4
DFS Deutsche Flugsicherung GmbH
In the 2013 business year, the Supervisory Board
performed its functions as prescribed by law and the
Articles of Association. It regularly advised the Board of
Managing Directors and was comprehensively involved in
decisions of fundamental importance to the company.
In its work, the Supervisory Board was supported by its
three committees: an audit, a personnel and a project
committee. The committees intensively discussed deci-
sion papers in advance and prepared recommendations
for the decisions to be taken at the plenary meetings.
With the resolution of the Shareholder Meeting on the
discharging of the Supervisory Board and the Board
of Directors for the business year 2012 on 26 April
2013, the fourth term of office of the Supervisory Board
ended as scheduled. As of the fifth term of office of
the Supervisory Board from 26 April 2013, Dr Martina
Hinricher, Dr Angelika Kreppein, Michael Odenwald and
Ralf Raddatz were again appointed as members of the
Supervisory Board on the Shareholder side. Repre-
sentatives on the Shareholder side for the first time
are Dr Edeltraud Leibrock and Carmen von Bornstaedt-
Radbruch.
The employee representatives were chosen by means of
an election among staff. In the fifth term of office, Peter
Schaaf and Dirk Wendland as well as the new members
Catja Gräber, Volker Möller, Markus Siebers and Andrea
Wächter are the staff representatives on the Supervisory
Board.
In the 83rd and constitutional meeting, the Supervisory
Board elected Michael Odenwald as Chairman of the
Supervisory Board and Markus Siebers as Deputy Chair-
man. In addition, the composition of the three commit-
tees was completely changed.
The Board of Managing Directors reported to the Super-
visory Board in due form by means of comprehensive
quarterly reports in accordance with Article 90 of the Ger-
man Stock Corporation Law (AktG). On the basis of these
reports, the Supervisory Board discussed the situation and
development of the company at four ordinary meetings as
well as at two extraordinary meetings. The Board of Man-
aging Directors provided supplemental ad hoc information
to the Supervisory Board on a case-by-case basis.
In addition to the regular deliberations on the quarterly
reports on the situation of the company, the Supervisory
Board specifically dealt with the following topics:
■ the 2012 annual financial statements, management
report and the audit report on the 2012 annual financial
statements,
■ the economic plan 2014, with the associated investment
and financial plan,
■ the submission of a tender for the apron management
service at Munich Airport and
■ the possible stake in the UK air navigation service
provider NATS.
In addition, the Supervisory Board decided on the replace-
ment investments
■ in the air traffic control system in the Munich Control
Centre as part of the P2 renewal programme
and
■ in the air traffic control system iCAS at the Karlsruhe
Control Centre.
At two extraordinary meetings, the Supervisory Board
passed the economic, investment and finance plans 2013
and dealt with the corporate strategy based on the DFS
five-point programme.
Report of the Supervisory Board
5
After the first year of the term of office of the new Board
of Managing Directors, the Supervisory Board sees itself
confirmed in the progress of the reorientation of DFS. The
Supervisory Board is convinced that DFS is on the right
path to meet demanding challenges in an economically
difficult environment.
The Supervisory Board discussed the 2013 financial
statements and the management report with the assis-
tance of the audit report prepared by the auditors RBS
RoeverBroennerSusat GmbH & Co. KG in accordance with
Article 53 of the German Budgetary Principles Act (HGrG).
The comprehensive risk management system established
in the company was included in the audit. The auditors
participated in the discussions and were available to
answer questions, giving an account of the key results of
their report. The Supervisory Board found no exceptions
to be taken against the audit report and its findings.
The Supervisory Board would like to thank the new Board
of Managing Directors, all members of staff and the mem-
bers of the staff councils for their commitment to DFS
and for their successful work in the business year 2013.
The Supervisory Board
Michael Odenwald
Chairman
Michael Odenwald
6
DFS Deutsche Flugsicherung GmbH
Members of the Supervisory Board
ChairpersonMichael OdenwaldState SecretaryFederal Ministry of Transport and Digital Infrastructure
Deputy ChairmanMarkus SiebersEmployee representativeDFS Deutsche Flugsicherung GmbH
Carmen von Bornstaedt-RadbruchMinisterialrätinFederal Ministry of Defence
Catja GräberEmployee representativeDFS Deutsche Flugsicherung GmbH
Dr Martina HinricherMinisterialdirektorinFederal Ministry of Transport and Digital Infrastructure
Dr Angelika KreppeinRegierungsdirektorinFederal Ministry of Finance
Dr Edeltraud LeibrockMember of the Executive BoardKfW Bankengruppe
Volker MöllerEmployee representativeDFS Deutsche Flugsicherung GmbH
Ralf RaddatzColonel (G.S.)Federal Ministry of Defence
Peter SchaafEmployee representativeDFS Deutsche Flugsicherung GmbH
Andrea WächterEmployee representativeDFS Deutsche Flugsicherung GmbH
Dirk WendlandEmployee representativeDFS Deutsche Flugsicherung GmbH
Correct at March 2014
7
Members of the Advisory Council
Christine AligChairpersonBARIG – Board of Airline Representatives in Germany e.V.
Gerd BechtManagement Board Member for Compliance, Privacy, Legal Affairs and Corporate SecurityDeutsche Bahn AG
Andreas BergerMember of the Board of ManagementAllianz Global Corporate & Specialty AG
Markus BeumerMember of the Board of Managing DirectorsCommerzbank AG
Michael EggenschwilerChief Executive OfficerFlughafen Hamburg GmbH
Dirk FischerMember of ParliamentGerman Bundestag
Prof Dr Elmar GiemullaPresidentAircraft Owners and Pilots Association AOPA Germany
Winfried HermannMinisterMinistry of Transport and Infrastructure Baden-Württemberg
Ulrich LangeMember of ParliamentGerman Bundestag
Kirsten LühmannMember of ParliamentGerman Bundestag
Karl MüllnerLieutenant GeneralChief of Staff, Air ForceFederal Ministry of Defence
Katherina ReicheParliamentary State SecretaryFederal Ministry of Transport and Digital Infrastructure
Paul RiemensChief Executive OfficerLuchtverkeersleiding Nederland (LVNL)
Prof Dr Bernd SannerAGAPLESION BETHESDA KRANKENHAUS WUPPERTAL gGmbHMedical Director
Dr Stefan SchulteChairman of the Executive BoardFraport AG
Carsten SpohrChief Executive Officer of Lufthansa Passenger AirlinesDeutsche Lufthansa AG
Wolfgang StertenbrinkChairman of the Supervisory BoardsALTE LEIPZIGER – HALLESCHE Group
Ralf TeckentrupPresident of the Executive BoardCondor Flugdienst GmbH
Klaus Thiemann
Daniel WederChief Executive Officerskyguide swiss air navigation services ltd
Permanent guest:Michael OdenwaldChairman of DFS Supervisory Board Federal Ministry of Transport and Digital Infrastructure
Correct at March 2014
8
DFS Deutsche Flugsicherung GmbH
Group management report
1. Overview of the DFS Group ...................................................................................................................................9
2. Economic environment .......................................................................................................................................16
3. Personnel ..........................................................................................................................................................33
4. Supplementary report .........................................................................................................................................35
5. Compliance .......................................................................................................................................................36
6. Risk report ........................................................................................................................................................36
7. Outlook .............................................................................................................................................................42
Group financial statements
Annex 1: Group statement of comprehensive income .................................................................................................48
Annex 2: Group balance sheet ..................................................................................................................................49
Annex 3: Group statement of changes in equity .........................................................................................................50
Annex 4: Group cash flow statement .........................................................................................................................51
Annex 5: Notes (group) ............................................................................................................................................52
Notes to the statement of comprehensive income ........................................................................................73
Notes to the balance sheet .........................................................................................................................81
Additional disclosures ..............................................................................................................................111
Acronyms and abbreviations .....................................................................................................................142
9
1. Overview of the DFS Group1.1 Business activities
The main business of air navigation services provided
by DFS Deutsche Flugsicherung GmbH is defined by the
tasks set out in Article 27c of the German Aviation Act
(LuftVG). Under this act, DFS is entrusted with providing
air traffic services and air traffic flow management as well
as with managing airspace utilisation (sovereign task). For
this purpose, it develops and operates air traffic service
systems as well as communications, navigation and sur-
veillance systems. DFS operates control centres in Lan-
gen, Bremen, Karlsruhe and Munich as well as 16 control
towers at international airports in Germany. In addition,
DFS is represented at the EUROCONTROL Control Centre
in Maastricht, the Netherlands. Through these activities
and with its 6,000 operational and administrative staff,
DFS ensures that approximately three million flights under
instrument flight rules (IFR) reach their destinations safely
and on time each year.
As payment for its main business, DFS levies air naviga-
tion charges. These charges are set by means of a charg-
ing ordinance issued by the Federal Ministry of Transport
and Digital Infrastructure (BMVI).
DFS also provides commercial services for third parties
on the free market (i.e. services not financed by air navi-
gation charges). These commercial services comprise
project work for national and international air navigation
service providers, consulting services, aeronautical publi-
cations, apron management services as well as the train-
ing services offered by the DFS Academy.
Group management report for the business year 2013
Air navigation services under Article 27c German Aviation Act (LuftVG)■ Air traffic services
■ Air traffic flow management
■ Management of airspace utilisation
■ Aeronautical information services
■ Projects■ Consulting■ Publications■ Apron management
services■ Training
Main business(Control Centre, Tower and AIM)
Commercial business(AS)
Not financed by air navigation charges
Financed by air navigation charges
Overview of business activities
Group management report 2013
10
Group management report 2013
The main business and the commercial business are
grouped into four business units:
1.2 Structure of the Group
Aeronautical information service and provision
of aeronautical information and data
Aeronautical Information
Management
Air traffic control for the terminal and en-route areas
Control Centre
Air traffic control at inter-national airports
Tower
DFS business units
Simulations, training and consulting services
as well as marketing of aeronautical
information products
Aeronautical Solutions
The four business units are complemented by corporate
service centres and corporate development centres. The
corporate service centres offer centrally provided internal
services to the business units. The corporate develop-
ment centres focus on management processes and on
preparing decisions to be taken by management.
100% The Tower Company
(TTC)
BILSODA
GmbH & Co. KG
(BILSODA)
100% DFS Energy GmbH
(DFS Energy)
55% FCS Flight
Calibration Services GmbH
(FCS)
100% Unterstützungs -
kasse GmbH
(DFS U-Kasse)
100% DFS International Business Services
GmbH
(DFS IBS)
GroupEAD Europe S.L.
(GEAD)
36%
Tower Air Traffic Services S.L.
(TATS)
50%
R. EisenschmidtGmbH
(Eisenschmidt)
100%
European Satellite Services Provider
Société par Actions Simplifiée(ESSP SAS)
16.667%
DFS Deutsche Flugsicherung GmbHWholly owned by the
Federal Republic of Germany
24.9%
11
The subsidiaries and investments of the DFS Group sup-
plement the portfolio of services offered by DFS and are
closely related to the aviation industry. Other major activi-
ties of the DFS Group:
Operational
■ Development, provision and conduct of air navigation
services at regional airports as well as the provision of
other services, especially apron management services,
coordination of ground handling and meteorological
observations.
■ Operation of an air transport company for the transport
of persons and the material of third parties for the
flight inspection of navigation aids as well as services,
developments and support of all kinds for the conduct
of flight inspections.
■ Operation of a database of aeronautical information
for the provision of aeronautical data and associated
services.
New since July 2013
■ Production and marketing of aeronautical charts and
publications as well as other aeronautical information,
including in electronic form. This encompasses the
marketing of technical accessories for the preparation,
planning and conduct of flights.
Supporting
■ Generation, provision and sale of energy for the own
use of DFS and for a fixed group of external customers.
■ Construction, rental, operation and administration of a
parking structure for DFS.
As a reaction to the continuing consolidation in the avia-
tion industry and the resulting diversified framework
conditions, DFS has initiated the first measures to adapt
and realign the structure of the Group. In preparation for
its future organisational and financing holding function,
DFS European Satellite Services Provider GmbH (DFS
ESSP) has been renamed and has been trading as DFS
International Business Services GmbH (DFS IBS) since
3 September 2013. The growing national and international
scope of DFS IBS covers primarily the management,
holding, administration and financing of investments in
companies that promote the development, provision and
conduct of services on the air transport market and their
further development. On 3 July 2013, DFS IBS acquired
100 percent of the shares in R. Eisenschmidt GmbH,
Egelsbach, Germany and integrated this long-standing
contracting party into the DFS Group. This step secures
a high level of quality and reliability over the long term for
our customers.
On 14 October 2013, DFS took over the payment of
grants to employees and eligible dependants in the case
of emergencies. These duties had previously been under-
taken by DFS Unterstützungskasse GmbH (DFS U-Kasse).
DFS U-Kasse is being wound up.
The contents of this group management report refer to
DFS only, as the subsidiaries neither individually nor col-
lectively exceed quantitative thresholds or display qualita-
tive characteristics with a material impact on the results
and financial position of DFS.
1.3 Legal framework and management organisation
In 1993, DFS was entrusted with the tasks of the Federal
Administration of Air Navigation Services (BFS). The head-
quarters of DFS is located near Frankfurt, in Langen, Am
DFS-Campus 10. The company is registered under HRB
34977 on the Commercial Register at the local district
court in Offenbach.
The object of the company is the development, provision
and execution of the air navigation services delegated
to the company by the Federal Ministry of Transport and
Digital Infrastructure (BMVI). The company can provide air
navigation services in Europe as well as carry out related
sideline activities in Germany and abroad.
The sole shareholder is the Federal Republic of Germany.
The management organisation is based on the distribution
of responsibilities among the DFS Managing Directors.
12
Group management report 2013
The Board of Managing Directors is supported by a
sixteen-strong Management Committee, whose members
come from the executive management level. The Manage-
ment Committee advises on important issues, shares
information and prepares the decisions of the Board of
Managing Directors.
The Supervisory Board of DFS comprises 12 members,
six appointed by the Shareholder and six elected by
the employees. In 2013, the Supervisory Board was
reformed as scheduled (see Note 42.2 on the composi-
tion of the Supervisory Board).
1.4 Strategies and objectives
DFS is committed to delivering an outstanding level of
performance at a first-class, uncompromising safety
level. The company services are provided in a sustain-
able manner and are tailored to the different needs of
our customers. As a certified provider of air navigation
services for complex airspaces and airports, DFS contrib-
utes to enhancing the performance of the air transport
system, while carefully taking noise abatement needs into
account. DFS offers challenging work for aviation enthusi-
asts and innovative people from around the world seeking
the opportunity to shape the future of air transport.
The financial strategy of DFS promotes the financial sta-
bility of the company and is based on the following areas
of focus:
■ A good to very good credit rating: Investors, business
partners and employees should be able to continue
to trust in the financial stability of the company. The
company secures a very good investment grade rating,
both in combination with its Shareholder and from a
stand-alone perspective (see section on Financial man-
agement).
■ Adequate liquidity: The company keeps an operational
reserve of €160 million to be able to react flexibly to
changed conditions in its environment. This ensures the
company's ability to act.
■ Adequate capital structure and equity ratio: The capital
structure and equity ratio are strengthened continu-
ously. The negative impact on the equity as defined
under IFRS stemming from the revised standard on the
recognition of long-term employee benefits (see Note
25.8) from the 2013 business year will be reduced step
by step over the next 15 years, starting from 2015
due to higher air navigation charges. DFS will continue
Distribution of responsibilities among the DFS Managing Directors
Chairman andCEO
■ Strategy, organisation, international affairs■ Institutional and legal affairs, insurances,
risk management, compliance■ Safety and security management systems■ Auditing, quality management■ Corporate communications, public relations,
environment■ Finance incl. taxes and charges■ General administration■ Procurement■ Consulting services and system deliveries
Managing Director Operations
■ Air traffic services■ Airspace management■ Air traffic flow management■ Aeronautical information service■ Communication, navigation
and surveillance services■ Product/system management for
technical systems, logistics■ Research and development■ Military affairs■ Technical and infrastructural facility manage-
ment■ Development of ATM systems
and business and administrative information technology
Managing Director Human Resources – Labour Director –
■ Human resources strategy■ Collective bargaining (strategies
and policies)■ Staff planning, human resources
management■ Human resources development,
initial and continuation training, Academy
■ Payroll accounting■ Compensation and incentive systems■ Occupational pensions■ Social and health management■ Industrial safety, accident prevention■ Labour law, collective bargaining law
13
to maintain the equity ratio shown in 'adjusted equity'
(see Note 35.4) of around 25 percent and to progress
towards a fully funded status for occupational pensions
in a step-by-step manner.
■ Low debt and unencumbered assets: The take-up of
loans is tightly linked to the capital expenditure to be
financed both as regards timing and purpose, and the
loans are paid back over the normal useful life of the
capital expenditure. The infrastructure of the company
is unencumbered and remains the property of the com-
pany. This creates a stable asset base that is for all
intents and purposes freely available.
■ Ability to pay a dividend: The provision of cost-effective
operational air navigation services ensures that the
capital provided by the Shareholder earns an adequate
return.
A modern risk management system supports the planning
and control of financial risks in a consistent manner.
Starting from the DFS vision with its long-term focus,
the Board of Managing Directors has developed strate-
gic guidelines and installed a five-point programme to
realign DFS with the demands of the future. In doing so,
it has defined fundamental strategic objectives. They
focus on cooperation among air navigation service pro-
viders in Europe, the optimisation of air traffic services,
the increase of productivity, the commercial business
and the reorganisation of the human resources function
at DFS.
Air navigation services in Europe
As a strong air navigation service provider, DFS is actively
shaping the European consolidation process. It cooper-
ates with European partners in a reliable and predictable
manner.
It analyses the competition and acquires new business
both in the commercial business and in the business
financed by air navigation charges. The company supports
suitable and appropriate regulations to implement the
SES objectives.
Air traffic services
DFS is reacting to the demands of customers by creat-
ing the conditions for the flexible deployment of staff
and improving both airspace structures and proce-
dures. ATS systems continue to be harmonised across
Europe.
Increase in productivity
By 2019, DFS aims to reduce operating costs by
approximately €100 million per year. The company is in
close dialogue with the employees, staff councils and
trade unions affected to avoid a further increase in head-
count and uses natural staff turnover to reduce staff
numbers. All measures will be introduced in a socially
compatible manner. Mandatory redundancies are not
planned.
The company is critically appraising capital expenditures
and reducing general administrative expenses.
Commercial business
DFS is improving its competitiveness and is systemati-
cally expanding its commercial business.
Human resources
DFS is strengthening its reliable and trust-based working
relationships with its staff, executives and the staff rep-
resentatives. It is improving the ability of staff members
to combine work and family life over the long term and is
reorganising the human resources function.
1.5 Planning and control
Corporate management at DFS is based on the regulation
targets, the strategic guidelines and objectives laid down
by the Board of Managing Directors, the requirements of
the business financed by air navigation charges and the
commercial business as well as the organisational struc-
ture and the five-point programme of DFS. The planning
and control process identifies suitable measures, embeds
14
Group management report 2013
them in the yearly rolling five-year plan and continuously
monitors the results of the Group, the segment financed
by air navigation charges, all other segments and the
group companies.
Performance and cost objectives as well as internal
goals from the five-point programme determine the
requirements placed on the individual organisational units
(business units, corporate service centres and corporate
development centres).
The achievement of these objectives and goals is meas-
ured by means of planned/actual comparisons which
are carried out both on a regular basis and as needed
(monthly, yearly and ad hoc). Achievement is monitored
and reported at a group, corporate, unit and product
level. For this purpose, a system of financial indicators
has been developed. The system is composed of indica-
tors derived primarily from IFRS accounting standards.
The system lays down budgets and cost ceilings. The
goals for operating costs are determined and laid down
using the following framework:
Staff costs
+ Other operating expenses (e.g. material costs)
+ Depreciation and amortisation
= Primary costs
+ Charges from internal cost allocation (ILV)
– Income from internal cost allocation (ILV)
= Operating costs
The commercial business is materially influenced by
the competitive environment in which it operates. Plan-
ning and control is carried out by means of contribution
margins and return on sales metrics, whereby a positive
contribution to earnings should be generated.
Planning and control also uses non-monetary indicators,
such as those from the traffic forecast.
DFS continuously measures safety and air traffic control
capacity. It reviews infringements of separation as well as
punctuality indicators.
1.6 Operating segments
1.6.1 Overview
DFS divides its business activities between the "Segment
financed by air navigation charges" and "All other seg-
ments". The segment financed by air navigation charges
is the focus of the main business in Germany. It is divided
into the material areas en-route services and terminal
services, which fall under the responsibility of the busi-
ness units Control Centre and Tower and their technical
support units
1.6.2 Segment financed by air navigation charges
1.6.2.1 En-route services
Within the scope of adopting of the Single European Sky
(SES) II package, EU Regulation 691/2010 and EU Reg-
ulation 1191/2010 introduced a performance scheme
for air navigation services and network functions from
1 January 2012. EU Regulation 691/2010 lays down
a performance scheme for air navigation services and
network functions (formerly EC Regulation 2096/2005)
and EU Regulation 1191/2010 lays down a common
charging scheme for air navigation services (formerly
EC Regulation 1794/2006). The core elements of these
Regulations are European and national requirements
covering safety, environment, capacity and cost-efficien-
cy. For the first reference period, target values have
been laid down in the performance plan (capacity and
environment) for the Functional Airspace Block Europe
Central (FABEC) and for the German contribution to the
performance plan (cost-efficiency performance area).
The respective national supervisory authority lays down
the charges to be levied for one reference period on the
basis of EU regulations. The first period covers 2012 to
2014. In Germany, the Federal Supervisory Authority for
Air Navigation Services (BAF) is the national supervisory
authority.
15
1.6.2.2 Terminal services
Terminal services will continue to be subject to the
existing system of full cost recovery until the end of
2014. The calculation of charges results in operational
over- and under-recoveries for the business year that
are carried forward as liabilities or receivables into
future periods (business year + 2) and offset when
calculating charges for airspace users. Over-recoveries
reduce the future basis for billing, while under-recover-
ies increase it.
1.6.2.3 All other segments
This segment covers the activities that are not individually
reportable as they are below the quantitative thresholds.
These activities primarily relate to commercial services,
investments and financial transactions that do not impact
air navigation charges. Commercial services are offered
globally. In contrast to the business financed by air navi-
gation charges, the activities under all other segments
are not subject to economic regulation or full cost recov-
ery. Commercial services make up the major component
of all other segments.
Intersegment transactions are conducted at arm's length
conditions and prices (see Note 30).
1.7 Research and development
German airspace demands a particularly well-performing
air navigation services organisation over the long term
as its airspace is considered to be extremely busy and
complex in international comparison. Technological and
operational innovations represent an important means
to manage the growing cost pressure, the increasing
requirements as regards environmental sustainability
and the rise in air traffic predicted in all forecasts for the
medium term. This must all be managed while maintain-
ing an unrestricted safety level. Therefore, DFS has been
involved in international and national research projects for
many years. It concentrates on applied research which
leads to new products, procedures and working methods
and which pursues the path from invention to innovation.
SESAR is the leading project in the international area,
which encompasses all areas of air navigation services.
It is organised within the scope of the SESAR Joint
Undertaking, which DFS joined as an active member in
June 2009, along with other leading organisations (air
navigation service providers, airspace users, airports
and the manufacturing industry). National activities focus
on regional challenges such as the optimisation of flight
routes for overflights and the operation of busy airports
En-route
■ Until the end of 2011: Full cost recovery
■ Since 2012: Economic regulation
Terminal services
■ Until the end of 2014: Full cost recovery
■ From 2015 onwards: Economic regulation
Commercial business
Investments
Financial transactions not impacting air navigation
charges
Segment financed by air navigation charges All other segments
Germany WorldGermany
16
Group management report 2013
such as those in Frankfurt and Munich (including their
approach and departure procedures) by means of real-
time and fast-time simulations. This also covers testing
new key technologies and the subsequent development
of air traffic control software and suitable simulators.
Within the scope of the German aeronautical research
programme with its technology line of funding for effec-
tive, safe and efficient flight guidance and flight control
sponsored by the Federal Ministry for Economic Affairs
and Energy, DFS was able to once again position itself as
a project manager. The goal is to work jointly with German
partners from research and industry to improve the start-
ing basis for later international activities.
DFS advances innovative developments and markets
some of these through the business unit Aeronautical
Solutions (AS) These include:
■ The remote control of airports (see Outlook).
■ Sectorless flying: a revolutionary concept that assigns
aircraft in the entire controlled area to a particular air
traffic controller and which promises more expeditious
traffic handling with less effort.
■ Surveillance systems that use all available sensors,
such as various radar systems, multilateration and the
position determined by the aircraft itself, to be able to
track the aircraft seamlessly from gate to gate, on the
ground as well as in the air.
■ Support systems for air traffic controllers that reduce
the burden on them by means of optimised information
processing, especially as regards conflict avoidance,
and by means of step-by-step automation.
■ The interoperability of European air traffic control
systems that keeps pace with new developments – an
important precondition of the Single European Sky.
A total of approximately 3.5 percent of the costs and
239 staff posts are allocated to research and own devel-
opments. The costs involved are partially offset by grant
funding of approximately €6.7 million awarded from Euro-
pean research framework programmes, including SESAR
and the German aeronautical research programme.
2. Economic environment2.1 Overall economic situation
The global economy stabilised in 2013 on the modest
level of the previous year with a growth rate of 2.4 per-
cent (status: February 2014). Despite the improved condi-
tions on the financial markets, unemployment and excess
capacity continue to have a negative impact on countries
with a high level of national income.
In contrast, the situation in Europe remained unchanged.
Gross domestic product (GDP) in the 28 EU countries
grew by 0.1 percent compared with the previous
year. In particular the expected stagnation in Italy and
France poses a risk for the further economic growth in
Germany.
German GDP rose in contrast to the situation in the EU
countries by an annual average of 0.4 percent in 2013
compared with the previous year. This growth rate was
within the range forecast by the leading economic insti-
tutes (between 0.3 percent and 0.9 percent) and the
Federal Government (0.4 percent).
As in previous years, exports are the foundation of eco-
nomic growth, which is being materially supported by
domestic consumption and the willingness to invest shown
by the corporate sector.
In a robust labour market, employment and income con-
tinued to increase. In 2013, an average of 41.78 million
people were in employment. The rise of 232,000 persons
compared with the previous year led to a record high.
2.2 Development of air traffic
In addition to the overall economic situation, political, legal
and industry-specific factors in particular have a fundamen-
tal influence on the development of air traffic.
Political unrest
Traffic is being negatively impacted by political unrest in
North Africa and the Middle East as well as the continued
stagnation of the European economy.
17
In the first quarter 2013, traffic volume in Europe was
5 percent below the level reached in 2012. After the
change to the summer schedule 2013, traffic volume
rose and reached the level of the previous year. From
August 2013, the trend in traffic volume was upwards,
restricted only by the loss of tourist traffic to/from Egypt
as a consequence of the renewed unrest. Overall, traffic
volume in Europe declined by 1.1 percent compared with
the previous year.
Grassroots movements, night curfew and the new Berlin
Brandenburg Airport
In Germany, citizens are reacting in an increasingly sensi-
tive manner to noise disturbance caused by air traffic. The
night curfew at Frankfurt Airport, the referendum against
the third runway at Munich Airport and the renewed post-
ponement of the opening of the new airport in Berlin are
dampening the growth impulses for the national economy.
Climate action plan and emissions trading system
On 2 February 2009, the EU Directive 2008/101/EC on the
inclusion of international aviation activities in the European
emissions trading scheme came into effect. This Directive
was in force until the end of 2012 and was superseded by
the provisions on the new trading period 2013 until 2020
(EU Directive 2009/29/EC). According to this Directive,
all aircraft taking off or landing at an airport in the EU are
included in the emissions trading system. From the total
number of certificates allocated to aviation, 85 percent
were divided among the air carriers involved. The remaining
15 percent were auctioned off. There was considerable
opposition against the inclusion of airlines from non-EU
States in the European emissions trading system, particu-
larly from the USA, the Russian Federation, China and India.
Following the agreement within the International Civil
Aviation Organisation (ICAO) on a climate action plan
for aviation, the European Commission intends to make
permanent changes to emissions trading in Europe. The
exception that requires airlines to only pay for flights that
take off and land in Europe has been limited to 2016 for
the time being.
Air transport tax
In Germany, the law introducing an air transport tax
(Luftverkehrssteuergesetz – LuftVStG) has been in force
since the beginning of 2011. This law governs the levy-
ing of a tax that has to be paid for every passenger that
departs from a German airport. Proceeds are expected
to come in at around €1 billion for 2013, despite a
slight reduction in the rate of this tax in the previous
year. Overall, this passenger-based air transport tax
increases the costs for the entire air transport industry.
According to the second evaluation report of the German
aviation association BDL (Bundesverband der deutschen Luftverkehrswirtschaft), the growth in air transport in
Germany has remained below the Western European aver-
age because of this and it was noted that passengers are
shifting to neighbouring countries. Overall, the drop in pas-
senger numbers can be quantified at five million per year
at least.
Competition, airlines' pressure to reduce costs and restructure
Low-cost airlines and the fast-growing airlines from the Gulf
region are changing and increasing the competition for
lucrative routes and customers in a fundamental manner.
The large European airlines continue to suffer from con-
siderable pressures as regards costs and the need to
restructure. The lasting high kerosene prices continue to
be a significant cost factor.
The airlines are reacting with far-reaching changes in their
capacity plans and are changing the size and load factors
of the aircraft used. As part of cost-cutting programmes,
Lufthansa German Airlines (DLH) and Air Berlin have
reduced the flights they offer by 7.5 percent and 4.7 per-
cent, respectively.
In addition, Lufthansa has brought together all its Euro-
pean direct connections under the Germanwings brand.
This low-cost airline subsidiary has taken over all routes
that do not involve the large hubs in Frankfurt and Munich.
With over 80 aircraft, the new Germanwings will have
more than doubled in size. Lufthansa expects savings of
hundreds of millions of euro per year from this initiative.
18
Group management report 2013
11.0
11.7
Following Lufthansa's retreat from decentralised Euro-
pean routes, it is becoming apparent that the German
market is attracting more and more low-cost airlines. As
a consequence, the number of flights conducted by low-
cost airlines rose by over 10 percent.
Court cases on the admissibility of wind farms
The disturbance-free operation of the air navigation facili-
ties operated by DFS is being put into question in some
court cases involving the building of numerous wind tur-
bines. Based on the current state of technology, distur-
bance is to be expected when wind turbines are erected
within a radius of 15 kilometres around VOR and DVOR
facilities. (VOR is the short form of VHF omnidirectional
radio range and the acronym VHF itself stands for very
high frequency, while DVOR stands for Doppler VOR.) In
accordance with Article 18a of the German Aviation Act
(LuftVG), such construction projects have to be notified
to the Federal Supervisory Authority for Air Navigation
Services (BAF). On a case-by-case basis, DFS checks
the disturbance potential of any additional wind turbines
to be erected on the operation of a VOR or DVOR facil-
ity. DFS informs the BAF of its assessment in an expert
opinion and the BAF takes its decision on the basis of
this opinion. According to Article 18a of the German
Aviation Act, it is not permitted to erect structures which
might interfere with air navigation services facilities.
In a case before the administrative court of Oldenburg
located in northern Germany, the competent authority of
the German Federal State in question approved five wind
turbines against the decision of the BAF and ordered
the immediate enforcement of the ruling. DFS lodged an
appeal, which has not been finally decided on yet.
DFS views that its right to operate its air navigation
services facilities without disturbance has been infringed
upon. The undisturbed operation of air navigation services
facilities is a precondition for the safe, orderly and expedi-
tious handling of air traffic.
IFR flights 2013
In Germany, the number of civil IFR flights in 2013 fell by
1.4 percent compared with the previous year. The rise
in low-cost airlines could not fully compensate for the
decline in traffic of the traditional air carriers as part of
their cost-cutting programmes, despite the growth in the
economy. There was therefore a significant shortfall in
IFR flights compared with the rise of 0.7 percent planned
for 2013. The volume of civil traffic declined by 1.3 per-
cent over the previous year, while military air traffic saw
7.8 percent fewer flights.
With a share of only 11.0 percent and 51.8 percent
respectively, the number of domestic flights and arrivals
and departures continued to decline, while the share of
overflights at 37.2 percent increased.
IFR flights in Germany
2013 2012
Total 2,952,624 2,993,866
Compared with previous year (%) -1.4 -2.2
2013
2012
51.8
52.2
37.2
36.1
0% 20% 40% 60% 80% 100%
Domestic flights
Flights arriving in or departing from Germany
Overflights
Distribution of IFR flights (%)
19
2.3 Overview of the business development
Impact of the revised IAS 19 standard
DFS offers defined benefit pensions to its staff. The
revised provisions of IAS 19 (Employee Benefits) have had
to be applied since the business year 2013. The amend-
ments to the accounting standard relate to the elimination
of an option for recording actuarial gains and losses.
Since 2013, such gains and losses as well as other
measurement changes have to be immediately recog-
nised in full in equity under other comprehensive income
(OCI). DFS can no longer use the corridor method it had
previously applied. Changes in interest rates that impact
occupational pensions can no longer be smoothed. Gains
and losses from the subsequent measurement of pension
obligations as well as the associated plan assets are fully
recognised in equity without impacting the income state-
ment (see Note 25.8).
The immediate impact of this is increased equity volatil-
ity. This volatility has been dampened when determining
charges by the introduction of an imputed model.
DFS has developed, under the auspices of its regulatory
authority, a model for the calculation of occupational
pensions that conforms to European regulations on the
performance plan and on the determination of charges.
It has been in use since 1 January 2012. Air navigation
charges take the length of service and interest cost into
account in a mutatis mutandis application of IAS 19. The
discount rate used to determine the obligation is orien-
tated in a prospective manner and in the medium term to
the interest rate that can be earned on the plan assets.
