FLUG REVUE October 2006: MUC expansion will contiunue

October 2006

VIP INTERVIEW

DR. MICHAEL KERKLOH

Chief Executive Officer of Munich airport

With new runway and high-speed railway link, Munich airport intends to continue an above-average rate of growth.

FLUG REVUE: The recently thwarted terrorist attacks in the United Kingdom have led to even stricter security regulations. Is there now a need for changes to existing procedures at airports, for extra staff to be hired and new control systems to be procured?

Dr. Kerkloh: Even before the terrorist attack plans discovered in London, the security precautions in air transport had been steadily getting stricter over the last few years. For example, it was only at the beginning of this year that 100% physical checks on all employees were introduced at access points to sensitive areas. Another example is the new, tighter control of passenger movement in the gate areas. Organisational expenditure and the cost burden on air traffic are already very high. Thus, for example, around 3,000 of the 25,000 or so people who work at Munich airport are already working in the area of security. In the “Air Transport for Germany” initiative, we and our partners, Lufthansa, Fraport and DFS, are fighting for coordinated, practical and above all cross-border security concepts under the catchphrase of “One Stop Security“ so as to avoid encumbering air transport unnecessarily with a multitude of different regulations.

FLUG REVUE: Passenger traffic in Europe is expected to double by 2020. Will Munich benefit fully from this trend?

Dr. Kerkloh: In recent years the airport has been the top-10 European airport with the strongest growth. In view of the dynamic impact on traffic that the establishment of Lufthansa's second hub here is having and against the background of existing and planned capacities, we are assuming that Munich will continue to experience above-average traffic growth in the future as well. Current forecasts predict a passenger volume of 56 million for the year 2020.

FLUG REVUE: You recently applied for a regional impact assessment for the construction of a third runway. How much extra capacity do you expect this to bring? How long will the procedure for obtaining official approval take?

Dr. Kerkloh: In the regional impact assessment, we are applying for a third, independent runway that will raise the capacity of the runway system to at least 120 flight movements per hour. Flughafen München GmbH intends to apply for planning permission for the third runway in 2007. Present information suggests it should be feasible to commission the third runway in 2011.

FLUG REVUE: What plans do you have for expansion on the ground? When will there be a new terminal?

Dr. Kerkloh: This year Munich airport will break through the 30 million passenger threshold for the first time. The present capacity of Terminals 1 and 2 is about 50 million passengers. As the traffic in Terminal 2 is growing disproportionately, we are currently considering relocating certain air traffic segments to Terminal 1 and also the need for an additional satellite building to the east of Terminal 2.

FLUG REVUE: What is Munich's long-term maximum annual passenger capacity?

Munich airport has the strategic advantage that even in the long-term there is sufficient space available for expanding its capacity. On the other hand, we do not feel it is very sensible to speculate on a final expansion capacity at the present time. But you can rest assured that Munich can definitely keep up with the big European airports.

FLUG REVUE: How do you rate the prospects of a high-speed Transrapid link to the airport? Would it have any significant benefits for the airport?

Dr. Kerkloh: As the operator of the second largest German and the seventh largest European airport, we are energetically committed to implementing the high-speed link between the airport and Munich's main railway station. This connection would overnight transform a competitive disadvantage of Munich airport, the lack of a long-distance main-line rail connection, into a competitive advantage. Munich airport could then be reached in ten minutes from Munich's main station, the second biggest German rail traffic hub, every ten minutes there would be a connecting service to the entire rail network of Deutsche Bahn. Clearly this long-distance main-line rail connection to the airport will be extremely important, but the signalling effect in terms of industrial policy that such a project would have for Germany as a business location cannot be estimated too highly.

FLUG REVUE: Munich's growth is primarily due to its role as a hub airport. Are you actually interested in the no-frills airlines and does your cost structure allow you to make suitable proposals to this clientele?

Dr. Kerkloh: With regard to our strategic orientation, we definitely view Munich airport as a hub airport with a dense network structure and a large number of intercontinental connections. Independently of this, however, the low-fares area is developing extremely positively due to the strong market position of Munich as a business location. Munich is also very popular as an incoming destination. Moreover, we are perfectly able to adapt to the business models of the low-fares sector through tailored offerings. Thus, the proportion of low-cost traffic in Munich is already up to 15 percent.

FLUG REVUE: Lufthansa especially has heavily expanded its route network from Munich. Are there any promising gaps?

Dr. Kerkloh: Today we have very good destination coverage, especially in the North American and Asian markets. But there is definitely scope for greater coverage in South America or in the connections to Africa.

FLUG REVUE: The airlines are passing the cost pressure on to the airports. What rationalisation measures have been and will be taken in MUC, especially as regards ground services?

Dr. Kerkloh: Under our “M Power” strategy and results improvement project, we have put a lot of effort over the last two years into improving the competitiveness of ground handling at Munich. Against the background of increasing competition and the immense cost pressure in the airline industry, there are no alternatives to still more efficient structures and procedures. Here in Munich we are making good progress with our staff representatives and we intend to reorganise the ground handling services, which are important to the quality of our hub, and to keep them within the company.

FLUG REVUE: How do you plan to increase your non-aviation revenue and where do you see the limits of what is feasible in this area?

Dr. Kerkloh: The non-aviation area is becoming more and more important for the refinancing of airport infrastructure. We are fully aware of this and we have drastically expanded our offerings in this area over the last few years. Terminal 2, which was opened in 2003, was designed right from the start to optimally map on to this business segment. Our customers are responding positively to these offerings, not least on account of the exceptional stopover quality and attractions of Munich airport: it has already twice been selected as the best airport in Europe in a study carried out by an independent London Institute, Skytrax. The benchmark must always be the needs and wishes of our customers. We intend to offer what our passengers and cargo operators require.

FLUG REVUE: Would privatisation be of interest to Munich airport?

Dr. Kerkloh: Privatisation of Munich airport is not a topic of discussion at the moment, and ultimately it is up to our shareholders to decide. In the medium- and long-term such an option cannot be ruled out. At any rate we are doing our best to ensure that our company has a lean and strong organisation and efficient, cost-optimised processes so that we do not have to worry about such developments.

Karl Schwarz was asking the questions.

From page 21 of FLUG REVUE 10/2006

Last updated 15 September 2006

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