German airport operator Fraport nudges up outlook, sees huge 2024 China boost

By Anna Mackenzie

(Reuters) – Frankfurt Airport operator Fraport on Tuesday said its 2023 core profit would hit the upper half of its forecast range after second-quarter earnings were boosted by strong travel demand.

Finance chief Matthias Zieschang forecast a “huge and significant” increase in Chinese passengers travelling to and from Frankfurt next year, with capacity set to reach up to 90% of pre-pandemic levels by December from under 40% in the second quarter.

“Passengers with high purchasing power are coming back,” Zieschang said.

The German group, which operates 28 airports around the world, expects group earnings before interest, taxation, depreciation and amortisation (EBITDA) to reach the upper half of the previously projected range of 1.04-1.20 billion euros ($1.14-$1.32 billion) this year.

Net profit should come in at the upper half of a range of 300-420 million euros, it said.

Demand for leisure travel, which has boosted profits for airlines and airports since pandemic restrictions ended last year, shows little sign of abating despite squeezed household incomes.

Traffic at Fraport’s home Frankfurt base grew 29% in the first half, reaching around 87% of 2019 traffic in July, preliminary figures showed. Full-year passenger numbers are likely to end in the middle of a forecast range of 80-90% of 2019 levels.

Recovery at Frankfurt was held back by capacity shortages and China’s slow recovery to date, it said.

Passengers travelling to and from China reached 39% of pre-pandemic levels in the second quarter, it said, around double the level of the first quarter, while route approvals, fresh testing rules and limited aircraft supply weighed.

“We expect very good and solid growth in 2024,” Zieschang said, predicting 10% passenger growth in Frankfurt in 2024, driven by China, was “realistic”.

The group expects 65-66 million passengers to use the hub in 2024, closer to the pre-pandemic record of 70.6 million.

European traffic benefited from strong demand for warm-weather destinations and improving business travel in the first half, Fraport said, predicting passenger numbers at its group airports close to 2019 levels this year.

Among Fraport’s international portfolio, its airports in Greece benefited most from holiday demand.

Intercontinental routes saw high growth rates for holiday destinations in North and Central Africa and the Caribbean, while traffic to and from North America almost reached pre-pandemic levels.

Fraport’s second-quarter revenue was 1.04 billion euros, 6% above consensus cited by J.P. Morgan, while quarterly EBITDA fell to 323 million euros, 4% below consensus.

“The miss looks to be primarily driven by weaker than expected margins in both Ground Handling and in International,” JPM said.

Fraport’s share price was up around 7% at 1359 GMT, with its stock one of the best performers in Germany’s mid-cap index, on track for its best day since March 2022.

($1 = 0.9100 euros)

(Reporting by Anna Mackenzie and Paolo Laudani in Gdansk; Editing by Muralikumar Anantharaman, Varun H K and Conor Humphries)