Situation of the Group

Business model of the GroupGRI 102-45

Situation of the Group

Flughafen München GmbH (FMG) is headquartered in Munich. As the parent company of the Munich Airport Group (Munich Airport) it is the operator of Munich’s commercial airport.

Munich Airport operates in the aviation, commercial activities, and real estate business units. The service portfolio offered by the Group covers virtually all the services available at the airport campus – from air travel including passenger and cargo handling through to retailing, hotels and catering services. This integrated business model and depth of added value sets Munich Airport apart from its European competitors.

Munich Airport is committed to a corporate policy of sustainability. The orientation on economic, environmental and social goals ensures public acceptance of the airport and consequently the viability of its business model.

Main features of management and control

The owners of FMG are the State of Bavaria with 51.0 percent, the Federal Republic of Germany with 26.0 percent, and the City of Munich with 23.0 percent.

The shareholders’ general meeting is the highest monitoring and decision-making body. It decides unanimously on the Group's business fundamentals such as airport expansion, long-term borrowing and the use of financial instruments for hedging purposes. All other decisions require a simple majority.

Governance structure

Chart: Governance structure

Supervisory Board

FMG has a Supervisory Board, as specified in Article 1  (1), (6) of the German Co-Determination Act (Mitbestimmungsgesetz - MitbestG). The Supervisory Board exercises monitoring and co-determination rights. It appoints members of the Executive Board and determines their remuneration. Transactions exceeding certain thresholds and terms require Supervisory Board approval. The employees' representatives in the Supervisory Board are elected for a five-year term by the Group employees. The shareholders’ representatives are elected by the shareholders’ general meeting. Their term in office ends with the shareholders' general meeting that resolves on the formal discharge of the members for the fourth fiscal year after the start of their term in office.

The Supervisory Board has appointed a proposals committee, a working committee, and an HR committee. The proposals committee, working committee and the HR committee were entrusted with the following tasks:

Committes in the Supervisory Board

   
Proposals committee
  • Right of proposal for the appointment of a member of the Executive Board in the event that voting in the Supervisory Board does not achieve the requisite two thirds majority for the member of the Executive Board to be appointed in the first ballot
Working committee
  • Statement on the resolutions proposed by the Executive Board
  • Approval of certain legal transactions that exceed set maximum monetary values and terms
HR committee
  • Designing the contracts of employment for the Executive Board (with the exception of remuneration)
  • Setting and amending the rules governing remuneration in the area of the Group not governed by collective wage agreements
  • Setting or amending the salary level of certain employees above a set salary level or level of remuneration
  • Commitment to an occupational old-age pension in individual cases
 

Executive Board

The Executive Board of FMG's term in office is normally five years; reappointment or extension of the term in office is permissible. It is responsible for the Group's corporate policy and strategic focus. It determines the budget and monitors business developments.

The Executive Board receives a fixed (salary) and a performance-related remuneration including short- and medium-term incentives (bonus). The bonus is primarily linked to the consolidated profit before taxes.

Female quota

Women account for 25.0 percent of the Supervisory Board. This quota is set to be maintained up to June 30, 2017. In the event of a replacement, the Supervisory Board will work to ensure women are adequately represented.

By June 30, 2017 the proportion of women on the Executive Board should be increased to one third due to the planned appointment of another member of the Executive Board. This has been achieved through the appointment of Andrea Gebbeken as of October 1, 2016.

By June 30, 2017 the proportion of female managers in the highest management tier of the Group parent company FMG should be raised to 13.0 percent and to 29.0 percent in the second-highest management tier.

Operating activities

The Group’s organizational structure is divided into the business divisions, service divisions and corporate divisions of FMG. Commercial management and the internal reporting system are based on the business units. The business units comprise the business divisions and service divisions of FMG and the Group companies integrated in the business units.

