Outlook, opportunities and risks report

Outlook report

Economic and industry-specific conditions

Global economic development continues to be greatly influenced by high inflation rates. While inflation has declined recently and is expected to decrease further in 2024 and 2025, central banks are likely to leave interest rates higher for the time being, in order to prevent inflation from rising again. This interest rate level puts the brakes on private consumption and investments. However, higher wage contracts with simultaneously declining inflation are likely to boost the purchasing power of private households during the forecast period. Therefore private consumption will become a central pillar of further economic development. The current weakness in global trade and continued high energy prices are hampering industrial development. As a result, the industrial sector is not expected to provide expansionary impulses over the next few months. Accordingly, the outlook for global economic development is subdued. The ifo Institute forecasts economic growth of 2.0 % and 2.3 % for 2024 and 2025, respectively.¹⁹⁾

The economic output of industrialized nations is likely to expand slightly in 2024 (+1.0 %). GDP growth of 1.3 % is expected for the USA. In the UK, on the other hand, the economy is only expected to grow by 0.4 % in 2024. Consumption and investment activity in both countries are hampered by higher interest rates.¹⁹⁾

According to the economic forecast of the ifo Institute, the emerging markets group will achieve overall economic growth of 3.8 % in 2024. The Chinese economy is expected to grow at a rate of 4.3 %, which is relatively low compared to the long-term average, since the situation in the real estate sector remains tense, while the export business also suffers from the negative effects of a relatively weak global economy. The Indian economy is also inhibited by weak global economic development. A growth rate of 5.7 % is forecast for the year 2024.¹⁹⁾

In the euro zone, economic output is expected to grow by 1.0 %. Compared to 2023, when the growth rate was 0.5 %, this represents a slight recovery trend. Nonetheless, high inflation and the associated rise in interest rates put a damper on economic activity. The industrial sector is still suffering from the after-effects of the energy price shock and energy prices that are still relatively high. Labor markets remain tense due to skilled labor shortages. The ifo Institute expects the GDP in France to grow by 0.7 % in 2024. For Italy and Spain, growth rates of 0.6 % and 1.2 %, respectively, have been forecast.¹⁹⁾

According to the forecast, the German economy will undergo a slow recovery in 2024 and grow by 0.9 % (2023: –0.3 %). A weak global economy, high interest rates (due to inflation) and the after-effects of the energy price shock also have a negative effect on the economic situation inside the country. There is weakness in industry, private consumption and the construction sector. The inflation rate is expected to reach 2.1 % in 2024 (2023: 6.0 %). The unemployment rate is expected to grow moderately by 0.2 percentage points to reach 5.9 %. The construction sector will continue to cool due to higher interest rates and increased construction costs. Industry is likely to benefit from an increase in global trade, leading to moderate expansion. Imports and exports are expected to grow by 0.9 % and 1.3 %, respectively.¹⁹⁾

In 2023, the oil price (Brent) was significantly lower than in the previous year. The average price for 2023 was 82.5 USD per barrel (2022: 98.7 USD per barrel). The ifo Institute anticipates that in 2024, oil prices will remain more or less at the level of 2023 (annual average of 81.3 USD per barrel). ²⁰⁾

The demographic and economic general conditions in Bavaria and especially in the airport catchment area mean that further strong growth in transportation demand can be expected at Munich Airport in the medium to long term despite short-term slumps. According to the results of the regionalized population projection by the Bavarian State Statistical Office, Bavaria’s population will grow by 4.6 % by 2042 compared to 2022. A strong to very strong population increase is expected in the Munich region in particular. In the City of Munich, the figure is expected to be 6.0 %; the administrative district of Munich is likely to increase by 4.8 %. Four of the fastest-growing districts in Bavaria are also located in the nearby catchment area of Munich Airport. Growth of 11.0 % and 10.5 % is forecast for the districts of Ebersberg and Dachau, respectively, and 11.0 % and 12.3 % for the districts of Pfaffenhofen a. d. Ilm and Landshut, respectively.²¹⁾

