Notes to the financial statements

The 2023 financial statements of Zurich Airport Ltd., based in Kloten, have been prepared in accordance with the accounting provisions of the Swiss Code of Obligations.

The significant valuation principles that have been applied but are not prescribed by law are described below. These single-entity financial statements also serve for tax purposes and form the basis for the statutory business of the Annual General Meeting.

As Zurich Airport Ltd. prepares consolidated financial statements in accordance with accepted financial reporting standards (IFRS accounting standards), it has omitted to present disclosures on interest-bearing liabilities, disclosures on auditors’ fees, a cash flow statement and a management report in these financial statements in accordance with the statutory provisions. As in the previous year, the average number of full-time equivalents was over 250 in the reporting period.

The financial statements were prepared in Swiss francs (CHF). Unless indicated otherwise, amounts are stated in millions of Swiss francs (CHF million). Due to the rules on rounding up or down, individual figures may not add up to precisely the sum total stated. This may also mean that individual amounts round to zero.

Costs for formal expropriations qualify as an intangible asset under the accounting provisions of the Swiss Code of Obligations. They are recognised as assets at the latest on the date on which the counterparty has attained an assertable claim. Amortisation of capitalised costs for formal expropriations is based at a minimum on the consolidated financial statements. Adequate provisions are recognised for current liabilities arising from sound insulation and resident protection measures. Any balance of revenue from noise charges after deduction of noise-related costs (compensation for formal expropriations, sound insulation and resident protection measures, operating costs, financing costs and amortisation) is transferred to the provision for aircraft noise (see note 10, Provision for aircraft noise).

With respect to formal expropriations, the reporting of noise-related costs in the financial statements is a complex matter due to a multitude of relevant legal bases, unclear or pending case law and political debate. Especially in the case of formal expropriations, this financial reporting requires significant assumptions and estimates concerning the capitalisation of such costs and the obligation to recognise appropriate provisions.

Zurich Airport Ltd. has received a total of around 20,000 noise-related claims for compensation, of which just under 5,100 were still pending at the end of 2023. Around 520 of these cases are currently being examined by the Swiss Federal Assessments Commission.

The rulings by the Swiss Federal Supreme Court in the first half of 2008 on fundamental issues related to formal expropriations enabled Zurich Airport Ltd. to 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. In further rulings in 2010, the Swiss Federal Supreme Court definitively set the cut-off date for the foreseeability of an eastern approach as 1 January 1961 and, in 2011, it ruled definitively on the method used to calculate a decline in the market value of investment property. In 2016, the Swiss Federal Supreme Court handed down two rulings in test cases regarding claims for compensation relating to eastern and southern approach routes and, in 2018, it handed down two rulings in test cases regarding cooperative ownership. Based on these Swiss Federal Supreme Court rulings and other fundamental issues that have been decided, the company undertook a reappraisal of costs for formal expropriations at these dates, 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. On 22 November 2019, the Swiss Federal Supreme Court handed down a ruling in test cases regarding the period of limitation on claims for compensation in Oberglatt. This Swiss Federal Supreme Court ruling and other fundamental issues that have been decided enabled Zurich Airport Ltd. to undertake a reappraisal of the outstanding cost of compensation for formal expropriations as at 31 December 2019.

With respect to sound insulation and resident protection measures, Zurich Airport Ltd. 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. In 2018, the Board of Directors approved further sound insulation measures in this context.

As at 31 December 2023, Zurich Airport Ltd. has recognised an intangible asset from the right of formal expropriation of CHF 19.9 million (previous year: CHF 24.8 million) and a provision for aircraft noise of CHF 427.8 million in total (previous year: CHF 431.3 million) in the financial statements in accordance with the provisions of the Swiss Code of Obligations.

Depending on future legal judgements, especially with respect to the southern approaches at Zurich Airport, noise-related liabilities may in future be subject to substantial adjustments, which would also require adjustments to the noise-related costs recognised 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.

Revenue recognition

Revenue is recognised by Zurich Airport Ltd. when the service has been rendered, it is probable that economic benefits will flow to the company and those benefits can be measured reliably. In addition, the significant risks and rewards of ownership have to be transferred to the recipient of the service. Revenue from fixed-rent tenancy agreements is recognised on a straight-line basis over the term of the agreement. Conditional rental payments (including 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. If lessees are granted significant lease incentives (e.g. rent concessions), the equivalent value of the incentive is recognised on a straight-line basis over the original or remaining lease term.

Inventories

Inventories mainly comprise operating supplies and consumables necessary 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.

Financial assets of the Airport Zurich Noise Fund

The financial assets of the Airport Zurich Noise Fund comprise quoted securities held for the short or long term. They are initially recognised at cost (fair value plus directly attributable transaction costs). The securities are subsequently measured at amortised cost (bonds) or at fair value (other financial assets), with gains and losses recognised in profit or loss. A fluctuation reserve is not recognised.

