NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
I ACCOUNTING POLICIES
STATEMENT OF COMPLIANCE
The unaudited interim consolidated financial statements for the six months ended 30 June 2018 were prepared in accordance with International Accounting Standard 34 (IAS 34) Interim Financial Reporting. They do not contain all the information included in the consolidated financial statements for the year ended 31 December 2017 and should therefore be read in conjunction with the latter.
Changes in accounting policies
The company adopted the following new and amended International Financial Reporting Standards which are mandatory for the first time for financial year 2018 beginning on 1 January:
- 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 application of the new and amended Standards does not have a significant impact on these interim consolidated financial statements. In all other respects, these interim consolidated financial statements were prepared in accordance with the accounting policies described in the consolidated financial statements for the year ended 31 December 2017.
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 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, but will affect disclosure in the consolidated financial statements.
Changes in the consolidated group
In April 2018, Flughafen Zürich AG established the wholly-owned subsidiary Zurich Airport Asia Consultancy Sdn. Bhd. based in Kuala Lumpur (Malaysia), with a view to developing the markets in Asia.
Seasonal factors
Due to the nature of the civil aviation sector and based on statistics, traffic volumes (passenger volumes and number of flights) are usually higher in the second half of the year than in the first half.
II REPORTING OF NOISE-RELATED COSTS IN THE FINANCIAL STATEMENTS
CURRENT DEVELOPMENTS RELATING TO THE REPORTING OF NOISE-RELATED COSTS IN THE FINANCIAL STATEMENTS
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 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 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 (see note 10, 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 7, Intangible assets).
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 3, Other income and expenses and note 10, Provision for formal expropriations plus sound insulation and resident protection).
III NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1 Segment reporting
(CHF million)
Regulated business
Noise
Non-regulated business
Eliminations
Consolidated
First half 2018
Revenue from third parties
303.4
5.6
231.2
0.0
540.2
Inter-segment revenue
9.4
0.0
43.8
–53.2
0.0
Total revenue
312.8
5.6
275.0
–53.2
540.2
Operating expenses
–170.6
–59.1
–124.1
53.2
–300.6
Segment result (EBITDA)
142.2
–53.5
150.9
0.0
239.6
Depreciation and amortisation
–67.8
–2.7
–53.3
–123.8
Segment result (EBIT)
74.4
–56.2
97.6
0.0
115.8
Finance result
–9.4
Share of profit or loss of associates
–1.8
Gain on disposal of associates
0.0
Income tax expense
–20.1
Profit
84.5
Invested capital as at 30 June 2018
1,883.1
72.7
1,429.4
3,385.2
Non-interest-bearing non-current liabilities 2)
585.3
Non-interest-bearing current liabilities 3)
212.7
Total assets as at 30 June 2018
4,183.2
ROIC (in %) 1)
6.7
–39.6
11.8
7.2
(CHF million)
Aviation
PRM
User fees
Air security 4)
Access fees 4)
Eliminations
Total regulated business
First half 2018
Revenue from third parties
178.8
7.2
34.0
82.8
0.6
0.0
303.4
Inter-segment revenue
9.2
0.0
2.8
5.3
1.1
–9.0
9.4
Total revenue
188.0
7.2
36.8
88.1
1.7
–9.0
312.8
Operating expenses
–83.6
–6.4
–16.2
–43.3
–30.1
9.0
–170.6
EBITDA
104.4
0.8
20.6
44.8
–28.4
0.0
142.2
Depreciation and amortisation
–50.3
–0.1
–12.6
–3.1
–1.7
–67.8
EBIT
54.1
0.7
8.0
41.7
–30.1
0.0
74.4
Invested capital as at 30 June 2018
1,421.8
6.5
310.3
112.0
32.5
1,883.1
ROIC (in %) 1)
6.5
27.4
4.0
62.4
–142.7
6.7
1) Based on the result of the 12-month period preceding the reporting date.
