Flughafen Zurich AG: A Scarce And Durable Real Asset In The Heart Of Switzerland

Mar. 04, 2020 8:15 PM ETFlughafen Zürich AG (FLGZY), UZAPF11 Comments
Oyat profile picture


  • Flughafen Zurich AG represents a real physical asset that is both scarce and extremely durable.
  • The company essentially enjoys a local monopoly status, and barriers to entry are close to insurmountable.
  • Having said that, there are a number of risks and uncertainties related to regulation, as well as the potential impact of the Coronavirus.
  • For long-term investors, the current share price is already quite fair.
  • More opportunistic investors may want to wait and continue to assess the impact of the Coronavirus before buying a participation in the company.

Source: All data is sourced from Refinitiv, unless stated otherwise.

Company background & description

Since 2000, Flughafen Zürich AG (OTCPK:FLGZY, OTCPK:UZAPF) ("FZAG") has operated Zürich Airport - Switzerland's largest airport - as a publicly listed company on behalf of the Swiss Confederation. FZAG is the owner and operator of the airport, with a license to operate it until 2051.

In 2018, the airport handled over 31 million passengers and 493k tons of cargo, servicing 206 European and intercontinental destinations in 68 countries. In addition to aviation services, Zurich Airport provides commercial, real estate, and other services closely related to its aviation services. Last, FZAG also manages eight airports in Latin America - mainly in Brazil, Chile, and Colombia. The company has also developed projects in Asia, including India.

In fiscal 2018, FZAG generated total sales of CHF 1’153 million, EBITDA of CHF 571 million, and net income of CHF 238 million.

The chart and graphs below display a breakdown of the company’s sales by segment and activities:

(Source: Annual report 2018)

(Source: S&P Global Rating)

The aviation segment generated sales of CHF 657 million in 2018, or 57% of group total.

This represents the regulated part of FZAG’s business. Pursuant to the Federal Aviation Act (FAA), a concession is required for the operation of any airport open to public aviation in Switzerland. The Federal Office of Civil Aviation (FOCA) provides regulatory oversight and ensures that the income resulting from the aviation charges does not exceed the certified costs plus a reasonable return on invested capital. The FOCA is responsible for the determination and collection of charges via the Ordinance on Airport Charges. The last Ordinance came into force in June 2012, and a process to selectively revise the Ordinance was announced by the FOCA in the summer of 2018. The revision process

This article was written by

Oyat profile picture
Oyat (www.oyat.com) is a Swiss-based family office focused on managing our own capital, as well as helping other families and individuals meet their financial goals.Our principal goal is the long-term preservation and appreciation of capital in real terms. We are active across asset classes, including private and public equities, fixed income securities, real estate, precious metals, as well as alternative investments. Our background and specialization is in global equities. Our investment process focuses on owning competitively-advantaged companies at reasonable prices.We also like to engage with the Seeking Alpha community to hear other viewpoints and share our opinions.

Disclosure: I am/we are long FZAG ON THE SWISS STOCK EXCHANGE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The information enclosed in this article is deemed to be accurate and reliable, but is not guaranteed to or by the author. This article reflects Oyat's views and does not constitute investment advice.

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