In the course of the coronavirus pandemic, the global aviation market experienced a historic downturn. The end of the pandemic measures led to a recovery. In 2023, global passenger traffic (8.6 billion passengers transported) reached 94.2 % of the pre-pandemic value of 2019. This recovery will probably continue into 2024. The ACI anticipates that in 2024, global passenger traffic (with 9.4 billion passengers transported) will exceed the pre-pandemic value of 9.2 billion passengers (102.5 %).²²⁾ While the ACI expects the return of Asian/Chinese traffic, it still sees risks relating to the economic weakness in Europe, the availability of aircraft and spare parts, and the continued existence of geopolitical risks.²³⁾

Forecast course of business

After massive traffic-related and economic losses in the course of the coronavirus pandemic, the aviation market enjoyed a significant recovery in 2022 and 2023. For the year 2024, Munich Airport expects passenger figures to increase by approximately 6 %. As a result, the expected passenger volume would be more than 80 % of the pre-crisis levels of 2019. However, this assumption is fraught with considerable uncertainty and will greatly depend on the future development of the political environment (mainly because of the Ukraine crisis and US-China tensions); similarly, the implications of the skilled labor shortages for Munich Airport's course of business also remain to be seen. If the above uncertainty factors escalate again, it would have a negative effect on the course of business, the results of operations and the financial key figures in the company.

With regard to revenues from airport charges, the Executive Board assumes an increase in line with traffic developments and in accordance with the provisions of the framework agreement on charges.

It is expected that the revenues in the retail segment will grow disproportionately to the recovery in traffic as wealthy customers gradually return.

Revenue from gastronomy and hotels, handling operations, parking and advertising is assumed to grow in accordance with traffic developments. On the other hand, the increase in the VAT on meals consumed locally (from 7 % to 19 %) will have a decidedly negative effect on gastronomy revenues.

With regard to revenue from rental and leasing, Munich Airport expects disproportionate growth compared to total revenues following the full opening of the terminal in Newark (US) in August 2023.

We believe that other revenues, which include throughput charges for aviation fuel supply, revenue for utility services and fuel, and revenues from management, consulting and training services for the aviation industry, are developing slightly less than traffic growth overall, but also depend on it only to a limited extent.

In total, the Executive Board expects revenues to grow by over 10 % compared to 2023.

Overall, the cost of materials is expected to increase at a slightly higher rate than revenues. This is mainly due to significantly higher expenses for services received in connection with the full start-up of the new terminal in Newark. Similarly, in the gastronomy and retail segment, the cost of sales is also increasing due to rising passenger volumes. The maintenance and remodeling measures included in the cost of materials will also increase due to the catch-up effects from the crisis years.

The personnel expenses of the Munich Airport will increase at a moderate pace – mainly because of increases in rates and remuneration, as well as an increase in employees, particularly in the operating Group units.

Other expenses are expected to rise disproportionately due to the revived business and the implementation of various projects.

Depreciation and amortization remain virtually constant compared to the previous year.

The financial result is expected to deteriorate in connection with the revaluation of financial liabilities from interests in partnerships. Steadily increasing interest rates for new loans and variable interest loans also have an effect.

Despite the higher revenues, Munich Airport expects a lower EBT for the 2024 fiscal year due to significant increases on the expense side, although it will remain to be positive due to the recovery in air traffic.

The Executive Board continues to make every effort to secure the liquidity of Munich Airport, and to create additional financial flexibility. This is achieved with a critical review of all operational and strategic expenses and investments.

Regarding the liquidity that will be required in the future, Munich Airport is in constant contact with its principal banks. During the course of 2024, the traffic, earnings and liquidity forecast will be continuously updated and the resulting financing requirements will be derived and procured if required. This ensures that Munich Airport has the necessary liquidity at all times.

The projected liquidity usage is based on the assumption that air traffic and hence revenues will continue to recover and reach the expected levels. Another prerequisite is that expenses stay within budget range, despite dynamic macroeconomic developments. If these assumptions do not come to pass in the manner outlined, this may lead to an increased liquidity demand and consequently to earlier consumption of the existing liquidity reserves. From its current perspective, Munich Airport will be able to cover any higher liquidity requirements on the capital market.

