1998 annual report Schiphol Group...... 981230 1998 annual report Schiphol Group ......

Table of contents...... 1998 annual report Schiphol Group

4 Profile of Schiphol Group 7 Report of the Supervisory Board 9 Composition of the Supervisory Board, the Board of Management and the Works Council 10 Key figures 12 Historical summary 13 Main organisational structure

Directors’ report 14 Introduction 18 Financial developments 22 Market and hub developments 30 International activities 34 Activities in The 36 Our relation with the surroundings 41 Personnel developments

Financial statements 46 Consolidated accounts 50 Principles of consolidation, valuation and determination of result 54 Notes to the consolidated balance sheet 61 Notes to the consolidated profit and loss account 64 Corporate accounts 66 Notes to the corporate accounts

71 Other information

74 Appendices

3 Board of Management of Schiphol Group: (from right to left) Gerlach Cerfontaine, Pieter Verboom and Ruud Uijlenhoet.

Profile of Schipholpp Group ......

8:15 “Schiphol Group” new overall name Mission Schiphol Group aims to be a leading, Up until now, NV Luchthaven Schiphol has enterprise. operated under a single business name: Airport Schiphol. This public limited Strategy company has now developed into a collection Schiphol Group’s strategy can be outlined of companies with a diversity of activities, both as follows: nationally and internationally. The new, overall • To further strengthen Schiphol Group’s business name “Schiphol Group” will therefore competitive position as an European ‘mainport’, be brought into use for the group and all its by increasing the volume of traffic, increasing participating interests. Amsterdam Airport quality, and extending the intermodal transport Schiphol will be used exclusively as the name for network – both nationally and internationally – ...... 1998 annual report Schiphol Group the company that operates the Schiphol location. within the context of sustained social The use of “Schiphol” in the group name is development. a conscious decision. The Schiphol “brand” ranks • To play an active role in the construction of a among the top ten most trusted brands in the network of airports, within which the Airport- Netherlands, and a sound international reputation City Concept can be developed and expanded as manager of quality airports has been developed upon, through a process of acquisition, under this name. This strong image will be built participation, and other forms of alliance. on further, while the name also provides the room • To build on know-how and service in retail sales, required for denoting the group’s current wider real estate, and information and communication field of activities. technology, in the framework of the AirportCity- Schiphol Group stands for a collection of concept, by developing new products and financially strong enterprises with a common services for new and existing customers. mission, strategy and positioning. Schiphol Group • To further develop and exploit the already- is involved in the development and operation of strong Schiphol brand and, in so doing, to activities and services which together constitute strengthen Schiphol Group’s reputation and the “AirportCity” concept. That goes beyond leading commercial position, nationally and the development of an efficient transport hub. internationally. The “AirportCity” offers its visitors – passengers, • To create a stimulating working environment so employees, meeters and greeters – but also the that Schiphol Group can attract, develop, and Schiphol based companies – , distribution hold onto the best professionals available and companies and logistic and business services thereby maintain its leading role in the industry. providers – services 24 hours a day in the field • To generate value for the investors of capital in of shops, hotels and catering, information and order to acquire an ongoing commitment from communication, corporate business and the capital market and command the necessary conference facilities, and recreation and financial power for international expansion. relaxation. In this way, the group increases the provision of service to its customers, while more value is simultaneously created for shareholders. Schiphol Group is not only strong in the development, but also and particularly in the integration of all these activities into a coherent and durable entity that is closely knit with its geographical surroundings. This knowledge is unique, and is also internationally in demand. Schiphol Group is therefore increasingly marketing the AirportCity concept internationally. 5 Priorities for 1999-2002 period Ownership The following priorities apply for the period The company is owned by the Dutch State until 2002: (75.8%), the City of Amsterdam (21.8%) and the • Capacity management: optimization of City of (2.4%). Borrowed capital has Amsterdam Schiphol and conducting studies been furnished by institutional investors in the into the potential offered by an artificial island form of a bond loan in the sum of NLG 400 in the North Sea and by a complete redesign of million. External rating agencies have rated the Amsterdam Schiphol to increase traffic volume organisation AAA (Standard & Poor’s) and Aa1 for the Dutch aviation industry, to increase the (Moody’s). contribution to the national economy and to facilitate sustained development. • Operational excellence: the aim is that 1998 annual report Schiphol Group Amsterdam Schiphol retains its top position in Europe in terms of services to airlines, passengers and cargo carriers. • The development of Schiphol Group as an enterprise: relinquishing of governmental control and privatization. • The further development of retail sales, real estate and information and communication technology (ICT) as building blocks for the AirportCity concept, both nationally and internationally. • The exploration of opportunities for strategic alliances in order to realize the desired strategy.

6 Report of the Supervisory Board ...... 1998 annual report Schiphol Group

The Supervisory Board met on seven occasions In order to flesh out the company’s ambition in the reporting year. Of these meetings, five were to become a leading international airport on the regular meeting schedule, whereas two operator, the regular meetings dealt with the were additional meetings. The additional meetings situation at the existing foreign participations. were convened in view of possible participations Discussion topics included transport developments in (March 1998) and Mexico at these airports and the effects of the crisis in (November 1998). The Financial Commission Asia. The Board also discussed a number of met twice. new opportunities for foreign participations. The company’s internationally oriented strategies During its meetings, the Supervisory Board played a key role in these discussions as well as devoted close attention to corporate strategy and the risk-analysis and the financing aspects thereof. operational risks. Corporate strategy was defined The Board also examined the possibilities by the discussion about the future airport infra- of a strategic alliance in the field of information structure in the Netherlands. The development technology with a view to the company’s of Amsterdam Schiphol, whether at the current continued strategic development. location or not, was an important topic of dis- In addition to dealing with the topics referred cussion during the meetings of the Supervisory to above, the Supervisory Board discussed a Board throughout the reporting year. The Board’s number of recurring topics, such as financial discussions also dealt with short-term policies, results, developments in traffic and transport, and including the relationship with the environment investment decisions, within the framework of, for and the various legal proceedings about the example, the Masterplan. The Board also took preservation of noise zoning in which the note of the resolution to change the name of the company was involved in the course of the organisation to ‘Schiphol Group’. In addition, the reporting year. Supervisory Board looked at the millennium issue In the context of short and medium-term and the consequences of the end to European policies, topics discussed by the Board included duty-free shopping, and the corrective measures increases to the available airspace capacity for civil to be taken in relation to these issues. aviation as well as the construction of the fifth Furthermore, the importance of privatization for , which can be qualified as belonging to the company’s further development was discussed the Optimization project. In the scope of long- in detail by the Board. term policies, the Board discussed various options, such as building an island in the North Sea and During a meeting not attended by the Board redesigning the current Schiphol location. of Management, the Supervisory Board discussed In this respect, the Board engaged in in-depth its own performance, as well as the composition discussions of the strategy to be pursued and the of the Board of Management and the Supervisory consequences for the current location. Board. The Supervisory Board also discussed the 7 remuneration received by the members of the The Board exchanged thoughts with the Board of Management and the Supervisory Board. external auditor PricewaterhouseCoopers about The remuneration commission met once in the the financial statements, financial reporting and reporting year. the status of the organisation’s internal controls. The Board of Management prepared the directors’ The composition of the Supervisory Board report and the financial statements on March 12, changed in a number of respects during the year 1999. under review. Mr Woltman joined the Board in February. Ms Krikke and Mr Van den Muijsenberg We concur with the proposal of the Board of left the Board as a result of the municipal Management to distribute a dividend in the sum elections in the spring of 1998. of NLG 45 million on the paid-up share capital Mr Groen who was already active as one of and to add, of the remainder of the profit of the members of the Board, acts as one of the NLG 252,612,00 an amount of NLG 3,477,000 to Supervisory Directors on behalf of the City of the statutory reserve for investments and to add Amsterdam since. Mr Van den Muijsenberg an amount of NLG 249,135,000 to the other has been succeeded by Mr Simons. Furthermore, reserves. Mr Lintjer has resigned from the Board in the Pursuant to the provisions of Article 11 of first quarter of 1999. the articles of association, the Supervisory Board We would like to thank the Supervisory Directors adopted the financial statements in their meeting who have left the Board for their contributions to of April 9, 1999. PricewaterhouseCoopers audited the activities of the Board. the financial statements and issued an unqualified The composition of the Board of Manage- opinion on them. The auditor’s report has been ment also underwent changes. The President, included on page 72 of this report. Mr H.N.J. Smits, left the company as of April 1998. The Supervisory Board will present the On August 1, 1998, he was succeeded by financial statements to the General Meeting Mr G.J. Cerfontaine. We would like to express of Shareholders to be held on April 21, 1999. our deep appreciation to Mr Smits for the We propose that these financial statements be commitment he consistently put forth during approved and that the Board of Management his years with the company. and Supervisory Board be discharged of their responsibility in respect of their management In March 1998, the Supervisory Board dealt and supervision respectively. with the topic of Corporate Governance. The In closing, we would like to take this Board concluded that the recommendations of opportunity to express our appreciation to all the Peters Committee on Corporate Governance, staff members of NV Luchthaven Schiphol, its where applicable and useful, would have to subsidiaries and investments. be implemented even before a possible stock exchange quotation. The Board noted that a The Supervisory Board number of recommendations are already common practice at the company. For example, there is a fixed schedule for retirement by rotation that does not include automatic reappointment and applies performance as a criterion. In addition, the Financial Commission referred to above has already existed for a number of years. However, a number of recommendations are not topical at this time, as the company is not listed. The issue of Corporate Governance has been placed on the agenda for the Meeting of Share- holders, which is scheduled for April 21, 1999. Members of the Supervisory Board individually 8 attended meetings of the Central Works Council. Members of the Supervisory Board,

Board of Management and Works Council ...... 1998 annual report Schiphol Group

Supervisory Board Board of Management R.J. Nelissen, chairman (1931) G.J. Cerfontaine, President & Chief Executive Former chairman Board ABN AMRO Holding N.V. Officer (1946) S. Patijn, vice-chairman (1936) R. Uijlenhoet, Executive Vice-President & Chief Mayor of the City of Amsterdam Operational Officer (1940) Dr A. van Es (1931) Dr P.M. Verboom, Executive Vice-President & Chief Former chairman Board of Akzo Nederland B.V. Financial Officer (1950) H.H.M. Groen (1944) Alderman of the City of Amsterdam Works Council J.M. Hessels (1942) R. Holtslag, chairman (1947) Chairman Board Vendex International J. Brouwer, secretary (1948) P.J. Kalff (1937) H.L. Bank (1945) Chairman Board ABN AMRO Holding N.V. C.G. Breems (1945) Dr J. Kremers (1933) P.A.M. van Egmond (1955) Former vice chairman Policy committee Robeco B.C. Doornbos (1969) Groep / President Rodamco N.V. K. Godri (1947) F.C. Rauwenhoff (1930) L.T. Houben (1955) Former chairman Board Nederlandse R. Kleijer (1953) Philipsbedrijven J.M. Koomen (1946) H.J. Simons (1947) N.J.L. van der Meer (1957) Alderman of the City of Rotterdam A.H. Oude Weernink (1953) T.H. Woltman (1937) L.J. Pol (1946) Chairman Chamber of Commerce Amsterdam Ms C. de Vos (1957)

Ms M. Ravoo, secretary (1966)

9 Key figures (in NLG millions, unless indicated otherwise)

1998 1997 1996 1995 1994*) Results Net turnover 1,219 1,110 982 884 815 Operating result 349 286 249 210 169 Net result 298 247 174 146 116 Amortisation and depreciation 215 206 193 185 193 Cash flow from operating activities 1) 612 522 419 254 317

Balance sheet Shareholders' equity 2,562 2,261 2,047 1,879 1,729 Total assets 4,265 3,785 3,479 3,240 3,117 Investments 576 376 248 334 319

Ratios Operating result as a % of turnover 28.6 25.8 25.4 23.7 20.8 Interest coverage ratio 2) 5.1 5.2 3.5 2.9 2.7 Return on average shareholders’ equity 12.3 11.5 8.9 8.1 7.0 Equity/debt ratio 1.50 1.48 1.43 1.38 1.25

Share ratio’s Earnings per share dividend (in NLG 1) 1,738 1,441 1,016 851 678 Dividend (in NLG 1) per share of NLG 1,000 263 204 146 90 90

10 1998 1997 1996 1995 1994*) 1998 annual report Schiphol Group Business volume (in numbers) Amsterdam Schiphol Air transport movements 376,810 349,476 321,779 290,689 274,064 Passenger movements (x 1,000) 34,420 31,570 27,795 25,355 23,559 Cargo (x 1,000 kg) 1,171,256 1,161,234 1,082,846 977,531 838,127

Rotterdam Airport Air transport movements 18,631 20,090 17,746 16,505 11,524 Passenger movements (x 1,000) 583 484 458 412 326 Cargo (x 1,000 kg) 2,564 2,035 2,125 5,690 5,441

Eindhoven Airport Air transport movements 14,535 15,286 15,003 11,608 11,007 Passenger movements (x 1,000) 288 271 257 211 182

Workforce Average effective workforce based on full-time equivalents 1,928 1,848 1,767 1,734 1,740 Gross added value per NLG of staff costs 3) 3.80 3.81 3.68 3.53 3.41

*) Adjusted for comparison purposes.

1) for a breakdown of this item, please refer to the cash flow statement.

2) profit before taxation increased by interest expense/interest expense. 3) operating result increased by amortisation/depreciation and salaries and social charges/salaries and social charges. 11 Historical summary (in NLG millions)

1998 1997 1996 1995 19941) Balance sheet Fixed assets 3,706 3,283 2,995 2,924 2,755 Current assets 559 502 484 316 362

Total assets 4,265 3,785 3,479 3,240 3,117

Shareholders’ equity 2,562 2,261 2,047 1,879 1,729 Provisions 217 182 129 109 120 Long-term liabilities 1,056 1,025 1,004 1,016 1,008 Current liabilities 430 317 299 236 260

Total liabilities 4,265 3,785 3,479 3,240 3,117

Profit and loss account Net turnover 1,219 1,110 982 884 815 Operating expenses -/- 870 -/- 824 -/- 733 -/- 674 -/- 646

Operating result 349 286 249 210 169 Financial income and expense -/- 58 -/- 44 -/- 65 -/- 66 -/- 56

Result before taxation 291 242 184 144 113 Taxation and share in income from investments 7 5 -/- 10 2 3

Net result 298 247 174 146 116

12 1) Adjusted for comparison purposes. Main organisational structure ...... 1998 annual report Schiphol Group

Support Staff

Amsterdam Schiphol Schiphol Schiphol Regional Airport Schiphol Real Estate Project Consult International Airports

Consumer Services

Airline & Handling Services

Schiphol Support Services Hostess with child in G pier

Introduction ......

