31 Political Newsletter Summer 2016

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1 31 Political Newsletter Summer 2016 Editorial Dear Reader, On the basis of six test cases concerning properties directly overflown by aircraft approaching Zurich Airport from the south, the Swiss Federal Supreme Court ruled on 18 March 2016 that also in the case of this southern approach route, noise compensation must be awarded if the property was acquired prior to 1 January The Federal Supreme Court thus confirmed a ruling of the Federal Administrative Court in 2014 that noise is deemed to have been foreseeable from 1 January 1961 onwards. Flughafen Zürich AG welcomes this decision as it helps establish legal and planning certainty, and it also means there is a uniform ruling for all geographic directions. Irrespective of the Supreme Court s ruling, however, Flughafen Zürich AG takes the issue of protecting local residents from the harmful effects of aviation noise very seriously and it is putting passive sound insulation measures in place in areas where noise limit values are exceeded. See the following pages for a detailed overview of current and future measures. Contents Editorial Overview of sound insulation measures undertaken by Flughafen Zürich AG Swiss aviation policy report 2016 prompt implementation essential Guest column: Thomas Klühr, CEO Swiss International Air Lines New section: airport-related terms Flughafen Zürich AG also successful abroad Airport glossary: Swiss aviation policy report Traffic statistics It is important for me to mention another milestone that helped create legal and planning certainty and provide investment security. Last year Flughafen Zürich AG agreed a reduction in airport charges with the airlines. Passengers and airlines will benefit from a decrease in airport charges amounting to approximately 40 million Swiss francs a year. Following a final legal ruling by FOCA, the lower charges are set to be introduced in the 3rd quarter of Our most important partner company the airline SWISS and all other airlines serving Zurich Airport stand to benefit directly from this reduction in charges. This will increase the competitiveness of the airport system as a whole. However, it is estimated that Zurich Airport will reach the limits of its capacity for aviation traffic in ten to 15 years time. Through airport-related activities and selective investment abroad, it will nevertheless be possible for Flughafen Zürich AG to create further added value. The successful construction and operation of Bengaluru Airport in India confirms that we are on the right track with our international strategy. Following the expiry of our operating contract, we decided to sell our remaining 5% stake in Bengaluru airport. In a new Airport glossary section, we will briefly and concisely explain an airport-related term in each issue of the Political Newsletter from now on. We will begin with a key foundation stone of Switzerland s aviation sector: the Swiss aviation policy report. See page 8 for more about this strategic document. Thank you for your interest in Zurich Airport and I wish you a stimulating read! Daniel Schmucki Chief Financial Officer

2 Installation of sound-insulating windows in a property exposed to noise above the limit values. Overview of sound insulation measures undertaken by Flughafen Zürich AG Air traffic creates noise. To shield local residents from aviation noise that exceeds the stipulated limits, as is permitted by the federal government, and prevent residents from being woken by air traffic, Flughafen Zürich AG is obliged to implement passive sound insulation measures. These measures are implemented in the current Programme 2010, the ongoing South-side sound insulation concept and in future in the 2015 sound insulation programme. Flughafen Zürich AG is investing a total of 340 million francs from the Airport of Zurich Noise Fund in sound insulation measures. Flughafen Zürich AG is licensed by the Swiss Confederation to operate Zurich Airport. As the holder of the airport s operating licence and as the operator of a fixed infrastructure of national importance, the federal government permits Flughafen Zürich AG under article 25 of the Environmental Protection Act to exceed the noise limits in certain areas. In return, it is obliged to take passive sound insulation measures to protect residents in affected areas from the harmful effects of noise. 207 million francs since 1999 The airport operator has been fulfilling this obligation for many years already. It has been implementing its Programme 2010 since 1999, based on its obligation to implement sound insulation measures wherever they are undisputed. Beginning with the municipalities next to the airport, to date the airport operator has invested some 207 million francs in passive sound insulation measures in areas where noise limits are exceeded. Depending on whether these limits are exceeded during the day or at night, these measures consist of installing sound-insulating windows or sound-absorbing ventilators, or reimbursing owners for improvements they have already made themselves sound insulation programme as future framework With the operating regulations proposed in the autumn of 2014 (BR2014), Flughafen Zürich AG applied for modifications to certain flight paths. This will also result in changes to the sector affected by exposure to noise above the limits and consequently to the area where remedial measures are required. Based on the planned BR2014 and on a decision by Federal Office of Civil Aviation (FOCA) relating to the noise levels permitted under the provisional operating regulations, the airport operator submitted a comprehensive sound insulation programme. This 2015 sound insulation programme builds on the previous work, but also includes additional measures and, following approval by FOCA and any legal proceedings, is intended to seamlessly continue on from the work carried out to date under Programme