Projected major financial and non-financial key performance indicators:

Earnings before taxes (EBT)

Overall, Munich Airport expects a smaller but still positive EBT for 2024. The exact figure will greatly depend on the further course of various political developments and the macroeconomic situation, therefore it is very difficult to estimate at this time. This means that in 2024, Munich Airport is likely to again remain below the pre-crisis level.

Carbon reductions

Further carbon reductions are expected for 2024. The planned measures should primarily reduce the energy requirements for lighting and air curtains.

Passenger Experience Index (PEI)

The forecast value for the Passenger Experience Index (PEI) for 2024 is set at the 2023 level of over 80, as Munich Airport expects operations to stabilize in 2024, and it believes that achieving a PEI target value of more than 80 is a realistic scenario. 

Lost Time Incident Frequency (LTIF)

As air traffic volumes grow, it becomes difficult to predict the development of Lost Time Incident Frequency (LTIF). In addition to increasing its workforce and the ensuing increase in working hours, Munich Airport plans to expand the LTIF to all subsidiaries. The LTIF forecast for 2024 is not only based on these significant changes but also on the empirically high volatility of the LTIF and the resulting big fluctuations in this value.

In order to counteract the increase in the LTIF and stabilize the incidence of accidents, the project to strengthen the occupational safety culture at AE Munich will be continued in 2024. The aim of the sensitization measures is to reduce occupational accidents by ensuring permanently attentive behavior in the workplace.

Opportunities and risks report

Opportunities

As an international air traffic hub, Munich Airport competes with other major passenger airports. Functional and targeted opportunity management is of central importance for maintaining and expanding the airport’s market position. This is an integral part of the strategy and planning processes at Munich Airport. Opportunities are future developments and events that may lead to a positive deviation from planning or strategic targets. Both external (for example, changes in the market environment) and internal opportunities (for example, programs to increase efficiency) are considered.

All divisional heads and CEOs of the subsidiaries and associated companies are responsible for developing and implementing measures to take advantage of opportunities. In this, they are supported by the corporate division Finance and Controlling. In addition, all employees of FMG in the business units and their subsidiaries are generally required to identify opportunities in the course of their daily work and report them to their supervisors.

As a basic principle, Munich Airport strives to strike a balance between opportunities and risks. If it was likely – at the time of planning – that an opportunity would arise, it was already included in the 2024 forecast or in the medium and long-term planning. The opportunities presented therefore focus on future developments or events that could lead to a positive deviation for Munich Airport from the forecast and the medium and long-term planning.

The evaluation of opportunities is based on the risk assessment system. The economic benefit resulting from the opportunities and the probability of occurrence are divided into the following categories analogous to the risks under consideration:

In contrast to the risks, the probability of occurrence and financial impact (economic advantage) are not shown separately, but are combined in the «high relevance» and «low relevance» opportunity categories.

Since Munich Airport is confronted in some cases with very long planning periods, the opportunities are also indicated as to when they will occur in the short, medium or long-term.

Compared to the previous year, the removal of the opportunity «Development of the Corona pandemic» on December 31, 2023 led to a change in the structuring of the identified opportunities. The content description and assessment of the remaining opportunities has been revised.

Market development

Airline industry trends are of particular importance for traffic volumes at airports. The coronavirus pandemic created unprecedented challenges for airlines and airports. The crisis led to a reduction in personnel numbers and aircraft fleets. Demand for air travel increased greatly after the pandemic restrictions were lifted. Since then, airports and airlines have struggled with significant labor shortages. In 2023, the problems in ground handling were improved but could not be resolved completely. The resulting imbalance between supply and demand led to higher ticket prices that exceeded the generally high inflation rate. If this situation eases and ticket prices fall again, it could lead to a higher-than-expected growth in passenger volumes. Deutsche Lufthansa has already reactivated most of its previously shut down fleet. Lufthansa also decided to station its entire Airbus A380 fleet in Munich. If Lufthansa stations other machines of other types at Munich Airport in the future, it would have a higher-than-expected positive effect on passenger figures and hence the company’s result.

