Reclutamiento y selección

Fraport adapted its segment reporting to the reorganized structure of its divisions at the begin- ning of fiscal 2004. Since then, its business operations have been presented in the four segments “Aviation”, “Retail & Properties”, “Ground Handling” and “External Activities”.

The strategic business divisions of Fraport AG in Frankfurt – flight and terminal operations, retail and rental management and ground handling services – are assigned clearly to the Aviation, Re- tail & Properties and Ground Handling segments. These segments also include investments that are integrated in the business processes at the Frankfurt location. The former strategic business divisions information technology and telecommunications services and real estate and facility management have been transformed into internal service departments and are included in the “Retail & Properties” segment.

All the investments outside Frankfurt are assigned to the central acquisitions and investments department at Fraport AG, are included in the “External Activities” segment and are controlled centrally. The same applies to three companies based in Frankfurt which have business opera- tions that do not fit in with any of the other segments.

Concentration of all the business operations relating to retailing as well as space rental and devel- opment in the “Retail & Properties” segment takes account of the increasing importance of the non-aviation business. It already makes the largest contribution to earnings and has tremendous growth potential too. We intend to expand the relevant business processes purposefully and to continue increasing their profitability by means of efficient control.

In connection with the restructuring exercise, most of the property, plant and equipment has also been allocated to the segments using it. The volume of charges for internal Group services has been reduced as a result.

The figures for the previous year have been adapted to the new segment structure. The earnings of minority interests that are included in the accounts at equity or with their acquisition costs are shown in the financial result.

The Group segment Aviation made the largest contribution to Group revenues (about 31%), followed by Ground Handling (30%), External Activities (20%) and Retail & Properties (about 19%). These contributions were essentially the same as the comparable figures for the previous year.

The most profitable segment – Retail & Properties – accounted for about 56% of Group EBITDA. The “loss” of about 10 percentage points to the three other segments is attributable mainly to special factors in this segment‘s earnings and expenses development. The Aviation segment increased its contribution to Group EBITDA by 3 percentage points to about 28%, while Ground Handling contributed 10% (5 percentage points more than in the previous year) and the Exter- nal Activities segment contributed 6%, a change of 2 percentage points.

Segment contributions to Group revenues (outside) and EBITDA (inside) in %

20 6 31 28 19 56 Aviation Retail & Properties Ground Handling External Activities

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68 Financial Report 2004 ... Group management report

Aviation

The Aviation segment of the Group is responsible for the flight and terminal operations, airport and aviation security and the infrastructure demands made on the Frankfurt location in this con- text. It is also responsible for the airport expansion program.

€ million 2003 2004 Change in % Revenues ...551.7 ...626.2 ...13.5 EBITDA ...115.6 ...144.8 ...25.3 EBIT ...59.1 ...90.8 ...53.6 Employees ...3,368 ...3,311 ...–1.7 Aviation increased its revenues over the previous year by 13.5% to € 626.2 million in 2004. The airport fees – i.e. passenger, landing, takeoff and slot fees in Frankfurt – were about € 43 million higher than in the previous year. This was attributable mainly to the growth in traffic volume, while the airport fees were also increased by an average of 4.0% with effect from January 1, 2004 in accordance with the general agreement with the airlines. The proceeds from military air traffic unexpectedly reached the same level as in the previous year, partly because of the temporary closure of the US Air Base in Mildenhall, Great Britain, in July 2004. The revenues from security services increased substantially by € 32.8 million too. This was due not only to higher passenger figures but also to the stricter and stricter security regulations at European airports. In accordance with the EU aviation security regulations, all goods and people (including airport and airline staff) have had to be checked when they enter “sensitive parts of the security areas” in the terminals since January 2004. The relevant expenses were reimbursed to Fraport in 2004 by the German Federal Ministry of Interior.

The operating expenses were higher than in the previous year. Whereas the personnel expenses

were slightly lower than in the previous year, primarily because of the reduction in the number of employees, non-staff expenses increased considerably. This was due mainly to expense items in connection not only with the security services, particularly the larger number of external person- nel required, most of whom were provided by the second-tier subsidiary FIS, but also with the modernization of the terminals and aircraft movement areas.

The higher utilization of the capacities of Frankfurt Airport combined at the same time with a reduction in the personnel expenses led to growth in segment EBITDA of 25.3% to € 144.8 mil- lion. EBIT increased to a disproportionately large extent – by 53.6% to € 90.8 million – thanks to lower depreciation and amortization charges.