The differences between the obligation and plan assets
(plan deficit/plan surplus) are allocated in a rolling fashion
over the average remaining time to work (15 years) of the
staff and also taken into account in the following refer-
ence periods as a component of the charges. Additional
conservative assumptions for interest rate, salary and
inflation trends support the correct matching of the cost
of occupational pensions and avoid random fluctuations in
the cost-base for charges and therefore arbitrary charges
for airspace users.
In a directive dated 12 December 2012, the Federal
Supervisory Authority for Air Navigation Services (BAF)
laid down that the actual financing expense for occupa-
tional pensions should not be subject to the cost-efficien-
cy targets of the performance plan, but is instead to be
considered as a determined cost in the performance plan
and therefore part of the cost-base. The model is adjust-
ed as part of the performance planning when drawing up
the following performance plan. The financing difference
(delta) that is determined in the planning phase for the fol-
lowing reference period is distributed over 15 years (roll-
ing view) and increases revenues and liquidity in the IFRS
group financial statements.
In the first reference period from 2012 to 2014, the
company has used a uniform interest rate of 4.65 per-
cent based on prudent commercial considerations. This
uniform rate is used for the assets underlying the occu-
pational pension scheme as well as for discounting the
corresponding obligations.
A conflict of norms between those governing the levying of
charges and those governing the determination of results
In accordance with European regulations for air navigation
service providers, DFS switched the cost-base for cal-
culating charges from German Commercial Code (HGB)
to the International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board
(IASB) as at 1 January 2007.
Since that time, DFS has been exposed to a material con-
flict of norms between the standards used to determine
charges and the standards used to draw up the commer-
cial and tax accounts. This conflict is eating into the sub-
stance of DFS. (See the last paragraph of this section for
the tax solution.) On the one hand, there were European
regulations requiring the application of IFRS for the rec-
ognition and measurement of issues that impact charges
and, on the other hand, there were commercial and tax
regulations that required measurements to be made that
significantly deviated from those required by those same
European regulations.
20
Group management report 2013
There is a divergence between the commercial account-
ing rules and the cost-related basis for determining
revenues from air navigation charges. This divergence
leads to a corresponding divergence in the expense line
items. The regulatory authority has given DFS the right
to spread the effects from the conversion to the new
accounting standards (catch-up effects) that lead to ex-
post financing requirements over a period of 15 years
after first recognising them directly in equity (Article 6 of
EC Regulation 1794/2006). These catch-up effects may
be invoiced to airspace users. They were included in rev-
enues for the first time in 2007.
The catch-up effects relate particularly to the following
balance sheet line items: non-current assets (development
costs, borrowing costs, depreciation and amortisation),
pension obligations and other provisions.
Therefore, the revenues earned in the area financed by
air navigation charges do not match the corresponding
costs in the accounts drawn up under commercial law.
In addition, it must be borne in mind that the day-to-day
accounting treatment of the same underlying issues can
lead to differences between the accounts from a charges
perspective, the accounts under IFRS and the accounts
under German Commercial Code (HGB) when the catch-up
effects are included.
Article 29 of the Law on the Implementation of the Mutual
Assistance Directive as well as on the Change to Tax
Regulations (AmtshilfeRLUmsG) dated 26 June 2013 now
governs the determination of the tax base previously set
out in Article 31b paragraph 3 of the German Aviation
Act (LuftVG). The positive or negative difference between
the profit from air navigation charges as calculated under
income tax law (EStG) and the result from the provision of
air navigation services as calculated under the provisions
governing charges are not considered when determin-
ing income for DFS. Taxation is therefore based on the
charges-related result. At a minimum, this regulation
resolves the existing tension between the charges and tax
perspective for the determination of profit. Nevertheless,
significant differences still remain from the divergence
between the determination of profit under the provisions
governing air navigation charges and those under com-
mercial law.
Unclear legal situation as regards uncontrollable costs
The current debate on the revised Regulations on
performance (EU Regulation 390/2013) and charges
(EU Regulation 391/2013) is still ongoing although
these Regulations have already been adopted. The
European Commission is investigating revising the rules
on uncontrollable costs. This investigation also covers
the approval process as well as amended rules on the
return on equity, on the consideration of the interest
on borrowings and on occupational pensions. The cur-
rent status quo requires the Commission to give the
final approval for each of these cost items. The timing
of this approval (annually/at the end of the reference
period) is currently being negotiated. The new rule
is to apply retroactively to the uncontrollable costs
incurred in the first reference period. Considering the
unclear legal situation, DFS does not yet consider those
costs that DFS itself believes, in its own legal opinion,
should be borne by airspace users when drawing up its
financial statements. On the other hand, provisions for
obligations are being recognised for the uncontrollable
costs that have to be reimbursed.
Five-point programme
The Board of Managing Directors is driving the expan-
sion of the commercial business. With the acquisition
of Eisenschmidt in 2013 (see section 1.2), it expanded
the commercial portfolio to include the production and
sale of aeronautical charts, publications and other aero-
nautical information, also in electronic form, including
the sales of technical devices for the preparation and
conduct of flights. It plans further expansion in those
commercial business areas directly connected to air
navigation services when opportunities arise in the mar-
ket. Our marketing and consulting activities are being
expanded worldwide.
21
In the core business, the productivity will be boosted,
staff flexibility enhanced and the rise in staff numbers
contained to respond to fluctuating demand. Vacant posi-
tions are not being filled and the natural turnover will be
used to reduce staff numbers. Airspace structures and
procedures are being optimised and capital expenditure
on recoverable, high-performance and harmonised ATM
systems is being stepped up. Project and general costs
are being reduced.
Purchase of a stake in the UK air navigation service
provider NATS
The evaluation process begun in the previous business
year on the possible purchase of a significant stake in the
UK air navigation service provider NATS was completed.
The sellers decided to sell their shares to a financial
investor.
Ryanair
Incomplete information submitted by the low-cost airline
Ryanair in the business years 2010 to 2012 led to a
basis for determining charges that was disadvantageous
for DFS. In 2013, DFS invoiced for the associated short-
fall in terminal services. However, contrary to the position
of DFS on this matter, EUROCONTROL decided not to
invoice for the amounts for en-route services after consul-
tation with the States affected and at its own reasonable
discretion. DFS is currently reviewing if it is possible to
enforce its claims in this matter.
2.4 Results of operations
2.4.1 Service units and unit rates
2.4.1.1 En-route services
For en-route services, a service unit is computed as the
square root of the weight factor multiplied by the distance
factor. The economic value of each flight conducted
is taken into account so that the value of the air traffic
control service performed is considered by the legislator
when establishing the relevant air navigation charges.
Definition of service units:
max. take-off weight in tonnes x
distance in km 50 100
En-route:
The amount to be paid by the airspace user is given by
multiplying the service unit by the unit rate.
The national unit rate for en-route charges comprises
air-traffic-related cost elements of DFS, the German
Meteorological Service (DWD), EUROCONTROL, the
Maastricht Control Centre, and other national bodies that
are involved with air navigation services, such as the Air
Navigation Services Division (LR23) of the German Fed-
eral Ministry of Transport and Digital Infrastructure (BMVI)
and the Federal Supervisory Authority for Air Navigation
Services (BAF). In 2013, the service units rose slightly
compared with 2012 and came in within the forecast of
the economic plan from the year 2012. The development
Development of service units – en-route
2013 2012
Total 12,506,062 12,442,470
Compared with previous year (%) +0.5 -1.7
En-route unit rate (€)
2014 2013 2012 2011 2010 2009
Total 77.32 76.50 74.19 71.84 68.86 67.02
DFS share 62.55 63.22 60.41 58.24 54.39 53.30
Compared with previous year (Total, in %) +1.1 +3.1 +3.3 +4.3 +2.7 +3.6
22
Group management report 2013
of service units remained well below the expectations set
out in the performance plan, as the overall economy has
suffered significantly since the plan was drawn up.
In 2013, the national unit rate for en-route services rose by
around 3.1 percent primarily because of the consideration
of the under-recovery from 2011, which was caused by
the slowdown in traffic. The EU Regulation on the common
charging scheme for air navigation services contains com-
pensation mechanisms within a reference period to partly
offset losses in revenues as a consequence of fluctuations
in traffic volumes as well as an inflation adjustment. The
adjustment to the unit rate from 2014 is primarily attributa-
ble to the two issues from 2012. The DFS share of the en-
route unit rate remains stable at approximately 81 percent.
2.4.1.2 Terminal services
For terminal services, a service unit is the quotient
obtained by dividing by fifty the maximum take-off weight,
expressed as a figure taken to two decimal places, to the
power of 0.7.
Definition of service units:
0.7
max. take-off weight in tonnes50
Terminal services:
The amount to be paid by the airspace user is given by
multiplying the service unit by the unit rate for terminal
services.
The unit rate for terminal services comprises air-traffic-
related cost elements of DFS, the German Meteorologi-
cal Service (DWD), and other national bodies that are
involved with air navigation services, such as the Air
Navigation Services Division (LR23) of the German Fed-
eral Ministry of Transport and Digital Infrastructure (BMVI)
and the Federal Supervisory Authority for Air Navigation
Services (BAF). The service units 2013 remained below
expectations, in particular due to the fact that the Ger-
man airlines conducted fewer flights as a result of their
cost-cutting programmes.
The 2013 unit rate for terminal services rose by 6.2 per-
cent compared with the previous year. Two factors are
primarily responsible for this. Firstly, traffic in 2011 was
below expectations. Secondly, material costs, such as
energy costs, as well as the costs for staff and occupa-
tional pensions rose more strongly than assumed in the
planning process. There are two main factors responsi-
ble for the rise from 2014. DFS was not allowed to fully
offset the under-recovery from 2011 in 2013. Instead,
the under-recovery has to be evenly distributed over
the years 2013, 2014 and 2015 in accordance with a
directive issued by the Federal Supervisory Authority
for Air Navigation Services (BAF). In addition, the carry-
over from the traffic-related under-recovery from 2012
increases the unit rate. The DFS share of costs of the
unit rate for terminal services amounts to approximately
96 percent.
Development of service units – terminal services
2013 2012
Total 1,287,989 1,310,562
Compared with previous year (%) -1.7 -1.3
Terminal unit rate (€)
2014 2013 2012 2011 2010 2009
Total 183.87 181.99 171.29 163.05 162.54 167.78
DFS share 177.20 175.84 165.70 155.76 154.33 160.80
Compared with previous year (Total, in %) +1.0% +6.2 +5.1 +0.3 -3.1 +3.4
23
0.59
-0.55
1.04
1.56
5.17
20.41
71.78
-10 0 10 20 30 40 50 60 70 80
Over-/under-recovery
Government reimbursements:Exempted flights
Other air navigation services
Other revenues
Government reimbursements:Military flights
Terminal services
En-route services
2.4.2 Revenues
In the business year 2013, DFS generated revenues of
€1,109.2 million. Revenues rose slightly compared with
the previous year by 0.7 percent despite the decline in
flight movements.
For DFS, the shift from full cost recovery to a perfor-
mance-oriented charging structure for en-route services
brings with it significant changes in the breakdown of
revenues. Within certain limits, DFS is exposed to oppor-
tunities and risks resulting from the development of air
traffic (see section 2.4.5).
Revenues from air navigation services increased from
€1,080.9 million to €1,091.9 million after netting the
2011 under-recovery (€32.3 million) and taking into
account the 2013 under-recovery (€22.2 million, including
the carry-over from the en-route area).
The increase resulted primarily from adjusted unit rates,
with which DFS can charge retroactively for the under-
recovery from 2011, as well as by a slightly higher num-
ber of service units when compared with the plan.
Revenue breakdown (in %)
(includes result contribution from netting over-/under-recovery)
Revenues from en-route charges (€m)
2013 2012 2011 2010 2009
Total 796.2 753.4 739.1 665.3 629.9
Compared with previous year (%) +5.7 +1.9 +11.1 +5.6 -3.1
24
Group management report 2013
Revenues from government reimbursements (€m)
2013 2012 2011 2010 2009
Military operational air traffic 57.4 57.1 57.7 55.4 60.8
Exempted flights 6.5 6.5 6.5 6.5 6.5
Total 63.9 63.6 64.2 61.9 67.3
Compared with previous year (%) +0.5 -0.9 +3.7 -8.0 +6.5
Revenues from other air navigation services (€m)
2013 2012 2011 2010 2009
Aeronautical publications 7.5 3.3 3.6 2.8 2.9
Flight inspection services 2.5 3.0 3.1 2.9 2.5
Other air navigation services 1.5 1.1 0.9 0.4 0.3
Total 11.5 7.4 7.6 6.2 5.7
Compared with previous year (%) +55.4 -2.6 +22.6 +8.8 +5.6
Other revenues (€m)
2013 2012 2011 2010 2009
Total 17.2 20.4 20.1 18.2 17.2
Compared with previous year (%) -15.7 +2.0 +10.4 +5.8 -23.2
Reimbursements for military flights contain services pro-
vided by the Maastricht unit. The exempted flights relate
to en-route flights under visual flight rules.
DFS generated other revenues primarily from consult-
ing and staff services, apron management services and
training services.
Within other air navigation services and other revenues,
commercial services made up roughly 83.4 percent,
generating revenues of €24.1 million (previous year:
€23.8 million), exceeding the planning forecast due to
increased marketing activities.
Revenues from terminal charges (€m)
2013 2012 2011 2010 2009
Gross 227.3 218.3 207.4 196.8 188.9
Reimbursements paid 1 (0.9) (0.7) (0.6) (0.5) (7.7)
Net 226.4 217.6 206.8 196.3 181.2
Compared with previous year (net, in %) +4.0 +5.2 +5.3 +8.3 -1.8
1 Since 2010, the air-traffic-related cost elements of the German Meteorological Service (DWD) have no longer been considered in the revenues of DFS. The air-traffic-related cost elements of the Federal Supervisory Authority for Air Navigation Services (BAF) remain.
25
2.4.3 Other operating income
Other operating income (€m)
2013 2012 2011 2010 2009
Total 33.7 77.8 38.4* 29.7 33.1
Compared with previous year (%) -56.7 +102.6 +29.3 -10.3 -39.2
* Due to a reclassification, the disclosures are not directly comparable with the previous years.
Other operating income came in within the level reached
in the years 2009 to 2011, after achieving a record high
in the previous year primarily attributed to the special
item from the QTE transaction (€52.2 million). Due to
the end of the principal contracts and the transfer of the
remaining shell structure (see 6.2.2.4), the deferral of the
net present value generated at the start of the transac-
tion was completely reversed in the income statement. In
contrast to the adjusted value of €25.6 million from the
previous year, the figure rose by approximately 31.6 per-
cent in 2013.
Material components:
■ Derecognition of liabilities (€8.6 million)
■ Project-specific funding by the European Commission
(€6.7 million)
■ Reversal of provisions (€5.5 million)
■ Reimbursement of costs of the business year
and of previous years (€4.1 million)
■ Benefits-in-kind (€3.1 million)
■ Income from the QTE transaction,
exchange rate gain (€2.6 million)
Employee expenses (€m)
2013 2012* 2011 2010 2009
Total 808.5 772.2(789.1) 701.9 625.8 608.1
Thereof wages and salaries 585.7 586.1 550.3 527.6 485.7
Thereof social security costs and expenses for pensions and assistance
197.8 160.2(177.2) 130.2 78.7 96.0
Thereof costs of personnel belonging to the Federal Aviation Office (LBA)**
25.0 25.9 21.3 19.5 26.4
Share of total costs (%) 76.7 75.1(75.5) 72.5 71.4 70.4
Compared with previous year (%) +4.7 +10.0(+12.4) +12.2 +2.9 +3.1
* Prior-year figures adjusted to IAS 19 (revised 2011). Figure in brackets: Originally reported figure.** LBA: Luftfahrt-Bundesamt (Federal Aviation Office)
2.4.4 Principal expense categories
The change compared with the previous year is primarily
attributable to the higher service cost and the changed
recognition of actuarial gains and losses (now only in
equity) due to the revised IAS 19 (revised 2011).
Interest of €98.0 million accruing from provisions for
pensions and early retirement is charged to the financial
result. The return on plan assets (€46.7 million) is cred-
ited to the financial result.
26
Group management report 2013
Material components:
■ Spare parts and maintenance (€41.7 million)
■ Occupancy costs (€23.4 million)
■ Costs of external personnel (€10.7 million)
■ Legal and consultancy costs (€9.1 million)
■ Rental and leasing (€8.9 million)
■ Telecommunication costs (€8.3 million)
■ Allowance for bad debts (€6.8 million)
■ Travel costs (€6.6 million)
■ Other employee expenses (€4.7 million)
■ Vehicle costs (€3.1 million)
In 2013, no impairment losses were recognised.
2.4.5 Earnings
In 2013, DFS realised net income of €35.8 million. In the
previous year, the figure was €73.1 million as originally
reported and €87.9 million after adjusting for IAS 19
(revised 2011). The operational under-recovery, including
the carry-over from the en-route area was €26.2 million,
reaching the same level of the previous year of €26.2 mil-
lion, including the carry-over from the en-route area.
Owing to the special regulatory influences acting on
the company, the results are impacted by the catch-up
effects, the inclusion of the imputed model (for pensions)
and the tax expense calculated based on the charges-
related result (see section 2.3).
Depreciation and amortisation (€m)
2013 2012* 2011 2010 2009
Total 102.4 105.0 102.5 100.8 116.3
Share of total costs (%) 9.7 10.2(10.0) 10.5 11.5 13.5
Compared with previous year (%) -2.5 +2.4 +1.7 -13.3 +6.2
* Prior-year figures adjusted to IAS 19 (revised 2011). Figure in brackets: Originally reported figure.
Other operating expenses (€m)
2013 2012* 2011 2010 2009
Total 35.8 87.9(73.1) 79.6 104.8 99.4
Compared with previous year (%) -59.3 +10,4(-8.2) -25.2 +5.4 +100.4
* Prior-year figures adjusted to IAS 19 (revised 2011). Figure in brackets: Originally reported figure.
Other operating expenses (€m)
2013 2012* 2011 2010 2009
Total 138.3 144.0 155.0** 144.9 133.8
Share of total costs (%) 13.1 14.0 (13.8) 16.0 16.5 15.5
Compared with previous year (%) -4.0 -7.1 +7.0 +8.3 -6.3
* Prior-year figures adjusted to IAS 19 (revised 2011). Figure in brackets: Originally reported figure.** Due to a reclassification, the disclosures are not directly comparable with the previous years.
27
Adjusted earnings before taxes (€m)
Net income 35.8
./. Taxes on income and revenues* 0.1
EBT 35.7
./. Catch-up effects from IFRS conversion 47.7
./. Catch-up effects from occupational pensions 73.9
Adjusted EBT -85.9
* This relates to the correction of a tax relief for 2013 overall.
The result in 2013 contains the costs reimbursed by
airspace users for previous years of €47.7 million
(previous year: €45.8 million) from the conversion of
the basis for calculating charges from the German Com-
mercial Code to IFRS as of 1 January 2007 (catch-up
effects). It also contains an amount of €73.9 million
(previous year: €23.4 million) from the change in the
charges-related parameters for expenses for occupa-
tional pensions (imputed model, see section 2.3) within
the scope of the introduction of regulated charges as of
1 January 2012.
Adjusted for the above factors, the adjusted earnings
before taxes amounts to minus €85.9 million.
The incomplete information provided by the low-cost air-
line Ryanair (see section 2.3) resulted in an allowance for
doubtful accounts of €5.6 million being charged against
receivables in the en-route area for 2010 to 2012.
The changeover from full cost recovery to charges
based on performance in the en-route area has a mate-
rial impact on the cost structures. Savings or additional
expenses are no longer passed on in the following
periods but directly impact the earnings of DFS. Cur-
rently, there are still issues concerning interpretation and
application which could influence the future development
of the company's economic situation. From the point of
view of DFS, there are a small number of measurement,
accounting and charging issues which have not been
unequivocally resolved since the date of the transition
(31 December 2011/1 January 2012). The regulatory
authority and DFS continue to work in a critical dialogue
on drawing up a binding catalogue of qualifying uncontrol-
lable costs. Such costs will have to be borne in full by
airspace users.
For the en-route area, the EU Charging Scheme
1191/2010 has split the chances and risks resulting
from the differences between planned and actual traffic
volume between the airspace users and DFS since 2012.
If defined thresholds are exceeded, DFS is authorised and
obliged to return or demand any over- or under-recoveries
(carry-over). The carry-over for 2013 will be carried
forward and taken into account in the determination of
charges for the second reference period.
Chance/risk transfer from deviation in traffic volume
Deviation in traffic volume (v) DFS share User share
v ≤ 2.0% 100.0% ---
2.0% < v ≤ 10.0% 30.0% 70.0%
v > 10.0% --- 100.0%
28
Group management report 2013
Terminal services will continue to be subject to full cost
recovery until the end of 2014. The principles governing
air navigation charges laid down by ICAO and EUROCON-
TROL continue to stipulate that – after making allowance
for a reasonable return on capital employed – over- or
under-recoveries have to be passed on in subsequent
years. Accordingly, the operational over-recovery from the
business year 2013 for terminal services will be taken into
account when determining charges for the year 2015.
Overall, the positive earnings have been impacted by the
material special items.
2.5 Assets and financial position
2.5.1 Capital expenditure
DFS invests in the preservation and further development
of the necessary infrastructure if the measures are
based on legal obligations or support the development
of earnings in an economically sound manner. Regula-
tions and standards from ICAO, EUROCONTROL and the
EU are adhered to. The safety of air traffic plays a deci-
sive role when it comes to decisions on capital expendi-
ture. Against this background, capital expenditure of
€124.6 million was made in the business year 2013.
As at 31 December 2013, a further €18.5 million of an
inter-Group long-term loan approval of €50 million from
DFS was drawn down.
The following projects are currently underway and repre-
sent the highest share of capital expenditure:
Construction of the Langen technical centre
DFS is constructing a new technical centre to set up ATC
test and reference installations and house the administra-
tive computer centre.
iCAS (interoperability Through European Collaboration Centre
Automation System) software
The future control centre ATS system iCAS will in par-
ticular meet the interoperability requirements of the SES
regulations.
Voice switching system ISIS-XM
(Improved Speech Integrated System) in Langen
DFS is harmonising its voice switching systems and is
replacing the system in Langen within the scope of the
LASER project. In the future, ISIS-XM is to be installed
at all DFS control centres to achieve a homogeneous
system landscape. Using a uniform user interface and
concept will increase training efficiency and create the
necessary conditions to enable the transfer of services
(e.g. consolidating control centres at night) and new con-
cepts to ensure ATC operations in contingencies.
Extension to the Munich Control Centre
Building work was required because of the increase in
space needed for the installation of the P2/ATCAS air
traffic management system. This is the successor system
to P1/ATCAS (P1 air traffic control automation system)
in the control centres for lower airspace. The building
work covers a control room with roughly 100 controller
working positions as well as office and functional rooms
for operations. In addition, two equipment rooms and two
centres each for the provision of air-conditioning, cooling
and electricity were fitted out.
Radio Site Upgrade and Modernisation (RASUM) 8.33
DFS is equipping 95 radio stations for the 8.33 kHz chan-
nel spacing requirements in lower airspace, including the
necessary structural and infrastructural measures. The
project caters for future traffic growth and implements
the Conclusion taken by the ICAO European Air Navigation
Planning Group (EANPG) 48 dated November 2006 and
EU Regulation 1079/2012.
P2 Langen Control Centre
The goal of the project is the installation and commis-
sioning of P2 in the new control room of the Langen
Control Centre. Frankfurt and Düsseldorf have separate
ATS, communication (COM) and air traffic flow manage-
ment (ATFM) systems. These are to be integrated into
one ATS, one COM and one ATFM system. At the same
time, the engineer on duty (EoD) Langen is to start work.
29
When it goes into operation, a centrally developed new
P2 controller working position will be employed that can
be used in various roles and will be used during the tran-
sition to iCAS and during future iCAS operations. After P2
starts up, the old P1/ATCAS systems will be uninstalled
from the old control room and equipment rooms. A new
cooling plant will be commissioned in the Langen Control
Centre for the new P2 components to be installed.
Rehosting ATCAS hardware and software
To ensure the product life cycle, ATCAS is being rehost-
ed. The software is being ported to Linux using Intel-
compatible hardware.
P1/ATCAS software extensions for PSS Langen
PSS is an extension within the area of flight data pro-
cessing and display in the ATS system P1/ATCAS used
in Bremen, Munich and Langen. PSS replaces paper
flight progress strips with electronic flight progress
strips and exchanges data with the FDPS (flight data
processing system) of P1/ATCAS. As PSS is an integral
component of ATCAS, software maintenance and fur-
ther development, especially the different functionality
PSS Langen (different when compared with Bremen and
Munich), will be carried out by the DFS Systems House
as part of the ATCAS maintenance processes. On a
case-by-case basis, external vendors will also provide
support.
Extension of VAFORIT software (Very Advanced Flight Data
Processing Operational Requirements Implementation)
The new air traffic management system for upper air-
space, which was put into operation in December 2010,
is being extended. VAFORIT is fully stripless and replaced
the old system KARLDAP (Karlsruhe Automatic Data Pro-
cessing and Display System).
SDDS-NG
The current RADNET network is made up of RMCDE sys-
tems. (RMCDE stands for Radar Message Conversion and
Distribution Equipment.) The life-cycle of these systems is
now exhausted. Vendor support ends in 2017. To ensure
the iCAS implementation in Karlsruhe, which requires the
expansion of RADNET, and to ensure the provision of
radar data at DFS, the SDDS-NG systems were procured,
which will replace the RMCDE over the next few years in a
step-by-step manner.
Multiplexer networks
Today, the switching of almost all radiotelephony
between air traffic controllers and pilots is made over
the MONIQUE multiplexer network. This network covers
not only the area under the responsibility of DFS but
also the area of the Benelux States. The DFS part of the
network primarily provides the transmission bandwidths
for all transmission services of DFS and the connection
of radar and radio stations. As part of the connection of
new radio stations and the new connections of existing
radio station, an expansion of the existing network is
necessary.
In the 2013 business year, assets under construction
worth a total of €49.4 million were completed. The main
projects included:
Extension to the Munich Control Centre
(see above)
P1/ATCAS software extensions for PSS Langen
(see above)
P2 Langen Control Centre
(see above)
Mode Select (Mode S) for Willy Brandt Airport Berlin (BER)
Currently, only the Berlin-Tegel Airport has a radar facility
with Mode S capability. To meet operational requirements
and an EU implementing regulation, two sensors with
Mode S capability will be needed. To provide Mode S
service at BER Airport, an additional Mode S radar sensor
is necessary.
With these projects, DFS secures its position as a reliable
partner for aviation.
30
Group management report 2013
2.5.2 Balance sheet structure
In 2013, the balance sheet total increased by
15.9 percent to €1,400.0 million (previous year:
€1,207.5 million).
Impact of the revised IAS 19 standard
The application of the revised provisions of the new IAS
19 had a material influence on the balance sheet struc-
ture. The discontinuation of the corridor approach led
to far-reaching changes in equity and the provisions for
pensions and similar obligations. There was a particularly
negative impact on equity from this change-over.
Equity, reconciliation (€m)
2013 2012*
31 Dec without application of IAS 19 (revised 2011) 34.3 -2.5
Remeasurement of pension obligations +555.5 -869.2(Impact in the running year)
Carry-over of the remeasurement reserve from the previous year -1,294.8 -440.4
Adjusted net income – +14.8
31 Dec according to IAS 19 (revised 2011) -705.0 -1,297.3
* Prior-year figures adjusted to IAS 19 (revised 2011).
More detailed overviews and reconciliations can be found
in the Notes. Because of the provisions of IAS 8 (account-
ing policies, changes in accounting estimates and errors),
the figures of the previous year were adjusted in line
with the revised IAS 19 for information and comparison
purposes. This means that comparisons with the years
before 2012 are limited.
Relevant Note:
4.2.1 Occupational pensions
9. Employee expenses
12. Financial result
24. Shareholder's equity
25. Provisions for pensions and similar obligations
Based on the adjusted prior-year figures, the number
reported in the balance sheet (the difference between
obligation and plan assets) declined at the end of
the year to approximately €1,346.1 million (previous
year: €1,827.2 million). This decline was due to the
significant rise in the discount rate, the moderate
salary adjustment in 2013 and the good growth in
investments, which when measured using the current
discount rate under IFRS made a significant positive
contribution in the general investment. The provisions
for pensions were adjusted by €1,295 million in total
at the expense of the remeasurement reserve. The left
hand side of the balance sheet and the original bal-
ance sheet total 2012 remain unchanged following the
adjustments.
31
Assets
The increase in the balance sheet total relates primarily
to the rise in current assets of approximately 52.4 per-
cent due to a significantly higher level of liquid assets
from the issuance of a new debenture loan (€110 million)
as well as the rise in non-current assets by approximately
4.7 percent, which is attributable to a rise in property,
plant and equipment and financial assets. The change
in financial assets was caused by additional drawdowns
(€18.5 million) under the existing loan contract with the
subsidiary DFS Energy GmbH, who is the borrower.
Equity and liabilities
Based on the adjusted prior-year figures, the negative
equity improved by 45.7 percent, while the non-current
debt declined by 17.0 percent.
The improvement in equity in comparison with the previous
year was attributable to the change in remeasurement
reserves in connection with pension provisions (€555.5
million) and the net income (€35.8 million) of the busi-
ness year.
Non-current debt was impacted by the positive develop-
ment in the net liability from pension obligations (primarily
from actuarial gains) and the rise in the financial liabilities
(primarily from the issuance of a new debenture loan).
Overall, current debt was constant. Current trade paya-
bles (chiefly relating to domestic suppliers) declined
considerably, while liabilities to affiliated companies rose
slightly, primarily due to higher cash pool credit balances.
Net financial indebtedness amounted to €128.3 million
at 31 December 2013, the leverage ratio at the balance
sheet date thus amounted to around 9.1 percent. Inter-
est expenses, driven primarily by pension obligations,
were higher than interest income by €53.9 million.
Balance sheet indicators
2013 2012 2011
Net financial indebtedness (€m)(Financial liabilities – liquid funds)
128.3 182.6 145.3
Leverage ratio (%)(Net financial indebtedness/balance sheet total)
9.1 15.1 13.1
Asset intensity (%)(Non-current assets/balance sheet total)
68.9 76.4 75.8
Balance sheet indicators when fully considering catch-up effects from the conversion to IFRS and the under-recovery
2013 2012* 2011
Net financial indebtedness (€m)(Financial liabilities – liquid funds)
128.3 182.6(182.6) 145.3
Leverage ratio (%)(Net financial indebtedness/balance sheet total)
4.6 5.8(10.0) 8.7
Asset intensity (%)(Non-current assets/balance sheet total)
34.9 29.5(50.3) 49.9
* Prior-year figures adjusted to IAS 19 (revised 2011). Figure in brackets: Originally reported figure
32
Group management report 2013
In Note 35.4, a detailed reconciliation can be found of
the equity as at 31 December 2013 to the charges-relat-
ed equity after the integration of DFS Energy and taking
into consideration the catch-up effects from the conver-
sion to IFRS and the procedure approved by BAF for
costs to be recovered from the treatment of occupational
pensions (see section 2.3).
2.5.3 Liquidity
2.5.3.1 Financial management
Financial management at DFS secures and supports the
statutory obligation in the Group. DFS optimises its per-
formance through an appropriate equity and debt struc-
ture, the economical use of equity capital, an optimised
use of debt and the planning and control of cash flows
in accordance with the plan. In this way, DFS also pro-
motes the competitiveness of the commercial business.
The company finances itself primarily by drawing on the
cash inflows from operating activities and on funds from
a money and capital market programme. Furthermore,
there are special items impacting assets that have a tem-
porarily favourable effect on liquidity (see section 2.4.5).
The Group Treasury department plans and controls the
level of cash and cash equivalents and the procure-
ment of funds and incorporates subsidiaries in the flow
of funds by means of a cash pool. Funds are collected
and centrally controlled where legally allowed and when
commercially sensible. The financing requirements of
subsidiaries are satisfied by inter-Group settlement
accounts and loans. The company pays attention to a
balanced financing structure and holds liquid reserves to
effectively meet unexpected changes in traffic volumes
(see section 6.2.1).
Business dealings with a selected group of principal bank-
ers are conducted using uniform standards and existing
two-way cash flows are continuously improved.
DFS finances its non-current liabilities congruently with
debenture loans and bonds traded on the exchange in
Luxembourg. Short-term liquidity is covered by means
of a multi-currency commercial paper programme. This
programme is supported by a syndicated line of credit
of €160 million as a back-up facility, which was not
used.
With its money and capital market programme, DFS
attracts both national and international investors. These
investors base their investment decisions and price fix-
ing on the credit rating of each debtor. To support their
decision-making process, DFS has its creditworthiness
rated by means of standardised credit ratings from credit
rating agencies according to internationally uniform and
consistent procedures. The rating agencies Standard &
Poor's and Moody's confirmed the ratings for DFS for
2013, both for the short- and long-term area (AAA/A-1+
and Aa3/P-1).
To cover its running capital requirements, DFS exploited
the favourable market environment and placed a deben-
ture loan of €110 million in the over-the-counter capital
market in February 2013. The loan has a remaining term
of ten years.
At year-end 2013, DFS had an issuing volume of bonds
with a nominal value of €47.2 million with remaining
terms of up to five years as well as debenture loans of
€285.0 million with remaining terms of up to 10 years.
The existing debenture loans and bonds have fixed
interest rates or have been swapped from variable
to fixed rates. The average nominal interest rate of
the bonds and debenture loans, taking the swaps into
account, amounted to 2.941 percent at the balance
sheet date.
33
2.5.3.2 Cash flow statement
Cash and cash equivalents at year-end are made up
as follows:
No payout was made to the Shareholder in the 2013 busi-
ness year. Detailed information can be found in Annex 5
and in Note 31.
