Flughafen Zürich AG - Annual Report 2020

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
2020	Regulated business	Noise	Non-regulated business	Eliminations	Consolidated
Revenue from contract with customers (IFRS 15)	216.0	5.5	156.4	0.0	377.9
Other revenue (non IFRS 15)	0.2	0.0	245.9	0.0	246.1
Total revenue from third parties	216.2	5.5	402.3	0.0	624.0
Inter-segment revenue	21.6	0.0	68.4	–90.0	0.0
Total revenue	237.8	5.5	470.7	–90.0	624.0
Personnel expenses	–62.5	–1.6	–115.2	0.0	–179.3
Other operating expenses	–145.4	–1.4	–101.9	0.0	–248.7
Inter-segment operating expenses	–67.6	–0.8	–21.6	90.0	0.0
Segment result (EBITDA)	–37.7	1.7	232.0	0.0	196.0
Depreciation and amortisation	–138.1	–3.6	–110.9	0.0	–252.6
Segment result (EBIT)	–175.8	–1.9	121.1	0.0	–56.6
Finance result					–24.8
Share of profit or loss of associates					–3.1
Income tax expense					15.4
Consolidated result					–69.1

Invested capital as at 31 December 2020	1,893.9	116.1	2,255.0		4,265.0
Non-interest-bearing non-current liabilities 1)					581.8
Non-interest-bearing current liabilities 2)					225.2
Total assets as at 31 December 2020					5,072.0

ROIC (in %)	–7.8	–1.3	4.6		–1.1

Capital expenditure	128.8	0.1	284.6		413.5
Investments in associates			3.7		3.7

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 agreements.

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
2020	Aviation	PRM	User fees	Air security 4)	Access fees 4)	Eliminations	Total regulated business
Revenue from contract with customers (IFRS 15)	136.0	4.1	27.6	47.6	0.7	0.0	216.0
Other revenue (non IFRS 15)	0.2	0.0	0.0	0.0	0.0	0.0	0.2
Revenue from third parties	136.2	4.1	27.6	47.6	0.7	0.0	216.2
Inter-segment revenue	20.3	0.0	5.0	12.6	2.3	–18.6	21.6
Total revenue	156.5	4.1	32.6	60.2	3.0	–18.6	237.8
Personnel expenses	–53.0	0.0	–6.9	–1.9	–0.7	0.0	–62.5
Other operating expenses	–43.5	–6.4	–4.5	–46.6	–44.4	0.0	–145.4
Inter-segment operating expenses	–49.2	–0.8	–13.8	–8.3	–14.1	18.6	–67.6
EBITDA	10.8	–3.1	7.4	3.4	–56.2	0.0	–37.7
Depreciation and amortisation	–103.2	–0.2	–24.6	–6.9	–3.2	0.0	–138.1
EBIT	–92.4	–3.3	–17.2	–3.5	–59.4	0.0	–175.8

Invested capital as at 31 December 2020	1,368.6	7.1	379.8	116.0	22.4		1,893.9

ROIC (in %)	–5.5	-62.3	–3.9	–3.3	–178.5		–7.8

Operating assets pursuant to Ordinance on Airport Charges (OAC) 3)	1,271.8	3.0	362.0	69.3	22.7		1,728.8
ROIC (in %) pursuant to OAC	–5.7	–97.7	–4.0	–4.1	–181.4		–8.1

3) The Ordinance on Airport Charges (OAC) 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 pursuant to OAC of the “Air security” segment amounts to –53.8%.

The following table shows the reportable segments in the previous year:

