded. A regular dialog takes place between Risk Management and Compliance.

Identifying and minimizing compliance risks

The Compliance department prepares the compliance risk analysis with input from the divisions and combines it with the subsidiaries’ compliance risk analyses every year.

Compliance risks are assessed in the same way as in the risk management process. Once the compliance risk analysis has been carried out, the Executive Board is notified of the results in a report.

The annual Compliance report to the Supervisory Board of FMG also includes the results of the compliance risk report. If there is an elevated loss potential and concomitant high probability of occurrence despite all the countermeasures taken, a detailed description is provided in the report.

In respect of 2016, there were no elevated compliance risks after the countermeasures taken were considered.

Preventing corruption

The compliance guidelines and the guidelines covering gifts and invitations support managers and employees in ensuring legally compliant and ethical behavior at the workplace. They are published on the intranet and are therefore available to all employees. The guidelines also reference other guidelines with which employees must comply, ensuring for example, compliance with public procurement law with regard to procurement and contracting processes, data protection, and information security. These ensure that processes and procedures are transparent and traceable, both internally and externally. In contracting and tendering procedures, Munich Airport requires bidders to submit a declaration of commitment stating that they will undertake everything necessary to preclude corruption. Compliance failures are liable to sanctions, such as exclusion from the contracting process.

The position of anti-corruption officer is exercised by the head of the Compliance department. There were no confirmed cases of corruption in 2016.

Communication and training

A key task of the Compliance department is to train and advise employees and managers in compliance matters as a preventative measure to stop compliance breaches from occurring.

Group compliance regularly provides training and publishes information to ensure that all employees and managers are familiar with the guidelines and any updates or amendments to them. Every year they must provide their signature to confirm that they have read the compliance documentation.

In 2016, some 71 managers of the Munich Airport Group took part in the three-hour training module on compliance as part of the Leadership Excellence program. In addition to the legal fundamentals and the responsibilities of managers, this also covers Munich Airport Group’s specific guidelines on compliance and the prevention of corruption. A total of 467 people have received training since the module started at the end of 2013.

Besides the training for managers, employees are offered a one-hour web-based training session on compliance matters. It includes compliance issues, such as gifts and invitations, secondary employment, conflicts of interest or data protection and their implementation in daily working life, presented in actual examples. 3,555 employees participated successfully in this from February 2015 until the end of 2016. Employees with no access to a company PC were given compliance training in face-to-face events. Just under 4,000 employees also took part in this in the period mentioned.

Participation in the compliance training sessions is recorded and also entered in the employee's own qualification profile.

The Executive Board and Supervisory Board deal with compliance issues at regular intervals.

Electronic whistle-blower system

Through an electronic whistle-blower system, the Business Keeper Monitoring System (BKMS®), Group employees, business partners, and customers can report behavior potentially damaging to the organization. People inside the Group and outside can also contact the Compliance department by other means of communication (telephone, e-mail, face-to-face discussions) if they wish to draw attention to compliance infringements and need advice. Tender documents inform potential bidders of the possibility of using the BKMS® should compliance infringements be suspected.

Data protection

Munich Airport’s data protection officer is also assigned organizationally to the Compliance department but conducts his job independently and reports directly to the Executive Board. Initial training courses provided to new employees and apprentices, along with periodic onward training for employees in data privacy law, have helped raise awareness of statutory data protection requirements. Specialized, individual advice is also available in instances where people are unsure how to comply properly with data protection regulations.

There were no known instances of complaints regarding breaches of customer privacy and losses of customer data.

Risiks

Risks that could have a material influence on the business activity or on the net assets, financial position and results as well as the reputation of Munich Airport are explained below. In each case, the risks are shown before and after consideration of appropriate countermeasures.

