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					Annual Report
2006
Over the years, Munich Airport has matured
into a major international aviation hub.
Today, it offers flights that span the globe,
crossing borders, uniting continents and
bringing together people of every nation.

It has also come to stand for growth –
growth that focuses, above all, on future
generations.

What symbol could better reflect this spirit
of globalism and the promise of tomorrow
than the children of the world, pictured
throughout this report?
                                 Introduction

                                  Foreword        3
                                 Highlights       4
                       Executive board and
                 heads of business divisions      9


                        The airport in figures

                              Traffic figures    10
                            Business figures     12


                   FMG Group structure and
                     business development

                            Group structure      13
                 Aviation/non-aviation sales     13

                           Aviation business
                                     Aviation    16
                            Ground Handling      20

                     Non-aviation business
          Corporate Real Estate Management
                           and Development       26
                          Retail and Services    28

                              Terminal 2         30
                              Personnel          32
                        Expansion plans          36
 Communications and community relations          40
         Aviation and climate protection         44
                     Safety and security         46

                              Financials and
                 business performance 2006

   The FMG Group’s business performance          50

    Consolidated financial statements 2006
                    Supervisory board’s report   53
             Consolidated management report      54
                  Consolidated balance sheet     62
              Consolidated income statement      64
            Consolidated cash flow statement     65
               Changes in consolidated equity    66
Annex to the consolidated financial statements   67
                 Independent auditor’s report    77
                        Additional information   78
2
Foreword
Looking back at 2006, two major events immedi-        The most challenging task our company faces
ately stand out that will doubtless be remem-         right now from a business perspective is to suc-
bered for a long time at Munich Airport. The          cessfully restructure our Ground Handling divi-
World Cup and Pope Benedict XVI’s visit both put      sion. We mapped out a strategy last fiscal year –
the airport front and center, attracting enormous     one that calls for exceptional dedication and flex-
attention, not just here in Germany but all over      ibility from our employees – and we hope that
the world. And on both occasions, the airport         this will ready our ground services for the rigors
showed itself from its very best side.                and challenges of an increasingly competitive
                                                      business.
We also enjoyed excellent approval ratings from
passengers. For the second year running, Mu-          At the end of the day, though, the key to safe-
nich Airport was not just picked as Europe’s best     guarding jobs at Munich Airport in the longer
airport in the world’s largest airline passenger      term is, of course, sustained traffic growth. En-
survey, we also succeeded in moving up a place        suring that aviation in Munich can continue to
in the global rankings to the number three slot.      grow rapidly means taking timely steps to create
                                                      the right conditions. The most important expan-
A new record high in passenger traffic also un-       sion project in this context at present is the addi-
derscores just how highly appreciated Munich          tion of a third runway, as this will boost our ca-
Airport has become inside and outside Germany.        pacity from 90 scheduled takeoffs and landings
Growing 7.5 percent year on year, the number of       an hour at present to at least 120.
passenger movements hit 30.8 million, bypass-
ing the 30 million mark for the first time in the     Following a detailed survey and review of more
airport’s history. No other airport in Germany        than 30 potential sites, we chose a runway loca-
saw passenger numbers increase on anything            tion that seems to offer the best possible solu-
like the same scale, and this exceptional growth      tion when it comes to avoiding negative impacts
helped propel Munich Airport into seventh place       on local communities. We submitted this location
in the rankings of Europe’s foremost aviation         for review in a regional planning process last
hubs.                                                 summer, and our choice was later ratified and
                                                      approved by the regional government of Upper
The cargo boom, too, continued unabated in fis-       Bavaria in February 2007. This means that our
cal 2006. As in prior years, growth remained          project is on schedule, and we still aim to begin
firmly in double digits. The key factor behind this   operating the new runway in 2011.
outstanding performance has been our drive to
expand long-haul services from Munich.                In summary, Flughafen München GmbH can look
                                                      back on an outstanding and highly rewarding
Flughafen München GmbH’s business perfor-             2006. Munich Airport succeeded in further
mance, too, has been more than commendable.           strengthening rather merely maintaining its posi-
The entire Group – FMG and its subsidiaries – re-     tion as a leading European center of aviation,
ported aggregate sales in excess of €900 million,     and, once again, we have come a good deal clos-
around 9 percent more than in the previous fis-       er to achieving our goal of becoming Europe’s
cal. And our after-tax profit in 2006 was well into   most attractive and efficient hub airport by 2010.
positive territory, up more than €50 million on
2005.
                                                      Dr. Michael Kerkloh
                                                      President and CEO,
                                                      Flughafen München GmbH




                                                                                                        3
Highlights
January 1, 2006                                      times a week. New additions to the timetable in-
New EU guidelines requiring additional physical      clude two weekly flights by Air Transat to Vancou-
screening to be carried out on employees at road     ver, a destination also served by LTU. Etihad Air-
access points to ramp areas and on vehicles at       ways flies to Abu Dhabi, five times a week
gates to the security area come into force – for     initially, then daily from July. In total, airlines had
the most part, without any problem. The new se-      coordinated more than 257,000 takeoffs and
curity checks affect around 20,000 employees         landings for the period through to October 28,
from numerous different companies at Munich          2006 – 3 percent more than for the same period a
Airport.                                             year earlier.

February 25, 2006                                    March 29, 2006
Following almost four months of remodeling           FMG unveils details of a candidate site for a third
work, the information center at the Visitors’ Park   runway to the Communities Council, the stake-
reopens to the public. It features a 700-square-     holder body formed in the summer of 2005 to
meter exhibition with theme zones, electronic in-    observe the runway planning process. The site,
formation kiosks, and a 15-square-meter model        chosen to minimize impact on local communities
with information on how the airport operates.        and the environment, is 1,180 meters from the
There are also special kiosks designed for junior    north runway (center to center) and offset by
visitors that offer a more accessible description    2,100 meters. Other potential sites were rejected
of airport operations for children. Admission to     on the grounds of conflicting space requirements
the exhibition and aviation films in the new         or their inability to provide the requisite capacity.
movie theater is free.
                                                     April 19, 2006
March 26, 2006                                       Flughafen München GmbH (FMG) opens a liai-
The launch of the new summer timetable sees          son office in Brussels to forge closer ties with
further expansion of long-haul services from Mu-     key European Union agencies responsible for
nich. Deutsche Lufthansa widens its offering of      aviation in Europe. The Brussels office enables
services to China with daily flights to Hong Kong    FMG to inform and advise officials and decision-
and Beijing. Star Alliance member Thai Airways       makers more effectively on aviation issues.
International continues operating five flights a
week to Bangkok. Air China, too, begins flying
from Munich to Beijing – daily from August 1.
Brazilian carrier Varig flies to Sao Paulo three




4
May 26, 2006                                          June 2006
FMG receives a silver award from Bavaria’s Min-       A comparative review in the business magazine
istry of the Environment, Public Health and Con-      Capital picks Munich as Germany’s best airport.
sumer Protection for its comprehensive work-          The magazine had commissioned Treugast, a
place health management program. FMG                  firm of management consultants specializing in
operates a raft of occupational health and safety     the travel and leisure industry, to assess the
schemes, illness and injury prevention initiatives,   quality of service and the passenger experience
company-organized physical exercise programs,         at German airports.
and management-led health promotion cam-
paigns. The company also runs awareness cam-          July 15, 2006
paigns to promote healthy eating and provides         FMG announces the formation of an impact
professional counseling on the management of          fund to compensate local individuals and com-
addictions, stress and social problems.               munities sustaining hardships as a result of the
                                                      construction of the airport’s third runway. The
June 2006                                             fund is an entirely voluntary measure over and
Munich Airport is chosen as Europe’s best airport     above any statutory, judicial or otherwise offi-
again in the World Airport Awards 2006 competi-       cial compensation obligations to be met by the
tion. In the world rankings, Munich moves up          airport.
one place to third, behind Singapore Changi Air-
port and Hong Kong International Airport. The         July 19, 2006
award is based on a survey conducted by avia-         Flughafen München GmbH launches a new and
tion researchers Skytrax among 7.2 million trav-      innovative technology project: Through to the
elers from 93 countries to rate passenger-friendli-   end of 2007, the company will switch 500 of its
ness, service offerings, and hub quality.             1,400 ramp vehicles over to running on rape-
                                                      seed fuel instead of diesel. The capital expendi-
                                                      ture on converting the engines will pay for itself
                                                      in two years, as rapeseed oil costs a good third
                                                      less than diesel. The switch to the alternative fu-
                                                      el will benefit local farmers and rapeseed oil
                                                      producers in the airport’s region.




                                                                                                        5
July 27, 2006                                          October 29, 2006
Munich’s IT service management unit becomes            The start of the winter season: Airlines had coor-
the first at any airport to receive ISO 20000 certi-   dinated more than 161,000 takeoffs and landings
fication. FMG is the first airport operator in the     at Munich Airport – around 10 percent more than
world to be awarded the illustrious quality mark.      for the 2005/2006 winter timetable. Condor be-
IT services ensure the rapid and reliable delivery     gins operating a service to Zanzibar via Mombas-
of data essential to controlling the complex han-      sa; Air Mauritius reintroduces its service from
dling processes at an international airport.           Munich to Mauritius from early December; and
                                                       LTU adds a second weekly frequency to Cape
August 25, 2006                                        Town. Egypt Air operates four flights a week on
The government of Upper Bavaria’s embarks on           its Cairo route, and Hapagfly begins offering a
the regional planning process for the third run-       new service from Munich, via Fuerteventura, to
way at Munich Airport as requested by Flughafen        the Cape Verde island of Sal. The are also new
München GmbH on July 31, 2006.                         services to destinations in Asia in the winter,
                                                       with Deutsche Lufthansa flying daily to Tokyo and
September 5, 2006                                      Dubai, and Star Alliance member Thai Airways In-
Dr. Michael Kerkloh, Flughafen München GmbH’s          ternational serving Bangkok from the beginning
President and Chief Executive Officer, is honored      of December. Qatar Airways offers a daily flight
as “Airport Manager of the Year” at a ceremony         from Munich to Doha, and LTU flies three times a
in Frankfurt following a survey commissioned by        week to Bangkok and twice weekly to Phuket.
Touristik Report, a respected travel and tourism
industry journal. The jury panel consisted of avia-    November 6, 2006
tion journalists, management consultants, airline      New EU security regulations come into force at
managers and the nominated airport executives          Europe’s airports, prohibiting travelers from car-
themselves.                                            rying fluids in hand luggage. For the most part,
                                                       the new rules are adopted smoothly at Munich
                                                       Airport, because the majority of passengers are
                                                       well-informed and prepared for more stringent
                                                       security screening.




6
November 16, 2006                                    December 15, 2006
FMG presents the results of its most recent work-    Flughafen München GmbH’s supervisory board
place survey. Based on data collected on June        extends Dr. Michael Kerkloh’s contract as Presi-
30, 2006, the results show that the airport is       dent and Chief Executive Officer for a further five
Bavaria’s second-largest place of employment,        years. The contract had been due to expire in the
with a total of 27,400 people working in 554 or-     summer of 2007. At the supervisory board meet-
ganizations and government agencies on cam-          ing, chairman Dr. Kurt Faltlhauser, Bavaria’s fi-
pus – over 4,000 or around 18 percent more than      nance minister, praised the accomplishments of
recorded in the previous survey at the end of        the 53-year-old airport CEO, who has headed per-
2003. The FMG Group is still the biggest employ-     sonnel and industrial relations as well as the air-
er at the airport. The number of people employed     port operating company since September 2002.
by Flughafen München GmbH and its sub-
sidiaries had risen by 2 percent to 7,415. A total   December 22, 2006
of 624 junior staff – 23 percent more than in 2003   Munich Airport records more than 30 million pas-
– were training for 24 occupations at Munich Air-    senger movements in a single year for the first
port. The survey shows that the FMG Group is al-     time. The 30-millionth passenger arrives to an of-
so the airport’s biggest provider of apprentice-     ficial welcome, complete with fanfare and gifts.
ship and trainee programs, with 234 young
people under contract.

November 28, 2006
Munich Airport opens a childcare center, the first
at any airport in Germany. The center, set up by
Flughafen München GmbH, can take up to 36
employee children a day and provides a day
nursery and kindergarten care, as well as after-
school homework support. It is open between
6:00am and 9:00pm on 348 days a year, includ-
ing weekends and school vacations.




                                                                                                     7
8
Executive board                              Heads of
                                             business divisions
Dr. Michael Kerkloh                          Rainer Beeck
President and Chief Executive Officer        Senior Vice President Corporate Real Estate
Personnel Industrial Relations Director      Management and Developement
Walter Vill                                  Wolfgang Hammerstädt
Vice President and Chief Financial Officer   Senior Vice President Ground Handling
Peter Trautmann                              Andreas von Puttkamer
Chief Operating Officer                      Senior Vice President Aviation
                                             Dr. Karl Heinz Schwarzmeier
                                             Senior Vice President Terminal 2
                                             Walter Vill
                                             FMG executive board member
                                             Senior Vice President Retail and Services
                                             (for the interim)




                                                                                           9
Traffic figures




Air traffic

                                                                                           2006                                                      2005                                              2006 / 2005


 Passenger movements (total)                                                          30,778,352                                        28,639,104                                                       +         7.5 %

 – Commercial traffic                                                                 30,757,978                                        28,619,427                                                       +         7.5 %

 – Scheduled and charter traffic                                                      30,727,363                                        28,591,429                                                       +         7.5 %

 Aircraft movements (total)                                                              411,335                                                   398,838                                               +         3.1 %

 – Commercial traffic                                                                   399,460                                                    386,841                                               +         3.3 %

 – Scheduled and charter traffic                                                        386,128                                                    374,626                                               +         3.1 %

 Air freight handled (total, t)                                                         404,409                                                    356,844                                               + 13.3 %

 – Carried by air (t)                                                                   224,409                                                    202,844                                               + 10.6 %

 – Carried by truck (t)                                                                 180,000                                                154,000                                                   + 16.9 %

 Air mail handled (t)                                                                    13,667                                                     15,205                                               - 10.1 %

 Maximum takeoff mass (MTOM)
 in commercial and
 non-commercial traffic (t)                                                           12,049,518                                        11,319,219                                                       +         6.5 %




Ten-year overview

Passengers (in + out + transit)                                                                    Aircraft movements
commercial traffic (million)                                                                       commercial traffic* (thousand)
31                                                                                                 40 0
                                                                                                                                                                                                         399,460
                                                                              30.76




30                                                                                                 390
                                                                                                                                                                                             386,841




29                                                                                                 380
                                                                      28.62




28                                                                                                 370
                                                                                                                                                                                   370,534




27                                                                                                 360
                                                              26.81




26                                                                                                 350
                                                                                                                                                                         343,027




25                                                                                                 340
                                                      24.19




                                                                                                                                                               330,888




24                                                                                                 330
                                      23.65




                                                                                                                                                     321,756
                                              23.16
                              23.13




23                                                                                                 320
22                                                                                                 310
                      21.28




                                                                                                                                         302,412




21                                                                                                 30 0
20                                                                                                 290
              19.32




19                                                                                                 280
                                                                                                                              280,067




18                                                                                                 270
      17.89




                                                                                                                    262,446




17                                                                                                 260
                                                                                                          253,109




16                                                                                                 250
15                                                                                                 240
14                                                                                                 230
13                                                                                                 220
      97 98 99 0 0 01 02 03                                   04      05      06                          97 98 99 0 0 01 02 03 04 05 06
                                                                                                                        * excluding ferry flights




10
Munich in comparison

Traffic figures for German airports in 2006 (commercial sector)

                                      Passengers             Aircraft               Air freight (t)         Air mail (t)
                                      (in + out + transit)   movements
 Frankfurt                             52,810,683               482,399              2,031,311                 96,485

 Munich                                 30,757,978              399,460                224,409                 13,667

 Berlin (total)                        18,506,506               224,039                  17,791                 9,895

 Düsseldorf                            16,590,055               206,893                 59,327                    106

 Hamburg                                11,954,117              145,572                 31,571                  6,048

 Stuttgart                              10,104,958              144,759                 19,456                  9,782

 Cologne/Bonn                            9,904,236              139,096                685,563                  5,548

 Hanover                                 5,699,299               76,255                   5,068                10,589

 Nuremberg                               3,961,458               61,972                  12,101                      0

 Hahn                                    3,704,633               37,006                112,291                       0

 Leipzig/Halle                           2,339,989               33,610                 26,519                       0

 Dortmund                                2,019,651               32,785                      37                      0

 Dresden                                 1,836,068               29,394                     573                      0

 Bremen                                  1,697,883               31,837                   1,006                     14

 Münster/Osnabrück                       1,551,173               31,745                     141                      0

 Saarbrücken                               420,221               10,980                       7                      0

 Erfurt                                    356,378                8,268                   4,816                      0

 Total                                174,215,286             2,096,070              3,231,987                152,134

Source: German Airports Association (ADV)




Passenger figures for Europe’s top ten airports in 2006 (commercial sector)
                                         Ranking             Passengers (million)            2006 / 2005

 London Heathrow                               1                    67.5                          - 0.6 %

 Paris Charles de Gaulle                       2                    56.8                          + 5.6 %

 Frankfurt/Main                                3                    52.8                          + 1.1 %

 Amsterdam                                     4                    46.1                          + 4.4 %

 Madrid                                        5                    45.5                          + 8.1 %

 London Gatwick                                6                    34.2                          + 4.2 %

 Munich                                        7                    30.8                          + 7.5 %

 Rome Fiumicino                                8                    30.1                          + 5.2 %

 Barcelona                                     9                    30.0                       + 10.5 %

 Paris Orly                                 10                      25.6                          + 3.1 %
Source: Airports Council International (ACI)
Status: March 2007




                                                                                                                           11
Business figures
FMG Group
Financials                                                                                                              Ten-year overview

