Notes to the consolidated financial statements
I Accounting policies
General remarks
The operating licence awarded by the Federal Government authorises and obliges the airport operator, Flughafen Zürich AG, to operate Zurich Airport until 2051. In addition to combining transport services by road, rail and air, Flughafen Zürich AG also operates Zurich Airport as a shopping, entertainment and services centre.
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRSs) and comply with Swiss law. They have been prepared under the historical cost convention, with the exception of the financial assets of the Airport of Zurich Noise Fund, derivative financial instruments, associates and defined benefit obligations.
The single-entity financial statements of the group’s subsidiaries, which have been prepared in accordance with uniform accounting policies, have been used as the basis for consolidation. The reporting date for all subsidiaries is 31 December.
The preparation of financial statements in accordance with IFRSs requires the Management Board to make estimates and assumptions, as well as exercise its discretion, when applying the accounting policies. This may affect reported income, expenses, assets, liabilities and contingent liabilities at the time of preparation of the financial statements. In the event that such estimates and assumptions made in good faith by the Management Board at the time of preparation of the financial statements subsequently deviate from the actual circumstances, the estimates and assumptions originally made are adjusted prospectively in the financial year in which the circumstances changed.
Judgements made by the Management Board in its application of IFRSs that have a significant effect on the consolidated financial statements, and estimates and assumptions with a significant risk of adjustment in the following financial year, are discussed in “II. Judgements and significant estimates and assumptions in the application of accounting policies” and in the following notes in Notes to the consolidated financial statements:
New and amended accounting policies
CHANGES IN ACCOUNTING POLICIES
The company adopted the following new and amended International Financial Reporting Standards which are mandatory for the first time for the financial year beginning 1 January 2018:
- IFRS 9 Financial Instruments
- IFRS 15 Revenue from Contracts with Customers
- IFRIC 22 Foreign Currency Transactions and Advance Consideration
- Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions
- Amendments to IAS 40: Transfers of Investment Property
- Annual Improvements to IFRSs (2014–2016 Cycle):
Except as outlined in the following, the above-mentioned amendments did not have a significant impact on the financial position, results of operations or cash flows of Flughafen Zürich AG for financial year 2018:
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments contains revised principles for classifying and measuring financial instruments, a new expected credit loss model for calculating impairment on financial assets and new general hedge accounting requirements. It replaces the existing principles in IAS 39 Financial Instruments: Recognition and Measurement.
In some cases, the new principles in IFRS 9 resulted in changes in the classification of financial assets, in particular the financial assets of the Airport of Zurich Noise Fund (AZNF), which were previously classified as available-for-sale securities. The financial assets of the AZNF are now classified as at amortised cost (bonds) or at fair value through profit or loss (other financial assets). In addition, under the new principles governing impairment, losses on financial assets are recognised earlier. In the case of trade receivables, Flughafen Zürich AG uses a simplified method to calculate expected credit losses. Therefore, changes in credit risk are not tracked; instead, a loss allowance is recognised at each reporting date on the basis of the lifetime expected credit losses. The company conducted an analysis based on its credit loss experience to date and taking into account forward-looking factors specific to the borrowers and general economic conditions. In hedge accounting, there were no changes. Initial application of IFRS 9 reduced equity by CHF 3.8 million as at 1 January 2018. Prior-year amounts were not adjusted, as the company chose to apply the modified approach on initial application.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers establishes a comprehensive framework in the form of a single, five-step model for determining whether, how much and when revenue is recognised. It replaces the existing principles for recognising revenue, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.
The new principles in IFRS 15 do not have a significant impact on revenue recognition or on equity as at 1 January 2018. The additional disclosures required under IFRS 15 are presented accordingly in the Notes to the consolidated financial statements.
INTRODUCTION OF NEW STANDARDS IN 2019 AND LATER
The new, revised and amended standards and interpretations issued by the end of 2018 and set out in the table below are not yet effective and were not applied early in these consolidated financial statements.
New standards or interpretations
Effective date
Planned application by Flughafen Zürich AG
IFRS 16 Leases
**
1 January 2019
Financial year 2019
IFRIC 23 Uncertainty over Income Tax Treatments
*
1 January 2019
Financial year 2019
Revisions and amendments of standards and interpretations
Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)
*
1 January 2019
Financial year 2019
Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)
*
1 January 2019
Financial year 2019
Prepayment Features with Negative Compensation (Amendments to IFRS 9)
*
1 January 2019
Financial year 2019
Annual Improvements to IFRSs (2015 – 2017 Cycle)
*
1 January 2019
Financial year 2019
* No, or no significant, impact is expected on the consolidated financial statements of Flughafen Zürich AG.
** Mainly additional disclosures or changes in presentation are expected in the consolidated financial statements of Flughafen Zürich AG.
IFRS 16 Leases
IFRS 16 Leases sets out the accounting and disclosure requirements for lessees and lessors. The new standard supersedes the existing IAS 17 Leases and the related interpretations. An analysis has revealed that application of IFRS 16 as of 1 January 2019 – with the exception of additional disclosures – is not expected to have any significant effects on the consolidated financial statements of Flughafen Zürich AG.
CHANGES IN THE CONSOLIDATED GROUP
In April 2018, Flughafen Zürich AG established the wholly-owned subsidiary Zurich Airport International Asia Sdn. Bhd. based in Kuala Lumpur (Malaysia), with a view to developing the markets in Asia.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SCOPE AND METHODS OF CONSOLIDATION
The consolidated financial statements comprise Flughafen Zürich AG and all companies in Switzerland and abroad that it directly or indirectly controls. Flughafen Zürich AG controls an entity if it is exposed or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control begins until the date on which control ceases. All assets and liabilities are therefore included in the consolidated financial statements together with all income and expenses in accordance with the principles of full consolidation. All unrealised gains and losses on intra-group transactions and all intra-group balances are eliminated on consolidation.
Business combinations are accounted for using the acquisition method at the date of acquisition. Consideration transferred in a business combination includes the fair value of the assets transferred, liabilities assumed or incurred and equity instruments issued by the group. Transaction costs incurred in connection with a business combination are recognised in the income statement. Goodwill arising from a business combination is recognised as an asset. Goodwill represents the excess of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of any previously held equity interest in the acquiree over the fair value of the assets acquired and liabilities assumed. Two choices exist regarding the measurement of non-controlling interests. Non-controlling interests are measured at their fair value or at their proportionate share of the recognised amount of the identifiable net assets. When the excess is negative, a bargain purchase gain is recognised immediately in the income statement, after first reassessing the fair value of the net assets acquired.
FOREIGN CURRENCY TRANSLATION
For consolidation purposes, all assets and liabilities reported in the balance sheets of companies within the group are translated into Swiss francs (functional currency of Flughafen Zürich AG) at the closing rate. Income statements and cash flow statements are translated at the average exchange rate for the period. Foreign currency differences arising on the translation of balance sheets and income statements are credited/charged directly to the translation reserve in equity. Transactions in foreign currency are translated into Swiss francs at the exchange rate in effect on the day of the transaction.
Foreign currency monetary items are translated at the exchange rate at the reporting date. Foreign exchange gains/losses that arise from the settlement or remeasurement of foreign currency items at the reporting date are recognised in the income statement.
ALTERNATIVE PERFORMANCE INDICATORS
Earnings before interest, tax, depreciation and amortisation (EBITDA)
EBITDA comprises earnings before tax, the finance result, the share of profit/loss of associates plus depreciation and amortisation.
Earnings before interest and tax (EBIT)
EBIT comprises earnings before tax, the finance result and the share of profit/loss of associates.
Revenue recognition
Revenue is recognised by Flughafen Zürich AG when the customer obtains control of a service (instead of when the risks and rewards of ownership transfer, as was previously the case).
Revenue in the “Aviation” segment primarily comprises passenger and landing charges. Charges for providing assistance to passengers with reduced mobility are received by the “PRM” segment, while the “User fees” segment primarily receives fees for the use of the central infrastructure. Revenue in the “Air security” segment mainly includes security charges, and in the “Noise” segment it mainly contains noise charges. Revenue is recognised immediately on rendering the service in question. Landing charges are billed per landing according to the weight of the aircraft. Passenger charges, fees for the use of the baggage sorting and handling system and security charges are based on the number of departing passengers. Noise charges are based, in turn, on the number of departing passengers and on an emissions-based charge according to the aircraft type.
The main components in the “Non-regulated business” segment are revenue from the marketing and rental of the commercial infrastructure at the airport (retail, tax & duty free, food & beverage operations, advertising media, parking, rental and leasing agreements, and energy and utility cost allocation). The service is rendered as soon as the commercial space is made available and the revenue recognised accordingly. For fixed-rent tenancy agreements classified as operating leases, the rents are recognised on a straight-line basis over the term of the tenancy agreement. Conditional rental payments (e.g. from turnover-based tenancy agreements) are recognised on an accrual basis based on the turnover generated by the lessee, in which case a minimum rent may be applied. The company does not currently have any tenancy agreements classified as finance leases.
Leases as lessee
Finance leases
Lease agreements that substantially transfer all the risks and rewards of ownership to the company concerned at inception of the lease are classified as finance leases. They are stated at the lower of fair value and present value of the minimum lease payments less accumulated depreciation and any impairment losses. Lease payments are allocated between an interest expense and a reduction of the outstanding liability. Leased assets are depreciated over the estimated useful life or over the term of the lease, whichever is shorter. Interest on finance leases and depreciation of the leased assets are charged to the income statement.
Operating leases
Income and expenses associated with operating leases are recognised in the income statement on a straight-line basis over the period of the lease.
Finance result
The finance result comprises interest payments on borrowings calculated using the effective interest method (excluding borrowing costs relating to buildings under construction), interest expense as a result of adjusting the present value of provisions and non-current liabilities, interest and dividend income, foreign currency gains and losses, and gains and losses on financial assets.
Interest income is recognised in the income statement using the effective interest method. Dividend income is recognised in the financial statements at the due date.
Borrowing costs arising during the construction stage for movables, buildings and engineering structures are capitalised up until the date the asset is taken into use or at the date of completion, if earlier.
Property, plant and equipment
Property, plant and equipment is stated at acquisition or construction cost, less accumulated depreciation and accumulated impairment losses. The construction cost of buildings includes direct costs for labour (third-party services and internal personnel), materials and overheads, plus the borrowing costs arising during the construction stage, which are capitalised up until the date the asset is taken into use or at the date of completion, if earlier. Borrowing costs and expenditure relating to significant assets under construction are capitalised.
Components of an item of property, plant and equipment with a different useful life are reported individually and depreciated separately. Expansion and replacement expenditure is capitalised only if it is probable that future economic benefits will flow to Flughafen Zürich AG. Maintenance and renovation expenditure is charged to the income statement when incurred.
The assets (with the exception of land, which is not depreciated) are depreciated using the straight-line method over the estimated useful life or over the term of the lease, whichever is shorter. The useful life for each category of property, plant and equipment is as follows:
- Buildings: maximum 30 years
- Engineering structures: maximum 30 years
-
Movables: 4 to 20 years
Government subsidies and grants
Government subsidies and grants related to investments are deducted from the carrying amount in the relevant balance sheet items and recognised in profit or loss over the useful life of the related asset. They are reported in the income statement as an adjustment to the depreciation of the related asset. All government subsidies take the form of “à fonds perdu” grants and do not have to be repaid.
Projects in progress
Projects in progress are stated at acquisition or production cost and include investments in projects that have not yet been completed. These mainly comprise assets under construction. Once a project has been completed, the related asset is transferred to the relevant categories of property, plant and equipment and segments. Assets that are already in use or are classified as “Projects in progress” are depreciated from the time they are brought into use. From the date the asset is taken into use or at the date of completion, if earlier, no further expenditure on the asset or related borrowing cost is capitalised.
Investment property
Investment property (in accordance with IAS 40) is property held for the long term to earn rentals or for capital appreciation. It is measured at initial recognition at its cost and subsequently at cost less straight-line depreciation and any impairment losses in accordance with IAS 36.
JOINT ARRANGEMENTS
A joint arrangement (in accordance with IFRS 11) is a contractual arrangement between two or more parties which gives those parties joint control of an activity. Each joint arrangement must be classified as either a joint operation or a joint venture. In a joint operation, the parties that have joint control have rights to the assets and obligations for the liabilities of the joint arrangement and account for them in relation to their interest. In a joint venture, the parties that have joint control merely have rights to the net assets of the joint arrangement (the investment is accounted for using the equity method).
Intangible assets
Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses. Intangible assets are amortised using the straight-line method.
With the award of the operating licence, Flughafen Zürich AG was also granted a right of formal expropriation in respect of property owners exposed to aircraft noise. This right of formal expropriation was granted on condition that the airport operator bears the costs associated with compensation payments and is recognised as an intangible asset at the date when the probable total cost can be estimated based on final-instance court rulings, so that the cost can be reliably estimated in accordance with IAS 38.21. The timing of recognition may differ depending on the airport region. At the same time as an intangible asset is recognised at the present value of the expected future payments, an equal amount is recognised as a provision. Any future adjustments to the probable total cost already recognised as assets and liabilities will be reflected on both sides of the balance sheet. The intangible asset is amortised using the straight-line method over the remaining duration of the operating licence (i.e. until May 2051).
In the case of clearly defined projects, external and internal costs directly attributable to the development of computer software are capitalised if they will be exceeded by the future economic benefits. The useful life of software is three to five years.
Investments in airport operator projects
The concession arrangements for the operation of foreign airports fall within the scope of IFRIC 12 and are generally accounted for under the intangible asset model (IFRIC 12.17), as the company as operator receives the right to charge for usage as consideration for the obligation to pay concession fees and provide upgrade services. The obligations under the concession arrangements to pay fixed concession fees are recognised as financial liabilities. They are initially measured at the fair value of the liabilities using a discount rate appropriate to the risk. The rights to operate the airports that are received as consideration are recognised as intangible assets in the same amount and presented as investments in airport operator projects. The rights received as consideration for the upgrade services provided are recognised as an intangible asset on an accrual basis at the cost of construction. Revenues and costs relating to upgrade services are generally recognised in accordance with IFRIC 12.14. The financial liabilities recognised are subsequently measured at amortised cost using the effective interest method. The rights recognised as assets are subsequently measured at cost less accumulated amortisation over the term of the concessions. In accordance with IFRIC 12.18, any minimum revenue guaranteed by the grantor is deducted from the intangible asset and accounted for as a financial asset.
Investments in associates
Associates are companies where the group is able to exercise significant influence, but not control, over the financial and operating policies (where the group holds between 20% and 50% of the voting rights). Associates are included in the consolidated financial statements by applying the equity method. Any difference between the cost of the investment and the fair value of the share of net assets acquired is determined at the time of acquisition and recognised as goodwill and included in the carrying amount of the investment. In subsequent reporting periods, the carrying amount is adjusted to recognise the share of Flughafen Zürich AG of any profit or loss and changes recognised in other comprehensive income of the investee and any dividends received.
Investments in associates where the group holds less than 20% of the voting rights, but where it nonetheless is able to exercise significant influence, are also included in the consolidated financial statements by applying the equity method.
Financial assets
The new principles in IFRS 9 resulted in changes in relation to the financial assets of the Airport of Zurich Noise Fund (AZNF), which until the end of financial year 2017 were classified as available for sale. Since 1 January 2018, the financial assets of the AZNF have been classified as at amortised cost (bonds) or at fair value through profit or loss (other financial assets).
Derivative financial instruments
Derivative financial instruments are used exclusively for the purpose of hedging interest rate and currency risks, and are recognised as other receivables or other current liabilities at fair value. Changes in fair value are recognised in the income statement.