2.6 Overall assessment on the economic situation
The results and financial position have been influenced
primarily by the legal framework conditions, economic
regulation, stagnating air traffic, the continuing low inter-
est level as well as measures taken by the Board of Man-
aging Directors to reduce costs. They show a negative
trend when special items are factored out.
In the business year 2013, revenues rose by 0.7 per-
cent compared with the previous year. Overall, DFS
generated net income of €35.8 million. While this
figure remained clearly in positive territory, it came in
below the result of the previous year of €87.9 million
(€73.1 million excluding the adjustment effects from
the application of IAS 19 (revised 2011)). It must be
noted in this comparison that the prior-year figure was
significantly impacted by the special item from the
termination of the QTE transaction (€52.2 million) (see
section 2.4.3).
As part of the five-point programme, the initial areas
have already been selected to reduce costs and boost
corporate flexibility. The objectives apply company-wide,
although the specific implementation measures will be
developed by each organisational unit.
3. PersonnelMotivated and qualified employees are an absolute must
for the long-term success of DFS. This is why human
resources management at DFS stresses a holistic
approach, ranging from selection through appropriate
compensation and targeted training and development to
the long-term retention of staff. Financial incentives are
supported by HR policies aligned with different phases of
life and family needs.
DFS employs non-exempt staff (covered by collective
agreements), exempt employees (not covered by collective
agreements), personnel of the Federal Aviation Office (LBA)
working for DFS and soldiers released from regular ser-
vice. Non-exempt employees are subject to the provisions
of the company-specific collective bargaining agreements.
Exempt status for employees is characterised by the
ability to negotiate contracts freely on an individual basis.
These employees have target agreements covering cor-
porate goals and their area of expertise. The degree of
fulfilment of these agreements determines the variable
salary components.
Cash and cash equivalents (€'000)
Cash inflow (+) / cash outflow (-) 2013 2012* Change (%)
Operating activities 184,425 137,988 33.65
Investing activities -140,693 -117,077 20.17
Financing activities 108,815 -40 -272,137.50
Changes impacting cash flow 152,547 20,871 630.90
Cash and cash equivalent at the beginning of the year 105,534 84,663 24.65
Cash and cash equivalent at the end of the year 258,081 105,534 144.55
* Prior-year figures adjusted to IAS 19 (revised 2011).
34
Group management report 2013
The personnel of the Federal Aviation Office (LBA) work-
ing for DFS comprise the third employee group at DFS.
These established and non-established civil servants, who
have remained in an employment relationship with the
Federal Government, still fall under the collective agree-
ment for the public service (Tarifvertrag für den öffentli-
chen Dienst – TVöD). The collective agreements at DFS
do not apply to them. DFS bears the relevant expenses.
As a rule, air traffic controllers (from the age of 55) and
flight data assistants (from 59) receive transitional pay-
ments in the period before their formal retirement. This
right to receive transitional payments accounts for a
significant component of the pension commitment. Infor-
mation on the compensation structure of the Board of
Managing Directors can be found in Note 42.1.
DFS is continuing to expand measures to support staff
in combining work and family life. Since 2011, DFS has
been involved in a childcare centre in Langen, where its
Headquarters is located. Places are available for employ-
ees' children there. Such places are also available at the
other DFS branches.
Over the course of their whole career, staff can avail of
flexible working-time models, health programmes, semi-
nars and further training opportunities. The validation of
the support measures related to the family is being made
through participation in the work and family audit initiative
(audit berufundfamilie).
As at 31 December 2013, DFS had a total of 6,046
employees.
Staff headcount is also impacted by the planned long-
term reduction in operating costs (see five-point pro-
gramme in section 1.4). Despite the continuing need for
specialists, staff numbers declined slightly.
Employees (as at 31 December)
2013 2012 2011 2010 2009
Permanent employees (total) 6,046 6,100 6,064 5,938 5,596
Salaried staff 5,552 5,560 5,239 5,074 4,745
Soldiers released from regular service 235 246 259 263 268
Wage-earners 27 28 31 31 32
Technical/commercial students & apprentices 50 51 51 45 45
Air traffic control trainees 172 193 189 213 175
Personnel belonging to the Federal Aviation Office (LBA) 245 268 295 312 331
of which established civil servants (188) (204) (227) (240) (255)
of which non-established employees (57) (64) (68) (72) (76)
Compared with previous year (%) -0.9 +0.6 +2.1 +6.1 +4.8
Share of female employees (%) 26.5 26.3 26.0 27.0 26.0
Share of foreign employees (%) 4.1 4.3 4.3 3.9 3.1
35
There were 682 part-time employees – 465 women and
217 men. The share of part-time employees increased
over the previous year and amounts to 12 percent.
Foreign employees mainly come from the USA and the
United Kingdom, followed by Spain and Austria. Overall,
46 nations are represented. The age structure of staff
is well balanced, with the average age being 42 years.
The average age for men is 43, while the average female
employee is 40 years old. The turnover rate – which only
considers employees who leave DFS voluntarily – was
1.6 percent in 2013.
The subsidiary The Tower Company GmbH had a staff
of 40 at the end of December. This number includes
27 qualified or trainee air traffic controllers.
DFS is well aware of its responsibility to society and has
been offering job-starters attractive trainee and college
places for years.
In addition to training air traffic controllers, the spectrum
of training currently offered at DFS encompasses appren-
ticeships and college places for dual courses of studies
graduating with a bachelor's degree in professions cur-
rently in short supply: engineering degrees (electronics and
telecommunications), IT, air navigation technology, service
technology and aviation management. This allows DFS
to meet its demand for qualified staff. As these staff are
trained internally, they will, in all likelihood, take on duties in
the company on completion of their training or degree.
In the future, DFS will continue to offer interesting and
promising trainee and college places.
4. Supplementary reportAfter the balance sheet date, there were no events that
individually or bundled had a material influence on the
assessment of the results and financial position.
0% 20% 40% 60% 80% 100%
2013
2012
49
48
8
8
43
44
Air traffic control
Operational engineering
Supporting functions
Employees by area of duties (%)
People starting training at DFS
2013 2012
Total 222 244
Air traffic controllers 172 189
Flight data assistants 0 4
Dual course of studies/apprenticeship 50 51
Compared with previous year (%) -9.0 +1.7
36
Group management report 2013
The State-owned DFS is subject to the Public Corporate
Governance Code of the Federal Government. Under this
code, the Board of Managing Directors has to ensure
adherence to and compliance with legal provisions
and corporate guidelines. On the basis of this, DFS
introduced a compliance management system (CMS) in
2011.
Together with the risk management system (RMS) and
the internal control system (ICS) for accounting and
financial reporting, these elements form the three pillars
of the corporate structure for risk management. This
system was further validated in 2012 and a compliance
officer was appointed as of 20 December 2012.
The compliance committee advises the compliance
officer. The committee is made up of the executive man-
agement level of Corporate Audit, Corporate Safety and
Security Management and Corporate Management. To
ensure the connection of the compliance management
system to the internal control system and the risk man-
agement system, the committee is supplemented by the
heads of Financial Management and Risk Management
who are permanent guests of the committee. In 2013,
the Compliance Committee had four scheduled meetings.
The main activities in 2013 related to a new assessment
of the compliance risk area. The results were presented
to the audit committee. With the first compliance half-
year report 2013, an additional new reporting path to
the Board of Managing Directors and the Supervisory
Board was introduced.
The compliance management system is constantly upgrad-
ed and expanded. Organisationally, the issue is assigned
to Institutional and Legal Affairs. There is a direct report-
ing channel from the compliance officer to the Board of
Managing Directors and the Supervisory Board.
6. Risk report6.1 Risk management system
DFS uses a comprehensive set of instruments to iden-
tify, analyse, monitor, and manage the risks associated
5. Compliance
Accounting Law Modernisation Act (BilMoG)
Public CorporateGovernance Code (PCGK)
Audit/monitor
Audit/support
Audit
Internal audit
Auditor
Corporate Governance
in the DFS Group
Board of Managing Directors
DFS departments
(represented by managers)
Supervisory Board Audit Committee
Risk management
Accounting policiesCompliance
Compliance officerCompliance committee
Compliance ICS Accounting policies – ICS
Expe
rts
exch
ange
kn
owle
dge
37
with its business. The risk management process is man-
aged centrally by the independent Risk and Contract
Management department. This department is supported
by the risk management committee (RMC) when con-
ducting evaluations that span several organisational
units and processes. As a rule, the members of this
body belong to the executive management level who
are closely involved in the business decision-making
processes, know company-wide interrelationships, and
are hence in a position to contribute to forming a com-
prehensive overview.
The Risk and Contract Management department takes
account of the changes taking place in the aviation
industry and the company, advances risk management
methodically and therefore ensures the early identifica-
tion of risks and the combating of business risks.
This specialist department uses a process description
and an operational instruction to lay down standards for
the ongoing company-wide recognition, assessment,
documentation and reporting of business risks. The
early identification of risks begins with the applications
for approval of business plans and projects. Possible
effects encompass the following topics: operations: e.g.
fulfilling the statutory mandate, infrastructure; finance:
e.g. costs, financial markets, customers/suppliers; man-
agement: e.g. strategy, personnel, organisation as well
as external environment: e.g. politics and legislation,
disasters and terrorist attacks.
The heads of the organisational units identify the
risks that have arisen as part of their management
duties. They report quarterly unless an ad-hoc report
is required. The heads of the organisational units are
responsible for ensuring that the statements on the risk
situation in their areas are correct. A risk announcement
contains a description and an assessment of the risk as
well as the causes and countermeasures. In general, the
forecast period is one year.
Risks are assessed across all segments and are based
on an evaluation of the probability of occurrence and the
possible level of damage of the hazard under considera-
tion as reported by the organisational unit concerned.
The goal is a quantified assessment; in well-founded
cases a qualified assessment is permissible. Criteria
for a qualified assessment are laid down centrally in an
assessment matrix. Based on this, the reported risks
are categorised as "red"/threat to going-concern status,
"yellow"/material and "green"/internal to the organisa-
tional unit.
The direct and indirect investments of DFS are sys-
tematically managed and monitored using in-house risk
management systems. The risk management systems of
subsidiaries are aligned with group regulations. DFS risk
management analyses, plans and controls the effects on
the Group.
The reporting of risks to the Board of Managing Direc-
tors takes place on a quarterly basis, while the Super-
visory Board is informed on a half-yearly basis. Both
reports include an overview of changes from the prior
period and all reports that were no longer judged to be
as business risks in the period under review.
The integrity of the risk management system is tested
by Internal Audit as well as in the course of the audit of
the annual financial statements by the external auditors.
6.2 Material risks
6.2.1 Corporate strategy risks
Corporate strategy risks arise primarily from misjudge-
ments of environmental conditions and future market
developments. They can lead to an inadequate alignment
of corporate activities, with negative consequences for
the earnings position. DFS has hardly any influence on
the development of air traffic. For this reason, the devel-
opment of air traffic is analysed in detail and forecast.
The same is true for the European charging and perfor-
mance scheme.
38
Group management report 2013
The DFS forecasts are highly reliable, which stands in
sharp contrast to the assumptions on which the regula-
tory provisions are based.
Since 2011, DFS has had to revise downwards the medi-
um-term forecast on which the regulatory provisions
are based year after year. As a result of the decline in
traffic, the traffic risk that DFS has to bear in the first
reference period (2012–2014) is in the tens of millions
of euro.
Starting from the vision of DFS with its long-term focus,
the Board of Managing Directors has developed stra-
tegic guidelines. The five-point programme has been
successfully installed and will realign the company with
the demands of the future (see section 1.4). The Board
of Managing Directors regularly reviews the achievement
of the goals of the five-point programme, discussing
potential risks, analysing variance and deciding on and
introducing suitable countermeasures. The continued
development of the company is ensured by close coop-
eration between the Board of Managing Directors, the
Supervisory Board and the Directors of the business
units. Against this background, corporate strategy risks
are judged to be low.
6.2.2 Financial risks
6.2.2.1 Principles of financial risk management
As part of its business activities, DFS is exposed to
numerous financial risks. The management of these
risks is an integral component of the planning and imple-
mentation system. The Board of Managing Directors
lays down the associated corporate policy. The objec-
tive of the corporate policy is to contain and/or mitigate
existing risks. Financial management implements these
targets and uses a system to manage financial risks that
is tailored to the specific business of DFS. Particularly
since the beginning of the global financial market crisis,
DFS has been continuously following and analysing the
developments on the financial markets in a critical dia-
logue with its principal bankers and the rating agencies
to reassess any existing strategies and develop new
strategies as necessary.
As part of its overall risk management system, DFS
performs Value-at-Risk (VaR) analyses to manage market
price risks (interest, currencies). The risk position is
assessed weekly by the Treasury department based
on market price risks and is reported to the Board
of Managing Directors at regular intervals. The VaR
indicates the absolute loss for a company of a defined
risk position which will not be exceeded with a previ-
ously defined probability over a given period of time.
The calculation of the VaR at DFS is based on a holding
period of 10 days and a probability of 95 percent. On
31 December 2013, the cumulative loss at a confidence
level of 95 percent amounted to under €3,064 thousand
(previous year: €1,675 thousand).
The VaR is determined with the help of statistical time
series on the relevant financial market data (interest
rates, exchange rates). Historical simulations are com-
puted by extrapolating scenarios from the past to the
future using simulated changes in market values for
financial instruments. This market risk analysis includes
all money market transactions of DFS, the issued bonds,
debenture loans, interest derivatives, securities, cur-
rency hedges as well as all associated risk positions
(foreign currency purchases and foreign currency
receivables/liabilities).
Quantitative information on VaR values for risks from cur-
rency and interest rate changes is summarised in Note 34.
Clearly defined framework conditions support the planning
and control of risks based on the reporting. Speculative
transactions with derivative instruments where there is no
underlying transaction are forbidden. As regards financial
investing, transactions are only entered into with counter-
parties who either have a long-term rating of at least AA-/
Aa3, short-term A-1/P-1, a correspondingly high credit-
worthiness or other form of collateral.
39
6.2.2.2 Liquidity risk
Daily liquidity is monitored by the Treasury department
and is managed with the help of liquidity planning dur-
ing the year and over the medium term (see section
2.5.3.1).
6.2.2.3 Default risk
DFS is exposed to default risk and, increasingly, a col-
lection and enforcement risk from the operating busi-
ness in en-route and terminal services, from the com-
mercial business as well as from financial instruments.
That is why receivables are monitored constantly in
the operating business and default risks considered by
means of specific allowances. In addition, for terminal
services DFS demands security deposits from custom-
ers with relevant sales volumes when defined warning
thresholds are exceeded.
In the en-route area, EUROCONTROL invoices all flights
on the basis of the data transmitted by the individual
Member States and supplementary information from the
Network Manager. The invoices are issued based on the
data (operator, weight, distance) known at that point in
time. In individual cases, agreements are reached under
which third parties make partial payments of outstanding
amounts for services received after consultation with
the Member States and at EUROCONTROL's reasonable
discretion. EUROCONTROL does not require any security
to be lodged but initiates enforcement measures to col-
lect amounts due which have not been paid within the
deadlines laid down. This requires a resolution from the
Member States.
DFS has no influence on the discretion applied when
EUROCONTROL makes such decisions. Notwithstand-
ing these restrictions, the regulatory authority currently
rejects the inclusion of these collection, default and
enforcement risks as uncontrollable costs. The maxi-
mum default risk is reflected in the carrying amounts of
the financial assets recognised on the balance sheet.
Warranty obligations from the commercial business are
managed as part of a contract-related quality management.
6.2.2.4 Rating risk
The business and performance of DFS are monitored by
external rating agencies and the Deutsche Bundesbank
(eligibility of DFS). Negative analyses and the downgrad-
ing of the ratings could make the take-up of external
financing more difficult and negatively influence the
conditions for such financing and lead to higher interest
rates.
DFS concluded a US lease-in/lease-out transaction (five
tranches) with two US investors (QTE transaction) for a
portion of its air navigation systems under non-current
assets in 2002 and 2003. This transaction was basi-
cally terminated in the second quarter of 2012. The
remaining German shell structure with a remaining term
up to and including 2021 is restricted to a receivable
to Nord/LB Bank (the borrower) and a liability to KfW
Bank (the lender). The associated cash flows match
as regards amount, term and currency. Over its term,
DFS bears the default risk to Nord/LB Bank to the
amount of €55 million as of the balance sheet date
(previous year: €61 million). KfW Bank is authorised to
extraordinarily terminate the loan if the rating of DFS
falls under AA- (Standard & Poor's) or Aa3 (Moody's).
In such a case, DFS has to name a third party within
a period of 30 days that will acquire the receivable of
KfW against DFS to the amount of €57 million (previous
year: €63 million).
6.2.2.5 Interest rate risk
DFS is exposed to interest rate risk from the financing
area, from financial assets as well as from the measure-
ment of obligations under occupational pensions.
In 2013, DFS made use of financial derivatives to hedge
interest rate risk and to minimise expenses. The effec-
tiveness of the hedges is guaranteed by the matching
of maturities and volumes between the hedge and the
40
Group management report 2013
underlying transaction. DFS monitors the impact of regu-
lation to be able to react with appropriate measures to
changes in the area of occupational pensions.
Variances in the value of the present value of the
pension obligations for changes in parameters of
+/- 0.5 percentage points are shown in the sensitivity
analysis in the Notes (See Note 25.3).
6.2.2.6 Currency risk
DFS is exposed to transaction risks as part of cross-
border procurement transactions. The majority of for-
eign currency purchases/liabilities result from suppliers
invoicing in US dollars. The total volume amounted to
approximately US$4.6 million in the reporting period
(previous year: US$8.5 million). Other currencies are
only of minor importance.
These risks are limited by means of hedging using deriv-
ative financial instruments. Currency risks from financial
transactions (foreign bonds, commercial paper) are
hedged immediately on conclusion of the transaction.
6.2.3 Performance-related and IT risks
The top priority for DFS is to ensure air safety, which
is why DFS has installed a safety management system
that corresponds to the provisions of EU Regulation
1035/2011.
A variety of measures are taken at all levels of plan-
ning, implementing and operating DFS infrastructure to
minimise the probability of downtime of the operational
infrastructure of DFS which would endanger air safety
and impact the business performance of DFS.
The risk management system of DFS has incorporated
the ATM-related systems and applications as well as the
administrative systems and applications.
Measures to avoid downtime that would have safety-
related or economic repercussions include the redundancy
and spatial separation of critical systems, the extensive
storage of data on separate data carriers as well as the
SAP backup computer centre.
6.2.4 Staff-related risks
The commitment and dedication of its staff are crucial
for DFS to maintain safety in German airspace and to
ensure the future development of the company.
A particular risk that cannot be underestimated stems
from demographic change and increasing competition
among companies for highly qualified staff and execu-
tives. DFS has set up targeted HR marketing initiatives
to counteract this trend for the technical professions
that are in short supply. DFS uses internal training pro-
grammes to retain talented young professionals. DFS
has a comprehensive in-house health management pro-
gramme to ensure that staff remain healthy and maintain
their ability to perform.
6.2.5 Insured risks
DFS has taken out insurance to cover common insurable
risks, including those of subsidiaries where DFS has a
direct majority shareholding. It particularly includes com-
pensation for the loss or damage of material assets and
the resulting interruption of operations minus the usually
agreed deductible.
It should be kept in mind when assessing the insured
risks that DFS mainly performs sovereign functions on
behalf of the Federal Republic of Germany in keeping
with Article 87d of the German Basic Law (Grundgesetz) in conjunction with Articles 31b and 31d of the German
Aviation Act (LuftVG). As a consequence, the Federal
Republic of Germany is liable for claims brought by third
parties for damages in line with the principles of State
liability. In the case of damage culpably caused by DFS,
aviation liability insurance covers a limit of €767 mil-
lion per instance of damage, thus releasing the Federal
Republic of Germany from its liability to this amount.
For non-sovereign tasks, statutory liability, and in some
41
cases such as apron management services, contractual
liability, are covered up to the named amount.
In addition, claims for damages by third parties from
employer's liability risks are covered by insurance.
6.2.6 Internal control and risk management system in
accordance with Article 315 paragraph 2 no. 5
of the German Commercial Code (HGB)
DFS implemented an internal control and risk man-
agement system as regards (group) accounting and
financial reporting. This ensures an orderly and efficient
presentation of all asset and liability transactions impact-
ing the finances or accounts and the associated flow of
money, goods and services. The assessment of transac-
tions and their recognition are conducted by adhering
to international and national accounting and disclosure
standards as well as by adhering to the applicable
European and national statutory provisions covering air
navigation charges, to tax and corporate law and to the
German principles of proper accounting (GoB).
DFS has set up the necessary organisational structures
and processes in the responsible divisions. Their tasks
are described in functional diagrams and ISO-certified
documents. Process and competence-based job descrip-
tions are available for each member of staff in these
divisions.
All recordable transactions are recognised using a
standardised enterprise resource planning (ERP) soft-
ware product – SAP R/3. This software carries out
programmed plausibility checks. Access rights and the
separation of functions in the system are administered
outside of the Finance division.
The statutory regulations and the regulations laid down
in the Articles of Association are supplemented in all
divisions by detailed internal instructions. These include
the mandatory provisions laid down in internal account-
ing handbooks, guidelines and orders that reflect IAS/
IFRS, the German Commercial Code (HGB), legislation
governing charges and tax law. These provisions are
constantly updated and revised as necessary. Special
issues due to complex, one-off and non-routine transac-
tions are also governed by decisions on their accounting
treatment.
Our internal accounting standards are based on special
European regulations tailored to the business model
used at DFS. Cost-efficiency is reviewed and there is
a separation between the tasks financed by air naviga-
tion charges and the commercial business. In the area
financed by air navigation charges, a differentiation is
made between the regulated sub-area of en-route and
the not (yet) regulated sub-area of terminal services.
Internal and external bodies concerned with accounting
report to the Board of Managing Directors on a monthly
basis on potential problem areas and identified risks.
Variances to planned figures are analysed. This report-
ing is supplemented by constant and standardised infor-
mation to the Supervisory Board. Early warning signals
are defined, with whose support the variances from the
ongoing business are counteracted systematically.
The preparation of the annual and group financial state-
ments is an organised process coordinated by a central
department. To ensure the completeness and correct-
ness of the processed information, a detailed procedural
plan as well as standardised information and request
methods and checklists tailored to DFS are used. To
ensure an optimal exchange of information, all those
involved in the process participate in regular coordina-
tion rounds. The staff members involved in the account-
ing and financial reporting receive regular training. There
is a clear separation of duties among those involved in
preparing the annual and group financial statements.
This separation of functions and segregation of duties
are strictly applied. Complex actuarial expert reports
and valuations are drawn up by specialised external
providers. DFS reviews the plausibility and usability of
42
Group management report 2013
these. Any advances in knowledge gained are used to
improve the efficiency, transparency and reliability of
the process. The external auditors participate in the con-
sultations of the Supervisory Board and report on the
results of their audit.
The Internal Audit department carries out compliance
audits at irregular intervals. Processes that are relevant
to the financial statements are also investigated.
The interlocking instruments described above provide
DFS with an internal control and risk management
system for accounting and financial reporting which
ensures a true and fair view of the actual assets, liabili-
ties, financial position and profit or loss of the Group.
Conscious or unconscious erroneous actions are thus
avoided to the greatest possible extent and discovered
with a high degree of probability. Complete certainty
cannot be guaranteed despite the highest possible level
of care.
6.3 Overall assessment of risk situation
Based on the assessment of the risk situation of the
company by the Board of Managing Directors of DFS, no
risks are currently discernible which individually, or as a
group, would pose a threat to the going-concern status
of DFS.
7. Outlook7.1 Development of the economic environment and
the effects on aviation
The leading economic institutes expect growth in GDP
in Germany of between 1.5 percent and 1.9 percent
for 2014. They assume that the peripheral countries
will stabilise and that the economic recovery in the
core countries of the eurozone will continue. The
Federal Government forecasts an increase in the real
gross domestic product of 1.8 percent for 2014 in its
Annual Economic Report for 2014. It expects growth to
accelerate, which will in particular lead to companies
investing more and more in equipment and buildings as
well as to employment and income rising considerably,
thus strengthening private consumption. Between 1995
and 2010, a one percent increase in economic growth
led to a rise in air traffic of 1.8 percent. Since the
introduction of the air transport tax in 2010, however,
air traffic has only grown slightly more strongly than the
economy. Therefore, for 2014 DFS expects a rise in IFR
flights in Germany to be within the bounds of the eco-
nomic growth set out by the economic institutes.
The International Air Transport Association (IATA) has
forecast an increase in passenger numbers to more
than 3.3 billion globally (6 percent more than in the
previous year) for 2014. The association sees improve-
ments to the structure and efficiency of the industry as
the foundation for this growth. This improvements stem
from such factors as increases in productivity and joint
ventures on the side of the airlines. For Europe, IATA
forecasts growth of a maximum of 2 percent, which is
within the bounds expected by DFS.
In the base scenario of the current STATFOR 7-year fore-
cast, EUROCONTROL expects traffic in German airspace
for 2014 to remain at the level of the previous year
(EUROCONTROL 7-year IFR Flight Movements and Ser-
vice Units Forecast: 2014–2020, EUROCONTROL Doc
522, Status: February 2014). Over the whole medium-
term period of the outlook until 2020, the organisation
expects growth of around 14 percent compared with the
year 2013.
In contrast, DFS expects growth of around 10 percent
compared with the year 2013 in the forecast period
until 2020. The major differences from the estimates by
EUROCONTROL relate to the expected economic growth
and to the assumed development of the airlines. DFS
expects medium-term growth in GDP of 1.4 percent in
line with the estimates published by the Federal Govern-
ment as well as a modest growth in fleet size on the
part of the German air carriers. In addition, DFS uses a
43
standardised planning approach over a five-year period
and therefore considers the fluctuations in air traffic.
The traffic forecast sets the framework for shaping
the second reference period from 2015 to 2019. The
impact on the financial position of the company in the
medium term can only be made after the determination
by the Federal Supervisory Authority for Air Navigation
Services (BAF) and the confirmation by the European
Commission.
7.2 Future development of the DFS Group
7.2.1 Single European Sky (SES) and regulatory
requirements
The initiative of the European Commission on forming
and managing a single cross-border European sky (SES)
represents a significant influencing factor. Future air
traffic management under SES will be based on traffic
flows rather than national borders, thus further enhanc-
ing airspace capacity and service quality.
A pillar of the SES initiative is the formation of functional
airspace blocks, in which air navigation services are to
be provided independently of national borders. Together
with the Benelux States, France, Switzerland and the
EUROCONTROL Control Centre in Maastricht, Germany
is actively participating in implementing this project
within the scope of FABEC (Functional Airspace Block
Europe Central). The FABEC Treaty entered into force
with the ratification by the Kingdom of Belgium on 1
June 2013. All the States involved had then completed
the ratification process and submitted the ratification
documents. At the moment, the FABEC air navigation
service providers are planning numerous airspace struc-
ture projects to ensure sufficient capacity and en-route
efficiency for the period until 2020.
Since 2012, a performance scheme for air navigation
services and network functions in the area of en-route
control services has been in operation based on EU Reg-
ulation 691/2010 and EU Regulation 1191/2010 from
the SES II package. EU Regulation 691/2010 lays down
a performance scheme for air navigation services and
network functions (formerly EC Regulation 2096/2005)
and EU Regulation 1191/2010 lays down a common
charging scheme for air navigation services (formerly
EC Regulation 1794/2006).
The goal is to enhance the performance of air naviga-
tion services, network functions and the cost situation in
the Single European Sky. The performance scheme has
mandatory performance goals for predefined periods
(reference periods) at the European level for the areas
of safety, environment, capacity and cost-efficiency.
On the basis of European target values, the FABEC per-
formance plan lays down joint capacity and environment
targets for the first reference period (2012–2014) as
well as the particular cost-efficiency target which has
been determined in the German contribution to the per-
formance plan.
The European performance scheme is supported at
FABEC level by the planned effective use of civil-military
airspaces.
As part of the preparations for the second reference
period (2015–2019), the EU Regulations from the cur-
rent regulation period were revised and their current
version dated 23 May 2013 is legally binding (EU Regu-
lations 390/2013 and 391/2013).
The expansion of economic regulation from the en-route
area to terminal services, the extension of the refer-
ence period from three to five years, the introduction
of compulsory European targets (which now include the
key performance area safety) as well as the mandatory
application of a financial incentive system for the capac-
ity value are the principal new components of these
regulations. The expansion of economic regulation to
terminal services in the second reference period (the
exact contents of which are not yet finalised) means that
44
Group management report 2013
the risk to revenues stemming from the splitting of the
traffic risk between airspace users and the air navigation
service providers has increased. The risk to revenues
can only be estimated with great uncertainty given the
range of fluctuations in the traffic forecasts and the long
forecast periods (five to seven years).
7.2.2 Centralised services
In spring 2013, EUROCONTROL introduced the central-
ised services initiative, in which nine supporting services
have been identified that should no longer be provided
nationally but centrally for all EUROCONTROL Member
States. DFS supports the basic approach of centralised
services proposed by EUROCONTROL. DFS has the goal
of exploiting the opportunities and minimising the risks
coming from the implementation of the EUROCONTROL
initiative. EUROCONTROL has laid down that centralised
services can only be provided by consortia and not by
individual vendors. DFS will participate in the tender for
selected services after weighing up the opportunities
and risks and seeking consortium partners.
7.2.3 Remote Tower Control (RTC)
Remote Tower Control (RTC) is the bundling of several
aerodrome control towers in one remote control centre
with the help of remote tower operations. Remote tower
operations involves the transfer of the aerodrome con-
trol unit from the original aerodrome to a different loca-
tion without changing the operational concept of having
a visual control procedure. In a remote tower centre,
several aerodrome control units are brought together
and operated remotely using one uniform concept of
endorsements and operations.
The business unit Tower is pursuing the strategy of
reducing costs by using new technologies and pro-
cedures and an optimised and efficient deployment
of staff. This is illustrated in the RTC project, which
involves the step-by-step consolidation of aerodrome
control for the international airports of Saarbrücken
(SCN), Erfurt (ERF) and Dresden (DRS) at one central
location in Leipzig (LEJ). At DFS, the implementation of
Remote Tower Control means a change of paradigm in
the provision of aerodrome control service.
7.2.4 iCAS programme
DFS initiated the iCAS programme to consolidate all
projects, sub-projects and individual measures for the
development of the ATS system iCAS, the future air
traffic control system at all DFS control centres. It com-
prises both concrete procurement and development
measures to provide the air traffic control system iCAS
for the DFS control centres as well as varied bilateral
and multinational cooperation measures at a European
level. The iCAS programme is to ensure that the multina-
tional initiatives to shape the future European air traffic
management system and the development of the air traf-
fic control system iCAS are conducted congruently and
in line with the requirements of DFS.
7.2.5 SESAR
In addition, DFS supports the European requirements for
the modernisation of the air traffic management network
through its participation in the SESAR project. Under the
auspices of the SESAR Joint Undertaking, it develops,
together with its partners, technologies and procedures
that are fit for purpose.
7.2.6 Commercial business
The business unit Aeronautical Solutions is strengthen-
ing its marketing activities with a focus on Asia and is
paving the way for growth by bundling together the com-
mercial business of DFS under one uniform strategic
responsibility.
7.2.7 Group structure
DFS is increasingly separating at the organisational
level the commercial business from the business
45
financed by air navigation charges. The company is
bringing together the group companies exposed to
competition in the holding company DFS IBS. In 2013,
for instance, DFS IBS acquired R. Eisenschmidt GmbH,
a company with a long tradition in the provision of
aviation supplies and accessories. In 2014, DFS will
transfer all the shares in TTC and its minority interest in
GroupEAD to DFS IBS.
7.3 Delopment of results and financial position
7.3.1 Interference in the determination of charges
for terminal services
In a directive dated 12 December 2012, the Federal
Supervisory Authority for Air Navigation Services (BAF)
laid down that the under-recovery concerning charges
from 2011 had to be distributed over the years 2013–
2015. The BAF also reduced the planned rise in staff
costs from 3 percent to 1 percent and raised the traffic
forecast, which now lies above EUROCONTROL's short-
term forecast (as at 12/2012) and the DFS forecast for
2013. This measure provides relief for airspace users
in the short term. Deviating from current practice, the
under-recovery concerning charges from 2011 is now
spread over a longer period of time instead of including
it in full in 2013. This impacts the cost-base for deter-
mining charges and the liquidity situation.
7.3.2 Revenues and costs
DFS is currently observing a significant variance
between the actual air traffic volume and the traffic fore-
cast for the first reference period.
The charges laid down per service unit are not sufficient
to offset the excessively high values in the plan. This had
a significant negative impact on the revenues of DFS in
the first reference period. The current forecast shows
that the service units for 2014 are 9.5 percent below
the traffic figures set out in the performance plan.
The stagnating traffic is forcing the Board of Managing
Directors to critically review the increase in staff num-
bers in air traffic control which has already been carried
out. With the exception of a few sectors, staffing levels
of operational personnel meet demand.
As a result, DFS is significantly reducing the recruitment
of new operational personnel to curb expenses. The
discussions with the local staff councils on the practical
implementation of the collective agreement on the grad-
ing system (ETV), which runs until the end of October
2016, have not yet been completed. In 2013, the col-
lective agreement on remuneration was cancelled within
the time prescribed. Negotiations are continuing.
The stagnation in air traffic is having a significant nega-
tive effect on revenues. Expenses will primarily be
influenced by the current collective bargaining negotia-
tions. The requirements of the regulatory authority on
cost-efficiency in the second reference period are not
yet available but are expected in spring 2014. At the
present moment, DFS is not able to make further state-
ments on the development of revenues and costs from
2015.
Measures and impact by business year (€m)
2013 2014 2015
Allocation of under-recovery -7.4 +3.7 +3.7
Staff costs due to salary rises under collective agreements -1.9 --- +1.9
Adjustment of traffic forecast -2.8 --- +2.8
46
Group management report 2013
7.3.3 Capital expenditure
In the future, capital expenditure for air navigation sys-
tems to expand capacity and for the infrastructure at
the international airports in Munich and Berlin as well as
replacement investments will lead to marginally higher
charges for depreciation. Additional capital expenditure
will be financed from cash flow and loans and amortised
by matched depreciation charges.