Group sales and                                                2006              2005         2006 / 2005               Group external sales (€ million)
earnings (€ million)
 Group sales                                                   920.1            844.3          +   9.0 %                950
                                                                                                                        925




                                                                                                                                                                                                         920.1
 EBITDA *)                                                     324.8            257.6          + 26.1 %
                                                                                                                        90 0
 EBIT *)                                                       169.1            104.9          +   61.2 %               875
                                                                                                                        850




                                                                                                                                                                                                 844.3
 Group net income                                               61.5                    3.6   + > 100.0 %
                                                                                                                        825
                                                                                                                        80 0




                                                                                                                                                                                       788.0
Profitability indicators                                                                                                775
                                                                                                                        750
 EBITDA margin (%)                                              35.3               30.5        + 15.7 %
                                                                                                                        725




                                                                                                                                                                               714.1
 EBIT margin (%)                                                18.4               12.4        + 47.9 %                 70 0




                                                                                                                                                               679.7
 ROCE (%)                                                        5.2                    3.1    + 67.7 %                 675




                                                                                                                                                                       672.7
                                                                                                                        650




                                                                                                                                                       646.7
 *) EBITDA excludes building leasing expense of €51 million in 2006                                                     625
 (2005: €48 million), EBIT excludes leasing interest.
                                                                                                                        60 0


                                                                                                                                               601.4
 Figures for 2006 include an extraordinary gain of €27 million from the
                                                                                                                        575
 reversal of accruals.
                                                                                                                                       555.8
                                                                                                                        550
                                                                                                                               532.9




                                                                                                                        525
                                                                                                                        50 0
Personnel                                                      2006              2005         2006 / 2005                      97 98 99 0 0 01 02 03                                   04 05 06


 Personnel costs
 (€ million)                                                   294.3            285.8          +   3.0 %

 Employees
 (average for year)                                            7,186            6,775          +   6.1 %




Flughafen München GmbH (FMG)
Ten-year overview

Net sales (€ million)                                                                               Net sales (€ million)                                2006             2005 2006 / 2005

70 0
                                                                                698.1




                                                                                                      Flughafen München GmbH
675                                                                                                   sales                                            698.1            656.2              +     6.4 %
                                                                        656.2




650
                                                                628.4




625
60 0
                                                       593.3




575
                                       557.5

                                               555.5




550
                               529.8




525
                                                                                                    Personnel                                            2006            2005          2006 / 2005
50 0
                       494.0




475
                                                                                                      Personnel costs
               455.6




450                                                                                                   (€ million)                                      226.4           226.0                   + 0.2 %
       442.9




425
40 0                                                                                                  Employees
                                                                                                      (average for year)                               4,739           4,827                   - 1.8 %
375
350                                                                                                   Employees
325                                                                                                   (at Dec. 31, 2006)                               4,747           4,789                   - 0.9 %
30 0
275                                                                                                   Average employee
                                                                                                      capacity                                         4,179           4,278                   - 2.3 %
250
       97 98 99 0 0 01 02 03                                    04 05 06




12
Group structure

                                                       Finance and Controlling
                                                         Human Resources
    Central divisions                              Corporate Communications
                                                     Legal Affairs and Security
                                           Corporate Development and Environment


                                      Corporate Real
    Business divisions   Aviation     Estate Manage-         Retail and            Ground                Terminal 2
                                         ment and             Services             Handling
                                       Development


                                                   Engineering and Facilities
                                                       Information Technology
    Support divisions
                                                         Corporate Services
                                                              Security



Flughafen München GmbH’s group structure or-             business divisions with professional expertise
ganizes company functions into strategic busi-           and specialized services. The central divisions are
ness divisions, support divisions, and overarch-         responsible for the overall control of the FMG
ing central divisions.                                   Group of companies.

Whereas the business divisions operate inde-
pendently within their markets, the support divi-
sions primarily operate internally and provide the




Aviation/non-aviation sales

                             2006       2005                                               2006


 Aviation sales              53 %       53 %

 Non-aviation sales          47 %       47 %




                                                                          Aviation sales    Non-aviation sales


The balance between aviation and non-aviation            business remains the dominant source of rev-
net sales essentially remained unchanged be-             enue across the FMG Group.
tween 2005 and 2006. Non-aviation business
grew marginally faster than aviation business
compared to a year earlier. However, aviation




                                                                                                                      13
14
Aviation business




                15
Aviation
New record highs at Munich Airport
With a record-breaking 30.8 million passenger
movements – around 7.5 percent or 2 million more
than a year earlier – Munich Airport continued its
rapid ascent in 2006, reporting what was easily
the greatest absolute increase in passenger num-
bers among commercial airports in Germany.




16
Thanks to its exceptional traffic growth, Munich      Italy remains the frontrunner in the continental
also succeeded in moving up a place in the rank-      sector
ings of Europe’s ten busiest passenger airports,      Continental traffic – flights to and from other Eu-
past Rome, to fill the number seven slot. At the      ropean countries and North African and Asian
same time, the FMG Group came a major step            states on the Mediterranean – also swelled in
closer to achieving its strategic goal of develop-    2006. Although the number of takeoffs and land-
ing Munich Airport into the most attractive and       ings was just 3.6 percent higher, passenger num-
efficient hub airport in Europe by the year 2010.     bers were up 9.9 percent. Traffic to and from
                                                      eastern Europe in particular expanded rapidly,
The airport also handled a record number of           showing an exceptional plus of almost 17 per-
takeoffs and landings. With almost 400,000 com-       cent.
mercial aircraft movements, the volume of flights
was up more than 3 percent in comparison with         Three-quarters of continental traffic – 13.3 million
a year earlier.                                       passengers in total and 10.7 percent more than
                                                      in 2005 – was recorded on services to and from
More transfer passengers                              destinations in the European Union. With a vol-
One key indicator for Munich’s burgeoning popu-       ume of more than 2.5 million passengers,
larity as a hub airport is the number of transfer     around 450,000 or 20 percent more movements
passengers, which in 2006 rose by 7.2 percent or      than a year earlier, routes to Italy were the
700,000 to exceed 10 million for the first time.      busiest in this category.
Proportionally, though, the number of transfers
remained unchanged year on year at 34 percent         The three top-ranked airports based on passen-
of total passenger movements. Originating traffic     ger traffic remained unchanged in 2006, with
in 2006 was up by 7.8 percent or 1.4 million pas-     London Heathrow in the number one slot with
sengers compared to 2005.                             more than 1.02 million passengers, Paris Charles
                                                      de Gaulle (around 719,000) and Palma de Mallor-
Intercontinental traffic surges                       ca (more than 568,000). Fourth-ranked was Rome
Munich Airport offers air travelers from inside its   Fiumicino (around 512,500), up from eighth place
own catchment area and transfer passengers a          a year earlier.
rich and attractive network of routes to destina-
tions all over the world, and in 2006, the number     Low-fare traffic expands
of long-haul flights increased by around 13 per-      Growth in the low-cost segment was strong, with
cent. With 3.8 million passengers – 9.0 percent       passenger numbers up by roughly 1 million to
more than a year earlier – growth on interconti-      4.6 million in total compared to 2005. Low fare
nental routes was outstanding.                        traffic now accounts for almost 15 percent of our
                                                      passenger traffic as a whole.
With these figures, the passenger volume on
long-haul routes has increased more than three-       Domestic traffic shows solid growth
fold during the last ten years, and we expect to      Although the number of takeoffs and landings on
see rapid growth continue in the short term as        domestic routes remained essentially flat year on
we add popular destinations to the network of         year at roughly 119,000, we registered 9.3 million
routes we serve. In 2006, we recorded the high-       passenger movements on services within Ger-
est numbers of passengers in the long-haul sec-       many, a slight but nonetheless better-than-aver-
tor on services to and from Dubai, Chicago,           age increase of 3.1 percent.
Washington and Bangkok.




                                                                                                       17
Services to and from Hamburg (with 1.6 million        port’s timetable and destinations and to help air-
passengers), Berlin Tegel, and Frankfurt carried      lines market their routes. Carriers benefiting
the greatest numbers of domestic air travelers.       from our marketing support included Air Mauri-
                                                      tius, Air Transat, Condor and CSA Czech Airlines.
More than 84,000 passengers a day                     We also launched an e-mail newsletter in early
Our statistics for 2006 show a number of all-time     2006, which we now send out five times a year to
highs. On July 5, we recorded the largest num-        some 4,000 recipients in the travel and tourism
ber of aircraft movements in a day in the com-        industry.
mercial sector – 1,311 takeoffs and landings (in
2005, the record was 1,257). The busiest day in       Trade shows, training programs and a new film
terms of passenger traffic was September 29,          By exhibiting at trade shows and holding work-
with 112,314 movements (2005: 112,355). Per day,      shops and other events, we helped to foster and
the airport handled 84,268 passenger move-            strengthen ties with the international travel in-
ments (2005: 78,409) and 1,094 takeoffs and land-     dustry. In 2006, these efforts centered on Sao
ings (2005: 1,060) on average.                        Paulo and other locations in South America, as
                                                      well as places in eastern Europe. In response to
In 2006, 108 airlines operated services from Mu-      the steadily increasing number of passengers on
nich on a regular basis to a total of 246 destina-    services to and from Ukraine, Munich Airport ex-
tions (22 domestic and 224 international) in 71       hibited for the first time at the Ukraine Interna-
countries.                                            tional Tourism and Travel Exhibition (UITT) in
                                                      Kiev. We also organized Bavarian evenings in
Sharp increase in landing-fee revenue                 Tyumen and Voronezh to promote new routes
Revenue from aircraft landing and parking fees        between Munich and Russia.
was substantially higher in 2006 than a year ear-
lier, rising 11.7 percent to €275 million. The rise   Munich Airport’s service facilities and infrastruc-
was driven by price adjustments in October 2005       ture and their unique selling propositions (easy
and October 2006, a 7.5 percent increase in the       transfers, for instance), were the focus of
number of passengers, and 3.3 percent more            Lufthansa call-center training programs conduct-
commercial aircraft movements. To mitigate the        ed in Berlin, Brno, Istanbul, Dublin, Peterborough
costs of wider personnel security checks, security    (Canada), Melbourne and Shanghai.
charges were also raised in February 2006.
                                                      FMG’s own film team produced a video on DVD
Revenue from the variable portion of landing          to Marketing’s specifications titled “30 Minutes
fees grew faster than revenue from weight-de-         Minimum Connecting Time at Munich Airport”,
pendent landing fees, rising 25.5 percent in 2006.    designed specifically for use at trainings like
This was due to an ongoing shift in the fee struc-    these as well as at workshops and similar events.
ture, away from fixed landing charges in favor of     Informal and entertaining, the film shows how
variable landing charges. Revenue generated by        quickly and easily passengers can transfer be-
central infrastructure in Terminal 1 – the baggage    tween flights at in Munich.
transportation system, for example – was mar-
ginally lower year on year, largely because of a      Award for the best marketing
slight drop in the number of movements. Rev-          At the international airports and airlines confer-
enue from central infrastructure in Terminal 2 is     ence Routes 2006, held in Dubai, Flughafen
booked to FMG subsidiary Terminal 2 Betriebsge-       München GmbH won the highly coveted Airport
sellschaft, the terminal building’s operating com-    Marketing Award for the eighth time in nine
pany, and is not reported in Flughafen München        years. In spite of a strong field, Munich’s market-
GmbH’s own yearend accounts.                          ing was picked as the best among airports with
                                                      more than 25 million passengers, tying for the
Marketing: Support for airlines                       top award with Amsterdam. Airports were rated
FMG’s marketing efforts in 2006 again included        on the quality of their marketing performance,
road shows, sales blitzes, and sales call initia-     including presentation, initiatives to acquire new
tives designed to keep domestic and foreign tour      business, and customer focus, care and support.
operators informed about changes in the air-




18
FMG’s marketing work was also honored with           In 2006, FMG also won new contracts to manage
the PATA Gold Award 2006 at the Pacific Asia         the commissioning of passenger terminals at
Travel Association (PATA) conference for the ex-     Barcelona, Alicante and Malaga airports and to
ceptional support given to airlines. The PATA pro-   help BAA, the UK’s airports authority, prepare a
motes tourism in the Asia-Pacific region and rep-    relocation strategy for London Heathrow’s new
resents businesses in the travel and tourism         Terminal 5. We have also been hired to plan Hy-
industry.                                            derabad’s new airport in the Indian state of
                                                     Andhra Pradesh.
Consulting services from FMG
Building on the enormous expertise acquired          MediCare: In the service of health
during the process of relocating and opening         FMG subsidiary MediCare Flughafen München
Munich Airport in 1992, Flughafen München            Medizinisches Zentrum GmbH is part of our Avia-
GmbH developed a strategy known as ORAT (Op-         tion business unit. MediCare operates Munich
erational Readiness and Airport Transfer), which     Airport’s medical center and AirportClinic M. Be-
today has acquired a firm place in major airport     sides delivering occupational healthcare services
infrastructure projects.                             and providing emergency care to airport employ-
                                                     ees, passengers and visitors, the company also
ORAT, designed to ensure that passenger termi-       serves as a contact and intermediation point for
nals and entire airports open smoothly and effi-     foreign patients at the airport. AirportClinic M
ciently, has helped Flughafen München GmbH to        provides outpatient and inpatient treatment to
achieve international market leadership in a         patients from Germany and abroad. Since June
highly specialized area of consulting.               1, 2006, the facility has been open to all health
                                                     insurance carriers’ patients rather just the pri-
In 2006, we again completed a number of impor-       vately insured. With its various businesses,
tant consulting assignments for clients. One ma-     MediCare covers a comprehensive range of med-
jor project, commissioned by Thai airport opera-     ical needs for airport personnel, passengers and
tor AOT, was to assist with the opening of           airport visitors.
Bangkok’s new Suvarnabhumi Airport on Sep-
tember 28, an event involving extensive trial op-    In fiscal 2006, MediCare reported sales of €4.2
erations up front as well as relocation to a new     million and had a workforce comprising 38 full-
site 50 kilometers away – also planned and or-       time employees and almost 40 additional staff on
ganized by FMG.                                      short-term and part-time contracts. MediCare is
                                                     co-owned by Flughafen München GmbH with 51
Other projects included providing support ser-       percent and by MAHM-GmbH, a group of doc-
vices to Thai Airways, which operates out of         tors, some of whom are based at Munich Airport,
Bangkok’s new airport, and helping commission        with 49 percent.
Terminal 4 with a satellite for 35 million passen-
gers at Madrid’s Barajas Airport.




                                                                                                   19
Ground Handling
A full-service offering
The Ground Handling division provides cus-
tomers with a comprehensive range of landside
and airside services, including aircraft handling,
baggage and cargo handling, and passenger and
crew transports. In combination with the services
offered by FMG subsidiaries aerogate (specializ-
ing in passenger handling, operations, and su-
pervision), Cargogate (cargo handling), muc-
ground Services (aircraft and baggage handling),
and EFM (pushback, towing and de-icing), all of
which have been assigned organizationally to
Ground Handling since the FMG Group restruc-
tured in early 2005, the division operates as a
full-service provider, delivering an end-to-end
range of ground services to airline customers.




20
Flexibility, professionalism and reliability           Extensive training programs
Ground Handling’s core competency lies in coor-        One major focus for Ground Handling is on pro-
dinating and networking complex, time-critical         viding employees with specialized training de-
service processes reliably and punctually. We          signed to maintain and advance quality stan-
support ramp-side hub operations for the Star Al-      dards and ensure that we optimize and
liance at Terminal 2, tourist hub-and-spoke and        streamline our service processes. In 2006, we
point-to-point operations for Condor, LTU, Ha-         held 613 training seminars with 2,545 attendees;
pagfly and Air Berlin, and long-haul traffic for up-   on average, these seminars scored an A+ when
market carriers like Emirates, Etihad, and Delta       rated by recipients, reflecting the emphasis we
Airlines in Terminal 1. High-volume, low-fare car-     place on quality in our trainings. The number of
riers, too, like dba and well-known scheduled          attendee days of training delivered increased 8
carriers like Turkish Airlines, Aeroflot and El Al     percent, to 7,333, in comparison with 2005.
are among Ground Handling’s long-standing cus-
tomers. Our ability to ensure minimum connect-         Key areas of training included courses on the
ing times and rapid turnaround times through           baggage identification system Eagle and ramp
professional, reliable and flexible ramp services      equipment, both attended by 1,000 employees.
forms the basis for trusting, enduring and suc-        More than 400 qualified for the integrated han-
cessful partnerships with customer airlines.           dling process. And, to date, 740 Ground Handling
                                                       employees have successfully completed ramp
Munich Airport’s ground handling services were         agent training and passed chamber of industry
the first at any airport in Germany to receive DIN     and commerce exams to become certified air-
EN ISO 2001 certification (in 1994); we also went      craft handlers.
on to obtain IATA AHM 804 certification in 2003.
This underscores our commitment to quality and         Quality assurance and satisfied customers
innovation leadership. We focus on serving the         We operate a comprehensive quality manage-
needs of customer airlines, delivering high-quali-     ment system that monitors service quality, speed
ty, continuously optimized services based on a         and customer satisfaction. This enables us to ad-
mature total quality management system, and            just our processes in line with customers’ needs
developing new products, such as baggage rec-          and to rapidly roll out precisely targeted im-
onciliation services and direct transfer services,     provements where necessary. Our customers ap-
in line with customer demand.                          preciate this responsiveness. El Al, for example,
                                                       recently chose Munich Airport as one of its best
                                                       stations worldwide in terms of punctuality of
                                                       overall handling, friendliness of personnel at the
                                                       handling desk, and low numbers of lost baggage
                                                       items. And in a survey of 7.2 million passengers
                                                       carried out by respected London-based opinion
                                                       researchers Skytrax, Munich Airport ranked num-
                                                       ber one in Europe in the Baggage Delivery cate-
                                                       gory.