2) 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 the non-interest-bearing portion of non-current financial liabilities.
3) 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, and the non-interest-bearing portion of current financial liabilities.
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 14.1%.
The reportable segments for the prior-year period are as follows:
(CHF million)
Regulated business
Noise
Non-regulated business
Eliminations
Consolidated
First half 2017
Revenue from third parties
286.9
5.5
196.4
488.8
Inter-segment revenue
9.6
0.0
43.4
–53.0
0.0
Total revenue
296.5
5.5
239.8
–53.0
488.8
Operating expenses
–171.6
–1.6
–97.0
53.0
–217.2
Segment result (EBITDA)
124.9
3.9
142.8
0.0
271.6
Depreciation and amortisation
–68.7
–2.7
–49.0
–120.4
Segment result (EBIT)
56.2
1.2
93.8
0.0
151.2
Finance result
–7.3
Share of profit or loss of associates
–1.3
Gain on disposal of associates
36.3
Income tax expense
–35.7
Profit
143.2
Invested capital as at 30 June 2017
1,889.8
146.7
1,268.3
3,304.8
Non-interest-bearing non-current liabilities 2)
609.0
Non-interest-bearing current liabilities 3)
156.4
Total assets as at 30 June 2017
4,070.2
ROIC (in %) 1)
5.6
1.6
13.5
8.4
(CHF million)
Aviation
PRM
User fees
Air security 4)
Access fees 4)
Eliminations
Total regulated business
First half 2017
Revenue from third parties
169.1
6.8
33.4
77.1
0.5
286.9
Inter-segment revenue
9.5
0.0
2.8
5.3
1.0
–9.0
9.6
Total revenue
178.6
6.8
36.2
82.4
1.5
–9.0
296.5
Operating expenses
–84.6
–6.1
–15.8
–44.0
–30.1
9.0
–171.6
EBITDA
94.0
0.7
20.4
38.4
–28.6
0.0
124.9
Depreciation and amortisation
–50.1
–0.1
–12.3
–4.0
–2.2
–68.7
EBIT
43.9
0.6
8.1
34.4
–30.8
0.0
56.2
Invested capital as at 30 June 2017
1,422.7
6.2
316.8
108.6
35.5
1,889.8
ROIC (in %) 1)
5.7
28.7
2.2
71.0
–134.3
5.6
1) Based on the result of the 12-month period preceding the reporting date.
2) 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 the non-interest-bearing portion of non-current financial liabilities.
3) 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, and the non-interest-bearing portion of current financial liabilities.
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 12.7%.
2 Revenue
(CHF 1,000)
First half 2018
First half 2017
Passenger charges
117,075
109,998
Security charges
81,746
76,639
PRM charges
7,239
6,799
Passenger-related flight operations charges
206,060
193,436
Landing charges
41,457
39,699
Aircraft-related noise charges
5,619
5,466
Emission charges
1,944
1,844
Parking charges
12,725
12,477
Freight revenue
4,378
4,010
Other flight operations charges
66,123
63,496
Total flight operations charges
272,183
256,932
Baggage sorting and handling system
20,718
19,892
De-icing
6,286
6,526
Check-in
2,873
2,739
Aircraft energy supply system
1,725
1,736
Other fees
3,026
3,014
Total aviation fees
34,628
33,907
Refund of security costs
1,008
470
Other revenue
1,205
1,100
Total other aviation revenue
2,213
1,570
Total aviation revenue
309,024
292,409
Retail, tax & duty-free
52,211
48,066
Food & beverage operations
8,895
8,236
Advertising media and promotion
9,103
9,037
Revenue from multi-storey car parks
38,846
38,076
Other commercial revenue (car rentals, taxis, banks, etc.)