9:45 Provide for sustained social growth Satisfaction about Cabinet decision together with the aviation sector concerning future of aviation We are satisfied about the Cabinet decision ● Financially good year taken in December 1998 concerning the future of ● Satisfaction about Cabinet decision Dutch aviation sector. In its decision, the Cabinet concerning future of aviation determined that Amsterdam Schiphol was allowed ● Privatization an essential development to grow to between 520,000 and 600,000 flights a year, provided new environmental standards From a financial point of view, 1998 was a are met. These replace the standards currently good year for Schiphol Group. This was mainly due applying from the 1995 Government White Paper to the Cabinet decision in March 1998 to allow for Schiphol and Surroundings. The Cabinet’s growth up to 380,000 flights during the year decision constitutes an important step toward ...... 1998 annual report Schiphol Group under review. This led to an increase in airport achieving sustainable growth in the Dutch fees and to additional concession income. The aviation sector and maintaining its international profit for the past year rose from NLG 247 million competitive position. This ties in well with to NLG 298 million. This profit is essential to the vision expressed by the sector itself in finance the major investments facing us in the November 1998. coming years, in order to optimize and keep in We are also particularly pleased with the shape the infrastructure and other facilities at manner in which this joint standpoint evolved. Amsterdam Schiphol and to continue satisfying Cooperation within the Dutch aviation sector market demands. Return on equity rose from inproved over the past year. The joint standpoint 11.5% to 12.3%. concerning sustainable growth in the Dutch aviation sector is but one example of what can First phase of master plan in full swing be achieved by working together. The main point Quality is one of the keys to our business of departure in this respect is to strive to achieve strategy. Amsterdam Schiphol can only compete sustained development while maintaining internationally and be attractive for investors in a healthy balance between economic and the future if the airport provides the highest environmental interests. quality at competitive prices and if we continually renew our products and services. To this end, we Further growth prospects will invest around NLG 3 billion during the period In combination with the fifth runway from 1998 to 2003. which according to planning will be completed In 1998, a record amount of NLG 576 million was in 2003, the decision reached by the Cabinet invested in increasing the quality and capacity of on December 18, 1998, holds out the prospect the facilities at Amsterdam Schiphol. The most of further growth until 2010. For the period important investment concerned the extension beyond 2010, the Cabinet sees two options for and refurbishment of the Central Lounge, the accommodating growth, either by completely widening of D pier and the construction of a new redesigning the runway system at Amsterdam B pier. The first phase of the 2015 Master Plan is Schiphol or by relocating air traffic to an island thus in full swing. in the North Sea. Both possibilities are currently under investigation within the framework of a project, including participation on the part of the aviation sector. We consider this is a positive development, illustrating the extent to which cooperation between the government and the sector has intensified over the past year as well. The studies should be completed by the end of 1999. A definite decision will be taken in 2005 whether and if so, which option will actually be implemented. Directors’ report 15 The Cabinet decision is thus an intermediate These discussions did produce clarity in some step in a continuing phased process in which respects. On the one hand, it emerged that the studies will have to be performed on a number of airport has always provided reliable figures and essential elements in order to solve any existing forecasts. Additionally, it appeared beyond uncertainties. It is essential that clarity be provided doubt that the current system of calculation as quickly as possible so that the aviation sector as and enforcement of the noise limits around well as people living in the Schiphol area know Amsterdam Schiphol is inadequate. Only a limited where they stand in the long term. number of insiders are able to understand the current system and this is unacceptable to every- Tension between market supply and demand one who is concerned with the airport, including In commercial terms, 1998 was a less favorable us. We want to be a reliable partner for everyone year. Although there was once again growth in in our environment, but that is only possible if 1998 annual report Schiphol Group traffic and transport, this was considerably lower clear, unambiguous limits are set which our than a year earlier. In part, this is due to the company can also adhere to. restrictions imposed on the airport by the government, such that the number of air Relinquishment of governmental control transport movements was not allowed to exceed essential a maximum of 380,000 in 1998. Amsterdam In light of the outcome of political debate Airport Schiphol was thus unable to completely surrounding the future of Schiphol, it is also satisfy market demand. important to redefine the roles of the respective This was particularly noticeable in the cargo sector, parties. A new, clearer division of roles between where there was hardly any growth because, on Schiphol Group, the airlines and the government is account of a lack of slots and restrictions in the urgently required. We want to be able to operate use of the airport at night, companies such as as a normal company which, on the basis of an Polar Aircargo and transferred some of their environmental permit, keeps to the limits imposed flights to airports outside the Netherlands. In the upon it by the government. It is then our passenger field, a number of intercontinental responsibility to stay within these limits, just like companies pulled out. Other factors playing a role every other company that is responsible for its in this respect were the increasing influence of own business practice. alliances and the financial crisis in Asia. In this respect, the government is the body that sets and monitors the limits, but will otherwise Rapid, more detailed decision required have to operate much more at a distance. The Schiphol and the business community situated term “Schiphol Group as enterprise” can only be at and around the airport will benefit from a substantiated by relinquishing governmental rapid, more detailed decision to be taken by the control. Enforcement should be the responsibility Cabinet with respect to the future of the airport of the company. We are both willing and able to in the short, medium and longer term. This also assume this responsibility and, together with the applies to all the regulations with respect to the aviation sector and the local environment, provide noise zoning, the method of calculation and all for sustained social growth. associated noise problems, as well as to the In this respect, we aim to involve the local construction of the fifth runway. environment and are therefore pleased with the During the past year, intensive discussions took emergence in 1999 of the “Temporary Schiphol place about figures, growth forecasts and the Consultation Platform.” From the government, number of dwellings permitted in the noise zones. we do, however, ask for the instruments and the trust to be able to work on this. As a result of the Cabinet decision on the future of the Dutch aviation industry at the end of the year under review, we have every hope that this is also the way things will go.

16 Directors’ report Privatization an essential development Prospects for 1999 Aside from plans to relinquish governmental We are also assuming continuing high control, we regard the privatization of our investments in the coming years. The growth of company as an essential development to achieve 20,000 flights per annum up until 2003, which our corporate objective. There is an increasing the Cabinet has in principle decided on in 1998, trend in the market towards privatization and the provides opportunities for sustained growth of creation of alliances, not only between airlines, traffic and transport. We are counting on a 7% but also between airports. If we do not privatize increase in passenger traffic in 1999 and a 6% in good time, we will miss opportunities to growth in air transport movements (to 400,000). participate in the privatization of other airports. We anticipate growth of 5% in cargo transport. Privatization will create opportunities to market Based on these forecasts, we expect a significant our AirportCity concept, so that we can develop increase in profits. Should the 1998 annual report Schiphol Group further internationally. After privatization, we will press ahead with its plan to abolish duty-free have to take even more account of our immediate sales for travelers with destinations within the EU, competitors (benchmarking), and will have to this will have a negative effect on earnings continually justify our actions and their financial performance. consequences. As a result, greater commercial We expect no growth in workforce in 1999. and financial awareness will be created in our A decision will be taken in 1999 about the future organization, leading to more effective business of aviation in the Netherlands. We look forward practice. Privatization also provides us with to this with confidence and expect that it will opportunities to operate financially in a different put an end to the current uncertainty. We will manner. A reduction in the government’s stake substantiate our international ambitions in 1999 will afford the company greater access to the by means of further acquisitions. In so doing, we capital market in order to attract funds to finance hope to strengthen our position as leading future activities. Discussions with central govern- international airport enterprise. Discussions with ment about the privatization of our company will International Airport Corporation will in be taking place before the summer of 1999. all probability lead to cooperation in the field of In June 1997, the government stated that it was ICT in 1999. in principle prepared to dispose of its block of shares. The Dutch State currently has a 75.8% To conclude with, we would like to thank our stake in Schiphol Group. The remaining shares are co-workers and the employee participation bodies. in the possession of the cities of Amsterdam and Rotterdam. To a large degree, we attribute the good results we achieved in the past year to efforts on Incorporation of subsidiaries the part of our staff and the constructive manner During the reporting year, three divisions in which they and the employee participation were hived off to become wholly-owned bodies have been thinking together about the subsidiaries, allowing them to achieve a better company’s future. position in the specific operations market. These were Schiphol Real Estate B.V. (SRE B.V.), Schiphol The Board of Management Project Consult B.V. (SPC B.V.) and Schiphol Utility Services B.V. (SUS B.V.). These companies are fully included in the consolidation of Schiphol Group.

Directors’ report 17 Passenger in terminal building

Financial developmentsp ......

12:30 Satisfactory development of ROE Operating expenses rose by 5.6% to NLG 870 million. This can primarily be attributed ● Profit climbs to NLG 298 million to deployment of more staff, both permanent ● Investments show sharp increases and temporary and higher salary charges ● Approach to the millennium issue on (NLG 25.4 million). Depreciation charges were up schedule slightly (NLG 8.3 million). Owing to an increase in construction activities, costs rose by The return on equity (ROE) of the Schiphol NLG 19.7 million as a result of temporary Group rose to 12.3% in 1998. This percentage was measures related to work contracted out and 11.5 and 8.9 in 1997 and 1996 respectively. other external costs. This was partly offset by Turnover increased by 9.8% to NLG 1,219 million lower maintenance costs and other operating in 1998. The net result achieved amounted to expenses, in particular on account of lower ...... 1998 annual report Schiphol Group NLG 298 million, i.e. a 21% increase. This growth in allocations to provisions for staff. turnover can chiefly be attributed to a satisfactory On balance, the operating result, expressed increase in traffic and transport, as a ministerial as a percentage of turnover, rose from 25.8% in decision permitted an additional 20,000 aircraft 1997 to 28.6%. Compared with 1997, this meant movements in 1998 and another 20,000 in each an increase in the gap between operating income of the coming years. As a result, the number of and operating expenses. While operating income air transport movements is now allowed to rose by 9.8%, operating expenses increased by increase to 460,000 in 2002. Airport fees and only 5.6%. This positive development will, revenues from the duty-free shopping centre however, become subject to pressure as a result rose proportionately. Income from property of the substantial investment programme planned development and parking fees rose slightly. for the near future. Productivity per staff member, measured as the gross added value per guilder of staff costs (NLG 3.80), remained at virtually the same level as in 1997.

Key financial data (in NLG millions)

1998 1997 change as a %

Profits development Net turnover 1,219 1,110 + 10 Total operating expenses -/- 870 -/- 824 + 6 Financial income and expense -/- 58 -/- 44 + 32 Income from investments 8 13 -/- 23 Taxation -/- 1 -/- 8 –

Net result 298 247 + 21

Earnings per share (in NLG 1) 1,737.83 1,440.83 + 21

Balance sheet developments Balance sheet total 4,265 3,785 + 13 Fixed assets 3,706 3,283 + 13 Shareholders’ equity 2,562 2,261 + 13 Long-term liabilities 1,014 1,000 + 1 Directors’ report 19 Operating income Operating expenses

(45.8%) Airport fees (43.1%) Work contracted out and other external costs (22.4%) Concessions (24.7%) Amortisation/ depreciation (16.6%) Other operating revenue (23.1%) Salaries and social charges (12.4%) Rents and Leases 1998 annual report Schiphol Group (9.2%) Other (2.8%) Utility services operating expenses

Operating income number of people making use of the long-term Airport fees, which amount to parking facilities in combination with longer NLG 558.5 million, make up 45.8% of income. average parking times. In the reporting year, airport fees rose by NLG 68.9 million (14.1%) as compared with 1997, Operating expenses primarily as a result of the additional increase In 1998, operating expenses rose by (20,000 movements) in traffic and transport NLG 46.3 million (5.6%) to NLG 870.5 million. and adjustments to the fee structure, which, on The cost of work contracted out and other balance, led to a 2% price increase. The volume external costs rose by NLG 19.7 million (5.5%) effect was 12.1%. to NLG 375.1 million. This increase can mainly Non-aviation revenues make a major be attributed to temporary measures, such contribution to the company’s financial as bus services and additional security for the development. Concession income from the duty- construction activities at the D pier. A number free shopping centre at the Schiphol location of planned maintenance activities became showed a clear increase in 1998, despite the unnecessary as a result of the construction negative effects of the crisis in Asia. It rose by activities. The maintenance costs, therefore, NLG 29.1 million (16.6%) to NLG 204.0 million. decreased by NLG 6.3 million in 1998. The average concession fee per passenger Salaries and social charges rose by NLG 25.3 improved by 6.9% compared with the previous million (14.4%) to NLG 201.0 million in 1998, reporting period. As a result of higher largely due to an increase in workforce and a concession income from hospitality, car rentals general increase in average salaries (under the and Schiphol Plaza, the other concession income collective labour agreement). Translated into full- increased by NLG 7.1 million to NLG 68.8 million. time equivalents (FTEs), the workforce increased Income from property development increased by 4.3%. by NLG 9.1 million to NLG 150.8 million in 1998. The increases in amortisation/depreciation This increase can primarily be attributed to Cargo charges and movements in value by NLG 8.3 Terminal 8 becoming operational in 1997, which million (4.0%) to NLG 214.7 million in 1998 were affected the entire reporting period. In addition, chiefly caused by amortisation/depreciation of the average occupancy rate of the lettable assets newly put into operation. property (average rate: 99%) can be termed high. On balance, other operating expenses The bulk of income from other activities is dropped by NLG 7.0 million (8.0%) compared with made up of car parking fees, which rose by 11.1% 1997, landing at NLG 79.8 million. This was due to to NLG 94.8 million in the reporting year. This lower allocations to provisions for staff and a 20 Directors’ report increase can chiefly be attributed to the rise in the number of non-recurring items in 1997. The drop is caused by the supplemental allocations for early NLG 353 million in 1998. Some of the major retirement and extraordinary expenses in 1997. projects completed in 1998 are the Innertrack Similar to last year, another NLG 30 million North-East (NLG 67 million) and the bus terminal was added to the general environmental provision at the G-pier (NLG 15 million). In addition, an for the lagging performance of the runway amount of NLG 36 million was capitalised in system. In addition, the provision for the relation to land and roads and NLG 40 million in millennium issue and IT was increased by relation to installations. The largest investments NLG 15 million. The company focused on solving in work in progress were the widening of the the problems associated with the millennium D-pier passenger bridge, including apron issue where possible in the reporting period. (NLG 186 million), the construction of the B-pier, A platform, which is responsible for activities including apron (NLG 28 million), the extension for the prevention of millennium problems, was and renovation of the terminal lounge 1998 annual report Schiphol Group established especially for this purpose. The (NLG 59 million), the replacement of the crew activities are on schedule and the problems the centre (NLG 36 million) and the fifth runway different systems might pose have now been (NLG 22 million). In the coming years, Schiphol listed. Additional amounts were reserved, in expects to maintain a high investment level for particular for adjustments to embedded software. such projects as the construction of the fifth run- way, the acquisition of land and the construction, Financial income and expense extension and widening of piers. The investment The (negative) balance of financial income programme for the years 1997-2003, consisting of and expense in the sum of NLG 57.5 million was investments to the amount of NLG 3 billion, higher by an amount of NLG 13.2 million (29.8%) which was laid down in phase 1 of Masterplan in the reporting year than in 1997. Interest income 2015, will be implemented in full. Of this amount, rose by NLG 0.7 million as a result of the fact that NLG 700 million has already been spent. 1999 the funds invested were higher by an average is expected to bring a higher investment level amount of NLG 30 million than in 1997. than 1998. Interest expense, on the other hand, increased by NLG 12.1 million to NLG 70.3 million. In 1997, Strong cash-flow developments unwinding of interest swaps had a positive effect Net cash flow from operating activities was on interest expense. NLG 612 million in 1998. Incoming cash flows from operating activities virtually kept pace with Investments outgoing cash flows from investing and financing Income from investments not included in activities. Additions to tangible fixed assets the consolidation amounted to NLG 7.6 million required an amount of NLG 576 million. We expect in 1998 compared with NLG 12.9 million in 1997. to have to raise additional borrowed capital in This drop was primarily caused by non-recurring 1999 for the purpose of the investment projects sales proceeds generated in 1997 by the sale of yet to be completed. As far as expenditure in a 10% interest in the joint venture John F. Kennedy relation to possible acquisitions or investments International Air Terminal Inc. (JFKIAT). Of the are concerned, the financing requirements of 1998 result, an amount of NLG 3.9 million relates each individual case are assessed. to investments in international activities of the subsidiary Schiphol International. A repayment of NLG 8.8 million was made in 1998 on a capital stake held in JFKIAT.

