Annual Report at December 31, 2017 Contents

Annual Report At December 31, 2017 Contents

2 Letter to the Shareholders

4 Key figures and general information 5 The SEA Group 6 SEA Group structure and investments in other companies 8 Corporate Boards 9 2017 Key Financial Highlights & other indicators

11 2017 Directors’ Report 12 Significant events in 2017 14 Economic overview 17 Regulatory framework 20 Operating and financial overview 20 Traffic data 21 Income Statement 26 Reclassified balance sheet 28 Net financial position 28 Reconciliation between equity of the Parent and consolidated equity 29 SEA Group investments 31 Subsequent events 32 Outlook 33 Operating performance - Sector analysis 34 Commercial Aviation 41 General Aviation 42 Energy 45 Risk Management Framework 54 Main disputes outstanding at December 31, 2017 59 Other information 72 Corporate Governance System 77 Board of Directors’ proposals to the Shareholders’ meeting 77 Shareholders’ Meeting motions

78 SEA Group - Consolidated Financial Statements 79 Financial Statements 85 Explanatory Notes to the Consolidated Financial Statements 155 Auditors’ Report

161 SEA SpA - Separate Financial Statements 162 Financial Statements 168 Explanatory Notes to the Separate Financial Statements 238 Board of statutory auditors’ report to the shareholders’ meeting of SEA – Società Esercizi Aeroportuali S.p.A. 242 Auditors’ Report

248 Glossary

Annual Report 2017 • 1 Letter to the Shareholders

Dear Shareholders, represent the end of a long pe- 2017 passenger number growth riod of difficulty that began in of 14.1%, a gain of more than Our company enjoyed an excel- 2008 with the de-hubbing by Al- twice the Italian national average lent year in 2017, in terms of both italia and the dawn of a new era and outperforming the European traffic volumes - up by 9.0% for in which the Milan airport system average by 7.9 percentage points, passengers and by 7.1% for cargo, and its management company can finally approaching the previous compared to the Italian national legitimately aim to compete with high reached in 2007 and 27% averages of +6.4% and +9.2% re- Europe’s foremost airports, in above the low of 2009, having suc- spectively - and of operating re- keeping with the renewed ambi- ceeded in compensating for the sults, with an increase in EBITDA tions of the local community and structural loss of the portion of from Euro 239.8 million to Euro its metropolitan centre. its short- and medium-haul traffic 264.0 million (net of non-recurring (over 7 million passengers in 2007) revenues and costs), almost entire- Malpensa began a new chapter linked to Alitalia’s previous role as ly offsetting the impact of the im- in its history in 2017, ending its hub carrier. The process took a pairment of the Alitalia receivables traditional dualistic relationship decade to complete and was not and other non-recurring items. with Linate and returning to its an easy one. It was supported by originally intended role as a cru- efforts to promote Milan from The results for the year are also cial component of northern Italy’s 2015 and was also made possible significant as marking a funda- infrastructure serving both short by SEA’s commitment to revamp- mental shift, the effects of which and long-haul passenger and car- ing its infrastructure - beginning will persist for some time. They go routes. Malpensa reported for with the radical restyling of Ter- minal 1 - by boosting operating efficiency and by cultivating relationships with new carriers and routes. Today Malpensa is well po- sitioned to lay claim to being one of Europe’s foremost “point-to- point” intercontinental airports. Its competitive strengths include the number of airlines serving it, the lower level of concentration of these airlines than at most com- peting airports (the main airline carries approximately one-third of its passengers), its extensive cata- logue of routes and destinations and its significant potential for additional development before reaching the levels of saturation typical of many other large and mid-size European airports, which not infrequently prove highly con- straining for growth. Malpensa is