Frankfurt Airport traffic figures 2003/2004 Change in %

Passengers

Cargo

Source: ACI reports, Fraport AG

5.7

11.4

Aircraft movements

4.1

Maximum takeoff weights

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Retail & Properties

The business operations in the areas of retailing, parking facility management, property rental and marketing at the Frankfurt location as well as CargoCity South are combined in the Retail & Properties segment of the Group.

€ million 2003 2004 Change in % Revenues ...369.0 ...373.9 ...1.3 EBITDA ...302.3 ...285.8 ...–5.5 EBIT ...186.4 ...174.5 ...–6.4 Employees ...3,038 ...3,050 ...0.4 Segment revenues increased slightly, by 1.3% to € 373.9 million. While the revenues generated in parking facility management and the real estate revenues were at roughly the same level as in the previous year, the retail business recorded slight revenue growth, particularly with advertising and services (revenue-based rental payments by restaurants, hotels, banks and car rental compa- nies). The shopping revenues decreased slightly, on the other hand. These revenue-based rental payments by retail outlets, including the duty-free and travel value shops, depend partly on the purchasing power of the international passengers, which was depressed by the strength of the euro compared with the US dollar. Whereas the euro – US dollar exchange rate had averaged € 1.13 in 2003, it increased to € 1.24 in the year under review. In addition to this, less shop- ping space was available temporarily due to the terminal modernization program and individual outlets had to be closed completely at times. The “retail revenues per passenger” key figure remained stable at € 2.22 all the same.

Modernization of the terminals in particular, but also two collectively agreed wage and salary rises of 1% in both January and May, made the operating expenses increase faster than the rev- enues. Segment EBITDA therefore decreased by 5.5% to € 285.8 million and EBIT were down 6.4% at € 174.5 million.

Ground Handling

The Ground Handling segment includes such ground services as aircraft handling, passenger and cargo services as well as the investments involved in these operations at the Frankfurt location.

€ million 2003 2004 Change in % Revenues ...570.7 ...608.1 ...6.6 EBITDA ...23.6 ...53.3 ...> 100 EBIT ...–0.4 ...31.1 ...– Employees ...7,120 ...7,042 ...–1.1 The increase of 6.6% in revenues in the Ground Handling segment to € 608.1 million essentially reflects the traffic growth at Frankfurt Airport. Both the infrastructure and ground services fees are linked closely to the development of the maximum takeoff weights (MTOWs), which are based on the number and size of the aircraft handled in Frankfurt. This revenue growth more than made up for shortfalls attributable to the small market share loss of 0.8 percentage point to 88.9%. Retail revenues € _million Services Advertising Shopping 2003 69.9 107.5 68.8 20 .5 ₂₄.1 17.1 20.4 113.3 2004 € 2.22/ passenger € _2.22/ passenger

70 Financial Report 2004 ... Group management report

The measures to increase efficiency and cut costs were most successful in the Ground Handling segment. The business processes were optimized while maintaining the high quality of the ser- vices provided, so that a somewhat smaller number of employees coped with the substantially higher traffic volume. The personnel expenses – the biggest item in the operating expenses of this particularly labour-intensive segment – decreased slightly.

The higher productivity led to an increase in segment EBITDA of € 29.7 million to € 53.3 mil- lion. A loss of € –0.4 million was reported (based on the EBIT) in the previous year; this figure was exceeded by € 31.5 million in the year under review.

External Activities

The newly established External Activities segment of the Group basically covers all the invest- ments that carry out their business operations outside Frankfurt or are not involved in the busi- ness processes at the Frankfurt location.

€ million 2003 2004 Change in % Revenues ...342.9 ...389.9 ...13.7 EBITDA ...20.3 ...32.3 ...59.1 EBIT ...–41.4 ...–15.3 ...– Employees ...9,827 ...10,779 ...9.7 The External Activities segment achieved revenue growth of 13.7% to € 389.9 million. This was due to a large extent to the expansion of the business of ICTS Europe, which specializes in secu- rity services. The Antalya and Frankfurt-Hahn locations reported particularly high revenue growth because of the positive traffic development.

The expansion of the security business was the most important reason for the increase in the

operating expenses. An average of 995 or 11.6% more staff than in the previous year were

deployed at ICTS Europe alone in the year under review.

EBITDA were € 12.0 million or 59.1% higher at € 32.3 million. Since the depreciation and

amortization charges decreased considerably – primarily because of the special depreciation and amortization charges made at the Frankfurt-Hahn location in the previous year – there was a disproportionately large increase in EBIT of € 26.1 million to € –15.3 million.

Not only the earnings of the External Activities segment but also income from investments and some of the results from investments held at equity are generated by the external business. These items are shown in the Group financial result. In 2004, they amounted to € 13.7 million and € 1.8 million respectively.

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