Mittwoch, 13. Mai 2009

Frankfurt Airport

While we're on the subject of air travel:

Fraport, the listed operator of Frankfurt Airport, is eager to start the construction of a new runway. The legal battle isn't over yet, but they are already in the process of clearing the forest ahead of schedule.

According to their Q1 financial report, they will invest 7 bn € into the new runway and a new terminal building.

No idea why they are in such a hurry:

Passenger throughput is down sharply: -9.2 % yoy in the year to April. Long-haul routes are down even more, with North American routes losing 14 % and Far Eastern routes losing 13 %.

However, the FTD reports that Fraport is worried about competition in the Gulf (I suppose that means Dubai), and needs to provide more capacity once travel volumes start booming again (expected from mid-2010 onwards). Going forward, Fraport expects travel volumes to increase at 4 % annually, in line with long-term historic averages.

Roland Koch called the beginning of construction activity a "historic day", and was happy that the "next generation" will get "a chance to compete internationally".

I cannot understand why so much money is being spent on infrastructure that will not be needed. It is absolutely impossible that German air traffic will see high growth-rates during the next few decades. Not enough people, not enough economic growth, and not enough kerosene.


  1. I second your skepticism. Especially in Frankfurt a significant fraction of the traffic was likely to be banking related. Banking is not going to see its former market share in economy in this decade or the next.

  2. I disagree. I think infrastructure is one of the best things to invest in at such times - let's build something of worth instead of doing stupid things like giving rebates for destroying assets (e.g. old car scheme).

  3. @Charles

    I have no problem with infrastructure investments, if they are useful and needed.

    AFAIK, the US invested quite a bit less in infrastructure than Germany over the last few decades, so US infrastructure spending is more likely to be useful.

    China can't be accused of spending too little, but it has the advantage of high growth-rates, i.e. demand will be there eventually.

    Germany is different due to demographics (shrinking population) and economics (not much growth potential left in a high-income economy).

    And Frankfurt is not the only airport about to expand: Munich is also determined to build a third runway, and Berlin will get a brand-new airport.

    The way I see it, there's a very large chance that most of this investment will turn out to be "white elephants": Huge amounts of money invested that will never see a reasonable return.

    But yeah, giving an incentive to destroy perfectly good cars might well be worse than building a new runway, that's true.

  4. It's a privately owned company, right? (Frankfurt Airport, I mean)

    So why can't they spend their money any way they please? Presumably they made their financial calculations, and it looks good to them.

  5. Sure, a privately owned company can spend its money any way it pleases. And I can criticize them for it any way I please, right?

    Anyway, I also thought Fraport is privately owned. After all, it is listed.

    But I checked just to be sure, and as it turns out, Fraport is a "Chinese-syle" privately owned company: 32% are owned by the state of Hesse, and a further 20% by the Frankfurt City Utility Company (which in turn is owned by the city of Frankfurt). Another 9 % are owned by Lufthansa (which is definitely privately owned). I suppose the rest is free-float.

    Not sure how old this info is, I found it here:

  6. But demographics have nothing to do with expanding the airport. It's not being built just for Germans to fly around everywhere: frankfurt is a major hub for connecting flights around the world and this investment will help them keep that status.

  7. Yes, that's what the folks at Fraport say.

    Still, most of Frankfurt's traffic either originates and/or terminates in Germany, and most of the traffic that doesn't do so originates and/or terminates in neighboring European countries with a similar demographic profile.

    The American traveler going to Dubai via Frankfurt, or the Singaporean going to New York via Frankfurt is the exception, not the rule.

    Also, many industry observers take the view that European hubs will lose market-share, because there will be more point-to-point traffic using smaller planes. Not sure if that will indeed happen, but if yes, Frankfurt would lose out big-time.

  8. >>>
    Still, most of Frankfurt's traffic either originates and/or terminates in Germany, and most of the traffic that doesn't do so originates and/or terminates in neighboring European countries with a similar demographic profile.

    This isn't inconsistent with it being a European hub. For example, I just did a search for a flight from Hamburg to Singapore on Lufthansa - guess what, it goes through Frankfurt.

  9. Sure, it's a European hub, definitely.

    But how much long-term growth potential exists on the Hamburg->Singapore route (to pick your example)? My personal opinion: Not much. I may be mistaken, though. Time will tell.