(CHF million)	Regulated business	Noise	Non-regulated business	Eliminations	Consolidated
2019	Regulated business	Noise	Non-regulated business	Eliminations	Consolidated
Revenue from contract with customers (IFRS 15)	648.4	12.8	285.3	0.0	946.6
Other revenue (non IFRS 15)	0.2	0.0	263.3	0.0	263.5
Total revenue from third parties	648.6	12.8	548.6	0.0	1,210.1
Inter-segment revenue	21.4		91.9	–113.3	0.0
Total revenue	670.1	12.8	640.5	–113.3	1,210.1
Personnel expenses	–82.5	–1.9	–132.0	0.0	–216.3
Other operating expenses	–183.3	–0.9	–167.8	0.0	–351.9
Inter-segment operating expenses	–91.2	–0.7	–21.4	113.3	–0.0
Segment result (EBITDA)	313.1	9.4	319.3	0.0	641.8
Depreciation and amortisation	–139.1	–4.3	–95.4	0.0	–238.7
Segment result (EBIT)	174.1	5.1	223.9	0.0	403.1
Finance result					–14.0
Share of profit or loss of associates					–2.5
Income tax expense					–77.4
Consolidated result					309.1

Invested capital as at 31 December 2019	1,693.0	109.6	1,951.1		3,753.7
Non-interest-bearing non-current liabilities 1)					611.6
Non-interest-bearing current liabilities 2)					228.2
Total assets as at 31 December 2019					4,593.5

ROIC (in %)	7.7	3.7	10.3		8.8

Capital expenditure	144.4	0.2	679.3		823.9
Investments in associates			9.3		9.3

(CHF million)	Aviation	PRM	User fees	Air security 4)	Access fees 4)	Eliminations	Total regulated business
2019	Aviation	PRM	User fees	Air security 4)	Access fees 4)	Eliminations	Total regulated business
Revenue from contract with customers (IFRS 15)	381.8	15.7	70.7	178.9	1.3	0.0	648.4
Other revenue (non IFRS 15)	0.2	0.0	0.0	0.0	0.0	0.0	0.2
Revenue from third parties	382.0	15.7	70.7	178.9	1.3	0.0	648.6
Inter-segment revenue	21.7	0.0	4.6	11.6	2.1	–18.5	21.4
Total revenue	403.7	15.7	75.3	190.5	3.4	–18.5	670.1
Personnel expenses	–69.0	0.0	–10.1	–2.5	–1.0	0.0	–82.5
Other operating expenses	–44.4	–12.3	–6.2	–73.3	–47.1	0.0	–183.3
Inter-segment operating expenses	–61.3	–1.1	–17.7	–15.4	–14.3	18.5	–91.2
EBITDA	229.0	2.4	41.3	99.4	–58.9	–0.0	313.1
Depreciation and amortisation	–103.9	–0.1	–25.1	–6.8	–3.1	0.0	–139.1
EBIT	125.2	2.3	16.1	92.6	–62.0	–0.0	174.1

Invested capital as at 31 December 2019	1,287.6	1.2	323.5	50.1	30.6		1,693.0

ROIC (in %)	7.4	43.1	4.0	92.7	–135.5		7.7

Operating assets pursuant to Ordinance on Airport Charges (OAC) 3)	1,318.6	2.3	329.2	64.4	29.4		1,743.8
ROIC (in %) pursuant to OAC	8.3	68.6	4.0	113.9	–144.7		8.5

Internal reporting of operating segments to the chief operating decision-maker is carried out in accordance with the Ordinance on Airport Charges (OAC), 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 OAC (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. This segment also includes income and expenses from international business.

Principles of segment reporting

For internal 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 (OAC)

In accordance with Art. 34 OAC, 30% of the economic added value in the airside area of the airport not relevant to flight operations and in 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 financial year 2020, an amount of CHF 0.0 million (2019: CHF 12.7 million) was allocated to the “Aviation” segment and is reflected in the reported return on operating assets. Moreover, in accordance with Art. 45 OAC, the shortfall in the “Access fees” segment can be charged to the “Air security” segment.

Revenue from security charges is allocated in full to the “Security” segment and revenue from PRM charges to the “PRM” segment. All other flight operations charges (with the exception of aircraft noise charges) are allocated to the “Aviation” segment. A breakdown of revenue by charge type can be found in note 2, Revenue.

Additional disclosures

Flughafen Zürich AG primarily provides services within Switzerland. In financial year 2020, external consulting services totalling CHF 4.8 million (2019: CHF 6.6 million) were provided in Brazil and Chile. Flughafen Zürich AGʼs revenue with Lufthansa Group in the reportable segments amounted to CHF 145.7 million in the past financial year (2019: CHF 445.3 million).