Continued high-level investments Investments reached a record high in 1998, totalling an amount of NLG 576 million. Of this amount, NLG 223 million worth in fixed assets was capitalised as a result of completed investment projects. Assets under construction rose by Directors’ report 21 Thalys high speed train at Schiphol railway station

Market and hub developmentsp ......

15:32 Passenger market share in Europe Amsterdam Schiphol thus retained its position as up slightly Europe’s fourth largest passenger airport. In cargo, Amsterdam Schiphol still holds third place, ● Investments in quality and growth although the market share fell from 15.9% to ● Government infrastructure falling behind 15.8%. ● New initiatives in the field of public The role of the KLM Group is vitally important transport for the development of Amsterdam Schiphol. The major part of the growth in the number of The Schiphol Group wants to develop the air transport movements was for the account of Amsterdam Schiphol location into an AirportCity, this group in 1998. As home base for KLM we are a compact, intermodal and multifunctional therefore happy with the cooperation between transport hub. Amsterdam Schiphol must become KLM and the Italian company . We regard ...... 1998 annual report Schiphol Group a place where a variety of forms of transport this cooperation as a great leap forward in the converge and intersect. Furthermore, the airport position of the KLM Group in the world market. wants to be more than just a place where travelers For a “Mainport” like Amsterdam Schiphol, arrive, depart, or change plane. It is a town with a strong home carrier is of vital importance. (almost) all the activities found in a normal town. To keep this AirportCity attractive it is essential Low growth of cargo transport that the route network be maintained and The low growth of cargo transport is mainly optimized where possible. the result of capacity restrictions at Amsterdam Schiphol. As a consequence, applications for Passenger market share in Europe up slightly additional cargo slots could not be met during In 1998, the airport handled 34.4 million a major part of 1998. The policy of discouraging passengers, including transit-direct passengers Chapter-2 and the noisiest Chapter-3 aircraft and (passengers who only make an intermediate of excluding them at night also had a negative landing without transferring), an increase of 9.0% effect on transport developments. Another cause compared to 1997. The number of air transport was the Asia crisis. The move of a number of movements rose by 7.8% to 376,810, while the intercontinental airlines also had consequences volume of air cargo increased by 0.9% to for cargo transport. The volume of mail carried 1,171,256 tons. increased by 3.1% to 47,500 tons. Compared to a year earlier, Amsterdam Schiphol’s market share among the top ten European airport cities in terms of passengers rose slightly to 9.4%.

Passenger movements Cargo traffic at European airports at European airports (x 1,000) (x 1,000 tonnes)

96,651 1,661.7 London

63,581 1,333.5

42,734 Frankfurt 1,171.3 Amsterdam

34,420 Amsterdam 1,089.8 Paris

26,134 585.7 Brussels

25,254 385.9 Luxembourg

19,321 354.9 Cologne

19,301 329.8 Zurich

19,292 287.1 Madrid

18,485 Brussels 221.5 Rome Directors’ report 23 Stable share of transfer passengers of passengers (excluding transit-direct) remained Amsterdam Schiphol remains a popular airport the same as 1997 at 42.2%. for transfer passengers. We attribute this, at least in part, to our consistent policy of providing all Creation of alliances influences network facilities under one roof, meaning transfer A good quality network with connections to passengers remain in the same building and can all parts of the world is of utmost importance for change planes quickly. The number of transfer the competitive position of Amsterdam Schiphol. passengers increased in 1998 by 9.6% to more In this respect, the developments during the past than 14 million, while the number of travelers year are a cause of concern for us. Compared to with Amsterdam Schiphol as starting point and a year earlier, the number of destinations fell final destination rose by 9.4%. As a result, the from 251 in 99 countries to 248 in 97 countries. share of transfer passengers in the total number Of this number, 211 were available throughout The loading of an aircraft

. 16:10 the year (compared to 216 in 1997) and the three most striking projects from the first phase remainder were available for just part of the year. which commenced in 1998. The number of airlines operating scheduled services also decreased, from 90 to 87, of which Central Lounge enlarged seven companies only performed cargo services. The Central Lounge will be enlarged and In April, Korean Airlines cancelled its passenger refurbished so that it is in keeping with the quality flights, although the cargo flights were of the newer West Lounge. The existing catering maintained. Varig, Gulf Air Thai Airways and facilities will also be renovated and extended. Air Lanka also disappeared. The move of these In addition, the tax-free shopping center will be companies is partly due to the Asia crisis, but also completely modernized. It will become larger partly the result of the increasing influence of and will be reorganized. Five shop “islands,” alliances in the aviation industry, with companies with retail outlets grouped around them, will be 1998 annual report Schiphol Group increasingly withdrawing to their partner’s home created. All activities should be completed by the base. end of 1999. The total floor area of the Central Paris Charles de Gaulle has now replaced Lounge will then be 22,000 m2, compared to Amsterdam Airport Schiphol to take second place 12,000 m2 at present. The retail floor space will in Europe, where the total number of scheduled almost be tripled from 1,250 m2 to 3,700 m2. destinations is concerned. now ranks third in terms of frequencies. In the summer Widening of D pier concourse of 1998, Amsterdam Schiphol still stood in third The D pier concourse will be widened to place. accommodate increasingly larger aircraft, such as the Boeing 767-300, which are deployed on Investments in quality and growth European routes. As a result, the number of The punctuality of both arriving and people using this pier will increase. New, larger departing scheduled flights reached an all-time waiting areas (gates) will be created at the exits. low in 1998. Only 71.2% of all arriving aircraft All these gates will be given a “switch” status so were on time, while no more than 58.2% of they can be used for both Schengen and non- all aircraft departed on schedule. This poor Schengen flights. The wider concourse will also punctuality is due to the bad weather in 1998, accommodate a shopping center with catering and congestion in European airspace, delays as a result bank facilities. The entire project must be ready in of the introduction of a new Netherland air-traffic August 1999. The total floor area of the D pier control system and the limited availability of concourse will then be 37,000 m2 compared to aircraft gate positions at the terminal as a result 13,000 m2 at present. of the building activities. The growth in traffic and transport during the First piles driven for new B pier past few years, together with the many In October, the first piles were driven for the renovations, particularly in the terminal, have construction of the new B pier. This pier will run also had an influence on the level of facilities at parallel to C pier – perpendicular to the existing Amsterdam Schiphol. That is why a lot will be B pier – and will be brought into service in April invested in the coming years to increase the 2000. The pier will have three gates for aircraft quality and the capacity, mainly in the terminal, with a maximum capacity of 290 passengers and and in the construction of the fifth runway. seven for aircraft with up to 180 passengers. This runway is not only important to reduce noise The pier is initially reserved for Schengen flights, pollution, but also to increase punctuality. About although the design takes account of a possible NLG 3 billion will be spent in the period from 1998 extension with a second layer for non-Schengen to 2003. This will be part of the first phase of the passengers. realization of our 2015 Master Plan. For the coming years, we are thus anticipating the growth permitted by the government. The extension of the Central Lounge, the widening of the D pier concourse and the building of the B pier are the Directors’ report 25 19:03

Police motorcyclist on arrivals passage way Cargo World Schiphol Southeast brought main user. Logistic services provider Schiphol into use Express has now also moved into the area. At the beginning of the year under review, The US company Expeditors International also a new cargo area called Cargo World Schiphol commissioned new offices and a hangar that were Southeast with an apron for five cargo aircraft brought into use in September. In addition, a start was opened at Amsterdam Schiphol at the other was made with the construction of a logistics side of runway 06-24. A tunnel under this runway center for Air Express International that plans connects this new cargo area to the existing areas to combine all its regional activities here. at Schiphol-Center and Schiphol-South, thus About 65% of all available space provided by the creating a single, unified cargo area. The first first phase of Cargo World Schiphol Southeast has apron hangar in the area is Cargo Terminal 8 with now been allocated. In the first phase, a total of cargo handler Cargo Service Center Nederland as 110,000 m2 of cargo terminals and 100,000 m2 of 26 Directors’ report cargo forwarding shed space will be created. Stimulating public transport Good infrastructure required The accessibility of Amsterdam Schiphol by Good accessibility, also with respect to public road is of vital importance for the airport. This transport, is dependent upon good infrastructure. accessibility has already been a major cause of The “Zuidtangent” plays an important role in this concern for many years. Schiphol Group is working respect. The construction of the 25-kilometer together with various bodies in order to remedy main track is progressing rapidly. Part of it, at infrastructure bottlenecks. Our efforts are mainly Amsterdam Schiphol, has already been in use for directed at reducing the individual use of the cars some time and will be further extended in 1999. for journeys to and from the airport. This is not The entire track should be ready in 2002. only important for the realization of our Good rail facilities are also of vital importance, not environmental objectives, but it is also essential only to get people out of their cars, but also to to guarantee accessibility for passengers and realize a substitution of aircraft with high-speed cargo by road. trains. These trains should become an attractive Under the influence of increasing traffic alternative for aircraft on short routes. It has been congestion on the A4 highway, use is increasingly agreed that in the year 2015 a minimum of five made of public transport. In 1998, the percentage million passengers at Amsterdam Schiphol will of public transport use among air travelers rose transfer from aircraft to high-speed trains and vice to 31.2% from 28.5% in 1997. If all forms of versa. Partly for this reason, the Schiphol tunnel collective transportation are added together will have four rail tracks by the year 2000. (public transport plus hotel and chartered busses), Unfortunately, the government has delayed then this share was 35.3% (1997: 33.5%). Our aim matters and, as a result, the southern high-speed is for 40% of all passengers requiring transport line will only be ready in 2005 instead of 2003 before or after their flights and 40% of all and the eastern high-speed line in 2010 instead Schiphol employees to use public transport of 2006. to and from the airport by 2003. Delay in “Utrechtboog” and “Hemboog” New public transport initiatives The construction of other rail infrastructure A number of activities were developed in 1998 that is important for Amsterdam Schiphol, such as to stimulate the use of public transport. These the “Utrechtboog” and the “Hemboog” has been include: delayed on account of government financing • Schiphol Baggage Transfer. At the end of 1998, problems. We regret this, because the infra- a trial was started whereby passengers structure will only come into service in 2006/2007 can have their baggage picked up from home instead of about 2003. We hope that a study into and delivered to Amsterdam Schiphol. other financing models will reduce this delay to Passengers then only have to attend to their a minimum. baggage at the final destination and less time is The accessibility by road appears to be improving required for the check-in. This should stimulate due to the construction of extra capacity on the the use of public transport. A4 highway to and from Amsterdam. Considerable • Schiphol Sternet. This project involves the progress was made in 1998. The first phase, development of an attractive form of public an increase in capacity from the direction of transport for a large group of Schiphol Amsterdam including an extra tunnel under employees living in the vicinity of the airport. runway 09-27, has already been completed. Ahead of this, a number of bus connections The second phase, commencing in 1999, starts with between Amsterdam Schiphol and towns such as the construction of the “Verlengde Westrandweg” and were improved in (A5) which will further relieve congestion on 1998. The “Sternet” should be fully operational the A4. in 1999.