At the moment, demand and supply for point-to-point traffic, particularly within Germany and in the business travel segment, are still well below the levels seen before the pandemic. Tight aircraft and handling capacities, along with expensive kerosene, result in high ticket prices. Competition between airlines could increase as the recovery continues. Accordingly, it is possible that in the course of the planning horizon flight tickets could become cheaper than anticipated. In that case, passenger figures would grow at a higher rate than was anticipated in the budget, resulting in higher-than-planned passenger growth and earnings for Munich Airport.

Munich Airport has been pursuing intensive quality management for some time and is just one of a small number of airports worldwide to hold the status of a 5-Star-Airport. It also has an extremely attractive catchment area, both in terms of business and private travel, and it has been operating a professional airline acquisition service for years. Deutsche Lufthansa is an important customer for Munich Airport. The company operates a hub at the Munich location and intends to maintain it in the future. In addition, cooperation is based on joint investments and long-term cooperation agreements.

If the airline market recovers more quickly than expected, and if  Munich Airport is able to expand its share of the recovery, it would lead to higher-than-planned earnings in the short and medium term. Although such a scenario is uncertain due to the current situation, the resulting opportunity must be rated as «high relevance» due to its impact on the subsequent development of the company.

Rail access

For some time now, the EU in particular has been calling for the various modes of transport to be interlinked as efficiently as possible, thus conserving resources. To this end, it makes sense to optimally connect the major European hub airports in particular to the rail infrastructure. In the context of the intensively conducted climate protection debate, this topic has gained in importance in recent years.

With regard to the rail access to Munich Airport, several projects, including the Erding ring closure, the Walpertskirchen Interchange, the second main line in Munich, and the Munich-Mühldorf-Freilassing/Salzburg Line 38 extension, are currently being planned or implemented. Should an adequate connection to the long-distance rail network also be established, Munich Airport could be efficiently integrated into a future multimodal transportation system. This would expand the passenger catchment area and consequently result in a higher-than-planned development of earnings. Regarding the long-distance rail connection, preparatory investigations for inclusion in the federal transport  infrastructure planning process are currently underway in collaboration with Deutsche Bahn, Deutsche Lufthansa and the Bavarian Ministry of Housing, Building and Transport.

Munich Airport has the necessary expertise on this subject and is in intensive contact with regional and national authorities as well as with Deutsche Bahn. The goal here is to realize an optimal connection of the airport to the long-distance rail network, which would bring a considerable economic advantage. The resulting opportunity must be rated as «high relevance» in the long-term.

Interest and exchange rate trends

Favorable interest rate and exchange rate trends may have a positive impact on the Munich Airport’s financial result. Thus, currency effects from the translation of results not denominated in euros into the Group's functional currency (euros) may have a positive impact on the financial results.

In the retail business at the Munich Airport, international customers (outside the eurozone) play a special role due to retail spending, some of which is significantly above average. Internal analyses have shown that fluctuations in exchange rates have a significant impact on retail revenues. A continued low euro compared to the relevant foreign currencies therefore offers the potential for an above-average earnings development.

Interest rates are much higher than in the previous year; Munich Airport’s planning therefore assumes continued high interest rates for variable-interest loans. However, if interest rates decline again during the planning period, it would have a positive effect on Munich Airport’s EBT.

Altogether, the opportunity arising from interest rate and exchange rate trends must be rated as «high relevance» in the short and medium term due to the current crisis situation.

Economic development

There is a close correlation between national and global economic growth and the growth in air traffic. Inflation rates in many parts of the world have risen as a result of the pandemic and the Russian attack on Ukraine. Central banks resorted to restrictive monetary policies. Higher interest rates hamper private consumption and investments, which has a negative effect on economic activity. This is also expected to have a negative effect on the demand for vacation travel. Moreover, the difficult situation that companies find themselves in also jeopardizes the development of business travel. At the same time, there has been a significant drop in inflation rates recently. Currently, it is expected that both the US central bank (FED) and the European Central Bank (ECB) will reverse their interest rate policies in the early summer of 2024. Moreover, higher wage contracts also ensure that real wages and hence the purchasing power of private households are increasing again.