Group structure of Munich Airport

Chart: Group structure of Munich Airport

 

 

1) MediCare Flughafen München Medizinisches Zentrum GmbH has a 18.2 percent equity interest in Radiologisches Diagnostikzentrum München Airport GmbH.
2) AeroGround Flughafen München GmbH has a 100 percent equity interest in AeroGround Berlin GmbH. In turn, AeroGround Berlin GmbH has a 100 percent equity interest in HSD Flughafen GmbH. (as of December 31, 2016)

In fiscal year 2016, Corporate Investment Management and Group Controlling were combined in one corporate division.

In total, the Group comprises eleven fully consolidated companies, one associate, and five companies that are not consolidated. These are directed by Group Controlling and Corporate Investment Management in line with the business division strategy assigned in each case.

With effect from January 18, 2016 AeroGround Berlin GmbH (AeroGround Berlin) acquired Acciona Airport Services, Berlin GmbH (Acciona) and HSD Flughafen GmbH (HSD). Acciona has a handling license for Berlin-Tegel Airport. This company was merged with AeroGround Berlin retroactively to January 1, 2016.

With the acquisition of the München Airport Center building (MAC building) by FMG, the lease agreement between MAC Grundstücksgesellschaft mbH & Co. KG i.L. (MAC KG) and München Airport Center Betriebsgesellschaft MAC mbH i.L. (MAC GmbH) was terminated as of October 31, 2016. The agency agreement for the management and lease of the office and commercial space of the MAC building concluded between FMG and MAC GmbH was also terminated. The agreements reached in the lease and agency agreements about the way MAC GmbH shall carry out its business were the basis for MAC GmbH being consolidated. As a consequence of the termination of these agreements, the company was deconsolidated.

Business units

  • Infrastructure operations at the limit of capacity
  • Wide variety of services and offerings along passenger routes
  • Highly attractive real estate location
  • Participations – full service provider for the airlines
  • Services – energy and telecommunications for all airport tenants
  • International business – Munich Airport in demand as a consultant

Aviation

The Aviation business unit covers the operation of Munich Airport's air traffic infrastructure.

In its current stage of development, Munich Airport has two runways with a maximum capacity of 90 aircraft movements per hour during daytime operations. As a rule, this capacity is fully utilized over large parts of the day. Between 10:00 p.m. and 6:00 a.m., flights are very limited and confined solely to exceptionally quiet aircraft. Scheduled and charter traffic is restricted to 28 planned aircraft movements per night. The restrictions may also be relaxed for homebase airlines and delayed flights. In the period between midnight and 5:00 a.m., night mail and survey flights by German air traffic control are permitted. Other exceptions to the curfew include, for example, emergency and medical aid flights, landings required for reasons of air safety as well as flights approved by the Bavarian Ministry of the Interior, for Building and Transport as the responsible authority in justified exception cases.

Although the runway system is still the real bottleneck, the airport terminals must also be continuously adjusted to increasing demand. The Terminal 2 satellite building providing additional capacity for around eleven million passengers was commissioned in 2016. The security checkpoints in departures/arrivals C were also expanded and planning for the conversion of Terminal 1 to create capacity for an additional six million passengers was expedited.

Through its central location in Europe, at the heart of one of the most economically successful regions, Munich Airport is ideally positioned in strategic terms. The region around the airport is distinguished not only by above average economic development but also by constant growth in the population and people in employment. This is also why Munich Airport is the German airport with the highest proportion of business travellers – and is consequently predestined for especially valuable scheduled connections. At the same time, population growth and rising prosperity are also leading to increased demand for private flights from Munich Airport. In 2015 and 2016, Munich registered more originating passengers (passengers who have not transferred) than Frankfurt and all other airports in the German-speaking area.

Collaborative work with Deutsche Lufthansa AG (DLH) has helped Munich Airport become a major international air traffic hub. Joint extension projects, such as Terminal 2 and the satellite building, form the basis for a sustainable partnership that ensures long-term growth, secures global connections for Munich and Bavaria and satisfies the continuous growth in demand for air travel with a high quality offering.