Directors’ report 27 18:05

Taxi-driver outside Schiphol Plaza. Underground logistical system conforming to planning guidelines, but it can also In order to maintain the accessibility of be constructed at less costs. Amsterdam Schiphol, we are very positive about The technical feasibility of the OLS will be tested the construction of an underground transport during the course of 1999. The call for tenders system (OLS) for cargo between the flower auction can start in 2000 and, provided the necessary in Aalsmeer, the airport and a future rail terminal permission is obtained, construction of the OLS near Hoofddorp. Amsterdam Airport Schiphol is can start in 2001. one of the participants in a project concerned with The link between Amsterdam Schiphol and the rail its development. terminal near Hoofddorp will make it possible to A 1998 study into the financing and operation load air cargo directly onto the train. Thus, the indicated that the OLS could be brought into use flower auction and Amsterdam Schiphol will gain in 2004. Not only is the OLS technically feasible, an optimum connection to other important 28 Directors’ report European distribution hubs. Study into European air cargo network by rail within the airport boundaries, which was 99% in In 1998, Amsterdam Airport Schiphol and December 1998, while the occupation of other Flughafen Frankfurt Main AG, in cooperation business premises amounted to 98%. This is typical with the Aalsmeer Flower Auction and the Dutch for the whole year. Ministry of Transport and Public Works, conducted a feasibility study into the development of a Recognition of various aspects European rail network for air cargo. It emerged Despite the fact that the quality of that there is sufficient demand to profitably run Amsterdam Schiphol came under pressure, partly such a network, which can compete with road as a result of building activities, the readers of transport; 20% of the total road transport, in the British magazine “Business Traveller” once this case high-quality and perishable goods and again chose Amsterdam Airport Schiphol as best express deliveries, could be carried by rail. European airport in 1998. This also applied to 1998 annual report Schiphol Group In 1998, the company Balkenende Aircargo the readers of the German magazine “Business Handling started a test with a special air-cargo Traveller.” They particularly appreciate the good train from Amsterdam-Westport to Frankfurt. network of connections and destinations and the tax-free shopping center. Redevelopment of Schiphol-East started The readers of the European journal for the Amsterdam Schiphol wants to be more than travel industry “Travel Trade Gazette Europe” just a location for departing and arriving also expressed their preference for Amsterdam passengers and one of the means of achieving this Schiphol as best airport in Europe. This was the is the development of a range of business services third time they had chosen Amsterdam and the and high-quality business premises. To this end, second consecutive year in a row. construction of the commercial shared office There was also recognition from the management building Avioport, with a floor area of about of the largest international airlines. According to 9,000 m2, commenced at Schiphol-Center in 1998. a study by the “Total Research Travel Group,” This building will be commissioned at the commissioned by a number of European airports, beginning of 2000. they chose Amsterdam Schiphol as the best airport The redevelopment of Schiphol-East also fits in in Europe. The airport was particularly praised for with this philosophy. At the end of the year under the quality of the network and the compact “one review, a start was made in this direction with the terminal” concept with good facilities. building of new headquarters for DCE Consultants In the annual survey by the organization of and the engineering firm Austin Nederland. companies IATA, Amsterdam Schiphol was chosen These two companies will acquire a plot of more as best airport among the largest airports in the than 6,500 m2 on a long lease from Schiphol Real world (more than 25 million passengers a year). Estate BV. The new buildings will be taken into In the field of real estate, the World Trade Center use in mid-1999. Amsterdam Airport won the FGH 1998 Real Estate At the end of the year, a start was also made prize. The prize was awarded for the daring with the construction of a modern shared office entrepreneurship and the international allure of building at Schiphol-East, the Constellation the WTC. Building, with a floor area of about 6,700 m2. Another remarkable award was the prize for the This building will be delivered at the beginning most profitable transport (related) enterprise in of 2000. Europe, taking account of the size of these enterprises in the airport category. This award “AirportCity” catches on was given by KPMG Transport & Distribution on The “AirportCity” concept, with good the basis of a survey of one hundred companies. accessibility by car and public transport, high- quality buildings and surroundings and the availability of modern IT and retail facilities in a dynamic 24-hour environment as the most important elements, is catching on. This appears among other things from the occupation of offices Directors’ report 29 Passengers on moving walkway in G pier

International activities ......

11:30 Internationalization central all passenger handling activities with one to the business strategy computerized system. In addition, the temporary arrivals lounge was opened in October. ● New masterplan for Brisbane The contract with JFKIAT, in which Schiphol USA ● Bids as yet unsuccessful has a 40% share, in any case provides for a ● Cooperation in ICT-field management and operating period up until 2015. The results of the participation in JFKIAT in If we are to succeed in our mission to become terminal 4 in New York are not directly included a leading international airport operator, further in our annual accounts. The operating results of internationalization must be a core component JFKIAT are under pressure, due to a strong mutual of Schiphol Group’s strategy. With the aid of competition between the New York airports and management positions and participating interests the various terminals at JFK. The number of ...... 1998 annual report Schiphol Group in airports at various locations in the world, we departing passengers fell from 3.1 million in want to develop a network of international 1997 to 2.3 million in 1998. Net profit fell from airports. On top of this, we direct our attention NLG 50 million to NLG 41 million. towards consultancy and project management. In 1997 a start was made with replacing the In this respect, we mainly focus on fields where existing terminal 4 at JFK. The building is at we are already strong. For instance, we are present in the structural work phase. The building on our good name as airport operators. construction of the terminal is lagging behind This contributed to our securing of an important planning for six months. The landside and airside project at John F. Kennedy Airport in New York activities do run according to schedule, however. () in 1997. We have also developed Work is expected to be completed in 2002. formulas for retail sales, real estate development as well as for information and communication New master plan for Brisbane technology (ICT) which can be applied throughout Since July 1, 1997, Brisbane Airport Corpo- the world. ration Ltd. (BACL), a consortium in which we hold We can commercially utilize the knowledge and 15.38% of the capital stock, is responsible for the expertise that we have acquired at Amsterdam operation of Brisbane airport, Australia, for a Schiphol. Furthermore, this enables us to test period of fifty years with an option to prolong ourselves against international criteria and our for another forty-nine. own staff are offered possibilities for developing In 1998, BACL developed a master plan for the internationally. Nevertheless, we do impose high airport and its surroundings, which describes the profitability requirements on all international business strategy to be pursued and the develop- investments. It is thereby to be noted that these ment of the airport until 2018. The plan was investments will in general not show a return until produced in cooperation with partners from the after a number of years. These must not be at the aviation industry in Brisbane. Use has also been expense of investments in the development of made of the experience that Amsterdam Airport Amsterdam Schiphol. Schiphol has acquired during the past few years, partly in the field of communication with the Replacement of Terminal 4 at John F. Kennedy surroundings. The project in New York is a good example Just as was the case in 1997, Brisbane airport was of how we use our know-how and experience at experiencing the influence of the Asia crisis in an international level. Under the leadership of 1998, too. The number of passengers (excluding Schiphol USA Inc. and the U.S. project developer transit-direct) amounted to 10.5 million in 1998 LCOR, the JFKIAT consortium is replacing Terminal against 10.7 million in 1997. The operating results 4 in phases with a completely new building are expected to increase from NLG 64 million in containing an attractive shopping center. 1997/1998 to NLG 70 million in 1998/1999 During the past year, the CUTE system (Common (financial year running from 1 July to 30 June). Use Terminal Equipment), which is also utilized Due to increased financial expenses, the net at Amsterdam Schiphol, was brought into use. deficit is expected to grow from NLG 14 million This system makes it easy for airlines to perform to NLG 19 million. The exchange rate of the Directors’ report 31 19:03

Bell-boy in Sheraton Hotel. Australian dollar went down from NLG 1.36 to operating these airports as a strategic partner and NLG 1.20. As a result of this, the participation was was also interested in acquiring a financial stake in scaled down by NLG 13 million to NLG 83 million. ACSA, which owns them. The bid made by Schiphol International and a Bids as yet unsuccessful number of South African financial institutions During the year under review, Schiphol focused on the long-term development of the International entered four bids on other projects, airports. However, the South African Ministry of although without success because we are not Transport ultimately opted for the consortium led willing to offer just any price to win a project. In by Aeroporti di Roma, which had submitted a March, Schiphol International bid on nine airports financially more favorable bid. in South Africa that the South African government In 1998, Schiphol International also made a bid on had targeted for partial privatization. Schiphol nine airports owned by Grupo Aeropuertuario del 32 Directors’ report International had hoped to be asked to join in Sureste, in Mexico. In the coming years, the Mexican government plans to privatize 35 of its Cooperation in ICT-field 58 airports. This will take place in three phases, by Throughout the year, negotiations were under region. The first phase involved the nine airports way with Brussels International Airport Corpo- in the southern division, of which Cancun is the ration (BIAC), which operates the Belgian airport most familiar. To this end, Schiphol International of Zaventem, on joining forces in the area of ICT. had formed a consortium with the Mexican This fits in with our aim to create added value building contractor Empresas ICA. Four other through the national and international develop- consortiums were involved in the bidding process. ment of new products and services. The intention At the end of the year, the Mexican government is to pool our efforts into the development of announced that the consortium in which ICT systems that can be used by both airport Copenhagen Airports is a partner had made the organizations and to use this expertise to highest bid. The third bid was submitted in March. launch ourselves onto the external market while 1998 annual report Schiphol Group This concerned Schiphol North America’s bid for taking advantage of the economies of scale the overall management of Stewart Airport near afforded by the partnership. It is expected that New York. In April, the airport announced it had these discussions will lead to the formation of accepted the offer made by National Express, a joint venture in 1999. a transport company based in the . The selection procedure for the Stewart Properties real estate development project, in which Schiphol North America is a possible candidate, is still in progress. The fourth bid concerned a management contract for a new cargo airport planned for the French airport Vatry. The contract was awarded to the Canadian Aeroports de Montreal, which was prepared to take on major financial and operational obligations.

Activities in terminated In 1998, activities on behalf of the Vienna airport were terminated. Schiphol Group took a 1% interest in this Austrian airport in 1995 and has assisted since in establishing and implementing projects to improve productivity.

Contracts in Orlando and At the beginning of 1999, Schiphol Project Consult (SPC) won two contracts for which the preparatory work was completed during the year under review. SPC has been chosen to assist U.S.- based architectural firm Hellmuth, Obata and Kassabaum (HOK) in the expansion of Orlando International Airport. SPC will be advising the firm on the best way to handle the anticipated growth in the number of passengers from 35 to 70 million. Sofia’s airport has also requested SPC’s consulting services, together with Netherlands Airport Consultants (NACO), in helping it revise its master plan for developments up to 2018.

Directors’ report 33 Surveyor in extension of Central Lounge

Activities in The Netherlands ......

13:15 Regional airport activities Majority interest in take definite shape In March, discussions within the framework of the Partnership Welschap with the Province ● Plans to modernize Rotterdam Airport of North Brabant, the City of Eindhoven and ● opens new terminal Eindhoven Airport led to the acquisition by ● Majority interest in Eindhoven Airport Schiphol Group of 50.5% of the stock in Eindhoven Airport NV and to the formation of Operating beyond the confines of our own a company for the operation of a business park airfield and doing what we do best are not in the immediate vicinity. Through Schiphol Real limited to the international sphere alone. In the Estate, Schiphol Group holds a 49% interest in Netherlands as well, Schiphol Group is always on this second venture. the lookout for opportunities to work together Eindhoven Airport seeks to develop step by step ...... 1998 annual report Schiphol Group more closely with the country’s regional airports into an international hub in the region for if this can open up the right perspectives. This different modes of transport. This has led to the explains our involvement in Rotterdam Airport, recent agreement with ’s Lelystad Airport and Eindhoven Airport. concerning the operation of a bus service between Eindhoven Airport and Brussels Zaventem. Other Plans to modernize Rotterdam Airport talks are also under way within the region that Early in 1998, the City of Rotterdam and should lead to agreements on the uses that the Amsterdam Airport Schiphol reached an airport can be put to beginning in the year 2000. agreement on the future shape and profitable operation of Rotterdam Airport. The agreement Development of Flight Forum gets off the in principle makes the development of Rotterdam ground Airport into a business airport possible within Immediately after the summer, Schiphol a noise zone based on 27,500 flights made by Real Estate, Schiphol Project Consult and the City aircraft weighing more than six tons. of Eindhoven set their plans in motion for the An important milestone in this process was the development of a business park near Eindhoven opening of the Jet Center for private business Airport. To this end, they formed Flight Forum CV, travel. To make Rotterdam Airport even more a real estate development company. Flight Forum attractive, there are plans to modernize and is also the name of the new industrial park. expand the terminal in the near future, while Covering 65 hectares, the grounds can preserving its characteristic sixties look. accommodate about 85,000 m2 of independent office space and 175,000 m2 of industrial space Lelystad Airport opens new terminal and have been reserved for companies with Within the next few years, Lelystad Airport aviation-related business. The first lots should is to develop into a business airport for small be available halfway through 1999. aircraft weighing less than 6,000 kg. During the year under review, the airport celebrated its 25th anniversary and gave added luster to the occasion by opening a new terminal cum control tower. The terminal is the first in a row of invest- ments. Before the turn of the century, the airport intends to make a start with widening its taxiways, installing an instrument landing system and adding more runway and approach lights. The aim of the investments is to relocate flights with small aircraft from Amsterdam Schiphol to Lelystad. Shortly after the turn of the century, Lelystad Airport needs to be fully prepared to accommodate the business aviation market with all the latest facilities. Directors’ report 35 Airport employee on runway

Our relation with the surroundingsg ......