Inventories
Inventories mainly comprise operating supplies and consumables used for the maintenance and repair of property, plant and equipment and are stated at cost or, if lower, at net realisable value. The first-in, first-out method is applied when calculating the cost.
Receivables
Receivables are stated at amortised cost, which is usually their nominal value, minus individual allowances for doubtful accounts. As soon as there is sufficient evidence that a receivable will not be recoverable, it is directly written off or offset against the corresponding allowances.
Flughafen Zürich AG uses a simplified method to calculate expected credit losses on trade receivables. Changes in credit risk are not tracked; instead, a loss allowance is recognised at each reporting date on the basis of the lifetime expected credit losses. In addition to forward-looking factors specific to the borrowers and general economic conditions, credit loss experience to date is also taken into account.
The recoverable amount of receivables is the present value of the estimated future cash flows. Impairment losses on receivables are reversed if the amount of the impairment loss decreases and the decrease is related to an event that occurred in a period after the impairment loss was recognised.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, in postal accounts and at banks and short-term investments with a maturity of 90 days or less from the date of acquisition.
Impairment
The carrying amounts of non-current non-financial assets (excluding deferred taxes) are assessed once a year for indications of impairment. If there is any indication that an asset may be impaired, the recoverable amount of the asset is calculated (impairment test).
If the carrying amount of an asset or related cash generating unit exceeds its recoverable amount, an impairment loss is recognised in the income statement.
The recoverable amount is the higher of the fair value less costs to sell and value in use. To determine value in use, the estimated future cash flows are discounted. The discount rate is a pre-tax rate that reflects the risks associated with the corresponding asset. If an asset does not generate cash inflows that are largely independent of those from other assets, the recoverable amount is determined for the cash generating unit to which the asset belongs.
Impairment losses on other assets are reversed if indications exist that the impairment loss has decreased or no longer exists, and if estimates that were used for calculating the recoverable amount have changed.
The increased carrying amount cannot exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years.
Equity
Share capital
Shares are classified as equity since they are non-redeemable and dividend payments are at the discretion of the company.
Treasury shares
The cost (purchase price and directly attributable transaction costs) of treasury shares is deducted from equity.
Dividends
Dividends are recognised as a liability as soon as they have been approved at the General Meeting of Shareholders.
Financial liabilities
Financial liabilities are initially recognised at fair value less transaction costs. The difference between the carrying amount and the redemption amount is amortised over the term of the liability using the effective interest method.
Provisions
Provisions are recognised when the entity has a present obligation as a result of a past event that occurred prior to the reporting date, if an outflow of resources is probable and the amount of the outflow can be estimated reliably. If the effect is significant, provisions are reported in the balance sheet at their present value.
Provisions for legal and constructive obligations for sound insulation and resident protection measures are recognised on the basis of the Environmental Protection Act as soon as they can be estimated reliably.
Provisions for formal expropriations are recognised for compensation payments as soon as these have been reliably estimated on the basis of final-instance court rulings (see Intangible assets).
Employee benefits
For defined benefit plans, the benefit cost and the defined benefit obligation are determined on the basis of various economic and demographic assumptions using the projected unit credit method and taking into account the past years of insurance up until the measurement date. The assumptions required to be made by Flughafen Zürich AG include, among others, expectations about future salary increases, the long-term return on retirement savings accounts, employee turnover and life expectancy. The calculations are performed annually by independent actuaries. The plan assets are measured annually at fair value and deducted from the defined benefit obligation.
The defined benefit cost consists of three components:
- service cost, which is recognised in the income statement within personnel expenses;
- net interest expense, which is recognised in the income statement within the finance result; and
-
remeasurement components, which are recognised in other comprehensive income.
Service cost comprises current service cost, past service cost and gains and losses on settlement. Gains and losses resulting from curtailments are regarded as past service cost. Employee contributions and contributions from third parties reduce service cost and are deducted from it if they are set out in the formal terms of the plan or arise from a constructive obligation.
The net interest expense is the amount calculated by multiplying the net defined benefit obligation (or asset) by the discount rate, both as at the beginning of the financial year, including any changes during the period as a result of contributions and benefit payments. Cash flows and changes during the year are factored in pro rata.
Remeasurement components comprise actuarial gains and losses resulting from changes in the present value of the defined benefit obligations due to changes in assumptions and experience adjustments, the return on plan assets less amounts included in net interest expense, and changes in unrecognised assets less effects included in net interest expense. Remeasurement components are recognised in other comprehensive income and cannot be recycled.
The amount recognised in the consolidated financial statements is the surplus or deficit of the defined benefit plans (net defined benefit obligation or asset). However, the asset recognised as a result of any surplus is limited to the present value of economic benefits to the group available in the form of reductions in future contributions.
Employer contributions to defined contribution plans are recognised in the income statement as personnel expenses when the employee earns the benefit entitlement. When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss.
For other long-term employee benefits, the present value of the obligation is recognised at the end of the reporting period. Changes in the present value are recognised in the income statement as personnel expenses.
Share-based payment
Flughafen Zürich AG’s annual bonus programme provides for one-third of the allocated bonus to be paid out to members of the Management Board and eligible members of management in the form of shares. The share-based payment is recognised as an expense with a corresponding increase in equity.
Income taxes
Income taxes comprise current and deferred taxes. They are recognised in the income statement unless relating to transactions recognised in other comprehensive income or directly in equity. In these cases, taxes are also recognised in other comprehensive income or directly in equity.
Current taxes comprise the taxes expected to be payable on the taxable result, calculated using tax rates enacted or substantively enacted at the reporting date.
Deferred taxes are recognised for temporary differences between the carrying amount of assets and liabilities in the consolidated financial statements and their tax base using the balance sheet liability method. No deferred taxes are recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets and liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Measurement of deferred taxes takes into account the expected timing and manner of realisation or settlement of the assets and liabilities concerned using tax rates that are enacted or substantively enacted at the reporting date.
Deferred tax assets are only recognised if it is probable that the deductible temporary differences can be offset against future taxable profits.
Segment reporting
Reporting of operating segments is carried out in accordance with IFRS 8 in line with the internal reporting to the company’s chief operating decision-maker. The Board of Directors has been identified as chief operating decision-maker of Flughafen Zürich AG responsible for major decisions concerning the allocation of resources and the assessment of the operating segments’ performance.
II Judgements and significant estimates and assumptions in the application of accounting policies
REPORTING OF NOISE-RELATED COSTS IN THE consolidated FINANCIAL STATEMENTS
The reporting of noise-related costs in the financial statements is a complex matter. In particular the issue of formal expropriations involves significant assumptions and estimates concerning the capitalisation of such costs and the obligation to recognise appropriate provisions. This complexity is attributable to a large variety of relevant legal bases, unclear or pending legal practice and political debate.
The rulings by the Swiss Federal Supreme Court in the first half of 2008 on fundamental issues related to formal expropriations enabled Flughafen Zürich AG to reliably estimate the total cost of compensation for formal expropriations for the first time, in spite of the remaining uncertainties regarding the accuracy of this estimate. With further rulings on 8 June 2010 and 9 December 2011, the Swiss Federal Supreme Court definitively set the cut-off date for the foreseeability of an eastern approach as 1 January 1961 and ruled definitively on the method used to calculate a decline in the market value of investment property. In the first half of 2016, the Swiss Federal Supreme Court handed down two rulings in test cases regarding claims for compensation relating to the eastern and southern approach routes. Based on these Swiss Federal Supreme Court rulings and other fundamental issues that have since been decided in a court of final instance, the company undertook a reappraisal of costs for formal expropriations, which in each case led to an adjustment to both the provision for formal expropriations and the intangible asset from the right of formal expropriation.
In the first half of 2018, the court handed down two rulings in test cases regarding cooperative ownership. These Swiss Federal Supreme Court rulings enabled Flughafen Zürich AG to undertake a reappraisal of the outstanding cost of compensation for formal expropriations. Based on the recalculation, the expected total costs for formal expropriations decreased from CHF 385.0 million to CHF 350.0 million. This enabled the provision for formal expropriations to be reduced by CHF 34.5 million (nominal amount: CHF 35.0 million) as at 30 June 2018 (see note 19, Provision for formal expropriations plus sound insulation and resident protection). At the same time, the intangible asset from the right of formal expropriation was reduced by the same amount (see note 11, Intangible assets).
As at the reporting date, the estimated costs for formal expropriations amounted to CHF 350.0 million (31 December 2017: CHF 385.0 million), of which CHF 72.1 million had already been paid out at that date. The outstanding costs of CHF 277.9 million (nominal amount) are stated at their present value of CHF 275.2 million in the consolidated financial statements for the period ended 31 December 2018.
With respect to sound insulation and resident protection measures, the Federal Office of Civil Aviation (FOCA) required Flughafen Zürich AG, in connection with its 2014 operating regulations application, to submit an extended sound insulation programme by the end of June 2015. Based on the permitted noise exposure levels specified by FOCA, and taking into account the still pending changes to its 2014 operating regulations, the company duly submitted its 2015 sound insulation programme by this deadline. At its meeting on 22 June 2015, the Board of Directors approved a further CHF 100 million of measures in this context in addition to the CHF 240 million previously estimated for sound insulation and resident protection.
Flughafen Zürich AG is required to implement sound insulation measures in the area where it claims exemptions from noise limits (emission limit). In this context, the Federal Office of Civil Aviation (FOCA) has initiated a night-time noise abatement procedure. The area with exemptions under the Sectoral Aviation Infrastructure Plan adopted by the Federal Council on 23 August 2017 is to be extended. A provision for further costs of CHF 60.0 million, with a present value of CHF 57.6 million, was recognised in this context as at 30 June 2018 in addition to the cost of CHF 340.0 million previously estimated for sound insulation and resident protection (see note 5, Other income and expenses and note 19, Provision for formal expropriations plus sound insulation and resident protection).
As at the reporting date, the estimated costs for sound insulation and resident protection measures amounted to CHF 400.0 million (31 December 2017: CHF 340.0 million), of which CHF 249.1 million had already been paid out at that date. The outstanding costs of CHF 150.9 million (nominal amount) are stated at their present value of CHF 148.2 million in the consolidated financial statements for the period ended 31 December 2018.
Depending on future and final-instance legal judgements, including with respect to the southern approaches, noise-related liabilities may in future be subject to substantial adjustments, which would also require adjustments to the noise-related costs recognised as assets and liabilities in the balance sheet. At the present time, it is not possible to reliably estimate the total costs to capitalise as an intangible asset from the right of formal expropriation, the resulting amortisation or the corresponding provision.
Aircraft noise costs are refinanced through charges. The most important charge from a refinancing standpoint up until 1 February 2014 was the separate CHF 5.00 passenger noise charge. Owing to a directive on airport charges issued by FOCA on 14 November 2013, this passenger-related noise supplement was no longer collected as of 1 February 2014 as it can be assumed that the funds of the Airport of Zurich Noise Fund are sufficient to finance the costs currently estimated. Should actual future noise-related costs significantly exceed the estimate, this supplement would have to be levied again over the medium term in order to cover the costs. Aircraft noise charges are still.
VALUE OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS; RELIABILITY OF ESTIMATE OF CAPITALISED NOISE-RELATED COSTS
Flughafen Zürich AG owns property, plant and equipment and intangible assets with a total carrying amount of around CHF 2.9 billion. If there is any indication that an asset may be impaired, the recoverable amount of the asset is calculated (impairment test). On each reporting date, a check is conducted to determine whether there are any such indications and an impairment test needs to be performed. The calculation is based on the estimated future free cash flows of Flughafen Zürich AG, and a variety of assumptions have to be made in order to estimate them. Actual cash flows may be negatively impacted by the risk factors described in the previous section “Reporting of noise-related costs in the consolidated financial statements”.
III Notes to the consolidated financial statements
1 Segment reporting
The following table shows the reportable segments in the current financial year:
(CHF million)
Regulated business
Noise
Non-regulated business
Eliminations
Consolidated
2018
Revenue from contract with customers (IFRS 15)
644.9
11.6
237.6
0.0
894.1
Other revenue (non IFRS 15)
0.2
0.0
258.6
0.0
258.8
Total revenue from third parties
645.1
11.6
496.2
0.0
1,152.9
Inter-segment revenue
19.3
0.0
88.3
–107.6
0.0
Total revenue
664.4
11.6
584.5
–107.6
1,152.9
Operating expenses
–352.1
–60.9
–276.5
107.6
–581.9
Segment result (EBITDA)
312.3
–49.3
308.0
0.0
571.0
Depreciation and amortisation
–135.1
–4.8
–104.6
0.0
–244.5
Segment result (EBIT)
177.2
–54.1
203.4
0.0
326.5
Finance result
–23.1
Share of profit or loss of associates
–4.3
Income tax expense
–61.3
Profit
237.8
Invested capital as at 31 December 2018
1,901.6
109.8
1,505.4
3,516.8
Non-interest-bearing non-current liabilities 1)
617.5
Non-interest-bearing current liabilities 2)
231.0
Total assets as at 31 December 2018
4,365.3
ROIC (in %)
7.3
–32.2
11.2
7.4
Capital expenditure
128.8
0.2
231.8
360.8
Investments in associates
12.3
12.3
1) Non-interest-bearing non-current liabilities include non-current provisions for formal expropriations plus sound insulation and resident protection, deferred tax liabilities, employee benefit obligations and non-current liabilities from concession arrangements.
2) Non-interest-bearing current liabilities include current provisions for formal expropriations and sound insulation and resident protection, current tax liabilities, trade payables and other current liabilities plus accruals and deferrals.
(CHF million)
Aviation
PRM
User fees
Air security 4)
Access fees 4)
Eliminations
Total regulated business
2018
Revenue from contract with customers (IFRS 15)
380.6
15.6
69.9
177.7
1.1
0.0
644.9
Other revenue (non IFRS 15)
0.2
0.0
0.0
0.0
0.0
0.0
0.2
Revenue from third parties
380.8
15.6
69.9
177.7
1.1
0.0
645.1
Inter-segment revenue
19.2
0.0
5.2
10.7
2.2
–18.0
19.3
Total revenue
400.0
15.6
75.1
188.4
3.3
–18.0
664.4
Operating expenses
–171.0
–13.1
–33.4
–89.0
–63.6
18.0
–352.1
EBITDA
229.0
2.5
41.7
99.4
–60.3
0.0
312.3
Depreciation and amortisation
–100.6
–0.1
–24.8
–6.2
–3.4
0.0
–135.1
EBIT
128.4
2.4
16.9
93.2
–63.7
0.0
177.2
Invested capital as at 31 December 2018
1,419.2
7.1
324.2
108.8
42.3
1,901.6
ROIC (in %)
7.1
25.1
4.2
66.5
–119.3
7.3
Operating assets pursuant to Ordinance on Airport Charges (FGV) 3)
1,323.2
2.9
306.4
65.0
38.9
1,736.4
ROIC (in %) pursuant to FGV
8.5
66.8
4.5
116.0
–131.6
8.8
3) The Ordinance on Airport Charges (FGV) defines operating assets, on which a reasonable rate of return forms the basis for the charges, as the sum of the “residual cost of the existing assets and net working capital”. This definition therefore results in minor deviations compared with the reported capital employed.
4) In accordance with the Swiss Ordinance on Airport Charges, the shortfall in the “Access fees” segment can be charged to the “Air security” segment. Taking the shortfall into account, the ROIC of the “Air security” segment amounts to 15.3%.