8,448
7,878
Total commercial revenue
117,503
111,293
Revenue from rental and leasing agreements
44,884
44,300
Energy and utility cost allocation
11,226
11,416
Cleaning
2,348
2,409
Revenue from services
1,999
1,892
Total revenue from facility management
60,457
60,017
Communication services
7,605
7,639
Other services and miscellaneous
8,635
7,705
Catering
960
923
Fuel charges
4,121
3,900
Total revenue from services
21,321
20,167
Revenue from consulting activities
3,198
3,214
Other revenue from international business
19,918
1,693
Revenue from construction projects as part of concession arrangements
8,761
0
Total revenue from international business
31,877
4,907
Total non-aviation revenue
231,158
196,384
Total revenue
540,182
488,793
Presentation of Revenue from Contracts with Customers (IFRS 15):
(CHF 1,000)
First half 2018
First half 2017
Flight operations charges
272,183
256,932
Aviation charges
34,628
33,907
Other aviation revenues
2,110
1,467
Total aviation revenue from contracts with customers (IFRS 15)
308,921
292,306
Aviation revenue (non IFRS 15)
103
103
Total aviation revenue
309,024
292,409
Commercial and parking revenue
38,882
37,531
Revenue from facility management
15,322
15,503
Revenue from services
20,631
19,481
Revenues from international activities
31,877
4,907
Total non-aviation revenue from contracts with customers (IFRS 15)
106,712
77,422
Non-aviation revenue (non IFRS 15)
124,446
118,962
Total non-aviation revenue
231,158
196,384
Total revenue
540,182
488,793
3 Other income and expenses
(CHF 1,000)
First half 2018
First half 2017
Capitalised expenditure
6,620
7,703
Other income
587
242
Capitalised expenditure and other income
7,207
7,945
Expenses for construction projects as part of concession arrangements
–8,761
0
Other expenses
–60,672
–952
Expenses for construction projects and other expenses
–69,433
–952
The expenses of CHF 8.8 million (prior-year period: CHF 0.0 million) for construction projects under concession arrangements are the result of investments 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 10, Provision for formal expropriations plus sound insulation and resident protection).
4 finance result
(CHF 1,000)
Net interest expenses on debentures and non-current loans
–5,545
–7,047
Net interest expenses on defined benefit obligations
–409
–542
Interest expenses on finance lease liabilities
–75
–105
Other interest expenses
–781
–712
Losses on financial assets of Airport of Zurich Noise Fund
–2,746
–594
Present value adjustment on provision for formal expropriations plus sound insulation and resident protection 1)
–94
0
Present value adjustment on liabilities from concession arrangements
–933
0
Other finance costs
–1,345
–835
Total finance costs
–11,928
–9,835
Interest income on financial assets of Airport of Zurich Noise Fund
1,088
1,171
Present value adjustment on provision for formal expropriations plus sound insulation and resident protection 1)
0
1,115
Other interest income
1,012
87
Foreign exchange gains
185
100
Other finance income
204
93
Total finance income
2,489
2,566
Finance result
–9,439
–7,269
1) See note 10, Provision for formal expropriations plus sound insulation and resident protection.