At the moment, consumer sentiment in Germany is still at a low level. High inflation, numerous global crises and the budget debates of the federal government cause uncertainty among consumers. If this situation stabilizes and the uncertainty abates, there is a chance that the economy will recover more quickly and that air traffic will also increase as a result.

Protectionist trade policy tendencies have been observed in various countries in recent years. Since air traffic volumes are strongly dependent on the degree of globalization of the world economy, protectionist measures generally have a slowing effect on global air traffic. If these trends reverse in the following years and there is a renewed political focus on the global distribution of labor, it could boost economic and air traffic growth.

Different divisions of Munich Airport intensively monitor all relevant economies worldwide. In this way, potentials for the various business units (e.g. for Aviation and Commercial Activities) are identified and appropriate measures are initiated to exploit opportunities on a decentralized basis.

Even though economic growth is one of the main factors affecting air traffic, it is not expected that short-term economic growth will be significantly higher than the current forecasts. The currently difficult geopolitical situation is also an obstacle for dismantling protectionist tendencies. The resulting opportunity must therefore be rated as «low relevance».

Regulation and legislation

Air transport has historically been a highly regulated market. Accordingly, laws, ordinances and international agreements are still decisive factors influencing air traffic today. The introduction of new regulations, as well as changes to existing ones, may involve risks, but also present opportunities for market participants.

Due to its national character, the German aviation surcharge, which was increased in 2020, has competition-distorting effects in the European aviation market. As a result, air travelers from areas close to borders are increasingly choosing airports abroad as their departure point. If the German aviation tax were to be replaced by more effective international climate policy instruments, it could reduce the competition-distorting effects. And this could lead to an increase in traffic at Munich Airport. However, based on the current budget debate, the federal government will once again increase the aviation surcharge on May 1, 2024. Therefore the probability of the potential outcome described above must be assessed as very low at the moment.

In recent years, the discussion on the creation of a Single European Sky has gained momentum. In addition to the introduction of uniformly high safety standards, the goal is to expand airspace capacity and achieve more economical supranational cooperation between the national air traffic control organizations. In concrete terms, the goal is, among other things, to enable airlines to operate more economical flight routes (direct air route). More efficient flight routes could lead to significant kerosene savings and thus reduce CO₂ emissions by up to 10 %. While the latter could bring a positive image boost for air travel as a whole, the former would have a positive impact on demand for air travel due to lower costs. However, Single European Sky is an extremely complex issue, since it affects the national sovereignty of the individual European states. Accordingly, possible solutions must be developed by all national and European players in dialog with industry.

In order to properly utilize opportunities arising from regulation and legislation, Munich Airport uses the expertise of the Communications & Politics corporate division and is also involved in various aviation associations, such as the BDL. The central objective here is to help shape important regulations for the aviation sector and counteract competition-distorting effects.

In summary, the opportunities arising from regulation and legislation are currently rated as «low relevance» due to the low probability of occurrence.

Implementation of climate protection measures

Munich Airport pursues the climate target of net-zero emissions until 2035 (updated in 2023). It aims to reduce the CO2 footprint it can control to net-zero emissions through a combination of reduction and removal measures at a ratio of 90:10. To this end, measures are implemented in the area of energy supplies, technical airport equipment, buildings and the vehicle pool. Achieving these targets is associated with costs. In the field of energy generation and conservation as well as renewable energies, a progressive increase in efficiency can generally be observed, however. If this development accelerates, the costs for the climate target of Munich Airport could be lower than expected. The Environment department and the Technology corporate division, as well as strategic sustainability management at the airport, monitor trends in this direction.

In the long-term, this could lead to higher than expected earnings. Despite changing political incentive and/or sanction mechanisms, the resulting opportunity is rated as «low relevance» due to the comparatively low earnings effect.