7.3.4 Liquidity
Currently, the financial strategy of DFS is primarily being
influenced by two counteracting effects from events on
the capital markets. Low interest rates on the capital
markets are favouring the take-up of debt and ensuring
low interest expenses. However, the low returns that
can currently be earned on the market mean that the
pension plan assets are not yielding substantial income.
The growth in plan assets is slowing down. In addition,
under IAS 19.78 the discount rate with which the obliga-
tion is to be measured and discounted is determined
by reference to market yields on high quality corporate
bonds. This rate is lower than the company-specific
discount rate used previously and leads to significantly
higher expenses for the vested benefits of staff, which
has a considerable impact on staff costs.
The regulatory authority has laid down that the actual
financing expense for occupational pensions should not
be subject to the cost-efficiency targets of the perfor-
mance plan, allowing a reliable servicing of this obligation
until further notice.
The forecast operating losses for 2014 will be financed by
means of a debenture loan issued in 2013. DFS assumes
that the regulatory authorities will set out an appropriate
return that is aligned with the business model from 2015.
7.3.5 Regulation of terminal services from 2015
The economic regulation of terminal services starts in
2015, but currently the regulatory authorities have not
yet laid down the rules. The Board of Managing Direc-
tors expects that the rules for terminal services from
2015 will be based on the framework used for the en-
route area. The chances and risks stemming from the
development of traffic will probably be split and limited.
Cost risks will be offset by an adequate return on the
equity tied up that is relevant to charges. Possible
chances and risks stemming from regulation are inte-
grated in the planning process.
The Board of Managing Directors does not expect any
influence on the results and financial position before full-
cost recovery is discontinued in 2015. DFS assumes in
its planning that regulation will take into account current
traffic and a determination of charges that considers risk.
7.3.6 General statement and earnings forecast
The Board of Managing Directors expects an overall
stagnation in air traffic volume in Europe. In its current
traffic forecast for 2014 for the en-route area, it antici-
pates that the number of service units will be approxi-
mately 9.5 percent lower than forecast in the FABEC
performance plan. However, the performance plan laid
down by regulation assumes a constant unit rate.
The slight increase in the number of service units
expected in 2014 when compared with 2013 (DFS fore-
cast) will unfortunately be offset by the slight decline in
the unit rate (see section 2.4.1.1). Therefore, based on
present knowledge, DFS will generate revenues at the
same broad level as last year in the en-route area.
As is common in this industry, expenses are particularly
influenced by staff costs and occupational pensions.
The Board of Managing Directors is counteracting these
challenges using collective bargaining measures and
by the targeted reduction of costs under the five-point
programme. It focuses on boosting productivity, react-
ing to fluctuating demand with increased staff flexibility
and limiting the planned increase in headcount. Vacant
47
positions are successively not being filled and the natural
turnover is being used to reduce staff numbers. Airspace
structures and procedures are being optimised and capi-
tal expenditure on recoverable, high-performance and
harmonised ATM systems is being stepped up. Project
and general costs are being reduced.
The Board of Managing Directors is counteracting the
possible decline in revenues in a targeted manner by
expanding the commercial business and with its five-
point programme. DFS intends to reduce its annual
operating costs by approximately €100 million by 2019
(see section 1.4).
These measures will only have a limited effect on offset-
ting the expected rise in costs, with revenues trending
at a constant level. The Board of Managing Directors
anticipates a small operational loss in 2014, which will
be offset by the catch-up effects (see section 2.3), and
a result at approximately the prior-year level.
Langen, 12 March 2014
The Board of Managing Directors
Prof Klaus-Dieter Scheurle
Robert Schickling
Dr Michael Hann
48
DFS Deutsche Flugsicherung GmbH
Group statement of comprehensive incomefor the period 1 January 2013 to 31 December 2013
Note 2013 2012*€'000 €'000
Revenues 5 1,109,197 1,101,317Changes in inventory and other own work capitalised 6 1,417 2,588
Other operating income 7 33,650 77,779
Total operating revenues and income 1,144,264 1,181,684
Cost of materials and services 8 -5,483 -6,705
Employee expenses* 9 -808,477 -772,172
Depreciation and amortisation 10 -102,410 -105,026
Other operating expenses** 11 -138,313 -143,968
Earnings before interest and taxes (EBIT) 89,581 153,813
Financial income* 12 61,322 73,137
Financial expenses 12 -115,261 -125,308
Financial result 12 -53,939 -52,171
Profit (loss) before income taxes 35,642 101,642
Income taxes 13 124 -13,756
Net income** 35,766 87,886
Of which attributable to the Shareholder of the parent company 35,766 87,886
Other comprehensive incomeItems that cannot subsequently be reclassified in profit or loss:Remeasurement of the net defined benefit liability* 24 555,524 -869,198
Tax effects 24 0 0
Items that can subsequently be reclassified in profit or loss:Change in the fair value of available-for-sale financial assets 24 -25 -101
Tax effects 24 993 -55
Total other comprehensive income 24 556,492 -869,354
Of which attributable to the Shareholder of the parent company 556,492 -869,354
Total result 592,258 -781,468
Of which attributable to the Shareholder of the parent company 592,258 -781,468
* Prior-year figures adjusted to IAS 19 (revised 2011)** Figure rounded down by €1 thousand for reconciliation purposes
49
Group balance sheet as at 31 December 2013
Note 31 Dec 2013 31 Dec 2012 1 Jan 2012€'000 €'000 €'000
Assets
Intangible assets 14 233,698 234,074 236,434Property, plant and equipment 15 531,459 511,486 508,873Investment property 16 843 873 903Financial assets 17 59,026 40,526 35,032Trade receivables 19 7 7 0Other receivables and assets 18 137,755 135,229 50,642Deferred tax assets 13 2,307 0 6,291
Non-current assets 965,095 922,195 838,175
Inventories 21 4,735 5,068 5,026Trade receivables 19 146,490 142,060 147,268Future receivables from construction contracts 20 2,770 1,415 3,998Other receivables and assets 18 21,417 20,061 24,746Current income tax assets 1,378 4,150 2,188Securities 22 0 7,018 0Liquid funds 23 258,081 105,534 84,663
Current assets 434,871 285,306 267,889
Balance sheet total (assets) 1,399,966 1,207,501 1,106,064
Note 31 Dec 2013 31 Dec 2012* 1 Jan 2012*€'000 €'000 €'000
Equity and liabilities
Subscribed capital 24 153,388 153,388 153,388Capital reserves 24 74,296 74,296 74,296Remeasurement reserves* 24 -739,298 -1,294,822 -440,428Retained earnings 24 -193,400 -229,166 -302,248Other reserves 24 0 -968 -812Shareholder's equity -705,014 -1,297,272 -515,804
Provisions for pensions and similar obligations* 25 1,346,114 1,827,237 988,344Other provisions 26 132,499 127,864 127,933Financial liabilities 27 381,931 284,544 229,940Trade payables 28 1,094 798 1,123Other liabilities 29 3,075 4,672 50,533Income tax liabilities 30,869 30,869 30,869Deferred tax liabilities 13 0 7,349 0Non-current debt 1,895,582 2,283,333 1,428,742
Other provisions 26 30,783 31,055 38,189Financial liabilities 27 4,423 3,627 0Trade payables 28 35,536 51,754 41,471Other liabilities 29 135,979 134,904 112,779Income tax liabilities 2,677 100 687Current debt 209,398 221,440 193,126
Balance sheet total (equity and liabilities) 1,399,966 1,207,501 1,106,064* Prior-year figures adjusted to IAS 19 (revised 2011)
50
DFS Deutsche Flugsicherung GmbH
Group statement of changes in equity for the period 1 January 2013 to 31 December 2013
Of which attributable to
Remeasure- the ShareholderSubscribed Capital ment Retained Other Total of the parent
capital reserve reserves* earnings reserves company€'000 €'000 €'000 €'000 €'000 €'000 €'000
Note (24) (24) (24) (24) (24)
As at 1 Jan 2012* 153,388 74,296 -440,428 -302,248 -812 -515,804 -515,804Payment of dividendto Shareholder 0 0 0 0 0 0 0
Total result
Net income 0 0 14,804 73,082 0 87,886 87,886
Other comprehensive incomeRemeasurement of the net defined benefit liability* 0 0 -869,198 0 0 -869,198 -869,198Change in the fair valueof available-for-salefinancial assets 0 0 0 0 -101 -101 -101Tax effects 0 0 0 0 -55 -55 -55
As at 31 Dec 2012* 153,388 74,296 -1,294,822 -229,166 -968 -1,297,272 -1,297,272Payment of dividend to Shareholder 0 0 0 0 0 0 0
Total result
Net income** 0 0 0 36,766 0 36,766 36,766
Other comprehensive incomeRemeasurement of the net defined benefit liability 0 0 555,524 0 0 555,524 555,524Change in the fair valueof available-for-salefinancial assets 0 0 0 0 -25 -25 -25Tax effects 0 0 0 0 993 993 993
As at 31 Dec 2013 153,388 74,296 -739,298 -192,400 0 -704,014 -704,014
* Prior-year figures adjusted to IAS 19 (revised 2011)** Figure rounded down by €1 thousand for reconciliation purposes
51
Group cash flow statementfor the period 1 January 2013 to 31 December 2013
Note 2013 2012*
(31) €'000 €'000
Net income* ** 35,766 87,887Depreciation and amortisation on intangible assets and property plant and equipment 102,410 105,026
Income taxes 8,540 171
Income from investments 0 -339
Gains (-) from the measurement of bonds -5,676 -3,534
Gains (-) from the measurement of securities -25 -7
Gains (-) from asset disposals -60 -1,775
Losses (+) from asset disposals 1,795 996
Non-cash changes from the QTE transaction -930 2,651
Increase (-) in other receivables and assets -3,770 -19,078
Increase (-) / decrease (+) in deferred tax assets -1,314 6,235
Decrease (+) / increase (-) in inventories 333 -42
Increase (-) / decrease (+) in trade receivables -4,430 5,201
Increase (-) / decrease (+) in future receivables from construction contracts -1,355 2,583
Decrease (+) / increase (-) in current tax assets 2,771 -1,962
Increase (+) / decrease (-) in provisions for pensions and similar obligations* 74,401 -30,306
Increase (+) / decrease (-) in other provisions 4,363 -7,203
Increase (+) / decrease (-) in other liabilities -9,988 -22,834
Decrease (-) / increase (+) in trade payables -15,921 9,957
Increase (+) / decrease (-) in income tax liabilities 2,577 -586
Decrease (-) / increase (+) in deferred tax liabilities -7,349 7,349
Taxes paid (-) -3,213 -2,741
Dividend received (+) 0 339Cash inflow from operating activities 178,925 137,988
Payments (-) for investments in intangible assets and property, plant and equipment -124,643 -107,441Payments (-) for investments in financial assets -18,500 -12,606
Proceeds (+) from disposal of intangible assets and property, plant and equipment 932 2,970
Proceeds (+) from disposals of financial assets 7,018 0Cash outflow for investing activities -135,193 -117,077
Payments (-) / proceeds (+) for finance leases -33 169Taking on (+) of financial assets (debenture loan) 110,000 0
Interest result 4,648 6,271
Interest received 2,821 1,159
Interest paid -8,621 -7,639Cash outflow for financing activities 108,815 -40Net change in cash and cash equivalents 152,547 20,871Cash and cash equivalent at the beginning of the year 105,534 84,663Cash and cash equivalent at the end of the year 258,081 105,534
* Prior-year figures adjusted to IAS 19 (revised 2011)** Figure rounded down by €1 thousand for reconciliation purposes
Notes 2013
52
1. General basisDFS Deutsche Flugsicherung GmbH (DFS) is a company under private law. It has its Headquarters (registered office) in
63225 Langen, Am DFS-Campus 10, Germany. The company is registered on the Commercial Register (HRB 34977) at
Offenbach am Main district court, Germany, as a limited liability company (GmbH). DFS is wholly owned by the Federal
Republic of Germany, represented by the Federal Ministry of Transport and Digital Infrastructure (BMVI).
The main business of DFS is defined by the tasks set out in Article 27c of the German Aviation Act (LuftVG). Under this
act, DFS is entrusted with providing air navigation services (a sovereign task). The group management report contains
information on the business activities of DFS and the object of the company (see sections 1.1 and 1.3 in the group man-
agement report).
2. Application of accounting standardsThe regulations:
EC Regulation 1606/2002 of the European Parliament and of the Council dated 19 July
2002 on the application of international accounting standards
EC Regulation 550/2004 of the European Parliament and of the Council dated 10 March 2004 on the provision of air navigation services in the Single European Sky(the Service Provision Regulation)
EC Regulation 1794/2006 of the Commission dated 6 December 2006 laying down a
common charging scheme for air navigation services
EU Regulation 1191/2010 dated 16 December 2010 amending EC Regulation1794/2006 of the Commission on the development of a common charging scheme for air navigation services
EU Regulation 390/2013 of the Commission dated 3 May 2013 laying down a
performance scheme for air navigation services and network functions
EU Regulation 391/2013 of the Commission dated 3 May 2013 laying down a common
charging scheme for air navigation services
oblige DFS to draw up its group financial statements as of 31 December 2013 in line with International Financial Reporting
Standards (IFRS). DFS applies the standards of the International Accounting Standards Board (IASB) and the interpreta-
tions of the International Financial Reporting Interpretations Committee (IFRIC) as recognised and endorsed by the Euro-
pean Union (EU).
These financial statements consider EU Regulation 1606/2002, which is enacted in Article 315a of the German Com-
mercial Code (HGB) by means of the Accounting Law Reform Act (BilReG) dated 4 December 2004.
These group financial statements of DFS were prepared in accordance with the standards endorsed for use in the EU.
The business year at the DFS group corresponds to the calendar year (1 January to 31 December).
Notes to the group financial statements 2013
53
The Board of Managing Directors drew up the group financial statements and approved them for submission to the Audit
Committee of the Supervisory Board on 12 March 2014. The Audit Committee checked the group financial statements and
stated its opinion of them. The Supervisory Board discussed the group financial statements and the opinion of the Audit
Committee and issued a recommendation to the Shareholder to approve the group financial statements. The Shareholder
may amend the group financial statements released by the Board of Managing Directors. The approved group financial
statements are available via the electronic German Federal Gazette in accordance with Article 325 paragraph 2a no. 1 of
the German Commercial Code (HGB) and from the website at www.dfs.de.
3. Scope of consolidation
Acronym Company Registered office Shareholdingin %
DFS DFS Deutsche Flugsicherung GmbH Langen, Germany Parent company
Affiliated companiesDFS IBS DFS International Business Services GmbH Langen, Germany 100.00
Formerly known as:DFS ESSP DFS European Satellite Services Provider
Beteiligungsgesellschaft mbH
U-Kasse DFS Unterstützungskasse GmbH (Benevolent fund) Langen, Germany 100.00
TTC The Tower Company GmbH Langen, Germany 100.00
DFS Energy DFS Energy GmbH Langen, Germany 100.00
Investments
FCS FCS Flight Calibration Services GmbH Braunschweig, Germany 55.00
GroupEAD GroupEAD Europe S.L. Madrid, Spain 36.00
BILSODA BILSODA GmbH & Co. KG Pullach, Germany 24.90
Investments through affiliated companies
Shares and investments through DFS International Business Services GmbH:
Eisenschmidt R. Eisenschmidt GmbH Egelsbach, Germany 100.00
ESSP SAS European Satellite Services Provider Toulouse, FranceSociété par Actions Simplifiée 16.67
Investment through The Tower Company GmbH:
TATS Tower Air Traffic Services S.L. Madrid, Spain 50.00
DFS recognises its stakes in affiliated companies and investments at cost (see Notes 17 and 41.1). Even when taken as a
whole, the stakes do not impact the results and financial position of the group and are therefore not included in the scope
of consolidation.
Although DFS holds more than half the shares in FCS, individual provisions of the articles of association of FCS as well as the
rules of internal procedure for the board prevent DFS from exercising control. Therefore, FCS is included under investments.
With the purchase and assignment contract dated 3 July 2013, DFS ESSP acquired 100 percent of the shares in R. Eisen-
schmidt GmbH for a purchase price of €296 thousand. The fully paid-in capital amounts to €26 thousand.
Notes 2013
54
With the notarial recording dated 26 August 2013, the Shareholder changed the name of DFS European Satellite Services
Provider Beteiligungsgesellschaft mbH to DFS International Business Services GmbH. The entry in the Commercial Register
was made on 3 September 2013.
4. Accounting policiesDFS and its subsidiaries carry out their accounting and measurement using uniform standards. They apply the histori-
cal cost principle, unless IFRS prescribes a different measurement principle. The associated disclosure is made with the
respective accounting policy.
4.1 New and revised international financial reporting standards and interpretations
4.1.1 Mandatory standards and interpretations
DFS uses the following new and revised standards that are mandatory for business years beginning on or after 1 January
2013. The endorsement by the European Union is made with the publication of the standard in the Official Journal of the
European Union.
Standard Title Publication EU EffectiveIASB endorsement date
IAS 1 Presentation of financial statements 16 Jun 2011 5 Jun 2012 1 Jul 2012(Presentation of components of
other comprehensive income)
IAS 19 Employee benefits 16 Jun 2011 5 Jun 2012 1 Jan 2013
IAS 12* Income taxes (Deferred tax– recovery 20 Dec 2010 11 Dec 2012 1 Jan 2013of underlying assets)
IFRS 1* First time adoption of IFRS 20 Dec 2010 11 Dec 2012 1 Jan 2013
(Severe hyperinflation and removal offixed dates for first-time adopters)
IFRS 13 Fair value measurement 12 May 2011 11 Dec 2012 1 Jan 2013
IFRIC 20* Stripping costs in the production phase 19 Oct 2011 11 Dec 2012 1 Jan 2013of a surface mine
IFRS 7 Financial instruments: Disclosures 16 Dec 2011 13 Dec 2012 1 Jan 2013(Offsetting of financial assets and
liabilities)IFRS 1* First time adoption of IFRS 13 Mar 2012 4 Mar 2013 1 Jan 2013
(Government loans)Catalogue Improvements to international financial 17 May 2012 27 Mar 2013 1 Jan 2013
reporting standards (2009 to 2011) * The revisions to the standards IAS 12, IFRS 1 and the interpretation IFRIC 20 are materially relevant for DFS. As such issues currently do not arise,
the standards and interpretation have no impact on the group management report, the net income as well as the results and financial position of the group financial statements.
DFS has retrospectively applied IAS 1 (Presentation of financial statements) for the first time effective from the business
year beginning 1 January 2013. IAS 1 was endorsed by the EU on 5 June 2012. When certain preconditions are met, the
revision splits the line items in other comprehensive income into items that could be reclassified to profit or loss in subse-
quent periods and items that remain in equity. The revisions to the standard impact merely the presentation of the state-
ment of comprehensive income.
55
DFS has applied IAS 19 (Employee benefits) for the first time effective from 1 January 2013. IAS 19 was endorsed by
the EU on 5 June 2012. The transitional provisions require retrospective application in conformity with IAS 8 (Accounting
policies, changes in accounting estimates and errors). The revised standard eliminates the option of using the corridor
method for actuarial gains and losses. They are now treated as remeasurements and recognised directly in equity. In
the case of plan amendments and plan curtailments, the resulting effects are recognised directly in profit or loss at the
point in time they occur. The expected return on plan assets and the interest expense for plan obligations are discounted
uniformly and reported as the net interest component. IAS 19 requires comprehensive disclosures on the characteristics,
risks and contributions of defined benefit plans, sensitivity analyses on actuarial assumptions, reconciliations and the pres-
entation of future cash flows. Overall, the changes lead to higher equity volatility. The impact of the retrospective appli-
cation of IAS 19 is presented in Note 4.2.1. As regards past service costs, DFS anticipates that there will be an annual
rise of around €3,000 thousand to €4,000 thousand, while the net interest expense will see an annual decline of around
€2,000 thousand to €4,000 thousand.
DFS has applied IFRS 13 (Fair value measurement) prospectively for the first time effective from 1 January 2013. IFRS 13
was endorsed by the EU on 11 December 2012. The new IFRS describes a uniform cross-standard framework for measur-
ing fair value, defines the term and presents possible methods for determining fair value. The fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market partici-
pants at the measurement date. The first-time application of the standard did not result in any changes to the DFS group
financial statements.
DFS has retrospectively applied IFRS 7 (Financial instruments: disclosures) for the first time effective from 1 January 2013.
IFRS 7 was endorsed by the EU on 13 December 2012. The amendments cover additional disclosures to be made when
netting financial assets and financial liabilities. DFS presents the net amount of financial receivables and liabilities to the
Shareholder, affiliated companies and investments (see Note 29). The standard was already applied and resulted in no
changes to the group financial statements.
DFS has applied the Improvements to International Financial Reporting Standards (2009 to 2011) for the first time effec-
tive from 1 January 2013. They were endorsed by the EU on 27 March 2013. The amendments are to be retrospectively
applied in conformity with IAS 8. Within the scope of the regular IASB project, non-urgent improvements and inconsisten-
cies in IFRS are tackled. This relates in particular to the clarification of wording and the correction of existing require-
ments as well as additional guidance. There was no impact on the group financial statements from the improvements of
IFRS already applied.
4.1.2 Voluntary standards and interpretations
The IASB has published the following revised or new standards and interpretations. The standards have already been incor-
porated into European law as part of the endorsement procedure. They become effective from the point in time given and
earlier application is permitted.
Notes 2013
56
DFS is currently examining the impact of the new and amended standards on the group's results and financial position. The
standards will be applied when they become effective and earlier application will not be availed of.
Standard Title Publication EU EffectiveIASB endorsement date
IFRS 10 Group financial statements 12 May 2011 11 Dec 2012 1 Jan 2014
IFRS 11 Joint arrangements 12 May 2011 11 Dec 2012 1 Jan 2014
IFRS 12 Disclosure of interests in other entities 12 May 2011 11 Dec 2012 1 Jan 2014
IAS 27 Separate financial statements 12 May 2011 11 Dec 2012 1 Jan 2014
IAS 28 Investments in associates and joint ventures 12 May 2011 11 Dec 2012 1 Jan 2014
IAS 32 Financial instruments: Presentation 16 Dec 2011 13 Dec 2012 1 Jan 2014(Offsetting of financial assets and liabilities)
IFRS 10 to 12 Transitional provisions to IFRS 10, 11 and 12 28 Jun 2012 4 Apr 2013 1 Jan 2014
IFRS 10 Group financial statements (Investment entities) 31 Oct 2012 20 Nov 2013 1 Jan 2014
IFRS 12 Disclosure of interests in other entities 31 Oct 2012 20 Nov 2013 1 Jan 2014(Investment entities)
IAS 27 Separate financial statements (Investment entities) 31 Oct 2012 20 Nov 2013 1 Jan 2014
IAS 36 Impairment of assets – disclosures on the 29 May 2013 19 Dec 2013 1 Jan 2014recoverable amount for non-financial assets
IAS 39 Financial instruments: Recognition and 27 Jun 2013 19 Dec 2013 1 Jan 2014measurement – novation of derivativesand continuation of hedge accounting
The new and revised standards IFRS 10, 11 and 12 as well as IAS 27 and 28 are the result of the IASB consolida-
tion project. The EU endorsed the standards on 11 December 2012 and made their first-time application mandatory
for companies retrospectively effective from 1 January 2014 in conformity with IAS 8. An early voluntary application
is permitted if all the standards mentioned are adopted at the same time. IFRS 10 creates a uniform basis for the
definition of the relationship between parent and investee and regulates the inclusion of companies in the scope of
consolidation. The standard also offers guidance in cases of doubt. IFRS 11 regulates the accounting by entities that
jointly control an arrangement either by joint venture or joint operation. IFRS 12 consolidates in one standard the quan-
titative and qualitative disclosures for all types of interests in other companies. After the introduction of this new group
standard, IAS 27 now only relates to the accounting for separate financial statements. IAS 28 describes the account-
ing for investments in associates and joint ventures. The option for proportionate consolidation for joint ventures was
discontinued. The amendments published on 4 April 2013 on new group standards regulate the transitional provisions.
The amendments published on 20 November 2013 aim to better reflect the business model of investment entities.
In addition to definitions and disclosures, the revised regulation requires that investment entities not consolidate the
subsidiaries they control and hold for investment purposes. Instead, fair value should be used to measure those invest-
ments. DFS does not expect the new and revised standards to impact the scope of consolidation as the investments in
affiliated companies are immaterial even when viewed as a whole.
57
The amendments to IAS 32 (Financial instruments: presentation – offsetting financial assets and financial liabilities) was
endorsed by the EU on 13 December 2012 and retrospective application is required for the first time effective from
1 January 2014. Early voluntary application is possible. The amendments clarify offsetting by providing additional guid-
ance. They specify that offsetting is only permitted when the entity currently has a right to set-off, it may not be contin-
gent on a future event and it must be legally enforceable in all of the following circumstances: (i) the normal course of
business; (ii) an event of default; and (iii) an event of insolvency or bankruptcy of the entity or any of the counterparties.
The amendments also regulate that gross settlement mechanisms are to be deemed equivalent to net settlement under
certain circumstances.
On 19 December 2013, the EU endorsed the amendments to IAS 36 (Impairment of assets – disclosures on the recov-
erable amount for non-financial assets). Application is retrospectively required effective from 1 January 2014. Early
application is permitted. These amendments regulate that the asset has to be carried at its recoverable amount if the
asset is an impaired or revalued asset determined on the basis of the fair value less costs to sell.
On 19 December 2013, the EU adopted the revised standard IAS 39 (Financial instruments: recognition and measure-
ment – novation of derivatives and continuation of hedge accounting). It is retrospectively effective from 1 January
2014. Early voluntary application is permitted. Due to the change, the novation of hedges to a central counterparty
(CCP) as a consequence of laws or regulations does not lead to the expiration or termination of the hedging instrument
under certain circumstances.
4.1.3 Published, though not yet mandatory, standards and interpretations
The IASB has issued the following standards which are not yet mandatory. Before these can be applied, they have to be
recognised and endorsed by the EU. They become effective from the point of time given.
DFS is currently examining the possible impact on the group financial statements. DFS does not avail of the right of earlier
application of new or revised standards.
Notes 2013
58
Standard Title Publication Expected RelevantIASB effective date for DFS
IFRS 9 Financial instruments 12 Nov 2009 Open YesIFRS 7/ IFRS 9 Financial instruments – amendments and 16 Nov 2011 Open Yes
mandatory effective date and transition disclosures
IFRIC 21 Disclosures 20 May 2013 1 Jan 2014 YesIAS 39/ Financial Instruments – changes and 19 Nov 2013 Open YesIFRS 7/ IFRS 9 hedge accountingIAS 19 Employee benefits (Defined benefit 21 Nov 2013 1 Jul 2014 Yes
plans: employee contributions)Catalogue Improvements to international financial 11 Dec 2013 1 Jul 2014 Yes
reporting standards (2010 to 2012)Catalogue Improvements to international financial 11 Dec 2013 1 Jul 2014 Yes
reporting standards (2011 to 2013)IFRS 14 Regulatory deferral accounts 30 Jan 2014 1 Jan 2016 Yes
4.2 Changes in accounting policies
4.2.1 Occupational pensions
The changes to IAS 19 (Employee benefits) are retrospectively effective from 1 January 2013. DFS therefore changed
its accounting policies for defined benefit obligations. The net interest component replaces interest expense of the
defined benefit obligation and the expected return on plan assets. The net interest expense (income) is calculated based
on the net defined benefit liability (asset). The uniform discount rate for the obligation and plan assets is the yield on
high quality fixed-rate corporate bonds measured at the beginning of the year. Net interest is disclosed in the financial
result. Actuarial gains and losses are recognised directly in the balance sheet (not in profit or loss) as remeasurements
of the defined benefit obligation in other comprehensive income in equity. The corridor method has been discontinued.
Amendments to benefit plans lead to past service costs. These are fully recognised in employee expenses immediately
when incurred. A reconciliation of the affected items is presented below.
59
Reconciliation of the group statement of comprehensive incomeValue after Adjustment Value after
IAS 19 publicationadjustment of IAS 19
(revised 2011) (corridor method)2012 €'000 €'000 €'000Employee expenses -772,172 16,966 -789,138(Amortisation of actuarial gains and losses)
Earnings before interest and taxes (EBIT) 153,813 16,966 136,847
Financial income 73,137 -2,162 75,299(Expected return on plan assets)
Financial result -52,171 -2,162 -50,009
Profit (loss) before income taxes 101,642 14,804 86,838
Net income 87,886 14,804 73,082
Remeasurement of the net defined benefit liability -869,198 -869,198 0
Other result after taxes -869,354 -869,198 -156
Total result -781,468 -854,394 72,926
Reconciliation of group balance sheetValue after Adjustment Value after
IAS 19 publicationadjustment of IAS 19
(revised 2011) (corridor method)1 Jan 2012 €'000 €'000 €'000
Remeasurement reserves -440,428 -440,428 0
Shareholder's equity -515,804 -440,428 -75,376
Provisions for pensions and similarobligations 988,344 440,428 547,916Non-current debt 1,428,742 440,231 988,511
31 Dec 2012 €'000 €'000 €'000
Remeasurement reserves* -1,294,822 -1,294,822 0
Retained earnings* -229,166 0 -229,166
Shareholder's equity -1,297,272 -1,294,822 -2,450
Provisions for pensions and similarobligations 1,827,237 1,294,822 532,415Non-current debt 2,283,333 1,294,822 988,511
* Adjustments to expenses and income due to IAS 19 (revised 2011) under remeasurement reserves
There are no disclosures on changes to agreements covering part-time work for older employees (Altersteilzeit).
Notes 2013
60
4.2.2 Introduction of new statutory regulations
Article 29 of the Law on the Implementation of the Mutual Assistance Directive as well as on the Change to Tax Regula-
tions (known in German as AmtshilfeRLUmsG) dated 26 June 2013 now regulates the determination of the tax base
previously set out in Article 31b paragraph 3 of the German Aviation Act (LuftVG). The positive or negative difference
between the profit from air navigation charges as calculated under income tax law and the result from the provision
of air navigation services as calculated under the provisions governing charges are not considered when determining
income for DFS. Taxation is therefore based on the charges-related result. The effects of this also impact the determina-
tion and calculation of deferred taxes.
In principle, differences in measurement between IFRS and tax regulation lead to deferred taxes. However, if deferred
taxes stem from charges-related issues there is no future tax expense/relief as the valuation differences between the
result from the charges perspective and the result from the tax perspective under Article 31b paragraph 3 of the Ger-
man Aviation Act (LuftVG) are not taxed. The designations of the accounts booked were adjusted to the current legisla-
tion.
At the same time, DFS adjusted the forecast period for the general composition of the deferred taxes as regards recov-
erability/settlement. Until the end of full cost recovery in 2012, the forecast period had extended over 15 years, until
the end of the catch-up effects from the conversion from German Commercial Code (HGB) to IFRS in 2021. Following
the introduction of the new regulatory regime, the forecast period was shortened to the next reference period from
2015 to 2019. DFS does not currently have reliable information on the development of the results and financial position
that stretch beyond the next reference period.
4.3 Use of assumptions and discretionary decisions
At the balance sheet date, DFS makes annual forecasts of future developments for accounting and measurement pur-
poses. The comprehensive set of assumptions, estimates and judgements made may have a considerable influence on
the representation of the results and financial position of DFS. They are based on experience and expectations about the
occurrence of future events which appear commercially reasonable in the given circumstances. DFS continuously proves
its estimates and prognoses. If external conditions develop differently than expected, the actual amounts may vary from
the estimates. Any variances from the actual circumstances are recognised in profit and loss when they occur. The key
assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date which
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
business year are described below.
4.3.1 International financial reporting standards and interpretations
Revisions to accounting policies resulting from new and revised standards and interpretations are applied retrospec-
tively, unless otherwise regulated. The prior-year statement of comprehensive income and the opening balance sheet for
the prior-year period are adjusted as if the new accounting policies had always applied.
61
4.3.2 Useful lives of property, plant and equipment
DFS estimates the useful lives of property, plant and equipment based on their probable usability. As an orientation,
DFS uses the official tax depreciation table (AfA-Tabelle) for general purpose assets (see letter from the German Federal
Ministry of Finance dated 15 December 2000 in the Federal Fiscal Gazette (Bundessteuerblatt) I 2000 – page 1532).
Adjustments are made, as necessary, based on historical experience.
4.3.3 Impairment of internally generated intangible assets
Impairment tests are carried out on internally generated intangible assets to determine the present value of expected future
cash flows if there are objective indications of impairment (see Note 4.5.2). DFS evaluates current requirements due to
changing market conditions as well as the progress of new intangible assets that are already in the development process.
4.3.4 Intrinsic value of financial assets
Impairment tests are carried out on financial assets to determine the present value of expected future cash flows if
there are objective indications of impairment (see Note 4.5.2). DFS evaluates, in addition to other factors, the tim-
ing and extent of variances from cost, interest and exchange rates, the financial situation, the short-term business
prospects as well as the general economic situation. If there is doubt about whether financial assets carried under the
category "Held-to-maturity" will be settled in full, DFS evaluates the need to impair the receivable using the estimated
probability of default. When there are doubtful trade receivables, DFS evaluates the creditworthiness of customers and
determines the allowance for doubtful accounts required based on probable default risks from information on insolven-
cies (see Note 4.6.8).
4.3.5 Long-term service contracts
DFS realises revenues from long-term service contracts using the percentage-of-completion method (see Note 4.5.1).
To determine the percentage of completion and thus the performance progress, estimates are required of the material
influencing factors such as costs incurred, contract income and contract risks. The responsible expert departments
constantly review all the estimates and make any necessary adjustments.
