Wilhelm Bender, Fraport AG
Release Date: 2009-07-24
If you had to summarize your 17 years as Chairman and CEO of Fraport in three themes what would they be?The highlights would include the IPO June 2001 that took three to four years of preparation. We underwent the IPO because we needed a capital increase to finance the expansion program of Frankfurt Airport, which was the second highlight. The discussion to expand started in 1997 due to the capacity constraints we have experienced for fifteen to twenty years now. Today, our capacity is now 83 slots per hour while demand has been more than 100 for years. The same discussion is going on in London, where Heathrow Airport is finding it very difficult to gain the political support for the third runway and the acceptance of the residents for the expansion of the airport. Fortunately, we have been rather successful in gaining the administrative approval of the authorities in the State of Hessen, and we are now waiting for the final ruling in the court cases that will come in August. The third point would be that we have changed the business model of Fraport, especially our focus on real estate and retail revenues makes this company totally different from 1993 when I started.
Today, Frankfurt Airport serves as an example to other airports around the world. Did you use another airport as a model when you took up the position of Chairman and CEO here in 1993?
I do not think that we used another airport as a model, but we were inspired by elements from other airports. In 1994, we inaugurated Terminal 2, which was planned by my predecessors. It had less retail space than our competitors due to a restriction in local law, which barred us from developing more than 20,000 m². Since then we have lobbied successfully. The legal restriction has been removed, which was crucial in our vision for the development of the airport company. The other important element was being a public utility. Fraport was an AG (public limited company) that was owned solely by public shareholders. We changed this in order to be more profit and service oriented. Also, Fraport has also become globally oriented. Previously, our international activities were limited to unprofitable consulting activities in the early 1990s. We then started investing in smaller German airports and today we are running 11 airports globally, including Chinese airports, and recently became the preferred bidder for St. Petersburg Airport, which means that this contract will be negotiated exclusively with our consortium.
Your annual report indicates that retail has become a significant source of revenue for Fraport. Can we say that Frankfurt Airport is gradually becoming a business park and shopping centre where you can fly?
No, in the end we will always be an airport. Our shopping areas are predominantly in the transit area, which is also where we are developing the additional space and where profitability is much higher than in a normal shopping centre. Therefore, our retail space requires the passenger flow. If you look at the P&L side of the business then approx. 60% of our operational profit derives from retail and properties business, and I am sure that this part will go up. In a sense this joke that we are becoming a shopping mall with additional runways is correct, but ultimately it will remain a joke because you need the passengers to support it.
Another priority has been the development of a greener airport. Terminal 3 is labelled as an eco-terminal; what is the business reason behind going green for Fraport?
Everybody has a responsibility for the reduction of climate change and the ecological situation of the world, not only individuals but companies as well. For example, for Terminal 3 we explored the possibilities of geothermal power generation together with RWE, which is possible due to the formation of the earth below the airport. This means that we could produce the electricity needed for the airport from the natural heat of the earth. This shows that you can combine your economic objectives and ecological possibility. In addition to the eco-terminal we are redeveloping the climate infrastructure at Terminal 1 to make it more energy efficient, and the same goes for other buildings around the airport in order to achieve the same goal. Additionally, we have a detailed business plan to reduce C02 emissions by 30% per traffic unit by 2020, and I am sure that we will achieve this target.
Do you believe there is a correlation between the more ecological atmosphere of the airport and the travelling experience of your passengers?
In the end, I think everybody who is travelling will see that the provider of the facility is doing his best to reduce emissions. People need their mobility and regulations and taxes to reduce mobility will have an unknown impact on the economy, so customers expect us to make investments in CO2 reduction and environmental protection. Therefore, we just hired a gentleman from the Federal Ministry of the Environment, whose task is to fine-tune our strategic framework concerning sustainability.
There always is a role to be played by the Chairman; what has been your contribution to the internal debate here and create awareness?
You have to send a clear message to the employees that ecological investments are not only good for the environment but for profitability as well. For example, I drive a fuel cell car.
Fraport owns airports, but also operates under Build-Operate-Transfer (BOT) agreements and management contracts. What is the contribution that Fraport makes to the airport it is involved in, and why do they decide to partner with you?
In the end we operate through different models but we play an important role in each airport we are involved in, we export our expertise.
Typically we give them a COO, a deputy CFO and through the executive board we enable these airports to increase the qualities of their services, execute expansion programs, and to meet and exceed international standards. There is also a steady stream of people coming from airports around the world where Fraport is operating to our training centre here in Frankfurt to get on hands experience with our experts and learn more about our “Made in Frankfurt” and “Made in Germany” expertise.
You are said to be the Marco Polo of Fraport; when did you first travel to China and what was your first impression?