3 Areas where remediation work has already been undertaken will also be able to benefit from certain additional measures. The aim is to implement and complete the outstanding remediation work and reimbursements amounting to a total of 133 million francs within ten years of the programme commencing. South-side sound insulation concept as additional protection In addition, with its ruling on the provisional operating regulations, the Federal Supreme Court obliged Flughafen Zürich AG to prevent residents to the south of the airport from being awoken by aircraft approaching from the south in the early morning. The South-side sound insulation concept submitted by Flughafen Zürich AG in 2011 has been legally in force since November 2015 and implementation is underway. This concept provides for installing sound- absorbing ventilators or automatic window- closing mechanisms in the bedrooms of houses and flats situated within a defined perimeter in the sector most affected by flights from the south in the mornings. Financing on basis of originator pays principle Flughafen Zürich AG is investing a total of 340 million francs in protecting local residents from excessive aircraft noise. For this purpose, Flughafen Zürich AG created the Airport of Zurich Noise Fund which is financed entirely by specific noise charges. As a consequence, it can be said that aviation is the only mode of transport where noise abatement measures required as a result of noise emissions are entirely financed by users. Sound insulation measures of Flughafen Zürich AG Programme Measures No. of homes affected Costs (in CHF) Programme 2010 (since 1999) Sound-insulating windows Sound-absorbing ventilators Window-closing mechanisms 1 Approx. 25,000 Approx. 340 m 2015 sound insulation programme (submitted 2015) Sound-insulating windows Sound-absorbing ventilators Contributions to roof renovation Window-closing mechanisms 1 South-side sound insulation concept (since 2015) Window-closing mechanisms Sound-absorbing ventilators Approx If limit values are exceeded during the night 3

4 Swiss aviation policy report 2016 prompt implementation essential Flughafen Zürich AG acknowledges the accurate description and analysis of the challenges facing Swiss aviation that the Federal Council has set out in its report on Switzerland s aviation policy. However, if these challenges are to be mastered, the Confederation must do more. The next step is for the federal government to pave the way in legislation and in the Sectoral Aviation Infrastructure Plan (SAIP) to enable our national airports to continue operating successfully as Switzerland s gateways to the world. Following extensive stakeholder involvement last year, the Federal Council published its new aviation policy report on 24 February 2016 and sent it to the parliamentary committees for deliberation. Accurate analysis challenges correctly identified Flughafen Zürich AG acknowledges that the Federal Council has accurately analysed aviation policy and clearly stated the greatest challenges facing Swiss aviation. In particular, Flughafen Zürich AG endorses the finding that the national airports, and specifically the Zurich intercontinental hub, constitute fundamental elements of Switzerland s basic infrastructure and form an important part of its overall transport system. We also welcome the consequent findings that the immediate capacity bottlenecks at the two national airports in Geneva and Zurich will require resolving primarily with technical and operational optimisation measures, and that over the long term demand-led capacity growth through infrastructure measures must remain possible as well. to the length of time required for such processes, these stipulations must anticipate developments for at least the next fifteen years and make provision for their spatial planning. Only then will it be possible to create the urgently required room for manoeuvre for demand-led growth of aviation in the long term, and only then will the national airports be able to continue fulfilling their function as Switzerland s gateways to the world in future in the interests of the country s economy and its entire population. The 2016 Swiss aviation policy report is published on the website of the Federal Office of Civil Aviation: Freedom to grow and develop by implementing solutions outlined In order to address these identified problems and challenges facing Switzerland s national airports, however, the federal government must also quickly accept the improvements proposed in the aviation policy report to the legislation and in the Sectoral Aviation Infrastructure Plan (SAIP) and its associated detailed plans for each airport. One important goal is to eliminate the capacity bottlenecks at the national airports in Geneva and Zurich. Binding capacity stipulations in the form of performance targets in line with demand forecasts, and flight paths that permit a moderate expansion of peak capacity while maintaining safety levels should be specified in the detailed SAIP plans. Owing 4

