Fraport Reports Growth Despite Challenges in Frankfurt
In the third quarter of 2024, Fraport AG (FRA.DE), the operator of Frankfurt Airport and other international hubs, reported revenues of €1.35 billion. This indicates a growth of over 10% compared to the previous year. The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 10% to €1.05 billion, while the group net result improved significantly by over 20% to €434 million. The positive financial performance is attributed in part to the recovery of passenger numbers to approximately 86-87% of pre-pandemic levels and successful operations at international locations such as Fraport Antalya. However, challenges continue due to strikes, geopolitical issues, and rising German aviation taxes.
Key Points
- Fraport's revenue rose to €1.35 billion in Q3 2024, with EBITDA reaching €1.05 billion, marking a 10% increase.
- The group net result increased by over 20% to €434 million, largely due to successful operations at Fraport Antalya.
- Passenger recovery at Frankfurt reached approximately 86-87% of 2019 levels despite ongoing challenges.
- The completion of Terminal 3 in Frankfurt is expected by summer 2026, with a new logistics center anticipated to open by 2028.
- International operations show optimism, with new terminals in Lima and Antalya planned to open in early 2025.
- Lufthansa is investing €600 million in the Cargo Center Evolution project at Frankfurt Airport.
- The company maintains its EBITDA guidance for the 2024 fiscal year, with operating cash flow increasing by 22% to €896 million.
- Net debt is above €8 billion, but an improvement in cash flow was recorded in Q3.
Company Outlook Fraport expects year-end EBITDA growth but has lowered its outlook to below €400 million. Capital expenditures for 2024 are expected to exceed €1.5 billion, primarily due to the T3 project, and to drop below €1.1 billion in 2025. Traffic growth is expected to be modest in 2025, as full recovery to 2019 levels remains uncertain.
Declining Factors
- Rising German aviation taxes and geopolitical issues are challenging passenger recovery.
- The ground services segment has reported negative EBITDA year-to-date.
- Full-year free cash flow was negative at €318 million due to expansion costs.
Rising Factors
- Fraport's international operations are optimistic, supported by strategic investments and acquisitions.
- The retail and real estate segments have seen revenue growth.
- Positive EBITDA growth in the public sector segment, with improved retail revenue per passenger.
Underperformance Areas
- Passenger numbers at Frankfurt have not fully recovered to pre-pandemic levels.
- Negative free cash flow reflects expansion and modernization investments.
Q&A Highlights
- Discussions are ongoing regarding Terminal 3 operations and airline allocations.
- The company aims to achieve breakeven free cash flow in 2025, with dividends dependent on financial stability.
- The sale of the stake in Delhi represents a shift from strategic to financial investment, with continued interest in the Indian market.
Fraport AG's financial performance in the third quarter of 2024 demonstrated resilience despite challenges faced from strikes, geopolitical tensions, and rising aviation taxes in Frankfurt. The company's strategic focus on international operations and investments, including projects like new terminals in Lima and Antalya and its exit from the Delhi stake, shows a clear direction towards optimizing its portfolio and improving financial stability. With significant planned capital expenditures for the development of Terminal 3 in Frankfurt and other projects, Fraport positions itself for future growth while navigating the complexities of the current aviation market.