I went to Hong Kong for the first time in 1978 when you only had the opportunity to go to the new territories, not the mainland China. My first trip to mainland China was in 1984 with the German Minister of Transport as part of an official delegation that visited Beijing, Shanghai and Hong Kong. Starting from this year I visited China every year as CEO of Schenker & Co GmbH, Europe’s biggest freight forwarding company, which had a branch in Hong Kong which later expanded into mainland China in cooperation with Sinotrans. The first time I went to China for Fraport was in 1994, but our business activities started only five years ago when we established contact with our colleagues at the airports, the Civil Aviation Authority in Beijing, and the Minister and showed them the Fraport business model and what we could do in China. This has resulted in very good relations over the years, and we are now the only international airport operator with business activities in China.
I understood the mentality of the Chinese market beforehand so it was not really a surprise. You need to act in acceptance of the Chinese mentality and support the bureaucracy of China’s political structure. As a foreign investor in a Chinese airport you need the approval of the local municipality, the province, the Civil Aviation Authority, MOFCOM as well as many other people. You have to accept and support this process, and we did that with the support of the German embassy, the German Minister of Transportation, Chancellor Merkel as well as Jürgen Heraeus and Jürgen Hambrecht who are very well known in China and helped us to create a network.
Do you think that the success could be linked to similarities between Frankfurt and Xi’an? They are both centrally located smaller cities, Frankfurt to Berlin and Munich, Xi’an to Beijing and Shanghai. Is there possibly a link between the mutual situations?
First of all, smaller cities are relative in China, and I think the airport structure is not comparable as Xi’an Airport has less international traffic. A 30% increase in traffic in the first half of 2009 makes Xi’an the fastest growing large airport in the world. The main source of this growth, however, is domestic traffic while Frankfurt’s is largely focussed on international traffic. Xi’an is also the centre for the space and aviation industry in China, so it is both a business and a tourist destination. I think we can support Xi’an Airport a lot in current expansion activities.They are building a new runway and terminal and we have great experience in these fields. Our colleagues in Xi’an accepted that we know a lot of the international aspect of the business, and appreciated that we came as a self-confident partner.
The achieved 30% growth in the first half of 2009 is exceptional; is Fraport a miracle maker or very good at picking an airport with high potential?
Of course we do support the airport, but the reason for this growth is the expansion of the middle class in China which now has the income to travel to the other side of China via plane where, as in the past, they would have taken the train. I think that managing growth of more than 30% a year is very difficult when you consider the staff training, facility management and expansion projects: this is where Fraport can help.
Is such a growth rate sustainable?
Yes, I think so. China’s GDP is forecasted to reach 7% this year and will remain strong in the years to come, so it is a normal development that people fly more. We have seen that in every country people want to have an apartment, a car and the opportunity to travel once they have money. Also, our strategy is to link Xi’an Airport internationally. Xi’an is a major tourist destination and can be developed into a domestic, regional and international hub that offers tourists the opportunity to start their Chinese itinerary in Xi’an rather than Beijing or Shanghai, which would reduce travelling time from Europe to China.
During your last trip you signed a cooperation agreement with Dalian Airport; what is the big picture strategy for Fraport in China and the role of new airports you aspire to cooperate with?
We are interested in participating in the development of the Chinese aviation market. That is the reason why we acquired a stake in Xi’an Airport and why we will continue in Dalian and perhaps Qingdao, Kunming and others airports in the future. In the end, business opportunities in China are far greater than those in developed markets such as Germany and other Western European companies. Also, we paid €45 million for a 24.5% stake in Xi’an while the tender process for Prague Airport, which is a comparable airport in terms of figures, is expected to generate €4 billion for 100% of the company. When you consider the growth potential of these locations and compare the differences in these prices then there is a very big gap.
Can we already call Fraport a truly global company or is there still some work to be done before you can claim this status?
I think it is already one if you consider the projects in the different parts of the world. Of course, based on passenger figures we are number two or three in the world, but that is not what is important. You must have a strong brand. You cannot develop a brand without market attachment, and for market attachment you need projects. Fraport is a strong brand; It stands for our excellent reputation as airport managers, and everybody in the world knows our “home base” Frankfurt Airport.
After spending so many years in China, working closely with your Chinese partners, to build Fraport’s success in this high growth market, I would like to give you the opportunity to send a final message to your friends and partners in China.
I remember that when I first visited Shanghai and looked towards Pudong from the Bund there was only forest; now you see only skyscrapers which are a symbol for the development. We can really learn from the Chinese people and the impressive growth and development in the past 25 years. It is unbelievable how the growth in the aviation industry has been managed over the past ten years. When I flew into Beijing for the first time in 1984 there was little more than a building that could only be called a terminal with a little imagination. That year Beijing Airport had under a million passengers. Today, Beijing has surpassed Frankfurt in terms of passengers with some 55 million last year with a brand new terminal and a fluid process. Fraport is proud to participate in the remarkable development of the Chinese aviation industry.
| Company: | Fraport AG |
| Position: | CEO |
| Country: | Germany |