                                                                                                      21
In spite of liberalization of the market for ground   aerogate: More ticketing revenue
services in 1999 and the market entry of third-       The purpose of aerogate München – Gesellschaft
party service providers at Munich Airport, FMG’s      für Luftverkehrsabfertigungen mbH is to provide
ground handling business has remained strongly        passenger and aircraft handling services in those
competitive, retaining a market share of roughly      sectors not already covered by ground services.
90 percent in 2006. With a workforce of around        The company also operates a baggage delivery
2,000, we handled 171,106 aircraft, 1.1 percent       service, as well as a ticketing service that has be-
more than in 2005, and 27,334,268 passengers,         come an increasingly valuable source of revenue
up 4.8 percent on a year earlier. The MTOM vol-       in recent years.
ume grew 4.6 percent to 21.2 million tons, and
air cargo handled expanded 9.2 percent to             Although competing ramp services operators
238,076 tons.                                         stepped up their activities, as did those airlines
                                                      that take care of their own ground handling,
Fierce price competition driven by sharp drops in     aerogate succeeded in generating proceeds on
air fares caused by low-cost carriers has led air-    external sales of €7.1 million in 2006. With its
line customers to pressure for lower ground han-      permanent workforce of 258 employees, the
dling charges in recent years, stoking the already    company handled around 1.2 million passengers
highly competitive situation in the ground han-       and 16,006 flights.
dling sector. FMG has responded by thoroughly
optimizing processes and introducing major im-        Cargogate: Number one in air cargo
provements to productivity and flexibility. Our       Wholly owned FMG subsidiary Cargogate Flug-
goal is to offset the decline in handling prices,     hafen München Gesellschaft für Luftverkehrsab-
currently averaging out at around 5 percent per       fertigungen mbH specializes in air cargo han-
year.                                                 dling services at Munich Airport. Besides the
                                                      transshipment of cargo, these services include
Restructuring strategy approved                       storage and documentation of freight goods.
To keep Ground Handling competitive in the            Customers also have the option of purchasing
longer term and to keep offering our services at      partial service packages if they wish. In spite of
realistic market prices, we continued to imple-       growing competition from other operators, Car-
ment our restructuring strategy, launched in          gogate remained the largest independent cargo
2005, in collaboration with the works council.        handler at Munich Airport in 2006, providing han-
FMG’s management road-mapped and approved             dling services to the vast majority of airlines op-
a restructuring program designed to continuous-       erating into Munich.
ly improve our Ground Handling division’s busi-
ness situation during the years ahead.                The company currently handles cargo for 83 car-
                                                      riers and also processes documentation for 51 of
The main pillars of the restructuring are the in-     them. In the past fiscal year, Cargogate had 226
troduction of more flexible working models (in-       employees and reported external sales of €10.6
volving alignment of personnel’s duty periods         million. The company handled over 100,400 tons
with the volume of flights), process optimization     of goods in 2006, around 5,400 tons more than in
(including integrated handling, and baggage and       the year before.
cargo integration), and the exploitation of poten-
tial cost savings. But, the importance of internal    EFM: Ready for the A 380
optimization aside, the success of the restructur-    EFM - Gesellschaft für Enteisen und Flugzeug-
ing depends, crucially, on our ability to establish   schleppen am Flughafen München mbH, co-
a viable long-term competitive framework and          owned by GlobeGround GmbH (51 percent) and
create lastingly competitive cost structures.         Flughafen München GmbH (49 percent), pro-




22
vides aircraft pushback and maneuvering servic-      freight volume was up 13.3 percent to more than
es on the apron and in the maintenance area, air-    400,000 tons. Around 224,000 tons, 10.6 percent
conditioning, and de-icing services at Munich        more than in 2005, were carried by air, and
Airport. The company’s fleet of 23 de-icing vehi-    trucked freight totaled 180,000 tons, up almost
cles now includes two trucks equipped to de-ice      17 percent on the year before. On average, the
the Airbus A 380.                                    airport handled 615 tons of flown freight a day in
                                                     2006, compared to 556 tons in 2005.
Due to the unusually harsh and long 2005/2006
winter, EFM and its 120 employees reported           Intercontinental traffic is driving cargo growth
record sales of €27.4 million. The company con-      The key factor in the exceptional growth in air
ducted close to 135,000 maneuvering operations       cargo is the expansion of long-haul traffic at Mu-
and almost 10,000 de-icing operations.               nich Airport. More than 70 percent of flown
                                                     freight is carried on long-haul routes, mostly as
mucground: Additional handling services              bellyhold freight. Freight capacity has risen in
With a workforce of 383 (averaged out over the       line with the sharp, 13 percent increase in inter-
year), mucground – MUC Ground Services               continental traffic, and takeup has been consider-
Flughafen München GmbH, a wholly owned sub-          able among Bavaria’s exporting industries.
sidiary of Flughafen München Holding GmbH,
supplies Ground Handling with additional aircraft    Services to China and Hong Kong carried the
loading and unloading capacity and manpower          most air cargo, followed by North Atlantic servic-
for the baggage transportation system during         es to the U.S. and Canada, and flights to the Gulf
peak traffic periods. mucground employees con-       region.
ducted around 33,580 handling operations in
2006.                                                Air mail: A nationwide decline
                                                     As in past years, the volume of air mail handled
With its competitive cost structures, mucground      at Munich Airport and other airports across Ger-
is also able to provide other competitively priced   many dropped once again in 2006. Munich trans-
services, including a limousine service for          shipped a total of 13,667 tons, 10.1 percent less
Deutsche Lufthansa HON and first-class passen-       than in 2005. On average, we handled 37 tons of
gers, much to customers’ satisfaction. Formed in     air mail a day in 2006, compared to 42 tons a
fiscal 2005, the company succeeded in generat-       year earlier.
ing sales of €19 million in the past fiscal year.
                                                     The causes behind this trend are the advance of
Air cargo: Double-digit growth                       electronic communications and an increase in
In 2006, cargo traffic in Munich again saw dou-      the amount of air mail carried as air cargo by the
ble-digit growth. Compared to a year earlier, the    rapidly expanding express carriers.




                                                                                                     23
24
Non-aviation
business




               25
Real Estate Management and Development
Departure lounges in Terminal 1                       In June 2006, Dubai-based airline Emirates
After two years of remodeling work, modules A         opened a lounge for first- and business-class
and B in Terminal 1 now have spacious lounge          passengers and Skywards Gold Members in
areas with a redesigned layout. The new restau-       module C of Terminal 1. This move reflects Mu-
rant areas with views overlooking the apron have      nich Airport’s importance in the carrier’s world-
proven extremely popular with passengers, as          wide network of routes. The 620-square-meter
has the wider retail offering with larger duty-free   lounge has a relax zone with comfortable leather
and Travel Value stores and a new multi-label         chairs where guests can unwind, a restaurant
fashion store. The hospitality and retail segments    zone offering a broad selection of refreshments
both reported renewed sales growth in fiscal          and gourmet hot and cold food, and an entertain-
2006, driven primarily by the completed remod-        ment and business zone equipped with phones,
eling work in all four Terminal 1 departure areas.    fax machines, scanners, 11 internet access
                                                      points, five internet-connected PC workstations,
A new car hire center and lounge                      and televisions with DVD players.
In April 2006, a new car hire center and
pickup/return area were opened in car park P6 in
the Central Area. The new location is more cen-
tral than its predecessor and is equally close to
both terminal buildings. The center is also better
equipped, allowing car hire companies to pres-
ent a more differentiated offering for first-class,
   ,
VIP preferred and Gold Club customers. Car hire
companies were allowed to design their cus-
tomer service desks to their own specifications
and with their own distinctive branding.




26
Traffic growth drives new construction projects         Online advertising on the airport’s web site
In response to continued air cargo sector growth,       Thanks to constantly increasing traffic on the air-
the airport is having to expand its cargo handling      port’s web site, marketing additional advertising
facilities, and in 2006 we began planning and           space on the site proved easy. The range of ad-
preparing for a new forwarders’ building and            vertising options available is described at
multistory car park. The facilities are slated for      www.munich-airport.com in the section on on-
completion in late 2007.                                line advertising.

As numbers of tourists and business travelers           Successful, market-driven advertising media
rise, hotel capacity at Munich Airport is becom-        Although advertising revenues failed to live up
ing increasingly short and will likely reach its lim-   to our high expectations in the World Cup year
its in the foreseeable future. We have embarked         2006, Munich Airport nonetheless saw a marked
on a new construction program to create addi-           increase in airport media sales, thanks largely to
tional capacity, beginning with a second airport        a sustained program to offer advertising space
hotel, a three-star facility, with around 250           aligned with market needs. The installation of
rooms.                                                  high-quality light boxes in particular boosted
                                                        purchases of ad space and helped us win new
Summer soccer spectacle and winter market               advertising business, most notably from the in-
The program of events held on a regular basis in        ternational fashion industry.
the forum at the München Airport Center (MAC)
is the primary marketing instrument used by the         The Munich Airport Award: A long-standing
hospitality and retail sectors’ advertising associa-    institution
tion at Munich Airport. One of the highlights in        The growing number of competition entries, the
2006 was an extensive beer garden with a vast           high quality of the submissions, and the huge
LED wall, set up during the summer, where               popularity of the award event attended by more
countless soccer fans came to watch World Cup           than 1,000 guests from the media and advertis-
football matches.                                       ing industries, reflect the exceptional standing
                                                        that the Munich Airport Award, presented for the
More than 700 tons of sand had to be brought in-        ninth time in 2006, has achieved over the years.
to the forum to build three beach volleyball            Intensive press work surrounding the award led
courts for the Bavarian championships and the           to extensive coverage in trade journals, an indi-
Smart Beach Tour, featuring the FMG-sponsored           cation of the growing interest in airport advertis-
“Roten Raben” women’s volleyball team. Due to           ing within the advertising industry.
the events’ huge success, beach volleyball tour-
naments will again be held at the MAC in 2007.

Other 2006 highlights included “Flughafen live,     ”
an event offering a behind-the-scenes look at the
airport, as well as the now traditional winter mar-
ket with its highly popular artificial ice rink. For
the first time, the market remained open beyond
Christmas through to the end of the holiday sea-
son on January 7, 2007, and included a vacation
program for school children.




                                                                                                         27
Retail and Services
Parking and customer services
Our parking and customer services business op-
erates all of Munich Airport’s open-air and multi-
story car parks – with more than 32,000 parking
spaces in total – used by passengers, tenants,
and airport employees. In 2006, more than 5.6
million vehicles parked in these facilities, around
100,000 more than in 2005. FMG offers a range
of value-added parking services that have proved
especially popular with customers; these include
convenience and secure parking, XXL parking
with extra-wide bays, valet parking, and the op-
tion of booking discounted parking spaces
through the airport’s web site.

In early 2006, the care hire return area was
moved to a point closer to the center of the air-
port, from car park P5 to P6. The relocation was
accomplished successfully without negatively
impacting on operations.

Our parking and services business profits mainly
from originating passengers, and their numbers
increased by 7.8 percent in 2006. In comparison,
though, sales in this area rose faster, up 12.1 per-
cent year on year.

Allresto: Dining for every taste
Allresto Flughafen München Hotel und Gaststät-
ten GmbH operates the restaurants and bars in
both of Munich Airport’s terminals, plus four em-
ployee canteens, a Burger King fast-food restau-
rant, the “municon” congress center, and the air-
port hotel (managed by the Kempinski Group).
Allresto runs its hospitality operations itself, but
its hotel and casino activities are managed by




28
third-party operators. With a workforce of 543         €120.9 million in external sales, a year-on-year
people, Allresto generated external sales of           increase of 16.8 percent, making the company
€61.3 million in 2006, 13.1 percent more than in       Flughafen München GmbH’s second highest-
2005, making the company Flughafen München             earning subsidiary. Sales in the souvenirs seg-
GmbH’s third highest-earning subsidiary.               ment were exceptionally high, thanks in part to
                                                       the World Cup and Pope Benedict XVI’s visit to
In Terminal 1, with its decentralized structure, the   Bavaria.
company operates bars in the arrival and depar-
ture areas in each of the modules. In addition,        eurotrade Flughafen München Handels-GmbH
there are snack bars, plus several restaurants, in-    runs a range of retail outlets at Munich Airport,
cluding Airbräu, Käfer, and Il Mondo. In Terminal      including duty-free and Travel Value shops,
2, Allresto runs the Airbräu and Käfer restau-         newsagents, and stores selling travel goods,
rants, an Italian piazza, and a number of bars in      souvenirs, cosmetics, clothing and toys. The
the pier area.                                         company also operates a number of restaurants
                                                       that add to Munich Airport’s unique and distinc-
To meet customer needs and expectations better,        tive flair.
all of the bars in the Terminal 1 arrival areas were
completely modernized in 2006. In Terminal 2,          In Terminal 1, the company has to operate duty-
the original pier bar in the north pier now oper-      free, Travel Value, and newsagent outlets in every
ates under the name Adelholzener Bar. The seat-        module because of the building’s decentralized
ing capacity here and in the piazza was in-            structure, but in Terminal 2, these stores are lo-
creased. In the Central Area, the Airbräu restau-      cated centrally for the most part. To meet the
rant, well-known and exceptionally popular with        constantly changing requirements of private and
local people for miles around, is an ideal venue       business travelers, eurotrade remodeled, reno-
for all kinds of events, especially cabaret.           vated, reopened and optimized stores in the pub-
                                                       lic and restricted areas of both terminal buildings
Allresto widened its offering with a new highlight     in 2006. One special attraction is the Event Shop,
in early 2006, the Thai restaurant BaMee in mod-       an open-plan retail outlet in Terminal 2, which re-
ule C of Terminal 1. The company also began re-        stocks with different companies’ products every
modeling Café Treffpunkt in the Central Area at        two months.
the end of 2006, which reopened as the Leysief-
fer restaurant in 2007 and serves up outstanding       eurotrade responded flexibly and at short notice
world cuisine 24 hours a day.                          to the need for tighter security checks on passen-
                                                       gers and their hand luggage by revising its retail
eurotrade: Attractive offerings for customers          strategy and by closing and relocating stores.
In 2006, retailers eurotrade again fared substan-
tially better than would have been expected, giv-
en the overall state of the German economy.
With 732 employees, the company generated




                                                                                                          29
Terminal 2
The Terminal 2 joint venture                           Terminal 2 Betriebsgesellschaft does not operate
The Terminal 2 division comprises two compa-           in a production capacity as such; instead, its two
nies, FM Terminal 2 Immobilienverwaltungsge-           corporate parents provide services, in particular,
sellschaft, which owns the terminal building, and      landside and airside handling. Other services
Terminal 2 Betriebsgesellschaft mbH & Co, the          needed in connection with marketing and operat-
terminal’s operating company. Both are co-             ing the building are bought in, above all from
owned by FMG and Lufthansa with respective             FMG. The terminal operating company’s role is to
holdings of 60 percent and 40 percent.                 coordinate services, to integrate operations, to
                                                       optimize processes, and to encourage and imple-
Coordinated services                                   ment new advancements.
FMG and Lufthansa stepped into new territory
with the T2 partnership. This is the first time any-
where in the world that an airport operator and
an airline company have teamed up to share the
entrepreneurial responsibility for the creation and
operation of a piece of airport infrastructure.




30
Partnering to build and operate the new terminal,        Growth continued in 2006, with Terminal 2 han-
used exclusively by Lufthansa, its group compa-          dling a total of 287,200 takeoffs and landings, 6.0
nies, other partners, and fellow Star Alliance           percent more than a year earlier. The growth in
members, has created a win-win situation.                passenger movements was even higher, with
Lufthansa has had the opportunity to co-develop          around 21.7 million air travelers using Terminal 2
a terminal building tailored to its customers’           in 2006, a year-on-year increase of 12.0 percent.
needs and its own handling processes, and can
continue to shape the facility’s future develop-         As a result of a new code-sharing agreement
ment. Lufthansa, Star Alliance members and oth-          with Lufthansa, Egyptair, due to become a full
er partners enjoy the benefits of an advanced            member of the Star Alliance, moved across to
passenger-handling building designed specifical-         Terminal 2 in 2006. More than 30 carriers now
ly to meet the needs of international hub traffic.       operate services out of Terminal 2, offering flights
And FMG now has substantial aircraft and pas-            to 169 destinations in total – 20 in Germany, 108
senger-handling capacity as well as a long-term          in European and Mediterranean countries, and
commitment to its airport from Germany’s lead-           41 on other continents.
ing carrier that will safeguard future growth.
                                                         Shops, restaurants and lounges
Thirty-one airlines in Terminal 2                        In 2006, there were 84 retail and service outlets
Terminal 2 is a unique success story. When this          in Terminal 2 (28 in the public area and 56 in the
advanced, highly efficient handling facility began       restricted area) and 18 restaurants (six in the
operating, it instantly doubled Munich Airport’s         public area and 12 in the restricted area). In the
capacity to 50 million passengers a year, and at         past year, eurotrade added a number of retail
just 30 minutes, Terminal 2’s minimum connect-           units in the restricted area: Private by Beate
ing time is one of the shortest in the world. The        Uhse, the Event Shop, a Behringer/Burberry
building is renowned for its outstanding architec-       store, and a Multitronics outlet.
ture, is clearly structured and user-friendly. It also
has a rich retail and hospitality offering, so it is     In the hospitality segment, Seafood Sylt, Piazza
hardly surprising that the terminal is extremely         Monaco and Pierbar Nord were all extended, as
popular with airlines and passengers.                    were the Travel Value, Cartier and Valleverde units
                                                         in the retail and services segment.
This modern passenger handling facility has
been a major factor in Munich Airport’s selection        The Wieners Kaffee coffee bar had to be closed
as the best airport in Europe in a 2006 survey           to make way for a larger Lufthansa first-class
among 7.2 million air travelers conducted by in-         lounge. The smart and exclusive lounge extends
dependent researchers Skytrax – a success re-            across two floors and is scheduled to open in Au-
flected in the recent rapid rise in our traffic fig-     gust 2007.
ures.