4.3.6 Pensions and similar obligations
The measurement of pensions and similar obligations is based on assumptions set out at the beginning of the business
year (see Note 25.2). The discount rate at the balance sheet date is based on the market yield on high quality corporate
bonds with an average rating of AA using the standard procedure. DFS uses bonds which, like the pension obligation, are
measured in euro. The term of the corporate bonds corresponds to the term of the obligation. The interest rate for the
expected return on plan assets corresponds to the discount rate. The percentage rates for the salary trend and the pro-
jected increase in benefits are based on past experience. Biometric data serve as the basis for the estimates of average
life expectancy (mortality tables taken from Heubeck-Richttafeln 2005 G). Any change to these assumptions has an impact
on the present value of the pension obligations (see Note 25.3). DFS recognises changes in value (particularly actuarial
gains and losses) directly in equity as a remeasurement of defined benefit obligations under other comprehensive income.
Notes 2013
62
4.3.7 Other provisions
The measurement of other provisions requires judgements on estimated costs, expected cash flows and their maturities
(see Note 4.6.15). The provisions relate to contracts, collective agreements, legal provisions or other obligations. They
are recognised based on financial and actuarial calculations and historic experience using sound commercial judgement.
The premises underlying other provisions are reviewed annually and adjusted to current circumstances as necessary.
The discount rates for non-current provisions were adjusted to the development of interest rates in the business year
(see Note 26).
4.4 Currency translation
The group financial statements and the separate financial statements are drawn up in the reporting currency euro. All
amounts are given in thousands of euro (units of currency). The common method of rounding is used.
Non-monetary items (intangible assets, property, plant and equipment, and inventories) in foreign currencies are carried at
historical cost. Monetary items (liquid funds, receivables as well as liabilities) in foreign currencies are translated by DFS
using the rate at the reporting date and the currency effects are recognised in the income statement.
Currency ISO code Standard EMU Standard EMUconversion conversion conversion conversion
Mean exchange Asked price Mean exchange Asked pricerate rate
1 EUR = 31 Dec 2013 31 Dec 2013 31 Dec 2012 31 Dec 2012
U.S. dollar USD 1.37910 1.38210 1.31940 1.32240
British pound GBP 0.83370 0.83570 0.81610 0.81810
Swiss franc CHF 1.22760 1.22960 1.20720 1.20920
Japanese yen JPY 144.72000 144.96000 113.61000 113.85000
4.5 Items in the statement of comprehensive income
4.5.1 Income and expense recognition
Revenues and other operating income are recognised if:
■ the provision of the service or the sale of goods involves the transfer of the material risks and rewards to the customer;
■ it is probable that future economic benefits will be generated from the transaction;
■ there is no right of disposition nor effective control;
and
■ the level of revenues and the costs to sell incurred and expected can be quantified reliably.
63
Operating expenses are recognised in the income statement when the service is used or at the time the expenses are
incurred.
DFS accounts for revenues and expenses from long-term service contracts using the percentage-of-completion method.
Revenues are recognised based on the stage of completion. The stage of completion results from the relationship
between the contract costs incurred up to the balance sheet date and planned contract costs to this date. If the execu-
tion of the service contract requires a significant period of time, contract costs may also include direct borrowing costs.
Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with
the customer. The contract costs are expensed using the matching principle. If the total contract costs exceed the total
contract revenue, the expected loss is expensed immediately. If the results of a service contract cannot be estimated
reliably, the probable revenues are recorded at the value of the costs incurred. Revenues from long-term service con-
tracts accounted for using the percentage-of-completion method are reported by DFS under "Future receivables from
construction contracts" in the balance sheet after deducting any payments received.
Interest income and expenses are recorded in accordance with the matching principle.
4.5.2 Impairment
Non-financial assets are reviewed at the balance sheet date to determine if there are indications of impairment. This
involves comparing the carrying amount with the recoverable amount of the asset.
The carrying amount is the amount at which an asset is recognised after deducting any accumulated amortisation/
depreciation and accumulated impairment losses thereon. The recoverable amount is the higher of the net realisable
value and the value in use. The net realisable value is equal to fair value less costs to sell. Value in use is the present
value of the future cash flows expected to be derived from the continuing use of an asset and its disposal at the end of
its useful life. DFS calculates the present value with an interest rate before tax that reflects market conditions, calculat-
ed using the estimated zero-coupon curves of the German Bundesbank (the Svensson method is used). No risk premium
in accordance with IAS 36.55 (b) was used, as the assets are not exposed to any special risks.
If the recoverable amount of an asset is less than the carrying amount, an impairment is made to the recoverable
amount. If a recoverable amount cannot be determined for the individual asset, then it is determined for the smallest
cash generating unit to which the relevant asset can be allocated. Impairment losses are recognised in profit or loss in
other operating expenses.
If at a later date the reasons for impairments made in previous years no longer apply, either in full or in part, the impairment
loss is reversed accordingly. The reversal is limited to the carrying amount which would have applied if the impairments from
the past were excluded and it is recognised in the income statement. It is not permissible to reverse impairments of good-
will.
Notes 2013
64
4.6 Items in the balance sheet
4.6.1 Intangible assets
Assets acquired for valuable consideration are capitalised at cost when it is probable that the asset will generate future
economic benefits for the company and the costs can be measured reliably.
Intangible assets that arose from own development activities are capitalised at cost. This presupposes that future
economic benefits will be generated from the products. Production costs comprise all direct costs and an appropriate
share of development-related overhead. Borrowing costs are capitalised as part of production costs in accordance with
the requirements of IAS 23.
Prepayments are measured at cost. The prepayments are allocated to the respective intangible assets at the time of com-
missioning and written off over their useful life.
Intangible assets have a limited useful life. They are written off on a straight-line basis from the beginning of use:
Intangible assets Useful lifeConcessions, industrial and similar propertyrights and assets as well as licences in suchrights and assets 3–8 years
Internally generated intangible assets 8 years
Prepayments Only after commissioning
Research expenses and associated government grants are recognised in profit or loss.
4.6.2 Property, plant and equipment
Tangible assets acquired for valuable consideration are capitalised at cost when it is probable that the asset will generate
future economic benefits for the company and the costs can be measured reliably.
Costs include the purchase price as well as all directly attributable costs required to bring the asset to the site and get it
into the working condition as intended by management.
DFS divides property, plant and equipment (in particular buildings) into the material economic components and reports
them separately. Costs for the replacement of components and general overhaul are capitalised separately.
Production costs for internally generated property, plant and equipment comprise direct production costs (prime costs), an
appropriate share of manufacturing overhead as well as the borrowing costs that are directly attributable up to the time of
completion in accordance with IAS 23.
65
Government grants are deducted from the carrying amount of the corresponding asset.
All assets (except for land) have a limited useful life and are written off on a straight-line basis from the beginning of use:
Property, plant and equipment Useful life
Building – Structure 25–40 years
Building – Façade 25–30 years
Building – Interior finishing 25 years
Building – Heating, ventilation, water 15–25 years
Building – Electronics 15–25 years
External facilities 5–19 years
Technical equipment 3–20 years
Operating and office equipment 5–20 years
Costs for repairs and ongoing maintenance of property, plant and equipment that do not lead to an extension or material
improvement are recognised under other operating expenses in the income statement.
When property, plant and equipment are sold, decommissioned or scrapped, any gains or losses from the difference
between the net disposal proceeds and the amortised cost are recognised in other operating income or expenses
4.6.3 Leases
DFS concludes rental and lease contracts with limited or unlimited terms to maintain flexibility as regards liquidity. The
company examines the contracts in accordance with IAS 17 to establish whether they are finance leases that have to be
capitalised or operating leases to be expensed.
A lease is considered a finance lease when the lessor transfers all the material risks and rewards from ownership of an
asset to the lessee (IAS 17.10). If these conditions are not met DFS classifies the lease as an operating lease.
For finance leases, DFS capitalises the lower of the present value of the minimum lease payments or the fair value of the
leased asset. The payment obligations resulting from future lease instalments are recognised as a financial liability at
the corresponding value of the leased asset. The minimum lease payments are split between a principal component and
an interest component, with the interest being calculated using the effective interest rate method. DFS depreciates the
leased asset over the shorter of the estimated useful life or the term of the lease.
The lease payments under operating leases are expensed over the term of the lease arrangement on a straight-line
basis.
Notes 2013
66
4.6.4 Investment property
Some property is not used operationally at DFS but is exclusively held either for rental income or capital gains. Such
property is classified as investment property, measured at amortised cost and written off on a straight-line basis.
4.6.5 Financial instruments – Financial liabilities
Financial instruments relate to all contractual claims and obligations that directly or indirectly lead to an exchange of
cash. Such an instrument is a contract which results in a financial asset for one party and either a financial liability or an
equity instrument for the other party.
Financial assets are classified as "At fair value through profit or loss", "Held-to-maturity", "Loans and receivables" or
"Available-for-sale" (see Note 32).
■ The category "At fair value through profit and loss" comprises financial assets that are held for trading. Financial
assets are assigned to this category if they were acquired with the intention to sell in the short term. Derivatives also
belong to this category unless they qualify as hedging instruments. DFS exclusively employs effective derivatives to
hedge existing and future interest rate and currency risks under a hedging policy defined by the Board of Manag-
ing Directors and monitored by the Treasury department (see sections 2.5.3.1 and 6.2.2 in the group management
report). While interest rate swaps are used to manage interest risk, cross-currency swaps hedge both interest rate
risk and currency risk from financing in foreign currencies. Initial recognition as of the time of settlement and subse-
quent measurement occur at fair value. Financial instruments are deemed current if their realisation is expected within
12 months. Otherwise, they are disclosed as non-current. Derivative financial instruments with positive fair values are
reported as receivables; those with negative fair values are reported as liabilities. All derivative financial instruments
were accounted for without the creation of designated hedging relationships. The changes in the fair value between
the reporting dates are recognised in profit or loss in the financial result.
■ The category "Held-to-maturity" contains non-derivative financial assets with fixed and determinable payments, and
a fixed term. The company must have the intention and ability to hold the financial instruments until maturity. Initial
recognition occurs at fair value as of the time of settlement (plus direct transaction costs). Receivables denominated
in a foreign currency are translated using the rate at the reporting date and recognised in the income statement. Sub-
sequently, financial instruments are carried at amortised cost using the effective interest method. If there are doubts
about the collectibility of receivables, they are written down to the lower recoverable amount based on the estimated
probability of default. If the amount of the write-down declines in the following periods, the required reversals are
made through the income statement. Interest income is reported in the financial result.
■ The category "Loans and receivables" consists of financial assets with fixed or determinable terms of payment
which are not traded on an active market. The assets are broken down into non-current and current remaining
terms. Initial recognition occurs at fair value as of the time of settlement (plus direct transaction costs). Receivables
67
denominated in a foreign currency are measured at the balance sheet date and recognised in the income statement.
Subsequent measurement is at amortised cost using the effective interest rate method for interest bearing and non-
interest bearing loans and receivables. If there are doubts about the collectibility of receivables, they are written
down to the lower recoverable amount based on the estimated probability of default and the impairment loss is rec-
ognised. If the amount of the write-down declines in the following periods, the required reversals are made through
the income statement. Interest income is reported in the financial result.
■ The category "Available-for-sale" includes all other financial assets which cannot be allocated to any other category
(such as financial assets or securities). Initial recognition occurs at fair value as of the time of settlement (plus direct
transaction costs). Subsequent measurement of this category occurs at fair value to the extent this can be reliably
determined at the balance sheet date. Unrealised gains and losses from changes in fair value between the reporting
dates are recognised directly in equity in other reserves. Upon the sale of financial assets or a permanent impairment
of the market value below the carrying amount, other reserves are reversed and the cumulative gains and losses are
recognised in profit or loss.
Financial assets are derecognised when the contractual rights to payments from the financial assets no longer exist or
all risks and rewards have been transferred.
4.6.6 Fair value
The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date (exit price). The fair value is measured
based on the assumptions that knowledgeable market participants who are independent of each other and who are will-
ing and able to enter into a transaction would make while acting in their economic best interest. Fair value is a market-
based measurement, not an entity-specific measurement.
The fair value measurement assumes that the transaction is made in the principal market for the asset or liability. In the
absence of such a market, the most advantageous market is to be used. This is the market that would maximise the
amount that would be received to sell an asset or minimise the amount that would be paid to transfer a liability, taking
into consideration transport and transaction costs. However, fair value measurements should not be adjusted for trans-
action costs.
DFS uses valuation techniques to determine fair value that are appropriate under the given circumstances and for which
sufficient data are available. The techniques maximise the use of relevant observable inputs and minimise the use of
unobservable inputs.
Notes 2013
68
Inputs
Level 1 Directly observable inputsObservable (unadjusted) quoted prices in accessible active markets for identical assets or liabilities.
Level 2 Indirectly observable inputs
Inputs that are observable for assets or liabilities either directly or indirectly.
a) quoted prices for similar assets or liabilities in active markets.
b) quoted prices for identical or similar assets or liabilities in markets that are not active.
c) inputs other than quoted market prices that are observable.
d) market-corroborated inputs (values derived from market data using statistical methods).
Level 3 Unobservable inputs
Entity's own assumptions on the behaviour of a typical market participant.
Valuation techniques
Market approachThis approach derives market multiples from a set of identical or comparable assets (matrix pricing).
Cost approachThis approach is based on the amount required to replace the service capacity of anasset (the current replacement cost).
Income approachThis method discounts future cash flows to a current amount (present value techniques,option pricing models, residual income method).
DFS undertakes reclassifications within the hierarchy at the end of the business year in which the changes took place.
Further information on the determination of the fair value can be found in Notes 16 and 32.
4.6.7 Investments accounted for using the equity method
Investments accounted for using the equity method are capitalised at cost at the acquisition date and, in subsequent
periods, adjusted to account for the associated changes in equity. If there are indications for an impairment of invest-
ments, the lower recoverable amount is used as required by the regulations of IAS 36 (see Note 4.5.2).
4.6.8 Trade receivables
Trade receivables are carried at amortised cost. DFS assumes that trade receivables can be sold for at least their car-
rying amounts in the short term and sets the fair value at the same level.
69
DFS determines the allowance for doubtful accounts required based on probable default risks from information on insol-
vencies. DFS also demands security deposits from customers with relevant sales volumes when defined warning thresh-
olds are exceeded. The allowances for doubtful accounts are recognised in a separate allowance account in the income
statement. The write-downs are reversed directly through the income statement should the reasons for the impairment
no longer apply in subsequent periods. If a receivable that had already been written down is classified as uncollectible, it
is written off completely.
Trade receivables in foreign currencies are measured at the reporting date and recognised in the income statement.
4.6.9 Other receivables and assets
Receivables and other assets are carried at amortised cost. DFS assumes that other receivables and assets can be
sold for at least their carrying amounts in the short term and sets the fair value at the same level.
After the probable default, allowances for doubtful accounts are measured based on an analysis of their age and matu-
rity and information on insolvencies, and recognised as an expense on a separate allowance account.
Other receivables and assets in foreign currencies are measured at the reporting date and recognised in the income
statement.
4.6.10 Deferred taxes
IAS 12 regulates the treatment of deferred taxes using the liability method. Deferred tax assets and liabilities are rec-
ognised by DFS for all temporary differences between the tax base of assets and liabilities and their carrying amounts
in the group balance sheet according to IFRS as well as for consolidation adjustments recognised in profit or loss. The
differences are limited to those items whose changes influence taxable earnings.
Issues related to the calculation of charges are excluded (see Article 31b paragraph 3 sentence 3 of the German Avia-
tion Act (LuftVG) and Note 4.2.2).
Deferred tax assets are also recognised for future claims to tax reductions resulting from tax loss carryforwards.
Deferred tax assets for deductible temporary differences and for tax loss carryforwards are only recognised to the
extent that there are future taxable profits which either the temporary differences or unused taxable losses can offset.
The computation of deferred taxes is based on the existing or applicable income tax rates in each country at the date
of valuation. The income tax rate of 29.83 percent (previous year: 29.83 percent) is made up of a corporate income
tax of 15.00 percent, a solidarity surcharge of 5.50 percent and a weighted-average German municipal trade tax mul-
tiplier rate of 400.00 percent on a tax rate (Steuermessbetrag) of 5.00 percent. The effect of changes in tax rates on
deferred tax assets and liabilities is reflected in the income tax expense for the period in which the law was changed.
Notes 2013
70
Deferred tax assets and liabilities are netted if permitted under law and the receivables and payables are against the
same tax authority.
Deferred tax assets and liabilities are not discounted.
4.6.11 Liquid funds
Liquid funds include cash, cash accounts as well as short-term money market investments and certificates of deposit at
credit institutions. Cash and cash equivalents are carried at amortised cost.
Liquid funds in foreign currencies are converted at the closing rate.
Overdrafts taken up are reported by DFS in the balance sheet as liabilities to credit institutions under current financial
liabilities.
4.6.12 Inventories
Inventories are carried at cost based on the weighted average method or at production cost.
Production costs comprise direct production costs (especially direct materials and direct labour) as well as an appropri-
ate share of the necessary material and manufacturing overhead. Administrative expenses and costs of employee assis-
tance programmes are included to the extent they can be allocated to production. Financing costs are not recognised
as part of production costs.
Subsequent measurement occurs at the lower of deemed cost and net realisable value. Inventory risks resulting from
the duration of storage or impaired usability led to write-downs upon determination of the net realisable value. If the
reasons for a write-down no longer apply, the write-down is reversed. Lower values at the reporting date due to lower
prices on sales and purchase markets were taken into account.
4.6.13 Other reserves
This item relates to changes recognised directly in equity, provided they are not based on capital transactions with the
Shareholder. This includes, in particular, the changes in fair value of the available-for-sale financial assets and their asso-
ciated tax effects.
4.6.14 Provisions for pensions and similar obligations
Defined benefit plans are measured in accordance with IAS 19 using the projected unit credit method on the basis of
actuarial reports at the balance sheet date. This requires, in particular, assumptions to be made about long-term salary
trends and average life expectancy. The premises on salary trends are based on historical trends and take into account
country-specific interest and inflation levels. Biometric data serve as the basis for the estimates of average life expec-
tancy (mortality tables taken from Heubeck-Richttafeln 2005 G).
71
The rate used to discount pension obligations is determined by reference to market yields at the end of the reporting
period on high quality fixed-rate corporate and treasury bonds. The discount rate is an actuarial assumption and it is set
at the beginning of each business year (see Note 25.2). With the help of this interest rate, DFS calculates the net inter-
est result, for which the net pension obligation or net defined benefit liability is multiplied by the interest rate. The net
pension obligation results from the deduction of plan assets with their fair value from the gross pension obligation and is
therefore a net amount. In the event of an asset surplus (i.e. a net defined benefit asset), a corresponding procedure is
applied. DFS reports the net interest result in the financial result.
Remeasurements of the net defined benefit liability are recognised directly in equity in other comprehensive income.
This includes in particular the actuarial gains and losses resulting from changes in expectations as regards the esti-
mates made at the beginning of the year compared with the actual development during the business year. In addition, a
portion of the actual return on plan assets at the end of the year in excess of the expected return on plan assets at the
beginning of the year is recognised directly in equity. The remeasurement recognised in equity cannot be recognised in
profit or loss in the following periods.
The service cost is made up of the current and past service costs. The latter reflects the change in pension obligations
as a consequence of plan adjustments and plan curtailments. It is recognised in profit or loss when incurred in the state-
ment of comprehensive income and reported under employee expenses.
The development of plan assets is made up of the contributions, payments and income from a matched reinsurance
contract. The reinsurance contract requires an investment in the general cover fund of the insurer in accordance with
section 54 of the Insurance Supervision Act (VAG) as well as a separate fund-based investment in accordance with sec-
tion 54b of the VAG. This fund-based investment allows the DFS group contract with the insurer to have a higher equity
ratio to gain a long-term increase in return compared with the return provided by the general cover fund of the insurance
consortium. The fund investment is restricted to a maximum of half of the whole capital reserve of the reinsurance con-
tract. The expectations placed on the fund investment are formulated by the strategy commission. It considers the lat-
est expectations for the capital markets and risk issues. Pension obligations for which there are plan assets are netted
against the fair value of these plan assets.
No provisions are recognised for defined contribution plans. The level of contributions at DFS is dependent on the
income relevant for pension calculations. The payments for defined contribution plans are expensed when due and
reported as part of employee expenses.
4.6.15 Other provisions
Other provisions are recognised for past events that result in present obligations to third parties. These provisions must
be capable of being estimated reliably and lead to an outflow of resources in the future with a probability of at least
50.00 percent. A provision is recognised with the settlement amount, which represents the highest probability of occur-
rence based on best estimates and under consideration of all discernible risks.
Notes 2013
72
DFS expects the majority of the other provisions to fall due in the next one to thirty years. Some of the individual provi-
sions may involve time periods of up to thirty years. Therefore, uncertainties remain as to the timing and concrete
amount of the expenses. Nevertheless, DFS expects to utilise the full amount of the provisions (100%) and expects that
the outflow of economic benefits will equal the amount set aside in the provisions.
Provisions for obligations which in all probability will not lead to a reduction in assets in the subsequent year are dis-
counted at prevailing market rates and carried at the present value of the expected outflow of resources, provided
the interest effect is material. The discount rates are based on the yields on debt securities outstanding issued by
residents, public debt securities and listed Federal securities corresponding to their remaining term as published by the
German Bundesbank. In addition to these yields, a company-internal risk premium of 0.25 percent is added.
If a change in an estimate results in a reduction of the obligation, then the provision is reversed proportionally and the
income reported under other operating income.
4.6.16 Financial instruments – Financial liabilities
Financial liabilities generally give rise to a claim for repayment in cash or in the form of another financial asset. The
classification is subdivided into the categories "At fair value through profit or loss" and "Amortised cost" (see Note 32).
■ Financial liabilities of the category "At fair value through profit and loss" (derivative financial instruments) are held
exclusively for trading purposes (see sections 2.5.3.1 and 6.2.2 in the group management report). The initial and sub-
sequent recognition are at fair value. The changes in fair value between the reporting dates and interest expenses are
recognised in profit or loss in the financial result.
■ The category "Amortised cost" contains all other financial liabilities which cannot be allocated to another category. The
initial recognition is at fair value, including transaction costs directly connected with the issuance of the liability. Sub-
sequent measurement of liabilities is at amortised cost using the effective interest rate method for liabilities with high
or low interest rates. Bonds and debenture loans are carried at amortised cost using the effective interest method.
Owing to the short-term maturity of the other financial instruments in this category, DFS sets the carrying amount as
the fair value. Amounts derecognised and allowance for doubtful accounts are disclosed in profit and loss, and inter-
est expenses in the financial result.
For financial liabilities with maturities up to one year the fair value corresponds to the carrying amount. If the maturity is
longer than one year, the fair value is calculated by discounting the settlement value at a risk-free rate.
Liabilities denominated in a foreign currency are converted using the rate at the reporting date.
73
Notes to the statement of comprehensive income
5. Revenues
2013 2012
€'000 €'000
Revenues from air navigation services 1,091,949 1,080,935
Other revenues 17,248 20,382
1,109,197 1,101,317
Revenues from air navigation services
2013 2012
€'000 €'000
En-route charges 796,206 753,373
Terminal charges 227,282 218,257
Payments to German MET Service (DWD) and MoT (BMVI)from terminal charges -878 -694
Offsetting over-recovery/under-recovery from previous year -28,346 12,810
Under-recovery of charges for current year 22,246 26,225
Revenues from en-route and terminal charges 1,016,510 1,009,971
Reimbursements by the State for military flights and facilities 57,394 57,064
Reimbursements by the State for exempted flights 6,500 6,500
Aeronautical publications 7,565 3,349
Flight inspection services 2,473 2,990
Other air navigation services 1,507 1,061
Revenues from air navigation services 1,091,949 1,080,935
6. Changes in inventory and other own work capitalised
2013 2012
€'000 €'000
Changes in inventory of finished goods and work in progress -171 129Other own work capitalised(Primarily internally generated IT systems) 1,588 2,459
1,417 2,588
Notes 2013
74
7. Other operating income
2013 2012
€'000 €'000
Income from derecognition of liabilities 8,567 5,254R&D project funding by the EU Commission and Germanfederal and regional ministries recognised in the income statement 6,706 7,192
Income from reversal of provisions 5,474 801
Cost reimbursements 4,137 4,827
Income from QTE transaction 2,600 52,248
- of which income from reversal of QTE provision 0 495
- of which income from exchange rate gain for the QTE liability 2,600 0
Rental income 778 648
Income from asset disposals 61 1,775
Miscellaneous 5,327 5,034
33,650 77,779
8. Cost of materials and services
2013 2012
€'000 €'000
Cost of raw materials, consumables and supplies, and of purchased goods 935 935
Cost of purchased services (flight inspection and consulting services) 4,548 5,770
5,483 6,705
75
9. Employee expenses
2013 2012***
€'000 €'000
Wages and salaries* 585,742 586,068
Expenses for IFRS pensions** *** 134,184 93,263
Social security costs and expenses for assistance 63,570 66,957
Cost of personnel belonging to the Federal Aviation Office (LBA) 24,981 25,884
808,477 772,172
* See Note 42.1 for the remuneration of the Board of Managing Directors** For the expenses and income for occupational pensions contained in the statement of comprehensive income see Note 25.11*** Prior-year figures adjusted to IAS 19 (revised 2011) – see Note 4.2.1
Besides the usual outlays for wages, salaries and social security expenses for DFS personnel, this item also includes the
costs charged by the Federal Aviation Office (LBA) for personnel belonging to the LBA.
Average annual number of employees
2013 2012
Salaried staff 5,302 5,280
Soldiers released from regular service 235 246
Wage-earners 28 29
Technical and commercial students and apprentices 256 266
DFS personnel 5,821 5,821
Employees covered by the collective agreement for the public service (TVöD) 62 67
Established civil servants 197 216
Personnel belonging to the Federal Aviation Office (LBA)
Air Navigation Services Directorate (Abteilung Flugsicherung) 259 283
6,080 6,104
10. Depreciation and amortisation
2013 2012
€'000 €'000
Intangible assets 33,675 33,650
Property, plant and equipment 68,705 71,346
Investment property 30 30
102,410 105,026
The impairment tests carried out in the business year resulted in no impairment charges being recognised for intangible
assets; property, plant and equipment; investment property and financial assets.
Notes 2013
76
11. Other operating expenses
2013 2012
€'000 €'000
Spare parts and maintenance 41,653 37,369
Occupancy costs 23,351 22,264
Costs of external personnel 10,734 12,430
Legal and consultancy costs 9,100 13,324
Rent and leasing costs 8,919 12,291
Telecommunication costs 8,265 8,618
Write-downs and write-offs of receivables 6,762 2,185
Travel costs 6,572 7,572
Other employee expenses 4,685 9,640
Costs from previous years 3,332 658
Vehicle costs 3,105 3,330
Insurance policies 2,122 2,184
QTE costs 1,989 2,695
- of which expenses for exchange rate losses forthe QTE receivable 1,989 0
Asset disposals 1,824 419
Magazines, journals, stationery 1,194 1,280
Costs of monetary transactions 1,137 817
Advertising costs 857 1,112
Entertainment 639 930
Apportionment EUROCONTROL 17 1,753
Remaining 2,056 3,097
138,313 143,968
77
12. Financial result
2013 2012*
€'000 €'000
Income from fund assets to finance retirement obligations* 46,749 64,867
Interest income from QTE transaction 6,617 1,734
Income from foreign currency translation 5,686 3,561
Interest income from affiliated companies 843 44
Income from profit transfer agreements with affiliated companies 776 1,333
Other interest income 651 1,259
Income from investments 0 339
Financial income 61,322 73,137
Expenses from discounting provisions -96,653 -110,960
Interest expense from QTE transaction -6,324 -3,513
Result from fair value adjustment of derivatives -5,311 -4,289
Other interest expense -6,435 -5,774
Expenses from loss transfer agreements with affiliated companies -526 -751
Expenses from foreign currency translation 0 -21
Expenses from securities -12 0
Financial expenses -115,261 -125,308
Financial result -53,939 -52,171
* Prior-year figures adjusted to IAS 19 (revised 2011)
Additional disclosures on the financial result
2013 2012
€'000 €'000
Interest result from financial instruments determined using the effective interest method not classified in the category"At fair value through profit or loss" -1,184 -3,352
Interest income from impaired financial assets 332 284
Impairment losses recognised directly in equity from thecategory "Available-for-sale" -25 -101
Notes 2013
78
13. Income taxes
2013 2012
€'000 €'000
Current income taxes 8,540 171
Deferred income taxes -8,664 13,585
-124 13,756
Current income taxes relate to corporation taxes, including the solidarity surcharge, and German municipal trade taxes.
The computation of income taxes is based on applicable tax regulations in connection with the newly created Article 31b
paragraph 3 sentence 3 of the German Aviation Act (LuftVG).
Breakdown of effective income taxes
2013 2012
€'000 €'000
Corporation tax 3,836 0
Solidarity surcharge 211 0
Municipal trade tax 4,411 0
Foreign taxes 82 171
8,540 171Reclassification from periods not under review to current provisions for taxes 0 0
In addition to the tax liabilities from the current business year, possible estimated additional tax demands are also included
to the extent that they might result from the current tax audit.
DFS owes tax as the dominant enterprise for the subordinated companies TTC and DFS Energy. Therefore, the deferred
taxes of the subordinated companies are reflected in the dominant enterprise. The spin-off of the energy plant, which is
assigned to those areas relevant for air navigation charges, into DFS Energy led to a continuation of the tax measurement
for this legal entity. Therefore, in determining taxes, the special situation as regards air navigation charges at DFS is also
taken into consideration at DFS Energy. This does not lead to taxable temporary differences in value between the IFRS and
the tax accounts. At TTC, there are deferred tax assets of €105 thousand (previous year: €87 thousand) for valuation dif-
ferences concerning provisions for transitional payments between the IFRS and the tax accounts. The business activities of
TTC are assigned to the commercial business.
The Law on the Implementation of the Mutual Assistance Directive as well as on the Change to Tax Regulations (Amtshilfe-
RLUmsG) was published in the Federal Law Gazette on 29 June 2013. Section 29 of this law contains the change to Article
31b paragraph 3 of the German Aviation Act (LuftVG). Consequently, the positive or negative difference between the profit
from air navigation charges under income tax law and the result under the regulations governing charges will not be consid-
ered when determining income. The difference is therefore not subject to tax.
The tax loss carryforward from the year 2012 was fully used up.
79
Reconciliation from expected to current income tax expense
2013 2012
€'000 €'000
Net income before income taxes 35,643 86,837
Expected income tax rate (in %) 29.83 29.83
Expected income tax expense 10,632 25,904
Tax expense/income not relating to the period under review 0 0
Reduction in the tax base due to Article 31b LuftVG 2,312 0
Reduction in EBT under the commercial code due to the plan deficit 0 -1,970
Variances in municipal trade tax 436 390
Revenues exempt from tax 0 -96
Foreign establishments 0 -459
Foreign taxes 82 171
Change in the measurement logic of deferred taxes due to Article31b LuftVG -9,638 0Derecognition of deferred for the changes in fair value of the available-for-sale financial assets 993 0
Variance of allowance n + 2:
- deferred tax assets 0 21,065
- deferred tax liabilities 0 2.050
Recognition of balancing items in the tax accounts (BilMoG) 0 -33,938
Tax loss carryforward (corporation tax) -2,822 0
Tax loss carryforward (municipal trade tax) -2,100 0
Miscellaneous -19 639
Current income tax expense -124 13,756
Effective tax rate (in %) -0.35 15.84
Notes 2013
80
Deferred taxes by balance sheet item Deferred tax assets Deferred tax liabilities
2013 2012 2013 2012
€'000 €'000 €'000 €'000
Intangible assets 0 0 11,830 12,934
Property, plant and equipment 2,318 8,656 2,720 9,731
Available-for-sale securities 0 0 2,273 4,877
Receivables and other assets 0 91,594 477 638
Provisions for pensions and similar obligations 446,114 187,157 0 0
Other provisions 26,644 21,332 203 1,464
Liabilities 3,545 6,412 922 743
478,621 315,151 18,425 30,387
Impact due to Article 31b LuftVG (until 2012: methodology under n + 2)
Intangible assets 0 0 -11,830 -7,981
Property, plant and equipment -2,263 -8,656 -2,720 -6,526
Available-for-sale securities 0 0 -79 -77
Receivables and other assets 0 -91,594 0 -638
Provisions for pensions and similar obligations -435,348 -187,157 0 0
Other provisions -26,640 -21,332 -203 -1,464
Liabilities -917 0 -439 -229
-465,168 -308,739 -15,271 -16,915
Other allowances -8,097 -376 0 0
Netting -3,154 -6,036 -3,154 -6,036
TTC 105 0 0 -87
2,307 0 0 7,349
There were no issues which resulted in deferred tax assets not being recognised.
81
Notes to the balance sheet
14. Intangible assets
CostAs at Additions Disposals Transfers As at1 Jan 31 Dec
2012 €'000 €'000 €'000 €'000 €'000
Concessions, rights and licences 526,262 11,416 -6,726 14,046 544,998Internally generated intangible assets 47,967 2,275 0 0 50,242Prepayments 25,910 17,250 0 -13,120 30,040
600,139 30,941 -6,726 926 625,280
2013 €'000 €'000 €'000 €'000 €'000
Concessions, rights and licences 544,998 12,792 -4,288 4,807 558,309Internally generatedintangible assets 50,242 1,381 0 0 51,623Prepayments 30,040 20,097 -1,170 -4,545 44,422
625,280 34,270 -5,458 262 654,354
AmortisationCarryingamount
As at Additions Disposals Transfers As at As at1 Jan 31 Dec 31 Dec
2012 €'000 €'000 €'000 €'000 €'000 €'000
Concessions, rights and licences 345,751 29,680 -6,600 450 369,281 175,717Internally generated intangible assets 17,954 3,971 0 0 21,925 28,317Prepayments 0 0 0 0 0 30,040
363,705 33,651 -6,600 450 391,206 234,074
2013 €'000 €'000 €'000 €'000 €'000 €'000
Concessions, rights and licences 369,281 29,712 -4,225 0 394,768 163,541Internally generated intangible assets 21,925 3,963 0 0 25,888 25,735Prepayments 0 0 0 0 0 44,422
391,206 33,675 -4,225 0 420,656 233,698
Notes 2013
82
Individually material intangible assetsCarrying amount Remaining Share of total
31 Dec 2013 useful life carrying amountin years 31 Dec 2013
€'000 in %
VAFORIT software 64,704 5 27.7
P1/ATCAS software including release 18,677 11 8.0
iCAS software 19,914 5 8.5
P1/ATCAS 2007 8,556 11 3.7
PSS software 10,289 4–11 4.4
122,140 52.3
Total carrying amount 233,698 100.0
Impairment tests for intangible assets showed no indications of a need to impair as required by IAS 36.