The risk assessment relates to the economic impact in the assessment period quoted. As of December 31, 2016, the following material gross risks were identified for Munich Airport:

Overview of gross risks

Chart: Overview of gross risks

Risks resulting from force majeure

Risk Description and analysis Countermeasure(s)
Natural disasters A breach of the Isar dams near Freising caused by heavy rain could lead to the terminals being flooded. Gradual upgrading of the Isar dams by the water authority. They have already been partially renovated. Insurance to cover earthquakes, storms, hail and flooding has been arranged.
Attack on air traffic The risk of terrorist attacks on air traffic remains high. Even following the attacks in Brussels and Amsterdam, there is currently no expectation of a specific threat in Germany. In addition to bodily injury and property damage, this would result, at least temporarily, in a decrease in the number of aircraft movements and passengers. Maintain high standards of security through the provision of adequate and well-trained personnel resources as well as construction measures to guarantee modern and approved security technology and infrastructure. Monitoring the quality of service through sustainable quality measures and constant dialog with the responsible security authorities. Bodily injury and property damage as well as interruptions of operations are insured.
Terror at the airport Acts of terror on the airport campus can result in bodily injury and property damage. A further consequence of such events would be, at least temporarily, a decrease in the number of aircraft movements and passengers. Maintain high standards of security through the provision of adequate and well-trained personnel resources as well as construction measures to guarantee modern and approved security technology and infrastructure. Monitoring the quality of service through sustainable quality measures and constant dialog with the responsible security authorities. Bodily injury and property damage as well as interruptions of operations are insured.
Fulfillment of security tasks The airline companies are responsible for security tasks in transferred areas. In these areas, airline companies fulfil the same task as airport operators but are not subject to the same supervisory authority. For Munich Airport, there is a risk that inspections will reveal defects in transferred areas and the airport as a whole will lose its security status as a result. Defective controls could lead to property damage and bodily injury as well as reputational damage. At present, a Group company owned by Munich Airport is tasked with performing operational security tasks in the transferred areas.
Market slump from epidemics/illness Epidemic/sickness outbreaks can result in market downturns with reduced aircraft movements and passenger numbers. Due to a relatively high fixed cost ratio, Munich Airport’s ability to react to market downturns is limited.
Large fire In the event of damage to or destruction of terminals or infrastructure systems caused by a large fire, property damage and bodily injury, as well as long-term interruptions of operations are to be expected. To minimize the large fire risk, Munich Airport maintains adequate technical warning equipment and an Airport Rescue and Firefighting service. Bodily injury and property damage as well as interruptions of operations are insured.
Aviation accidents Aviation accidents or damage to aircraft can result in bodily injury and property damage as well as interruptions of operations and consequential damage. To minimize the risk, Munich Airport maintains an Airport Rescue and Firefighting service, a medical service, and a counseling team. The risk of aviation accidents is minimized through liability insurance and fully comprehensive insurance.

Market risks

Risk Description and analysis Countermeasure(s)
Loss of/adverse impact on hub If DLH amends its strategy of developing the Airport as a hub, this would result in dramatic falls in the number of passengers and aircraft movements. Munich Airport's collaboration with DLH is based on joint investments and long-term cooperation agreements.
Airlines’ economic difficulties The European air traffic industry is in a difficult competitive situation. The airlines operating from Munich Airport are also affected by this. Steady acquisitions of new customers should be able to compensate for any decreases in existing customers.
Economic outlook As a consequence of a weak economy, the growth parameters assumed in the planning process cannot be achieved, which has an adverse impact on profits. During more significant economic crises, a collapse in loan finance markets may occur. Reducing expenses through cost monitoring, if necessary reducing staff numbers in a socially responsible manner plus a short-term cut in the investment budget in non-critical divisions aim to mitigate the consequences of economic slowdowns. There are revolving credit lines to ensure the company is solvent.