5 Property, Plant and equipment
(CHF million)
Land
Engineering structures
Buildings
Projects in progress
Movables
Leased assets
Total property, plant and equipment
Cost
Balance as at 1 January 2018
118.7
1,712.0
4,311.7
122.8
273.5
21.8
6,560.5
Additions
72.4
72.4
Disposals
–1.0
–44.7
–8.7
–54.4
Transfers
–0.1
4.0
–10.9
3.5
–3.5
Balance as at 30 June 2018
118.7
1,710.9
4,271.0
184.3
268.3
21.8
6,575.0
Depreciation, amortisation
Balance as at 1 January 2018
0.0
–880.6
–2,798.6
0.0
–192.0
–18.0
–3,889.2
Additions
–31.3
–77.3
–7.7
–0.7
–117.0
Disposals
1.0
44.6
8.5
54.1
Balance as at 30 June 2018
0.0
–910.9
–2,831.3
0.0
–191.2
–18.7
–3,952.1
Government subsidies and grants
Balance as at 1 January 2018
0.0
–10.9
–1.1
0.0
–0.7
0.0
–12.7
Additions
0.0
Disposals
0.4
0.1
0.1
0.6
Balance as at 30 June 2018
0.0
–10.5
–1.0
0.0
–0.6
0.0
–12.1
Net carrying amount as at 1 January 2018
118.7
820.5
1,512.0
122.8
80.8
3.8
2,658.6
Net carrying amount as at 30 June 2018
118.7
789.5
1,438.7
184.3
76.5
3.1
2,610.8
Projects in progress
In the first half of 2018, Flughafen Zürich AG invested a total of CHF 72.4 million in projects in progress (prior-year period: CHF 28.4 million). The biggest items comprise the following projects:
- Upgrading and expansion of the baggage system (CHF 14.4 million)
- Expansion of the south-side aircraft stands (CHF 10.4 million)
-
Construction of multiple-entry and high-speed taxiways (CHF 7.2 million)
Depreciation
Depreciation of property, plant and equipment totalling CHF 117.0 million was offset against government grants and subsidies recognised in the income statement in the amount of CHF 0.6 million.
6 investment property
(CHF 1,000)
Land
Project and construction costs
Total investment property
Cost
Balance as at 1 January 2018
950
211,309
212,259
Additions
0
36,426
36,426
Balance as at 30 June 2018
950
247,735
248,685
Accumulated depreciation and impairment losses
Balance as at 1 January 2018
0
–352
–352
Additions
0
–120
–120
Balance as at 30 June 2018
0
–472
–472
Net carrying amount as at 1 January 2018
950
210,957
211,907
Net carrying amount as at 30 June 2018
950
247,263
248,213
THE CIRCLE PROJECT
Based on the nature of the contractual arrangement, the co-ownership structure 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 (Flughafen Zürich AG’s share: 51%).
The share of THE CIRCLE properties under construction 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 in the amount of CHF 1.0 million represents the purchase cost of the share of the plot of land on which the project will be implemented. The item “Project and construction costs” in the amount of CHF 247.3 million (31 December 2017: CHF 211.0 million) includes the share of the production costs capitalised to date.
The fair value of THE CIRCLE was CHF 298.7 million at the reporting date (31 December 2017: CHF 242.6 million).
7 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 2018
188,558
77,094
84,962
Additions
0
28,735
1,012
Disposals
–34,528
0
–2,084
Transfers
0
1,116
2,367
Foreign exchange differences
0
–7,985
–222
Balance as at 30 June 2018
154,030
98,960
86,035
Accumulated depreciation and impairment losses
Balance as at 1 January 2018
–56,876
–1,901
–69,950
Additions
–1,971
–2,458
–2,752
Disposals
0
0
1,841
Foreign exchange differences
0
171
28
Balance as at 30 June 2018
–58,847
–4,188
–70,833
Net carrying amount as at 1 January 2018
131,682
75,193
15,012
Net carrying amount as at 30 June 2018
95,183
94,772
15,202
Intangible asset from right of formal expropriation
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 costs for formal expropriations. Based on the recalculation, the provision for formal expropriations was reduced by CHF 34.5 million (see note 10, 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 the reporting date, Flughafen Zürich AG has therefore recognised an intangible asset from the right of formal expropriation in the amount of CHF 95.2 million (31 December 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 94.8 million (31 December 2017: CHF 75.2 million) include 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 33.3 million; 31 December 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 61.5 million; 31 December 2017: CHF 50.8 million) through the subsidiary Concessionária do Aeroporto Internacional de Florianópolis S.A. The obligations of CHF 25.9 million (31 December 2017: CHF 11.7 million) relating to the corresponding concessions are recognised as current and non-current liabilities (see note 9, Financial liabilities).