Property, plant and equipment

Property, plant and equipment is stated at acquisition or production cost less accumulated depreciation and impairment. With the exception of land, which is not depreciated, items are depreciated over their estimated useful life using the straight-line method. If there are indications that they are impaired, the carrying amounts are reviewed and, if necessary, adjusted.

Leases

Leases are accounted for by applying the concept of control. In doing so, a lease contract is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the leased item to Zurich Airport Ltd. as lessee. All other leases are operating leases. At the commencement date of a finance lease, the value of the leased item is recognised as a right-of-use asset and as a lease liability in the same amount. The right-of-use asset is depreciated and the lease liability amortised over the lease term. In the case of an operating lease, the lease payments are recognised directly in profit or loss at maturity.

Intangible assets

Intangible assets are stated at cost less amortisation. They are amortised over their estimated useful life using the straight-line method. If there are indications that they are impaired, the carrying amounts are reviewed and, if necessary, adjusted.

Treasury shares

At the date of acquisition, treasury shares are recognised at cost as a deduction from equity. In the event of their sale at a later date, the gain or loss is credited or charged directly to voluntary retained earnings.

In the previous year, extraordinary expenses included an amount of CHF –24.6 million incurred in the course of the restructuring and recapitalisation of the subsidiary Zurich Airport International AG.

Investments comprised the following as at the reporting date:

The equity interests stated are also the share of the voting power in the investees listed.

Zurich Airport International AG, the wholly-owned subsidiary responsible for advising, operating and/or owning airports and airport-related companies throughout the world, holds all the investees existing in this context (with the exception of those in Venezuela).

In 2010, Zurich Airport Ltd. 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 and interest incurred up until receipt of payment. After an application for annulment was rejected, the tribunal’s decision is definitive and final. The value of this holding has been fully impaired.

Loans comprised the following as at the reporting date:

During the reporting period, further loans of CHF 55.0 million were extended to Zurich Airport International AG for the purposes of financing international airport operator projects.

In 2015, Zurich Airport Ltd. 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 Circle co-ownership structure between the two parties provided for in the financing agreements, in which Zurich Airport Ltd. has a 51% interest and Swiss Life AG a 49% interest. The joint real estate project was subsequently carried out and opened in November 2020.

The cost of the right-of-use assets recognised and the accumulated depreciation are shown below:

The corresponding lease liabilities have the following maturity structure:

At the reporting date, other current liabilities to employee pension funds comprised outstanding liabilities to the BVK Employee Pension Fund of the Canton of Zurich.

The CHF 400.0 million debenture reaching maturity was fully repaid in April of the reporting period. In addition, the CHF 300.0 million debenture maturing in May 2024 was reclassified out of non-current and into current financial liabilities.

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 289.8 million (previous year: CHF 288.8 million).

For information on the reporting of noise-related data in the financial statements in accordance with the Swiss Code of Obligations, see also Reporting of noise-related costs in the financial statements.

The share capital of Zurich Airport Ltd. amounting to CHF 307,018,750 is composed of 30,701,875 fully paid-up registered shares with a par value of CHF 10.

At the reporting date, the capital contribution reserves amounted to CHF 83.2 million (previous year: CHF 117.0 million).

In the reporting period, 12,387 registered shares were purchased at the market price (previous year: 5,690 registered shares). Treasury shares are distributed to members of the Management Board and members of the most senior management level under the bonus programme. They are used primarily for this participation programme. In addition, Zurich Airport Ltd. gives those employees who have completed their first year of service a one-off gift in the form of one share free of charge.

A number of legal proceedings and claims against Zurich Airport Ltd. 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 financial statements and cash flow of Zurich Airport Ltd.

Depending on future legal judgements, including with respect to the southern approaches at Zurich Airport, 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.

Zurich Airport Ltd. and Swiss Life AG are jointly and severally liable to third parties for the liabilities of the co-ownership structure the Circle and the ordinary partnership the Circle.

As part of its involvement in the expansion and operation of the airport in Belo Horizonte, Brazil, Zurich Airport Ltd. provides a guarantee as security for local debt financing in the amount of CHF 19.9 million (previous year: CHF 19.5 million). The guarantee provided as security for local debt financing as part of its involvement in the operation and expansion of the airport in Florianópolis, Brazil was terminated with effect from September 2023 (previous year: CHF 81.3 million).

No hidden reserves were reversed in the reporting period or in the previous year.

As part of the performance-related remuneration awarded to members of the Management Board and other members of management, 2,939 shares (previous year: 2,130 shares) worth CHF 501,687 (previous year: CHF 359,970) were distributed to members of the Management Board and 4,752 shares (previous year: 3,543 shares) worth CHF 811,166 (previous year: CHF 598,767) to other members of management in the reporting period.

In addition, Zurich Airport Ltd. 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, 154 shares (previous year: 54 shares) worth CHF 27,121 (previous year: CHF 8,645) were handed out in this context.

The Board of Directors authorised the 2023 financial statements in accordance with the provisions of the Swiss Code of Obligations (CO) for issue on 7 March 2024. These also have to be approved by the Annual General Meeting.