Capitalisation of borrowing costs for intangible assets
31 Dec 2013 31 Dec 2012
Borrowing costs in €'000 1,264 710
Capitalisation rate in % 3.19 3.21
As the intention of DFS to acquire shares in the UK air navigation service provider NATS proved unfruitful, the capitalised
acquisition and consultancy costs of €2,192 thousand were expensed in the business year.
Intangible assets for which there is a contractual obligation to accept but which do not yet come under the economic power of
disposition of DFS are shown in Note 36.2.
DFS has not assigned any intangible assets nor pledged them as collateral. DFS freely controls these assets.
83
15. Property, plant and equipment
CostAs at Additions Disposals Transfers As at1 Jan 31 Dec
2012 €'000 €'000 €'000 €'000 €'000
Land and buildings 608,110 2,336 -1,698 4,141 612,889
Technical equipment and machinery 1,078,479 33,640 -37,503 11,860 1,086,476
Operating and office equipment 94,223 5,676 -2,426 1,128 98,601
Assets under construction 36,459 34,849 0 -18,055 53,253
1,817,271 76,501 -41,627 -926 1,851,219
2013 €'000 €'000 €'000 €'000 €'000
Land and buildings 612,889 8,107 -2,789 26,521 644,728
Technical equipment and machinery 1,086,476 32,409 -67,076 15,162 1,066,971
Operating and office equipment 98,601 6,115 -2,529 257 102,444
Assets under construction 53,253 43,742 0 -42,202 54,793
1,851,219 90,373 -72,394 -262 1,868,936
Depreciation
Carryingamount
As at Additions Disposals Transfers As at As at1 Jan 31 Dec 31 Dec
2012 €'000 €'000 €'000 €'000 €'000 €'000
Land and buildings 326,553 21,286 -977 0 346,862 266,027
Technical equipment and machinery 906,296 46,159 -36,192 -452 915,811 170,665
Operating and office equipment 75,549 3,900 -2,391 2 77,060 21,541
Assets under construction 0 0 0 0 0 53,253
1,308,398 71,345 -39,560 -450 1,339,733 511,486
2013 €'000 €'000 €'000 €'000 €'000 €'000
Land and buildings 346,862 19,958 -2,574 -1 364,245 280,483
Technical equipment and machinery 915,811 44,382 -66,013 2 894,182 172,789
Operating and office equipment 77,060 4,365 -2,374 -1 79,050 23,394
Assets under construction 0 0 0 0 0 54,793
1,339,733 68,705 -70,961 0 1,337,477 531,459
Capitalisation of borrowing costs for property, plant and equipment
31 Dec 2013 31 Dec 2012
Borrowing costs in €'000 1,903 1,358
Capitalisation rate in % 3.19 3.21
Notes 2013
84
Research and development costs
31 Dec 2013 31 Dec 2012
€'000 €'000
Expenses for research and development 37,874 30,097
- of which research costs recognised in the income statement 36,586 27,882
- of which capitalised additions in assets under construction 1,288 2,215
Capitalised borrowing costs on development costs 93 59
Development costs in assets under construction as at 31 December 0 2,677
Scheduled depreciation of development costs based on thedegree of completion notified 3,963 3,971R&D project funding by the EU Commission and German federal and regional ministries deducted from cost 0 0
At the reporting date, there were no indications that property, plant and equipment may need to be impaired as required
by IAS 36.
DFS concludes rental and lease contracts for land and buildings, technical facilities and machines as well as vehicles.
The material rewards and risks are borne by the respective contracting party. There are no additional risks from these
contracts for DFS. DFS does not make use of purchase price options, rather the items are transferred when the lease
matures. Vehicles are leased for one year without an option to extend.
Maturity of operating leases
Up to 1 year 1 to 5 years More than 5 years Total
€'000 €'000 €'000 €'000
2013 6,440 3,830 210 10,480
2012 8,144 4,991 368 13,503
Expenses and income recognised in the statement of comprehensive income
31 Dec 2013 31 Dec 2012
Minimum lease payments from operating leases 8,919 12,291
The QTE transaction was terminated except for the remaining shell structure (for additional disclosures see Note 18).
Property, plant and equipment for which there is a contractual obligation to accept but which do not yet come under the
economic power of disposition of DFS are shown in Note 36.2. DFS has not assigned any property, plant and equipment
nor pledged them as collateral. DFS freely controls these assets.
Compensation of €19 thousand (previous year: €10 thousand) for third parties for property, plant and equipment that was
impaired, irrecoverably lost or decommissioned was recognised in the income statement.
85
16. Investment property
CostAs at Additions Disposals Transfers As at1 Jan 31 Dec
2012 €'000 €'000 €'000 €'000 €'000
Investment property Braunschweig 1,210 0 0 0 1,210
2013 €'000 €'000 €'000 €'000 €'000
Investment property Braunschweig 1,210 0 0 0 1,210
Depreciation Carryingamount
As at Additions Disposals Transfers As at As at1 Jan 31 Dec 31 Dec
2012 €'000 €'000 €'000 €'000 €'000 €'000
Investment property Braunschweig 307 30 0 0 337 873
2013 €'000 €'000 €'000 €'000 €'000 €'000
Investment property Braunschweig 337 30 0 0 367 843
DFS rents a building, including the land, in Braunschweig, Germany, to FCS, which uses this land for its own operational
purposes.
Expenses and income recognised in the statement of comprehensive income
31 Dec 2013 31 Dec 2012
€'000 €'000
Rental income 61 111
Depreciation 30 30
Repairs 0 0
The property is depreciated over the useful life of 40 years using the straight-line method. Impairment tests showed no indi-
cations of a need to impair as required by IAS 36. The appraisal dated 3 December 2012 demonstrates the recoverability
of the carrying amounts.
Appraisal on the value of the property
Date of appraisal 3 December 2012 22 October 2008
Date for which appraisal applies 1 December 2012 1 October 2008
Procedure DCF method DCF method
Market value €980 thousand €1,030 thousand
Fair value €980 thousand €1,013 thousand
Property yield (Liegenschaftszinssatz) of the city of Braunschweig 7.60% 6.30%
Initial discount rate 8.25% 7.75%
Notes 2013
86
The fair value of investment property is determined by an external independent property valuer who possesses the relevant
professional qualification and up-to-date experience on the location and type of property to be valued.
Valuation techniqueDiscounted cash flow method: The calculation of the fair value is based on current rental rates considering various factors such as the standard ground values, property yield, other operating expenses, risk of default on rents, remaining useful life of the building, maintenance risk as well as current property developments.
Unobservable inputs
Discount rate, risk of default on rents, other operating expenses
Level3
Relationship between inputs and fair value
The estimated fair value would increase if
- the risk-adjusted discount rate was lower;
- the risk of default on rents was lower;
- other operating costs were lower.
Reconciliation of the fair value level 3
31 Dec 2013
€'000
As at 1 Jan 2013 980
Ongoing gains and losses 0
Gains and losses recognised in other comprehensive income 0
Additions and disposals 0
Transfers in and out of levels 0
As at 31 Dec 2013 980
DFS is not contractually obliged to conduct repairs, maintenance or improvements. However, DFS is authorised to make
material changes to the premises and the rental object as well as necessary repairs and maintenance without the approval
of FCS. There are no other contractual obligations or restraints on disposition.
87
17. Financial assets
CostAs at Additions Disposals Changes in As at1 Jan market value 31 Dec
2012 €'000 €'000 €'000 €'000 €'000
Shares in affiliated companies 27,172 0 0 0 27,172
Loans to affiliated companies 0 11,000 0 0 11,000
Investments 748 1,606 0 0 2,354
Long-term securities 7,112 0 -7,112 0 0
35,032 12,606 -7,112 0 40,526
2013 €'000 €'000 €'000 €'000 €'000
Shares in affiliated companies 27,172 0 0 0 27,172
Loans to affiliated companies 11,000 18,500 0 0 29,500
Investments 2,354 0 0 0 2,354
Long-term securities 0 0 0 0 0
40,526 18,500 0 0 59,026
Impairment Carryingamount
As at Additions Disposals Transfers As at As at1 Jan 31 Dec 31 Dec
2012 €'000 €'000 €'000 €'000 €'000
Shares in affiliated companies 0 0 0 0 0 27,172Loans to affiliated companies 0 0 0 0 0 11,000
Investments 0 0 0 0 0 2,354
Long-term securities 0 0 0 0 0 0
0 0 0 0 0 40,526
2013 €'000 €'000 €'000 €'000 €'000 €'000
Shares in affiliated companies 0 0 0 0 0 27,172Loans to affiliated companies 0 0 0 0 0 29,500
Investments 0 0 0 0 0 2,354
Long-term securities 0 0 0 0 0 0
0 0 0 0 0 59,026
Notes 2013
88
Shares in affiliated companies*DFS IBS U-Kasse TTC DFS Energy
(formerly: DFS ESSP) (Benevolent fund)€'000 €'000 €'000 €'000
Shareholding 100.00% 100.00% 100.00% 100.00%
Share capital 26 26 25 5,000
Capital reserve 198 132
Retained earnings 264
Contributions in kind 21,501
Carrying amount at 31 Dec 2013 21,527 26 223 5,396
Business year 1 Jan–31 Dec 1 Jan–31 Dec 1 Jan–31 Dec 1 Jan–31 Dec
Accounting standards HGB HGB IFRS and HGB IFRS and HGB
* For additional disclosures see Note 3 and Note 41.1
The registered and fully paid-in capital of DFS IBS amounts to €25,600.00. In the business year, a contribution in cash
of €35.41 was made to raise the capital from €25,564.59 (DM50,000.00) for smoothing purposes.
Control contract and a profit-and-loss transfer agreement with affiliated companiesTTC On 21 February 2006, a profit-and-loss transfer agreement was signed with effect from
1 January 2006 and dissolved by mutual consent on 31 December 2013, 24:00 hrs.
A profit in accordance with the German Commercial Code (HGB) of €776 thousand (previous year: €1,333 thousand) was transferred from TTC to DFS for the business year 2013.
DFS Energy On 15 December 2009, the control and profit-and-loss transfer agreement was agreed with effect from 1 January 2010 and a term until 31 December 2014. After this time, this contract extends for one year at a time, provided neither of the parties terminates the contract six months before its expiry. The loss at Energy of €526 thousand under the German Commercial Code (HGB) was taken over by DFS (previous year: loss of €751 thousand).
The loans to affiliated companies relate to a loan to DFS Energy of €50,000 thousand agreed in 2011. The loan has a
term until 31 December 2031. It has been taken up since 1 January 2012 and can be disbursed until 1 January 2014
as necessary. In the business year, €18,500 thousand (previous year: €11,000 thousand) was drawn down. As of
31 December 2013, the loan amounted to €29,500 thousand (previous year: €11,000 thousand). Interest has been
paid on the loan at the end of each quarter in arrears since the beginning of the disbursements with an effective interest
rate of 3.45 percent.
89
Investments
FCS GroupEAD BILSODA
€'000 €'000 €'000
Shareholding 55.00% 36.00% 24.90%
Other SKYNAV S.A., Belgium, FREQUENTIS AG, Austria, AD GrundstücksgesellschaftShareholders 25.00%; 28.00%; mbH & Co. KG, Germany,
AUSTRO CONTROL, Entidad Pública Empresarial 75.10%;Austria, Aeropuertos Españoles y BILSODA Beteiligungs GmbH,20.00% Navegación Aérea, Spain, general partner, Germany,
36.00% 0.00%
Paid-in capital or liability contribution 0 360 2
Other contribution 1,992
Carrying amount at 31 Dec 2013 under €1 thousand 360 1,994
Income from investments 0 0 0
(Previous year) (0) (339) (0)
Total assets* 11,956 2,510 9,006
Total debts* 8,120 848 5,527
Equity* 3,836 1,662 3,479
Net income* 76 555 -85
Revenues* 8,556 6,184 342* Values as at 31 Dec 2012
Business year 1 Jan–31 Dec 1 Jan–31 Dec 1 Jan–31 Dec
Accounting standards HGB Spanish Commercial HGBCode / IFRS
The long-term securities were due on 31 January 2013 and disclosed under current assets (see Note 22).
There were no indications of a need to impair as required by IAS 36.
Notes 2013
90
18. Non-current and current other receivables and assets
31 Dec 2013 31 Dec 2013 31 Dec 2012 31 Dec 2012Total Remaining term Total Remaining term
more than 1 year more than 1 year€'000 €'000 €'000 €'000
Under-recovery 87,984 87,984 72,481 72,481
QTE transaction 53,767 49,663 58,945 55,694
Derivative financial instruments 0 0 6,908 6,908
Interest receivables 1,933 0 3,444 0
Receivables from affiliated companies* 4 0 0 0
Receivables from investments* 0 0 33 0
Remaining financial assets 5,667 108 1,194 146
Other financial receivables and assets 149,355 137,755 143,005 135,229
Remaining non-financial assets 9,095 0 8,292 0
Prepayments 722 0 3,993 0
159,172 137,755 155,290 135,229* Disclosures on netting in Note 29
Aged-list
2013 2012
€'000 €'000
Carrying amount 159,172 155,290
Of which not impaired and
- not yet overdue 159,172 155,290
- up to 30 days overdue 0 0
- 31 to 60 days overdue 0 0
- 61 to 180 days overdue 0 0
- more than 180 days overdue 0 0
Of which impaired 0 0
No receivables served as securities for loans or as collateral for liabilities.
Since 2012, a regulated procedure for determining charges has been in force. Across Europe, the respective national
supervisory authority lays down binding unit rates for the en-route cost unit according to EU regulations. Consequently,
traffic volume and cost changes impact profit and loss (see section 2.4.5 in the group management report and Note 40.1).
If the values fall short, DFS is authorised and obliged to demand any under-recovery and if the values exceed the relevant
thresholds DFS is authorised and obliged to return any over-recovery (carry-over).
91
For terminal services, DFS continues to treat as a receivable the under-recoveries (and over-recoveries as a provision) that
are carried forward until the next reference period to be netted with the users due to the regulations on traffic volume and
cost risk distribution.
The qualified technological equipment transaction with foreign investors was basically terminated in the previous year. DFS
agreed with the remaining contracting parties to keep up the domestic cash flows. The restructuring of the contractual
relationships allowed financial drawbacks to be avoided. The remaining purely inner-German shell structure comprises a
claim against NORD/LB and a liability against KfW Kreditanstalt für Wiederaufbau (see Note 27). The new loan contracts
concluded have fixed interest and principal payments and a term until 2 January 2022 (see section 6.2.2.4 in the group
management report). DFS receives the claims from the ongoing rent from NORD/LB without having to provide a considera-
tion. DFS bears the default risk of NORD/LB during the term. The rating agencies Moody's and Fitch Ratings awarded an
Aa1 or AAA rating for the long-term guaranteed liabilities of NORD/LB. For the liability, temporally limited collateral was
pledged to KfW in the form of the assignment of the receivables against NORD/LB. This hedge was dissolved in the first
quarter of 2013 after a one-off payment. The termination of the QTE transaction led to a significant improvement in the risk
position for the creditors of DFS.
19. Trade receivables
Due dates of trade receivablesUp to 1 year 1 to 5 years More than 5 years Total
€'000 €'000 €'000 €'000
2013 146,490 7 0 146,497
2012 142,060 7 0 142,067
Due date and allowances
2013 2012
€'000 €'000
Carrying amount 146,497 142,067
Of which not impaired and
- not yet overdue 140,276 135,811
- up to 30 days overdue 4,175 4,014
- 31 to 60 days overdue 728 958
- 61 to 180 days overdue 247 542
- more than 180 days overdue 1,071 742
Of which impaired 0 0
Trade receivables were written down to the amount that could be recovered as soon as information on the insolvency of
customers was available. There are no indications that the debtors whose receivables were overdue will not be able to fulfil
their obligations.
Notes 2013
92
Development of allowances
2013 2012
€'000 €'000
As at 1 Jan 6,076 4,439
Additions 6,819 2,210
Utilisation 0 0
Reversal -802 -573
As at 31 Dec 12,093 6,076
The receivables of €5,556 thousand in the en-route area from 2010 to 2012 against Ryanair were written off completely
(see section 2.3 in the group management report).
Expenses and income recognised in the statement of comprehensive income
2013 2012
€'000 €'000
Derecognition and write-off of receivables -826 -586
Income from payment of receivables previously written off 1 5
Income from other derecognitions 4 33
Additions to specific allowances -6,819 -2,210
Income from reversal of specific allowances 802 573
Trade receivables in foreign currencies amount to €591 thousand (previous year: €1,161 thousand). Due to the low impact
on the results (<€50 thousand), there is no currency valuation.
DFS did not pledge any receivables as securities for loans.
20. Future receivables from construction contracts
Due dates of future receivables from construction contractsUp to 1 year 1 to 5 years More than 5 years Total
€'000 €'000 €'000 €'000
2013 4,474 0 0 4,474
Prepayments -1,704 0 0 -1,704
31 Dec 2013 2,770 0 0 2,770
2012 7,029 4,046 0 11,075
Prepayments -5,614 -767 0 -6,381
31 Dec 2012 1,415 3,279 0 4,694
93
Expenses and income recognised in the statement of comprehensive income
2013 2012
€'000 €'000
Contract revenue recognised in the business year 2,453 2,983
Costs incurred in the business year 1,688 1,794
Profit earned for ongoing projects 765 1,189
Amounts withheld 0 0
21. Inventories
31 Dec 2013 31 Dec 2012€'000 €'000
Raw materials, consumables and supplies 4,418 4,580
- Impairment 11 23
Finished goods and goods for resale 317 488
- Impairment 52 202
4,735 5,068
22. Securities
31 Dec 2013 31 Dec 2012€'000 €'000
0 7,018
23. Liquid funds
31 Dec 2013 31 Dec 2012
€'000 €'000
Cash in hand and cheques 38 42
Cash at bank 258,043 105,492
258,081 105,534
Notes 2013
94
24. Equity
31 Dec 2013 31 Dec 2012*
€'000 €'000
Subscribed capital 153,388 153,388
Capital reserve 74,296 74,296
Remeasurement reserves* -739,298 -1,294,822
Retained earnings -193,400 -229,166
Other reserves 0 -968
-705,014 -1,297,272
* Prior-year figures adjusted to IAS 19 (revised 2011)
The share capital of DFS amounts to DM300,000 thousand (three hundred million Deutschmark).
The share capital of DM100 thousand and DM299,900 thousand is held by the sole Shareholder, the Federal Republic of
Germany, represented by the Federal Ministry of Transport and Digital Infrastructure (BMVI). The shares may not be sold or
encumbered. Additional shareholders shall not be admitted.
The capital reserves consist of other payments of the Shareholder (Article 272 paragraph 2 no. 4 HGB) and serve to
strengthen the share capital.
Other reserves are used for changes recognised directly in equity that are not based on capital transactions with the
Shareholder.
The Shareholder approved the group financial statements, the group management report and the financial statements as
of 31 December 2012 under the German Commercial Code (HGB) in resolution no. 133 dated 26 April 2013 and decided
on the transfer of the net income 2012 under HGB to retained earnings:
31 Dec 2013 31 Dec 2012
€'000 €'000
Retained profit 6,433 35,510
Gross dividend to the Shareholder 0 0
Transferred to retained earnings 6,433 35,510
95
Other comprehensive income after taxes contained in the reservesRemeasurement Other Other
reserves reserves comprehensiveincome
31 Dec 2013 €'000 €'000 €'000
Remeasurement of the net defined benefit liability 555,524 555,524
Change in the fair value of available-for-sale financial assets 968 968
555,524 968 556,492
31 Dec 2012 €'000 €'000 €'000Remeasurement of the net defined benefit liability -869,198 -869,198Change in the fair value of available-for-sale financial assets -156 -156
-869,198 -156 -869,354
25. Provisions for pensions and similar obligations
Provisions for pensions are recognised exclusively for defined benefit plans for active and former employees.
The level of detail presented in the numbers reported in the following sections is based on the collective agreements and
individual contracts relevant for DFS:
Acronym Contents
VersTV (Pensions)* This collective agreement relates to the pensions for the staff employed at DFS.
ÜVersTV This collective agreement relates to the transitional payments for air traffic (Transitional payments) controllers and flight data assistants employed at DFS.KTV This collective agreement covers the health and long-term care insurance for (Insurance) the staff employed at DFS.Miscellaneous The accessory obligations for death grants and under the deferred compensation
scheme for pensions (old) are grouped under "Miscellaneous".
* The defined benefit obligations under the VersTV continue to be split between the final salary benefits and the benefits linked to average career earnings (see Note 25.6).
Notes 2013
96
25.1 Pension plans
There are various forms of pension provision available to the employees of DFS which are largely governed by collective
agreements.
Under the collective agreement covering pensions (VersTV), employees who began employment by 31 December 2004
receive old-age, disability and surviving dependant's benefits (defined benefit plans) linked to the respective final salary of
the employee (Plan A). However, employees who entered service from 1 January 2005 receive benefits under the collec-
tive agreement covering pensions which are linked to average career earnings (Plan B). Under this system, a pension com-
ponent is calculated each year based on the respective income and the old-age pension is determined based on the sum of
the annual pension components.
Air traffic controllers and flight data assistants receive transitional payments linked to their final salary (ÜVersTV). This is to
cover the period from the end of their operational activity until the earliest possible receipt of the statutory pension.
Both plans (VersTV and ÜVersTV) are financed by congruent reinsurance policies that are recognised as plan assets under
IAS 19.7. The reinsurance contract requires an investment in the general cover fund of the insurer in accordance with the
investment principles of section 54 of the Insurance Supervision Act (VAG) and a separate fund-based investment created
for part of the assets under section 54b of the VAG. The latter, however, is limited to a maximum of half of the actuarial
reserve.
DFS pays an increased employer contribution for health insurance for the employees who were previously employed as
established civil servants with the former Federal Administration of Air Navigation Services (BFS) / the Federal Aviation
Office (LBA). This compensates over the entire active period of employment and in retirement for the fact that these staff
are no longer covered by the German Civil Service welfare provisions for healthcare.
DFS pays death grants to qualifying next of kin of active employees. The grants are equal to the previous remuneration and
are paid for two and half months from the month following the month in which the employee passed away.
In addition, there are individual contractual benefits based on the salary conversion model for exempt employees which
were approved in 2005. The amount of the pension capital underlying the benefit is based on the salary converted with a
return of 6.00 percent.
There were no changes, curtailments or settlements to the pension plans in the business year.
Following changes to the collective agreement relating to health and long-term care insurance in 2012, the calculation of
the grants for the statutory insured transferred established civil servants was adjusted from 1 January 2013. This adjust-
ment meant that DFS has achieved equal treatment of privately and statutory insured transferred established civil servants.
The remeasurement within the scope of this collective agreement led to a rise in the expense charged to net income of
approximately €6,000 thousand. This adjustment is not a plan adjustment within the scope of IAS 19.104.
97
25.2 Actuarial assumptions
In percent 2014 2013 2012 2011 2010
Discount rate 3.60 2.90 4.50 4.90 5.50
Expected return on plan assets 3.60 2.90 4.65 4.00 4.00
Projected increase in salaries 3.50 3.50 3.50 3.50 3.50
Projected increase in benefits* 1.25/2.00 1.25/2.00 1.25/2.00 1.25/2.00 1.25/2.00
* 1.25 percent for the guaranteed adjustment for staff with benefits under VersTV 2009 2.00 percent for staff with benefits under VersTV 1993 (static reference)
25.3 Sensitivity analysis
The sensitivity analysis takes into account the respective change of the individual assumption compared to the reference
value, which is made up of the sum of the individual present values of the pension obligations from the VersTV (Pensions),
ÜVersTV (Transitional payments) and KTV (Insurance). The remaining parameters of the original calculations remain
unchanged. This ensures that potential correlation effects are excluded.
Changes to Impact on the the actuarial defined benefitassumptions obligations
€'000 in %
Present value of defined benefit obligations at 31 Dec 2013 3,078,133
Discount rate Increase by 0.5 percentage points -268,405 -8.72Decrease by 0.5 percentage points 310,079 10.07
Projected increase in salaries Increase by 0.5 percentage points 142,722 4.64 Decrease by 0.5 percentage points -132,118 -4.29Present value of defined benefit obligations at 31 Dec 2012 3,419,860 Discount rate Increase by 0.5 percentage points -320,075 -9.36
Decrease by 0.5 percentage points 372,656 10.90Projected increase in salaries Increase by 0.5 percentage points 171,582 5.02 Decrease by 0.5 percentage points -157,276 -4.60
The VersTV dated 21 August 2009 sets out a fixed annual adjustment of 1.25 percent. This means there is no sensitivity
calculation from the pension progression.
For a specific group of people, the adjustment logic is set out in the VersTV 2005. This collective agreement has an
adjustment of 2.00 percent per year as well as a lagging correction for inflation that follows a three-year rhythm. As this
represents an immaterial portion of the overall obligation, DFS does not conduct a sensitivity calculation for the pension
progression.
Notes 2013
98
25.4 Risks
The pension obligations and the plan assets are subject to fluctuations over time. The reasons for these fluctuations and
the associated risks arise from the usual actuarial risks and the financial risks in connection with the plan assets.
25.4.1 Market price risks
The amount of the net obligation from occupational pensions is exposed to interest rate risk and is particularly influenced
by the discount rate. The rate is determined by reference to market yields at the reporting date on high quality fixed-rate
corporate and treasury bonds. The current low level of interest rates has resulted in a comparatively high obligation. Poten-
tial fluctuations in the pension obligations are considered when managing the plan assets. Nevertheless, the rise in the
pension obligations can only be partly offset by the rise in the market values of the plan assets. The low interest rate level
means that substantial returns cannot be earned, which reduces the speed at which the assets for occupational pensions
may grow.
25.4.2 Liquidity risks
The daily liquidity of DFS is monitored by the Treasury department and is managed with the help of short- (< year) and
medium-term liquidity plans.
25.4.3 Inflation risks
DFS distinguishes in its pension plans between benefits that are based on the respective final salary of the employee
and benefits based on the career average plan. With the latter, the pension component is directly tied to the respective
income. A rise in salaries tied to inflation would therefore lead to a rise in the pension obligations.
25.5 Duration and expected pension and contribution payments
DFS has concluded congruent reinsurance policies with an insurance consortium consisting of four life insurance compa-
nies to secure its obligations from the collective agreement on pensions and transitional payments. This ensures that the
benefits payable can actually be paid when the insured event arises. The capital investment of the consortium is made
under the provisions of the Insurance Supervision Act (VAG), which requires a separate investment in a fund-based pension
insurance policy under Section 54b of the Act (VAG). All the consortium members to the group insurance policy are also
members of the guarantee fund of the Protektor Lebensversicherungs-Aktiengesellschaft, ensuring that the interests of the
insured are protected in the event of an insolvency of one of the companies (additional information can be found at: www.
protektor-ag.de).
99
Expected due dates of undiscounted payments
2014 2015 to 2018 2019 to 2028
Up to 1 year 2 to 5 years 6 to 15 years
€'000 €'000 €'000
Estimated pension payments* 83,380 384,015 1,601,983
- of which reinsured with the insurance consortium 76,839 353,961 1,503,128
Expected employer contributions to plan assets* 144,822 1,267,180 2,794,922
* From the Aon-Hewitt detailed forecast 2013 to 2028 dated 29 May 2013
The weighted duration of the pension obligations amounts to 19.4 years (previous year: 20.7 years) as of 31 December
2013.
25.6 Defined benefit obligations
VersTV ÜVersTV KTV Other Total(Pensions) (Transitional (Insurance)
payments)31 Dec 2012* €'000 €'000 €'000 €'000 €'000
As at 1 Jan 2012 1,522,255 735,707 154,922 5,182 2,418,066
Interest expense 67,798 32,279 6,853 229 107,159
Current service cost 48,460 34,210 1,509 113 84,292
Past service cost 0 0 6,399 0 6,399
Retirements benefits paid -31,362 -32,108 -5,926 -424 -69,820
Actuarial gain (-) and losses (+) 672,431 163,066 37,561 706 873,764
- of which changed parameters 667,164 167,932 44,163 618 879,877
- of which experience-based adjustments 5,267 -4,866 -6,602 88 -6,113
Present value of defined benefit obligations 2,279,582 933,154 201,318 5,806 3,419,860
- of which benefits based on final salary
Retirement payments 2,174,523 - - - -
One-time payments 1,370 - - - -
- of which benefits based on career average plan
Retirement payments 103,689 - - - -
One-time payments 0 - - - -
* Prior-year figures adjusted to IAS 19 (revised 2011)
Notes 2013
100
VersTV ÜVersTV KTV Other Total(Pensions) (Transitional (Insurance)
payments)31 Dec 2013 €'000 €'000 €'000 €'000 €'000
As at 1 Jan 2013 2,279,582 933,154 201,318 5,806 3,419,860
Current service cost 86,624 49,205 2,063 132 138,024
Interest expense 65,585 26,511 5,750 166 98,012
Retirements benefits paid -34,528 -33,581 -6,220 -435 -74,764
Past service cost 0 0 0 0 0
Actuarial gain (-) and losses (+) -377,544 -98,622 -21,164 -213 -497,543
- of which changed parameters -343,366 -82,066 -22,176 -270 -447,878
- of which experience-based adjustments -34,178 -16,556 1,012 57 -49,665
Present value of defined benefit obligations 2,019,719 876,667 181,747 5,456 3,083,589
- of which benefits based on final salary
Retirement payments 1,916,948 – – – –
One-time payments 0 – – – –
- of which benefits based on career average plan
Retirement payments 102,771 – – – –
One-time payments 0 – – – –
25.7 Plan assets
VersTV ÜVersTV KTV Other Total(Pensions) (Transitional (Insurance)
payments)31 Dec 2012* €'000 €'000 €'000 €'000 €'000
As at 1 Jan 2012 976,323 428,920 24,479 0 1,429,722
Expected return on plan assets 45,243 19,624 0 0 64,867
Employer contributions 97,189 47,669 0 0 144,858
Retirement benefits paid -23,530 -27,237 -622 0 -51,389
Actuarial gains (+) and losses (-) 14,957 -10,358 -34 0 4,565
Market value of plan assets 1,110,182 458,618 23,823 0 1,592,623Actual return on plan assets 60,200 9,266 -34 0 69,432* Prior-year figures adjusted to IAS 19 (revised 2011)
31 Dec 2013 €'000 €'000 €'000 €'000 €'000
As at 1 Jan 2013 1,110,182 458,618 23,823 0 1,592,623
Expected return on plan assets 32,610 13,458 681 0 46,749
Employer contributions and payments 49,842 45,800 0 0 95,642
Retirement benefits paid -26,436 -28,414 -669 0 -55,519
Actuarial gains (+) and losses (-) 55,057 3,556 -633 0 57,980
Market value of plan assets 1,221,255 493,018 23,202 0 1,737,475
Actual return on plan assets 87,667 17,014 48 0 104,729
101
Composition of plan assets
31 Dec 2013 31 Dec 2012
€'000 €'000
Capital investment in the general cover fund of the insurer under Section 54 VAG 1,046,099 944,201
Capital investment in the fund-based pension insurance policy under Section 54b VAG 668,174 624,599
Capital investment in the general cover fund of the insurer under Section 54 VAG (KTV) 23,202 23,823
Market value of plan assets 1,737,475 1,592,623
The capital investment of the consortium is subject to the provisions of the Insurance Supervision Act (VAG). While the
life insurance policies are subject to the specific investment guidelines under Section 54 of the VAG, the use of Section
54b of the VAG allows the capital investment to have a higher equity allocation. This should lead to higher returns than
available from the regular return under Section 54 of the VAG. The separate investment is managed by an investment
company on behalf of the insurance company and the asset allocation is as follows: equities: 50.90 percent, debt secu-
rities 47.80 percent and cash 1.30 percent.
Each year as of 31 December, the life insurance companies compare the capital reserve of the fund-based pension
insurance policy with the capital reserve of a normal pension insurance policy. They check if there is sufficient cover for
the promised insurance benefits. If this is not the case, the contribution to the fund-based pension insurance policy is
increased to boost the existing capital reserve to the required level.
The capital investment under Section 54b of the VAG is measured at present value and not at market price. It is a com-
ponent of assets and it is determined by the consortium at the balance sheet date.