Internal process and efficiency improvements

The impact of the coronavirus pandemic prompted Munich Airport to launch the «Restart» change program. The program was successfully implemented and served to make the company viable and efficient for the future. In addition, increases in efficiency (through digitization projects and the IT transformation) were taken into account in the medium-term planning for Munich Airport, and ambitious targets were defined despite the currently challenging macroeconomic environment. Therefore the probability of significantly higher-than-anticipated developments must be assessed as minimal. The resulting opportunity is therefore rated as «low relevance».

International business

Despite the existing challenges in the aviation industry, the international business of Munich Airport operates in a growth market: According to IATA, demand for air travel will double by 2040, with an average annual global growth rate of 3.4 %. International diversification to ensure the sustainable growth of Munich Airport is becoming increasingly important precisely because of the increasing challenges in the German and European home market.

As a result, the international business of Munich Airport enjoys long-term growth opportunities with regard to its management, consulting and training services for the aviation industry.

At the international level, the trend towards involving private companies in the management and operation of previously managed by the public sector is continuing. In the business units concession and management contracts, Munich Airport has established itself in the market through a number of initial projects. New strategic partnerships can strengthen the local market position in important target markets and ensure positive business developments.

To this end, Munich Airport closely monitors all relevant markets and developments, conducts professional customer acquisition and continuously adapts its product and service portfolio to market requirements. In this way, opportunities that arise can be optimally exploited.

In the medium and long-term, this could lead to higher than expected earnings. However, the resulting opportunity must be rated as «low relevance» due to the comparatively immaterial earnings effect.

Real Estate

The current major economic and ecological challenges are putting companies in the Federal Republic of Germany under high pressure to innovate and collaborate. Moreover, major changes are also occurring in the labor market, which will require a rethinking with regard to the future configuration of workplaces. This could lead to an expanded need for cooperative sites and test sites.

With its «LabCampus» project, Munich Airport is creating a new type of innovation center that provides lease premises and that focuses on cross-sector collaboration, joint development, testing, presentation and realization. Seen over the long term, there is the possibility that the LabCampus will be completed earlier than has been anticipated in the current planning. An earlier start date for additional buildings and clusters would be accompanied by the corresponding revenue streams, ensuring higher-than-expected earnings.

Munich Airport keeps a close eye on all relevant markets and conducts professional customer acquisition activities in order to make the best possible use of opportunities that arise in the market. The resulting opportunity is currently rated as «low relevance» due to the long-term impact horizon.

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 this system by defining and communicating the corporate strategy and targets. It formulates specifications for the risk management process and the organizational structure of the risk management system.

The goal of the risk management system is to identify events and developments that could have a negative impact on the achievement of strategic and operational targets in good time and develop suitable countermeasures. All dimensions of the business activities are taken into account.

The general principles of risk management in the Group, as well as the tasks and responsibilities of the relevant function owners, are set out by the risk management guideline on the basis of the internationally recognized framework model «COSO ERM» (Committee of Sponsoring Organisations of the Treadway Commission – Enterprise Risk Management).

The Risk Management Committee, which reports directly to the Executive Board, serves as an additional supportive management, control and supervisory body. It consists of the entire Executive Board, the heads of the Aviation, Commercial Activities and Real Estate business units, the heads of the Legal, Corporate Bodies, Compliance and Environment, Finance and Controlling, Group Security, Corporate Development, Communication and IT divisions, and the risk manager. The head of Compliance and the Business Continuity Management (BCM) officer also participate in the committee.

The task of the Risk Management Committee is to analyze the risks from a Group perspective and to monitor the effectiveness of countermeasures. It provides support for developing the risk management system and for risk identification, assessment, and control. The Risk Management Committee meets quarterly and issues the risk report for the shareholders.

