Frankfurt Airport to Miss Sales Goal on China Clampdown

The operator of Frankfurt airport said China’s anti-corruption crackdown and unfavorable currency shifts will prevent its retail business from reaching a goal for passenger spending.

Net retail revenue per passenger at the company’s most profitable unit won’t meet the target of about 3.60 euros ($4.50) this year, Fraport AG Chief Financial Officer Matthias Zieschang said at a press conference today. The company’s mid-term goal for 4 euros, first envisioned for 2013, won’t be met for another three years, the executive said.

“The strong anti-corruption measures by the Chinese government are hurting us,” Zieschang said. The measures weigh particularly on luxury watches sold for between 20,000 euros and 40,000 euros, he said. “The very high-end products are not in as high demand as they used to be.”

China’s campaign, seeking to eliminate extravagance among both high and low-ranking officials, is denting demand for western-made status symbols. Hermes International SCA reported a 14 percent decline in third-quarter watch sales today, adjusted for currency shifts.

Fewer high-spending passengers from countries also including Brazil and Russia are weighing on profit in Frankfurt as intercontinental traffic declined. Weaker currencies in some of those countries are also reducing purchasing power of those travelers.

Intercontinental traffic in Frankfurt declined 1 percent through September, and the third quarter was little changed, the operator said. For the fourth quarter, long-haul services are expected to rise again, Zieschang said.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, as a percentage of sales stood at 78.9 percent at the group’s retail and real estate activities through September, compared with 29.4 percent for the larger aviation unit and 7.1 percent for ground handling.

Net retail revenue per passenger amounted to 3.60 euros last year, and the measure fell in each of the three quarters this year. The unit had Ebitda of 264 million euros in the first nine months, a decline of 0.2 percent.

“This year many factors have really hit us, but there will also be better times,” Zieschang said.