                                                                                                          31
Personnel
Headcount down slightly
At December 31, 2006, Flughafen München
GmbH had 4,747 employees, 0.9 percent fewer
than in 2005. Of these 4,747 employees, 4,531
had unlimited contracts. With the signing of a
new collective labor agreement for public service
workers on October 1, 2005, and contrary to pre-
vious practice, we no longer differentiate be-
tween wage and salaried employees in our re-
porting.




32
Foreign nationals numbered 698, accounting for         Breakdown of personnel costs
14.7 of the total workforce. The majority of these     (€ million)
foreign workers – 433 – were from Turkey; a fur-                                         2006      2005
ther 51 were from Austria, and 43 from Italy.
                                                        Wages and salaries
                                                        (including travel
The FMG Group as a whole had 7,186 employees,           expenses and meal
6.1 percent more than a year earlier.                   subsidies)                       176.5     176.9

                                                        Social security levies,
Completion of the M-Power project                       costs of retirement
                                                        plans and related
In 2006 we finished our M-Power restructuring           benefits                          49.9      49.1
project. Spanning two years, it focused on defin-
ing and implementing initiatives designed to            Total personnel expense          226.4     226.0
boost productivity throughout the FMG Group.

The project also had an impact on our head-
count: In 2006 we again ran a tight hiring policy,     Vocational trainees total 234 across the FMG
only replacing natural wastage to a limited de-        Group
gree, especially in the area of operations. As a re-   Eighty-six school-leavers embarked on vocation-
sult, FMG’s HR capacity dropped by 99 employ-          al training programs with Flughafen München
ee-years, or 2.3 percent, to 4,179. Nonetheless,       GmbH and its affiliates in September 2006. Fifty
we handled 3.1 percent more aircraft and 7.5 per-      of them were assigned to FMG, which again rein-
cent more passengers than in 2005.                     forced its commitment to uphold the voluntary
                                                       apprenticeship pact between government and in-
Personnel expense in 2006 increased by €0.4            dustry in Germany. A further 36 joined FMG sub-
million or 0.2 percent year on year. The rise was      sidiaries aerogate, Cargogate, eurotrade, and All-
mostly due to the formation of reserves for work-      resto. Group-wide, vocational trainees totaled
force retirement plans, service anniversaries, and     234 in 2006, with 154 assigned to corporate par-
vacation and overtime entitlements.                    ent FMG.




                                                                                                       33
New bachelor’s program in aviation manage-            At the same time, other international airports’
ment                                                  employees, including retail specialists from Por-
On September 1, 2006, FMG expanded its train-         tuguese airport operator ANA - Aeroportos de
ing portfolio to include a new bachelor’s program     Portugal, employees from Malta International
in aviation management, which the company             Airport’s IT, passenger and traffic management
spearheaded as part of a group of six partner or-     units, and vocational trainees from Vienna’s air-
ganizations. Unique nationwide, this industry-        port operating company, Flughafen Wien AG, had
specific degree program unites aviation’s three       the chance to spend time at Munich Airport to
key partner groups – airports, air-traffic control,   see how their counterparts here work. We also
and airlines. Undergraduates spend each year of       built stronger ties with airports and the aviation
their three-year degree program with a different      industry in Japan and China by hosting work-
company while attending classroom training at a       shops and management training programs and
technical college in Frankfurt/Main.                  receiving visits from delegations.

With this degree program, FMG hopes to deliver        The EncourAGE pilot project
training that provides future employees with a        FMG is one of the organizations supporting En-
strong grounding in business management as            courAGE, a Leonardo da Vinci pilot project that
well as a thorough understanding of typical avia-     has received around €340,000 in backing from
tion industry challenges and projects.                the European Union. The goal of the project is to
                                                      work with partner organizations to develop new
The EQJ and exchange programs                         HR management instruments to prepare strategi-
In 2006, FMG again took part in the EQJ pro-          cally for a demographic shift that will result in
gram, set up to provide school-leavers unable to      fewer junior employees and greater numbers of
win a place on a vocational program with train-       older employees in the workforce.
ing to help them find their way into a career. The
initiative was a resounding success, with all 19      New performance benchmarking
young people assigned to FMG and its sub-             In 2006, our HR and organizational development
sidiaries Cargogate and Allresto successfully         unit helped FMG divisions to introduce a new
finding employment or vocational training op-         system of performance benchmarking based on
portunities.                                          the balanced scorecard. Communication boards
                                                      were used as a medium to instruct employees
For an international airport like Munich, a global-   clearly and in detail on the importance of accom-
ly aligned employee training and education pro-       plishing FMG’s mission.
gram is of great importance. As part of the
Leonardo da Vinci European educational and cul-
tural exchange program, 20 of our vocational
trainees were given the opportunity to spend in-
ternships with partner airports in Vienna, Malta,
Helsinki, Turku, Lisbon and Faro. Engineering sec-
tor employees, too, were able to acquire valu-
able experience working at Lisbon Airport.




34
Upward feedback and employee advancement              Training for internal and external customers
In 2006, we introduced 180° manager feedback          In 2006, we again focused on delivering needs-
company-wide. This enables employees to score         driven employee development training and pro-
their managers’ performance in an anonymous           grams. Increasingly, we have also been provid-
questionnaire. The findings were reviewed with        ing personal education consulting and tailored
managers in presentations and feedback meet-          in-house seminars, parallel to our general train-
ings, and development measures were discussed         ing and education program.
with them. Our next step will be to introduce a
paperless, IT-based 270° manager feedback sys-        In 2006, FMG came a step closer to achieving its
tem in which managers’ performance is rated ad-       goal of forming a best-practices and knowledge
ditionally by their peers.                            sharing network with other airports and organi-
                                                      zations: The company began offering its training
FMG has introduced another HR development             programs to other airports, which led to an in-
initiative, the advancement circle, designed spe-     crease in the number of attendee-days of training
cially for high potentials looking to develop in      delivered from 5,850 in 2005 to 7,132 in 2006.
their current positions and prepare for future
cross-disciplinary assignments. Working in close
collaboration with the Erding College of Applied      In appreciation of their services and with sorrow
Management, we aligned course curricula with          we remember the following colleagues who
the aviation sector, the airport’s own specific re-   passed away in 2006. They will be sadly missed
quirements, and with participants’ personal com-      by their fellow employees.
petency-building needs. Candidates for the ad-
vancement circle were chosen through an               Lajos Baranyai                † February 18, 2006
assessment center.                                    Alexandra Keller                 † August 3, 2006
                                                      Albrecht Fischer                † August 30, 2006
                                                      Johann Hacker               † November 19, 2006
                                                      Renate Bader                 † December 2, 2006




                                                                                                      35
Expansion plans
Planning for tomorrow: The third runway
Ranked as one of the top ten commercial airports
in Europe, Munich Airport enjoys a first-rate rep-
utation among airport organizations, airlines and
passengers all over the world. Our excellent
standing has helped drive extraordinary growth
at the airport in recent years, and 2006 was no
exception: The number of aircraft movements in-
creased by 3.1 percent year on year to more than
410,000, while passenger numbers surged 7.5
percent, bypassing the 30 million mark for the
first time in the airport’s history.




36
This growth will doubtless continue in the future.     Meeting tomorrow’s needs
According to forecasts by Intraplan Consult            To sustain Munich Airport’s rapid growth as a
GmbH, a firm of consultants hired as part of the       competitive international hub, regional job en-
regional planning process, annual takeoffs and         gine and economic driver, we have to achieve a
landings could increase to 610,000 by 2020, with       capacity target of at least 120 takeoffs and land-
passenger movements rising in tandem to al-            ings an hour – a figure entirely beyond the capa-
most 56 million a year over the same period.           bilities of today’s two-runway system.

Two runways are not enough                             The regional planning process
The continuous traffic growth in past years has        On July 26, 2005, Flughafen München GmbH’s
regularly pushed Munich Airport’s twin runway          executives informed the supervisory board and
system, currently capable of processing 90             shareholders about the foreseeable capacity bot-
scheduled services an hour, to its capacity limits     tlenecks and explained the need to create addi-
at peak times, and will continue to do so in years     tional runway capacity. The company’s share-
ahead. Even taking potential scope for fine-tun-       holders authorized executive management to
ing flight handling operations into account, it will   begin planning the expansion of the current run-
be impossible to deliver the major increase in ca-     way system and to quickly prepare and set in
pacity needed to meet carriers’ demand for slots.      motion the requisite regional planning process.
As a result, we can already expect to see long
waits and significant delays in the not-so-distant
future, and our ability to accommodate traffic
growth in line with real-life demand compro-
mised.




                                                                                                       37
Minimizing impact                                   The goal was to ensure that the chosen runway
Following an in-depth review and the completion     location was the best option in terms of costs
of a runway configuration analysis by the Ger-      and capacity as well as low negative impacts on
man Center for Aerospace (DLR), six potential       the airport region. The documentation comprised
runway locations – from a total of 31 reviewed –    eight ring binders containing several thousand
were identified as capable of achieving the tar-    pages of information and more than a hundred
geted minimum of 120 scheduled takeoffs and         maps and drawings.
landings per hour. Following additional assess-
ments and an impact evaluation, the runway site     Government approval
known as “5b” – 1,180 meters (center to center)     On February 21, 2007, Upper Bavaria’s regional
from the north runway, offset by 2,100 meters,      government completed the regional planning
and 4,000 meters in length – emerged as the op-     process for the third runway, and on March 8,
tion with the lowest impact on local communities    FMG received the desired notification of ap-
and the environment.                                proval. In its official statement, the government
                                                    emphasized the importance and implications of
Expert reports and studies                          Munich Airport’s ability to operate efficiently
Based on this runway location and size, Flugha-     within the world’s aviation network.
fen München GmbH, submitted its application for
the regional planning process on July 31, 2006.     The conditions stipulated in the Upper Bavarian
After an initial review of the application docu-    government’s approval document provided a
ments, the authorities initiated the process on     framework for preparing an application for zon-
August 24, 2006. Besides explaining in detail the   ing approval.
grounds for expanding the airport, the applica-
tion included 18 expert opinions and planning
documents, among them an air traffic forecast,
capacity analyses, an environmental compatibili-
ty study, technical planning, water management,
and landscaping assessments, and expert re-
ports on the potential noise nuisance and the im-
pact on air quality and climate.




38
Zoning approval                                       Dialogue with local communities
In contrast to the regional planning process,         As the expansion project goes forward, FMG is
which examines a project’s importance and im-         eager to foster an open and constructive dia-
pacts at the regional level, a public zoning          logue with local communities, and the Commu-
process addresses a comprehensive catalog of          nities Council was formed specifically to provide
public and private issues and potential impacts       them with a platform through which they could
related to construction projects, including envi-     voice their legitimate interests. The council en-
ronmental compatibility. Besides assessing the        ables FMG to meet at intervals with local coun-
relevance and permissibility of a project, the zon-   cilors, mayors, and stakeholders, as well as avia-
ing process also examines the need for follow-on      tion industry representatives and members of
measures. Such measures as deemed necessary           the local business community to hear their con-
to protect local communities and the environ-         cerns. It ensures that stakeholders are kept in-
ment are defined as binding by lawmakers and          formed about progress on planning and provides
the zoning agency.                                    them with an opportunity to put forward their
                                                      ideas and interests in connection with the air-
FMG plans to submit an application for zoning         port’s expansion.
approval before the end of 2007. If the process
goes ahead as planned, the third runway, a factor     The scope of council discussions is not confined
crucial to the future of Munich Airport and its       to the third runway but also includes issues like
ability to compete effectively in the aviation mar-   local transport infrastructure projects and the
ketplace, could go into operation in 2011.            voluntary impact fund to be set up by FMG and
                                                      its shareholders to help in cases of exceptional
                                                      hardship caused by the airport’s expansion initia-
                                                      tives. The Communities Council will play a major
                                                      role in framing specific projects and programs in
                                                      this context.




                                                                                                      39
Communications and community relations
Reaching a wide target audience
Corporate Communications’ tasking in 2006
again centered for the most part on informing
the general public about events and changes at
Munich Airport and on publicizing the airport’s
importance for aviation and its host region.




40
We engaged in extensive media relations work,           Working with neighboring communities
including the publication of numerous news re-          We believe in fostering strong ties with the air-
leases and press photos, in order to deliver our        port’s neighboring communities, and we do this
messages through the news media. Two major              in part by providing them with timely, compre-
events focused the attention of the world’s media       hensive information on our plans and by involv-
on Munich Airport in 2006: the Football World           ing them in life at the airport. Community rela-
Cup and Pope Benedict XVI’s visit. In both cases,       tions work in 2006 involved a variety of
members of the German and foreign press were            initiatives, including the hosting of art exhibi-
on site at the airport to cover the visitors’ arrival   tions. Besides providing local artists with a plat-
and departure. The extensive preparations and           form on which to show their work, the exhibi-
media support provided by FMG on both occa-             tions generate considerable interest among the
sions resulted in a strong image gain for Munich        local population and passengers.
Airport.
                                                        We also had booths at several regional shows
External and internal communications                    where local people, especially those living in the
To keep passengers, visitors, and the interested        airport’s neighboring towns and villages, could
public informed about the airport, we produced a        obtain first-hand information on the airport and
number of publications, including M terminal, a         its expansion plans. To meet the demand for in-
newsletter published every two months, and the          formation, FMG published a flyer on its plans for
environmental statement Perspectives, which             a third runway, which it handed out at shows and
won first prize in an award competition held by         mailed to all households in the airport’s local
the Berlin Chamber of Auditors. We also pub-            area. The company also posted details of its ex-
lished information on the airport’s web site and        pansion program on the Munich Airport web site.
on the FMG Group’s newly expanded portal.
                                                        The new airport visitors’ center, opened in 2006,
Dedicated and well-informed employees are a             and FMG’s redesigned newsletter for neighbors,
key capital asset for any company, and FMG              M Dialog, offered detailed information on the air-
does its best to keep its people informed. Inter-       port’s expansion, too. Published every two
nal communications media include Flughafen              months, with a print run of 96,000, and sent out
Report, a monthly employee newsletter, the cor-         to all households in the Freising and Erding ad-
porate intranet, and flyers and posters on key          ministrative districts, the newsletter provides an
topics. Entertainment and group activities, in-         excellent means of delivering in-depth informa-
cluding the employee party and the company              tion to local communities.
run, also play an important role in internal com-
munications.




                                                                                                          41
The regional relations office: Networking with        ters from the Bavarian government to clarify the
neighbors                                             need for the planned runway and to discuss the
For many years now, Flughafen München GmbH            region’s road and rail networks.
has worked hard to promote an open dialogue
with stakeholders in its immediate locale and         Since the autumn of 2006, the Council’s commit-
wider outlying region. Our aim is to break down       tee has been examining the issues surrounding a
barriers and identify overlapping interests to cre-   voluntary impact fund that Flughafen München
ate mutually beneficial relationships. Our efforts    GmbH plans to set up to provide compensation
in this area have proved a success. We under-         for hardships sustained as a result of the runway
stand the importance of getting to know one an-       project. The committee is also reviewing a num-
other – to understand others’ positions and con-      ber of current questions of infrastructure.
cerns, and, crucially, to build mutual trust. To
achieve this, Flughafen München GmbH needs to         The regional marketing association
network closely with local organizations, and our     The regional marketing initiative, operated and
regional relations officer and his bureau help to     funded by FMG in association with the Erding
make this happen.                                     and Freising administrative districts, is an excel-
                                                      lent example of active collaboration between the
The Communities Council: Dialogue with the            airport and its host region. A joint taskforce, set
region                                                up in 2005, works to actively develop the region
The Communities Council, formed in the sum-           and promote and publicize its advantages further
mer of 2005 and independently chaired by Edda         afield. The primary focus is on promoting busi-
Huther, was set up to provide a forum for dia-        ness investment and tourism.
logue and an exchange of ideas with the region
on Flughafen München GmbH’s expansion plans           In 2006, we laid the strategic foundations for the
to build a third runway.                              regional marketing initiative’s future programs.
                                                      With the finalization of a marketing roadmap and
During the first six months of 2006, the Commu-       the creation of a corporate design in the first
nities Council convened on numerous occasions         quarter of 2007, the groundwork has largely been
to review and discuss plans and experts’ reports      completed.
in depth as they became available. At a meeting
in July 2006, the Council met with three minis-




42
At the same time, the initiative has engaged in a   FMG also continued to support cultural high-
number of inward activities focused on the re-      lights in the region, including the Erding Jazz
gion and its population. These included a cam-      Festival, Erding Symphony Orchestra concerts,
paign titled “Faces of the Region” in which indi-   and the Freising Cultural Festival.
viduals who had helped shape the region sig-
nificantly through their efforts and dedication     Competency center for municipal road
were chosen to be honored with special awards.      construction
The measures also included the first regional re-   Improving the airport and region’s transport in-
ception for the five partners, attended by 300      frastructure has always been a major concern for
people from various segments of society, to         Flughafen München GmbH, and the company re-
strengthen ties and make new contacts.              cently set up a competency center to help ad-
                                                    vance municipal road construction in the region.
Outward-directed measures included attending
the largest German industry show for industrial     The competency center offers local municipali-
location and regional development in Leipzig,       ties support with non-delegable construction du-
where the region for the first time mounted a       ties related to planning and implementing mu-
promotional presence for an audience of outside     nicipal road building projects. The technical
experts.                                            support offered by the center has been well re-
                                                    ceived by neighboring communities and has
Sponsorships for the region’s youth                 helped a number of projects to progress.
In 2006, FMG set out to create a new foundation
for sponsorships and to introduce a new system
of sports sponsorships in the region. Working
closely with local sports clubs, the company de-
cided that it would focus its support on young
people and that funding provided by Flughafen
München GmbH would be determined by the
number of young people in clubs. Under this
scheme, FMG sponsors around 18,000 young
people up to the age of 18.