The following table shows the reportable segments in the previous year:
(CHF million)
Regulated business
Noise
Non-regulated business
Eliminations
Consolidated
2017
Revenue from contract with customers (IFRS 15)
612.4
11.6
166.9
0.0
790.9
Other revenue (non IFRS 15)
0.2
0.0
246.0
0.0
246.2
Total revenue from third parties
612.6
11.6
412.9
0.0
1,037.1
Inter-segment revenue
18.9
0.0
88.6
–107.5
0.0
Total revenue
631.5
11.6
501.5
–107.5
1,037.1
Operating expenses
–352.3
–3.5
–205.3
107.6
–453.5
Segment result (EBITDA)
279.2
8.1
296.2
0.1
583.6
Depreciation and amortisation
–138.6
–5.3
–99.8
0.0
–243.7
Segment result (EBIT)
140.6
2.8
196.4
0.1
339.9
Finance result
–18.3
Share of profit or loss of associates
–3.1
Gain on disposal of assets held for sale
36.3
Income tax expense
–69.3
Profit
285.5
Invested capital as at 31 December 2017
1,934.4
157.5
1,378.8
3,470.7
Non-interest-bearing non-current liabilities 1)
579.8
Non-interest-bearing current liabilities 2)
248.2
Total assets as at 31 December 2017
4,298.7
ROIC (in %)
5.9
1.4
12.2
8.1
Capital expenditure
94.4
0.1
196.2
290.7
Investments in associates
13.5
13.5
1) Non-interest-bearing non-current liabilities include non-current provisions for formal expropriations plus sound insulation and resident protection, deferred tax liabilities, employee benefit obligations and non-current liabilities from concession arrangements.
2) Non-interest-bearing current liabilities include current provisions for formal expropriations and sound insulation and resident protection, current tax liabilities, trade payables and other current liabilities plus accruals and deferrals.
(CHF million)
Aviation
PRM
User fees
Air security 4)
Access fees 4)
Eliminations
Total regulated business
2017
Revenue from contract with customers (IFRS 15)
361.3
14.7
68.6
166.8
1.0
0.0
612.4
Other revenue (non IFRS 15)
0.2
0.0
0.0
0.0
0.0
0.0
0.2
Total revenue from third parties
361.5
14.7
68.6
166.8
1.0
0.0
612.6
Inter-segment revenue
19.0
0.0
5.7
10.7
2.1
–18.6
18.9
Total revenue
380.5
14.7
74.3
177.5
3.1
–18.6
631.5
Operating expenses
–174.7
–12.5
–33.4
–89.6
–60.7
18.6
–352.3
EBITDA
205.8
2.2
40.9
87.9
–57.6
0.0
279.2
Depreciation and amortisation
–100.8
–0.1
–24.9
–8.6
–4.2
0.0
–138.6
EBIT
105.0
2.1
16.0
79.3
–61.8
0.0
140.6
Invested capital as at 31 December 2017
1,452.3
7.4
318.2
114.0
42.5
1,934.4
ROIC (in %)
5.8
27.0
4.0
61.1
–116.4
5.9
Operating assets pursuant to Ordinance on Airport Charges (FGV) 3)
1,337.9
2.5
296.5
62.7
38.0
1,737.6
ROIC (in %) pursuant to FGV
7.0
64.3
4.3
97.5
–126.6
7.0
3) The Ordinance on Airport Charges (FGV) defines operating assets, on which a reasonable rate of return forms the basis for the charges, as the sum of the "residual cost of the existing assets and net working capital". This definition therefore results in minor deviations compared with the reported capital employed.
4) In accordance with the Swiss Ordinance on Airport Charges, the shortfall in the “Access fees” segment can be charged to the “Air security” segment. Taking the shortfall into account, the ROIC of the “Air security” segment amounts to 9.6%.
Internal reporting of operating segments to the chief operating decision-maker is carried out in accordance with the Ordinance on Airport Charges (FGV), more specifically with regard to the regulated charges and fees affected by the Ordinance. The following segments are presented for the regulated business and submitted to the chief operating decision-maker as the basis for his significant judgements and decisions:
- “Aviation” segment
- “PRM” segment
- “User fees” segment
- “Air security” segment
-
“Access fees” segment
The “Regulated business” column presented in the segment reporting tables is not a separate segment in accordance with IFRS 8; for presentation reasons, it merely combines the reportable segments in which charges and fees are regulated by the FGV (excluding the “Noise” segment).
All regulated revenue related to aircraft noise and the corresponding expenses are reported separately in the “Noise” segment so as to ensure transparency in presenting the performance and balance of the Airport of Zurich Noise Fund in particular (note 20, Airport of Zurich Noise Fund).
In all, Flughafen Zürich AG therefore has the following reportable segments:
→ Aviation
The “Aviation” segment comprises the original infrastructure and services related to flight operations. It incorporates all the core services provided to airlines and passengers by Flughafen Zürich AG in its capacity as operator of Zurich Airport. These services include the runway system, most apron zones (including control activities), passenger zones in the terminals, freight operations, passenger handling and services, and safety. The main sources of revenue for the “Aviation” segment are passenger and landing charges. Revenue from third parties is determined by passenger volumes, flight volumes and the trend with respect to aircraft take-off weights.
→ PRM
The “PRM” (People with Reduced Mobility) segment combines the infrastructure and services related to implementing the regulation regarding the provision of support for passengers with reduced mobility. Revenue consists exclusively of the PRM charge.
→ User fees
The “User fees” segment comprises the central infrastructure, in particular the check-in areas and facilities, baggage sorting and handling system, aircraft power supply system, handling apron areas and the related services and fees.
→ Air security
The “Air security” segment comprises the equipment and services that Flughafen Zürich AG is responsible for providing for air security (passenger and aircraft security measures). This includes all systems and their operation and maintenance designed to prevent actions of any kind that affect the security of commercial civil aviation, in particular facilities for checks on passengers, hand luggage, checked baggage and freight. The security charges levied per passenger are the main source of revenue for covering the costs of the “Air security” segment.
→ Access fees
The “Access fees” segment comprises the air security-related equipment and services that have to be provided in order to allow all persons other than passengers to access the airside areas. This includes all relevant systems and their operation and maintenance. It also includes airport policing duties such as surveillance patrols and other security-related duties. Revenue in the “Access fees” segment comes mainly from the fees for issuing airport badges.
→ Noise
All revenue and expenses related to aircraft noise are reported separately in the “Noise” segment. A liquidity-based statement of noise-related data is presented in the notes to the consolidated financial statements (note 20, Airport of Zurich Noise Fund). This statement presents the accumulated surplus or shortfall as at the reporting date arising from noise charges determined on a costs-by-cause basis, less expenses for formal expropriations, sound insulation and resident protection measures, and operating costs.
→ Non-regulated business
The “Non-regulated business” segment encompasses all activities relating to the development, marketing and operation of the commercial infrastructure at Zurich Airport. This includes all retail and restaurant/catering operations at the airport, revenue from rented premises and supplementary costs (energy supply, etc.), parking charges plus a broad range of commercial services provided by Flughafen Zürich AG.
Principles of segment reporting
For reporting purposes, each profit centre has been allocated to a segment. Any internal supplies and services that have been provided to other segments have been booked as inter-segment revenue or offset against costs. For example, the “Supplementary costs” profit centre is allocated to Non-regulated business and proportionate costs are charged to the Regulated business segments on a costs-by-cause basis. Support functions are also allocated to Non-regulated business and charged on accordingly.
Invested capital is allocated to the respective operating segments based, firstly, on the allocation of the individual assets in the fixed-asset ledger and, secondly, on the pro rata allocation of the remaining assets (buildings, engineering structures and net working capital) to the respective segments. Until projects in progress have been completed, they are allocated to the segment with the largest share of the project measured by value. The definitive allocation to segments takes place after the projects have been classified into the relevant asset categories.
The identified operating segments have not been aggregated.
ADDITIONAL DISCLOSURES IN ACCORDANCE WITH THE SWISS ORDINANCE ON AIRPORT CHARGES (FGV)
In accordance with Art. 34 FGV, 30% of the economic added value in the airside area of the airport not relevant to flight operations and the area of road vehicle parking is to be used in the form of a transfer payment to finance the costs in the “Aviation” segment. Pursuant to this rule, in 2018 the sum of CHF 14.5 million (2017: CHF 14.3 million) was allocated to the “Aviation” segment and is reflected in the reported return on operating assets. Moreover, in accordance with Art. 45 FGV, the shortfall in the “Access fees” segment can be charged to the “Air security” segment.
Additional disclosures
Flughafen Zürich AG primarily provides services within Switzerland. In financial year 2018, external consulting services totalling CHF 6.0 million (2017: CHF 6.6 million) were provided in Brazil and Chile. Flughafen Zürich AG’s revenue with Lufthansa Group in the reportable segments amounted to CHF 432.3 million in the past financial year (2017: CHF 400.1 million).
2 Revenue
(CHF 1,000)
2018
2017
Passenger charges
251,798
238,757
Security charges
175,685
165,884
PRM charges
15,554
14,675
Passenger-related flight operations charges
443,037
419,316
Landing charges
86,838
82,609
Aircraft-related noise charges
11,629
11,561
Emission charges
4,068
3,830
Parking charges
26,257
25,102
Freight revenue
8,919
8,667
Other flight operations charges
137,711
131,769
Total flight operations charges
580,748
551,085
Baggage sorting and handling system
43,500
41,438
De-icing
11,742
12,750
Check-in
5,900
5,830
Aircraft energy supply system
3,800
3,636
Other fees
6,148
5,933
Total aviation fees
71,090
69,587
Refund of security costs
1,961
943
Other revenue
2,868
2,626
Total other aviation revenue
4,829
3,569
Total aviation revenue
656,667
624,241
Retail, tax & duty-free
111,379
102,108
Food & beverage operations
18,900
17,496
Advertising media and promotion
18,137
18,303
Revenue from multi-storey car parks
81,462
79,387
Other commercial revenue (car rentals, taxis, banks, etc.)
18,427
16,924
Total commercial revenue
248,305
234,218
Revenue from rental and leasing agreements
89,994
89,234
Energy and utility cost allocation
21,959
21,438
Cleaning
4,712
4,872
Revenue from services
4,686
4,254
Total revenue from facility management
121,351
119,798
Communication services
15,436
15,282
Other services and miscellaneous
17,446
16,072
Catering
2,109
1,977
Fuel charges
8,707
8,220
Total revenue from services
43,698
41,551
Revenue from consulting activities
6,048
6,596
Other revenue from international business
36,130
7,589
Revenue from construction projects as part of concession arrangements
40,698
3,132
Total revenue from international business
82,876
17,317
Total non-aviation revenue
496,230
412,884
Total revenue
1,152,897
1,037,125
Presentation of revenue from contracts with customers (IFRS 15):
(CHF 1,000)
2018
2017
Flight operations charges
580,748
551,085
Aviation charges
71,090
69,587
Other aviation revenue
4,624
3,364
Total aviation revenue from contracts with customers (IFRS 15)
656,462
624,036
Aviation revenue (non IFRS 15)
205
205
Total aviation revenue
656,667
624,241
Commercial and parking revenue
81,738
79,246
Revenue from facility management
30,763
30,146
Revenue from services
42,238
40,135
Revenue from international business
82,876
17,317
Total non-aviation revenue from contracts with customers (IFRS 15)
237,615
166,844
Non-aviation revenue (non IFRS 15)
258,615
246,040
Total non-aviation revenue
496,230
412,884
Total revenue
1,152,897
1,037,125
3 PERSONNEL EXPENSES
(CHF 1,000)
2018
2017
Wages and salaries
158,551
151,131
Pension costs for defined benefit plans 1)
21,617
23,170
Social security contributions
14,326
14,114
Other personnel expenses and employee benefits
16,989
13,043
Total personnel expenses
211,483
201,458
Average number of employees (full-time positions) 2)
1,735
1,618
Number of employees as at reporting date (full-time positions) 2)
1,757
1,713
Personnel expense per full-time position as at 31 December
120
118
1) See note 22, Employee benefits.
2) Including employees of all subsidiaries.
Staff participation programme
Flughafen Zürich AG gives those employees who have completed their first year of service a one-off gift in the form of one share free of charge. In the reporting period 140 shares (2017: 151 shares) worth CHF 28,506 (2017: CHF 33,644) were handed out.
Bonus programme for members of the Management Board and other members of management
The total annual remuneration awarded to members of the Management Board and other members of management comprises a fixed salary and a variable performance component (bonus), which is based on the consolidated result. The criterion for measuring the consolidated result is earnings before interest and tax (EBIT) excluding noise-related factors, or the difference between targeted and achieved EBIT (excluding noise-related factors). The decision relating to the degree of achievement of the consolidated result is taken in the following financial year (grant date). Two thirds of the bonus is paid out in cash and one third in shares.
2018
2017
2017 1)
Price per share 1)
(Recipient)
(CHF 1,000)
(CHF 1,000)
(Number of shares)
(CHF)
Members of the Management Board
390
401
1,921
205.20
Other members of management
772
760
3,560
205.20
Adjustment of bonus accrued in the previous year 2)
–36
16
Total
1,126
1,177
5,481
1) Shares distributed in the 2018 financial year under the bonus programme for the Management Board and other members of management (number and price per share) for the 2017 financial year.
2) In the subsequent period, the accrued bonus is adjusted through personnel expenses on the basis of the actual degree of achievement of the relevant profit figure.
The equity-settled portion of the bonus for financial year 2018 was calculated and accounted for on the basis of the data available as at the reporting date regarding the degree of achievement of the consolidated result. The number of shares to be granted cannot yet be established precisely at the reporting date, as that number is determined based on the quoted price as at the payment date (mid-April 2019). If the shares had been granted as at year-end, a total of 7,150 shares would have been distributed.
Bonus programme for the Board of Directors
No bonus programme exists for members of the Board of Directors. Their remuneration comprises an annual lump sum plus payments for attending meetings.
Option programme
No option programme exists at Flughafen Zürich AG.
4 OTHER OPERATING EXPENSES
(CHF 1,000)
2018
2017
Zurich Protection & Rescue Services
20,973
20,830
PRM costs (service costs of service providers)
12,111
11,768
Other operating costs
9,235
7,478
Insurance
3,599
3,201
Cleaning by external contractors, incl. snow clearing
3,200
3,030
Costs for own car park
2,116
2,201
Communication costs
2,138
1,817
Passenger services
1,382
1,246
Total other operating expenses
54,754
51,571
5 OTHER INCOME and EXPENSES
(CHF 1,000)
2018
2017
Capitalised expenditure
14,450
14,649
Other income
1,020
5,101
Capitalised expenditure and other income
15,470
19,750
Expenses for construction projects as part of concession arrangements
–40,698
–3,132
Other expenses
–63,841
–2,168
Expenses for construction projects and other expenses
–104,539
–5,300
Capitalised expenditure of CHF 14.5 million (2017: CHF 14.6 million) primarily comprises fees for the company’s architects and engineers as well as for project managers representing the client.
In the previous year, “Other income” included a payment of CHF 4.8 million in connection with the liquidation of Swissair in debt restructuring proceedings.
The expenses for construction projects as part of concession arrangements amounting to CHF 40.7 million (2017: CHF 3.1 million) are the result of investments made in infrastructure at the airports in Brazil and Chile. The corresponding counter-item can be found under note 2, Revenue.
“Other expenses” include the CHF 57.6 million increase in the provision for sound insulation and resident protection measures that is recognised in profit or loss (see note 19, Provision for formal expropriations plus sound insulation and resident protection). Also included are losses on asset disposals (CHF 1.3 million), the share of the costs for the new shooting range of the Canton of Zurich police force (CHF 3.0 million) and expenses from variable concession payments relating to international business (CHF 1.4 million).