5 Guest column New aircraft less noise? replaced most of its current aircraft in the Airbus A320 family used for short-haul flights with A320neo jets. In other words, in future SWISS will have a state-of-the-art short-haul fleet in terms of both technology and environmental performance. SWISS cannot survive on this alone, however. The money for investment has to be earned. Further restrictions to operating conditions or inappropriate noise control charges are inimical as they would jeopardise the medium- and long-term economic viability of SWISS. Thomas Klühr There can hardly be any airport where there is not a sometimes highly emotional debate about aircraft noise between the operator and residents near airports. It is undisputed that aviation noise can conflict with certain residents need for rest. Calls for new, less noisy aircraft are then regularly voiced and at the same time for penalising the existing fleet with noise charges if possible. At first glance this seems to be a simple equation: new aircraft = less noise. The noise footprint in Zurich has been cut by two-thirds over the past 25 years, mainly as a result of major advances in aircraft engine technology. At second glance and this is often ignored the improvements are down to massive investment by the airlines. SWISS alone is investing some 5 billion francs in renewing its fleet in From 2016 it is replacing some of its A340 fleet with Boeing 777s. Bombardier CSeries jets will begin to be introduced into the fleet from the summer. Set to replace the AVRO as well as older Airbuses, this entirely new design of aircraft sets new standards as far as environmental performance is concerned: 25% less CO2 emissions and a halving of noise levels compared with the current short-haul fleet will lighten the burden on the region around the airport. And that s not all: by 2019 SWISS will have As a result, SWISS favours the balanced approach taken by the ICAO for the longterm resolution of conflicts over noise. This imposes obligations on all parties. Airlines are required to reduce the noise produced by their aircraft primarily by investing in advanced technology while airports are obliged to employ noise-optimised procedures, and in spatial planning residential areas should be sited outside noise exposure zones wherever possible. However, it is precisely this latter requirement that has been ignored the regions around airports are the fastest growing development zones. People still want to live close to a well-connected infrastructure. As a consequence, the population growth around airports is higher than average. The willingness to also accept the downsides, however, is waning. And so we come full circle. If policy-makers do not take the necessary steps in spatial planning far enough ahead, it is usually restrictions to air traffic that are pushed through as solutions. These restrictions then make it impossible for the airlines to do their bit to mitigate the problem in the long term. Namely by investing in new and noise-optimised aircraft. Thomas Klühr CEO Swiss International Air Lines 5

6 New section: Airport-related terms explained an airport glossary As key infrastructure of national importance, Zurich Airport is regulated by numerous laws and decrees of the Confederation as well as due to its local impact those of its home canton of Zurich. Articles in our Political Newsletters regularly make reference to these rules and regulations. In our new section Airport-related terms explained an airport glossary, we will explain one of the terms used in this complex field of airport regulation in each of the upcoming issues of the Political Newsletter. We kick off on page 8 of this issue with the Federal Council s aviation policy report, the strategic foundation for Switzerland s aviation sector. The graphic below shows the most important regulations of relevance to Zurich Airport and how they interrelate. Most important regulations relevant to Zurich Airport Swiss Confederation Federal Council Swiss Aviation Policy Report (LUPO) Sectoral Aviation Infrastructure Plan (SAIP) Parliament Federal Aviation Act (FAA) Environmental Protection Act (EPA) DETEC 1 /FOCA 2 Approval of: Operating regulations Planning approval incl. runway modifications Canton of Zurich Government Council Operating regulations (noise-related) Runway modifications Cantonal Parliament Cantonal Development Plan Runway modifications Electorate of the Canton of Zurich Zurich Cantonal Airport Act Runway modifications Flughafen Zürich AG Board of Directors with state representative Operating regulations (noise-related) Planning approval (noise-related) incl. runway modifications Management Board Operating regulations (not noise-related) Planning approval (not noise-relatet) 1 Federal Department of the Environment, Transport, Energy and Communications 2 Federal Office of Civil Aviation 6