Notes 2013
102
25.8 Remeasurement of the net defined benefit liability in equity
VersTV ÜVersTV KTV Other Total(Pensions) (Transitional (Insurance)
payments)31 Dec 2012* €'000 €'000 €'000 €'000 €'000
As at 1 Jan 2012 -215,279 -176,383 -48,668 -98 -440,428
Changes in expense in the income statement:
Amortisation of actuarial gains (-) and losses (+) 4,203 7,037 5,723 4 16,967Expected return on plan assets -1,508 -654 0 0 -2,162
Remeasurement of the net defined benefitliability in equity (other comprehensive income) = actuarial gains (+) and losses (-) of theongoing business year -657,474 -173,424 -37,595 -706 -869,199Remeasurement of the net defined benefit liability in equity -870,058 -343,424 -80,540 -800 -1,294,822* Prior-year figures adjusted to IAS 19 (revised 2011)
31 Dec 2013 €'000 €'000 €'000 €'000 €'000As at 1 Jan 2013 -870,058 -343,424 -80,540 -800 -1,294,822Remeasurement of the net defined benefitliability in equity (other comprehensive income) = actuarial gains (+) and losses (-) of theongoing business year 432,601 102,179 20,531 213 555,524Remeasurement of the net definedbenefit liability in equity -437,457 -241,245 -60,009 -587 -739,298
103
25.9 Net defined benefit liability
VersTV ÜVersTV KTV Other Total(Pensions) (Transitional (Insurance)
payments)31 Dec 2012* €'000 €'000 €'000 €'000 €'000
As at 1 Jan 2012 545,932 306,787 130,443 5,182 988,344
Expenses in income statement 71,015 46,865 14,761 342 132,983
Retirements benefits paid -7,832 -4,871 -5,304 -424 -18,431
Employer contributions -97,189 -47,669 0 0 -144,858
Remeasurement of the net defined benefitliability in equity (other comprehensive income) = actuarial gains (+) and losses (-) of theongoing business year 657,474 173,424 37,595 706 869,199Net defined benefit liability 1,169,400 474,536 177,495 5,806 1,827,237
* Prior-year figures adjusted to IAS 19 (revised 2011)
31 Dec 2013 €'000 €'000 €'000 €'000 €'000
As at 1 Jan 2013 1,169,400 474,536 177,495 5,806 1,827,237
Expenses in income statement 119,599 62,258 7,132 298 189,287
Retirements benefits paid -8,092 -5,166 -5,551 -435 -19,244
Employer contributions -49,842 -45,800 0 0 -95,642
Remeasurement of the net defined benefitliability in equity (other comprehensive income) = actuarial gains (+) and losses (-) of theongoing business year -432,601 -102,179 -20,531 -213 -555,524Net defined benefit liability 798,464 383,649 158,545 5,456 1,346,114
Notes 2013
104
25.10 Balance sheet amounts
VersTV ÜVersTV KTV Other Total(Pensions) (Transitional (Insurance)
payments)31 Dec 2013 €'000 €'000 €'000 €'000 €'000
Present value of defined benefit obligations 2,019,719 876,667 181,747 5,456 3,083,589Fair value of plan assets 1,221,255 493,018 23,202 0 1,737,475
Funding status obligation (+) and asset (-) 798,464 383,649 158,545 5,456 1,346,114
Amount not recognised as assets (IAS 19.64) 0 0 0 0 0
Net amount of debt items (+) and asset items (-) in the balance sheet 798,464 383,649 158,545 5,456 1,346,114
31 Dec 2012* €'000 €'000 €'000 €'000 €'000
Present value of defined benefit obligations 2,279,582 933,154 201,318 5,806 3,419,860
Fair value of plan assets 1,110,182 458,618 23,823 0 1,592,623
Funding status obligation (+) and asset (-) 1,169,400 474,536 177,495 5,806 1,827,237
Amount not recognised as assets (IAS 19.64) 0 0 0 0 0
Net amount of debt items (+) and asset items (-) in the balance sheet 1,169,400 474,536 177,495 5,806 1,827,237
* Prior-year figures adjusted to IAS 19 (revised 2011)
105
25.11 Expenses and income recognised in the statement of comprehensive income
VersTV ÜVersTV KTV Other Total(Pensions) (Transitional (Insurance)
payments)31 Dec 2013 €'000 €'000 €'000 €'000 €'000
Interest expense 65,585 26,511 5,750 166 98,012
Expected return on plan assets -32,610 -13,458 -681 0 -46,749
Net interest expense 32,975 13,053 5,069 166 51,263
Current service cost 86,624 49,205 2,063 132 138,024
Past service cost 0 0 0 0 0
Expenses in income statement 119,599 62,258 7,132 298 189,287
Reversal of the provision for past service cost -6,065
Contributions to the German mutual insurance association 1,663
Payments to defined contribution plans 34,400
- of which contributions to pension insurance 32,716
219,285
31 Dec 2012* €'000 €'000 €'000 €'000 €'000
Interest expense 67,798 32,279 6,853 229 107,159
Expected return on plan assets -45,243 -19,624 0 0 -64,867
Net interest expense 22,555 12,655 6,853 229 42,292
Current service cost 48,460 34,210 1,509 113 84,292
Past service cost 0 0 6,399 0 6,399
Expenses in income statement 71,015 46,865 14,761 342 132,983
Reversal of the provision for past service cost -6,065
Contributions to the German mutual insurance association 2,768
Payments to defined contribution plans 34,912
- of which contributions to pension insurance 32,642
164,598
* Prior-year figures adjusted to IAS 19 (revised 2011)
Notes 2013
106
26. Other provisions
As at Utilisation Reversal Discounting Additions As at Remaining1 Jan 31 Dec term more2013 2013 than 1 year€'000 €'000 €'000 €'000 €'000 €'000 €'000
Over-recovery of charges 61,172 -6,066 0 0 21,604 76,710 70,644
Personnel 39,617 -5,488 0 747 -313 34,563 26,290
Re-conversion 16,688 -60 -339 -931 31 15,389 11,932
Leasehold 16,162 -561 0 -1,037 0 14,564 13,992
Preserving records 10,642 -913 0 -139 451 10,041 9,113
Restructuring 2,277 0 0 0 51 2,328 528
QTE transaction 500 0 -452 0 0 48 0
Miscellaneous 11,861 -103 -5,135 0 3,016 9,639 0
158,919 -13,191 -5,926 -1,360 24,840 163,282 132,499
The provision for over-recovery of charges relates to the over-recovery for the past service cost still to be allocated
over nine years.
Personnel provisions are recognised for early retirement, part-time work for older employees and anniversary payments.
These provisions are recognised based on the expert reports of actuaries. In addition, DFS grants recuperation cures to
air traffic controllers.
The leasehold interest to be paid relates to land in Berlin-Schönefeld which is not used operationally.
The provision for the QTE transaction relates to the costs for the foregoing of collateral by KfW (for additional disclo-
sures on the QTE transaction see Note 18).
The provision for restructuring relates to personnel (severance payments) and infrastructural measures (re-conversion
obligations) in connection with operational units to be closed where no future economic benefits are expected.
Due dates of future non-discounted settlement values2014 2015 2016 2017 2018 From
2019 on €'000 €'000 €'000 €'000 €'000 €'000
Over-recovery of charges 6,065 34,252 6,065 6,065 6,066 18,196
Personnel 8,275 4,332 1,311 1,310 1,310 18,197
Leasehold 572 583 595 607 619 18,220
QTE transaction 48 0 0 0 0 0
Restructuring 1,800 0 140 0 412 0
Preserving records 928 936 944 952 974 6,368
Re-conversion 3,456 0 93 0 88 15,660
Miscellaneous 9,639 0 0 0 0 0
30,783 40,103 9,148 8,934 9,469 76,641
107
Discount rates distributed over the respective remaining terms in years
1 to 2 2 to 3 3 to 4 4 to 5 5 to 6 6 to 7
2013 0.46 0.57 0.80 1.08 1.34 1.57
2012 0.28 0.32 0.40 0.56 0.79 0.96
7 to 8 8 to 9 9 to 10 11 to 15 15 to 30
2013 1.80 1.99 2.21 2.23 2.96
2012 1.12 1.36 1.52 1.48 2.25
Due to the change in the discount rates, the discounted provisions and the interest expense declined by €2,866 thousand
respectively (previous year: €2,042 thousand) in comparison with the application of the previous year's rates.
27. Financial liabilities
31 Dec 2013 31 Dec 2013 31 Dec 2012 31 Dec 2012Total Remaining term Total Remaining term
more than 1 year more than 1 year€'000 €'000 €'000 €'000
Bonds 45,730 45,730 51,406 51,406
Debenture loans 285,000 285,000 175,000 175,000
QTE transaction 55,488 51,101 61,595 58,002
Finance lease liabilities 136 100 170 136
386,354 381,931 288,171 284,544
Bonds and debenture loans
Term Currency Nominal Nominal Effective 31 Dec 2013 31 Dec 2012value interest interest €'000 €'000
2003 to 2018 EUR 25,000 4.840% 4.840% 25,000 25,000
2004 to 2016 JPY 22,200 1.820% 1.820% 20,730 26,406
Bonds 47,200 45,730 51,406
2010 to 2017 EUR 87,500 2.564% 87,500 87,500
2010 to 2020 EUR 87,500 3.007% 87,500 87,500
2013 to 2023 EUR 110,000 2.308% 110,000 0
Debenture loans 285,000 285,000 175.000
DFS hedges its interest rates for bonds and debenture loans with derivative financial instruments (see Note 33).
Notes 2013
108
In the business year, DFS placed a debenture loan of €110,000 thousand on the over-the-counter capital market.
The QTE transaction with foreign investors was basically terminated in the business year. DFS agreed with the remaining
contracting parties to keep up the domestic cash flows (for additional disclosures on the QTE transaction see Note 18).
Future minimum lease payments from finance lease liabilities31 Dec 2013 31 Dec 2013 31 Dec 2013 31 Dec 2013Up to 1 year 2 to 5 years More than 5 years Total
€'000 €'000 €'000 €'000
Future minimum lease payments 44 109 0 153
Interest component 8 9 0 17
Finance lease liabilities (present value) 36 100 0 136
31 Dec 2012 31 Dec 2012 31 Dec 2012 31 Dec 2012Up to 1 year 2 to 5 years More than 5 years Total
€'000 €'000 €'000 €'000
Future minimum lease payments 44 152 0 196
Interest component 10 16 0 26
Finance lease liabilities (present value) 34 136 0 170
28. Trade payables
31 Dec 2013 31 Dec 2013 31 Dec 2012 31 Dec 2012Total Remaining term Total Remaining term
more than 1 year more than 1 year€'000 €'000 €'000 €'000
Germany 30,792 0 47,948 0
Abroad 4,510 307 2,957 0
Creditors with debit balances 70 0 250 0
Amounts withheld 1,256 787 1,394 798
Maastricht unit 2 0 3 0
36,630 1,094 52,552 798
Trade payables in foreign currencies amount to €62 thousand (previous year: €613 thousand). Due to the low impact on
the results (<€1 thousand), there is no currency valuation.
Trade payables are regularly secured by means of reservation of title clauses until payment is made in full.
109
29. Other liabilities
31 Dec 2013 31 Dec 2013 31 Dec 2012 31 Dec 2012Total Remaining term Total Remaining term
more than 1 year more than 1 year€'000 €'000 €'000 €'000
Staff costs 35,104 0 37,701 0
Amounts owed to affiliated companies 27,455 0 22,023 0
Outstanding invoices 14,754 0 12,808 0
Interest payable 6,484 0 5,690 0
Amounts owed to Shareholder 3,132 0 3,325 0
Derivative financial instruments 3,075 3,075 4,672 4,672
Liabilities to investments 2,769 0 2,063 0
German Meteorological ServiceShare of charges: En-route 1,642 0 1,660 0Remaining financial liabilities 291 0 787 0
Other financial liabilities 94,706 3,075 90,729 4,672
Staff costs 20,845 0 21,553 0
Amounts owed to the tax authorities 14,348 0 15,057 0
QTE transaction 0 0 0 0
Remaining non-financial liabilities 9,155 0 12,237 0
Other non-financial liabilities 44,348 0 48,847 0
139,054 3,075 139,576 4,672
Owing to the complete termination of the core component of the QTE transactions, the accrued liability was reversed
through the income statement (for additional disclosures on the QTE transaction see Note 18).
Notes 2013
110
Offsetting of financial assets and liabilitiesFinancial Financial Assets (+) and
assets (+) liabilities (-) debts (-) as reported at the balance sheet
31 Dec 2013 €'000 €'000 €'000
ShareholderBMVI (formerly: BMVBS), BMVg, regulatory authority, LBA 3,798 -6,930 -3,132
3,798 -6,930 -3,132
Affiliated companies
DFS IBS 21 -19,282 -19,261
U-Kasse (Benevolent fund) 4 0 4
TTC 866 -1,172 -306
DFS Energy 0 -7,888 -7,888
891 -28,342 -27,451
Investments
FCS 51 -2,788 -2,737
GroupEAD 0 -32 -32
51 -2,820 -2,769
31 Dec 2012 €'000 €'000 €'000
Shareholder
BMVBS, BMVg, regulatory authority, LBA 2,853 -6,178 -3,325
2,853 -6,178 -3,325
Affiliated companies
DFS IBS 32 -18,882 -18,850
U-Kasse (Benevolent fund) 4 -5 -1
TTC 1,473 -1,574 -101
DFS Energy 0 -3,071 -3,071
1,509 -23,532 -22,023
Investments
FCS 68 -2,131 -2,063
GroupEAD 42 -9 33
110 -2,140 -2,030
The fair value of the offset financial assets and liabilities corresponds to the carrying amount. DFS did not receive col-
lateral for the financial assets nor did it provide collateral for the financial liabilities.
111
Additional disclosures
30. Notes to segment reportingSegment reporting is based on the internal management and reporting systems. Commercial management and reporting
have been based on cost units and contribution margins since the start of economic regulation. This enhances the trans-
parency as well as the planning and control of the individual business units.
Within the scope of segment reporting, the Board of Managing Directors as the chief operating decision-maker allocates
company funds and assesses the performance of the operating segments. The operating result (operating EBIT) is an
important performance indicator for DFS. EBIT is used for resource allocation and to measure the profitability of the seg-
ments. Further data are neither collected nor communicated to the chief operating decision-makers.
The main business of DFS (see section 1.1 in the group management report) is air navigation services and the directly
associated support activities. DFS defines these activities as the "Segment financed by air navigation charges". Since
2012, this segment has been divided into the units: en-route and terminal services.
Commercial services comprise consultancy services offered globally, the sale of ATM systems as well as analysis, simula-
tion and project management activities.
The other products (both commercial and financed by air navigation charges) relate to services which either cannot be
assigned to a particular segment or which would require considerable expense to do so. This includes in particular services
for operational air traffic (OAT), visual flight rules (VFR) and Maastricht Upper Area Control (MUAC).
The determination of segment data is based on the following premises:
■ The assets and liabilities of DFS Energy were included as part of the operating assets in the cost-base for determining
charges. Consequently, in the reconciliation to DFS results, the expenses and income of DFS Energy were disclosed
separately.
■ The financial result and income taxes were not assigned to the individual segments as the departments Treasury and
Taxes are active at the corporate level.
■ The number of staff corresponds to the number of employees.
Notes 2013
112
Information on the business segments by cost typeBusiness All other Reconciliation Total
financed by segmentsair navigation
charges2013 €'000 €'000 €'000 €'000
External revenues 1,058,886 24,060 1,082,946
Intersegment revenues 24,730 -24,730 0
Other operating income 33,763 33,763
Changes in inventory -171 -171
Own work capitalised 1,588 1,588
Total operating revenues and income 1,118,796 24,060 -24,730 1,118,126
Staff costs 778,125 778,125
Material costs 124,999 124,999
Depreciation and amortisation 102,646 102,646
Project costs 18,913 18,913
Intersegment costs 24,730 -24,730 0
Total costs 1,024,683 24,730 -24,730 1,024,683
Internal results for the period 94,113 -670 0 93,443
Under-recovery -13,910 -13,910
Carry-over en-route 40,150 40,150
Balancing items: cost accounting 0 0
Earnings before taxes from a charges-related perspective 120,353 -670 0 119,683
2012 €'000 €'000 €'000 €'000
External revenues 1,051,316 23,821 1,075,137
Intersegment revenues 21,962 -21,962 0
Other operating income 26,363 26,363
Changes in inventory 129 129
Own work capitalised 2,459 2,459
Total operating revenues and income 1,102,229 23,821 -21,962 1,104,088
Staff costs 790,641 790,641
Material costs 127,608 127,608
Depreciation and amortisation 105,547 105,547
Project costs 20,610 20,610
Intersegment costs 21,962 -21,962 0
Total costs 1,044,406 21,962 -21,962 1,044,406
Internal results for the period 57,823 1,859 0 59,682
Under-recovery 6,963 6,963
Carry-over en-route 19,263 19,263
Balancing items: cost accounting 6,065 6,065
Earnings before taxes from a charges-related perspective 90,114 1,859 0 91,973
113
Information on business segments with reconciliation from charges-related resultto IFRS earnings before interest and taxes
EBIT EBIT2013 2012*€'000 €'000
Terminal services 24,242 21,166
En-route services 90,471 62,558
Commercial products -670 1,859
Remaining commercial products and products financed by air navigation charges 5,639 6,390
Earnings before interest and taxes from a charges-related perspective 119,682 91,973
Reconciliation to DFS earnings before interest and taxes under IFRS
Occupational pensions from a charges-related perspective 49,003 82,111
Occupational pensions under IAS/IFRS* -134,184 -93,263
Change in equity relevant for charges (closing deficit) 54,816 23,384
DFS Energy earnings before interest and taxes under IFRS -316 709
QTE transaction 2,600 52,248
Differing apportionment between the accounting perspectiveand a charges-related perspective -2,020 -3,349
DFS earnings before interest and taxes under IFRS 89,581 153,813
* Prior-year figures adjusted to IAS 19 (revised 2011)
Information on important external customers
2013 2013 2012 2012
€'000 in % €'000 in %
DFS total revenues* 1,093,243 100.00 1,041,926 100.00
Lufthansa 219,661 20.09 222,229 21.34
Air Berlin 75,044 6.86 75,021 7.20
Federal Ministry of Defence 62,780 5.74 63,090 6.06
Ryanair 54,771 5.01 41,303 3.96
Germanwings 32,794 3.00 24,505 2.35
KLM 31,900 2.92 30,204 2.90
British Airways 31,763 2.91 28,860 2.77
* Comprising terminal and en-route revenues as well as revenues from military operational air traffic
Notes 2013
114
31. Additional disclosures on the cash flow statementThe cash flow statement shows the change in liquid funds between two balance sheet dates and the movements in cash
and cash equivalents. Cash inflows and outflows are divided into operating, investing and financing activities and only show
cash flows from continuing operations. There are no discontinued operations.
Bank overdrafts are deducted from liquid funds when drawing up the cash flow statement:
31 Dec 2013 31 Dec 2012
€'000 €'000
Cash in hand and cheques 38 42
Cash at bank 258,043 105,492
Current overdraft 0 0
Cash and cash equivalents 258,081 105,534
Cash inflow from operating activities was calculated using the indirect method by adjusting net income for changes in
inventory, receivables, other assets and borrowings as well as depreciation and amortisation and other non-cash income
and expenses. The cash flows from income taxes relate to all of the above areas of activity. However, owing to the time
that would be involved in assigning the cash flows from income taxes to the individual activities, for the purpose of the
cash flow statement they were allocated to operating activities.
In addition to the separate group cash flow statement using the indirect method, DFS has adopted the recommendation
of IAS 7.19 and also shows the cash flows from operating activities according to the direct method. The direct method
provides information that makes it easier to estimate future cash flows. This sort of information is not available under
the indirect method. The direct cash flow statement is oriented towards the structure of the actual cash flows. The cash
inflows from revenues are shown alongside the cash outflows. In particular, the difference between staff costs and the
employee expenses reported in the statement of comprehensive income can be seen, namely the payment of reinsurance
premiums and actual pension payments after the reimbursement from the pension plan reinsurance. These cash outflows
are matched with revenues from air navigation charges that show the actual liquidity inflows, which may not correspond
exactly to revenues reported in the group statement of comprehensive income. Investment grants, revenues from the
commercial business and reimbursements which are relevant to the calculation of air navigation charges (SESAR) are
recorded under other proceeds. The value accruals item shows the cash flows whose clear allocation to items previously
used in the cash flow statement would have involved considerable expense.
115
Cash flows from operating activities using the direct method
2013 2012
€'000 €'000
Terminal charges received 236,951 225,828
En-route charges received 786,836 753,289
Reimbursement OAT/Maastricht/VFR flights 80,696 74,710
Reimbursements paid -7,927 -7,845
Staff costs -819,923 -813,829
Non-staff and project costs -155,428 -152,792
Other payments 50,875 42,323
Netting of tax refunds (+) / overpayment (-)(Income taxes, VAT, withholding taxes) 13,905 14,936Value accruals -1,560 1,368
184,425 137,988
Cash outflows for investing and financing activities are presented using the direct method.
Notes 2013
116
32. Financial instruments
Financial assets by categoryCarrying At fair value Held-to- Loans and Available- Fair value Levelamount through maturity receiva- for-sale
profit or loss bles31 Dec 2013 €'000 €'000 €'000 €'000 €'000 €'000
Shares in affiliated companies 27,172 27,172 27,172 3
Loans to affiliated companies 29,500 29,500 29,500 3
Investments 2,354 2,354 4,464 3
Trade receivables 146,497 146,497 146,497 3
Future receivables from construction contracts 2,770 2,770 2,770 3
Under-recovery 87,984 87,984 87,984 3
QTE transaction 53,767 53,767 53,767 2
Interest receivables 1,933 1,933 1,933 2
Receivables from affiliated companies 4 4 4 3
Other financial assets – Level 2 4,867 4,867 4,867 2
Other financial assets – Level 3 800 800 800 3
Liquid funds 258,081 258,081 258,081 2
615,729 0 53,767 532,436 29,526 617,839
31 Dec 2012 €'000 €'000 €'000 €'000 €'000 €'000
Shares in affiliated companies 27,172 27,172 27,172 3
Loans to affiliated companies 11,000 11,000 11,000 3
Investments 2,354 2,354 4,422 3
Securities 7,018 7,018 7,018 2
Trade receivables 142,067 142,067 142,067 3
Future receivables from construction contracts 1,415 1,415 1,415 3
Under-recovery 72,481 72,481 72,481 3
QTE transaction 58,945 58,945 58,945 2
Derivative financial instruments 6,908 6,908 6,908 2
Interest receivables 3,444 3,444 3,444 2
Receivables from investments 33 33 33 3
Remaining financial assets 1,194 1,194 1,194 3
Liquid funds 105,534 105,534 105,534 2
439,565 6,908 58,945 337,168 36,544 441,633
117
Valuation technique
Cost approach: For shares in affiliated companies, loans to affiliated companies and
investments, DFS assumes they can be sold for at least their carrying amounts in the short
term and sets the fair value at the same level. There is a grey capital market for the shares
DFS holds in limited liability companies (GmbH-Anteile). The fair value of the shares can be
calculated reliably and backed up by financial calculations. The stake in FCS corresponds to
the nominal remaining amount. DFS therefore determines the fair value from the share in the
accounting equity of FCS. For other receivables and assets in the category "Loans and
receivables", DFS assumes they can be sold for at least their carrying amounts in the short
term and sets the fair value at the same level.
Market approach: The fair values of securities and derivatives with positive fair values are
determined completely or partially using recognised valuation models or the external valuations
of third parties based on the market conditions prevailing at the balance sheet date (interest
and exchange rates) using external sources or market prices. In determining the fair value of
derivatives, compensating effects from the primary transaction (pending business or
anticipated transactions) are excluded.
Present value method: The fair value of the QTE transaction is determined based on
discounting future expected cash flows.
Unobservable inputs
Discount rate, nominal value of shares and investments as well as other receivables and assets
Observable inputs
Security prices, market interest rates
Relationship between inputs and fair value
The estimated fair value would increase if
- the risk-adjusted discount rate was lower;
- the nominal values were higher;
- the security prices were higher;
- the market interest rates values were higher.
Reconciliation of the fair values of level 2 and 3
Level 2 Level 3
31 Dec 2013 31 Dec 2013
€'000 €'000
As at 1 Jan 2013 181,849 259,784
Ongoing gains and losses 6,918 -6,762
Gains (+) and losses (-) recognised in other comprehensive income -25 0
Additions (+) and disposals (-) 129,906 46,169
Transfers in and out of levels 0 0
As at 31 Dec 2013 318,648 299,191
Notes 2013
118
Financial liabilities by category with disclosures on fair valueCarrying At fair value Amortised Fair value Levelamount through profit cost
or loss31 Dec 2013 €'000 €'000 €'000 €'000
Bonds 45,730 45,730 50,418 1
Debenture loans 285,000 285,000 300,884 2
QTE transaction 55,488 55,488 55,488 2
Finance leases 136 136 136 3
Trade payables 36,630 36,630 36,630 3
Staff costs 35,104 35,104 35,104 3
Amounts owed to Shareholder 3,132 3,132 3,132 3
Amounts owed to affiliated companies 27,455 27,455 27,455 3
Liabilities to investments 2,769 2,769 2,769 3
Outstanding invoices 14,754 14,754 14,754 3
Interest payable 6,484 6,484 6,484 2
Derivative financial instruments 3,075 3,075 3,075 2
Share of charges: German Meteorological Service 1,642 1,642 1,642 3
Remaining financial liabilities 291 291 291 3
517,690 3,075 514,615 538,262
31 Dec 2012 €'000 €'000 €'000 €'000
Bonds 51,406 51,406 58,016 1
Debenture loans 175,000 175,000 194,162 2
QTE transaction 61,595 61,595 61,595 2
Finance leases 170 170 170 3
Trade payables 52,552 52,552 52,552 3
Staff costs 37,701 37,701 37,701 3
Amounts owed to Shareholder 3,325 3,325 3,325 3
Amounts owed to affiliated companies 24,086 24,086 24,086 3
Outstanding invoices 12,808 12,808 12,808 3
Interest payable 5,690 5,690 5,690 2
Derivative financial instruments 4,672 4,672 4,672 2
Share of charges: German Meteorological Service 1,660 1,660 1,660 3
Remaining financial liabilities 787 787 787 3
431,452 4,672 426,780 457,224
119
Valuation technique
Cost approach: DFS assumes that the fair value is at least equal to the settlement value from
the current obligation for other liabilities and liabilities under the category "Amortised cost".
Market approach: The fair values of debenture loans and derivatives with negative fair values are
determined completely or partially using recognised valuation models or the external valuations
of third parties based on the market conditions prevailing at the balance sheet date (interest
and exchange rates) using external sources or market prices. In determining the fair value of
derivatives, compensating effects from the primary transaction (pending business or anticipated
transactions) are excluded. The fair value of the bonds is determined using market listing on
public markets.
Present value method: The fair value of finance leases and the QTE transaction is determined
by discounting future expected cash flows using prevailing market interest rates.
Unobservable inputs
Discount rate, settlement value of other liabilities and liabilities
Observable inputs
Exchange prices, exchange rates, market interest rates
Relationship between inputs and fair value
The estimated fair value would increase if
- the risk-adjusted discount rate was lower;
- the settlement values were higher;
- the exchange prices were higher;
- the exchange rates were higher;
- the market interest rates values were higher.
Notes 2013
120
Reconciliation of the fair values of level 2 and 3
Level 2 Level 3
31 Dec 2013 31 Dec 2013
€'000 €'000
As at 1 Jan 2013 266,119 133,089
Ongoing gains and losses -1,597 0
Gains and losses recognised in other comprehensive income 0 0
Additions and disposals 101,409 -11,176
Transfers in and out of levels 0 0
As at 31 Dec 2013 365,931 121,913
Assets (+) and liabilities (-) at fair valueAs at Change in value Cumulative change As at1 Jan 2013 in value 31 Dec
31 Dec 2013 €'000 €'000 €'000 €'000
Interest rate swap 647659 90 -90 0 0
Interest rate swap 918388L 6,818 -6,818 0 0
6,908 -6,908 0 0
Interest rate swap 653604L -29 29 0 0
Interest rate swap 918135L -4,272 1,828 -2,444 -2,444
Interest rate swap 918388L 0 -631 -631 -631
Interest rate swap LEES2089U0 -371 371 0 0
-4,672 1,597 -3,075 -3,075
31 Dec 2012 €'000 €'000 €'000 €'000
Interest rate swap 647659 909 -819 90 90
Interest rate swap 918388L 9,903 -3,085 6,818 6,818
10,812 -3,904 6,908 6,908
Interest rate swap 653604L -247 218 -29 -29
Interest rate swap 918135L -3,298 -974 -4,272 -4,272
Interest rate swap LEES2089U0 -742 371 -371 -371
-4,287 -385 -4,672 -4,672
121
Net results of financial instruments by measurement category
Assets LiabilitiesAt fair value Held-to- Loans and Available-for- Amortised cost
through profit maturity receivables saleor loss
31 Dec 2013 €'000 €'000 €'000 €'000 €'000
Result component 250
Currency effect 5,686
Changes in market value -5,311
Impairment losses -7,645 -12
Interest result -754 6,617 1,430 40 -15,143
Other operating expenses -903 -230
-6,065 6,617 -7,118 278 -9,687Recognised directly in othercomprehensive income 0 0 0 -25 0
31 Dec 2012 €'000 €'000 €'000 €'000 €'000
Result component 921
Currency effect 3,539
Changes in market value -4,289
Impairment losses -2,797
Interest result -830 1,734 912 392 -10,459
Other operating expenses -622 -190
-5,119 1,734 -2,507 1,313 -7,110Recognised directly in othercomprehensive income 0 0 0 -101 0
The net results by measurement category were determined for financial instruments that were recognised and measured
at the balance sheet date. In the business year, financial receivables and liabilities were recognised from the changes to
the QTE transaction. The relevant interest income and expenses were considered in the categories "Held-to-maturity" and
"Amortised cost". The net result of financial assets is made up of profit transfers of affiliated companies, changes in market
value of derivatives, write-downs and write-offs of receivables, interest income and expenses as well as incidental costs
of monetary transactions. The net result of financial liabilities encompasses expenses from foreign currency translation,
interest income and expenses as well as incidental costs of monetary transactions. All other expenses and income were
disclosed under the financial result except for the impairment losses and the incidental costs of monetary transactions.
Notes 2013
122
33. Derivative financial instrumentsDFS is exposed to market risks in the form of interest and currency fluctuations (see section 6.2.2 in the group manage-
ment report and in Note 34). DFS uses derivative financial instruments to manage these risks.
In addition, DFS is exposed to default risk. To minimise this risk, DFS concludes derivative transactions exclusively with its
principal bankers, who have good credit ratings.
Speculative transactions with derivative instruments where there is no underlying transaction are forbidden.
Derivative financial instruments
Remaining term Nominal volume Fair value Nominal volume Fair value
31 Dec 2013 31 Dec 2013 31 Dec 2012 31 Dec 2012
€'000 €'000 €'000 €'000
Positive fair value
Receiver interest rate swaps 0 0 25,000 90
Receiver cross-currency swaps 0 0 22,200 6,818
Negative fair value
Payer interest rate swaps 0 0 32,000 -400
Payer interest rate swaps 1 to 5 years 22,200 -2,444 22,200 -4,272
Receiver cross-currency swaps 1 to 5 years 22,200 -631 0 0
44,400 -3,075 101,400 2,236
The clean price of the financial instruments is reported as the fair value. The change in fair value is primarily due to the
development of interest rates. As of 31 December 2013, the fixed interest rates were 1.8200 percent and 5.1675 per-
cent. The variable interest rates were 0.392 EURIBOR (previous year: between 0.196 and 0.698 EURIBOR).
34. Financial risks Financial risks arise in the form of liquidity risks, default risks and market price risks. DFS provides disclosures in the
group management report under section 6.2.2 on the required qualitative information under IFRS 7 about the type and
means by which risks from financial instruments arise as well as the procedures for the management of these risks.
123
34.1 Liquidity risks
Liquidity risk describes the risk that DFS may not be in the position to settle its financial liabilities as contractually required
through the delivery of cash or other financial assets. through the delivery of cash or other financial assets.
Aged-list of the undiscounted principal and interest payments of financial liabilitiesTotal Up to Due in Due in Due in
3 months 4 to 12 2 to 5 years more thanmonths 5 years
31 Dec 2013 €'000 €'000 €'000 €'000 €'000
Non-derivative financial liabilities
Bonds 47,200 0 0 22,200 25,000
Debenture loans 285,000 0 0 87,500 197,500
Interest 60,042 3,749 5,279 33,058 17,956
QTE transaction 55,488 4,387 0 20,704 30,397
Finance lease liabilities 136 12 24 100 0
Trade payables 36,630 35,203 333 1,094 0
Other liabilities 91,631 84,553 7,078 0 0
Derivative financial liabilities
Derivatives 2,229 0 743 1.486 0
578,356 127,904 13,457 166,142 270,853
31 Dec 2012 €'000 €'000 €'000 €'000 €'000
Non-derivative financial liabilities
Bonds 47,200 0 0 22,200 25,000
Debenture loans 175,000 0 0 87,500 87,500
Interest 41,142 1,210 5,279 25,550 9,103
QTE transaction 61,595 3,593 0 19,959 38,043
Finance lease liabilities 170 11 23 136 0
Trade payables 52,552 51,587 167 798 0
Other liabilities 86,057 79,368 6,689 0 0
Derivative financial liabilities
Derivatives 3,151 178 743 2,230 0
466,867 135,947 12,901 158,373 159,646
Notes 2013
124
34.2 Default risks
DFS is exposed to default risks from financial receivables that result from the possible default on the obligations of a party
to a contract. The maximum value equals the positive fair value or market value of the financial instrument.
Default risk by category
31 Dec 2013 31 Dec 2012
€'000 €'000
At fair value through profit or loss 0 6,908
Held-to-maturity 53,767 58,945
Loans and receivables 532,436 337,168
Available-for-sale 29,526 36,544
615,729 439,565
With the exception of trade receivables, there were no financial assets that were overdue or impaired. Trade receivables
were written down to the amount that could be recovered as soon as information on the insolvency of customers was
available. DFS demands security deposits from customers with relevant sales volumes when defined warning thresholds
are exceeded. In addition, there are no indications that the debtors whose receivables are overdue will not be able to
fulfil their obligations.
As regards financial investing, DFS only enters into transactions with counterparties who either have a long-term rating
of at least AA- (Standard & Poor's) or Aa3 (Moody's), short-term A-1 (Standard & Poor's) or P-1 (Moody's), a correspond-
ingly high creditworthiness or other form of collateral.