Operating risks

Risk Description and analysis Countermeasure(s)
EASA certification If the European Aviation Safety Agency (EASA) Certificate is not renewed, then Munich Airport could lose its operating licence. The certificate must be renewed before January 1, 2018. Based on the progress made in preparing for the EASA certification in 2016, the risk of the airport being closed for a longer period is no longer paramount as of December 31, 2016. However, costs for changes to flight operation-relevant infrastructure and equipment may accrue from demands from the authorities that are still outstanding. A good starting situation for the certification process is to be created by prioritizing EASA activities, supporting the safety and risk assessment by external consultants and ongoing coordination with the certification authority.
IT failure Damage to the IT system can result from fire, water ingress, or sabotage. Failure of IT for traffic operations with the corresponding interruptions of operations would be the consequence. Critical corporate IT systems are fully redundant with systems located in physically separate locations. Property damage and interruptions of operations are insured.
Water damage Water damage caused by a break in the main drinking water or fire extinguishing water pipelines could lead to the failure of infrastructure systems important for air traffic. Remotely controlled emergency shut-off equipment and additional protective devices in the pipeline connections limit the possible damage. Property damage and interruptions of operations are insured.
Expansion of EU safety requirements The European regulations on aviation security require the rules governing checks on persons and luggage at airports to be extended in phases. The resultant conversion measures cause costs. Depending on the design, the conversion work causes the loss of leasable space. Munich Airport is introducing optimization measures to minimize the loss of space.
Failure to pass an EU safety inspection The EU's aviation authorities are conducting safety inspections at airports. If an inspection results in a high number of complaints, Munich Airport will lose its security status. The consequences would be a heightening of the safety regulations, considerable obstruction with operational processes, competitive disadvantages and a loss of image. Munich Airport conducts thorough and strict quality controls to manage the quality of all safety aspects at the airport.
Utilities and waste disposal The inadequate availability of substances necessary for operating activities, such as electricity, heat, cooling energy, drinking and extinguishing water, waste water, and waste, may result in property damage and interruptions of operations. The service and maintenance programs, network redundancies, and storage reduce the risk of gaps in supply. Property damage and interruptions of operations are insured.
Reorganization of ground handling The successful reorganization of the former Ground Handling business division could be put in jeopardy by the following uncertain events and circumstances: handling contracts are not extended, order volumes from existing customers decrease, aggressive pricing results in loss of orders. The profitability and competitiveness of AeroGround are being improved continuously. At the end of 2016, AeroGround agreed on the key conditions of the handling agreement for the next seven years with its main customers. As a result, associated collective restructuring agreements could be extended. Progress with restructuring is monitored on an ongoing basis.
Staff shortages Staff shortages at one of Munich Airport's Group companies could impair the quality of checks on persons and luggage as well as following up alarms; delays in operations would be possible. CAP tasks third party companies with providing security services to cover staff shortages temporarily. Staff are employed on an ongoing basis and trained as aviation security staff.

Legal risks

Risk Description and analysis Countermeasure(s)
Third take-off and landing runway In the event of the third runway project being finally shelved or postponed for a significant period of time, all existing planning and land acquisition costs must be checked in respect of their recoverability and depreciated if necessary. There could be a significant loss of corporate value unless capacity is expanded through the construction of the third take-off and landing runway. A decision on the expansion project or, if applicable, a new referendum is to be reached again in spring 2017 on the basis of current aircraft movement figures. The legal ruling in favour of Munich Airport dated February 19, 2014 was an important milestone in limiting the legal risks for project implementation. Munich Airport is also making a case to politicians for the expansion. The well-founded work to convince people of the merits of the third take-off and landing runway is continuing.
Products used for de-icing There is a suspicion that the products currently used for de-icing paved areas and runways accelerate the oxidation of aircraft brakes. There are discussions about banning these products at the SAE (Society of Automobile Engineers) international standardization committee. If they are banned, Munich Airport would have to invest substantial sums in waste water systems to comply with the requirements of water management legislation. Together with other German airports, Munich Airport is arguing against these de-icers being banned.

For the gross financial risks listed below, the expected financial liability fell short of the reporting limit as of December 31, 2016. Therefore they were not included in the risk reporting.