Annual Report 2017 • 2 Europe’s fifth-largest cargo -air sustainable, high-quality devel- tinues, in constant pursuit of the port and in 2017 it accounted for opment. The quality of growth is best possible balance between 52% of the total volume of goods particularly focused on - as also opportunities for airport growth handled by Italian airports. shown by this Annual Report - a valuable means of connecting which for the first time includes, communities and providing em- As Malpensa grows, Linate is as required by law, a Non-Financial ployment - and strict compliance consolidating its traffic volumes Report dedicated to social, envi- with environmental restrictions. (while posting a 1.4% decline in ronmental and governance sus- The process of drafting and ap- passengers tied to the transfer tainability, alongside the Financial proving the Malpensa Master Plan of several Continental routes to Statements. is based on a transparent, partici- Malpensa). It remains essential to patory process that is destined to business traffic and continues to The aspects of sustainability con- yield positive results. rank among the best-connected sidered extend to all of the crucial city airports in Europe located in a dimensions of an airport’s exist- The positive trends witnessed in major metropolitan centre. ence, starting with the fundamen- 2017 continued in the first part of tal value of security. The company the new year. New domestic, Euro- Considerable investments contin- remains committed to refining its pean and intercontinental routes ued to be rolled out in 2017, for methods of measuring the actual have been announced and the a total spend of Euro 85.0 million, and perceived quality of our infra- plan to develop Air Italy is soon to evenly divided between the two structure and the related services, be launched, with the potential to airports. Investments are set to while continuing to improve them. propel Malpensa to regain its posi- proceed in the coming years in ac- In 2017 progress was made on al- tion as an intercontinental hub in cordance with the company’s stra- most all indicators, but there is the coming years - a phenomenon tegic plans: the restyling of Linate always room for further improve- which could entail a significant has already begun and is scheduled ment. rise in passenger numbers. for completion by 2020, Malpen- sa’s Terminal 2 will be renovated Collaborative, concerted and mo- In conclusion, the efforts made and a further cycle of renovations tivated shareholders are also es- by SEA - even in difficult years - to will be carried out at Terminal 1, in sential to sustainable growth. The protect and develop a harmonious addition to the initiatives essential company has set itself challenging airport system with the capacity to ensuring that flight and passen- organisational goals, based on for sustainable growth, capable ger accommodation infrastructure investing in individual responsi- of living up to the ambitious goals remains constantly up-to-date and bility in view of trust, proactive and potential of its community, the cargo business is able to con- collaboration and a result-orient- bore fruit in 2017 - in terms of tinue to grow. ed approach, which are expect- both operating results and traffic ed to yield measurable results in growth. Now the challenge is to Such growth is entirely compatible terms of the quality of the overall ensure excellence, to promote the with the company’s financial situa- performance and the sustaina- development of the Milan metro- tion. Our steadily rising operating bility of results over the medium politan area and to provide Lom- revenues permit the self-funding term. Within the framework of bardy with increasingly efficient, of investments, while also paring constant, transparent dialogue accessible and well-connected air- back debt and without compro- with trade unions, SEA remains ports, to help meet the challeng- mising dividend payouts. EBITDA committed to training (dedicating es posed by globalisation and to was in fact driven by the rise in rev- over 57,000 hours, equivalent to boost the region’s attractiveness enues generated by both aviation training for 33 people every day), and hospitality. SEA has prepared (+Euro 33.0 million) and non-avia- improving working conditions and itself for this challenge above tion (+Euro 9.2 million) business, safeguarding company welfare. all through the dedication of its combined with a containment of The many facets of this commit- workers, who deserve the compa- operating costs. Operating costs - ment include measures aimed at ny’s gratitude for the results that adjusting for components tied to meeting old and new needs and have been achieved thus far and the increase in volumes and public initiatives that seek to set a better that will certainly continue into fees - were in line with 2016. work-life balance. the future.

SEA is committed to building on As part of this same process, dia- its current success in pursuit of logue with local communities con-

Annual Report 2017 • 3 Key figures and general information KEY FIGURES AND GENERAL INFORMATION