6 Finance result
(CHF 1,000)
2018
2017
Interest expenses on debentures and non-current loans
–10,960
–12,178
Net interest expenses on defined benefit obligations
–796
–1,072
Interest expenses on finance lease liabilities
–135
–195
Other interest expenses
–1,375
–710
Losses on financial assets of Airport of Zurich Noise Fund
–6,205
–2,222
Present value adjustment on provision for formal expropriations plus sound insulation and resident protection
–1,859
–1,355
Present value adjustment on liabilities from concession arrangements
–3,123
–843
Foreign exchange losses
0
–1,493
Other finance costs
–2,694
–4,063
Total finance costs
–27,147
–24,131
Interest income on financial assets of Airport of Zurich Noise Fund
621
3,183
Other interest income
3,255
1,287
Foreign exchange gains
50
650
Other finance income
157
687
Total finance income
4,083
5,807
Finance result
–23,064
–18,324
Thanks to the debenture refinanced on more favourable terms in May 2017, interest expenses on debentures and non-current loans declined by CHF 1.2 million year on year to CHF 11.0 million.
Under the new requirements in IFRS 9 Financial Instruments, losses on financial assets of the Airport of Zurich Noise Fund (some of them unrealised) must be recognised in profit or loss (previously recognised in equity). This was a factor contributing to the increase in the losses from CHF 2.2 million to CHF 6.2 million.
The adjustment to the present value of the provision for formal expropriations plus sound insulation and resident protection resulted in an expense of CHF 1.9 million in the reporting period (2017: CHF 1.4 million). An additional expense of CHF 3.1 million (2017: CHF 0.8 million) was incurred due to the adjustment to the present value of liabilities from concession arrangements in Brazil and Chile.
The CHF 2.0 million increase in other interest income compared with the previous year is due primarily to higher average bank balances of the group companies in Brazil and Chile.
7 GAIN ON DISPOSAL OF ASSETS HELD FOR SALE
On 15 April 2016, Flughafen Zürich AG had signed an agreement for the sale of its 5% interest in Bangalore International Airport Ltd. (BIAL), the owner and operator of the international airport in the Indian city of Bengaluru, at a price of USD 48.9 million. At that date, the interest in BIAL was for the last time measured using the equity method applied up until then and presented as a “Non-current asset held for sale” within current assets on Flughafen Zürich AG’s consolidated balance sheet. The sale transaction was completed on 24 March 2017. The disposal resulted in a pre-tax gain of CHF 36.3 million.
8 Income tax
(CHF 1,000)
2018
2017
Taxes for current year
78,175
73,027
Taxes for prior years
–94
–3,610
Total current income tax
78,081
69,417
Deferred income tax on changes in temporary differences
–16,788
–167
Total deferred income tax
–16,788
–167
Total income tax
61,293
69,250
Income tax can be analysed as follows:
(CHF 1,000)
2018
2017
Profit before tax
299,134
354,777
Tax expense based on the statutory tax rate of 20.5% applicable at the parent company (2017: 20.5%)
61,286
72,686
Prior-period adjustments
–94
–2,787
Effect of share of results of associates
–124
–932
Current-year losses for which no deferred tax assets were recognised
1,122
343
Effect of application of different income tax rates
404
–138
Miscellaneous items
–1,301
78
Total income tax
61,293
69,250
9 Property, plant and equipment
(CHF million)
Land
Engineering structures
Buildings
Projects in progress
Movables
Leased assets
Total
Cost
Balance as at 1 January 2017
108.7
1,689.2
4,288.6
147.4
275.7
21.8
6,531.4
Additions
10.0
136.9
146.9
Disposals
–3.4
–87.2
–18.7
–109.3
Transfers
26.2
110.3
–161.5
16.4
–8.6
Change in consolidation scope
0.1
0.1
Balance as at 31 December 2017
118.7
1,712.0
4,311.7
122.8
273.5
21.8
6,560.5
Balance as at 1 January 2018
118.7
1,712.0
4,311.7
122.8
273.5
21.8
6,560.5
Additions
194.7
194.7
Disposals
–3.6
–54.6
–16.3
–74.5
Transfers
50.6
59.9
–132.7
15.8
–6.4
Reclassification
–61.0
61.0
0.0
Foreign exchange differences
–0.1
–0.1
–0.2
Balance as at 31 December 2018
118.7
1,698.0
4,377.9
184.8
272.9
21.8
6,674.1
Depreciation, amortisation
Balance as at 1 January 2017
0.0
–822.6
–2,728.8
0.0
–194.8
–16.6
–3,762.8
Additions
–60.8
–156.4
–15.6
–1.4
–234.2
Disposals
2.8
86.6
18.4
107.8
Balance as at 31 December 2017
0.0
–880.6
–2,798.6
0.0
–192.0
–18.0
–3,889.2
Balance as at 1 January 2018
0.0
–880.6
–2,798.6
0.0
–192.0
–18.0
–3,889.2
Additions
–62.2
–150.7
–15.2
–1.4
–229.5
Disposals
3.5
53.7
15.6
72.8
Reclassification
40.9
–40.9
0.0
Balance as at 31 December 2018
0.0
–898.4
–2,936.5
0.0
–191.6
–19.4
–4,045.9
Government subsidies and grants
Balance as at 1 January 2017
0.0
–10.2
–1.1
–1.1
–0.1
0.0
–12.5
Additions
–1.3
–1.3
Disposals
0.7
0.1
0.3
1.1
Transfers
–1.4
–0.1
2.4
–0.9
0.0
Balance as at 31 December 2017
0.0
–10.9
–1.1
0.0
–0.7
0.0
–12.7
Additions
–0.7
–0.7
Disposals
0.8
0.1
0.3
1.2
Transfers
–0.7
0.7
0.0
Balance as at 31 December 2018
0.0
–10.1
–1.7
0.0
–0.4
0.0
–12.2
Net carrying amount as at 31 December 2017
118.7
820.5
1,512.0
122.8
80.8
3.8
2,658.6
Net carrying amount as at 31 December 2018
118.7
789.5
1,439.7
184.8
80.9
2.4
2,616.0
Projects in progress
In the past financial year, Flughafen Zürich AG invested CHF 194.7 million in projects in progress (2017: CHF 136.9 million). The biggest items comprise the following projects:
- Expansion and refurbishment of the baggage sorting system (CHF 33.0 million)
- Creation of multiple-entry runway 16 and high-speed runway 28 (CHF 17.6 million)
-
Expansion of the south-side aircraft stands (CHF 17.1 million)
LEASE AIRCRAFT ENERGY SUPPLY SYSTEM AND BAGGAGE SORTING AND HANDLING SYSTEM
In December 2001, Flughafen Zürich AG concluded a framework lease agreement for financing the aircraft energy supply system and the baggage sorting and handling system, which was then under construction. On 1 August 2003, since the systems were near completion, a first tranche of each of the definitive lease agreements totalling CHF 84.5 million was put into effect. Between 2004 and 2014, a further eleven tranches totalling CHF 28.2 million were added. Based on their form and content, both the framework agreement and the definitive lease agreements are classed as finance leases and have therefore been recognised in the balance sheet. The leased facilities available for use have been depreciated with effect from their date of completion. The lease for the baggage sorting and handling system ended on 31 December 2016. The finance lease for the aircraft energy supply system runs until 31 July 2020.
Depreciation
Depreciation of property, plant and equipment totalling CHF 229.5 million was offset against government grants and subsidies recognised in the income statement in the amount of CHF 1.2 million.
Impairment
Flughafen Zürich AG voluntarily carries out a calculation at company level on a yearly basis to determine whether there is any indication that property, plant and equipment and intangible assets (see note 11, Intangible assets) may be impaired. The calculation is based on the expected future free cash flows of Flughafen Zürich AG and various assumptions regarding future trends (e.g. passenger and traffic volumes, investments, the hub status of Zurich Airport and the discount rate). The calculation as at 31 December 2018 did not identify any indications of impairment.
10 Investment property
(CHF 1,000)
Land
Project and constrution costs
Total investment property
Cost
Balance as at 1 January 2017
950
119,186
120,136
Additions
0
92,123
92,123
Balance as at 31 December 2017
950
211,309
212,259
Balance as at 1 January 2018
950
211,309
212,259
Additions
0
95,387
95,387
Balance as at 31 December 2018
950
306,696
307,646
Depreciation, amortisation
Balance as at 1 January 2017
0
0
0
Additions
0
–352
–352
Balance as at 31 December 2017
0
–352
–352
Balance as at 1 January 2018
0
–352
–352
Additions
0
–240
–240
Balance as at 31 December 2018
0
–592
–592
Net carrying amount as at 31 December 2017
950
210,957
211,907
Net carrying amount as at 31 December 2018
950
306,104
307,054
THE CIRCLE project
On 5 February 2015, Flughafen Zürich AG and Swiss Life AG notarised the purchase agreement for the share of land for THE CIRCLE and registered it for entry in the Land Register, thereby establishing the co-ownership structure between the two parties provided for in the financing agreements, in which Flughafen Zürich AG has a 51% interest and Swiss Life AG a 49% interest. Flughafen Zürich AG then transferred the project costs incurred for THE CIRCLE up until that date to the co-ownership structure.
Based on the nature of the contractual arrangement, the co-ownership structure for THE CIRCLE is classified as a joint operation in accordance with IFRS 11. The share of the rights to the assets and the share of the obligations for the liabilities of the co-ownership structure are therefore recognised and presented in the relevant line items in the consolidated financial statements of Flughafen Zürich AG.
The share of the property under construction for THE CIRCLE is classified as investment property in accordance with IAS 40. In this context, Flughafen Zürich AG has decided to apply the cost model. The land recognised for THE CIRCLE in the amount of approximately CHF 1.0 million represents the purchase cost of the share of the plot of land on which the project will be implemented. “Project and construction costs” in the amount of CHF 306.1 million (2017: CHF 211.0 million) include the share of the production costs capitalised to date.
The fair value of THE CIRCLE was CHF 373.3 million at the reporting date (2017: CHF 242.6 million). The value was calculated by an external expert using the discounted cash flow method (level 3). Under this method, the fair value is determined on the basis of the total expected future net income (before tax, interest payments, depreciation and amortisation) discounted to the present date. A risk-adjusted discount rate is set depending on the risks and rewards and in line with market rates.
11 Intangible assets
(CHF 1,000)
Intangible asset from right of formal expropriation
Investments in airport operator projects
Other intangible assets
Cost
Balance as at 1 January 2017
188,558
0
76,357
Additions
0
51,294
434
Disposals
0
0
–425
Transfer
0
0
8,596
Changes in consolidation scope
0
25,800
0
Balance as at 31 December 2017
188,558
77,094
84,962
Balance as at 1 January 2018
188,558
77,094
84,962
Additions
0
66,763
3,937
Disposals
–34,529
0
–2,142
Transfer
0
0
6,378
Foreign exchange differences
0
–13,382
–758
Balance as at 31 December 2018
154,029
130,475
92,377
Depreciation, amortisation
Balance as at 1 January 2017
–52,935
0
–65,951
Additions
–3,941
–1,901
–4,390
Disposals
0
0
391
Balance as at 31 December 2017
–56,876
–1,901
–69,950
Balance as at 1 January 2018
–56,876
–1,901
–69,950
Additions
–3,416
–5,586
–6,804
Disposals
0
0
2,142
Foreign exchange differences
0
2,644
120
Balance as at 31 December 2018
–60,292
–4,843
–74,492
Net carrying amount as at 31 December 2017
131,682
75,193
15,012
Net carrying amount as at 31 December 2018
93,737
125,632
17,885
INTANGIBLE ASSET FROM RIGHT OF FORMAL EXPROPRIATION
With the award of the operating licence, Flughafen Zürich AG was also granted a right of formal expropriation in respect of property owners exposed to aircraft noise. This right of formal expropriation was granted on condition that the airport operator bears the costs associated with compensation payments and is recognised as an intangible asset at the date when the probable total cost can be estimated based on final-instance court rulings, so that the cost can be reliably estimated in accordance with IAS 38.21.
As a result of the Swiss Federal Supreme Court rulings in the first half of 2018 in test cases regarding cooperative ownership, Flughafen Zürich AG was able, as at 30 June 2018, to undertake a reappraisal of the outstanding cost of compensation for formal expropriations. Based on the recalculation, the provision for formal expropriations was reduced by CHF 34.5 million (see note 19, Provision for formal expropriations plus sound insulation and resident protection). At the same time, the intangible asset from the right of formal expropriation was reduced by the same amount.
As at 31 December 2018, Flughafen Zürich AG has therefore recognised an intangible asset from the right of formal expropriation in the amount of CHF 93.7 million (2017: CHF 131.7 million). This is amortised using the straight-line method over the remaining term of the operating licence (i.e. until May 2051).
Investments in airport operator projects
The investments in airport operator projects in the amount of CHF 125.6 million (2017: CHF 75.2 million) consist of concession rights which, due to the application of IFRIC 12, comprise minimum concession payments recognised as assets and investments made. They relate to the expansion and operation of the Chilean airports in Antofagasta and Iquique (CHF 30.4 million; 2017: CHF 24.4 million), in which Flughafen Zürich AG holds a controlling interest via its subsidiary A-port Chile S.A., as well as the expansion and operation of the Brazilian airport in Florianópolis (CHF 95.2 million; 2017: CHF 50.8 million) through the subsidiary Concessionária do Aeroporto Internacional de Florianópolis S.A. The obligations of CHF 26.1 million (2017: CHF 11.7 million) relating to the corresponding concessions are recognised as current and non-current liabilities (see note 18, Financial liabilities).
Impairment
Flughafen Zürich AG carries out a calculation at company level on a yearly basis to determine whether there is any indication that property, plant and equipment (see note 9, Property, plant and equipment) and intangible assets may be impaired. The calculation is based on the expected future free cash flows of Flughafen Zürich AG and various assumptions regarding future trends (e.g. passenger and traffic volumes, investments, the hub status of Zurich Airport and the discount rate). The calculation as at 31 December 2018 did not identify any indications of impairment.
12 Investments in associates
(CHF 1,000)
31.12.2018
31.12.2017
Sociedade de Participação no Aeroporto de Confins S.A., Belo Horizonte (Brazil)
Share capital: BRL 474 million (previous year BRL 399 million)/Equity share 25.0% (previous year 25.0%)
12,323
13,518
Administradora Unique IDC C.A., Porlamar (Venezuela)
Share capital: VEB 25 million (previous year VEB 25 million)/Equity share 49.5% (previous year 49.5 %)
0
0
Aeropuertos Asociados de Venezuela C.A., Porlamar (Venezuela)
Share capital: VEB 10 million (previous year VEB 10 million)/Equity share 49.5% (previous year 49.5 %)
0
0
Total investments in associates
12,323
13,518
Brazil
Alongside Brazilian company CCR, Flughafen Zürich AG holds a 25% interest in Sociedade de Participação no Aeroporto de Confins S.A., a private consortium which in turn controls 51% of the local airport operator Concessionary do Aeroporto Internacional de Confins S. A. The remaining 49% of the shares are held by the state-owned Infraero. As a consequence, since 2014 Flughafen Zürich AG and CCR have been responsible for the operation and expansion of the international airport in Belo Horizonte in the Brazilian state of Minas Gerais. The concession agreement is for 30 years and prescribes certain infrastructure expansion during the first few years. After only 14 months’ construction time, a new terminal commenced operation at the end of 2016. There is an Operations, Management & Service Agreement (OMSA) with the licence holder. The company receives revenue from this service agreement. Flughafen Zürich AG appoints the retail and flight operations managers.