00:06 Taking the initiative to improve these efforts can be found in the Schiphol Annual environmental performance Environmental Report, which was published concomitantly with this financial report. ● New noise zone in the making ● Aviation industry for the time being in Certification for environmental care system favor of further growth of Amsterdam After Dublin, Amsterdam Schiphol became the Schiphol second European airport operator to obtain ISO ● Government decision opens up new 14001 certification in 1998 for its environmental perspectives for sustainable growth care system. The purpose of environmental care systems is to detect, control and reduce the impact Schiphol Group wants Amsterdam Schiphol of a company’s operations on the environment. to remain a major hub for the KLM/Northwest This has to do with all the policy related, organi- ...... 1998 annual report Schiphol Group Airlines/Alitalia alliance, without losing sight zational, administrative and technical procedures of the living environment around the airport. and provisions utilized by the company to protect We are well aware of our responsibility towards the environment. What is so unique about the society around us. Caring for a livable Amsterdam Airport Schiphol’s environmental care environment is therefore an integral part of our system is that it does not stop at the airport’s own operations. In line with the 1995 Government operations but goes one step further to cover the White Paper for Schiphol and Surroundings, we environmental impact of the entire airfield as well. have chosen to strengthen the Mainport function of Amsterdam Schiphol and improve the quality New noise zone in the making of living around the airport. The objective of this The current environmental limitations are laid decision is sustainable growth. Maximum safety, down in the Schiphol Airfield Designation from minimum environmental impact and socially 1996. One of the points of the directive is that the responsible actions are the keys to this concept, airport is subject to certain noise level limitations. just as is putting business objectives and stake- To make it possible for the authorities to maintain holder concerns on an equal footing. This means these limitations, Amsterdam Airport Schiphol is finding a good balance between economic and required to prepare an annual Operations Plan. environmental interests. This must reflect how much traffic the airport expects in the coming year and how it plans to Quality of living must not be allowed fit this into the established noise zones. to deteriorate In 1997 already, it became apparent that it would To show that Schiphol Group is serious about be very difficult for Amsterdam Airport Schiphol a good environmental policy, we published a 1998- to stay within the noise zones on account of the 2003 Environmental Policy Plan for Amsterdam way they were shaped. The In ‘t Veld Commission, Schiphol at the beginning of the year. This plan which had been set up by the Minister of Trans- sets out environmental aims for Amsterdam port and Public Works, came to the conclusion Schiphol for the next five years. The keystone of that this was the result of “absurdities” in the this policy is our personal responsibility towards zoning system and its application. In response, the environment. This means acting on our own the Cabinet decided that the current noise zone initiative to improve our environmental for the entire twenty four hours’ period (35 KU) performance wherever possible. The 1998-2003 should be redrawn. In 1998, a start was made on Environmental Policy Plan sets out our objectives the Environmental Impact Report that is needed for Amsterdam Schiphol for air, noise, energy, in order to be able to do so. The new zone should waste, soil, rain and waste water and office take effect at the end of 1999 and will remain in environmental care. The most important point is force from 2000 to 2003. that the continuing growth of the airport must not be allowed to compromise the quality of living at and around the airport. The concrete results of

Directors’ report 37 Green light for controlled growth until 2003 To prevent any further violation of the nighttime For 1998, we initially projected 360,000 air zone, a landing ban from 11:00 p.m. to 6:00 a.m. transport movements. This figure fitted just within has been placed on runway 04-22 and the north- the noise zones but would have had a negative eastern side of runway 06-24 from mid-December impact on Dutch airlines in particular. Since a to the turn of the year. As a result, Amsterdam new, revised zone is now in the making, in March Schiphol was closed for all incoming flights during the former Cabinet declared itself in favor of the night of December 26-27, under the then controlled growth up to 380,000 flights in 1998 prevailing strong westerly winds. Consequently, with an increase of 20,000 flights each year a number of aircraft were rerouted at that time. thereafter until 2003. The available slots are subsequently divided between all airlines wishing 1999 Operations Plan fits in with government to make use of the airport by an independent decision 1998 annual report Schiphol Group slot coordinator appointed by the Minister of The Operations Plan for 1999 provides for Transport and Public Works. On April 1, 1998, this 396,700 flights to and from Amsterdam Airport slot coordination system became fully operational. Schiphol. This fits in with the government decision During the year, problems occurred on a number to allow an increase of 20,000 flights a year after of occasions on the application of the noise zones. 1998, up to a total of 460,000 in 2002, the year In September, this culminated in proceedings before the fifth runway becomes operational. being started by four environmentalist groups In order to fit in as closely as possible with the against the Minister of Transport and Public airline industry’s winter and summer schedules, Works. They demanded that the minister take the Operations Plan runs from November 1, 1998, measures against the imminent violation of the to October 31, 1999. zones. The court refused to honor their request The Operations Plan shows that the number of and allowed the minister to take a discretionary dwellings within the area with the highest level stance on the matter. of noise disturbance (35 KU contour) will rise for the first time in 1999 after years of decline. Violation of nighttime zone However, the Dutch aviation industry has promised In September, violation of the 26 LAeq that it will see to it that the actual number of (nighttime) zone was reported at two locations, dwellings impacted will be less than 12,000. The owing to westward take-offs from runway 09-27. statutory limit imposed by the 1995 Government As a result, Amsterdam Airport Schiphol decided White Paper for Schiphol and Surroundings is to ban the use of the runway for westward take- 15,100 dwellings. offs during the night for the rest of the year. From the end of November to December 31, Policy of discouragement continued runway 09-27 was closed for all take-offs and To reduce noise impact in the area, we have landings between 11:00 p.m. and 6:00 a.m. This been maintaining a policy for several years now to was a result of an enforcement order (Bestuurs- discourage the use of noisy Chapter-2 aircraft. This dwangbesluit Schiphol 1998) from the Minister policy was continued in 1998, and includes new, of Transport and Public Works. The purpose of higher surcharges for this aircraft classification. this measure was to prevent any further violation As a result, only 1.6% of all jet aircraft had the of the nighttime noise zones. These violations Chapter-2 classification in 1998. In order to make were not covered by the so-called Gedoogbesluit the best possible use of our noise capacity, we Geluidszones Schiphol 1998 and were mainly have also been using a sliding scale for Chapter-3 caused by the extreme weather (strong westerly aircraft since August 1: the fees these aircraft have winds) in the months of September and October. to pay for landings are now based on noise levels Owing to these conditions, it was necessary to as well. Although Chapter-3 aircraft are the use runway 09-27 during the night much more quietest in the industry, some of them are noisier frequently than permitted by law. This is the or quieter than others. safest runway for taking off and landing during strong westerly winds. 38 Directors’ report Fewer complaints the limitations set down in the Government In 1998, the complaint registration office of White Paper for Schiphol and Surroundings into the Schiphol Noise Disturbance Commission (the a universally acceptable environmental permit, Dutch CGS) received about 199,000 noise-related similar to those used by other Dutch businesses. complaints, which were lodged by 12,500 different The participants meanwhile convened on this issue people. The year before, the total number of for the first time at the beginning of 1999. complaints was much higher: 245,000. According to the CGS, 1997 should be seen as an exception Aviation industry for time being in favor of in connection with the rerouted flight paths for further growth at Amsterdam Schiphol departing aircraft and the temporary closure of In an elaboration on the discussion that was runway 06-24 in that year. opened in February 1997 on the Future Dutch Aviation Infrastructure (the Dutch TNLI), the Dutch 1998 annual report Schiphol Group Decision by Council of State responsible aviation industry announced its joint standpoint in for delay November 1998 on the opportunities for growth In addition to being essential for handling the in the short and medium terms. According to the increase in air traffic on the one hand, the fifth sector, Amsterdam Schiphol should be able to runway will on the other hand also reduce the continue growing in its present location up to an noise impact on the areas within the airport’s upper-limit capacity of about 600,000 air transport immediate vicinity. Amsterdam Airport Schiphol movements. The airport is expected to reach this therefore wants to be able to use this runway as figure around 2010. In order to make the present soon as possible. During the year under review, location suitable for this kind of growth, however, however, a decision by the Council of State put a a number of conditions will have to be met. One damper on these plans. Halfway through the year of these is a greater allocation of airspace to civil the Council decided in favor of various parties aviation. In addition, the fifth runway would need who had lodged appeals against the government to be completed as soon as possible. Designation on the fifth runway. This does not If the growth in air traffic after 2010 shows signs mean that the Designation has been revoked, but of approaching 800,000 to 900,000 air transport that the Minister of Transport and Public Works movements, issues such as business management, and the Minister of Housing and Environment environmental impact and social acceptance will need to underpin decisions with respect to lodged make it necessary to consider a new location. In appeals. The actual construction work is therefore that case, the Dutch aviation industry sees an not expected to begin until 2000. Originally, this island in the North Sea as the most realistic option. was supposed to commence at the end of 1998. As This would provide the industry with a sustainable a result, the runway will not be fully operational way to expand its activities and would offer the until 2003. people living within the vicinity of Amsterdam Schiphol a lasting solution for their quality of TOPS for acceptable environmental living. If the growth levels off, the industry’s limitations preference will be for remaining at the present Schiphol Group regrets the environmental location. A final decision on this issue is required movement’s repeated decisions in 1997 and 1998 in 2005. to use the court as a venue to settle our conflicts over the noise-pollution situation. We believe that it is high time for the aviation industry and the environmental movement to sit down and discuss the issues together; we have even insisted on this to the Minister of Transport and Public Works. She has since decided to set up a Temporary Schiphol Consultation Platform (the Dutch TOPS), under the direction of J. van der Vlist, former deputy for environmental issues of the Province of South Holland. The heart of the matter is to translate Directors’ report 39 Cabinet decision opens up new perspective Safety system takes shape for sustainable growth The Integral Safety Management System (the Just before Christmas, the government gave Dutch IVMS), which was developed to guarantee Amsterdam Schiphol the green light to grow to safety at Amsterdam Schiphol during the growing between 520,000 and 600,000 air transport increase in air traffic, has entered a new phase. movements within revised, forthcoming The organizational structure of this system, in environmental standards. The standards will which all parties involved in the aviation process be similar to those currently in use, but easier play a part, has been changed since January 1, to measure and apply. The new code will replace 1999. Airport safety can now be more efficiently the limitations set down in the 1995 Government guaranteed. In addition, the Operational Airport White Paper for Schiphol and Surroundings. Safety Information System (OASIS), which was set In our opinion, this decision by the govern- up in 1998 for the IVMS, has already generated its 1998 annual report Schiphol Group ment constitutes an important step forwards first batch of management information on safety towards making the growth in aviation in the at the airport. Netherlands sustainable and maintaining the Another safety system, developed to make safety Dutch aviation industry’s international competitive on airside controllable on the basis of possible position. Moreover, it signals a change in the risks, is the Airside Safety Management System relationship between the aviation industry and (the Dutch AVMS). In anticipation of the new Air the government. The aviation industry will now be Traffic Act, the government audited this AVMS in seen as a normal business, with its own responsi- 1998. This closed another important chapter in the bility for sustainable development and economic history of the AVMS, which was started in 1995. growth. Capacity of wastewater purification plant Implementation of noise insulation project doubled under way In 1998, the airport doubled the capacity of In May, a start was made with insulating its wastewater purification plant. The quality of the first 250 dwellings in as part the purified water has been improved as well. of the Schiphol Noise Insulation Project (the These improvements were made to satisfy the new Dutch PROGIS). In the first part of this project, standards of the Rijnland Water Control Board. 4,600 dwellings have already been insulated. The wastewater that is discharged into the “Ring- The second phase will involve about another vaart” canal now contains far fewer nitrogen and 14,000 residences. Dwellings within the 40 KU phosphate compounds than before. The sewage (twenty-four hours’ period) noise contour qualify sludge that remains after purification is dried and for living room, dining room and bedroom insula- used to fuel one of Amsterdam’s power stations. tion whereas in dwellings within the 26 LAeq Nearly all of the biogas released during the (nighttime) noise zone only the bedrooms will biological purification process is used to power the be insulated. wastewater purification plant itself. The capacity PROGIS is a joint project between the Ministry of the renovated wastewater purification plant of Transport and Public Works and Amsterdam can be compared with that of a plant for a city Airport Schiphol. The ministry is responsible for with a population of 45,000. At this point in time, the regulations (who qualifies for what type of the airport produces just as much wastewater insulation) and Amsterdam Airport Schiphol is as a city with a population of 25,000. responsible for coordinating the insulation work and keeping the residents informed of their status. The Dutch Civil Aviation Authority will be responsible for pre-financing, but the total costs of the project will ultimately be borne by the aviation industry itself. The dwellings will be insulated according to regulations set down by the Ministry of Transport and Public Works. 40 Directors’ report Schiphol Group employees in office building

Personnel developmentsp ......

18:15 Capitalizing on our inherent qualities Employment at Schiphol (x 1,000) ● New organizational structure in place

● Increase in number of staff 34.1 1989 ● New collective labor agreement 36.0 1990

36.7 1991 Schiphol Group wants to develop into an organization with a strong product, market and 37.2 1992 quality focus: one that functions as a center of 37.6 1993

expertise and generates a high return. It is for 38.7 1994 this very reason that we invest so heavily in our 40.9 1995 organization and staff. We do this by offering 1998 annual report Schiphol Group 43.4 1996 special training programs and making it possible for our staff to rotate jobs on a regular basis. 46.5 1997

The ultimate goal is for the organization to 49.2 1998 capitalize on the qualities inherent in its staff.

New organizational structure in place focus and responsiveness. We plan to go ahead On January 1, 1998, Amsterdam Airport with these improvements on July 1, 1999. Schiphol revealed a new organizational structure. The new system fits in better with the plan we set Increase in number of staff in motion several years ago to transform the In 1998, the number of staff at Amsterdam company from a facilities and service provider Airport Schiphol increased by 7.6% from 1,794 into an organization with a strong consumer and at the end of 1997 to 1,931 at year-end 1998. market focus. The organization now comprises Expressed in full-time equivalents (FTEs), the three business units that mainly provide products number of employees on December 31, 1998 was and services for the Amsterdam Schiphol location 1,823 (+ 7.6%) compared with 1,695 during the and three operational entities that were trans- previous year, and 1,928 for the entire Schiphol formed into Dutch limited liability companies in Group (1997: 1,848). May on account of their heavy focus on markets A growing number of these employees are also with national and international competition. active outside Schiphol. Increasingly more people The three business units are Airline & Handling are being seconded to posts abroad for shorter Services (AHS), Consumer Services (COS) and Schip- or longer periods of time. With an increase from hol Support Services (SSS). The first is primarily 6.5% to 6.6%, absenteeism owing to illness was engaged in providing flight-handling products and a fraction higher in 1998 than during 1997. services, the second provides products and services for passengers, visitors and other patrons of Employment up Amsterdam Schiphol and the last performs Amsterdam Schiphol’s role as a driving force primarily support services for all of Amsterdam for the Dutch economy is clearly evident from the Schiphol. employment figures. According to the figures The three limited liability companies are Schiphol compiled each year by the firm Regioplan, the Real Estate (SRE), Schiphol Project Consult (SPC) number of jobs at the airfield increased drama- and Schiphol International (SI). SRE is engaged in tically over the previous year. On October 31, real estate development and management, SPC 49,217 people were employed at the airport in provides consulting and project management comparison with 46,519 in 1997. It is estimated services and SI was formed to work largely on that the same number of people are indirectly foreign acquisitions. The next step towards making employed as a result of the airport. the organization complete was taken at the end of the year. This step is expected to lead to the restructuring of the group’s managerial posts and 42 Directors’ report the strengthening of the organization’s client Training programs increase staff New hiring policy for firefighters employability In connection with the heavy physical Improving our staff’s skills and increasing their demands made of firefighters, we wish to employability are of paramount importance to us. stimulate the flow of personnel in such a way In May we started an employability project aimed that the average age of the crew drops back to at making it easier to deploy our personnel at between 35 and 40 years. To achieve this goal, different places within the organization. This is we have agreed with the trade unions on a special also the reason why many of our staff have been hiring policy for our fire-fighting staff, which is given special training at various levels within the set down in the separate “collective agreement organization. A large number of managers have for the fire-fighting industry.” The basis of the also attended company management courses agreement is that new firefighters will be hired aimed at developing their management skills. for a maximum period of five years. Under certain 1998 annual report Schiphol Group In order to ensure that our key positions are filled circumstances, an extra year may be added with the most highly skilled people on a long-term without this leading to a contract of employment basis, we continued recruiting university graduates for an indefinite period. During the term of the in 1998 for many of our traineeships. We also contract, these staff members will have the kicked off our recruitment of personnel with opportunity to take extra courses to give them a degree from one of the various institutes of the best possible chance of finding another job technology (Higher Vocational Education) for the either inside or outside the organization after technician’s traineeship. This is our way of meeting their contract expires. the great demand for those technicians who are so scarce at this time. According to a major survey of Employees generally under a lot of pressure Dutch university students on the most popular Together with TNO Arbeid, we conducted an companies to work for in the Netherlands, our organization-wide study in 1998 into the level of traineeship programs definitely have something occupational stress in our organization. The study to offer to young graduates. Amsterdam Airport showed that our employees generally work under Schiphol emerged from the study at fifth place. a lot of pressure. This problem was traced to three Of the total budget for personnel expenditure, main areas: the severe demands placed on our 2.4 % was spent on training. This comes to a staff as a result of Schiphol Group’s aspirations total of NLG 5,490,000, an average of NLG 3,013 and the public’s interest in everything that has per FTE. to do with Amsterdam Schiphol, the discrepancy between our staff’s qualifications (training/- New collective labor agreement experience) and what they need to perform In 1998, consensus was reached with the their jobs, and lastly the lack of sufficient means trade unions on a new two-year collective labor in certain positions for handling unexpected agreement (CAO), which has been in force since problems. April 1. This includes a collectively agreed pay For certain departments, we subsequently made increase of 3.25% on April 1, 1998, and another a more detailed (qualitative) study into their 3.25% on April 1, 1999. The new collective qualifications and the means available to them agreement also added a new module to its for solving problems. We then used this infor- “cafeteria” system, which, under certain mation to develop a tool for the management conditions, allows employees to take sabbatical and staff to use to work together on reducing leave once every five years (with a period of the pressure within their departments. reflection of not more than four months). In addition, the maximum number of days off that can be cashed in has been increased to eighteen. In the new collective agreement, staff members who work in shifts gain three extra days off a year, as compensation for the fact that the statutory reduction in working time is built into their roster. Employees are required to interchange these three Directors’ report 43 days in the cafeteria system. Corridor to G pier 12:41 Consolidated balance sheet as of December 31, 1998 (a (in NLG 1,000)