The following airport charges are levied for the provision and operation of the air traffic facilities:

Air traffic charges

  Assessment basis
Take-off and landing charge Maximum take-off mass of the aircraft (MTOM) on take-off and landing
Noise charge Fixed amount per landing depending on the noise category
Emissions charge Nitrogen oxide equivalent emitted per landing
Passenger charge Number of passengers on take-off
Freight charge Number of workload units on take-off/landing
Parking charge Maximum take-off mass (for each 24 hours, from the forth hour)
Security charge Number of passengers and/or workload units on take-off
Charge for passengers with reduced mobility (PRM charge) Number of passengers on take-off
De-icing charge Number of passengers and/or workload units on take-off
Waste disposal charge Number of passengers on take-off
 

In fiscal year 2014, Munich Airport concluded a master agreement on charges with uniform terms and conditions for all airlines, which sets the future trend of air traffic charges until 2020 and consequently ensures funding for infrastructure. On average charges rise by around two percent per year.

Commercial Activities

The Commercial Activities business unit is responsible for marketing space throughout Munich Airport that may be used for commercial purposes. This includes both strategic planning of the sector mix with regard to the retailing, service and catering space as well as the issue of leases and concessions to third parties and Group companies.

Munich Airport has over 19,625 square meters of catering space and 24,595 square meters of space dedicated to retailers and service providers. FMG's subsidiaries operate their own retail or catering businesses on around 65 percent of the total area.

Commercial Activities is also responsible for the five-star hotel in the airport’s central area. It currently has 389 rooms and ten conference rooms. Following completion of an extension, the hotel will have 551 rooms and 30 conference rooms from spring 2017.

This business unit is also responsible for marketing parking at Munich Airport. At present, there are around 36,000 parking spaces, of which 23,000 are in multi-story car parks and garages and around 13,000 are on paved and unpaved car parks.

Commercial Activities markets the advertising media and spaces at the airport as well. As a niche area of out-of-home advertising, Munich Airport features high-profile advertising spaces with little wastage tailored to clients' individual requirements.

The business unit's service portfolio also includes the events business.

Real Estate

The Real Estate business unit develops, operates and markets all real estate and property owned by Munich Airport. The real estate location is divided into location-specific areas, which are marketed under the AirSite concept.

Munich Airport has a lot to offer as a real estate location: an attractive environment, good road connections, very good parking, and a comprehensive range of goods and services for daily needs. The existing rail traffic access will be significantly improved by the addition of the Neufahrner Kurve.

In accordance with the high expectations of the entire site, a vibrant, distinctive urban development concept, which will provide the basis for excellent leisure amenities and successful business, is currently being developed.

Participations, Services & External Business

Participations

The other companies of the Group complete the airport's business. The significant companies are:

Significant subsidiaries

   
AeroGround The companies provide landside and airside handling services for airline passengers, including ground handling services, cargo handling and passenger care, at the Munich and Berlin locations.
aerogate Aerogate’s main services are passenger handling, operations services with ramp supervision, ticketing and lost & found and arrival services. The range is completed by the baggage delivery service and general aviation services.
Cargogate As a regulated agent, the company carries out services in relation to the throughput of airfreight and dealing with the associated customs formalities. The company packs and stores the airfreight in a hall area of circa 20,000 square meters as well as handling the documents involved. Cargogate also offers handling services for all common special goods, such as hazardous substances, refrigerated and valuable goods.
 

Services

Besides the business units and subsidiaries, Munich Airport's service divisions are also involved in external sales. The largest contribution comes from the following service divisions:

Significant service divisions

   
Technology The service division is responsible for the secure and cost-effective operation of airport infrastructure. Among other things, this includes the supply of energy and heating/refrigeration, maintenance of buildings and airport specific equipment as well as vehicle management for series vehicles and handling equipment. This division also plays a significant role in implementing Munich Airport’s CO2 strategy as part of its energy management.
IT Munich Airport's IT provides all airport tenants with telecommunication and network services.

