Germany's Fraport says higher costs to dent 2023 earnings

Frankfurt Airport operator Fraport on Tuesday forecast 2023 earnings below market expectations, sending its shares down by as much as 7%, as higher operational costs erode gains from increased traffic. Air traffic at airports across Germany has been disrupted by ongoing strikes over pay and conditions, after the rapid recovery in tourism in 2022 led to staff shortages and soaring inflation prompted employees to demand higher wages. CE Stefan Schulte said expected wage increases were a major factor in rising costs, meaning that the outcome of ongoing negotiations would impact whether Fraport’s ground handling business could break even next year as hoped. The operator of Germany’s largest airport sees annual earnings before interest, taxation, depreciation and amortisation (EBITDA) of E1.04b to 1.20b in 2023. The outlook mid-point of E1.12b was below an analysts’ estimate of E1.17b in Refinitiv data. Jefferies analyst Graham Hunt said the guidance reflected cost inflation that was expected to offset faster traffic recovery this year. He said staff costs were the main reason for what he called a cautious outlook. Fraport expects 2023 passenger traffic to be between 80% and 90% of the pre-pandemic level of 2019. The group in January said passenger travel at its airports nearly doubled last year, driven by the relaxation of travel restrictions after pandemic-related lockdowns, but was still around 30% below the 2019 level. In response to the rebound in traffic, it has expanded its operational workforce at Frankfurt Airport and plans to hire some 1,500 staff members this year, it said.<br/>