                                                                                                      43
Aviation and climate protection
Continuous monitoring of aviation noise                Fewer night flights
In spite of a 3.1 percent rise in the number of air-   In 2006, there were 19,837 nighttime aircraft
craft movements year on year, none of our avia-        movements. These used up 42 percent of our al-
tion noise monitoring system’s 16 fixed measur-        lotted maximum noise quota (Neq) for night
ing stations showed a continuous sound pres-           flights, down from 45 percent a year earlier. The
sure level of more than 60 dB(A) during 2006. By       drop was due to the declining number of air mail
contrast, due to carriers operating more long-         services as well as fewer delayed flights. The
haul jets, the incidence of noise events with lev-     continuous sound pressure level along the
els in excess of 75 dB(A) was 8 percent higher         perimeter of the combined daytime and night-
than in the prior year. Levels of more than 85         time noise protection zone never reached its per-
dB(A) were recorded three times a day on aver-         mitted maximum of 50 dB(A) during the course
age.                                                   of the year.




44
Airborne pollutants remain at non-critical levels      With these voluntary environmental analysis pro-
Limits for dust particulate levels in the airport’s    grams, Flughafen München GmbH aims to track
area were exceeded during 2006, but not as a re-       and monitor current pollutant levels at the air-
sult of flight operations. The dust was caused by      port and in its immediate surrounding area to
gravel mining operations and transportation at a       provide local communities with a clear picture of
pit located to the east of the airport. The mining     the environmental situation in the area. We plan
has since stopped.                                     to introduce additional monitoring programs us-
                                                       ing grass cultures during the summer of 2007.
Continuous monitoring of airborne pollutants
showed that the nitrogen dioxide level had in-         Ramp vehicles running on rapeseed fuel
creased further, to 34 µg/m3 from 31 µg/m3 in          Flughafen München GmbH is committed to con-
2005, but was still below the statutory limit of 48    tinuing and extending trials and production use
µg/m3. Overall, airborne pollutants again re-          of renewable energy sources at Munich Airport in
mained below critical levels in 2006.                  an effort to protect the climate. As part of this
                                                       commitment, we are converting a large number
Bioindicator tests with curly kale                     of our ramp vehicles to run on rapeseed fuel
Munich Airport has continuously measured lev-          rather than on conventional diesel.
els of airborne pollutants since 1991 using analy-
sis equipment. In the autumn of 2006, we also          Award-winning environmental statement
reintroduced a biomonitoring program of the            Flughafen München GmbH’s environmental
kind already operated between 1991 and 1993 to         statement, produced as part of our environmen-
supplement ongoing monitoring. Standardized            tal management program, was picked by the
curly kale plants were set up at 14 points around      Berlin Chamber of Auditors as the winner of the
the airport campus and in neighboring areas.           German Environmental Reporting Award (DURA)
Pollutants in the air are absorbed by the kale and     competition. The award citation praised the re-
accumulate in the plants’ cells. After a few           port’s innovative approach, clarity of presenta-
weeks, the plants are sent to labs for analysis.       tion, and comprehensive scope.
The program allows us to measure levels of
polycyclic aromatic hydrocarbons (PAHs) pro-           Protecting the climate
duced in combustion processes – by industrial          Aware of its responsibility to help protect and
plants, automobiles, aviation, and house heating       preserve the environment and the world’s cli-
systems, for example.                                  mate, Munich Airport is keen to encourage air-
                                                       lines to operate more environment-friendly air-
Parallel to the biomonitoring program, we also         craft. We are therefore currently reviewing the
track the deposition and accumulation in ecosys-       option of introducing emission-based landing
tems of other substances using simple precipita-       fees in addition to current noise-based charges
tion collectors. This enables us to record levels of   as an incentive.
heavy metals and nitrogen and sulfur com-
pounds.




                                                                                                         45
Safety and security
Averting threats
Safety and security are two key concerns for aviation
and airports. Measures to ensure safety center on pos-
sible dangers to and from flight operations, whereas
security measures focus on guarding against external
threats targeting, rather than issuing from, aviation.
FMG goes to great lengths to ensure security and safe-
ty at Munich Airport.




46
Passenger and airline safety                           Germany’s Federal Ministry of Transport, Building
Operators of commercial airports are obligated         and Urban Affairs on airport safety management
to ensure the safety of flight operations, taxiing,    systems and inspections by government agen-
and aircraft handling. The unit responsible for        cies.
this at Munich Airport is Traffic Management. Be-
sides carrying out inspections of the airport, it is   Security without inconveniencing passengers
in charge of safety, damage, accident, and con-        In 2006, a year with a number of high-profile, in-
struction operations, as well as snow and ice          ternational events, Munich successfully cement-
clearing services and bird control. Its work en-       ed its reputation for robust security while incon-
sures passengers and airlines enjoy a high level       veniencing passengers as little as possible.
of safety at all times.
                                                       This we owe to the professionalism and dedica-
The Safety Management System                           tion of our employees and to the positive out-
To maintain high safety standards, Flughafen           comes and successes of our M-Power restructur-
München GmbH has deployed a Safety Manage-             ing program. From January 1, 2005, M-Power
ment System (SMS) in accordance with ICAO re-          assigned operational security to the Security
quirements. The system has promoted a culture          service division and security management to the
of safety, supported and sustained by Munich           Legal Affairs and Security division. As a result,
Airport employees and all of the companies and         Security employed roughly 140 people in 2006,
organizations involved in any way with safety at       plus around 450 indirectly through FMG sub-
the airport. The purpose of the SMS is to enable       sidiary CAP Flughafen München Sicherheits
us to identify and assess possible dangers to          GmbH, operating in the capacity of a contractor,
flight operations and to work with specialist units    while the security management unit had just sev-
to introduce countermeasures.                          en employees.

Munich Airport has helped spearhead the intro-
duction of safety management systems at air-
ports: In a joint research project conducted with
Berlin’s Technical University, we have helped to
define baseline national requirements for the de-
ployment of safety management systems at air-
ports in Germany. The results of the research,
which attracted considerable international inter-
est, have informed recommendations issued by




                                                                                                       47
Smooth implementation of screening                     Other security management tasks included con-
Following careful groundwork by security man-          tinuous revision of the aviation security plan and
agement teams and airport security, physical           technical security reviews concerning a future
checks on employees, vehicles and objects were         terminal satellite.
introduced efficiently from January 1, 2006, at
the interfaces between the publicly accessible         Routing in Terminal 2
area and the security-sensitive parts of the re-       Security management teams were also responsi-
stricted area. Implementing these checks costs         ble for planning the implementation of EU avia-
FMG more than €11 million a year, a sum that           tion security requirements regarding the separa-
has only been passed on to passengers in part in       tion of passenger streams. Under these require-
the form of security charges.                          ments, passengers arriving from non-EU coun-
                                                       tries must be kept separate from departing air
Likewise in January 2006, we incorporated a key        travelers who have already undergone security
extension to the airport’s cargo facilities into the   checks. They and their baggage must also be
security regime, meeting urgent requirements is-       screened before they can be permitted to trans-
sued by DHL, UPS and FedEx as well as specifi-         fer to an onward flight.
cations defined FMG’s security management. We
also implemented multi-stage automated bag-            In Terminal 1, the construction work to comply
gage checks in Terminal 1’s baggage transporta-        with these requirements has already been com-
tion system, bringing it up to a standard similar      pleted at a cost of more than €4 million; in Termi-
to that in Terminal 2. The final system compo-         nal 2, the changes have been accomplished for
nents were successfully deployed at the begin-         transfer passengers with onward flights to EU
ning of March 2007.                                    destinations. In the summer of 2007 we will be-
                                                       gin making the necessary changes for transfer
Security at major events                               passengers bound for non-EU destinations.
Flughafen München GmbH prepared and coordi-            Specifically, this involves creating a passenger
nated security programs with the aviation securi-      routing hallway on building level 06 in Terminal 2
ty authorities and the federal and Bavarian police     to take transfer passengers to the transfer check-
as well as a number of FMG Group units to put          points. The capital expenditure is expected to run
appropriate security in place for several large-       to more than €60 million and the work is slated
scale events, including the 2006 World Cup, and        for completion in 2008.
visits by Pope Benedict XVI and President Putin.




48
Screening passengers and carry-on luggage              The fact that passengers are allowed to take
One crucial event for the whole of Europe’s civil      small quantities of liquids as carry-on luggage
aviation was the timely discovery on August 9-         from the public area through security checks,
10, 2006, in the United Kingdom of plans for sui-      provided these liquids are contained in reseal-
cide bombers to use liquid explosive to bring          able clear plastic bags with a volume of one liter
down a total of nine aircraft on flights to the U.S.   at most and the volume of any one liquid does
What was remarkable about this incident was,           not exceed 100 millimeters, is, in light of the
first, that home-made liquid explosives were to        original plans to ban liquids completely, a testa-
be used and, second, that the plot was not foiled      ment to the success of the lobbying efforts.
by airport security checks but by security forces      When the time came to enforce the regulations
observing suspected terrorists.                        from October 6, 2006, Munich Airport had done
                                                       an exceptional job of preparing passengers for
The European Commission’s response as defined          the changes. A high-profile information cam-
in Regulation 1546/2006 aimed once again to            paign with posters, news releases, and, initially,
tighten the last line of defense, passenger and        the distribution of resealable one-liter bags to
hand-luggage screening. Munich Airport’s securi-       passengers meant that Munich did not experi-
ty management expressly endorsed and support-          ence the same delays and passengers com-
ed the intense lobbying by national and interna-       plaints as other airports when the new security
tional airport associations. At the end of the day,    regulations came into force.
the efforts resulted not in a complete ban on liq-
uids as originally envisaged, but in a ruling that     Leading customer service and satisfaction
allowed passengers to purchase liquids once in-        The Security support division and the Legal Af-
side the sterile area at EU airports and to carry      fairs and Security central division’s security man-
with them, in sealed bags, toiletries and spirits      agement unit will continue to maintain high se-
purchased in duty-free stores, if flying on to an-     curity standards in 2007, but not at the expense
other EU airport on the same day.                      of passengers’ and employees’ convenience.
                                                       One success has been the postponement for 12
                                                       months of plans by Brussels to limit the size of
                                                       hand luggage from May 6, 2007 – plans that
                                                       would have presented passengers and airport
                                                       operators with enormous and unnecessary prob-
                                                       lems.

                                                       Munich Airport will continue to fulfill statutory
                                                       safety and security requirements to exceptional
                                                       standards while maintaining its strong reputa-
                                                       tion for customer focus and satisfaction.




                                                                                                        49
The FMG Group’s
business performance




50
The FMG Group in 2006                                 Operating costs

Compared to other commercial airports in Ger-         Operating costs in fiscal 2006 totaled €853 mil-
many, Munich Airport saw exceptional traffic          lion, an increase of €43 million or 5.3 percent
growth in 2006. Recording around 30.8 million         year on year. Although the headcount was 6 per-
passenger movements, Munich ranked seventh            cent higher than in 2005, personnel expense
in the league table of the busiest airports in Eu-    grew less rapidly at 3 percent.
rope. To secure sufficient capacity to accommo-
date predicted intermediate-term growth, FMG
began preparations for the construction of a third    Net income
runway during 2006. The company applied for a
regional planning process for the runway on July      Having made a return to positive earnings in
31, 2006, and received approval from the region-      2005 with a profit €3.6 million, the FMG Group
al government of Upper Bavaria in early March         reported net income of €61.5 million in fiscal
2007.                                                 2006. This was due not just to operating earnings
                                                      but also to stronger financial earnings, which im-
                                                      proved as a result of better interest management
Group sales                                           and higher income from investments.

In fiscal 2006, FMG Group sales totaled €920 mil-
lion, up €76 million, or 9 percent on 2005. More
than half of Group sales – €486 million – were
generated by the servicing of air traffic, an in-
crease of almost 9 percent year on year, in line
with the positive growth in traffic. Non-aviation
sales, consisting for the most part of leases, con-
cessions, hospitality and retail revenues, likewise
grew 9 percent in comparison with the prior
year, to €434 million.




                                                                                                      51
Consolidated financial
statements 2006




52
Supervisory board’s report
The supervisory board was informed regularly        There were no changes to the membership of the
and in detail by executive management through       supervisory board in fiscal 2006.
written reports and at meetings about the com-
pany’s situation, its development, and important    The supervisory board wishes to express its grat-
business events. On the basis of the reports and    itude and respect for the work carried out and
the information received, the supervisory board     the successes achieved by the company’s execu-
monitored the management of the company’s           tive management and employees in fiscal 2006.
business and made such decisions as it was
called upon to make in accordance with its statu-   Munich, July 26, 2007
tory responsibilities.

The yearend accounts as at December 31, 2006,
and the report on the economic development
and position of Flughafen München GmbH and          Flughafen München GmbH
its group of companies presented by executive       The supervisory board
management have been audited and approved
by Deloitte & Touche GmbH, the appointed audi-      Prof. Kurt Faltlhauser
tors. Having conducted its own review, the su-      Chairman
pervisory board accepts the auditors’ findings
and raises no objections. In accordance with Sec-
tion 42a, Paragraphs 2 and 4 of the Limited Lia-
bility Companies Act (GmbHG) and Section 171,
Paragraph 2 of the Stock Corporations Act (AktG),
the board approves the yearend accounts of
Flughafen München GmbH and the FMG Group.
The supervisory board proposes that the share-
holders endorse the yearend accounts of
Flughafen München GmbH and the FMG Group.




                                                                                                  53
Consolidated management report for 2006
The purpose of the Flughafen München Group is          The number of takeoffs and landings in the com-
to operate Munich Airport and to engage in ancil-      mercial and non-commercial sectors rose 3.1 per-
lary lines of business. The FMG Group comprises        cent year on year to 411,335 aircraft movements.
Flughafen München GmbH and 12 subsidiary
companies.                                             With intercontinental traffic up 12.5 percent at
                                                       Munich Airport, the volume of cargo also expand-
                                                       ed. Cargo traffic in the flown cargo segment rose
General economic environment and situation in          10.6 percent to 224,409 tons. Given that around
the industry                                           70 percent of the cargo transported by air to and
                                                       from Munich is carried as bellyhold freight on
The global economy again continued to expand           passenger services, the renewed rise in the flown
in 2006 in spite of new historic highs in the price    cargo tonnage was the result of a drive to devel-
of oil. Alongside the fast-growing national econ-      op long-haul services.
omies of east Asian countries and the United
States, Europe’s economy, too, rapidly picked up       Group net sales totaled €920.1 million in fiscal
speed.                                                 2006, up 9.0 percent on the prior year. The servic-
                                                       ing of air traffic contributed €475.2 million, with
In 2006, the German economy showed strong              concessions, rents, leases and other sources pro-
growth for the first time since the boom year          viding a further €246.5 million, retail and hospi-
2000, not least on account of burgeoning domes-        tality €182.2 million, cargo handling €10.6 mil-
tic demand and robust and expanding exports.           lion, security services €3.0 million, medical
                                                       services €1.9 million, and insurance €0.7 million.
Against the background of a hale global economy
and recovery in Europe, conditions were right for      Aviation earnings rose in tandem with the growth
world aviation to continue growing as it had a         in traffic, and revenue from landing and parking
year earlier. The German Airports Association          fees rose sharply. Although a second authorized
(ADV) and its member airports reported a solid         ramp services operator succeeded in winning a
5.3 percent increase in the number of passenger        greater share of the ground handling market,
movements, to 174.2 million, in 2006.                  FMG succeeded in generating higher revenues
                                                       from ramp services than a year earlier. Overall,
                                                       aviation revenues grew €39.1 million, an increase
Business trends                                        of 9.0 percent.

The passenger volume at Munich Airport rose            Non-aviation revenues were also higher year on
sharply again in fiscal 2006 to 30.8 million, ex-      year, up 9.0% or €36.7 million, contributing
ceeding 30 million for the first time in the air-      €444.9 million, or 48.3 percent, to total net sales.
port’s history. This marked a 7.5 percent increase     For the most part, these revenues comprised
or 2 million passengers more than in the year be-      rents, leases and concessions (€246.5 million)
fore. Within the circle of Europe’s ten busiest pas-   and retail and hospitality revenues (€182.2 mil-
senger airports, this result ranked Munich as one      lion).
of the strongest growth engines, with only
Madrid and Barcelona airports reporting even
higher rates of growth.

Based on passenger movements, Munich suc-
ceeded in moving up a place among Europe’s top
ten airports to seventh in the rankings.




54
Materials expense rose by €23.2 million or 10.8        provided in the form of shareholder loans to en-
percent on 2005, to €238.6 million. This was           able the construction of the new airport had to be
mainly due to additional spending on guarding          paid back at the end of 2006.
and security services and higher material require-
ments in line with stronger sales growth among         A project team was formed to find the most fa-
FMG’s retail subsidiaries. However, efforts to low-    vorable and reliable way to refinance the share-
er procurement costs were successful in reducing       holder loans through banks or the money market.
expenditure on third-party services.                   In 2006, the team thoroughly researched the capi-
                                                       tal procurement options. In association with the
Although sales were substantially higher in com-       shareholders and under the guidance of West-
parison with 2005, personnel costs rose just €8.5      deutsche Landesbank and Bayerische Landes-
million, or 3.0 percent, to €294.3 million.            bank, the most favorable solution identified was a
                                                       syndicated loan involving 21 German and other
Other operating expense and interest, a major          European banks. The Group’s net interest for fis-
factor in the company’s costs, accounted for           cal 2007 will be encumbered with a further €29
€247.5 million or 26.9 percent of total costs. De-     million by the syndicated loan.
preciation across the Group totaled €139.5 mil-
lion, down marginally on 2005.
                                                       Investments1
After two years of losses and then a return to
positive territory in fiscal 2005 with Group profits   Having successfully expanded its business activi-
of €3.6 million, FMG reported a net profit before      ties, eurotrade Flughafen München Handels-GmbH,
tax of €61.5 million in 2006. However, this figure     Munich, increased its sales by €17 million, from
                                                                                           .5
includes an extraordinary gain from the reversal       €103.4 million to €120.9 million, a rise of 16.8 per-
of a €26.7 million provision formed in previous        cent. Due to the higher sales and a reduction in ma-
years to cover aviation invoicing risks.               terials costs, the company was able to report an
                                                       earnings rise from €5.5 million to €8.4 million.
The primary cause for this development was a           With the approval of its corporate parent, eurotrade
€75.8 million increase in external revenues and        retained €1.0 million in earnings. The increase in
an exceptional increase in operating expense, in-      other retained earnings is related to substantial
cluding interest. At the same time, FMG for the        capital investment in Terminal 2 security upgrades.
first time accrued €800 thousand for deferred          The residual profit of €7 million was transferred
                                                                                .4
taxes to account for higher interim results within     to Flughafen München GmbH under a profit-and-
the Group.                                             loss transfer agreement.