International business

Munich Airport is also active in business in Germany and abroad outside the campus. Teams of experts provide consultation services worldwide in respect of commissioning and operating airports. International business is currently being developed.

Individual business units and subsidiaries also take part in the tenders of other airport operators in Germany and abroad. With the expansion of Acciona and HSD, Munich Airport took an important step in fiscal year 2016 to expanding outside its headquarters in Munich.

In total less than five percent of the Group's external sales are accounted for by activities of Participations, Services & External Business. Therefore, the economic development of this business unit is not explained in detail.

Control system and values management

Indicator system ensures sustainable business

Munich Airport measures the performance of its managers using financial and non-financial indicators. The focus is on indicators measuring corporate sustainability and quality. Accordingly, earnings before taxes (EBT) give the economic, CO2 reductions the ecological, and the employee retention index the social perspective of traditional sustainability management. The Airport Service Quality (ASQ) Overall Index identifies if the quality objectives have been achieved. FMG surveys internal and external interest groups to determine and regularly affirm the relevance of the performance indicators for stakeholders.

Earnings before taxes (EBT)

Since fiscal year 2016, the earnings targets of management have been formulated on the basis of earnings before taxes (EBT).

EBT is the input factor for determining profitability. It relates to the consolidated profit before taxes, calculated by applying the International Accounting Standards in the version adopted into European law by the European Commission.

CO2 reductions

CO2 reduction measures include cutting greenhouse gas emissions, conserving resources, the use of energy, and energy efficiency. One of Munich Airport’s goals is to achieve CO2-neutral growth with 2015 as the base year. In addition to the emissions caused by energy generation and consumption at Munich Airport itself (Scope 1) and the emissions from energy procurement (Scope 2), the emissions from the energy consumption of buildings, systems and vehicles of independent third party companies using the airport (Scope 3a) are observed.

Airport Service Quality (ASQ) Overall Index

The ASQ Overall Index is the globally recognized benchmark ratio for determining the quality of the range of services and products at airports. The ratio is not calculated by airports themselves, but by Airports Council International (ACI), the leading international umbrella organization of airport operators. This organization conducts passenger satisfaction surveys at more than 280 airports in over 50 countries over the entire year. At the end of the year, an overall benchmark, the so-called ASQ Overall Index, is determined for every participating airport.

Employee retention index

Munich Airport surveys all Group staff every three years to determine the level of employee satisfaction. The employee retention index represents the percentage of employees indicating their loyalty to the company in the employee survey. The last survey took place in 2013.

The whole process of the employee survey is designed over three years. In the first year, the employee survey is prepared and carried out and the results are announced. The results are evaluated in the second year and improvement measures developed. The third year gives the company time to implement and establish the measures that have been developed.

Innovation and ideas management GRI 102-43

As a service provider, Munich Airport does not conduct any research and development in the traditional sense. However, the quality of the airport’s products and services is to be developed through the management of innovation and ideas.

The airport increasingly uses the potential of its employees for this purpose. Since the start of the new open innovation and ideas management system «InnovationPilot» in April 2016, 862 ideas have been submitted to the corporate idea management team and of these, 40 have already been implemented. At the end of the year, 37 ideas were still being implemented. Increasingly, the focus is concentrated on ideas with economic benefits. In addition, 43 ideas were submitted, discussed and developed in internal open innovation campaigns, i.e. campaigns on behalf of a division.

With the introduction of an external crowdsourcing platform in 2016, Munich Airport is also picking up ideas from end customers and passengers. In the last fiscal year, 156 ideas were generated, discussed and assessed via this platform. The best ideas are to be implemented in 2017.

Munich Airport's innovation management aims primarily to introduce new products and processes to increase customer satisfaction, improve the customer experience and boost revenue. The feasibility and cost-effectiveness of innovations is reviewed in pilot projects and subsequently a decision is made on whether they should be continued and implemented. Here, Munich Airport counts not only on expertise within the Group but also increasingly on start-ups and established companies in the region.