Venezuela
In 2010, Flughafen Zürich AG and its consortium partner Unique IDC turned to the International Centre for Settlement of Investment Disputes (ICSID) in Washington D.C. in the matter of the airport expropriated in Venezuela (Isla de Margarita). This step is in compliance with the investment protection treaty between Venezuela, Switzerland and Chile. The ICSID reached its decision in November 2014, requiring the Bolivarian Republic of Venezuela to reimburse the consortium the costs incurred for the proceedings and project plus a compensation payment of around USD 19.5 million as well as interest incurred up until receipt of payment (around USD 22.2 million accrued as at 31 December 2018). Flughafen Zürich AG is entitled to 50% of the total amount of the payments. Prior to the deadline set for 18 March 2015, Venezuela appealed to the ICSID to set aside the tribunal’s decision on the grounds of an infringement of procedural rules. A decision is expected in the next few months. Regardless of the outcome the tribunal’s decision is already binding and enforceable. The value of this holding has been fully impaired.
Additional disclosures
The following table contains the summarised financial information for the associate Sociedade de Participação no Aeroporto de Confins S.A. The amounts correspond to those in the associate’s financial statements prepared in accordance with IFRSs.
SOCIEDADE DE PARTICIPAÇÃO NO AEROPORTO DE CONFINS S. A.
(CHF 1,000)
31.12.2018
31.12.2017
Revenue
96,299
122,219
Loss
–17,316
–12,272
Comprehensive income
–17,316
–12,272
Non-current assets
607,805
676,421
Current assets
31,669
40,335
Non-current liabilities
–498,857
–442,898
Current liabilities
–44,089
–167,849
Equity attributable to non-controlling interests
–47,238
–51,936
Net equity
49,290
54,073
Equity share
25.0%
25.0%
Carrying amount of interest in associate
12,323
13,518
13 FINANCIAL ASSETS OF THE AIRPORT OF ZURICH NOISE FUND
(CHF 1,000)
31.12.2018
31.12.2017
Current financial assets of Airport of Zurich Noise Fund
21,967
76,578
Non-current financial assets of Airport of Zurich Noise Fund
377,241
360,525
Total financial assets of Airport of Zurich Noise Fund
399,208
437,103
The financial assets of the Airport of Zurich Noise Fund consist mostly of CHF-denominated bonds and a mixed investment fund. The investment horizon is based on the expected obligation to make payments from the Airport of Zurich Noise Fund and averages around four years. Interest on bonds was between 0.00% and 2.625% in 2018 (2017: between 0.00% and 2.625%). The funds are managed by professional financial institutions (see note 6, Finance result, and note 24.1 a) Financial risk management, i) Credit risk).
14 Trade receivables
(CHF 1,000)
31.12.2018
31.12.2017
Trade receivables, gross 1)
102,610
110,663
Allowance for expected credit loss
–586
–761
Trade receivables, net
102,024
109,902
1) Trade receivables include an amount of CHF 21.8 million due from Swiss (2017: CHF 27.1 million). In the period between the balance sheet date and the preparation of the 2018 annual report, Swiss had paid the outstanding amount arising from airport charges in full as at 31 December 2018.
Geographical distribution of trade receivables:
(CHF 1,000)
31.12.2018
31.12.2017
Switzerland
35,013
41,927
Europe
9,110
10,004
Other
7,670
6,031
Total aviation
51,793
57,962
Switzerland
44,918
50,400
Europe
67
247
Latin America
5,785
1,973
Other
47
81
Total non-aviation
50,817
52,701
Total trade receivables, gross
102,610
110,663
The expected credit losses in the case of trade receivables for both the reporting period and the previous year are as follows:
(CHF 1,000)
31.12.2018
Not past due
Past due, 0 to 30 days
Past due, 31 to 60 days
Past due, more than 60 days
Total
Expected credit loss rate (in %)
0.3
1.5
2.5
5.0
Trade receivables, gross
88,039
9,683
2,050
2,838
102,610
Expected credit loss
–248
–145
–51
–142
–586
(CHF 1,000)
31.12.2017
Not past due
Past due, 0 to 30 days
Past due, 31 to 60 days
Past due, more than 60 days
Total
Expected credit loss rate (in %)
0.3
1.5
2.5
4.0
Trade receivables, gross
88,719
12,269
1,428
8,247
110,663
Expected credit loss
–222
–179
–36
–325
–761
In almost all cases, receivables not past due concern long-standing client relationships. Based on past experience, Flughafen Zürich AG does not expect any additional credit losses.
15 Other receivables and prepaid expenses
(CHF 1,000)
31.12.2018
31.12.2017
Services not yet invoiced
14,686
11,119
Accrued interest on interest-bearing debt instruments Airport of Zurich Noise Fund
380
566
Prepaid services
61,712
21,923
Prepaid expenses and accruals
76,778
33,608
Tax receivables (VAT and withholding tax)
11,812
5,600
Other receivables
627
1,712
Total other receivables and prepaid expenses
89,217
40,920
of which financial instruments
15,066
11,685
of which other receivables and prepaid expenses
74,151
29,235
The interest from the liquid funds of the Airport of Zurich Noise Fund that were invested separately (see also note 13, Financial assets of the Airport of Zurich Noise Fund and note 20, Airport of Zurich Noise Fund), was recognised on an accrual basis.
All services provided in the reporting period were invoiced between the reporting date and the preparation of the annual report. There are no past due receivables reported in the above items that would require the recognition of an allowance.
16 Cash and cash equivalents and fixed-term deposits
31.12.2018
31.12.2017
(CHF 1,000)
Total
of which AZNF
Total
of which AZNF
Cash on hand
213
0
227
0
Cash at banks and in postal accounts
273,288
34,242
225,346
20,184
Fixed-term deposits 1)
122,371
0
89,042
0
Total cash and cash equivalents
395,872
34,242
314,615
20,184
Current fixed-term deposits 2)
149,167
0
230,000
0
Non-current fixed-term deposits 2)
37,500
0
41,667
0
Total fixed-term deposits
186,667
0
271,667
0
1) Due within 90 days from date of acquisition.
2) Due after 90 days from date of acquisition.
17 Equity and reserves
(Number of shares)
Issued registered shares (nominal value, CHF 10)
Treasury shares
Total shares in circulation
Balance as at 1 January 2017
30,701,875
5,713
30,696,162
Purchase of treasury shares
2,349
–2,349
Distribution of treasury shares to employees and third parties
–5,968
5,968
Balance as at 31 December 2017
30,701,875
2,094
30,699,781
Purchase of treasury shares
5,185
–5,185
Distribution of treasury shares to employees and third parties
–5,624
5,624
Balance as at 31 December 2018
30,701,875
1,655
30,700,220
SHARE RIGHTS
The holders of registered shares are entitled to participate at the General Meeting of Shareholders and cast one vote per share.
Treasury shares
Treasury shares are distributed to employees and third parties under the bonus programme; see note 3, Personnel expenses, and note 24.5, Related parties. Treasury shares are used for the bonus programme and are held as treasury stock.
Fair value reserve
Until 31 December 2017 the fair value reserve comprised the cumulative fair value changes in available-for-sale financial assets of the Airport of Zurich Noise Fund.
Translation reserve
The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign operations and associates.
Earnings per share
Basic and diluted earnings per share are calculated from the results and share data as at 31 December, which are composed as follows:
2018
2017
Profit attributable to shareholders of Flughafen Zürich AG in CHF
237,832,160
285,224,564
Weighted average number of outstanding shares
30,691,512
30,698,833
Effect of dilutive shares
8,873
7,046
Adjusted weighted average number of outstanding shares
30,700,385
30,705,879
Basic earnings per share (CHF)
7.75
9.29
Diluted earnings per share (CHF)
7.75
9.29
Dividend distribution limit
The amount available for payment as a dividend is based on the available retained earnings of Flughafen Zürich AG and is determined in accordance with the provisions of the Swiss Code of Obligations (CO). As at the reporting date, reserves amounting to CHF 153.9 million (2017: CHF 154.0 million) were subject to a restriction on distribution under the provisions of commercial law.
Major shareholders and shareholder structure
The shareholder structure as at 31 December was as follows:
2018
2017
Public sector
38.60%
38.60%
Private individuals
6.50%
4.69%
Companies
4.60%
4.55%
Pension funds
2.09%
1.96%
Financial institutions (including nominees)
25.78%
26.58%
Balance available and non-registered shareholders
22.43%
23.62%
Total
100.00%
100.00%
Number of shareholders
13,592
9,862
As at the reporting date, the following shareholders or groups of shareholders held more than 5% of the voting rights:
2018
2017
Canton of Zurich
33.33%
33.33%
City of Zurich
5.00%
5.00%
18 Financial liabilities
(CHF 1,000)
31.12.2018
31.12.2017
Debentures
1,050,244
1,050,134
Non-current liabilities from concession arrangements
25,711
11,665
Non-current lease liabilities
1,655
3,010
Other non-current financial liabilities
7,860
11,751
Non-current financial liabilities
1,085,470
1,076,560
Debentures
38,204
0
Current liabilities from concession arrangements
438
0
Current lease liabilities
1,355
1,752
Other current financial liabilities
2,660
2,967
Current financial liabilities
42,657
4,719
Total financial liabilities
1,128,127
1,081,279
In financial year 2018, a total of CHF 1.8 million (2017: CHF 1.7 million) of the outstanding lease liabilities was repaid in accordance with the existing lease agreements.
Other current and non-current financial liabilities include bank loans taken out by the subsidiaries in Brazil and Chile.
Composition of non-current financial liabilities as at the reporting date:
as at 31.12.2018
as at 31.12.2018
Financial liabilities
Nominal value
Carrying amount
Duration
Interest rate
Early amortisation
Interest payment date
(CHF 1,000)
(CHF 1,000)
Debenture
300,000
299,816
2012 – 2020
1.250%
no
3.7.
Debenture
400,000
399,792
2013 – 2023
1.500%
no
17.4.
Debenture
350,000
350,636
2017 – 2029
0.625%
no
24.5.
Non-current liabilities from concession arrangements
52,495
25,711
2023 – 2047
n/a
no
n/a
Non-current lease liabilities
1,195
1,655
2019 – 2020
3.476%
no
1 st of each month
Other non-current financial liabilities
7,860
7,860
2022
6.200%
no
n/a
Total non-current financial liabilities
1,085,470
External financing is subject to standard guarantees and covenants, which were complied with as at the reporting date.
In addition, unused credit facilities at the reporting date amounted to a total of CHF 239.9 million (see note 24.1 a) Financial risk management, ii) Liquidity risk).
The maturities of financial liabilities are shown in the table below:
(CHF 1,000)
31.12.2018
31.12.2017
Due within 1 year
42,657
4,719
Due between 1 and 5 years
701,497
314,455
Due in more than 5 years
383,973
762,105
Total financial liabilities
1,128,127
1,081,279
Financial liabilities changed as follows as a result of cash and non-cash changes:
31.12.2017
Cash flows
Non-cash changes
31.12.2018
(CHF 1,000)
Increase(+)/decrease(-)
Foreign exchange movements
Value changes
Debentures
1,050,134
110
1,050,244
Non-current liabilities from concession arrangements
11,665
16,656
–2,610
25,711
Non-current lease liabilities
3,010
–1,355
1,655
Other non-current financial liabilities
11,751
–2,822
–1,069
7,860
Non-current financial liabilities
1,076,560
0
12,479
–3,679
110
1,085,470
Debentures
0
40,582
–2,378
0
38,204
Current liabilities from concession arrangements
0
74
364
438
Current lease liabilities
1,752
–397
1,355
Other current financial liabilities
2,967
9
7
–323
2,660
Current financial liabilities
4,719
40,591
–316
–2,337
0
42,657
Total financial liabilities
1,081,279
40,591
12,163
–6,016
110
1,128,127
Overview of lease liabilities
The lease liabilities shown below primarily include the lease agreement for the aircraft energy supply system outlined in note 9, Property, plant and equipment. In this case, the interest rate on the lease liability was 3.476% as at the reporting date.
(CHF 1,000)
31.12.2018
31.12.2017
Future minimum lease payments
Due within 1 year
1,887
1,887
Due between 1 and 5 years
1,207
3,094
Due in more than 5 years
0
0
Total future minimum lease payments
3,094
4,981
Future interest payments
–84
–219
Present value of lease liabilities
3,010
4,762
Due within 1 year
1,815
1,752
Due between 1 and 5 years
1,195
3,010
Due in more than 5 years
0
0
19 Provision for formal expropriations plus sound insulation and resident protection
(CHF 1,000)
Formal expropriations
Sound insulation and resident protection
Total
Balance as at 1 January 2017
320,218
119,656
439,874
Provision used 1)
–4,563
–17,319
–21,882
Decrease of provision
0
0
0
Present value adjustment 2)
968
387
1,355
Balance as at 31 December 2017
316,623
102,724
419,347
of which current (planned payment within 1 year)
34,140
15,980
50,120
of which non-current (planned payment from 1 year on)
282,483
86,744
369,227
Balance as at 1 January 2018
316,623
102,724
419,347
Provision used 1)
–8,263
–12,617
–20,880
Release of provision
–34,529
0
–34,529
Increase of provision
0
57,556
57,556
Present value adjustment 2)
1,352
507
1,859
Balance as at 31 December 2018
275,183
148,170
423,353
of which current (planned payment within 1 year)
21,273
9,983
31,256
of which non-current (planned payment from 1 year on)
253,910
138,187
392,097
1) The amount paid for formal expropriations only includes effective payments of compensation, and excludes other associated external costs in accordance with the regulations of the Airport of Zurich Noise Fund (see note 20, Airport of Zurich Noise Fund).
2) In the year under review as well as in the previous year, a reassessment was made of the discount rates and the expected cash outflows.
Provision for formal expropriations
In the first half of 2018, the Swiss Federal Supreme Court handed down two rulings in test cases regarding cooperative ownership. These court rulings enabled Flughafen Zürich AG to undertake a reappraisal of the outstanding cost of compensation for formal expropriations. Based on the recalculation, the total cost expected in relation to formal expropriations decreased from CHF 385.0 million to CHF 350.0 million. This enabled the provision for formal expropriations to be reduced by CHF 34.5 million (nominal amount: CHF 35.0 million) as at 30 June 2018. At the same time, the intangible asset from the right of formal expropriation was reduced by the same amount (see note 11, Intangible assets).
As at the reporting date, the estimated costs for formal expropriations amounted to CHF 350.0 million, of which CHF 72.1 million had already been paid out at that date. The outstanding costs of CHF 277.9 million (nominal amount) are stated at their present value of CHF 275.2 million in the consolidated financial statements for the period ended 31 December 2018. Due to a slight fall in interest rates, the interest rate used to adjust the present value of the nominal payment flows was 0.25% (2017: 0.35%). It is still expected that the payments can be completed by the end of 2025.
Provision for sound insulation and resident protection
Flughafen Zürich AG is required to implement sound insulation measures in the area where it claims exemptions from noise limits (emission limit). In this context, the Federal Office of Civil Aviation (FOCA) has initiated a night-time noise abatement procedure. The area with exemptions under the Sectoral Aviation Infrastructure Plan adopted by the Federal Council on 23 August 2017 is to be extended. A provision for further costs of CHF 60.0 million, with a present value of CHF 57.6 million, was recognised in this context as at 30 June 2018 in addition to the cost of CHF 340.0 million previously estimated for sound insulation and resident protection (see note 5, Other income and expenses).
As at the reporting date, the estimated costs for sound insulation and resident protection measures amounted to CHF 400.0 million, of which CHF 249.1 million had already been paid out at that date. The outstanding costs of CHF 150.9 million (nominal amount) are stated at their present value of CHF 148.2 million in the consolidated financial statements for the period ended 31 December 2018. Despite a slight fall in interest rates, the interest rate used to adjust the present value of the nominal payment flows rose to 0.35% (2017: 0.25%), as the average maturity of the future payments increased due to the extended sound insulation programme. It is currently expected that the payments can be completed by the end of 2030 (previously 2025).
