Germany's Fraport says higher costs to dent 2023 earnings

By Anna Mackenzie and Bartosz Dabrowski

FRANKFURT (Reuters) -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.

Chief Executive 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 1.04 billion to 1.20 billion euros ($1.11 billion to 1.29 billion) in 2023. The outlook mid-point of 1.12 billion euros was below an analysts' estimate of 1.17 billion euros 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.

But the company is also struggling to fill open positions, with Schulte saying that a planned government reform of immigration law did not go far enough to bring in foreign workers over the the long term.

Fraport's 2022 EBITDA rose by 36% to 1.03 billion euros from a year earlier and was around 13% below the 2019 figure of 1.18 billion euros.

Fraport, which last paid a dividend for fiscal 2018, said it would also not propose a dividend for 2022, citing the continued economic impact of the pandemic.

Its shares were down 1.7% at 1214 GMT, at the bottom of Germany's mid-cap index.

($1 = 0.9338 euros)

(Reporting by Anna Mackenzie and Bartosz Dąbrowski in Gdansk, Ilona Wissenbach and Rachel More in Berlin; Editing by Milla Nissi and Barbara Lewis)