Assets December 31, 1998 December 31, 1997

Fixed assets Tangible fixed assets – Runways, taxiways and aprons 509,067 440,836 – Land and roads 628,175 570,438 1998 annual report Schiphol Group – Buildings 1,429,852 1,442,270 – Installations 419,028 431,368 – Other fixed assets 86,064 96,314 – Assets under construction 503,254 150,191

3,575,440 3,131,417 Financial fixed assets 130,534 151,498

3,705,974 3,282,915 Current assets Stock 5,652 5,054 Debtors 224,150 205,171 Liquid assets 329,625 292,232

559,427 502,457

4,265,401 3,785,372

46 Financial statements fter profit appropriation)

Liabilities December 31, 1998 December 31, 1997

Shareholders’ equity 2,562,008 2,260,709

Minority interests 20,737 3,060

1998 annual report Schiphol Group Equalisation account for investment facilities 21,600 21,345

Provisions Major repairs 50,083 52,770 Early retirement 54,100 59,251 Other provisions 113,201 70,249

217,384 182,270

Long-term liabilities 1,013,944 1,000,489

Current liabilities 429,728 317,499

4,265,401 3,785,372

Financial statements 47 Consolidated income statement over the year 1998

1998 1997*

Net turnover 1,219,304 1,110,253

Costs of work contracted out and other external costs 375,096 355,383 Salaries and social charges 200,921 175,563 1998 annual report Schiphol Group Amortisation/depreciation and movements in value 214,728 206,471 Other operating expenses 79,776 86,758

Total operating expenses 870,521 824,175

Operating result 348,783 286,078 Financial income and expense -/- 57,548 -/- 44,349

Result before taxation 291,235 241,729 Taxation -/- 537 -/- 7,882 Share in income from investments 7,633 12,903

Group result after taxation 298,331 246,750 Minority interests -/- 719 –

Net result 297,612 246,750

48 Financial statements *Adjusted for comparison purposes. Consolidated cash flow statement (in NLG 1,000)

1998 1997

Net result 297,612 246,750

Items leading to cash flow from operating activities: – Amortisation/depreciation 214,728 206,471 1998 annual report Schiphol Group – Release of negative goodwill -/- 2,260 – – Addition to equalisation account for investment facilities 1,295 2,818 – Change in provisions 34,877 53,285 – Net changes in stock, debtors and current liabilities * 65,319 12,520

313,959 275,094

Net cash flow from operating activities 611,571 521,844

Investments – Addition to tangible fixed assets -/- 575,989 -/- 375,678 – Acquisitions -/- 18,579 – – Net investment in financial fixed assets 20,964 -/- 115,071 – Provision for investment – 10,000

Net cash flow from investing activities -/- 573,604 -/- 480,749

Financing – Dividend paid in the reporting year -/- 35,000 -/- 25,003 – Currency translation differences -/- 14,039 -/- 12,202 – Change in minority interests 17,677 – – Change in loans and bank credits 30,788 -/- 9,494

Net cash flow from financing activities -/- 574 -/- 46,699

Change in net liquid assets 37,393 -/- 5,604

* Exclusive of dividends, bank debts and loans. Financial statements 49 Principles of consolidation, valuation and determinatio

Principles of consolidation Corporate profit and loss account The company made use of the option to Criteria for the consolidated financial prepare an abbreviated corporate profit and loss statements account as provided by Article 402, Book 2 of the In accordance with uniform principles, the Netherlands Civil Code. consolidated financial statements include the 1998 annual report Schiphol Group financial information of Amsterdam Airport Schiphol and its group companies listed on page Principles of valuation 73 according to the full consolidation method. The term subsidiaries refers to those companies General that belong to the economic entity of N.V. Equity and results are based on replacement Luchthaven Schiphol, in which the company has value unless indicated otherwise. decisive control over business and financial policy. The results of the group companies acquired in the Foreign currencies course of the year are consolidated as from the Income and expense denominated in foreign moment at which the company acquired decisive currencies are included in the profit and loss control in the policies of those group companies. account at the rate of settlement. Debtors, The shares of the other shareholders in the debts and liquid assets denominated in foreign consolidated shareholders’ equity and the currencies are converted at the rate prevailing consolidated result are included under minority on balance sheet date. Exchange differences are interests. included in the profit and loss account under financial income and expense. Exchange Reclassification differences resulting from translation of net The format of the profit and loss account foreign investments are directly taken to changed compared with last year. The current shareholders’ equity. format is more in line with common practice in the Netherlands. The comparative figures for 1997 have been adjusted accordingly.

50 Financial statements n of result

Fixed assets Financial fixed assets Tangible fixed assets Financial fixed assets consist of investments, In general, tangible fixed assets are carried at other financial fixed assets and other debtors. replacement value less depreciation based on this Investments are carried at net asset value. value. The replacement value is determined based Investments in which the company does not have on current price index figures. Changes in the decisive control are carried at cost less a provision 1998 annual report Schiphol Group replacement values of tangible fixed assets are for long-lasting decreases in value where taken to the revaluation reserve. Assets belonging necessary. Other financial fixed assets are carried to the asset category runways, taxiways and at face value. A provision for possible non- aprons that are not eligible for replacement are collectibility is deducted from other debtors valued at cost. The land included in the asset where necessary. category land and roads is carried at cost. The same valuation principle, in general, applies Current assets to the other fixed assets included under the Stock category other fixed assets. Tangible fixed assets In general, stock is valued based on average of which the company and its subsidiaries have purchase prices. Stock for technical maintenance the beneficial ownership pursuant to lease is valued at nil. agreements, are capitalised. Debtors Debtors are carried at face value less a provision for possible non-collectibility where necessary.

Financial statements 51 Liquid assets Long-term liabilities Liquid assets are carried at face value. Loans Loans are carried at face value. The share Revaluation reserve premium on the 1993 bond loan is included under Movements in capital caused by revaluation of this heading and is released during the term of the tangible fixed assets at replacement value are the loan. 1998 annual report Schiphol Group expressed in the revaluation reserve. Current liabilities Equalisation account for investment facilities Current liabilities are carried at face value. This item includes the investment subsidies, which form a contribution towards the operating expenses related to the investments, less the Determination of result release calculated annually. This item is carried at face value. Net turnover Net turnover represents the proceeds from Provisions goods delivered/services rendered less turnover The provisions for early retirement (including tax. The proceeds are recorded at the moment pre-early retirement) are generally carried at that the goods are delivered/services are rendered. actuarial value; the actuarial interest rate is 4% Costs are charged against turnover in the year in (1997: 5%). The other provisions are carried at which the related turnover is entered. face value.

52 Financial statements Depreciation Equalisation account for investment facilities Depreciation of tangible fixed assets is Investment facilities are released to the result provided by the straight-line method, based, in in proportion to the depreciation periods of the principle, on the depreciation periods listed below, assets to which they relate. The release is taken which, in part, depend on the nature of the asset. to the profit and loss account and included under This applies to assets carried at both replacement depreciation. 1998 annual report Schiphol Group value and cost. Assets under construction and land are not depreciated. Financial instruments The company makes use of financial Depreciation periods instruments not included in the balance sheet Tangible fixed assets (derivatives) in order to limit interest expense on – Runways, taxiways and aprons 30 - 40 years the long-term loans included. These instruments – Land and roads concern interest swaps. Results by virtue of these • Car parks 30 years instruments are balanced in proportion to the • Roads 30 years interest flows attributable to the financial year • Other paved surfacing 10 - 30 years and included in the profit and loss account under – Buildings 20 - 40 years financial income and expense. If swaps are – Installations 5 - 30 years unwound because there no longer is an opposite – Other fixed assets 3 - 20 years position, the related income and expense are directly taken to the result.

Financial statements 53 Notes to the consolidated balance sheet (in NLG 1,000) otes to t e co so dated ba a ce s eet as o ece b

Assets

Fixed assets

Tangible fixed assets This item can be broken down as follows: 1998 annual report Schiphol Group

Runways, Land Buildings* Installations taxiways and and roads aprons

Composition at year end Cost 742,197 731,713 1,763,291 941,157 Revaluation 366,994 231,512 474,047 220,696

Replacement value 1,109,191 963,225 2,237,338 1,161,853 Depreciation -/- 600,124 -/- 335,050 -/- 807,486 -/- 742,825

Book value at year end 509,067 628,175 1,429,852 419,028 Book value at beginning of financial year -/- 440,836 -/- 570,438 -/- 1,442,270 -/- 431,368

Changes during the financial year 68,231 57,737 -/- 12,418 -/- 12,340

Changes during the financial year Additions 69,974 58,410 38,580 40,696 Acquisitions 13,009 6,443 9,129 727 Disposals -/- 2,586 – -/- 10,219 -/- 1,286 Revaluation not effected as a result of disposals -/- 148 – -/- 4,285 -/- 213 Revaluation 11,648 12,928 26,428 7,611 Recategorisation – – – 2,006 Depreciation -/- 23,666 -/- 20,044 -/- 72,051 -/- 61,881

Total changes during the financial year 68,231 57,737 -/- 12,418 -/- 12,340

* The asset category buildings includes an amount of NLG 125 million in relation to assets of which the company does not have the legal 54 Financial statements ownership (financial lease). be 3 , 99

Other fixed assets 1998 annual report Schiphol Group

Other Assets not Assets Total fixed conducive to under assets the production construction process

241,554 3,921 503,254 4,927,087 512 3,182 – 1,296,943

242,066 7,103 503,254 6,224,030 -/- 158,283 -/- 4,822 – -/- 2,648,590

83,783 2,281 503,254 3,575,440 -/- 93,857 -/- 2,457 -/- 150,191 -/- 3,131,417

-/- 10,074 -/- 176 353,063 444,023

15,266 – 353,063 575,989 420 – – 29,728 -/- 1,004 – – -/- 15,095

– – – -/- 4,646 105 – – 58,720 -/- 2,006 – – – -/- 22,855 -/- 176 – -/- 200,673

-/- 10,074 -/- 176 353,063 444,023

Financial statements 55 Financial fixed assets This item can be broken down as follows:

Investments Amounts Other Total owed by debtors investments 1998 annual report Schiphol Group

Book value at beginning of financial year 131,407 14,091 6,000 151,498 Investments 65 – – 65 Disposals -/- 39 – – -/- 39 Withdrawals/repayments – -/- 8,825 200 -/- 8,625 Result 8,139 – – 8,139 Dividend -/- 5,414 – – -/- 5,414 Translation differences -/- 14,890 – – -/- 14,890 Other changes – – -/- 200 -/- 200

Book value at year end 119,268 5,266 6,000 130,534

Current assets

Stock Stock consists of stock for facility services and technical maintenance. The stock value totals NLG 5,652,000 (1997: NLG 5,054,000). A provision was deducted from the stock value for the purpose of a full downward revaluation of the stock for technical maintenance.

Debtors This item can be broken down as follows:

1998 1997

Trade debtors 145,768 140,387 Participations and investments 5,965 3,203 Other debtors 20,929 10,675 Prepayments and accrued income 51,488 50,906

224,150 205,171

Trade debtors include a provision for possible non-collectibility. Other debtors include a claim in the sum of approximately NLG 11.2 million in relation to taxation and social security contributions.

56 Financial statements Liquid assets Liquid assets consist almost entirely of deposits with terms ranging from one to twelve months.

Liabilities

1998 annual report Schiphol Group Shareholders’ equity The notes to the corporate balance sheet include a reference to the company's financial position.

Minority interests This item includes the minority interests in the capital of the group companies Ontwikkelingsmaatschappij Nieuw-Rotterdam Airport N.V. and Eindhoven Airport N.V.