Business dealings with a selected group of principal bankers are conducted using uniform standards and existing recip-
rocal cash flows are continuously improved.
34.3 Market risks
Market risk is defined as the risk that the fair value or future cash flows of a primary or derivative financial instrument fluc-
tuate due to fluctuations in market prices (interest rate risk and currency risk). Interest rate risk arises primarily when refi-
nancing with variable rates. Currency risks result from exchange rate fluctuations for transactions in foreign currencies.
Interest rate risk for financial assets and liabilities31 Dec 2013 31 Dec 2012
Nominal value Nominal value€'000 €'000
Financial assets
Fixed rate securities 0 7,000
Financial liabilities
Fixed rate bonds 47,200 47,200
Fixed rate debenture loans 285,000 175,000
332,200 229,200
125
Net risk by currency
31 Dec 2013 31 Dec 2012
Nominal value Rate Nominal value Rate
JPY '000 JPY '000
Primary transactions -3,000,000 144.72 -3,000,000 113.61
Derivative financial instruments 3,000,000 144.72 3,000,000 113.61
Planned hedges 0 0
0 0
USD ‚000 USD ‚000
Primary transactions 3,779 1.37910 4,173 1.31940
Derivative financial instruments 0 0
Planned hedges 0 0
3,779 1.37910 4,173 1.31940
The value-at-risk analysis conducted determines the currency and interest risk, which is based on a sensitivity model used
for internal planning and control. The value-at-risk shows the decline which will not be exceeded with a probability of
95.00 percent when the holding period is 10 days.
Value-at-risk
31 Dec 2013 31 Dec 2013 31 Dec 2012 31 Dec 2012
Foreign Interest rate Foreign Interest rateexchange risk risk exchange risk risk
By currency €'000 €'000 €'000 €'000
USD 59 143
EUR 3,078 1,624
By line item €'000 €'000 €'000 €'000
Money market 0 7 0 6
Capital market 570 3,032 1,078 1,739
Hedge 815 70 955 68
Overall risk At year-end High Low Average
€'000 €'000 €'000 €'000
2013 3,064 4,434 1,840 3,382
2012 1,675 3,043 1,675 2,291
Foreign exchange risks that impact the balance sheet arise due to monetary items that are not in the functional currency.
As the primary monetary financial instruments are held mainly in the functional currency or converted into the functional
currency by means of derivatives, changes in exchange rates therefore have no material impact on the result or equity.
Notes 2013
126
Interest rate risk results mainly from the sensitivity of financial instruments. Liquidity is ensured by means of money market
and capital market programmes with long maturities that have fixed and variable interest rates. The use of derivative finan-
cial instruments, such as interest rate swaps and cross currency swaps, secures fixed interest rates and thus limits inter-
est rate risk. The changes in interest rates therefore have no material impact on the result or equity.
The obligation and plan assets for occupational pensions are exposed to interest rate risk. The discount rate for pensions
and similar obligations is based on the market yields for high quality fixed-rate corporate bonds. The continued decline in
the level of interest rates would lead to a further increase in the obligation. The low returns that can currently be earned
on the market mean that the pension plan assets cannot yield substantial income, which reduces the speed at which the
assets for occupational pensions may grow.
35. Capital managementAs regards commercial considerations, capital is managed from a charges-related perspective (for further disclosures see
section 2.5.3.1 in the group management report). The charges-related perspective takes additional elements into account
when contrasted with the accounting principles under IAS/IFRS.
35.1 Consideration of the catch-up effects from conversion to IAS/IFRS not included in the financial statements
The financial statements were converted from the German Commercial Code (HGB) to IFRS in 2007 (see Note 2). This
led to measurement changes, in particular as regards occupational pensions, which were recognised directly in retained
earnings. This resulted in a negative equity situation. DFS is authorised to include these negative consequences in the
cost-base for determining and levying charges. These off-balance sheet catch-up effects may be charged to airspace users
over a 15-year period. This will have a positive influence on the equity and liquidity of DFS over the remaining period of nine
years.
35.2 Inclusion of the model to finance occupational pensions approved by the regulatory authority
Since 2012, DFS has been authorised to distribute the following components of charges over the average remaining time
to work of the staff (15 years) in a rolling fashion and include them in the following reference periods, resulting in a liquidity
effect (see section 2.3 in the group management report):
■ service cost and
■ the distribution of the deficit, including interest on the outstanding instalments to close the deficit. The deficit at the
beginning of a reference period is the difference between the obligation and the assets less the present value of the
cash flows (including interest) that were already approved in prior periods to close the deficit. The determination of the
present value of cash flows is based on the respective current interest rate for charges.
127
35.3 Law on the Implementation of the Mutual Assistance Directive as well as on the Change to Tax Regulations
(AmtshilfeRLUmsG)
Section 29 of this law contains the change to Article 31b paragraph 3 of the German Aviation Act (LuftVG). Consequently,
the positive or negative difference between the profit from air navigation charges under income tax law and the result
under the regulations governing charges will not be considered when determining income and thus is not subject to tax.
35.4 Integration of DFS Energy
The assets and liabilities of DFS Energy were included as part of the operating assets in the cost-base for determining
charges.
Reconciliation and indicators on capital management
31 Dec 2013 31 Dec 2012*
€'000 €'000
Reconciliation to charges-related equity
Equity recognised on the balance sheet* -705,014 -1,297,272
Catch-up effects not yet accounted for 498,510 552,298
Deferred taxes on this amount -758 -27,292
Occupational pensions from a charges-related perspective* 939,861 1,381,373
Change in equity relevant for charges (closing deficit) -53,912 14,294
Charges-related inclusion of DFS Energy 588 -253
Charges-related equity 679,275 623,148
Indicators
Equity ratio 24.40% 19.92%
Return on equity 5.27% 14.10%
Net income 35,766 87,886
EBIT 89,581 153,813
Borrowings 2,104,980 2,504,773
Debt ratio 75.60% 80.08%
Return on total assets 1.28% 2.81%
Leverage ratio 4.61% 5.84%
Liquid funds 258,081 105,534
Non-current financial liabilities 381,931 284,544
of which QTE transaction 51,101 58,002
Current financial liabilities 4,423 3,627
of which QTE transaction 4,388 3,593
Net financial indebtedness 128,273 182,637
* Prior-year figures adjusted to IAS 19 (revised 2011)
Notes 2013
128
This perspective includes the future flow of charges approved by the supervisory authorities and delivers a clear picture of
the capital structure, debts and cash flows. Assets and liabilities that are subject in full or in part to economic regulation
are transferred to a regulatory asset base, i.e. an accounting of the results and financial position from the perspective of
economic regulation.
The view of DFS is supported by the supplement to Article 31b paragraph 3 of the German Aviation Act (LuftVG). This regu-
lation obliges DFS to determine its taxes based on the charges-related result.
The assessment of the financial risks of DFS is given by the rating awarded by the rating agencies.
Ratings
Long-term Short-term Outlook
Standard & Poor´s AAA A-1+ Stable
Moody´s Aa3 P-1 Negative
36. Contingent liabilities and other financial commitments36.1 Contingent liabilities
Due date of contingent liabilities
Up to 1 year 1 to 5 years More than 5 years Total
€'000 €'000 €'000 €'000
Sureties 2013 1,320 0 0 1,320
2012 1,270 0 0 1,270
No provisions were recognised for the commitments shown because the risk of use was deemed to have a low probability.
There exist no uncertainties as regards the amount or maturity of the contingent liabilities.
Sureties relate to guarantees for advance payments, warranties, contract fulfilment and tender guarantees for simulation,
radar data and air traffic control systems. At the end of the business year, there were no obligations for the issuance or
endorsement of guarantees covering bills of exchange and cheques.
129
36.2 Other financial commitments
Due dates of other financial obligations
Up to 1 year 1 to 5 years More than 5 years Total
31 Dec 2013 €'000 €'000 €'000 €'000
Loans commitments 0 0 50,000 50,000
- of which taken up 0 0 29,500 29,500
Intercompany credit lines with affiliated companies 14,900 0 0 14,900 - of which taken up 0 0 0 0
Capital expenditure commitments for the acquisition of
- intangible assets 23,128 13,565 0 36,693
- property, plant and equipment 38,400 14,937 2,140 55,477
- other 61,591 44,320 523 106,434
138,019 72,822 52,663 263,504
31 Dec 2012 €'000 €'000 €'000 €'000
Loans commitments 0 0 50,000 50,000
- of which taken up 0 0 11,000 11,000
Intercompany credit lines with affiliated companies 14,900 0 0 14,900 - of which taken up 0 0 0 0
Capital expenditure commitments for the acquisition of
- intangible assets 18,195 15,628 0 33,823
- property, plant and equipment 67,481 24,659 969 93,109
- other 51,142 16,455 27 67,624
151,718 56,742 50,996 259,456
No provisions were recognised for the commitments shown because the risk of use was deemed to have a low probabil-
ity. There exist no uncertainties as regards the amount or maturity of the other financial obligations.
To cover their liquidity needs, affiliated companies were granted an inter-company credit line as part of daily cash pooling.
By doing so, the group optimises its conditions for cash investments and loans and exploits the advantages of a central,
systematic financial planning.
Capital expenditure commitments relate to the contractual obligations for the purchase of intangible assets as well as
property, plant and equipment.
The new Board of the benevolent fund (U-Kasse) was released from its liability by the Board of Managing Directors of DFS.
Notes 2013
130
37. Contingent assets
There are two separate abstract acknowledgements of debt (abstrakte Schuldanerkenntnisse – a standardGerman law acknowledgement of a borrower's indebtedness) between DFS and FCS:Effective from 26 April 2006 29 September 2008 and 6 October 2008,
respectively
Collateral Registration of a charge Registration of a chargeLegal basis Article 1 LuftfzgG (Law on Rights Regarding Article 1 LuftfzgG (Law on Rights Regarding
Aircraft – Gesetze über Rechte an Flugzeugen) Aircraft – Gesetze über Rechte an Flugzeugen)
Beneficiary DFS DFS
Object Hawker Beechcraft Super King Air 350 Hawker Beechcraft Super King Air 350
Serial number FL-473 D-CFMD FL-626 D-CFME
Local court Braunschweig Braunschweig
Registration 22 August 2006 16 September 2009
Basis Loan agreement dated March 2006 Loan agreement dated September 2008and October 2008, respectively
Parties to the contract DFS IBS and FCS DFS IBS and FCS
Loan 1 Aircraft FL-473 D-CFMD Aircraft FL-626 D-CFMETerm until 31 December 2022 Term until 31 December 2025€5,500 thousand €4,300 thousand
Loan 2 Flight inspection system (type Aerodata AeroFIS) Flight inspection system (type Aerodata AeroFIS)Term until 31 December 2016 Term until 30 September 2019€3,000 thousand €1,700 thousand
Miscellaneous The loan is collateralised over its entire The loan is collateralised over its entire maturity by an abstract acknowledgement of maturity by an abstract acknowledgement of debt in favour of DFS by means of a liability of debt in favour of DFS by means of a liability of €8,500 thousand. €6,000 thousand.€7,100 thousand of the volume of the loan €5,200 thousand of the volume of the loan have been taken up. have been taken up.
38. Post-balance sheet eventsOn 3 December 2013, DFS spun off TTC as of 1 January 2014 by means of a spin-off and take-over contract formalised by
notarial recording. Under this contract, DFS transfers its only share in TTC with a nominal value of €25,000.00 (100 per-
cent of the paid-in capital) to DFS IBS. The spin-off was made by means of a universal transfer of assets and liabilities in
return for 100 new shares with a total nominal value of €100.00. The profit and loss transfer agreement between DFS and
TTC was dissolved by mutual consent as of 31 December 2013, 24:00 hrs. Now, a profit and loss transfer agreement and
a cash pool agreement apply between DFS IBS and TTC effective from 1 January 2014.
131
39. Auditors' fees
Total fees of the auditor under Article 314 paragraph 1 no. 9 of the German Commercial Code (HGB)
2013 2012
€'000 €'000
Audit services 163 164
Other assurance services 13 0
Tax advice 2 17
Other services 277 59
455 240
40. Service concession arrangementsUnder Article 27c of the German Aviation Act (LuftVG), DFS is obliged to perform its sovereign tasks (see section 1.1 in the
group management report). The details of these tasks are regulated by an indefinite framework agreement with the Federal
Republic of Germany.
The law and the framework agreement authorise DFS as the current entrusted air navigation service provider to require the
airports under Article 27d of the German Aviation Act (LuftVG) to:
■ establish and maintain the necessary facilities and take the necessary structural measures in these facilities; make the
necessary facilities available and allow cables to be laid, connected and maintained on the premises,
■ enable the air navigation services personnel to use the infrastructure at aerodromes,
■ ensure that the buildings and rooms made available by the aerodrome operator are provided with power, thermal energy,
water, heating and air-conditioning; perform other utility services and ensure that waste disposal services are rendered.
In return, DFS reimburses the airports for these costs. If another air navigation service provider is entrusted with these
duties, the legal and contractual rights and obligations transfer to this air traffic service provider.
Charges levied are the main source of revenue at DFS and they should cover the costs incurred (for changes to the unit
rate see section 2.4.1 in the group management report).
Notes 2013
132
40.1 En-route services
Since 2012, the performance scheme for air navigation services has aimed to improve the overall efficiency across the
performance areas safety, environment, capacity and cost-efficiency in the en-route area. The European Commission has
laid down the performance targets and alert thresholds for the whole European Union for one reference period. Each refer-
ence period comprises five years. To gather experience in the introductory phase, the first reference period was limited to
three years (2012–2014).
The national supervisory authority, the Federal Supervisory Authority for Air Navigation Services (BAF), draws up a perfor-
mance plan on the national or functional airspace block level that is aligned with the performance targets of the European
Union. Upon proposal of the national supervisory authorities, Member States adopt their performance plans and com-
municate them to the Commission. The Commission evaluates the performance plans and suggests or takes corrective
measures.
For the first reference period from 2012 to 2014, the Federal Supervisory Authority for Air Navigation Services (BAF) has
laid down the unit rates for en-route services for DFS. Previously, the business risk DFS was exposed to under the system
of full-cost recovery was limited. However, the business risk has risen since the start of this economic regulation.
The cost risks that arise within a reference period impact the profits of DFS. However, the traffic risk is spread between
DFS and the airspace users. Variances from the forecasts within the first 2.00 percent (up or down) are borne by DFS. For
variances of more than 2.00 percent to 10.00 percent, 70.00 percent of any additional revenues are given back to the
airspace users. In the case of a negative variance, 70.00 percent is retroactively charged two years later. For variances in
the traffic forecast of more than 10.00 percent, additional revenues are returned to airspace users and any shortfall can
be charged in full (see section 2.4.5 in the group management report).
The variances are determined by the Federal Supervisory Authority for Air Navigation Services (BAF) and reported to
the European Commission and EUROCONTROL. EUROCONTROL checks the differences and submits the adjustments to
the representatives of the Member States in the Enlarged Committee for Route Charges. This Committee prepares the
adjusted unit rates for en-route services after consultation with the airspace users. These are submitted to the enlarged
Commission for final approval.
The Federal Ministry of Transport and Digital Infrastructure (BMVI) publishes the unit rate for en-route services in the Fed-
eral Law Gazette on the basis of the German Ordinance on Terminal Charges of the Air Navigation Services (FSStrKV) and
taking into consideration the EU Regulations on a common charging scheme for air navigation services.
133
40.2 Terminal services
For terminal services, the Federal Ministry of Transport and Digital Infrastructure (BMVI) lays down a unit rate each year on
the basis of the German Ordinance on Terminal Charges of the Air Navigation Services (FSAAKV) and taking into considera-
tion the EU Regulations on a common charging scheme for air navigation services.
To this end, DFS sends the national supervisory authority, the Federal Supervisory Authority for Air Navigation Services
(BAF), a preliminary cost estimate for the coming year. The cost estimate is based on the costs of the last business year
and the estimates of the cost development in the current and following business year. The unit rate is calculated from the
quotients between the planned costs and the planned traffic volume. If the assumptions fail to materialise, the resulting
over-recovery or under-recovery is carried over into the costs of the next years.
As the EU regulations currently do not contain precise provisions on the allocation of under- or over-recoveries, DFS
assumes that a comparable regulation to the one in the en-route area will apply.
41. Related party disclosures41.1 Related parties – entities
In the normal course of business, services are rendered to related parties (entities). Group companies also render ser-
vices to DFS. These extensive delivery and service relationships are conducted at arm's length and are no different from
the business relationships with other companies.
The existing group allocation contract between DFS and DFS Energy will be revised after an initial adjustment for the
years 2012 and 2013. The view of the relevant tax authority will be incorporated.
DFS maintains business relations with the sole controlling Shareholder, the Federal Republic of Germany, and with other
companies controlled by it as part of the entrusted sovereign functions for air navigation services. These transactions
are conducted at arm's length and are no different from the delivery and service relationships with other companies. DFS
avails of the exemption in IAS 24.25 and does not disclose information on outstanding balances and transactions with
government-related entities.
Since June 2009, DFS has been an active member of the SESAR Joint Undertaking (SJU), along with other leading organi-
sations. Funds have been made available from the European research framework programmes for this project.
Notes 2013
134
Company Registered office Shareholding Equity Net incomein % €'000 €'000
Affiliated companies
DFS International Business Services GmbH Langen, Germany 100.00 26,113 69
Formerly known as:
DFS European Satellite Services Provider Beteiligungsgesellschaft mbH
DFS Unterstützungskasse GmbH Langen, Germany 100.00 21 -5
The Tower Company GmbH Langen, Germany 100.00 223 0
DFS Energy GmbH Langen, Germany 100.00 5,132 0
Investments
FCS Flight Calibration Services GmbH* Braunschweig, Germany 55.00 3,836 76
GroupEAD Europe S.L.* Madrid, Spain 36.00 1,662 555
BILSODA GmbH & Co. KG* Pullach, Germany 24.90 3,479 -85
Investments through affiliated companies
Shares and investments of DFS International Business Services GmbH:
R. Eisenschmidt GmbH Egelsbach, Germany 100.00 168 -96
European Satellite Services Provider Toulouse, France 16.67 5,781 1,525
Société par Actions Simplifiée*
Investment of The Tower Company GmbH:
Tower Air Traffic Services S.L.* Madrid, Spain 50.00 1,000 0
* Equity and net income as at 31 December 2012
Outstanding balancesShareholder Affiliated Investments
companies2013 €'000 €'000 €'000
Financial assets 56,672 2,354
Other assets 3,798 891 51
Other liabilities 6,930 28,342 2,820
2012 €'000 €'000 €'000
Financial assets 38,172 2,354
Other assets 2,853 1,577 42
Other liabilities 6,278 25,663 10
135
Income (+) and expenses (-)Shareholder Affiliated Investments
companies2013 €'000 €'000 €'000
Revenues 70,506 299 279
Other operating income 281 214
Purchased services -38 -3,149
Employee expenses -24,982 -1
Other operating expenses -5,619 -3,400
Interest income 843
Interest expense
Profit transfers 776
Loss adjustment -526
2012 €'000 €'000 €'000
Revenues 70,511 335 408
Other operating income 85 1,442 265
Purchased services -160 -3,192
Employee expenses -25,884 -17
Other operating expenses -5,213 -3,516
Interest income 44
Interest expense -5 -1
Profit transfers 1,333 339
Loss adjustment -751
41.2 Related parties – persons
In accordance with IAS 24, DFS also reports on business relationships between the company and related parties (persons)
or members of those persons' families. Related parties (persons) were identified as the Board of Managing Directors, Level
1 executives, the Supervisory Board and their family members (for remuneration see Note 42). There were no material or, in
their form or character, atypical reportable transactions between DFS and people in key positions of management and their
close family.
Notes 2013
136
42. Organs of the company42.1 Board of Managing Directors
Prof Klaus-Dieter Scheurle, Frankfurt am Main,
Chairman and Chief Executive Officer
Robert Schickling, Bad Homburg vor der Höhe,
Managing Director Operations
Dr Michael Hann, Bad Dürkheim,
Managing Director Human Resources
See section 1.3 in the group management report for the distribution of responsibilities of the Board of Managing Directors.
Payments due in the short term for members of the Board of Managing DirectorsFixed components Performance- Total emoluments
(including benefits in relatedkind) components
2013 €'000 €'000 €'000
Prof Klaus-Dieter Scheurle (Chairman) 347 0 347
Robert Schickling 259 26 285
Dr Michael Hann 272 43 315
Former Managing Directors 0 343 343
878 412 1,290
2012* €'000 €'000 €'000
Dieter Kaden (Chairman) 330 126 456
Ralph Riedle 257 107 364
Jens Bergmann 268 104 372
Dr Michael Hann 91 0 91
946 337 1,283
* Includes the managing directors who departed the company as of 31 December 2012
DFS did not grant any advance payments, loans or benefits to members of the Board of Managing Directors or former
Managing Directors on their termination. In addition, DFS paid no remuneration for consultancy or service contracts.
137
Post-employment benefitsPension Pension Expenses forbenefits payments pension benefits
earned in the current year**
2013 €'000 €'000 €'000
Prof Klaus-Dieter Scheurle (Chairman) 218 0 0
Robert Schickling 1,548 0 0
Dr Michael Hann 254 0 216
Former Managing Directors 12,647 709 402
14,667 709 618
2012* €'000 €'000 €'000
Dieter Kaden (Chairman) 3,671 0 277
Ralph Riedle 2,493 0 95
Jens Bergmann 2,787 0 98
Dr Michael Hann 97 0 0
Former Managing Directors 5,263 293 189
14,311 293 659
* Includes the managing directors who departed the company as of 31 December 2012** Service cost and interest cost
There were no other long-term benefits due or share-based compensation.
Notes 2013
138
42.2 Supervisory Board
Shareholder representatives
Michael Odenwald Dr Angelika KreppeinChairman RegierungsdirektorinState Secretary Federal Ministry of Finance
Federal Ministry of Transport and Digital
Infrastructure Dr Edeltraud Leibrock
Member of the Board of Managing
Carmen von Bornstaedt-Radbruch Directors KfW Bankengruppe
Ministerialrätin Member from 26 April 2013
Federal Ministry of Defence
Member from 26 April 2013 Ralf Raddatz
Colonel General Staff
Dr Martina Hinricher Federal Ministry of Defence
MinisterialdirektorinFederal Ministry of Transport and Digital Martin Walber
Infrastructure RegierungsdirektorFederal Ministry of Defence
Dr Norbert Kloppenburg Member until 26 April 2013
Member of the Board of Managing
Directors KfW Bankengruppe
Member until 26 April 2013
Staff representatives
Michael Schäfer Holger Müller
Deputy Chairman Air traffic controller
Flight data watch supervisor Member until 26 April 2013
Member until 26 April 2013
Petra Reinecke
Markus Siebers Air traffic controller
Deputy Chairman Member until 26 April 2013
Air traffic controller
Member from 26 April 2013 Peter Schaaf
Air traffic controller
Otto Fischer Chairman Central Staff Council
Director Corporate Development
Member until 26 April 2013 Andrea Wächter
Tower manager
Catja Gräber Member from 26 April 2013
Senior expert customer service
Member from 26 April 2013 Dirk Wendland
Systems engineer
Volker Möller
Air traffic controller
Member from 26 April 2013
139
In the business year, there were four scheduled ordinary meetings and two extraordinary meetings of the Supervisory Board.
Remuneration of the Supervisory Board
2013 2012
€'000 €'000
Otto Fischer 0.2 1.0
Catja Gräber 0.6 0.0
Dr Martina Hinricher 0.9 0.1
Dr Norbert Kloppenburg 0.3 1.0
Dr Angelika Kreppein 0.7 1.2
Dr Edeltraud Leibrock 0.3 0.0
Volker Möller 0.6 0.0
Holger Müller 0.2 0.6
Rainer Münz 0.0 0.8
Michael Odenwald 1.0 0.3
Hans-Dieter Poth 0.0 0.1
Ralf Raddatz 0.9 0.4
Petra Reinecke 0.3 1.3
Peter Schaaf 0.8 0.9
Michael Schäfer 0.4 1.4
Prof Klaus-Dieter Scheurle 0.0 0.7
Markus Siebers 1.4 0.0
Carmen von Bornstaedt-Radbruch 0.6 0.0
Martin Walber 0.1 1.1
Andrea Wächter 0.7 0.0
Dirk Wendland 0.6 0.9
10.6 11.8
The Articles of Association determine the level of remuneration of the Supervisory Board. The emoluments of the Supervi-
sory Board are comprised of fixed and variable components. The fee for meeting attendance is €80.00 and the daily allow-
ance amounts to €26.00 per meeting.
The members of the Supervisory Board received no advances, loans or remuneration from consultancy or service con-
tracts.
Notes 2013
140
43. Disclosures on the public corporate governance codeDFS is subject to the Public Corporate Governance Code of the Federation (PCGK). The Board of Managing Directors and
the Supervisory Board jointly issue a compliance statement each year and publish the corporate governance report on the
internet page of the company.
Responsibility statement
The Board of Managing Directors of DFS Deutsche Flugsicherung GmbH issues the following statement, pursuant to Article
37y No 1 of the Securities Trading Act (WpHG) in conjunction with Articles 297 paragraph 2 sentence 4, 315 paragraph 1
sentence 6 and 315a paragraph 1 of the German Commercial Code (HGB):
To the best of our knowledge, and in accordance with the applicable reporting principles, the group financial statements
give a true and fair view of the results and financial position of the group, and the group management report includes a
fair review of the development and performance of the business and the position of the group, together with a description
of the principal opportunities and risks associated with the expected development of the group.
Langen, 12 March 2014
Prof Klaus-Dieter Scheurle Robert Schickling Dr Michael Hann
Chairman and Managing Director Managing DirectorChief Executive Officer Operations Human Resources
We have audited the group financial statements of DFS Deutsche Flugsicherung GmbH (DFS) – consisting of the balance
sheet, statement of comprehensive income, statement of changes in equity, cash flow statement and notes to the group
financial statements – together with the group management report for the business year from 1 January to 31 December
2013. The preparation of the group financial statements and the group management report in accordance with the IFRS to
be applied within the EU and provisions to be additionally applied according to Art. 315a para. 1 of the German Commercial
Code (HGB) are the responsibility of the Company's management. Our responsibility is to express an opinion on the group
financial statements and on the group management report based on our audit.
We conducted our audit of the group financial statements in accordance with § 317 of the German Commercial Code (HGB)
and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaft-
sprüfer [Institute of Public Auditors in Germany] (IDW). Those standards require that we plan and perform the audit such that
misstatements materially affecting the presentation of the net assets, financial position and results of operations in the group
financial statements in accordance with the applicable financial reporting framework and in the group management report
are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of
the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures.
The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the
group financial statements and the group management report are examined primarily on a test basis within the framework
of the audit. The audit includes assessing the annual financial statements of those entities included in the consolidation, the
determination of the entities to be included in consolidation, the accounting and consolidation principles used and significant
estimates made by the Company's Board of Management, as well as evaluating the overall presentation of the group finan-
cial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the group financial statements comply with IFRS as adopted by the EU, the
additional requirements of German commercial law pursuant to section 315a paragraph 1 of the German Commercial Code
(HGB) and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance
with these requirements. The group management report is consistent with the group financial statements and as a whole
provides a suitable view of the Group's position and suitably presents the opportunities and risks of future development.
Cologne, 12 March 2014 RBS RoeverBroennerSusat GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft
Rudolph Susanne Schorse Auditor Auditor
Auditor's report
142
DFS Deutsche Flugsicherung GmbHDFS Deutsche Flugsicherung GmbH
Acronyms and abbreviations
AfA Official German Schedule for Deductions for Depreciation – Absetzung für AbnutzungAG Public Limited Company – AktiengesellschaftAIM Aeronautical Information ManagementAktG German Stock Corporation Law – AktiengesetzAS Aeronautical SolutionsATC Air Traffic ControlATCAS Air Traffic Control Automation SystemATFM Air Traffic Flow ManagementATM Air Traffic ManagementATS Air Traffic ServiceAUSTRO CONTROL Austro Control Österreichische Gesellschaft für Zivilluftfahrt mbH, Vienna, AustriaBAF Federal Supervisory Authority for Air Navigation Services – Bundesaufsichtsamt für FlugsicherungBDL German Aviation Association – Bundesverband der Deutschen LuftverkehrswirtschaftBFS Federal Administration of Air Navigation Services – Bundesanstalt für FlugsicherungBilReG German Accounting Law Reform Act – BilanzrechtsreformgesetzBILSODA BILSODA GmbH & Co. KGBMF Federal Ministry of Finance – Bundesministerium der FinanzenBMVBS Federal Ministry of Transport, Building and Urban Development – Bundesministerium für Verkehr, Bau und Stadtentwicklung (now BMVI)BMVg Federal Ministry of Defence – Bundesministerium der VerteidigungBMVI Federal Ministry of Transport and Digital Infrastructure – Bundesministerium für Verkehr und digitale InfrastrukturBMWi Federal Ministry for Economic Affairs and Energy – Bundesministerium für Wirtschaft und EnergieCMS Compliance Management SystemCOM CommunicationDLH Deutsche LufthansaDWD German Meteorological Service – Deutscher Wetterdienste.V. Registered Association – eingetragener VereinEANPG European Air Navigation Planning GroupEBIT Earnings before Interest and TaxesEBT Earnings before TaxesEoD Engineer on DutyESSP European Satellite Services ProviderETV Collective Agreement on the Grading System at DFS – EingruppierungstarifvertragEURIBOR Euro Interbank Offered RateEUROCONTROL European Organisation for the Safety of Air NavigationFABEC Functional Airspace Block Europe CentralFCS Flight Calibration Services GmbHFDP Flight Data ProcessingFDPS Flight Data Processing SystemFSAAKV German Ordinance on Terminal Charges of the Air Navigation Services – Flugsicherungs-An- und Abflug-KostenverordnungFSStrKV German Ordinance on Route Charges – Flugsicherungs-StreckenkostenverordnungG.S. General StaffGmbH Limited Liability Company – Gesellschaft mit beschränkter HaftungGoB German Principles of Proper Accounting – Grundsätze ordnungsmäßiger BuchführungGroupEAD GroupEAD Europe S.L., Madrid, SpainHGB German Commercial Code – HandelsgesetzbuchHGrG German Budgetary Principles Act – HaushaltsgrundsätzegesetzHRB German Commercial Register B – Handelsregister Abteilung BIAS International Accounting StandardsIASB International Accounting Standards BoardIATA International Air Transport AssociationIBS DFS International Business Services GmbH, Langen, GermanyICAO International Civil Aviation OrganisationiCAS iTEC Centre Automation System
143
ICS Internal Control SystemIFR Instrument Flight RulesIFRIC International Financial Reporting Interpretations CommitteeIFRS International Financial Reporting StandardsILV Internal Cost Allocation – Interne LeistungsverrechnungISIS-XM Improved Speech Integrated SystemISO International Organisation for StandardisationKARLDAP Karlsruhe Automatic Data Processing and Display SystemKfW Reconstruction Loan Corporation – Kreditanstalt für WiederaufbauKG Partnership – KommanditgesellschaftKTV Collective Agreement on Health and Long-Term Care Insurance at DFS – Kranken- und PflegeversicherungstarifvertragLASER Langen Replacement of the Voice Switching System – Langen Sprachvermittlung ErneuerungLBA Federal Aviation Office – Luftfahrt-BundesamtLuftfzgG German Law on Rights Regarding Aircraft – Gesetz über Rechte an FlugzeugenLuftVG German Aviation Act – LuftverkehrsgesetzLuftVStG German Air Transport Tax – LuftverkehrssteuergesetzMET MeteorologicalMode S Mode SelectMONIQUE Multiplexer Operated Network Interconnection for High Quality ExchangeMoT Ministry of Transport (in Germany: BMVI)MUAC Maastricht Upper Area Control CentreNATS National Air Traffic Services (UK)Nord/LB Norddeutsche LandesbankOAT Operational Air TrafficOCI Other Comprehensive IncomeP1/P2 Project 1/Project 2PCGK German Public Corporate Governance Code – Public-Corporate-Governance-KodexPSS Paperless Strip SystemQTE Qualified Technological EquipmentRADNET Radar Data NetworkRASUM Radio Site Upgrade and ModernisationRMC Risk Management CommitteeRMCDE Radar Message Conversion and Distribution EquipmentRMS Risk Management SystemRTC Remote Tower ControlS.A. Société AnonymeS.L. Sociedad LimitadaSAS Société par Actions SimplifiéeSDDS-NG Surveillance Data Distribution System – Next GenerationSES Single European SkySESAR Single European Sky ATM ResearchSJU SESAR Joint UndertakingSKYNAV S.A. SKYNAV Société Anonyme, Awans, Belgium TATS Tower Air Traffic Services S.L.TTC The Tower Company GmbHTVöD Collective Agreement for the Public Service – Tarifvertrag für den öffentlichen DienstÜVersTV Collective Agreement on Pensions and Transitional Payments at DFS – ÜbergangsversorgungstarifvertragVAFORIT Very Advanced Flight Data Processing Operational Requirements ImplementationVAG German Insurance Supervision Act – VersicherungsaufsichtsgesetzVaR Value at RiskVersTV Collective Agreement on Pensions at DFS – VersorgungstarifvertragVFR Visual Flight RulesVHF Very High FrequencyVOR VHF Omnidirectional Radio RangeWpHG German Securities Trading Act – Wertpapierhandelsgesetz
Acronyms and abbreviations
DFS Deutsche Flugsicherung GmbH
DFS Deut sche Flug si che rung GmbH
Corporate Communications
Am DFS-Cam pus 10
63225 Lan gen
Germany
Telephone +49 (0)6103 707-4111
Facsimile +49 (0)6103 707-4196
E-mail [email protected]
Inter net www.dfs.de
ISSN 1865-6420
Picture credits
Source: BMVI
60-2
290-
217