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Fraports offshore expansion continues, but core profit remains flat in 2007

Fraport has announced that it intends to acquire further shareholdings in airports in China and it is also reportedly considering investment opportunities in Europe and India. Fraport took a stake of 25.4% in Xi’an Airport in 2007 and has signed a letter of intent for a second airport participation in China, with a third in preparation. Fraport has previously expressed an interest in Ningbo Lishe Airport in Zhejiang and Guangzhou Baiyun International Airport.

In India, Fraport is a 10% shareholder in the Delhi Airport International Ltd company (DIAL) since 2005 together with the leading Indian infrastructure company, GMR, which itself has reportedly expressed an interest in the forthcoming privatisation of Prague Airport, a likely target of Fraport.

Fraport’s other interests currently are at Hahn in Germany, Varna and Bourgas in Bulgaria, Antalya in Turkey, Cairo (a management contract without investment) and Lima, Peru.

Traffic grew at all airports in 2007, except Varna (-2.6%), with Lima and Antalya recording growth of 24.3% and 12.7%, respectively. Overall, Fraport’s investments have been beneficial, with the exception of the ultimately abortive one in a third terminal at Ninoy Aquino Airport in Manila that caused a write down of EUR350 million and a protracted wrangle over the diversion of traffic away from its terminal at Antalya that has been resolved.

Fraport is clearly heading, confidently, into new foreign investment territory. At the same time, it is seeing a surge in traffic at Frankfurt itself, by 3.7% and 4% in Jan-08 and Feb-08, with aircraft movements unchanged. This has convinced Fraport’s management that considerably more growth would be possible if Frankfurt had sufficient capacity available to meet the demand, even though the annual growth total for 2008 is expected to be more like 1-2%.

The EBITDA and net profit (affected by undisclosed ‘special effects’) results for 2007 were disappointing, but Fraport insists earnings will increase in 2008 as it takes measures to improve passenger growth at the Frankfurt hub. The 54 million passengers recorded in 2007 was, in any event, a record and, as observed earlier, 2008 got off to a strong start.