20 Airport of Zurich Noise Fund
Flughafen Zürich AG refinances all costs relating to aircraft noise through special noise charges based on the “costs-by-cause” principle. In the interest of transparency, costs and income relating to aircraft noise are recognised in a special statement for the Airport of Zurich Noise Fund. This is a liquidity-based fund statement. The fund statement presents the accumulated surplus or shortfall as at the reporting date arising from noise charges, less expenses for formal expropriations, sound insulation and resident protection measures, and noise-related operating costs. Its presentation is independent of the accounting policies. The key figures from the fund statement are shown in the table below.
If the fund statement shows an accumulated income surplus, this surplus is moved to a special investment account and invested by professional financial institutions, partly on the basis of a conservative, money market-oriented investment strategy and partly in a mixed investment fund. The income from these investments is credited to the fund statement.
The detailed fund statement is disclosed to a committee comprising representatives of Zurich Airport customers and the relevant authorities. The regulations of the Airport of Zurich Noise Fund and other information (including an overview of its financial performance) can be downloaded from the website.
The balance on the Airport of Zurich Noise Fund changed as follows in the reporting period:
(CHF 1,000)
2018
2017
Airport of Zurich Noise Fund as at 1 January
443,505
457,924
Revenue from noise charges
11,945
11,557
Costs for sound insulation and resident protection
–12,617
–17,320
Costs for formal expropriations 1)
–8,629
–5,133
Balance before operating costs and finance result
434,204
447,028
Operating costs
–3,402
–3,295
Interest income from financial assets
1,109
1,730
Adjustments to fair value and realised gains/losses on financial assets
–6,506
–1,958
Airport of Zurich Noise Fund as at 31 December
425,405
443,505
1) In addition to compensation payments for formal expropriations, this amount includes other associated external costs (in accordance with regulations of the Airport of Zurich Noise Fund; see note 19, “Provision for formal expropriations plus sound insulation and resident protection”).
Summary of assets invested for the Airport of Zurich Noise Fund:
(CHF 1,000)
31.12.2018
31.12.2017
Cash equivalents (see note 16, "Cash and cash equivalents")
34,242
20,184
Current financial assets of Airport of Zurich Noise Fund
21,967
76,578
Non-current financial assets of Airport of Zurich Noise Fund
377,241
360,525
Accrual/deferral towards Flughafen Zürich AG 1)
–8,045
–13,782
Total assets invested for Airport of Zurich Noise Fund
425,405
443,505
1) For accounting reasons, an asset or liability towards Flughafen Zürich AG arises as of the balance sheet date. This is compensated in the subsequent month, so the balance of liquid funds is restored.
The table below presents an overview of the maturities and credit ratings of the assets invested for the Airport of Zurich Noise Fund:
(CHF 1,000)
2019
2020
2021
2022
2023ff.
Total
Cash and cash equivalents
34,242
34,242
AAA
9,412
13,929
44,549
15,180
66,848
149,918
AA+/AA/AA–
10,552
1,841
10,119
68,061
90,573
A+/A/A–
2,003
1,573
3,912
20,242
35,591
63,321
Without rating
95,396
95,396
Other 1)
–8,045
–8,045
Total assets invested for Airport of Zurich Noise Fund
48,164
17,343
48,461
45,541
265,896
425,405
in %
11.3
4.1
11.4
10.7
62.5
100.0
1) For accounting reasons, an accrual (deferral) towards Flughafen Zürich AG arises as of the balance sheet date. This is compensated in the subsequent month, so the balance of liquid funds is restored.
21 DEFERRED TAX ASSETS AND LIABILITIES
In accordance with IAS 12.47, deferred tax assets and liabilities are calculated at the rate that is expected to apply when the asset is realised or the liability settled. Flughafen Zürich AG anticipates an unchanged tax rate of 20.5%. The expected tax rate is calculated on the basis of the applicable rate (rounded up or down) at the domicile of Flughafen Zürich AG and its subsidiaries.
The balance of deferred tax assets and liabilities changed as follows:
(CHF 1,000)
2018
2017
Deferred tax assets and liabilities, net as at 1 January
–61,687
–49,409
Deferred taxes on remeasurement of defined benefit obligations, recognised in OCI
2,617
–12,947
Change according to income statement
16,736
669
Deferred tax assets and liabilities, net as at 31 December
–42,334
–61,687
of which deferred tax assets
1,950
0
of which deferred tax liabilities
–44,284
–61,687
Deferred tax assets and liabilities are allocated to the following items:
31.12.2018
31.12.2017
(CHF 1,000)
Assets
Liabilities
Assets
Liabilities
Property, plant and equipment & other intangible assets
–15,011
–17,845
Investments in associates and other financial assets
–1,321
–1,321
Renovation fund
–35,588
–34,461
Aircraft noise
–24,224
–37,551
Financial liabilities issuing costs
50
28
Employee benefit obligations
31,848
28,134
Miscellaneous items
1,950
–38
1,329
Deferred tax assets and liabilities, gross
33,848
–76,182
29,491
–91,178
Offsetting of assets and liabilities
–31,898
31,898
–29,491
29,491
Deferred tax assets and liabilities, net
1,950
–44,284
0
–61,687
22 Employee benefits
(CHF 1,000)
31.12.2018
31.12.2017
Net defined benefit obligations
–143,466
–125,560
Other long-term employee benefits
–11,889
–11,678
Employee benefit obligations
–155,355
–137,238
22.1 Post-employment benefits
Flughafen Zürich AG maintains the following employee benefit plans:
a) Defined benefit plans
Affiliation contract with the BVK Employee Pension Fund of the Canton of Zurich (BVK)
The employees of Flughafen Zürich AG are affiliated to the BVK (Employee Pension Fund of the Canton of Zurich). The BVK is a multi-employer plan for employees of the Canton of Zurich and other employers. The BVK is registered with the Pensions and Trusts Supervisory Authority of the Canton of Zurich and is monitored by the latter.
The BVK Foundation Board, comprising nine employer and nine employee representatives, is the senior executive body of the Foundation and thus responsible for the strategic objectives and principles and for monitoring its management. The management is responsible for implementing legal requirements and the instructions given by the Foundation Board and its committees.
The BVK is subject to the provisions of the Federal Act on Occupational Old Age, Survivors’ and Invalidity Pension Provision (BVG) and its implementing provisions. The BVG defines the minimum insured salary, the minimum retirement credits and the return on them, and the conversion rate. As a result of these statutory provisions and the features of the plan, Flughafen Zürich AG, as an employer affiliated to the BVK, is exposed to actuarial risks such as investment risk, interest rate risk, disability risk and the risk of longevity.
Moreover, in accordance with the statutory provisions, the management body of the pension fund is also responsible for ensuring that restructuring measures are decided and implemented in the event of a shortfall, so that complete cover for future pension benefits is restored within a reasonable period. Among other things this includes restructuring payments in the form of additional contributions.
According to the applicable Swiss accounting regulations (Art. 44 BVV2), the liabilities of the BVK were funded at an (unaudited) level of 95.1% as at 31 December 2018 (2017: 100.0%).
Employees of Flughafen Zürich AG are insured with the BVK against the risks of old age, death and disability. The retirement benefits are determined on the basis of the individual retirement savings accounts at the time of retirement and are calculated by multiplying the balance of the savings account by the conversion rate stipulated in the regulations. The statutory retirement age is 65. Early retirement with a reduced conversion rate is possible as of the time the employee turns 60. Flughafen Zürich AG pays age-related contributions for all insured persons of between 6.0% and 17.4% of the insured salary and risk contributions of 1.2%. Up to the age of 20, only the risk contribution is incurred.
The assets originate from the BVK benefit plans. The investment strategy is defined by the BVK Foundation Board, based on the proposals and recommendations of the Board’s own investment committee, which in particular is responsible for managing the BVK’s assets. It prepares all the investment-related decisions taken by the Foundation Board and manages and supervises their implementation by the management. In addition, it is supported in the monitoring of the investment strategy and the investment process by an external investment controller.
The investment strategy (asset allocation) ranges within tactical bandwidths so as to enable a flexible response to current market situations. The aim is to manage the capital investments effectively and efficiently. The assets are well diversified. Compliance with the investment guidelines and the investment results are reviewed periodically.
Because the BVK, as a multi-employer plan, does not prepare separate financial statements for Flughafen Zürich AG, the company is also liable for liabilities of other affiliated employers, in accordance with the statutory provisions.
Explanation of the amounts in the consolidated financial statements
The actuarial calculation of the defined benefit obligations as at 31 December 2018 and the service cost was performed by independent actuaries using the projected unit credit method. The fair value of the plan assets was determined as at 31 December 2018 based on the information available at the date of preparation of the annual financial statements.
As no separate information was available for the affiliation contract with Flughafen Zürich AG for the plan assets or for the breakdown of assets into asset classes at the reporting date, assumptions had to be made on the basis of the available information for these purposes.
The net defined benefit obligations recognised in the balance sheet at the reporting date are as follows:
(CHF 1,000)
31.12.2018
31.12.2017
Present value of funded defined benefit obligations
–652,069
–642,408
Fair value of plan assets
508,603
516,848
Net defined benefit obligations recognised in the balance sheet
–143,466
–125,560
The defined benefit obligations changed as follows:
(CHF 1,000)
2018
2017
Present value of defined benefit obligations as at 1 January
–642,408
–657,505
Current service costs
–21,379
–22,912
Interest expenses on defined benefit obligations
–4,089
–3,867
Employee contributions
–11,504
–11,219
Benefits paid
30,674
29,477
Gain/(loss) due to experience
–16,181
–1,523
Gain/(loss) due to demographic assumption changes
0
20,122
Gain/(loss) due to financial assumption changes
12,818
5,019
Present value of defined benefit obligations as at 31 December
–652,069
–642,408
The weighted average duration of the defined benefit obligations at 31 December 2018 was 17.0 years (2017: 17.4 years).
The plan assets changed as follows:
(CHF 1,000)
2018
2017
Fair value of plan assets as at 1 January
516,848
474,872
Employer contributions
17,198
18,097
Employee contributions
11,504
11,219
Benefits paid
–30,674
–29,477
Administration expenses
–238
–258
Interest income on plan assets
3,364
2,858
Return on plan assets excluding amounts included in interest income
–9,399
39,537
Fair value of plan assets as at 31 December
508,603
516,848
The net defined benefit obligations changed as follows:
(CHF 1,000)
2018
2017
Net defined benefit obligations as at 1 January
–125,560
–182,633
Total charge recognised in the income statement
–22,342
–24,179
Total remeasurements recognised in other comprehensive income
–12,762
63,155
Employer contributions
17,198
18,097
Net defined benefit obligations as at 31 December
–143,466
–125,560
The company expects employer contributions of CHF 18.6 million for financial year 2019.
Analysis of the amounts recognised in the income statement:
(CHF 1,000)
2018
2017
Current service cost
–21,379
–22,912
Net interest expenses on defined benefit obligations
–725
–1,009
Administration expenses
–238
–258
Total charge recognised in the income statement
–22,342
–24,179
Analysis of the amounts recognised in other comprehensive income:
(CHF 1,000)
2018
2017
Actuarial gains/(losses) due to experience
–16,181
–1,523
Actuarial gains/(losses) due to changes in financial assumptions
0
20,122
Gain/(loss) due to demographic assumption changes
12,818
5,019
Return on plan assets excluding amounts included in net interest
–9,399
39,537
Total remeasurements recognised in other comprehensive income
–12,762
63,155
Assumptions used in actuarial calculations:
(in % or years)
2018
2017
Discount rate as at 31 December
0.80
0.65
Consumer price inflation
0.75
0.50
Expected rate of salary increases (incl. inflation)
1.50
1.00
Expected rate of pension increases
0.00
0.00
Life expectations at age 65 (years):
Female (aged 45)
25.7
25.5
Female (aged 64)
23.8
23.7
Male (aged 45)
23.7
23.5
Male (aged 65)
21.8
21.7
The discount rate is based on CHF-denominated corporate bonds with an AA rating issued by domestic and foreign issuers and listed on SIX Swiss Exchange. The future rate of salary increase is the long-term historical average adjusted for management’s current estimates for the future. Based on the current financial status of the pension fund, no future increases in pensions are anticipated.
As at 31 December 2018, the life expectancy assumption used is the BVG 2015 mortality table with future improvements determined by calibrating the Continuous Mortality Investigation (‘CMI’) 2016 model to Swiss population data with a long-term longevity improvement rate of 1.50%. The first-time application of the CMI model as at 31 December 2017 resulted in a decrease in the defined benefit obligation of CHF 15.7 million, which was recognised in other comprehensive income as part of the remeasurement of the net defined benefit obligation.
Breakdown of plan assets by asset class:
(in %)
31.12.2018
31.12.2017
Asset category:
Cash and cash equivalents
4.7
4.1
Shares
33.3
34.8
Bonds
36.8
34.9
Property
17.0
16.9
Other
8.2
9.3
Total
100.0
100.0
Sensitivities
The discount rate, the assumption regarding future salary increases and the return on retirement savings accounts are the significant actuarial assumptions in calculating the present value of the defined benefit obligations. A change in the assumptions of +0.25% or –0.25% has the following impact on the present value of the defined benefit obligations (DBO):
2018 Effect on DBO
2017 Effect on DBO
(CHF 1,000)
+0.25%
–0.25%
+0.25%
–0.25%
Discount rate
–24,127
26,083
–23,769
25,696
Expected salary increases
1,956
–1,304
1,285
–642
Interest rate on retirement savings accounts
1,956
–1,304
1,285
–642
The above sensitivity calculations are based on one assumption changing while the others remain unchanged. In practice, however, there are certain correlations between the individual assumptions. The same method was used to calculate the sensitivities and the defined benefit obligations recognised at the reporting date.
b) Defined contribution plan
An agreement exists with Zurich Insurance Company offering benefits to the pensioners of the former Flughafen-Immobilien-Gesellschaft (FIG). This group of beneficiaries did not transfer to the BVK. This is a defined contribution plan which is fully funded. Zurich Insurance Company is responsible for providing all future benefits.
22.2 Other long-term employee benefits
Flughafen Zürich AG pays its employees loyalty bonuses on the basis of years of service, in accordance with the employment regulations of 1 January 2016. The corresponding provision of CHF 11.9 million (2017: CHF 11.7 million) was calculated based on the number of accumulated years of service which, at the reporting date, was 9.3 years (2017: 9.2 years).
23 Other current liabilities, accruals and deferrals
(CHF 1,000)
31.12.2018
31.12.2017
Expenses not invoiced
28,964
37,457
Accrued interest on financial liabilities
7,373
7,373
Investments not invoiced
25,882
38,211
Other deferred income and accruals
27,886
13,464
Deferred income and accruals
90,105
96,505
Cross currency swap
5,624
6,088
Amounts due to personnel (holidays and overtime)
4,636
4,078
Deposits and advance payments by customers
7,819
9,225
Social security contributions
19
5,919
Other liabilities
3,556
4,083
Total other current liabilities, accruals and deferrals
111,759
125,898
of which financial liabilities carried at amortised cost
62,219
83,041
of which financial liabilities measured at fair value
5,624
6,088
of which other current liabilities, accruals and deferrals excluding financial instruments
43,916
36,769
24 Further details
24.1 Information concerning the performance of a risk assessment
Flughafen Zürich AG has set itself the strategic goal of maintaining a comprehensive risk management system and is committed to carrying out uniform and systematic risk management.