                                                       In the review year, Cargogate Flughafen München
Financial situation                                    Gesellschaft für Luftverkehrsabfertigungen mbH,
                                                       Munich, posted sales totaling €10.6 million (2005:
Of shareholder loans totaling €1.276 billion grant-    €10.1 million). More business and the continued in-
ed to the Group’s parent company, €784.3 million       crease in cargo tonnage enabled the company was
were repaid on December 15, 2006.                      able to post a profit of €0.9 million (2005: €0.6 mil-
                                                       lion). The profit was transferred to Flughafen Mün-
The repayment became due when Flughafen                chen GmbH under a profit-and-loss transfer agree-
München GmbH’s shareholders (the state of              ment.
Bavaria, the Federal Republic of Germany, and
the city of Munich) decided in December 2005           1
                                                           Sales figures are external sales unless otherwise stated.
that around 62 percent of the financial support




                                                                                                                       55
Allresto Flughafen München Hotel und Gaststät-        IMMO FM Terminal 2 Immobilien-Verwaltungsge-
ten GmbH, Munich, succeeded in boosting sales         sellschaft mbH & Co oHG, Freising, reported sales
by €7.1 million or 12.7 percent year on year. In      of €77.3 million (2005: €76.9 million), generated
fiscal 2006, the company increased profits by         entirely within the Group. The company posted its
€1.7 million to €2.4 million. The profits were        first ever profit in 2006, with net earnings of €1.5
transferred to Flughafen München GmbH under a         million (2005: negative €0.5 million). Profits were
profit-and-loss transfer agreement.                   transferred to FMG in proportion to its sharehold-
                                                      ing through Flughafen München Holding GmbH
aerogate München Gesellschaft für Luftverkehrs-       (formerly, T2 Holding GmbH) and Lufthansa Com-
abfertigungen mbH, Munich, provides passenger         mercial Holding GmbH.
and aircraft handling services. In fiscal 2006, the
company reported sales of €7.1 million (2005:         AeroGround Flughafen München Aviation Support
€8.8 million). Due to a decline in the number of      GmbH, Munich, supports handling operations by
handling services delivered and the attendant         recruiting temporary workers and hiring them out
drop in revenue, the company reported a net loss      to ground services. In fiscal 2006, the company re-
for 2006 of €175 thousand (2005: negative €79         ported sales of €910 thousand (2005: €946 thou-
thousand).                                            sand), generated entirely within the Group. The
                                                      company posted a profit of €54 thousand (2005:
CAP Flughafen München Sicherheits-GmbH, Frei-         €55 thousand). The profit was transferred to Flug-
sing, an FMG unit, provides guard and security        hafen München GmbH under a profit-and-loss
services at Munich Airport, in particular special     transfer agreement.
security measures as required under aviation law.
In fiscal 2006, the company reported a €1.7 mil-      MediCare Flughafen München Medizinisches Zen-
lion drop in external revenues. CAP’s total sales,    trum GmbH, Oberding, reported sales of €4.2 mil-
however, grew from €14.6 million to €17.6 mil-        lion (2005: €3.3 million), of which €2.3 million
lion, with the company reporting a net profit of      (2005: €2.3 million) were generated internally
€121 thousand (2005: €62 thousand) for the year.      within the Group. In the review year, the company
                                                      posted a profit of €128 thousand (2005: €8 thou-
In fiscal 2006, FMV - Flughafen München Versi-        sand).
cherungsvermittlungsgesellschaft mbH, Freising,
reported sales of €999 thousand, including exter-     In fiscal 2006, Terminal 2 Betriebsgesellschaft
nal revenues of €714 thousand (2005: €600 thou-       mbH & Co oHG, Oberding, grew its sales by
sand). The company posted profits of €458 thou-       €19.5 million, from €167.4 million to €186.9 mil-
sand, up from €424 thousand a year earlier. The       lion, a rise of 11.6 percent. The company reported
profits were transferred to Flughafen München         its first ever annual net profit – €8.7 million
GmbH under a profit-and-loss transfer agree-          (2005: negative €8.0 million) – before dividend
ment.                                                 payouts to its shareholders, FMG and Passage
                                                      Services Holding GmbH. The profits were shared
                                                      in proportion to the shareholders’ respective hold-
                                                      ings.




56
Flughafen München Holding GmbH (formerly, Ter-       In fiscal 2005/2006, EFM – Gesellschaft für Ent-
minal 2 Holding GmbH), Freising, holds shares in     eisen und Flugzeugschleppen am Flughafen
IMMO FM Terminal 2 Immobilien-Verwaltungsge-         München mbH, Freising, reported sales of €27.4
sellschaft mbH & Co oHG, Freising, and, as of fis-   million (prior year: €23.4 million). The net profit
cal 2006, in AeroGround Flughafen München Avi-       for the year totaled €4.0 million (prior year: €2.0
ation Support GmbH, Munich, and in MUCGround         million). As FMG has a 49 percent holding, the
Services Flughafen München GmbH, Freising.           company is included as an associated company
Under the terms of the company agreement,            in the consolidated accounts. EFM paid out €980
Flughafen München Holding GmbH has a propor-         thousand to FMG in the review year.
tionate share in IMMO’s profits and therefore
posted a profit of €852 thousand in 2006 (2005:      FMG holds 50 percent of AFBG Augsburger Flug-
negative €319 thousand). This profit was trans-      hafen Betriebs-GmbH, Augsburg. Due to the im-
ferred to Flughafen München GmbH under a prof-       materiality of this holding, it is omitted from the
it-and-loss transfer agreement.                      yearend accounts in accordance with the provi-
                                                     sions of Section 311, Paragraph 2 of the German
In its first full fiscal year, MUCGround Services    Commercial Code.
Flughafen München GmbH, Freising, reported
sales of €19.0 million, compared to €4.9 million     In fiscal 2006, Bayern Facility Management
in its short fiscal year from March 23 to December   GmbH, Munich, reported sales of €19.7 million
31, 2005. These sales were generated in their en-    (2005: €16.1 million). The net profit for the year
tirety within the Group. The company earned a        totaled €450 thousand (2005: €372 thousand).
profit of €3.5 million in 2006, compared to a loss   FMG has a 49 percent stake in the company. The
of €91 thousand in the previous, short fiscal. The   company is therefore included as an associated
profit was transferred to Flughafen München un-      company in the consolidated accounts. The prior
der a profit-and-loss transfer agreement.            year’s profit was retained in its entirety as a rev-
                                                     enue reserve.




                                                                                                       57
Asset and capital structure
                                                          December 31, 2006             December 31, 2005
                                                            € million      %             € million      %
Assets
Unpaid contributions to capital stock                             0.1     0.0                  0.1     0.0
Startup expenses                                                  0.0     0.0                  0.1     0.0
Intangible assets                                                 2.2     0.1                  2.3     0.1
Tangible assets                                               2,863.8    95.7              2,952.9    91.6
Financial assets                                                  3.9     0.1                  2.9     0.1
Fixed assets                                                  2,869.9    95.9              2,958.1    91.8


Inventories                                                     55.1      1.8                50.9      1.6
Receivables                                                     52.4      1.8                96.2      3.0
Liquid assets                                                    11.1     0.4                115.8     3.6
Current assets                                                  118.6     4.0               262.9      8.2
Prepaid expenses and deferred charges                             3.1     0.1                  0.6     0.0
Total assets                                                  2,991.7   100.0              3,221.8   100.0
Capital
Capital stock                                                  390.0     13.1               328.7     10.2
Special reserve items                                             1.2     0.0                  0.8     0.0
Shareholder loans                                              491.9     16.4                491.9    15.3
Long-term debt                                                1,515.7    50.7              1,068.2    33.2
Short-term debt                                                592.9     19.8              1,332.2    41.3
Total assets                                                  2,991.7   100.0              3,221.8   100.0




Total assets at December 31, 2006, were 7.1 per-      er loans were to be repaid by the end of 2006. The
cent lower at €2.991 billion, compared to a year      loans were originally granted to Flughafen Mün-
earlier. The €230.1 million drop was largely          chen GmbH to finance the new airport. Booked
caused by the €154.6 million reduction in fixed-      under liabilities to shareholders in 2005, the
term deposits with banking organizations, need-       €784.3 million were repaid in December 2006.
ed in part to pay back the shareholder loans due      This was partly covered by the company’s own fi-
on December 15, 2006.                                 nancial resources and partly by outside financing,
                                                      with liabilities to banks increasing by €501.4 mil-
Other reductions totaling €88.1 million in com-       lion in 2006.
parison with a year earlier were triggered by a re-
duction in long-term assets. Depreciation totaled     Compared to a year earlier, accruals were re-
€139.5 million, compared to asset additions of        duced by €23.0 million to €154.7 million, primari-
€70.2 million. Compared to a year earlier, finan-     ly through the elimination of aviation invoicing
cial assets increased by €1.077 million, to €3.939    risks.
million, as a result of investment valuations.
                                                      Liabilities were €268.0 million lower, at €1.948
Current assets and liquid assets were down            billion, in comparison with the prior fiscal. The
€144.3 million, mainly because of low levels of       change is largely the result of liabilities to share-
cash and cash equivalents.                            holders being transferred to liabilities to banks,
                                                      as well as to the consumption of cash and cash
The €61.4 million change in equity is the result of   equivalents.
profits to the same amount. In 2005, the share-
holders decided that €784.3 million in sharehold-




58
Capital investments                                     creasingly tough competition and, thus, to safe-
                                                        guard jobs. In addition, the company has not just
Additions to tangible assets totaled €66.2 million,     widened its employee health management initia-
compared to retirements totaling €28.3 million.         tives, it has also conducted an employee survey to
                                                        create a solid foundation for workplace and social
                                                        improvements, and has stepped up internal com-
Environmental stewardship and HR issues                 munications programs on health.

As an airport operator, Flughafen München GmbH          In 2006, the FMG Group’s average headcount in-
has special responsibilities toward the environ-        creased by 411 in comparison with a year earlier.
ment and local communities, and to meet these re-       The figure includes 190 vocational trainees
sponsibilities we have deployed a sustainable en-       (2005: 160).
vironmental management system that has been
certified to DIN ISO 14001 and to EMAS 761/2001.
                                                        Risks and opportunities
This advanced environmental management sys-
tem takes an end-to-end approach to company en-         The FMG Group’s system of risk management is
vironmental stewardship. Continuous documenta-          designed to identify and gauge potential risk fac-
tion of resource consumption and environmental          ing the enterprise and covers all of its operational
outputs enables us to monitor our impacts, to de-       business processes. Risks are assessed based on
fine specific environmental performance targets,        the likelihood of occurrence and on quantification
to track implementation and goal attainment, and        of the scale of impact in the event of an occur-
to develop new initiatives to ease environmental        rence. The primary goal of risk management is to
burdens.                                                take a controlled approach to risk and to define
                                                        preventive measures to avoid it.
Going forward, the company will continue to place
great emphasis on preserving natural resources          All risk information is processed internally on a
and limiting environmental impacts arising              quarterly basis to enable executive management
through the operation and expansion of Munich           and division heads to respond swiftly and effec-
Airport. Our planning and preparations for the          tively to shifts in risk scenarios. When the need
construction of a third runway at the airport are in-   arises, management responds immediately to
formed by fundamental principles of environmen-         new or changing risk situations. The latest risk re-
tal compatibility.                                      ports are also made available to the members of
                                                        the supervisory board.
With regard to human resources, there is the fol-
lowing to report: Executive management has              To minimize possible financial damage, the FMG
worked with the works council and the labor             Group has insurance for appropriate amounts
unions to develop a restructuring strategy de-          covering key areas of potential loss and liability.
signed to achieve stronger earnings in the ground
handling sector. This strategy includes extensive       External risks identified in 2006 as having a low
programs to increase the flexibility of working         likelihood but potentially severe economic impact
hours and to lower HR expense. The aim is to put        included flooding as a result of record high-water
us in a position to meet the future challenges of in    levels in the river Isar and acts of terror.




                                                                                                          59
Other risks, such as the effects of the pending        of 1,180 meters from the airport’s north runway
corporate tax reform, the price of oil, the eco-       (center to center), offset by 2,100 meters to the
nomic cycle, changes to aviation law, and loss of      west, and 4,000 meters long. To build support for
market share to rival ground services operators        the project, the Communities Council, formed in
are also addressed in our system of risk manage-       2005, is currently reviewing possible compensa-
ment.                                                  tory measures, including an impact fund, im-
                                                       provements to the region’s infrastructure, and
A concluding review of the risks has shown that        other protective measures that are to be negotiat-
there is no threat to the company’s continuity. In     ed bilaterally.
the review period, no risks were identified as pos-
ing a threat to the current situation, either before   At the beginning of March 2007, Upper Bavaria’s
or subsequent to the making of risk provisions.        regional government completed the regional
                                                       planning process for the third runway and ap-
Financial instruments – receivables, liabilities and   proved plans for the addition to the airport infra-
derivatives – are assessed at regular intervals        structure in the form submitted (with runway lo-
with regard to price, default and liquidity risks.     cation 5b). As was highlighted in a government
Derivative financial instruments are employed          news release, Flughafen München GmbH had
with the approval of executive management to           clearly demonstrated “that current runway capac-
hedge and optimize interest rates. The relevant        ity would be stretched to its limits in the next few
hedge amount is set at FMG Group shareholder           years and that the growth in air traffic anticipated
meetings.                                              in the intermediate and longer term necessitates
                                                       an additional runway. ”
To safeguard rapid ongoing growth in air traffic
and continued development in line with future          For Flughafen München GmbH, regional planning
demand, Flughafen München GmbH began plan-             approval for the third runway is an important step
ning the construction of a third runway in 2005        along the road toward creating the much-needed
and prepared and initiated the requisite regional      additional capacity that will enable us to achieve
planning process in 2006. Following the review of      our goal of safeguarding traffic and business
a number of possible locations to assess their po-     growth and remaining the region’s economic and
tential to provide the required additional capacity,   employment powerhouse.
those capable of sustaining 120 aircraft move-
ments an hour were examined in detail based on         FMG is submitting its application for zoning ap-
a comprehensive set of criteria, including noise       proval to the regional government of Upper
levels, land requirements, and the impact on the       Bavaria in 2007.
natural ecological balance. As a result, candidate
runway location 5b was chosen. It is at a distance




60
Outlook                                                Development, Retail and Services, and Terminal 2.
                                                       The structural reorganization has proved to be a
We continue to rigorously pursue plans to devel-       sound decision and has worked out well. The
op and expand Munich Airport as a leading Euro-        new, more flexible organizational structure and
pean aviation hub. The company is submitting an        the clear strategic direction have put us on the
application for zoning approval for the third run-     right footing to respond more rapidly to econom-
way in 2007.                                           ic change and to compete effectively in a liberal-
                                                       ized marketplace.
The planned capacity increase through the con-
struction of a third runway will strengthen Mu-        The project also set the target of raising earnings
nich Airport’s economic development in the long        by €50 million a year from 2008 and of achieving
term, sustain the expansion of hub traffic in the      a €100 million increase in earnings by the end of
years ahead, and bring our long-haul offering in-      2007. We look set to over-fulfill both these targets:
to line with that of other major European hub air-     The annual earnings improvement will amount
ports. Before we proceed to expand our landside        to around €90 million a year, and the cumulative
capacity – through extensions to our terminal          earnings increase between 2005 and 2007 will to-
buildings, for example – we will take steps to         tal almost €200 million.
make better use of our available resources. In
2007, for example, we are concentrating on filling     The offering of long-haul flights at Munich Air-
capacity in Terminal 1.                                port will expand in 2007, with Deutsche Lufthansa
                                                       operating daily services to Denver and three
To meet the needs issuing from the exceptionally       flights a week to Busan, via Seoul. From July
rapid growth in aviation, we began expanding           2007, South African Airways will offer a nonstop
our freight handling facilities at the beginning of    service to Johannesburg. In addition, a number
2007. In the initial phase, we are adding 15,000       of airlines will be expanding their networks and
square meters of cargo capacity, due to open at        adding further frequencies on routes in Europe.
the end of 2007.
                                                       The rates of growth predicted for the traffic sec-
We also need additional hotel capacity at the air-     tor and the favorable outlook for Germany’s
port and are planning to build a three-star facility   economy mean that we have a solid foundation
with around 250 rooms. The new hotel is to be          on which to continue to build and grow our busi-
run by a well-known international operator and         ness successfully in the years ahead. Due to the
funded by an outside real-estate investor.             one-time cumulative effect of the reversal of pro-
                                                       visions in 2006 and the additional burden of refi-
In 2006 we successfully completed M-Power, the         nancing shareholder loans, we expect to report a
strategy development and earnings growth proj-         substantially improved operating result for 2007
ect we launched back in 2003. Its goal was to re-      but a lower net profit than in 2006.
organize the FMG Group and to realign it strategi-
cally to achieve sustained, profitable growth and      Munich, April 27, 2007
create greater company value. Key objectives in-
cluded a significant and sustained improvement
in the Group’s earning power through a compre-
hensive restructuring of services and costs.           Dr. Michael Kerkloh

