DFS continues on path to success

Klaus-Dieter Scheurle, the Chairman and CEO of DFS Deutsche Flugsicherung, gives a positive report on the year 2016

25.04.2017.- DFS, the German air navigation service provider, had a positive year in 2016 both economically and operationally, despite the difficult environment it faced. Overall, the business year 2016 ended well. Operationally, DFS maintained the high level of performance for both en-route and terminal services in the areas of safety, efficiency and punctuality. The number of aircraft movements in German airspace again exceeded the three-million mark. In 2016, the number of IFR flights rose by 2.6 percent year-on-year to 3.109 million. The DFS Group, with its approximately 5,500 staff, generated revenues of EUR 1.219 billion under IFRS in 2016 (previous year: EUR 1.264 billion). Net income at DFS amounted to EUR 86.6 million (previous year: EUR 123.6 million). The slight decline in revenues and profit primarily reflects the significant reduction in en-route and terminal charges required by regulation at the beginning of 2016.

"DFS can look back on a successful year. We have been confronted with the challenge of maintaining service quality even as costs decline. The year 2016 demonstrated that we can master this challenge successfully. As regards the future, DFS expects to exceed the traffic high reached in 2008 – more than 3.15 million flights – in 2017. We forecast revenues of around EUR 1.16 billion for 2017," said Klaus-Dieter Scheurle, Chairman and CEO of DFS.

DFS delivers first-rate performance for safety and punctuality
The safety level in German airspace remained as high as ever, even as the volume of traffic continued to increase. DFS once again fulfilled its duty to ensure the safety of aircraft in the air and on the ground and to handle air traffic in a safe, orderly and expeditious manner while avoiding unnecessary aircraft noise. In 2016, 97.5 percent of all flights reached their destination without any delays caused by air traffic control. In absolute figures, this means that the average delay per flight due to bad weather, capacity bottlenecks at airports or high traffic volume was 33 seconds in German airspace. Only about 14 seconds of the total delay were caused by air traffic control. Direct routings played a major role in this. In this regard, DFS controllers were again exemplary: The route flown in German airspace was, on average, only 3.7 km (previous year: 3.8 km) longer than the direct route. This is a deviation of only 1.12 percent.

Traffic growth remains positive
The number of IFR flights in German airspace rose by 2.6 percent to a total of 3,108,761, again exceeding the three-million mark. The number of overflights above Germany grew at an above-average rate in 2016. These flights now account for 38 percent (2015: 37.5 percent) of all flights. 25.8 percent of IFR flights were either entries to or exits from German airspace. Only 10.5 percent of flights were purely domestic. The record number of 3.15 million flights set in 2008 was narrowly missed in 2016. However, based on the traffic volume in the first three months of the year, this record will probably be broken this year. In the first quarter of 2017, the number of flight movements grew by 2.6 percent over the prior-year period to 685,905. DFS forecasts 3.22 million controlled flights in German airspace for the whole year.

For the business year 2017, DFS expects a difficult market despite the general upward trend in air transport. DFS considers that it will be almost impossible to raise the revenues from the regulated core business. DFS launched an ambitious cost-cutting programme to reach its cost targets. Under this programme, DFS aims to reduce its annual operating costs by around 10 percent by 2019 as compared with 2012. The programme also involves cuts in personnel, which will be achieved through natural staff turnover. Since 2012, the number of staff has declined from 6,103 to 5,444 (as at 31 March 2017), leading to a decline in staff costs in the financial statements. Personnel expenses are the largest cost item at DFS, amounting to EUR 838.5 million (previous year: EUR 850.6 million).

DFS Group – a second strategic pillar
The commercial business promises the potential for growth and is to be expanded to form the second strategic pillar of the company. DFS laid the foundations for the growth of the commercial business in 2016. The wholly owned subsidiary DFS Aviation Services will be the competitive platform on which this growth is based. DFS Aviation Services markets and sells products and services related to air navigation services. The commercial business had been handled either by DFS itself or its subsidiary, The Tower Company, which has now been renamed DFS Aviation Services. DFS decided to bundle all commercial activities into one entity. In 2016, total revenues from the DFS commercial business amounted to around EUR 50 million. In the medium term, these revenues should increase to EUR 100 million. DFS Aviation Services currently has 110 employees and plans to raise that number to 130 by the end of the year. The company's headquarters are located in Langen, near Frankfurt. DFS has established representative offices in Singapore and Beijing to make itself better known on the Asian market.

DFS calls for drone registration
In the opinion of the DFS CEO, the developments in the field of drone technology are to be seen both as a challenge and an opportunity with respect to safety and market potential. In Germany, approximately 400,000 drones were in operation in 2016 according to estimates. The rise in unmanned aircraft systems (UAS, or drones) is leading to more and more conflicts in airspace. In 2016, DFS registered 64 cases in which drones impeded air traffic. This is almost five times more than in 2015. Most of these were recorded at Frankfurt Airport. Eight cases were already reported in the first quarter of 2017. DFS expects the number of drones sold to rise even more in 2017. This year will see 600,000 new drones in the skies above Germany (plus/minus 50,000) according to estimates. "We welcome the fact that the Federal Government has put in place the statutory instrument to regulate unmanned aircraft systems. Given the enormous growth in drone use, it is essential that this positive first step is followed up with a system of mandatory registration as the second step. It's the only way to ensure the safe and fair integration of drones into German airspace," said Scheurle.

DFS Deutsche Flugsicherung GmbH
, the German air navigation service provider, is a State-owned company under private law with 5,550 employees as at 31 December 2016. DFS ensures the safe and punctual flow of air traffic over Germany. Around 2,000 air traffic controllers guide up to 10,000 flights in German airspace every day, about three million movements every year. This makes Germany the country with the highest traffic volume in Europe. The company operates control centres in Langen, Bremen, Karlsruhe and Munich as well as control towers at 16 international airports in Germany. The subsidiary, DFS Aviation Services GmbH, markets and sells products and services related to air navigation services as well as providing air traffic control at eight regional airports in Germany and at London Gatwick Airport in the UK.