Equalisation account for investment facilities Movements in this item were as follows during the financial year:

1998 1997

Book value at beginning of financial year 21,345 19,384 New entitlements 1,295 2,818 Release to the result -/- 1,040 -/- 857

Book value at year end 21,600 21,345

Provisions

Major repairs Movements in the provision for major repair were as follows:

Book value at beginning of financial year 52,770 Increase due to acquisitions 1,550 Withdrawals -/- 24,865 Allocations 20,628

Book value at year end 50,083

This provision was formed to equalise the costs of major repairs in the asset categories runways, taxiways and aprons, terminals and roads.

Financial statements 57 Early retirement The provision for early retirement can be broken down as follows:

Functional Retaining Pre-early and Total super- pay pre-extra- annuation ordinary 1998 annual report Schiphol Group retirement

Book value at beginning of financial year 26,480 3,493 29,278 59,251 Withdrawals -/- 1,497 -/- 938 -/- 5,893 -/- 8,328 Allocations 2,083 725 369 3,177

Book value at year end 27,066 3,280 23,754 54,100

The extent of the liabilities in relation to the provisions for functional superannuation and retaining pay are calculated according to the actuarial cost method. During the reporting year, the actuarial interest rate used was lowered to 4% (1997: 5%). The provision for functional superannuation includes an amount of NLG 21.1 million for commitments relating to future recipients of benefits (1997: NLG 22.6 million). The provision for pre-extraordinary retirement ensues from the collective labour agreement adopted in April 1996 under which staff are offered the opportunity to retire early, i.e. before they have reached the official early retirement age.

Other provisions Other provisions can be broken down as follows:

Environmental and Lagging Other Total risks millennium performance Lelystad

Book value at beginning of financial year 42,987 16,662 10,413 187 70,249 Withdrawals -/- 3,146 -/- 2,077 -/- 631 – -/- 5,854 Release – – – -/- 76 -/- 76 Allocations 33,200 15,400 235 47 48,882

Book value at year end 73,041 29,985 10,017 158 113,201

Environmental risks The provision for environmental risks is partly intended for future asbestos, soil and sludge clean-ups. An amount of NLG 3.2 million is allocated to this provision annually. During the reporting year, an amount of NLG 3.1 million was withdrawn from this provision for the purpose of clean-ups. In addition, during the year under review, NLG 30 million was allocated to the provision. This amount was intended to mitigate the consequences of the lagging performance of the runway system as a result of the environmental restrictions imposed on the runway system as a whole. 58 Financial statements Euro and millennium The provision for euro and millennium was formed for the adjustment of the financial packages warranted by the introduction of the single European currency (the euro) and the turn of the millennium. The provision for the euro and the millennium issue and that for information and communication technology in the sum of NLG 10 million, which was formed in the preceding financial year, were combined into one. This was done in view of the cohesion between the activities to be carried 1998 annual report Schiphol Group out in these contexts. Further insights in 1998 led to an additional allocation of NLG 15.4 million.

Lagging performance The provision for lagging performance was created in 1993, by virtue of an obligation at the time of the take-over of the Lelystad group company. This provision is used to mitigate future negative results of this group company. The allocation to this provision refers to the revaluation of tangible fixed assets of the N.V. Luchthaven Lelystad in 1998.

Long-term liabilities This item can be broken down as follows:

1998 1997

Average Total Expiring Total Expiring interest after 5 years after 5 years rate Bond loan 1993 6.75 400,514 – 400,857 – Debts to credit institutions 8.00 38,690 35,290 29,250 25,850 Other loans 8.66 424,740 67,810 402,870 246,649 Financial lease obligations 6.98 150,000 150,000 167,512 167,512

1,013,944 253,100 1,000,489 440,011

In 1993, a bond loan was issued in the sum of NLG 400 million. The term of the loan is seven years. The annual interest coupon is 6.75%. In accordance with the term of the bond loan, the issue bond premium was taken to the result. The loan will be repaid as a lump sum payment in 2000.

During the year under review, NLG 10.0 million worth in new loans with zero-coupons was included under other loans. During the term of the loan, the difference between the amount received and the amount repayable will be included in the profit and loss account under interest expense.

The obligations ensuing from financial lease agreements concern buildings.

The amounts to be repaid in the next financial year, totalling NLG 23.1 million, are included in the balance sheet under current liabilities.

Financial statements 59 Current liabilities This item can be broken down as follows:

1998 1997 Repayments of long-term liabilities falling due within one year 23,085 5,525 1998 annual report Schiphol Group Debts to credit institutions 52 279 Debts to suppliers 190,057 112,605 Amounts owed to participations and investments 688 1,043 Debts in relation to taxation and social security contributions 915 4,913 Debts in relation to pensions 1,478 1,558 Other debts 103,056 84,836 Accruals and deferred income 110,397 106,740

429,728 317,499

Contingencies and commitments not included in the balance sheet In addition to the liabilities included in the balance sheet, the company has the following obligations:

1998 1997 Obligations involving: – investments 306,000 104,693 – operational lease and tenancy agreements 134,900 156,820 – subsidies and other outside contributions 22,200 23,000

Guarantees furnished to third parties for: – loans contracted 10,000 10,000 – loans contracted by staff and other guarantees 1,900 1,820

475,000 296,333

Among other things, the operational lease and tenancy agreements include the obligations relating to a multi-level car park. The item subsidies and other outside contributions includes an amount of NLG 18.7 million relating to a financial contribution within the framework of the Mainport and Greenery Development Plan. Payments will be spread over the years 2006 up to and including 2009.

60 Financial statements Notes to the consolidated profit and loss account (in NLG 1,000)

Net turnover The distribution of net turnover is as follows:

1998 1997

Airport fees 558,509 489,566 1998 annual report Schiphol Group Concessions 272,814 236,687 Rents and leases 150,785 141,644 Utility services 34,220 33,805 Other activities 202,976 208,551

1,219,304 1,110,253

Operating income was generated mainly in the Netherlands. Income from other activities was generated primarily by car parking fees, services and activities charged on and advertising.

Costs of work contracted out and other external costs This item can be broken down as follows:

1998 1997

Work contracted out 121,299 102,385 Energy purchased 39,992 40,551 Maintenance 60,977 67,283 Other external costs 152,828 145,164

375,096 355,383

Maintenance includes the allocation of NLG 20.6 million (1997: NLG 23 million) to the provision for major repairs.

Salaries and social charges 1998 1997

Salaries and wages 168,777 160,086 Pension charges 13,152 8,316 Social charges 18,992 7,161

200,921 175,563

The average workforce based on full-time equivalents employed by N.V. Luchthaven Schiphol and its group companies increased from 1,848 in 1997 to 1,928 in 1998.

Financial statements 61 In 1998, the remuneration of directors (including former directors) and supervisory directors pursuant to Article 383, Book 2 of the Netherlands Civil Code amounted to NLG 2,268,000 and NLG 304,000 respectively (1997: NLG 1,682,000 and NLG 300,000).

Depreciation 1998 1997 1998 annual report Schiphol Group Tangible fixed assets – Runways, taxiways and aprons 23,666 22,197 – Land and roads 20,044 17,774 – Buildings 72,051 69,397 – Installations 61,881 62,826 – Other fixed assets 23,031 22,294

200,673 194,488 Additional depreciation in relation to disposals 15,095 12,840

215,768 207,328 Release from equalisation account for investment facilities -/- 1,040 -/- 857

214,728 206,471

Other operating expenses Other operating expenses include an amount of NLG 51.8 million (1997: NLG 55.0 million) in relation to net allocations to provisions (allocation less release). For further information about the allocation, please consult the notes to the balance sheet.

Financial income and expense This item can be broken down as follows:

1998 1997

Interest income 13,840 13,175 Interest expense -/- 70,280 -/- 58,214 Other financial results -/- 1,108 690

-/- 57,548 -/- 44,349

Taxation Taxation relates to tax on the income from foreign investments.

62 Financial statements Share in income from investments This item includes shares in income from unconsolidated investments. As a result of (local) legislation and regulations, the principal entities are exempt from profits tax.

Schiphol, April 9, 1999

1998 annual report Schiphol Group

For the 1998 consolidated financial statements:

Supervisory Board R.J. Nelissen, chairman S. Patijn, vice-chairman Dr A. van Es H.H.M. Groen J.M. Hessels P.J. Kalff Dr J. Kremers F.C. Rauwenhoff H.J. Simons T.H. Woltman

Board of Management G.J. Cerfontaine, President & Chief Executive Officer R. Uijlenhoet, Executive Vice-President & Chief Operational Officer Dr P.M. Verboom, Executive Vice-President & Chief Financial Officer

Financial statements 63 Corporate balance sheet as of December 31, 1998 (afte

Assets December 31, 1998 December 31, 1997

Fixed assets

Tangible fixed assets – Runways, taxiways and aprons 483,092 432,253 1998 annual report Schiphol Group – Land and roads 449,935 561,528 – Buildings 1,039,119 1,434,666 – Installations 367,099 428,282 – Other fixed assets 73,213 86,729 – Assets under construction 474,712 149,515

2,887,170 3,092,973

Financial fixed assets 604,166 163,864

3,491,336 3,256,837 Current assets Stock 5,386 4,949 Debtors 226,548 206,705 Liquid assets 300,462 280,642

532,396 492,296

4,023,732 3,749,133

64 Financial statements r appropriation) (in NLG 1,000)

Liabilities December 31, 1998 December 31, 1997

Shareholders’ equity Issued capital 171,255 171,255 Revaluation reserve 951,825 889,099 Statutory reserves for investments 7,215 5,312 1998 annual report Schiphol Group Reserve for translation differences -/- 26,185 -/- 12,146 Other reserves 1,457,898 1,207,189

2,562,008 2,260,709

Equalisation account for investment facilities 16,270 17,659

Provisions Major repairs 46,926 51,663 Early retirement 54,100 59,251 Other provisions 99,232 59,725

200,258 170,639

Long-term liabilities 853,654 1,000,489 Current liabilities 391,542 299,637

4,023,732 3,749,133

Corporate profit and loss account for the year 1998

(in NLG 1,000) 1998 1997

Operating result 257,846 242,213 Share in income from investments 39,766 4,537

Net result 297,612 246,750

Financial statements 65 Notes to the corporate accounts (in NLG 1,000)

General The principles of valuation and determination of result used for the corporate accounts are identical to those used for the consolidated accounts. Reference is made, therefore, to the notes to the consolidated accounts. If the notes to the corporate accounts do not show any material differences with the notes to the consolidated accounts, they have not been included.

1998 annual report Schiphol Group During the past year, various activities and related assets and liabilities were placed in a number of newly-incorporated subsidiaries (private limited liability companies (BVs)). The following summaries of transactions refer to these changes as “BV incorporation”.

Tangible fixed assets This item can be broken down as follows:

Runways, Land Buildings Installations taxiways and and roads aprons

Composition at year end Cost 708,397 519,371 1,317,219 857,208 Revaluation 357,357 231,243 427,979 207,269

Replacement value 1,065,754 750,614 1,745,198 1,064,477 Depreciation -/- 582,662 -/- 300,679 -/- 706,079 -/- 697,378

Book value at year end 483,092 449,935 1,039,119 367,099 Book value at beginning of year -/- 432,253 -/- 561,528 -/- 1,434,666 -/- 428,282

Changes during the financial year 50,839 -/- 111,593 -/- 395,547 -/- 61,183

Movements during the financial year Additions 69,065 25,012 24,232 34,916 Disposals -/- 2,586 – -/- 457 -/- 1,212 Change as a result of BV incorporation -/- 1,395 -/- 133,587 -/- 375,158 -/- 46,836 Revaluation not effected as a result of disposals -/- 148 – -/- 4,285 -/- 213 Revaluation 8,458 12,866 16,126 7,443 Recategorisation – – – 2,006 Depreciation -/- 22,555 -/- 15,884 -/- 56,005 -/- 57,287

Total changes during the financial year 50,839 -/- 111,593 -/- 395,547 -/- 61,183

66 Financial statements 1998 annual report Schiphol Group

Other fixed assets:

Other Assets not Assets Total fixed conducive to under assets the production construction process

219,378 1,269 474,712 4,097,554 512 – – 1,224,360

219,890 1,269 474,712 5,321,914 -/- 147,813 -/- 133 – -/- 2,434,744

72,077 1,136 474,712 2,887,170 -/- 84,272 -/- 2,457 -/- 149,515 -/- 3,092,973

-/- 12,195 -/- 1,321 325,197 -/- 205,803

12,403 – 325,902 491,530 -/- 759 – – -/- 5,014 -/- 1,053 -/- 1,296 -/- 705 -/- 560,030

– – – -/- 4,646 105 – – 44,998 -/- 2,006 – – – -/- 20,885 -/- 25 – -/- 172,641

-/- 12,195 -/- 1,321 325,197 -/- 205,803

Financial statements 67 Financial fixed assets This item can be broken down as follows:

Investments Amounts Other Amounts Other Total in group owed by investments owed by debtors companies group other 1998 annual report Schiphol Group companies investments

Book value at beginning of financial year 6,980 114,635 33,291 2,958 6,000 163,864 Change as a result of BV incorporation 263,336 123,822 – – – 387,158 Investments 2,500 – – – – 2,500 Disposals – – -/- 39 – – -/- 39 Withdrawals and repayments – 13,379 – – 200 13,579 Result 35,630 – 4,136 – – 39,766 Dividend -/- 378 – -/- 2,113 – – -/- 2,491 Translation differences -/- 1,780 -/- 13,256 – – – -/- 15,036 Other changes 4,817 10,248 – – -/- 200 14,865

311,105 248,828 35,275 2,958 6,000 604,166

Shareholders’ equity Movements in shareholders’ equity can be broken down as follows:

Issued Revaluation Statutory Reserve for Other Total capital reserve reserve for translation reserves investments differences

Balance at beginning of financial year 171,255 889,099 5,312 -/- 12,146 1,207,189 2,260,709 Revaluation – 64,986 – – – 64,986 Allocation from 1998 profit appropriation – – 3,477 – 249,135 252,612 Changes – -/- 2,260 -/- 1,574 -/- 14,039 1,574 -/- 16,299

Balance at year end 171,255 951,825 7,215 -/- 26,185 1,457,898 2,562,008

68 Financial statements Issued capital

Shareholders: The State of the Netherlands 129,880 75.8% The City of Amsterdam 37,276 21.8% The City of Rotterdam 4,099 2.4% 1998 annual report Schiphol Group

171,255 100.0%

The authorised capital amounts to NLG 300,000,000 and is divided into 300,000 shares of NLG 1,000 each.

