Aug 8 (Reuters) – Frankfurt Airport operator Fraport (FRAG.DE) on Tuesday said its 2023 core profit would hit the upper half of its forecast range after second-quarter earnings were boosted by strong travel demand despite capacity shortages and a slow recovery in China.

The German group, which operates 28 airports around the world, expects earnings before interest, taxation, depreciation and amortisation (EBITDA) to reach the upper half of the previously projected range of 1.04-1.20 billion euros ($1.14-$1.32 billion) this year.

Net profit will also reach the upper half of a projected range of 300-420 million euros, it forecast.

“We are seeing sustained recovery in passenger demand across our portfolio of global airports,” CEO Stefan Schulte said in a statement, noting the group expects passenger traffic to grow further at Frankfurt Airport during the full year.

Demand for leisure travel, which has driven up ticket prices and boosted profits for airlines and airport operators since pandemic restrictions ended last year, shows little sign of abating despite the squeeze on household incomes from high inflation and rising interest rates.

Fraport’s first-half results were boosted by an ongoing recovery in passenger numbers across Fraport’s global airport network.

Traffic at its home-base in Frankfurt grew 29.1% in the first six months of 2023, reaching around 87% of 2019 traffic in July according to preliminary figures. Full-year passenger numbers at the airport are forecast to be in the middle of an earlier forecast range of 80-90% of 2019 levels.

Recovery at Frankfurt was held back in the second quarter by capacity shortages in handling, airlines and air traffic control, as well as a slow recovery in China, it said, with traffic to and from the country only reaching 39% of pre-pandemic levels.

European traffic benefited from strong demand for leisure travel to warm-weather destinations and improving business travel in the first half, the company said, noting it expects passenger numbers at its group airports close to the 2019 level this year.

Among Fraport’s international portfolio of airports, its airports in Greece benefited most from holiday demand in the first half.

Intercontinental traffic saw high growth rates specifically for holiday destinations in North and Central Africa and the Caribbean, while the number of passengers travelling to and from North America almost reached pre-pandemic levels, it said.

Fraport’s second-quarter revenue was 1.04 billion euros, 6% above consensus cited by J.P. Morgan, while quarterly EBITDA fell to 323 million euros, 4% below consensus.

“The miss looks to be primarily driven by weaker than expected margins in both Ground Handling and in International,” JPM said.

Fraport’s share price was up around 7.1% at 0822 GMT, with its stock topping Germany’s mid-cap index (.MDAXI), on track for its best day since March 2022.

($1 = 0.9100 euros)

Reporting by Anna Mackenzie and Paolo Laudani in Gdansk; Editing by Muralikumar Anantharaman, Varun H K and Conor Humphries

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