The risk management process comprises the following steps. A digital coordination and communication platform has been established to support this 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. All risk-relevant information is coordinated, managed, documented and forwarded through the risk managers. The risk manager checks the divisions’ risk reports for plausibility and compliance with the Group-wide standards for risk assessment. The role involves combining the divisions’ individual reports in a risk report, taking account of materiality for Munich Airport, and reporting quarterly to the Risk Management Committee and the 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. All employees are responsible for reporting risks in their department.

Assessment of risks

The risk assessment allows the company to determine the extent to which individual risks jeopardize the fulfillment of corporate goals and strategies, and which risks may possibly threaten its existence. For this purpose, the factors damage amount and probability of occurrence/frequency are presented in a risk matrix. The expected loss describes the impact on profits that can be expected if the risk occurs. In the case of events that recur over time, the company works with the frequency with which they occur. The assessment first takes place without considering measures to limit the risk (gross risks, see the section «Risks»). Subsequently, the risks are assessed after countermeasures are implemented (net risks, see section «Risks»).

Dealing with risk

Starting from the risk analysis, appropriate countermeasures for dealing with risk are specified according to the corporate strategy and economic aspects. Risk management strategies include: control, insure against, minimize, eliminate and transfer. The risk officers have the task of specifying and implementing countermeasures to manage risks in the respective division that is affected.

Risk monitoring

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

Compliance management system

Compliance covers compliance with all Munich Airport-related laws, specifications and regulations, national and international rules and standards, as well as in-house rules and guidelines. To this end, Munich Airport has established a Group-wide compliance management system.

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. Regular dialog takes place between Risk Management and Compliance.

The Code of Conduct that went into force on May 1, 2022 includes principles and guidelines for conduct in line with values and the law. It is the benchmark for everyone and applies both within the Group and third parties in the national and international context. The Code of Conduct was adjusted in 2023 as part of the coming into force of the Supply Chain Due Diligence Act (LkSG) and the Whistleblower Protection Act.

The Executive Board addresses the issue of compliance in an ongoing process at frequent intervals, and the Supervisory Board is informed at regularly scheduled intervals.

Identifying and minimizing compliance risks

Every year, the Compliance department prepares the compliance risk analysis with input from the FMG divisions and combines it with the compliance risk analyses of the subsidiaries and affiliates. The Executive Board and the Supervisory Board are informed of the results. Compliance risks are assessed in the same way as the risk management process.

If, despite all countermeasures taken, a risk has a high or very high potential for damage and at the same time a medium or high probability of occurrence, then it is examined in more detail.

After consideration of the countermeasures, no significant compliance risks remain for the year 2023.

Preventing corruption

The Code of Conduct and the Gift and Invitation Policy support the Executive Board, executives and employees in behaving lawfully and ethically in the workplace. They are published on the intranet and are therefore available to all employees. In addition, the Code of Conduct refers to the observance of other internal company guidelines, such as compliance with public procurement law during procurement and procurement processes, data protection organization or information security. These ensure that processes are transparent and traceable, both internally and externally. A declaration of commitment by the providers to avoid corruption is required during procurement and tender processes, with sanctions for violations.

The position of anti-corruption officer is exercised by the head of the Compliance department. There were no known confirmed cases of corruption in the Group for 2023.

Communication and training

A key task of the Compliance department is to train and advise the Executive Board, the executives and the employees as a preventative measure to stop compliance breaches from occurring.

All employees and executives are regularly familiarized with compliance documents and innovations. The implementation of the compliance training is documented by the specialist departments.

In order to raise awareness of compliance issues and data privacy, web-based compliance training is mandatory for all employees throughout the Group once a year; it must be successfully completed with a test. In the context of the «Check-in Compliance» manager module, compliance training is provided by an external law firm together with the Compliance department.

Internal reporting location in the Compliance department

To implement the Whistleblower Protection Act, the Munich Airport set up an internal reporting location in the Compliance department in 2023. Employees of the Munich Airport, business partners and customers have already been able to report information about conduct that is damaging to the company since 2013, specifically by using the electronic whistle-blower system Business Keeper Monitoring System ( BKMS®); the information can also be provided in English and anonymously. It also covers the complaints procedure in the context of the LkSG. In addition, internal and external persons can also contact staff at the internal reporting location by other means of communication (telephone, e-mail, in person) if they wish to draw attention to compliance infringements. Tender documents inform potential bidders of the possibility of using the BKMS® should compliance infringements be suspected. 