8 CASH AND CASH EQUIVALENTS AND FIXED-TERM DEPOSITS
30.06.2018
31.12.2017
(CHF 1,000)
Total
of which AZNF
Total
of which AZNF
Cash on hand
224
0
227
0
Cash at banks and in postal accounts
191,881
17,127
225,346
20,184
Fixed-term deposits 1)
73,037
0
89,042
0
Total cash and cash equivalents
265,142
17,127
314,615
20,184
Current fixed-term deposits 2)
162,645
0
230,000
0
Non-current fixed-term deposits 2)
50,000
0
41,667
0
Total fixed-term deposits
212,645
0
271,667
0
1) Due within 90 days from date of acquisition.
2) Due after 90 days from date of acquisition.
9 FINANCIAL LIABILITIES
(CHF 1,000)
30.06.2018
31.12.2017
Debentures
1,050,309
1,050,134
Non-current lease liabilities
2,110
3,010
Non-current liabilities from concession arrangements
25,041
11,665
Other non-current financial liabilities
9,798
11,751
Non-current financial liabilities
1,087,258
1,076,560
Debentures
38,319
0
Current lease liabilities
1,783
1,752
Current liabilities from concession arrangements
835
0
Other current financial liabilities
2,832
2,967
Current financial liabilities
43,769
4,719
Total financial liabilities
1,131,027
1,081,279
10 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 2018
316,623
102,724
419,347
Provisions used 1)
–3,830
–1,795
–5,625
Release of provision
–34,528
0
–34,528
Increase of provision
0
57,556
57,556
Present value adjustment
527
–433
94
Balance as at 30 June 2018
278,792
158,052
436,844
of which current (planned payment within 1 year)
45,062
21,655
66,717
of which non-current (planned payment from 1 year on)
233,730
136,397
370,127
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.
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 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 provision for formal expropriations was 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 7, Intangible assets).
As at the reporting date, the estimated costs for formal expropriations amounted to CHF 350.0 million, of which CHF 67.7 million had already been paid out at that date. The outstanding costs of CHF 282.3 million (nominal amount) are stated at their present value of CHF 278.8 million in the interim consolidated financial statements for the period ended 30 June 2018. The discount rate used to discount the future nominal payments flows remained unchanged at 0.35%. It is currently 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 3, 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 (previously: CHF 340.0 million), of which CHF 238.3 million had already been paid out at that date. The outstanding costs of CHF 161.7 million (nominal amount) are stated at their present value of CHF 158.1 million in the interim consolidated financial statements for the period ended 30 June 2018. The discount rate used to discount the future nominal payment flows rose from 0.25% to 0.45%, as the average term of the future payments increased. It is currently expected that the total payments, including the extended sound insulation programme, can be completed by the end of 2030 (previously: end of 2025).
11 AIRPORT of ZURICH NOISE FUND
(CHF 1,000)
2018
Airport of Zurich Noise Fund as at 1 January
443,505
Revenue from noise charges
5,293
Costs for sound insulation and resident protection
–1,795
Costs for formal expropriations 1)
–3,916
Airport of Zurich Noise Fund as at 30 June before operating costs and finance result
443,087
Noise-related operating costs
–1,669
Interest income from financial assets of Airport of Zurich Noise Fund
571
Adjustments to fair value and gains/losses on financial assets
–2,196
Airport of Zurich Noise Fund as at 30 June
439,793
1) In addition to compensation payments for formal expropriations, this amount includes other associated external costs (in accordance with the regulations of the Airport of Zurich Noise Fund).
Summary of assets invested in the Airport of Zurich Noise Fund:
(CHF 1,000)
30.06.2018
31.12.2017
Cash equivalents (see note 8, "Cash and cash equivalents")
17,127
20,184
Current financial assets of Airport of Zurich Noise Fund
33,772
76,578
Non-current financial assets of Airport of Zurich Noise Fund
386,528
360,525
Accrual / deferral towards Flughafen Zürich AG 1)
2,366
–13,782
Total assets invested for Airport of Zurich Noise Fund
439,793
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.