One major change introduced by M-Power was             Walter Vill
the reorganization of the Group into five business
divisions, five central divisions, and four service    Peter Trautmann
divisions. Our core business is conducted by the
five business divisions, Aviation, Ground Han-
dling, Corporate Real Estate Management and




                                                                                                         61
Consolidated balance sheet as at December 31, 2006




Assets                                                                                           Dec. 31, 2006        2005


                                                                                         €                  €    € thousand


A. Outstanding contributions to subscribed capital                                                  110,249.25          110


B. Startup expenses                                                                                      0.00           58


C. Fixed assets
  I. Intangible assets
     1. Franchises, intellectual property, and similar rights and assets      2,195,372.67                            2,085
     2. Goodwill                                                                      0.00                              94
     3. Advances on intangible assets                                                 0.00                              105
                                                                                                  2,195,372.67        2,284
  II. Tangible assets
     1. Land, rights similar to land, and buildings,
        including buildings on land not owned                              2,357,214,971.83                       2,420,075
     2. Technical equipment and machinery                                   419,324,168.31                          461,448
     3. Other equipment, plant and office equipment                          43,523,754.69                           50,178
     4. Construction in progress and advances on fixed assets                43,732,635.07                           21,232
                                                                                              2,863,795,529.90    2,952,933
  III. Financial assets
     1. Investments in associated companies                                   3,344,455.81                            2,150
     2. Other loans                                                             594,547.78                             712
                                                                                                 3,939,003.59         2,862
                                                                                              2,869,929,906.16    2,958,079
D. Current assets
  I. Inventories
     1. Substitute plots of land                                             29,986,309.04                           28,952
     2. Raw materials and supplies                                            4,751,224.47                            4,342
     3. Finished goods and goods for resale                                  20,387,178.70                           17,540
                                                                                                55,124,712.21        50,834
  II. Receivables and other current assets
     1. Trade accounts receivable                                            35,378,369.23                           31,363
     2. Receivables from associated companies                                    95,747.05                             506
     3. Other current assets                                                 16,922,654.61                           64,358
        of which €4,392,239.88 with a residual term
        of more than one year (2005: €1.712 million)
                                                                                                52,396,770.89        96,227
  III. Liquid assets                                                                             11,045,100.71      115,822
                                                                                                118,566,583.81      262,883
E. Prepaid expenses                                                                               3,108,421.84         647



Total assets                                                                                  2,991,715,161.06    3,221,777




62
Liabilities                                                          Dec. 31, 2006         2005


                                                             €                  €    € thousand


A. Equity
   I.   Subscribed capital                      306,776,000.00                          306,776


   II. Capital reserves                         102,258,376.24                          102,258


   III. Earnings reserves
        Other reserves                             7,743,830.36                           6,697


   IV. Consolidated net loss                    - 38,181,615.97                         - 98,406


   V. Minority interests                          11,461,125.59                          11,379
                                                                    390,057,716.22      328,704
B. Conditionally repayable shareholder loans                       491,912,735.89       491,913


C. Special item for subsidies toward assets                          1,186,500.00           741


D. Accrued liabilities
   1. Pension accruals                           12,239,081.00                           12,392
   2. Tax accruals                               34,963,295.37                           29,600
   3. Other accruals                             107,485,724.06                         135,720
                                                                   154,688,100.43       177,712
E. Liabilities
   1. Liabilities to banks                     1,815,172,896.29                       1,313,800
   2. Trade accounts payable                      57,033,375.65                          40,268
   3. Liabilities to shareholders                         0.00                          784,314
   4. Liabilities to associated companies          3,810,094.96                           2,617
   5. Other liabilities                          72,242,808.44                           75,246
                                                                  1,948,259,175.34    2,216,245


F. Deferred income                                                    5,610,933.18        6,462




Total liabilities                                                 2,991,715,161.06    3,221,777




                                                                                               63
Consolidated income statement
for the fiscal year
from January 1 to December 31, 2006



                                                                                              2006          2005


                                                                              €                  €    € thousand


 1. Net sales                                                                       920,081,082.79       844,316
 2. Other capitalized labor, overheads and material                                   4,015,013.89         2,616
 3. Other operating income                                                            61,037,907.45       34,722
                                                                                    985,134,004.13       881,654
 4. Material expense
     a. Supplies, raw materials
        and merchandise                                         - 118,692,530.97                        - 108,750
     b. Purchased services                                      - 119,936,089.64                        - 106,617
                                                                                   - 238,628,620.61     - 215,367
 5. Personnel costs
     a. Wages and salaries                                      - 234,027,689.89                        - 227,751
     b. Social security, pension costs,
        and support                                             - 60,284,704.69                          - 58,088
                                                                                   - 294,312,394.58     - 285,839
 6. Depreciation, amortization and write-downs on intangible
     assets and property, plant and equipment, and on
     capitalized startup and business expansion
     expenses                                                                      - 139,453,510.70     - 140,394
 7. Depreciation of goodwill                                                            - 94,193.30          - 94
 8. Other operating expense                                                        - 178,338,201.51     - 170,351
                                                                                   - 850,826,920.70     - 812,045
                                                                                    134,307,083.43        69,609
 9. Income from investments in associated companies                2,173,969.04                            1,187
10. Other interest and similar income                              6,220,666.55                            6,020
11. Interest and similar expense                                - 69,120,554.61                          - 74,831
                                                                                    - 60,725,919.02      - 67,624
12. Income from ordinary activities                                                  73,581,164.41         1,985
13. Taxes on earnings                                                                - 5,827,170.17          390
14. Other taxes                                                                      - 2,207,410.82       - 2,127
15. Income from loss transfer                                                                 0.00         3,396
16. Losses absorbed under profit-and-loss transfer agreements                        - 4,063,202.78            0
17. Consolidated net income                                                          61,483,380.64         3,644
18. Minority interest in consolidated net income                                       - 211,626.52         - 134
19. Transfers to retained earnings                                                   - 1,047,163.01          - 56
20. Consolidated loss carried forward                                               - 98,406,207.08     - 101,860
21. Consolidated net loss                                                           - 38,181,615.97      - 98,406




64
Consolidated cash flow statement




Financial resources                                                                                  2006         2005
                                                                                                 € million    € million


Liquid assets                                                                                         11.1        115.8
Short-term deposit investments included in miscellaneous assets                                        0.0        50.0
                                                                                                      11.1       165.8


Consolidated net income                                                                               61.5          3.6
Depreciation, amortization and write-downs on fixed assets and on capitalized startup expenses      139.6        140.5
Increase in medium- and long-term accruals                                                             5.5          2.6
Significant noncash credits                                                                         - 26.7          0.0
Cash earnings according to DVFA/SG                                                                  179.9        146.7


Reduction in short-term accruals                                                                      - 1.8      - 61.7
Losses (prior year: profits) from the retirement of assets (on balance)                                0.1        - 0.4
Increase (prior year: decrease) in inventories,
trade receivables and other assets not
booked under investment or financing activities                                                     - 12.9        12.0
Increase in inventories, trade payables and other liabilities not booked under
investment or financing activities                                                                   14.5           0.3
Cash flow from operating activities                                                                 179.8         96.9


Proceeds from the sale of noncurrent assets and from subsidies                                       18.8        129.7
Capital expenditure                                                                                 - 70.2       - 69.6
Cash flow from investment activities                                                                - 51.4        60.1


Payments to minority shareholders                                                                    - 0.2        - 0.1
Repayment of shareholder loans                                                                     - 784.3          0.0
Proceeds from financing loans                                                                       581.0        254.0
Repayment of financing loans                                                                        - 79.6      - 264.0
Cash flow from financing activities                                                                - 283.1       - 10.1


Change in cash and cash equivalents                                                                - 154.7       146.9


Cash and cash equivalents at start of period                                                        165.8         18.9
Cash and cash equivalents at end of period                                                            11.1       165.8




                                                                                                                      65
Changes in consolidated equity




                                                     Parent company                                     Minority
                                                                                                      shareholders

                           Subscribed         Capital         Consolidated            Equity            Minority        Consolidated
                             capital          reserve           retained                                capital            equity
                                                                earnings

                                €                €                    €                  €                 €                  €
At Jan. 1, 2005           306,776,000.00   102,258,376.24    - 95,258,926.39       313,775,449.85      11,366,741.87    325,142,191.72
Other changes                       0.00              0.00        39,345.74             39,345.74          3,323.39         42,669.13
Dividends                           0.00              0.00                 0.00                0.00    - 124,600.00       - 124,600.00
Consolidated net income             0.00              0.00     3,510,040.94          3,510,040.94        133,772.62       3,643,813.56
At Dec. 31, 2005          306,776,000.00   102,258,376.24    - 91,709,539.71       317,324,836.53      11,379,237.88    328,704,074.41
At Jan. 1, 2006           306,776,000.00   102,258,376.24    - 91,709,539.71       317,324,836.53      11,379,237.88    328,704,074.41
Other changes                       0.00              0.00                - 0.02             - 0.02            113.21             113.19
Dividends                           0.00              0.00                 0.00                0.00     - 129,852.02      - 129,852.02
Consolidated net income             0.00              0.00    61,271,754.12         61,271,754.12        211,626.52      61,483,380.64
At Dec. 31, 2006          306,776,000.00   102,258,376.24    - 30,437,785.61       378,596,590.63     11,461,125.59     390,057,716.22




66
Annex to the consolidated financial statements 2006
I. General notes on the consolidated financial       2. Principles of consolidation
statements
                                                     In fiscal 2006, capital consolidation was conducted
Flughafen München GmbH, Munich, (FMG) man-           using the fair-value method in accordance with
ages and coordinates all of the businesses in the    Section 301, Paragraph 1, Item 2 of the German
FMG Group. In accordance with Section 290,           Commercial Code (HGB).
Paragraph 1 of the German Commercial Code
(HGB), FMG, as the parent company, therefore         As in fiscal 2005, assets and liabilities were valuat-
presents consolidated financial statements and a     ed in accordance with German Accounting Stan-
consolidated management report for the FMG           dards (DRS), Section 4, “Company acquisitions in
Group for fiscal 2006.                               consolidated accounts.  ”

                                                     The difference resulting from first-time consolida-
1. Scope of consolidation                            tion was stated as a goodwill asset in accordance
                                                     with Section 301, Paragraph 3 of the German Com-
Besides FMG as the parent company, the consoli-      mercial Code. The goodwill is written down pro-
dated financial statements also incorporate the      portionally over the estimated useful life of five
following subsidiaries:                              years. The final write-down was in 2006, leaving a
                                                     book value of €0 at December 31, 2006.
– aerogate München Gesellschaft für Luftver-
  kehrsabfertigungen mbH, Munich (aerogate)          EFM – Gesellschaft für Enteisen und Flugzeug-
– AeroGround Flughafen München Aviation              schleppen am Flughafen München mbH, Freising,
  Support GmbH, Munich (AeroGround)                  Augsburger Flughafen Betriebs-GmbH, Augsburg,
– Allresto Flughafen München Hotel und Gast-         and Bayern Facility Management GmbH, Munich,
  stätten GmbH, Munich (Allresto)                    are reported as associated companies at the value
– CAP Flughafen München Sicherheits-GmbH,            of the proportionate interest in their respective net
  Freising (CAP)                                     worth. The three companies were initially consoli-
– Cargogate Flughafen München Gesellschaft           dated as follows at the value of the proportionate
  für Luftverkehrsabfertigungen mbH, Munich          interest in their respective net worth as per Section
  (Cargogate)                                        312, Paragraph 1, Item 2 of the German Commer-
– eurotrade Flughafen München Handels-GmbH,          cial Code: EFM at December 31, 1992; Augsburger
  Munich (eurotrade)                                 Flughafen Betriebs-GmbH at December 31, 2001
– FM Terminal 2 Immobilienverwaltungsgesell-         (due to an increase in the proportionate interest at
  schaft mbH & Co oHG, Oberding (IMMO)               December 31, 2000); and Bayern Facility Manage-
– FMV-Flughafen München Versicherungsvermitt-        ment GmbH at December 31, 2004. EFM's fiscal
  lungsgesellschaft mbH, Freising (FMV)              year is from October 1 to September 30.
– MediCare Flughafen München Medizinisches
  Zentrum GmbH, Oberding (MediCare)
– Terminal 2 Betriebsgesellschaft mbH & Co oHG,
  Oberding (T2BG)
– Flughafen München Holding GmbH, Freising
  (formerly Terminal 2 Holding GmbH),
  (FM Holding)
– MUCGround Services Flughafen München
  GmbH, Freising (MUCGround)

The yearend accounts for all the fully consolidat-
ed companies are dated December 31, 2006, and
have received the full and unqualified approval of
the auditors.




                                                                                                         67
The yearend accounts of AFBG – Augsburger             II. Accounting and valuation principles
Flughafen Betriebs-GmbH, Augsburg, are not in-
cluded in the consolidated financial statements
on account of their insignificance as per Section     1. Tangible and intangible assets
311, Paragraph 2 of the German Commercial
Code.                                                 Changes in Group assets are presented sepa-
                                                      rately.
Expenses totaling €233 thousand for the startup
and expansion of operations of a private clinic,      Tangible and intangible assets are valuated at
Airport Klinik München, for MediCare Flughafen        their original cost or at their mandatory capital-
München Medizinisches Zentrum GmbH, Ober-             ized cost of production in accordance with statu-
ding, capitalized in 2002, are written down accord-   tory fiscal requirements. Assets with a limited
ing to schedule over four years. The final write-     useful life are written down over their anticipated
down of €58 thousand was made in fiscal 2006.         overall service life as per the write-down tables
                                                      for airport operating companies. Movable items
Sales, expenses and earnings, as well as receiv-      of plant and office equipment, which until Decem-
ables and liabilities within the group of consoli-    ber 31, 2003, were generally written down ac-
dated companies are set off against one another.      cording to the declining balance method, are now
Interim profits of €18.1 million from fiscal 2003     written down as per the straight-line method, ef-
through 2006 for FMG and IMMO and interim             fective January 1, 2004.
profits of €1.4 million from fiscal 2005 and 2006
for FMG and T2 BG were deducted from additions        The difference between the additional deprecia-
to land and buildings and depreciated over a re-      tion recorded by Flughafen München GmbH and
maining useful life of two years. The depreciation    by FM Terminal 2 Immobilien-Verwaltungsgesell-
of €4.9 million was deducted from depreciation        schaft mbH & Co oHG between the accounts pre-
on property, plant and equipment.                     pared for tax purposes and the accounts pre-
                                                      pared for financial reporting purposes in fiscal
                                                      2006 totaled €24.9 million. This concerns build-
                                                      ings as per Section 7, Paragraph 4, Item 1 of the
                                                      German Income Tax Code that are operating busi-
                                                      ness assets and are non-residential in character,
                                                      essentially buildings belonging to the passenger
                                                      handling facilities.

                                                      Minor-value assets are written off in full in the
                                                      year in which they are added.




68
2. Financial assets                                    4. Accruals

In fiscal 2006, EFM’s carrying value grew from         Accruals for pensions are valuated as per Section
€1.779 million at January 1, 2006, to €2.752 mil-      6a of the German Income Tax Code (EStG) accord-
lion at December 31, 2006, with a proportionate        ing to their actuarial value at a 6% rate of interest
net profit for the year of €1.953 million and a pay-   and according to 2005 tables produced by Prof.
out of €980 thousand.                                  Klaus Heubeck.

AFBG’s carrying value was set at €0 at December        Trade taxation accruals are valuated based on an
31, 2006.                                              assumed tax rate of 15 percent.

Bayern Facility Management GmbH’s carrying             Other provisions take into account all uncertain li-
value in fiscal 2006 rose from €367 thousand at        abilities and potential losses. They are of a size
January 1, 2006, to €587 thousand at December          deemed appropriate to meeting obligations,
31, 2006, with a proportionate net profit of €220      based on a reasonable commercial assessment.
thousand. The entire prior-year profit of €372
thousand was assigned to retained earnings.
                                                       5. Liabilities
Other financial assets are stated at cost.
                                                       Liabilities are valuated at the respective amounts
Low-interest employee loans are stated at their        repayable. Liabilities for annuity payments are
nominal value at the balance-sheet date.               stated at their cash values.


3. Current assets                                      6. Currency conversion

Inventories are mostly stated at their weighted        Foreign-currency receivables and liabilities are
average cost for the past three months and are         booked at the respective buying or selling rate
written down at the lower of cost or fair value to     and converted at the less favorable rate applica-
cover risks arising from slow-moving items and         ble on the balance-sheet date.
drops in price.

Substitute plots of land reported as inventories
are capitalized at the lower of cost or fair value.

Receivables, other current assets, and liquid as-
sets are stated at the lower of nominal or fair val-
ue. Identifiable risks are accounted for in valua-
tion adjustments. Appropriate provisions are
made to cover general credit risk.