Risk management ensures that risks are approached systematically and given due consideration. It guarantees transparency over all the risks associated with the company’s business activities as well as continuous improvement and monitoring of the risk situation.
The risk management system is the tool used to manage corporate risk and consists of the following components:
- Risk policy objectives and principles
- Risk management organisation
- Risk management process (method for managing risk)
- Risk reporting
-
Auditing and review of the risk management system
The risk management organisation forms the backbone of this system and includes the following units and functions:
Board of Directors, Management Board and Chief Risk Officer
The Board of Directors and Management Board have overall responsibility under Swiss company law for ensuring the group’s existence and profitability. The Board of Directors is responsible for overall oversight of risk management. The Chief Financial Officer also acts as the Management Board’s Chief Risk Officer.
Risk Management & Insurance department
The central Risk Management & Insurance department is run by the Risk Manager, who reports to the Chief Risk Officer. This department supports the line units in all matters relating to risk management and is responsible for risk reporting as well as the operation and ongoing development of the risk management system.
Line units (divisions and departments)
As part of their role, the line units also bear responsibility for risks in their respective division or department and manage them within the framework of the risk management system (risk owner concept).
SPECIALIST UNITS
In consultation with the Risk Management & Insurance department, the specialist units perform specific risk-related cross-divisional functions within the group (liquidity management, occupational safety and health, information security, fire prevention, contingency planning, etc.).
In risk reporting, Flughafen Zürich AG describes in detail the most important business risks it has identified and assesses them for their probability of occurrence as well as for their potential operational and economic impact. Along with defining responsibilities, a plan of action is drawn up, containing specified target dates and outlining how the risks can be minimised. The risk management organisation continually monitors implementation of the defined measures.
a) Financial risk management
Due to the nature of its activities, Flughafen Zürich AG is exposed to various financial risks, including:
- i) Credit risk
- ii) Liquidity risk
-
iii) Market risk (foreign currency and interest rate risks)
The following sections provide an overview of the extent of the various financial risks and the objectives, principles and processes relating to the assessment, monitoring and hedging of risks, as well as of the capital management of the group. Further information on financial risks can also be found in the corresponding notes.
i) Credit risk
Credit risk refers to the risk that Flughafen Zürich AG could incur losses if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Cash and cash equivalents, accruals, trade receivables and other financial assets are exposed to credit risk.
Flughafen Zürich AG invests its cash and cash equivalents and fixed-term deposits with major banks with a rating indicating their solvency. In addition, the company minimises other risks relating to cash and cash equivalents and fixed-term deposits in that it does not invest with a single bank, but with a variety of financial service providers.
As a rule, accruals as at the reporting date are invoiced within one month and subsequently monitored as part of trade receivables management.
With the exception of Swiss as the main client, credit risk is distributed over a broad clientele. Trade receivables include an amount of CHF 21.8 million due from Swiss (2017: CHF 27.1 million) (see note 14, Trade receivables). In the period between the reporting date and the preparation of the 2018 annual report, Swiss paid the outstanding amount arising from flight operations charges as at 31 December 2018 in full.
The exposure to credit risk primarily depends on the individual characteristics of each client. Risk assessments include a creditworthiness check, taking account of the client’s financial circumstances, past experience and other factors. The maturity structure of trade receivables is normally examined on a weekly basis. Where necessary, terms of payment aimed at minimising risk (normally proforma invoicing) are applied, or security is requested (mainly in the form of bank guarantees).
The financial assets of the Airport of Zurich Noise Fund are invested by professional financial institutions, partly on the basis of a conservative, money market-oriented investment strategy (mainly in fixed-rate debt instruments) and partly in a mixed investment fund. Here, priority is given to preservation of value and flexibility with respect to early redemption of investments. The direct use of derivative financial instruments is not permitted. The investment horizon is based on the expected obligation to make payments from the Airport of Zurich Noise Fund and averages around four years. For bonds held directly, the minimum acceptable rating is BBB+ (Standard & Poor’s) or Baa1 (Moody’s), or an equivalent rating from another recognised rating agency (see note 20, Airport of Zurich Noise Fund).
The maximum exposure to credit risk corresponds to the carrying amounts of the individual financial assets. No guarantees or similar commitments exist that could give rise to an increase in the credit exposure above the respective carrying amounts. The maximum exposure to credit risk as at the reporting date was as follows:
(CHF 1,000)
31.12.2018
31.12.2017
Cash equivalents (excluding cash on hand)
395,659
314,388
Current and non-current fixed-term deposits
186,667
271,667
Non-current financial assets of Airport of Zurich Noise Fund
377,241
360,525
Trade receivables, net
102,024
109,902
Current financial assets of Airport of Zurich Noise Fund
21,967
76,578
Other receivables and prepaid expenses
15,066
11,685
Other financial assets
6,713
21
Total maximum exposure to credit risk
1,105,337
1,144,766
ii) Liquidity risk
Liquidity risk refers to the risk that Flughafen Zürich AG may not be able to meet its financial obligations on the due date.
Flughafen Zürich AG monitors liquidity risk via a prudent liquidity management process. Here it observes the principle that it must have sufficient flexibility and room for manoeuvre with respect to the availability of liquid funds at short notice. This means maintaining an adequate reserve of liquid funds, ensuring the availability of sufficient funds for financing purposes by securing adequate credit facilities, and being able to issue financial securities on the capital market. For this purpose, the company uses rolling liquidity planning that is based on expected cash flows and is periodically updated. Treasury is responsible for monitoring liquidity risk. As at the reporting date, Flughafen Zürich AG had the following unused credit facilities at its disposal:
(CHF 1,000)
Duration
31.12.2018
31.12.2017
Operating credit lines (committed credit lines)
31.12.2019
240,000
240,000
Total credit lines
240,000
240,000
Utilisation 1)
–60
–1,522
Total unused credit lines
239,940
238,478
1) Letter of credit and bank guarantees.
The table below shows the contractual maturities of financial liabilities (including interest payments) held by Flughafen Zürich AG:
(CHF 1,000)
Carrying amount
Contractual cash flows
Due within 1 year
Due within 1 to 5 years
Due in more than 5 years
31 December 2018
Debentures
1,088,448
1,149,608
49,983
736,500
363,125
Liabilities from concession arrangements
26,149
52,932
438
5,281
47,213
Lease liabilities
3,010
3,094
1,887
1,207
0
Other financial liabilities
10,520
10,520
2,660
7,860
0
Trade payables
53,625
53,625
53,625
0
0
Other current liabilities and accruals
90,105
90,105
90,105
0
0
Total non-derivative financial liabilities
1,271,857
1,359,884
198,698
750,848
410,338
Cross currency swap
5,624
5,624
1,406
4,218
0
Total derivative financial liabilities
5,624
5,624
1,406
4,218
0
Total
1,277,481
1,365,508
200,104
755,066
410,338
(CHF 1,000)
Carrying amount
Contractual cash flows
Due within 1 year
Due within 1 to 5 years
Due in more than 5 years
31 December 2017
Debentures
1,050,134
1,123,501
11,938
340,250
771,313
Liabilities from concession arrangements
11,665
46,576
0
0
46,576
Lease liabilities
4,762
4,981
1,887
3,094
0
Other financial liabilities
14,718
14,718
2,967
11,751
0
Trade payables
39,846
39,846
39,846
0
0
Other current liabilities and accruals
83,041
83,041
83,041
0
0
Total non-derivative financial liabilities
1,204,166
1,312,663
139,679
355,095
817,889
Cross currency swap
6,088
6,088
1,218
4,870
0
Total derivative financial liabilities
6,088
6,088
1,218
4,870
0
Total
1,210,254
1,318,751
140,897
359,965
817,889
iii) Market risk
Market risk refers to the risk that changes in market prices such as exchange rates and interest rates could have an impact on the finance result or the value of the financial instruments.
The objective of market risk management is to monitor and control such risks in order to ensure that they do not exceed a specified limit.
iiia) Currency risk
The functional currency of the consolidated financial statements of Flughafen Zürich AG is the Swiss franc (CHF). The group is exposed to foreign currency exchange movements primarily in respect of the Brazilian real (BRL), Chilean peso (CLP), US dollar (USD) und euro (EUR).
An appreciation or depreciation of the Swiss franc by 5% against the currencies below as at 31 December 2018 would have increased or reduced equity or profit by the amounts in the table below. This analysis assumes that all other variables – in particular interest rates – remain unchanged.
Appreciation of CHF (plus 5%)
Depreciation of CHF (minus 5%)
(CHF 1,000)
Equity
Profit
Equity
Profit
BRL
–3,549
0
3,549
0
CLP
–921
0
921
0
USD
0
–299
0
299
EUR
0
–41
0
41
31 December 2018
–4,470
–340
4,470
340
BRL
–2,194
0
2,194
0
CLP
–841
0
841
0
USD
0
–1,891
0
1,891
EUR
0
–145
0
145
31 December 2017
–3,035
–2,036
3,035
2,036
iiib) Interest rate risk
Interest rate risk can be divided into an interest-related cash flow risk, i.e. the risk that future interest payments could change due to fluctuations in the market interest rate, and an interest-related risk of a change in fair value, i.e. the risk that the fair value of a financial instrument could change due to fluctuations in the market interest rate.
Preference is normally given to external financing denominated in the functional currency, the Swiss franc, and subject to fixed interest rates. However, if external financing in foreign currencies is obtainable on more attractive terms, both the currency and the interest rate risk are hedged. In the case of such foreign currency transactions, the aim is to make fixed interest payments and repayments in the functional currency, the Swiss franc.
All non-current financing transactions have been concluded at a fixed interest rate. The interest rate risk on short-term variable advances is hedged on a case-by-case basis using interest rate swaps.
The financial assets of the Airport of Zurich Noise Fund are primarily invested in fixed-rate debt instruments and a mixed investment fund. The direct use of derivative financial instruments is not permitted in this context.
As at the reporting date, Flughafen Zürich AG’s interest rate profile was as follows (interest-bearing financial instruments):
(CHF 1,000)
31.12.2018
31.12.2017
Current and non-current fixed-term deposits
186,667
271,667
Fixed-interest financial assets of Airport of Zurich Noise Fund
303,812
329,649
Fixed-interest financial instruments (assets)
490,479
601,316
Cash and cash equivalents
361,630
294,431
Cash and cash equivalents of Airport of Zurich Noise Fund
34,242
20,184
Variable-interest financial assets of Airport of Zurich Noise Fund
0
6,004
Variable-interest financial instruments (assets)
395,872
320,619
Total interest-bearing assets
886,351
921,935
Current and non-current debentures
–1,088,448
–1,050,134
Current and non-current lease liabilities
–3,010
–4,762
Current and non-current other financial instruments
–10,520
–14,718
Fixed interest financial instruments (liabilities)
–1,101,978
–1,069,614
Total interest-bearing liabilities
–1,101,978
–1,069,614
The table below shows the sensitivity analysis for variable and fixed-rate financial instruments with a deviation of 50 basis points:
Increase by 50 bp
Decrease by 50 bp
(CHF 1,000)
Equity
Profit
Equity
Profit
Variable-interest financial instruments
0
1,574
0
–1,574
Fixed-interest financial instruments
–5,828
0
5,828
0
31 December 2018
–5,828
1,574
5,828
–1,574
Variable-interest financial instruments
0
1,251
0
–1,251
Fixed-interest financial instruments
–5,203
0
5,203
0
31 December 2017
–5,203
1,251
5,203
–1,251
B) Fair values
Due to their short-term nature, the carrying amounts of cash and cash equivalents, fixed-term deposits, trade receivables, other current receivables and current liabilities are a reasonable approximation of their fair values.
Financial assets in the Airport of Zurich Noise Fund: The fair value of the bonds corresponds to the market price of the securities at the reporting date (level 1). The fair value of the mixed investment fund is the unadjusted net asset value, as the units may be redeemed at that value as at the reporting date (level 2).
Financial liabilities: The fair value of the debentures corresponds to the market price (level 1).
Derivative financial instruments: The fair value of the cross-currency swap is determined using a fair value model (level 2). The key inputs are foreign exchange rates and interest rates observable in the market. Unobservable inputs are not significant to the measurement.
(CHF 1,000)
31.12.2018
31.12.2017
Carrying amount
Fair value
Carrying amount
Fair value
Financial assets of Airport of Zurich Noise Fund (bonds)
303,812
307,599
335,654
335,654
Total financial assets
303,812
307,599
335,654
335,654
Debentures
–1,088,448
–1,121,597
–1,050,134
–1,095,379
Total financial liabilities
–1,088,448
–1,121,597
–1,050,134
–1,095,379
c) Categories of financial instruments
The following tables show the carrying amounts of all financial instruments by category:
(CHF 1,000)
31.12.2018
Cash (excl. cash on hand) and cash equivalents, collateral and short-term monetary investments
395,659
Current and non-current fixed-term deposits
186,667
Trade receivables, net
102,024
Other receivables and prepaid expenses
15,066
Other financial assets
6,713
Total loans and receivables
706,129
Current and non-current financial assets of Airport of Zurich Noise Fund (bonds)
303,812
Total financial assets carried at amortised cost
303,812
Current and non-current financial assets of Airport of Zurich Noise Fund (mixed investment fund)
95,396
Total financial assets measured at fair value
95,396
Financial liabilities
–1,128,127
Trade payables, net
–53,625
Other current liabilities, accruals and deferrals (excluding derivatives and non-financial instruments)
–90,105
Total financial liabilities carried at amortised cost
–1,271,857
Other current liabilities, accruals and deferrals (cross currency swap)
–5,624
Total financial liabilities measured at fair value
–5,624
(CHF 1,000)
31.12.2017
Cash (excl. cash on hand) and cash equivalents, collateral and short-term monetary investments
314,388
Current and non-current fixed-term deposits
271,667
Trade receivables, net
109,902
Other receivables and prepaid expenses
11,685
Other financial assets
11
Total loans and receivables
707,653
Current and non-current financial assets of Airport of Zurich Noise Fund
437,103
Other financial assets
7,920
Total available-for-sale financial assets measured at fair value
445,023
Financial liabilities
–1,081,279
Trade payables, net
–39,846
Other current liabilities, accruals and deferrals (excluding derivatives and non-financial instruments)
–83,041
Total financial liabilities carried at amortised cost
–1,204,166
Other current liabilities, accruals and deferrals (cross currency swap)
–6,088
Total financial liabilities measured at fair value
–6,088
d) Fair value hierarchy of financial instruments
Financial instruments recognised or disclosed at fair value are categorised according to the following hierarchy, reflecting the significance of the inputs used to measure fair value:
Level 1 – Quoted market prices
The inputs used to measure the assets or liabilities are quoted, unadjusted market prices determined in active markets for identical assets or liabilities at the measurement date.
Level 2 – Measurement based on observable inputs
The assets or liabilities are measured on the basis of inputs (other than the quoted prices included within level 1) that are directly or indirectly observable for the asset or liability.
Level 3 – Measurement based on unobservable inputs
The inputs for these assets or liabilities are not observable.
(CHF 1,000)
31.12.2018
01.01.2018
31.12.2017
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Available-for-sale financial assets of the Airport of Zurich Noise Fund at fair value 1)
335,653
101,450
Mixed investment fund of the Airport of Zurich Noise Fund at fair value 2)
95,396
101,450
Cross currency swap
–5,624
–6,088
–6,088
1) The change in comparison between 31 December 2017 and 1 January 2018 is attributable to the introduction of IFRS 9. For further information, see also Notes to the consolidated statements, I. Accounting policies, IFRS 9 Financial Instruments.
