Current risk situation
The current risk situation for the Zurich Airport Group may be characterised primarily by the following risks:
1. Regulatory uncertainties
1.1 Airport charges
Flughafen Zürich AG is regulated with regard to the charges it levies for the use of the monopolised infrastructure. In a normal year, the regulated charges amount to around 60% of revenue. The Swiss airport charges regulation is based on EU-wide regulation but additionally includes specific stipulations for airport charges at Swiss airports. There is consequently a risk that regulatory requirements may be tightened and the related revenues jeopardised.
In the context of the current climate debate, increased charges as a result of regulatory changes are also a possibility. Even if no such policy proposals currently exist, incentive levies on CO2-emitting transport services and a consequent fall in revenues cannot be ruled out.
1.2 Regulation governing the use of south German airspace
The use of south German airspace is presently regulated by an implementing regulation (DVO) issued unilaterally by Germany. On 4 September 2012, Switzerland and Germany signed an aviation treaty. This treaty must be ratified by both countries. The two chambers of Switzerland’s Parliament have already approved the treaty, but in Germany ratification was halted, and no date has yet been set for ratification there. Germany could also unilaterally change the implementing regulation (DVO), which could lead to additional capacity restrictions at Zurich Airport.
1.3 Investments to reduce operational complexity
The complexity of the runway and taxiway layout, the departure and approach routes and various operational regulations at Zurich Airport is considerable. Following the near-collision of two aircraft at the runway intersection in 2011, Flughafen Zürich AG, Skyguide, Swiss and the Swiss Air Force in 2012 prepared a comprehensive risk report with the assistance of the Federal Office of Civil Aviation (FOCA) and the Department of the Environment, Transport, Energy and Communications (DETEC). In addition, various measures aimed at improving safety were implemented or are in the process of being implemented. However, there is still a risk that capacity may be restricted due to safety considerations and that business performance may be negatively impacted as a result. The planned taxiway around runway 28 will spatially separate inbound and outbound aircraft for the most part. Compared with 2019, this will avoid more than 100,000 crossings over runway 28 each year. The planned extensions to runways 28 and 32 will also enable more stable operation in all weather conditions and for all aircraft types.
1.4 Noise exposure (during shoulder periods and at night)
Prior to the Covid-19 crisis, flight operations at Zurich Airport after 10 p.m. exceeded the night-time noise level permitted by the authorities. The permitted noise level was defined in law in 2015 but is based on an obsolete forecast from 2003 for the year 2010. In 2021, the permitted noise level was exceeded to a considerable extent in the two night-time hours. If, faced with a continued rise in traffic volumes, it is not possible to significantly improve compliance – for example through measures to prevent delays or as a result of changes to the permitted noise levels as already requested by the company – there is a risk of further operational restrictions, especially from 10 p.m. onwards, and a concomitant loss of revenue. Flughafen Zürich AG is actively working to improve the situation in talks with authorities, as well as in ongoing approval and court proceedings, and also operationally together with its airport partners Skyguide and Swiss. If the permitted noise exposure limits are maintained or were to be tightened even further, this would pose a substantial threat to the airport's hub operations and to its intercontinental connections. As a consequence, numerous connecting feeder flights on European routes would also disappear.
2. Decline in demand/disruption due to external influencing factors
Experience over the past few years has shown that the air transport sector is sensitive to external events such as economic crises, acts of terrorism or pandemics. In addition, other external factors such as the political and macro-economic environment could have a negative impact on demand in both the aviation and non-aviation segments at Zurich Airport.
2.1 Geopolitical uncertainties
Geopolitical uncertainties could seriously impact airport operations, especially if they caused a slump in air travel as a result of security concerns, unpredictable political situations or a drop in spending power for example. Embargoes, such as cancelled flight routes for instance, could also have serious consequences for connections to and from Zurich.
2.2 Energy shortages
Energy shortages can severely impact operations at Zurich Airport. However, it can be assumed that, as key infrastructure, operation of the airport would be prioritised even in the event of power cuts or rationing. At its Zurich site, Flughafen Zürich AG has recourse to various forms of energy that will enable it to remain operational, albeit at a much-reduced level. An internal task force has been created to coordinate measures in the event of specific energy supply bottlenecks. In addition, a crisis team drawn from various airport partners can also take general measures.
2.3 Pandemics and epidemics
A pandemic could have severe company-wide effects, starting with a significant reduction in air traffic due to border closures, quarantine requirements and a lack of internationally coordinated action to tackle the pandemic. In addition, authorities could order businesses to close, which could have an appreciable impact on retail partners and therefore on the related revenue of Flughafen Zürich AG. In the event of large-scale employee absences due to illness or quarantine, it cannot be guaranteed that labour-intensive activities will be carried out to the usual standard of quality.
2.4 Natural hazards
Flughafen Zürich AG is constantly adapting to foreseeable developments resulting from climate change such as, for example, the general rise in temperatures, more prolonged periods of heat and drought, changes in the patterns and intensity of precipitation and wind, or shortages of renewable resources. Such developments are always taken into account when planning upgrades and extensions, for example to drainage systems, cooling plants or even handling processes.
It must be assumed, however, that climate change will also result in an increase in one-off events such as flooding following heavy rainfall. Wherever possible and cost-effective, property and business interruption insurance is taken out to mitigate the resulting financial risks. The same applies to risks from other events not caused by climate change such as earthquakes for example.
2.5 Suppliers and customers
The home carrier at Zurich Airport flies over half the passengers who travel via Zurich Airport. Swiss, in turn, is integrated into the Lufthansa Group along with other airlines that offer hub systems at various locations. If the home carrier were to get into financial difficulty, a considerable number of long-, medium- and short-haul flights would cease operating. The fact that Swiss is integrated into its parent company Lufthansa increases the risk as it is then also dependent on the situation of other group companies. In the event of difficulties at these other group companies, or if political, economic and/or social circumstances change, the parent could shift capacity between airports.
Flughafen Zürich AG passes elements of its licence to operate the airport on to ground handling companies by issuing licences for ground handling operations. Flughafen Zürich AG does not perform any ground handling activities itself. Swissport, the largest ground handler at Zurich Airport, commands around 80% of market volume in the main ground handling activities (passenger and ramp handling). If the market leader were to cease operating, Flughafen Zürich AG would have to ensure the proper continuity of airport operations, including ground handling.
3. Interruptions to business due to operational events and IT systems failure
Given their tightly interconnected complexity, airport operations could be severely disrupted by operational events such as accidents or the failure of critical systems. Depending on the scale of the disruption, operations would have to be curtailed or even suspended altogether in order to maintain the safety of passengers and airport employees.
Nowadays, the majority of Flughafen Zürich AG’s workflows and processes cannot be carried out properly without the aid of IT systems. A serious system failure could lead to the loss of personal, business-critical and/or confidential data. Such a scenario could result in major operational problems or even accidents. There is also the risk of severe interruptions to business that could conceivably last several weeks, with a concomitant loss of revenue on top of the costs for restoring operations.
4. International business
Projects abroad and international holdings inherently pose commercial and sector-specific risks comparable with those associated with operating Zurich Airport. Along with political risks, location-specific risks typically include country, market and currency risks that could severely impact future revenue prospects or even lead to the total failure of a venture.
Given the greater risk involved, when considering any project, both the financial risks and the political and economic risks are analysed in detail against the backdrop of the prevailing social and economic conditions. They are also continually monitored for existing activities. The same standards as practised at Zurich Airport apply.