Fraport Vows to Restore Profit at Ground-Handling Unit

Fraport AG (FRA), operator of Frankfurt airport, said it’s working on returning its ground handling unit to profitability after three consecutive quarters of losses.

“We’ll take different measures to bring the business back,” Anke Giesen, the head of the division, said today at a press conference at the airport. She declined to specify a deadline or target figure, saying the plan is to make the check-in and baggage operation profitable “as soon as possible.”

Fraport’s second-quarter earnings before interest and taxes were held back as the ground-handling business at Frankfurt airport, Europe’s third-busiest by passenger numbers, reported a loss because of a traffic decline and a new terminal’s higher depreciation costs. Holding back spending will be key to making the unit profitable again, Giesen said.

“We have quite a bit of work to do,” she said. “Mainly these are efficiency issues, and it’s also about cost structures.”

Airport operators are being squeezed by airlines to lower fees and service charges. Earnings growth at Frankfurt-based Fraport is also hampered by a ban on overnight takeoffs and landings at the German airport, which is the main hub for Deutsche Lufthansa AG (LHA), Europe’s second-biggest carrier.

Fraport handles the bulk of ground services at Frankfurt, with Spanish infrastructure operator Acciona SA (ANA) as its main third-party competitor there. The unit, which last posted an operating profit in the third quarter of 2012, has a workforce of about 8,900 employees, Giesen said.

Traffic Decline

Chief Executive Officer Stefan Schulte said on Aug. 7 that meeting Fraport’s group financial goals for this year has become more challenging. Passenger numbers in Frankfurt slipped 0.7 percent in July as political unrest in northern Africa and the Middle East reduced travel to those regions.

Fraport forecast in its 2012 annual report that the ground-handling division will generate a “minor increase in revenue” this year, while Ebit will remain unchanged at about 4.7 million euros. The company said on Aug. 7 that it’s sticking with projections for earnings at its businesses, though airlines’ flight cutbacks “could negatively influence” ground-handling profit.

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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