2) The AZNF’s mixed investment fund continues to be measured at fair value. Since 1 January 2018, changes in fair value have been recognised in profit or loss (previously through OCI). See also Consolidated statement of changes in equity, Effect of the initial application of IFRS 9.
e) Capital management
With respect to capital management, Flughafen Zürich AG pays particular attention to ensuring the continuation of the group’s activities, achieving an acceptable dividend for shareholders and optimising the balance sheet structure, particularly in periods of major investment activity, taking account of the cost of capital. In order to achieve these objectives, Flughafen Zürich AG can adjust the amount of the dividend payment or repay capital to shareholders.
Flughafen Zürich AG constantly monitors the following key financial data: equity ratio, debt ratio and interest coverage. Here it is especially important to ensure that the ratio of debt to equity is in line with the budgetable cash flows and investments, and tends towards the conservative side. In this way a high degree of entrepreneurial flexibility can be assured at all times, including when unforeseeable events occur.
The necessary quantity of treasury shares may be held for the purpose of employee and bonus programmes. It is not permitted to accumulate several years’ worth of treasury shares for the purpose of bonus programmes, however. Neither is it permitted to hold treasury shares to use as payment for acquisitions (exchange of shares in the event of a takeover) or for the purpose of speculating on higher selling prices. Accumulated treasury shares may in no case exceed 10% of all shares issued.
24.2 Tenancy agreements
The tenancy agreements entered into by Flughafen Zürich AG in its capacity as landlord may be either fixed tenancy or turnover-based agreements:
a) Fixed tenancy agreements
Fixed tenancy agreements comprise in particular agreements for office, warehouse, archive and workshop premises. They are divided into limited-term and indefinite agreements, whereby the latter are usually subject to either six or twelve months’ notice to be communicated in advance.
b) Turnover-based agreements
Sales-based tenancy agreements primarily relate to commercial premises. These agreements between the partners generally comprise guaranteed basic rents plus turnover-based portions with a fixed term of five years and no other options. Moreover, some agreements involving basic rents and turnover-based portions exist as a function of passenger trends or prior-year sales.
Commercial revenue (retail, tax & duty free plus food & beverage) and revenue from facility management (rental and leasing agreements) in the reporting period contained conditional rental payments amounting to CHF 24.0 million (see also note 2, Revenue).
At the reporting date, minimum lease payments (fixed rents and guaranteed basic rents) under non-cancellable leases were as follows:
(CHF 1,000)
31.12.2018
31.12.2017
Due date up to 1 year
202,615
184,304
Due date from 1 to 5 years
675,995
558,469
Dute date in more than 5 years
403,071
488,045
Total
1,281,681
1,230,818
24.3 Capital commitments
As at the reporting date, capital commitments for various buildings and engineering structures amounted to around CHF 280 million in total. The most significant capital commitments involved the refurbishment and expansion of the baggage sorting system (approx. CHF 145 million), the refurbishment of the airfield power supply (CHF 23 million), the refurbishment of the maintenance workshop (CHF 15 million) and refurbishment of car parking facilities (CHF 15 million), In addition, the company’s share of capital commitments for THE CIRCLE amount to approximately CHF 200 million.
24.4 Contingent liabilities
A number of legal proceedings and claims against Flughafen Zürich AG in the context of its normal business activities are still pending. The company does not expect the amounts required to settle these lawsuits and claims to have a significantly negative impact on the consolidated financial statements and cash flow of Flughafen Zürich AG.
Depending on future and final-instance legal judgements, especially with respect to the southern approaches, in particular the new noise-related liabilities, but also the old ones, may in future be subject to substantial adjustments, which would also require adjustments to the noise-related costs recognised as assets and liabilities in the balance sheet. At the present time, it is not possible to reliably estimate the total costs to capitalise as an intangible asset from the right of formal expropriation, the resulting amortisation or the corresponding provision.
As part of its involvement in the expansion and operation of Confins International Airport in Belo Horizonte, Flughafen Zürich AG provides a guarantee as security for local debt financing, which is made available by the Brazilian development bank Banco Nacional de Desenvolvimento Econômico e Social (BNDES). As at the reporting date, the amount arising from this guarantee was CHF 26.5 million (2017: CHF 15.9 million). Moreover, the company has entered into a counterbond for a performance bond which the operator, Concessionária do Aeroporto Internacional de Confins S.A., had to submit to Brazil’s National Civil Aviation Authority (ANAC). As at the reporting date, the amount arising from the counterbond was CHF 10.6 million (2017: CHF 12.0 million).
In connection with the concession for the airport in Florianópolis, the operator, Concessionária do Aeroporto Internacional de Florianópolis S.A., has entered into a performance bond for Brazil’s National Civil Aviation Authority (ANAC). As at the reporting date, the amount arising from the counterbond was CHF 28.8 million (2017: CHF 33.5 million).
In addition, in June 2018, Concessionária do Aeroporto Internacional de Florianópolis S.A. arranged a one-year bond with Brazilian company Simplific Pavarini Distribuidora de Títulos e Valores Mobiliários. Comprising two tranches of BRL 150 million each, the bond will be used to finance the mandatory infrastructure measures specified in the concession arrangement, including the construction of a new terminal building, the expansion of the parking areas and the extension of the runway at Florianópolis airport. Flughafen Zürich AG provides a guarantee to Simplific Pavarini Distribuidora de Títulos e Valores Mobiliários as security for the local debt financing. As at the reporting date, an initial tranche of the bond had been drawn down in the amount of BRL 150 million (CHF 38.0 million).
As part of the concession arrangements for the airports in Antofagasta and Iquique, the operators have entered into counterbonds for performance bonds issued to the Chilean Ministry of Public Works (Ministerio de Obras Públicas). As at the reporting date, the amount arising from the counterbond was CHF 7.0 million (2017: CHF 6.9 million).
Flughafen Zürich AG is jointly and severally liable to third parties for the liabilities of the co-ownership structure THE CIRCLE and the ordinary partnership THE CIRCLE.
24.5 Related parties
Related parties are:
- Canton of Zurich
- Members of the Board of Directors
- Members of the Management Board
- Associates
-
BVK Employee Pension Fund of the Canton of Zurich
a) Transactions with related parties
In the reporting period, the Canton of Zurich police force was paid CHF 98.0 million (2017: CHF 98.4 million). In this context, accrued liabilities and deferred income amounting to CHF 5.8 million at the reporting date (2017: CHF 6.3 million) were included in “Other current liabilities, accruals and deferrals”.
In financial year 2018, consulting revenue from operations and management agreements amounted to CHF 2.7 million (2017: 3.3 million) for the airport in Belo Horizonte and to CHF 3.3 million (2017: CHF 3.3 million) for the Chilean airports.
In the reporting period, Flughafen Zürich AG paid employer contributions amounting to CHF 17.2 million (2017: CHF 18.1 million) to the BVK Employee Pension Fund of the Canton of Zurich for employee benefits (see note 22, Employee Benefits). As at the reporting date, CHF 2.4 million of this (2017: CHF 2.4 million) was still included in “Other current liabilities, accruals and deferrals” (see note 23).
b) Shares held by related parties
As at the reporting date, members of the Board of Directors and related parties held the following number of shares:
Number of shares as at
Number of shares as at
Name
Function
31.12.2018
31.12.2017
Andreas Schmid
Chairman
15
20
Vincent Albers
Member
2,217
117
Guglielmo L. Brentel
Member
309
309
Josef Felder
Member; Chairman Audit & Finance Committee
25,000
25,000
Stephan Gemkow
Member
100
100
Corine Mauch
Member
0
0
Eveline Saupper
Vice Chairwoman; Chairwoman Nomination & Compensation Committee
675
675
Carmen Walker Späh
Member; Chairwoman Public Affairs Committee
5
5
Total
28,321
26,226
As at the reporting date, members of the Management Board and related parties held the following number of shares:
Number of shares as at
Number of shares as at
Name
31.12.2018
31.12.2017
Stephan Widrig
4,650
3,858
Lukas Brosi
698
464
Stefan Gross
515
218
Daniel Scheifele
532
235
Stefan Tschudin
130
5
Total
6,525
4,780
Neither members of the Board of Directors nor the Management Board held options on the company’s shares at the reporting date.
c) Remuneration for key management personnel
Remuneration for the members of the Board of Directors and Management Board comprises the following:
(CHF 1,000)
2018
2017
Short-term employee benefits
3,797
3,774
Post-employment benefits
553
569
Share-based payments
390
401
Total
4,740
4,744
24.6 Composition of the group
As at the reporting date, the group comprised the following companies:
Company
Domicile
Share capital
Stake held in %
Flughafen Zürich AG
Kloten
CHF 307,018,750
Parent company
Zurich Airport International AG
Kloten
CHF 100,000
100.0
Zurich Airport International Asia Sdn. Bhd.
Kuala Lumpur
MYR 1.0 million
100.0
Zurich Airport Latin America Ltda.
Rio de Janeiro
BRL 1.8 million
100.0
Concessionária do Aeroporto Internacional de Florianópolis S.A.
Florianópolis
BRL 304 million
100.0
A-port S.A.
Santiago de Chile
CLP 16,139 million
100.0
A-port Chile S.A.
Santiago de Chile
CLP 10,613 million
100.0
Sociedad Concesionaria Antofagasta S.A.
Santiago de Chile
CLP 3,600 million
100.0
Sociedad Concesionaria Iquique S.A.
Santiago de Chile
CLP 600 million
100.0
Sociedad Concesionaria Aeropuerto Diego Aracena S.A.
Santiago de Chile
CLP 10,700 million
100.0
A-port Operaciones S.A.
Santiago de Chile
CLP 1,352 million
99.0
A-port Operaciones Colombia S.A.
Bogotá
COP 100 million
99.0
Unique IDC S.A. de C.V.
Tegucigalpa
HNL 200 million
99.0
In addition, the following associates are included by applying the equity method:
Company
Domicile
Share capital
Stake held in %
Sociedade de Participação do Aeroporto de Confins S.A.
Belo Horizonte
BRL 474 million
25.0
Concessionária do Aeroporto Internacional de Confins S.A.
Belo Horizonte
BRL 907 million
12.8
Administradora Unique IDC C.A.
Porlamar
VEB 25 million
49.5
Aeropuertos Asociados de Venezuela C.A.
Porlamar
VEB 10 million
49.5
24.7 Notes on the licence to operate Zurich Airport
The Swiss Federal Department of the Environment, Transport, Energy and Communications (DETEC) awarded Flughafen Zürich AG the licence to operate Zurich Airport for 50 years from 1 June 2001 to 31 May 2051.
The licence encompasses the operation of an airport in accordance with the provisions of the ICAO (International Civil Aviation Organisation) governing domestic, international and intercontinental civil aviation services. Flughafen Zürich AG is authorised and obliged to operate Zurich Airport for the entire period cited in the operating licence, and to provide the necessary infrastructure for this purpose. To accomplish this, it is entitled to collect charges from all users of the airport. Furthermore, Flughafen Zürich AG is authorised to assign specific rights and obligations arising from the operating licence to third parties. Insofar as they concern activities relating to airport operations such as aircraft handling, passenger handling, baggage sorting and handling, mail and freight handling, these rights and obligations shall be subject to the provisions of public law. Flughafen Zürich AG regulates rights and obligations it has assigned to third parties in the form of binding entitlements (concessions).
The concessionaire is obliged to grant access to the airport to all aircraft that are licensed to provide domestic and international flights. The volume of flight traffic and handling of licensed aircraft are governed by the regulations laid down in the Sectoral Aviation Infrastructure Plan (SAIP) and the provisions of the operating regulations. The concessionaire is obliged to implement all measures relating to regulations governing the use of German airspace for landings at, and take-offs from, Zurich Airport without delay, and to submit the necessary applications for approval by the authorities in good time. The concessionaire is empowered and obliged to enforce sound insulation measures and to implement them where they are not contested. The provision whereby the concessionaire shall meet all obligations to which it is bound through clauses of the civil aviation treaty between Germany and Switzerland without entitlement to compensation was declared null and void in response to an objection lodged by Flughafen Zürich AG.
As part of the bilateral agreements that came into effect on 1 June 2002, the EU ground handling directive (Council Directive 96/67/EC of 15 October 1996 on access to the groundhandling market at Community airports) also became applicable to Switzerland. The principles governing the granting of rights to carry out ground handling activities are defined in the operating regulations for Flughafen Zürich AG dated 30 June 2011. The licences for ground handling operations in areas in which the number of admissible service providers may be limited were re-awarded on the basis of tender procedures on 1 December 2018 for the period to the end of November 2025.
24.8 Service concessions for the operation of foreign airports
As at the reporting date, Flughafen Zürich AG was responsible, via its subsidiaries, for the operation and expansion of three foreign airports:
Brazil
In 2017, in a public tender conducted by the Brazilian government as part of an airport privatisation programme, Flughafen Zürich AG was awarded the concession for the operation and expansion of Hercílio Luz International Airport (IATA: FLN) in Florianópolis in the south of Brazil. The airport has a catchment area of 1.1 million people and is located in Santa Catarina, a popular holiday destination for both local and international travellers. In 2018, traffic volumes reached 3.8 million passengers. Concession fees totalling BRL 241.5 million are payable as consideration for the right to operate the airport. A portion of the concession charge was paid on the day that the concession arrangement was signed (BRL 83.3 million or CHF 24.7 million). Further minimum concession payments totalling BRL 158.2 million (CHF 40.1 million) are due over the 30-year term of the concession. Following the signing of the concession arrangement in July 2017, the wholly-owned subsidiary Concessionária do Aeroporto Internacional de Florianópolis S.A., as sole holder of the concession, took over flight operations from the state-owned operator Infraero on 3 January 2018. Flughafen Zürich AG is currently expecting investments in airport infrastructure of approximately BRL 550 million (approximately CHF 140 million) during the first five years.
Chile
Since 2011, Sociedad Concesionaria Aeropuerto de Antofagasta S.A., a wholly-owned subsidiary of A-port Chile S.A., has held the concession for the expansion and operation of Andrés Sabella International Airport (IATA: ANF) in Antofagasta in the north of Chile. The airport is located approximately 25 kilometres north of the city of Antofagasta. The concession has a term that is dependent upon traffic volumes and ends 36 months after the date on which 75% of the maximum aeronautical revenues are generated, but at the latest after 15 years. It is currently expected to end in 2025. No notable infrastructure investments are anticipated in the period through to the end of the concession.
Until the end of March 2018, Sociedad Concesionaria Aeropuerto de Iquique S.A., a wholly-owned subsidiary of A-port Chile S.A., held the concession for the operation and expansion of Diego Aracena International Airport (IATA: IQQ) in Iquique in the north of Chile. The airport is located 41 kilometres south west of the city of Iquique in the Tarapacá region. With 1.4 million passengers a year, it is the country’s fifth-largest airport.
In 2017, Sociedad Concesionaria Aeropuerto Diego Aracena S.A., a wholly-owned subsidiary of A-port Chile S.A., acquired the new concession for the operation and expansion of Diego Aracena International Airport in Iquique. The new concession commenced on 1 April 2018 and has a variable term that is dependent upon traffic volumes and ranges from an anticipated 18 years up to a specified maximum of 25 years. As part of the concession arrangement, the company has undertaken to invest in measures to upgrade and extend the airport infrastructure, in particular to extend the existing terminal. The company is currently expecting investments in airport infrastructure of approximately USD 60 million (around CHF 60 million) during the first four years.
24.9 Events after the reporting date
The Board of Directors authorised the 2018 consolidated financial statements for issue on 7 March 2019. These also have to be approved by the General Meeting of Shareholders.
No events occurred between 31 December 2018 and the date on which these consolidated financial statements were authorised for issue by the Board of Directors which would require an adjustment to the carrying amounts of the group’s assets and liabilities or which would have to be disclosed here.