                                                                                                         69
III. Notes on individual balance-sheet items


1. Changes in Group fixed assets




                                                                Acquisition and production costs

                                                 Jan. 1, 2006         Additions      Retirements     Reclassifications      Dec. 31, 2006
                                                           €                  €                 €                   €                  €



Startup and business
expansion expenses                                233,000.00               0.00              0.00                0.00         233,000.00
                                                  233,000.00               0.00              0.00                0.00         233,000.00


Fixed assets


  I. Intangible assets
     1. Franchises, intellectual property,
        and similar rights and assets           22,134,013.87       1,198,439.93       - 65,366.13         121,522.00      23,388,609.67
     2. Goodwill                                  470,966.50               0.00              0.00                0.00         470,966.50
     3. Advances on intangible assets             104,842.36               0.00              0.00        - 104,842.36               0.00
                                               22,709,822.73        1,198,439.93       - 65,366.13          16,679.64      23,859,576.17


 II. Tangible assets
     1. Land, rights similar to land,
        and buildings, including
        buildings on land not owned          3,329,651,043.64      16,507,766.30   - 16,540,908.78        - 867,824.74   3,328,750,076.42
     2. Technical equipment and machinery    1,334,480,454.24      14,716,107.04    - 3,303,861.31       4,087,153.78    1,349,979,853.75
     3. Other equipment,
        plant and office equipment             246,072,667.85       8,996,901.97    - 8,165,682.23         - 75,763.57    246,828,124.02
     4. Construction in progress and
        advances on fixed assets               21,231,995.21       25,990,644.17     - 329,759.20       - 3,160,245.11     43,732,635.07
                                             4,931,436,160.94      66,211,419.48   - 28,340,211.52        - 16,679.64    4,969,290,689.26


 III. Financial assets
     1. Investments                              2,176,731.21       2,173,969.04     - 980,000.00                0.00       3,370,700.25
     2. Other loans                               711,632.79          594,547.78      - 711,632.79               0.00          594,547.78
                                                2,888,364.00        2,768,516.82    - 1,691,632.79               0.00       3,965,248.03
                                             4,957,034,347.67      70,178,376.23   - 30,097,210.44               0.00    4,997,115,513.46




70
                   Accumulated depreciations                                                         Book values

    Jan. 1, 2006       Additions      Retirements     Reclassifications      Dec. 31, 2006      Dec. 31, 2006       Dec. 31, 2005
              €                €                 €                   €                  €                  €                   €




     174,750.00        58,250.00              0.00                0.00         233,000.00               0.00           58,250.00
     174,750.00         58,250.00             0.00                0.00         233,000.00               0.00           58,250.00




  20,048,858.47      1,209,744.66       - 65,366.13               0.00       21,193,237.00       2,195,372.67        2,085,155.40
     376,773.20         94,193.30             0.00                0.00         470,966.50               0.00            94,193.30
           0.00              0.00             0.00                0.00               0.00               0.00           104,842.36
  20,425,631.67      1,303,937.96      - 65,366.13                0.00      21,664,203.50        2,195,372.67        2,284,191.06




  909,576,517.95    62,147,154.37      - 99,434.80          - 89,132.93    971,535,104.59    2,357,214,971.83   2,420,074,525.69
 873,032,190.19     60,390,924.07   - 3,030,173.73          262,744.91     930,655,685.44     419,324,168.31       461,448,264.05


  195,894,687.96    15,647,437.60    - 8,064,144.25        - 173,611.98    203,304,369.33      43,523,754.69        50,177,979.89


           0.00              0.00             0.00                0.00               0.00      43,732,635.07        21,231,995.21
1,978,503,396.10   138,185,516.04   - 11,193,752.78               0.00    2,105,495,159.36   2,863,795,529.90   2,952,932,764.84



      26,244.44              0.00             0.00                0.00          26,244.44       3,344,455.81         2,150,486.77
           0.00              0.00             0.00                0.00               0.00          594,547.78          711,632.79
      26,244.44              0.00             0.00                0.00          26,244.44       3,939,003.59         2,862,119.56
1,998,955,272.21   139,489,454.00   - 11,259,118.91               0.00    2,127,185,607.30   2,869,929,906.16   2,958,079,075.46




                                                                                                                               71
2. Details of ownership

– Companies included in the consolidated
financial statements
                                                                                                                    Share of
Name                                                                                             Seat               capital %
aerogate München Gesellschaft für Luftverkehrsabfertigungen mbH                                  Munich                100.0


AeroGround
Flughafen München Aviation Support GmbH                                                          Munich                100.0 1


Allresto
Flughafen München Hotel und Gaststätten GmbH                                                     Munich                100.0 1


CAP Flughafen München Sicherheits-GmbH                                                           Freising               76.1


Cargogate Flughafen München
Gesellschaft für Luftverkehrsabfertigungen mbH                                                   Munich                100.0 1


eurotrade
Flughafen München Handels-GmbH                                                                   Munich                 74.0 1


FM Terminal 2 Immobilien-Verwaltungsgesellschaft mbH & Co oHG                                    Oberding               60.0 1


FMV – Flughafen München Versicherungsvermittlungsgesellschaft mbH                                Freising              100.0 1


MediCare
Flughafen München Medizinisches Zentrum GmbH                                                     Oberding               51.0


MUCGround Services Flughafen München GmbH                                                        Freising              100.0 1


Terminal 2 Betriebsgesellschaft mbH & Co oHG                                                     Oberding               60.0 1


Flughafen München Holding GmbH (vormals: Terminal 2 Holding GmbH)                                Freising              100.0 1



– Associated companies
                                                                                                                    Share of
Name                                                                                             Seat               capital %
Augsburger Flughafen Betriebs GmbH                                                               Augsburg               50.0


Bayern Facility Management GmbH                                                                  Munich                 49.0


EFM – Gesellschaft für Enteisen und Flugzeugschleppen
am Flughafen München mbH                                                                         Freising               49.0

1
    Exemption provisions with regard to the yearend accounts as per Section 264, Paragraph 3 and Section 264b of the German
Commercial Code apply.




72
3. Equity                                                  4. Accruals

The FMG Group’s retained earnings comprise                 Accruals for deferred taxes in the FMG consoli-
other retained earnings from Allresto, CAP euro-
                                          ,                dated financial statements increased to €31.9 mil-
trade, and FMG, earnings from consolidation en-            lion in fiscal 2006 through the addition of €3.5
tries, and subsidiaries’ net income.                       million for trade income tax. In addition, in line
                                                           with higher interim figures within the Group, ac-
The Group’s net loss is calculated as follows:             cruals totaling €800 thousand were made for de-
                                                           ferred trade income tax (assuming a taxation rate
                                           Dec. 31, 2006   of 15 percent) and for income tax.
                                            € thousand
Consolidated net income                          61,483    In the review year, the FMG Group had other ac-
Minority interest in net income                    - 212   cruals totaling €107.5 million. This sum largely
Amounts transferred to retained earnings         - 1,047   comprises €11.4 million for HR expenses, €22.6
Loss carried forward                            - 98,406   million for settlement backlogs, future obliga-
Consolidated net loss                           - 38,182   tions, and compensation for phased retirement
                                                           programs, €12.8 million as a contingency for
                                                           losses, and €18.1 million for maintenance obliga-
Minority interests comprise eurotrade (+ €127              tions and outstanding invoices.
thousand), CAP (+ €78 thousand), IMMO
(+ €10.00 million), MediCare (+ €46 thousand)              Other accruals include €4.6 million to cover risks
and T2 BG (+ €1.21 million).                               issuing from water damage that occurred in 2002,
                                                           €4.5 million for public offices’ entitlements from
The change in consolidated equity is presented             rental agreements, and €1.8 for litigation risks.
separately in the equity table.




                                                                                                          73
5. Liabilities


Liabilities table

                                                              December 31, 2006                                 December 31, 2005


                                                 Residual term      Residual term       Residual term                         Residual term
                                         Total     up to 1 year       1 to 5 years        over 5 years              Total       up to 1 year
                                            €                €                    €                 €                  €                  €


 Liabilities to
 shareholders                            0.00             0.00               0.00                0.00     784,313,725.48     784,313,725.48
 Liabilities to
 banks                        1,815,172,896.29   432,930,670.05    334,622,350.18     1,047,619,876.06   1,313,800,239.89    363,300,021.15
 Trade accounts
 payable                         57,033,375.65    54,356,357.26       2,677,018.39               0.00       40,267,855.55      35,162,531.38
 Liabilities to
 associated companies             3,810,094.96     3,810,094.96              0.00                0.00        2,617,086.90       2,617,086.90
 Other liabilities              72,242,808.44     20,467,959.89       2,660,829.57       49,114,018.98     75,246,338.54      38,100,069.18
 of which to
 insurance companies            43,688,860.40       120,860.40               0.00       43,568,000.00       43,757,040.40     14,313,040.40
 of which in taxes               8,869,302.88      8,869,302.88              0.00                0.00       11,658,334.50      11,658,334.50
 of which in social welfare        228,859.81       228,859.81               0.00                0.00        6,690,917.47       6,690,917.47
                              1,948,259,175.34   511,565,082.16     339,960,198.14    1,096,733,895.04   2,216,245,246.36   1,223,493,434.09




74
IV. Notes on the income statement

The consolidated income statement was
prepared according to the total cost method.


1. Proceeds on sales

Following is a breakdown of year-on-year sales
growth by business segments across the FMG
Group:

                                                                         2006                       2005
                                                             € million             %    € million             %
 Servicing of aviation                                          475.2            51.6      436.1            51.6
 Franchises, rents, leases                                      246.5            26.8      233.7            27.7
 Retail and hospitality                                         182.2            19.8       157.6           18.7
 Cargo handling                                                   10.6            1.2        10.1            1.2
 Security services                                                 3.0            0.3         4.7            0.6
 Medical services                                                  1.9            0.2         1.1            0.1
 Insurance                                                         0.7            0.1         1.0            0.1
                                                                920.1           100.0      844.3           100.0



2. Own work capitalized/Other operating income        3. Other financial obligations

Since 2005, planning work conducted by Flugha-        Existing real-estate lease contracts are expected
fen München GmbH for goods for which capital-         to incur costs of around €51.4 million in 2007. The
ization is mandatory has been booked as own           burden through to the end of the basic lease term
work capitalized. For fiscal 2006, this item in-      in 2020 will amount to €355.7 million.
cludes €1.2 million in planning work for the air-
port’s future third runway.                           Existing construction, supply and service con-
                                                      tracts and agreements with planners, architects
Other operating income includes €33.3 million         and engineers pertain essentially to ongoing
from the reversal of provisions (including €26.7      business operations and are of a scope consis-
million to cover aviation billing risk). Additional   tent with such operations. There are also addi-
operating income items include €6.2 million in        tional obligations for environmental protection
transferred charges for vacant capacity in Termi-     measures and the honoring of public-law require-
nal 1, €4.4 million from advertising, €3.7 million    ments.
for the provision of the utility infrastructure for
Terminal 2, and €1.1 million from long-term           Obligations issuing from service agreements and
building rights.                                      purchasing commitments are within the usual
                                                      business scope.




                                                                                                               75
4. Derivative financial instruments                       In addition to this remuneration, executive board
                                                          members received emoluments in kind and con-
The FMG Group had the following derivative fi-            tractually agreed fringe benefits totaling €37.0
nancial instruments at the balance-sheet date:            thousand. Reserves totaling €1.926 million were
                                                          also formed at December 31, 2006, to cover fu-
– 29 payer swaps with a volume of €979.4 million          ture pension obligations.
  and terms through to 2016. Of these, 14 swaps
  with a nominal volume of €375 million had a             Former members of executive management and
  market value of €7.7 million at December 31,            surviving dependents of former members re-
  2006, and 15 with a nominal value of €604.4             ceived emoluments of €561.9 thousand in fiscal
  million had a market value of negative €43.1            2006. Reserves of €4.559 million were formed to
  million.                                                cover future pension payments and accrued pen-
– 2 receiver swaps with a term through to 2015            sion rights of surviving dependents.
  and a volume of €190 million (market value:
  negative €3.7 million)                                  Emoluments paid to supervisory board members
– 3 caps with a volume of €80 million and terms           totaled €16.4 thousand.
  through to 2010 (market value: negative €0.6
  million)
– 4 constant maturity swaps with a volume of              6. Employees
  €178 million and terms through to 2015 (market
  value: negative €6.3 million)                           Since the introduction of a new collective labor
                                                          agreement, we no longer differentiate between
The market values of all of the derivative finan-         wage, salaried and temporary employees in our
cial instruments were stated by the relevant              reporting as of fiscal 2006.
banks and were computed by these banks using
the discounted cash flow method and current in-           As per Section 267, Paragraph 5 of the German
terest structure curves.                                  Commercial Code, the FMG Group had, on aver-
                                                          age, 6,996 employees on unlimited, fixed-term
Due to the negative market values of the four             and trainee contracts in fiscal 2006 (2005: 6,615).
constant maturity swaps, a reserve of €6.3 mil-
lion was formed as a hedge against losses (2005:          In addition, 190 apprentices were undergoing vo-
€2.8 million).                                            cational training (2005: 160).

All other swaps and caps were combined with
underlying transactions for valuation purposes
and are not stated separately in the balance              Munich, April 27, 2007
sheet.

Moreover, two loans in existence at the balance-
sheet date that were originally taken out in
Japanese yen were transferred into euros by               Dr. Michael Kerkloh
means of cross-currency swaps (total volume:
€43.6 million).                                           Walter Vill

                                                          Peter Trautmann
5. Parent company executive board remuneration
and loans

Remuneration of executive board members con-
sists of a fixed salary and a variable, perform-
ance-based amount:

Executive board            Fixed    Variable      Total
remuneration          € thousand € thousand € thousand
Dr. Michael Kerkloh        225.0        87.6     312.6
Walter Vill                181.5       72.2      253.7
Peter Trautmann            179.5       72.1      251.6
Total                      586.0      231.9      817.9




76
Independent auditor’s report
We have audited the consolidated financial state-       dit. The audit includes assessing the annual financial
ments prepared by Flughafen München GmbH, Mu-           statements of those entities included in consolida-
nich, comprising the balance sheet, income state-       tion, the determination of entities to be included in
ment, cash flow statement, equity statement, and        consolidation, the accounting and consolidation
the notes to the consolidated financial statements,     principles used and significant estimates made by
together with the consolidated management report        management, as well as evaluating the overall pre-
for the fiscal year from January 1 to December 31,      sentation of the consolidated financial statements
2006. The preparation of the consolidated financial     and the consolidated management report. We be-
statements and the consolidated management re-          lieve that our audit provides a reasonable basis for
port in accordance with German commercial law re-       our opinion.
quirements is the responsibility of the company’s
management. Our responsibility is to express an         Our audit has not led to any reservations.
opinion, based on our audit, on the consolidated fi-
nancial statements and on the consolidated man-         In our opinion, based on the findings of our audit,
agement report.                                         the consolidated financial statements of Flughafen
                                                        München GmbH, Munich, comply with the statutory
We conducted our audit of the consolidated finan-       requirements and give a true and fair view of the
cial statements in accordance with Section 317 of       net assets, financial position and results of opera-
the German Commercial Code (HGB) and with gen-          tions of the company in accordance with these re-
erally accepted standards for the audit of financial    quirements. The consolidated management report
statements in Germany as issued by the Institute of     is consistent with the consolidated financial state-
Public Auditors in Germany. These standards re-         ments and as a whole provides a suitable view of
quire that we plan and perform the audit such that      the company’s position and suitably presents the
misstatements materially affecting the presentation     opportunities and risks of future development.
of the net assets, financial position and results of
operations in the consolidated financial statements     Munich, June 6, 2007
in accordance with the principles of proper account-
ing and in the consolidated management report are       Deloitte & Touche GmbH
detected with reasonable assurance. Knowledge of        Appointed auditors
the business activities and the economic and legal
environment of the company and expectations as to       Dorn
possible misstatements are taken into account in        Auditor
the determination of audit procedures. The effective-
ness of the accounting-related internal control sys-    pp Häussermann
tem and the evidence supporting the disclosures in      Auditor
the consolidated financial statements and the con-
solidated management report are examined prima-
rily on a test basis within the framework of the au-




                                                                                                           77
Additional information
1. Executive board                              Federal Republic of Germany

Members of the executive board:                 Dr. Dieter Knoll
                                                Ministerial councilor,
Dr. Michael Kerkloh                             Federal Ministry of Finance, Bonn
President and Chief Executive Officer
Walter Vill                                     Robert Scholl
Vice President and Chief Financial Officer      Director-General,
Peter Trautmann                                 Federal Ministry of Transport
Chief Operating Officer                         Building and Housing


2. Supervisory board                            City of Munich

Members of the supervisory board:               Christian Ude
                                                Chief Mayor, City of Munich
Prof. Kurt Faltlhauser
Minister of State,                              Dr. Reinhard Wieczorek
Bavarian State Ministry of Finance, Munich      Councilor, City of Munich
Chairman

Thomas Bihler                                   Employee representatives
Clerical employee
Employee representative and vice chairman       Heinrich Birner
                                                Director of the ver.di labor union, Munich region

Free State of Bavaria                           Hans-Joachim Bues
                                                Head of Corporate Communications
Josef Poxleitner                                Executive employees’ representative
Director-General,
Board of Building and Public Works in the       Willy Graßl
Bavarian State Ministry of Home Affairs         Certified aircraft handler
                                                Works council chairman (from May 1, 2006)
Hans Spitzner                                   Full-time works councilor
Undersecretary,
Bavarian State Ministry for Economic Affairs,   Ralf Krüger
Transport and Technology                        Works council chairman (until April 30, 2006)
                                                Full-time works councilor
Klaus Weigert
Director-General,                               Orhan Kurtulan
Bavarian State Ministry of Finance, Munich      Certified aircraft handler
                                                Full-time works councilor

                                                Anna Müller
                                                Clerical employee
                                                Full-time works councilor

                                                Otto Siegl
                                                Clerical employee




78
Publisher:
Flughafen München GmbH
Finance and Controlling

Tel.: +49 89 975-00
Fax: +49 89 975-3 50 06

Editor:
Corporate Communications
Internal Communications and Publications
Dr. Reingard Schöttl

Flughafen München GmbH
Postfach 23 17 55
85326 Munich
Germany

www.munich-airport.de

Photographs:
Corbis
Marco Einfeldt
Alex Tino Friedel
Getty Images
Dr. Werner Hennies
Jupiterimages
Miguel Perez
Jan Wolter

Design:
Pantos Werbeagentur GmbH, Munich

Printing:
Lang Offsetdruck GmbH & Co. KG, Unterschleißheim

Paper:
Inside pages printed on Recy-Satin recycled paper with
at least 80 percent secondary fiber content.




                                                     79

				
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