Data protection

Munich Airport has taken comprehensive measures to comply with the General Data Protection Regulation (GDPR) and the Federal Data Protection Act (BDSG). The subsidiaries and associated companies have appointed data protection officers to perform advisory and oversight duties in accordance with the GDPR. Data protection coordinators have also been established in FMG’s specialist departments in order to identify and address the issues and risks faced by the departments.

The Group-wide data privacy policy was audited and published in an updated form. Its objective is to provide a uniform and high level of protection for data subjects when their personal data is processed within Munich Airport, and ensuring compliance with data privacy laws. Responsibility for data protection compliance is decentralized among the individual FMG specialist departments and the subsidiaries/affiliates for their respective processing activities.

Throughout the year, the data protection team in the Compliance department supported the specialist departments in charge to comply with the provisions for protecting personal data. This process is carried out in collaboration with the FMG Data Protection Officer, who is integrated into the Compliance department at the organizational level, and who exercises his/her responsibilities pursuant to Art. 39 GDPR. The Data Protection Officer is also appointed in some subsidiaries and affiliates in the same role. The data protection coordinators were continuously trained, informed and advised by the Compliance department in cooperation with the Data Protection Officer. In addition, all employees are sensitized and web-based training must be completed every year.

Risks

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

The risk assessment relates to the economic impact in the period quoted. As of December 31, 2023, the following material gross risks were identified for Munich Airport:

In addition to the risks shown in the matrix, the risk «Reorganization of ground handling» also existed in the previous year.

Munich Airport is confronted with various legal disputes during the normal course of business. These can lead, in particular, to the payment of compensation claims or, in the case of construction projects, to changes in the remuneration of services. Moreover, other legal disputes can be initiated or existing legal disputes can be expanded. Apart from matters for which provisions have already been made in the balance sheet, Munich Airport is not currently anticipating any material negative impacts for the results of operations, assets and financial position from other known cases at the present time.

In the case of foreign subsidiaries, risks may arise in particular from the assumption of operational responsibility abroad in the context of consulting services for other airports and the operation of terminals. Airport operator projects run for long periods of time and are subject to the general economic and company-specific risks – ranging from future air traffic developments to changing consumer behavior on the part of airline passengers. To minimize risk, Munich Airport therefore works with local partners who have experience with respect to the specific country regulations and conditions. To counter liability risks for Munich Airport in particular, local limited liability corporations have been established outside Germany to act as independent entities and as local contractors. Risks may also arise from unforeseen regulatory intervention in the tariff, tax and levy structure of airports or from contractual breaches to the detriment of airport operators.

(Operational) audits by tax authorities are also considered a general risk.

Financial risks

The expected financial burden for the gross financial risks listed below were under the reporting limit as at December 31, 2023. Therefore they were not included in the risk reporting. The monitoring and management of these risks are the responsibility of central finance and cash management.

After considering countermeasures, the following net risks remain:

Overall assessment of the opportunities and risk situation

It is important for Munich Airport to actively seize opportunities as they arise in order to secure and further improve its position in the market through steady growth. However, it is also a key objective of Munich Airport to recognize risks in good time and to counter them systematically.

Therefore, the actual expected impact of possible events and developments is already taken into account in the 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 in collaboration with the Finance and Controlling corporate division.

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. The Executive Board is convinced that it will be possible to access liquidity in order to cover financing requirements, as was the case in the previous year. With its diversified business units, Munich Airport’s fundamental earnings power forms a solid basis for exploiting opportunities for future business development and for providing the necessary resources to accomplish this.

Munich Airport would like to point out that various known and unknown risks, uncertainties and other factors could lead to material differences between the actual events, the financial situation, the development or performance of the company and the estimates given here.

Munich, April 8, 2024

Jost Lammers Nathalie Leroy Jan-Henrik Andersson