7 Flughafen Zürich AG also successful abroad Without a fundamental shift in the aviation policy framework, it is estimated that Zurich Airport will reach the limits of its capacity for aviation traffic in ten to 15 years time. With a view to the long term, therefore, Flughafen Zürich AG is generating additional added value through airport-related activities abroad. Zurich Airport regularly receives awards for the outstanding quality of its infrastructure and services. With its extensive expertise among other things in optimising operational processes, master planning and construction management and massive investment, Flughafen Zürich AG has made Zurich Airport the most important aviation infrastructure in Switzerland, and continues to develop it further. This created added value for the Swiss economy. However, it is estimated that Zurich Airport will reach the limits of its capacity for aviation traffic in ten to 15 years time. In the long term, growth and further added value can be generated from complementary real estate projects such as The Circle and the expansion of airportrelated and selective investments abroad. Belo Horizonte airport, Brazil Photo: BH Airport Successful construction and operation of Bengaluru Airport For many years Flughafen Zürich AG has been involved in projects in newly industrialised countries in Latin America and Asia in which there is a great need for development and a high demand for aviation infrastructure services. The first step was taken in 2001 when it was awarded the contract to build and operate a new inter national airport in Bengaluru, the third most populous city in India. Under the leadership of Flughafen Zürich AG, the airport was completed after a 35-month construction period, and within eight years of commencing operation it had established itself as the third-largest hub in India handling some 19 million passengers a year. Moreover, in 2015 Bengaluru airport received the prestigious Skytrax Award for Best Regional Airport in Central Asia. When it sold off 12% of the airport operating company in 2009, Flughafen Zürich AG made a profit of 95 million francs. On expiry of its operating contract in May 2015, the role of Flughafen Zürich AG was reduced to that of a minority shareholder, which led to the decision to sell off its remaining 5% stake in Bengaluru Airport s operating company. In April 2016 Flughafen Zürich AG signed an agreement to this effect which set the purchase price at USD 48.9 million. Subject to the customary contract conclusion conditions, the sale is expected to be completed in the third quarter of years of experience in India shows that, with the expertise of an internationally respected airport operator and the transfer of Swiss values, it is possible to generate significant added value for the local airport infrastructure and Flughafen Zürich AG. Given this positive experience, many years of operating in the market, and close cooperation with the Indian aviation authorities, Flughafen Zürich AG will carefully consider any further opportunities that may arise in the Indian market. Promising airport activities in Latin America Flughafen Zürich AG is involved in the operation of four airports in Latin America, and since 2014 also in the airport in Belo Horizonte which serves the third- largest metropolitan area in Brazil. Flughafen Zürich AG has a 12.75% stake in the airport s operating company and is driving forward improvements to the infrastructure there. In cooperation with the Brazilian CCR Group and the state-owned Infraero, Flughafen Zürich AG is responsible for the construction and operation of a new terminal as well as for extensive renovation of the existing terminal in order to meet the highest international quality standards in future. Building a second runway is also planned for Flughafen Zürich AG has also been involved in the operation of the airport in the Columbian capital Bogotá for the past ten years. Its activities abroad are always focused on responsibility for airport operations and close cooperation with strong local partners. To expand the portfolio, selective airport projects are also undertaken in developed countries with stable revenues. Flughafen Zürich AG is confident that passing on its extensive know-how in the operation and management of airports can create added value for the regions in which the airports are located as well as for Flughafen Zürich AG and its home canton of Zurich. 7

8 Airport-related terms explained an airport glossary Swiss aviation policy report In the Swiss aviation policy report, the Federal Council analyses the current situation of the civil aviation sector in Switzerland and sets out how it intends to strengthen aviation for the benefit of the public and the economy as a key pillar of its transport policy, taking economic, environmental and social factors into consideration. It serves as a strategic guideline for government agencies, policy-makers and the public. In the report the Federal Council analyses the environment and the development of Swiss civil aviation, sets out the general framework and principles of Swiss aviation policy and describes the various elements of the Swiss aviation system. The report s conclusions lay down guidelines for the Confederation s aviation policy for the next ten years. The report is implemented through incorporating its recommendations into legislation and into the Sectoral Aviation Infrastructure Plan (SAIP) and its associated SAIP drafts for each airport. The report calls for creating the conditions that will enable Switzerland s good international transport links to be maintained, ensure a high level of safety and safeguard the competitiveness of Swiss aviation. With reference to Zurich Airport, the report states that the Zurich hub is of vital importance to Switzerland. The capacity bottlenecks already experienced during peak periods should be eliminated. The federal government also speaks in favour of competitive operating hours at national airports and that consideration should be given to payment of national security costs out of the public purse. Traffic statistics Traffic volumes January to March Change in % 2016 compared with 2015 Local passengers 4,019,495 3,732, Transfer passengers 1,603,812 1,656, Share of transfers 28.5% 30.7% Total passengers 1 5,630,525 5,408, Flight movements 60,631 59, Freight (in tonnes) 100, , Mail (in tonnes) 7,693 7, incl. transit, general aviation and other Source: Flughafen Zürich AG The most recent traffic statistics are updated every month and can be found in the Internet under Publication details Texts prepared by Flughafen Zürich AG Printing: Flughafen Zürich AG P.O. Box, CH-8058 Zurich-Airport politikbrief@zurich-airport.com 8