12 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 currently anticipates an applicable tax rate of 20.5% (31 December 2017: 20.5%).
The balance of deferred taxes changed as follows:
(CHF 1,000)
2018
Deferred tax assets and liabilities, net as at 1 January
–61,687
Deferred taxes on remeasurement of defined benefit liability, recognised in OCI
–2,172
Change according to income statement
14,086
Deferred tax assets and liabilities, net as at 30 June
–49,773
of which deferred tax assets
10,907
of which deferred tax liabilities
–60,680
13 FAIR VALUE DISCLOSURES
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 (level 1).
Financial assets in the Airport of Zurich Noise Fund (AZNF) : 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 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 at the reporting date (level 1).
(CHF 1,000)
30.06.2018
31.12.2017
Carrying amount
Fair value
Carrying amount
Fair value
Debentures
1,088,628
1,123,714
1,050,134
1,095,379
Total
1,088,628
1,123,714
1,050,134
1,095,379
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.
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. Flughafen Zürich AG does not have any assets or liabilities in this level.
(CHF 1,000)
30.06.2018
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 AZNF
335,653
101,450
Bonds of the AZNF at amortised cost 1)
320,875
331,846
Mixed investment fund of the AZNF at fair value 2)
99,425
101,450
Cross Currency Swap
–6,004
–6,088
–6,088
1) The change of CHF –3.8 million between 31 December 2017 and 1 January 2018 is attributable to the introduction of IFRS 9. CHF –3.4 million results from the measurement of the bond at amortised cost (previously: fair value through OCI) and CHF –0.4 million from the new guidance on calculating impairment losses under IFRS 9. Among other things, the new standard requires forward-looking information (expected credit losses) to be included. 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). The cumulative amount in equity as at 31 December 2017 (CHF 1.4 million) was therefore reclassified out of the fair value reserve and into other retained earnings within equity as at 1 January 2018 (see also Consolidated statement of changes in equity, Effect of the initial application of IFRS 9, net of tax).
14 FURTHER DETAILS
14.1 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 following three foreign airports:
Brazil (Florianópolis)
On 16 March 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 2017, traffic volumes reached 3.8 million passengers. A concession fee of BRL 241.5 million (CHF 61.7 million) is due as consideration for the right to operate the airport. A portion of the concession fee (BRL 83.3 million; adjusted for inflation: BRL 83.7 million – approximately CHF 21.4 million) was paid and recognised as an intangible asset on the day that the concession arrangement was signed. Further minimum concession payments totalling BRL 158.2 million (adjusted for inflation; approximately CHF 40.4 million as at 30 June 2018) are payable over the term of the concession and have been recognised as a provision at their present value and as an intangible asset. The concession runs for 30 years. Following the signing of the concession arrangement on 28 July 2017 and with all suspensive conditions having been met, 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 (CHF 141 million) during the first five years.
Chile (Antofagasta and Iquique)
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 1.3 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. Flughafen Zürich AG is currently expecting investments in airport infrastructure of approximately USD 60 million (CHF 59 million) during the first four years.
14.2 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, 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.
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 13.8 million (31 December 2017: CHF 15.9 million). In the context of the local debt financing, the company has also entered into a counterbond in the amount of CHF 12.9 million (31 December 2017: CHF 14.9 million) in respect of Companhia de Concessões Rodoviárias S.A., which is a co-shareholder in Confins Airport. 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 10.7 million (31 December 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 29.0 million (31 December 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 38.3 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 total amount arising from these counterbonds was CHF 7.3 million (31 December 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.
14.3 Events after the reporting date
The Board of Directors approved the 2018 interim consolidated financial statements and authorised them for issue on 23 August 2018. No events occurred between 30 June 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.