Financial risks

Risk Description and analysis Countermeasure(s)
Currency risks Currency risks arise insofar as planned sales in foreign currencies are not balanced by any corresponding expenses or outgoings in the same currency. Munich Airport hedges currency risks using currency forwards.
Credit and reliability risks Credit and reliability risks primarily arise from short-term deposits as well as trade receivables. In general, deposits are only made with German banks with deposit protection. The management of risks of default includes the constant monitoring of debtors’ creditworthiness, overdue invoices, and a stringent collections management. Dependent on the credit rating, certain services are only performed against prepayment or provision of collateral in the form of bank guarantees.
Interest rate risks Interest rate risks essentially arise from floating-rate financial liabilities. Munich Airport counters interest rate risks using interest payer swaps.

After considering countermeasures, the following nets risks remain:

Overview of net risks

Chart: Overview of net risks

Opportunities

The divisions and investments identify, assess, and manage opportunities on a decentralized basis with support from Corporate Development and Group Controlling and Corporate Investment Management.

The report shows the developments and events that could lead to a positive deviation from planning. The presentation is based on the risk report with the difference that the horizontal axis shows maturities – that is the time until opportunities are expected to occur and how long it will be until they have an impact – and not the frequency with which they occur. Where opportunities are mentioned more than once, this indicates that they will have an impact over several periods.

Overview of opportunities

Chart: Overview of opportunities

Opportunities

Opportunities Description and analysis
Consumption Overcoming the current geopolitical and economic crises could lead to an increase in the propensity to consume of passengers from regions outside Europe above the planned level.
Economic outlook Global economic growth above planned levels could boost revenues further.
Traffic An increase in air traffic growth above the expected level could increase revenues in all corporate divisions.
Hub development The key partner airline DHL might improve its market position through internal optimization measures, leading to greater expansion of the Munich Airport hub and consequently to growth in passenger numbers above the planned target.
Digitization Munich Airport is working on the strategy to adjust the Airport’s business model more closely to the structural change resulting from digitization. The potential medium and long-term effects on growth resulting from this strategy have not yet been taken into consideration.
Off-campus activities The off-campus business of Munich Airport (services and retail) might develop better than expected, with corresponding growth in the consolidated profit.
Real Estate In the long-term, activities in the Real Estate business division could be strengthened more than is currently planned, which would lead to revenue in this business unit being increased.
CO2 strategy The continuing increase in efficiency among energy-saving technologies and an associated improvement in the price-performance ratio of low emissions energy generation could lead to the costs of Munich Airport's new CO2 strategy being lower than expected.
Rail access Better than expected improvements to rail access could lead to an expansion in the passenger catchment area and consequently to increased revenue in all business units.

Overall assessment of the opportunities and risk situation

For Munich Airport as the second largest passenger airport in Germany and one of the largest airports in Europe, it is important to actively exploit any opportunities that arise and to improve its position on the market still further through constant growth. However, it is also a key objective of Munich Airport to recognize risks in good time and to counter them systematically.

Accordingly, the currently anticipated impact of possible events and developments is taken into consideration in business planning every year. The reported opportunities and risks are defined as potential deviations going beyond the forecast corporate result. Munich Airport consolidates and aggregates the risks reported by the corporate divisions and Group companies and reports quarterly to the Executive Board and shareholders. Opportunities are identified and managed with the involvement of the corporate divisions, Corporate Development as well as Group Controlling and Corporate Investment Management.

Taking account of the current business plan, the opportunities and risk situation has scarcely changed year on year. No new risks were identified that might potentially have a critical impact on income.

No risks were foreseeable from the Group-wide risk management system or in the assessment of the Executive Board during the current forecast period, which individually or in their entirety could jeopardize the continued existence of Munich Airport.

Munich Airport points out that various known or unknown risks, uncertainties and other factors may lead to actual events, the financial position, the business development or the performance of the company deviating significantly from the estimates provided here.