Revaluation reserve The revaluation reserve consists of the revaluation reserve for tangible fixed assets and the revaluation reserve for investments. The change in the revaluation reserve for tangible fixed assets totals NLG 49.9 million. Of the balance at year end, i.e. NLG 951.8 million, NLG 239 million relates to revaluation yet to be realised. During the financial year, an amount of NLG 15.1 million was added to the revaluation reserve for investments as a result of the difference between the acquisition price and the net asset value of an investment acquired during the reporting year. This amount will be released to the result over a five-year period.

Statutory reserve for investments The withdrawal in the sum of NLG 1,574,000 concerns the dividend distributions by investments that are added to the other reserves.

Reserve for translation differences The reserve for translation differences accounts for exchange differences resulting from the translation of net foreign investments.

Financial statements 69 Contingencies and commitments not included in the balance sheet This item is broken down in the notes to the consolidated balance sheet. The company filed a declaration of joint and several liability as referred to in Article 403, Book 2 of the Netherlands Civil Code for a number of group companies (p. 73: Overview of investments). In addition, the company has assumed joint and several liability for the debts of V.O.F. Proefdraaiplaats Holding 27. There is also a contingent liability to pay up in full the issued capital of Ontwikkelingsmaatschappij Nieuw-Rotterdam 1998 annual report Schiphol Group Airport N.V. up to an amount of NLG 3.3 million.

Schiphol, April 9, 1999

For the 1998 corporate financial statements:

Supervisory Board R.J. Nelissen, chairman S. Patijn, vice-chairman Dr A. van Es H.H.M. Groen J.M. Hessels P.J. Kalff Dr J. Kremers F.C. Rauwenhoff H.J. Simons T.H. Woltman

Board of Management G.J. Cerfontaine, President & Chief Executive Officer R. Uijlenhoet, Executive Vice-President & Chief Operational Officer Dr P.M. Verboom, Executive Vice-President & Chief Financial Officer

70 Financial statements Other Information

Profit appropriation according to the articles of association Article 25 of the company's articles of association contains the following provisions on profit appropriation:

1. Without prejudice to the provisions of Article 105, Book 2 of the Netherlands Civil Code, the profit pursuant to the approved financial statements is reserved, unless the General Meeting 1998 annual report Schiphol Group of Shareholders resolves to make profit distributions.

2. Subject to the approval of the Supervisory Board of a proposal presented by the Board of Management, the General Meeting of Shareholders decides on the appropriation of the amounts thus reserved.

Proposed profit appropriation Result NLG 297,612

With due observance of Article 25 of the articles of association, it is proposed to appropriate the profit as follows:

Addition to the statutory reserve for investments -/- NLG 3,477

NLG 294,135 Dividend distribution -/- NLG 45,000

Addition to the other reserves NLG 249,135

Financial statements 71 Auditor’s report

Introduction We have audited the 1998 financial statements of N.V. Luchthaven Schiphol, Schiphol. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

Scope 1998 annual report Schiphol Group We conducted our audit in accordance with auditing standards generally accepted in the Netherlands. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion In our opinion, the financial statements give a true and fair view of the financial position of the company as at December 31, 1998 and of the result for the year then ended in accordance with accounting principles generally accepted in the Netherlands and comply with the financial reporting requirements included in Part 9, Book 2 of the Netherlands Civil Code.

Amsterdam, April 9, 1999

PricewaterhouseCoopers N.V.

72 Financial statements Overview of investments

Group companies Location interest as a % Schiphol Belgium N.V. Antwerp 100 Schiphol Australia PTY Ltd. Brisbane 100 Schiphol North America Holding Inc. Delaware 100 Eindhoven Airport N.V. Eindhoven 50.5 Schiphol Asia Sdn. Bhd. 100 1998 annual report Schiphol Group N.V. Luchthaven Lelystad Lelystad 100 Schiphol USA Inc. New York 100 Nieuw-Rotterdam Airport Development Company N.V. Rotterdam 60 Rotterdam Airport B.V. 1) Rotterdam 100 Rotterdam Airport Supplies Services B.V. Rotterdam 100 Balnag B.V. Schiphol 100 Facility Management Schiphol B.V. Schiphol 100 Oneport B.V. Schiphol 100 Schiphol Dienstverlening B.V. 1) Schiphol 100 Schiphol International B.V. Schiphol 100 Schiphol Project Consult B.V. 1) Schiphol 100 Schiphol Real Estate B.V. 1) Schiphol 100 Schiphol Real Estate Eindhoven B.V. Schiphol 100 Schiphol Real Estate Eindhoven Finance B.V. Schiphol 100 Schiphol Utility Services B.V. 1) Schiphol 100 Fricla B.V. Utrecht 100 Luchthaven Schiphol Management Dienste GmbH Vienna 100

Other investments

Beijing GSA Aviation Business Management Corporation Ltd. 33 1/3

Brisbane Airport Corporation Ltd. Brisbane 15 1/3 Flight Forum Beheer B.V. Eindhoven 50 Flight Forum C.V. Eindhoven 49 P.T. Angkasa Pura Schiphol 50 JFK Joint Venture New York 40 Beheer Personeelsrestaurant Schiphol B.V. Schiphol 40 Cargonaut B.V. Schiphol 37 Quality Park B.V. Schiphol 25 Schiphol Area Development Company N.V. Schiphol 25

Schiphol Telematics B.V. Schiphol 331/3 V.O.F. Proefdraaiplaats Holding 27 Schiphol 50 Flughafen Wien AG Vienna 1

1) Article 403, Book 2 of the Netherlands Civil Code applies. 73 Appendices

Appendix Ia Traffic and transport at Amsterdam Schiphol 1998 1997 Change compared with 1997 as a % 1998 annual report Schiphol Group

Passengers (incl. transit-direct passengers) 34,420,143 31,569,977 + 9.0

Air cargo (in tonnes) 1,171,256 1,161,234 + 0.9

Air mail (in tonnes) 47,490 46,048 + 3.1

Air transport movements 376,810 349,476 + 7.8 Other aircraft movements 15,887 18,049 – 12.0

Total aircraft movements 392,697 367,525 + 6.8

Appendix Ib Traffic and transport at Rotterdam Airport 1998 1997 Change compared with 1997 as a %

Passengers (incl. transit-direct passengers) 582,506 484,150 + 20.3

Air cargo (in tonnes) 2,564 2,035 + 26.0

Air mail (in tonnes) – 1 –

Air transport movements 18,631 20,040 – 7.8 Other aircraft movements 81,545 89,916 – 10.3

Total aircraft movements 100,176 110,006 – 9.8

74 Appendices Appendix Ic Traffic and transport at Eindhoven Airport 1998 1997 Change compared with 1997 as a % 1998 annual report Schiphol Group

Passengers (incl. transit-direct passengers) 288,055 271,285 + 6.2

Total aircraft movements 14,535 15,286 – 4.9

Appendix Id Traffic and transport at Lelystad Airport 1998 1997 Change compared with 1997 as a %

Total aircraft movements 127,344 134,776 – 5.5

Appendices 75 Appendix II Air transport movements at Amsterdam Schiphol per continent in 1998

Scheduled Change Non- Change Change Total change compared scheduled compared compared compared with 1997 with 1997 with 1997 1998 annual report Schiphol Group as a % as a % as a %

Europa-EU 248,636 + 9.0 16,748 + 3.7 265,384 + 8.6 Europa (non EU) 43,863 + 7.8 5,302 + 6.0 49,165 + 7.6 North America 20,616 + 7.5 1,130 – 10.6 21,746 + 6.4 Central and South America 5,170 + 1.5 1,545 + 18.3 6,715 + 4.9 Africa 7,177 + 10.7 2,089 – 8.6 9,266 + 5.7 Middle East 8,538 + 3.5 1,168 + 12.4 9,706 + 4.5 14,037 + 3.1 791 – 11.6 14,828 + 2.2

Total 348,037 + 8.2 28,773 + 3.0 376,810 + 7.8

Appendix III Passenger transport at Amsterdam Schiphol per continent in 1998

Scheduled Change Non- Change Change Total change compared scheduled compared compared compared with 1997 with 1997 with 1997 as a % as a % as a %

Europa-EU 16,122,500 + 11.5 2,546,573 + 10.1 18,669,073 + 11.3 Europa (non EU) 3,177,879 + 11.1 779,322 + 3.6 3,957,201 + 9.5 North America 4,755,460 + 6.4 148,498 + 8.9 4,903,958 + 6.4 Central and South America 1,316,048 + 2.5 150,348 + 2.8 1,466,396 + 2.5 Africa 1,114,281 + 10.8 178,961 – 17.8 1,293,242 + 5.7 Middle East 927,118 + 7.7 125,713 + 21.9 1,052,831 + 9.2 Far East 2,542,735 + 7.7 66,712 + 42.6 2,609,447 + 8.4

Total 29,956,021 + 9.7 3,996,127 + 7.5 33,952,148 + 9.4

Transit (counted once) 397,659 – 12.2 70,336 – 26.6 467,995 – 14.8

Total 30,353,680 + 9.4 4,066,463 + 6.7 34,420,143 + 9.0 76 Appendices Appendix IV Cargo transport at Amsterdam Schiphol per continent (in tonnes) in 1998

Scheduled Change Non- Change Change Total change compared scheduled compared compared compared with 1997 with 1997 with 1997 1998 annual report Schiphol Group as a % as a % as a %

Europa-EU 112,570 + 0.2 7,659 + 8.2 120,229 + 0.7 Europa (non EU) 24,467 + 1.9 2,719 – 23.1 27,186 – 1.3 North America 250,447 – 1.0 28,874 + 4.5 279,321 – 0.4 Central and South America 59,546 + 5.7 61,383 + 38.5 120,929 + 20.2 Africa 42,466 – 3.5 56,026 + 12.8 98,492 + 5.1 Middle East 169,793 – 4.9 18,303 + 5.6 188,096 – 4.0 Far East 300,661 + 2.9 36,342 – 29.2 337,003 – 1.9

Total 959,950 0.0 211,306 + 5.2 1,171,256 + 0.9

Appendices 77 Appendix V Comparison of the 10 major Western European airports

Air transport movements (x 1,000)

1998 1997 Growth as a %

1. London (1) 782.2 744.3 5.1 1998 annual report Schiphol Group 2. Paris (2) 663.5 632.6 4.9 3. Frankfurt 404.7 377.0 7.3 4. Amsterdam 376.8 349.5 7.8 5. Rome (3) 281.8 271.8 3.7 6. Brussels 280.5 254.7 10.1 7. Copenhagen 277.6 279.3 – 0.6 8. Madrid 265.8 252.4 5.3 9. 261.8 252.4 3.7 10. Zurich 252.1 241.5 4.4

3,846.8 3,655.5

Share of Amsterdam Schiphol: 9.8% (1997: 9.6%)

Passenger movements (transit-direct passengers counted once) (x 1,000)

1998 1997 Growth as a %

1. London (1) 96,651 90,362 7.0 2. Paris (2) 63,581 60,350 5.4 3. Frankfurt 42,734 40,262 6.1 4. Amsterdam 34,420 31,570 9.0 5. Rome (3) 26,134 25,876 1.0 6. Madrid 25,254 23,594 7.0 7. Munich 19,321 17,895 8.0 8. Zurich 19,301 18,269 5.6 9. Milan (4) 19,292 18,192 6.0 10. Brussels 18,485 16,054 15.1

365,173 342,424

Share of Amsterdam Schiphol: 9.4% (1997: 9.2%)

78 Appendices Air cargo (x 1,000 tonnes)

1998 1997 Growth as a %

1. London (1) 1,661.7 1,548.0 7.3 2. Frankfurt 1,333.5 1,373.2 – 2.9 1998 annual report Schiphol Group 3. Amsterdam 1,171.3 1,161.2 0.9 4. Paris (2) 1,089.8 1,129.5 – 3.5 5. Brussels 585.7 518.4 13.0 6. Luxembourg 385.9 337.7 14.3 7. Cologne 354.9 374.3 – 5.2 8. Zurich 329.8 335.0 – 1.6 9. Madrid 287.1 265.8 8.0 10. Rome (3) 221.5 253.4 – 12.6

7,421.2 7,296.6

Share of Amsterdam Schiphol: 15.8% (1997: 15.9%)

(1) London = Heathrow, Gatwick and Stansted

(2) Paris = Orly and Charles de Gaulle

(3) Rome = Fiumicino and Ciampino (4) Milan = Malpensa and Linate Appendices 79 Appendix VII Scheduled Airlines at Amsterdam Airport Schiphol as of December 31, 1998

Passenger/cargo airlines 45. Lithuanian Airlines 1. Adria Airways 46. LOT Polish Airlines 2. 47. 3. 48. Lufthansa Cityline 4. Air Aruba 49. Macedonian Airlines 5. Air Engiadina 50. Maersk Air 1998 annual report Schiphol Group 6. Air 51. Airlines 7. Air Malta 52. Malev Hungarian Airlines 8. Air Moldova 53. Holland 9. Alitalia 54. Meridiana 10. Armenian Airlines 55. 11. 56. Olympic Airways 12. Balkan Bulgarian Airlines 57. PIA International 13. Bellview 58. Regional Airlines 14. Braathens SAFE 59. Royal Air Maroc 15. 60. Royal Jordanian 16. British Airways (Maersk Air Ltd) 61. Sabena 17. British Midland Airways 62. Airlines 18. Airways 63. 19. Airlines 64. Suckling Airways 20. China Southern Airlines 65. Surinam Airways 21. City Flyer Express 66. Swissair 22. 67. Syrian Arab Airlines 23. 68. S.A.S. 24. Airways 69. TAP Air 25. Czech Airlines 70. Tarom 26. 71. THY 27. Easy Jet 72. Transavia Airlines 28. Air 73. 29. El-Al 74. Air 30. Estonian Air 75. Tyrolean Airways 31. 76. T.A.C.V. Cabo Verde 32. EVA Air 77. International Airlines 33. 78. United Airlines 34. Garuda 79. Uzbekistan Airways 35. Iberia 80. US Airways 36. Icelandair 37. Air Cargo companies 38. Airlines 1. Asiana 39. Airlines 2. Emirates 40. Kuwait Airways 3. Korean Airlines 41. KLM 4. Nippon Cargo Airlines 42. KLM Cityhopper 5. Polar Air Cargo 43. KLM Exel 6. TMA of Libanon 80 44. KLM UK 7. Willow Jet