The SEA Group

The SEA Group manages the Mal- ◼◼ Terminal 2 is easyJet’s main the restyling project, which is to pensa and Linate airports under a base of operations in Europe, involve thorough renovation of 40-year agreement signed by SEA serving a broad network of des- the entire airport. and the Italian Civil Aviation Au- tinations. Following the exten- ◼◼ Milan Linate Prime, an airport thority in 2001. The Milan airport sion of the rail network, which managed by SEA Prime SpA, system consists of the following already connected Milan with a subsidiary of SEA SpA. Ded- airports: Terminal 1, Terminal 2 can now icated to general aviation, its also be reached by train. services and facilities provide ◼◼ Milan Malpensa, Milan’s inter- ◼◼ Milan Malpensa Cargo is the significant added value. continental airport, consisting nerve centre of inbound and of two terminals. Terminal 1, outbound cargo distribution in Finally, through SEA Energia (a which was fully renovated fol- Italy. Nineteen all-cargo airlines wholly-owned subsidiary of SEA lowing the completion of the operate out of Malpensa Cargo. SpA), the Group owns two co-generation plant, mainly meeting the restyling of the Schengen area, ◼◼ Milan Linate primarily serves serves a wide range of domes- frequent-flyers travelling to energy needs of the Linate and Malpensa airports, providing elec- tic, international and interconti- destinations in Italy and the EU. tricity, heat and district cooling. nental destinations and is home Just 8 KM from Milan city cen- to a diverse assortment of tre, Linate is truly a city airport, stores, restaurants and services with structures and areas dedi- which meet the needs of all of cated to business and shopping. the airport’s passengers. Ground was broken in 2017 on

Annual Report 2017 • 5 KEY FIGURES AND GENERAL INFORMATION

SEA Group structure and investments in other companies

DIRECT AND INDIRECT INVESTMENTS OF SEA SPA AT DECEMBER 31, 2017

SEA SpA

Airport Commercial management Utilities activities Other activities Handling

S.A.C.B.O. SpA SEA Energia Dufrital SpA Romairport Signature Società per SpA Srl Flight Support l’aeroporto 40% Italy Srl civile di 100% 0.23% Bergamo - 39.96% Orio al Serio SEA Services Disma SpA Srl SITA Società 30.98% Cooperativa Malpensa 18.75% 40% arl (**) Logistica Europa SpA Aeropuertos 6 shares Argentina 25% 2000 SA (*) 8.5%

SEA Prime SpA 99.91%

Controlling shareholding Associate Investment in other companies

(*) With regards to SEA’s investment in AA2000, reference should be made to Note 6.5 of the separate financial statements of SEA SpA. (**) In February 2018, SEA SpA submitted a request for withdrawal from SITA SC.

The SEA Group included the fol- ers’ Meeting approved the liq- ◼◼ the liquidation of Consorzio lowing companies in liquidation at uidator’s final statement of- ac Malpensa Construction was December 31, 2017: counts and related distribution concluded on October 31, 2017 ◼◼ Consorzio Milano Sistema in liq- plan for the company SEA Han- with the presentation and ap- uidation (10% SEA SpA). dling, a wholly-owned subsid- proval of the liquidator’s final iary of SEA SpA. The company statement of accounts and It should be noted that: was removed from the Compa- shareholders’ distribution plan ◼◼ on July 10, 2017 the Sharehold- nies Register on July 25, 2017; Malpensa Construction.

Annual Report 2017 • 6 KEY FIGURES AND GENERAL INFORMATION

Share Capital structure PUBLIC SHAREHOLDERS 9 entities/comp.

(*) The share capital of SEA amounts Municipality of Milan 54.81% to Euro 27,500,000, comprising Province of Varese 0.64% 250 million shares of a par value of Euro 0.11, of which 137,023,805 Municipality of Busto Arsizio 0.06% Class A shares, 74,375,102 Class Other public shareholders 0.08% B shares and 38,601,093 other shares. Total 55.59% The Class A shareholders upon divestment resulting in the loss of control must guarantee Class B shareholders a right to co- sale. Class A shareholders have a PRIVATE SHAREHOLDERS pre-emption right on the sale of 2i Aeroporti SpA 35.75% Class B shares. F2i Sgr SpA (**) 8.62% At December 31, 2017, SEA does Other private shareholders 0.04% not hold treasury shares. The ownership structure is as follows: Total 44.41%

(*) Holder of Class A shares.

(**) On behalf of F2i - second Italian Fund for infrastructure.

0.82% Others

8.62% F2i Sgr SpA

35.75% 54.81% 2i Aeroporti SpA Municipality of Milan

On February 15, 2018, the shares Following the issuance of the bond defined in Article 16, paragraph 1, held by the Province of Varese designated “SEA 3 1/8 2014-2021” letter a) of Legislative Decree No. were purchased by 2i Aeroporti on April 17, 2014 and the admis- 39/2010. SpA Accordingly, as at the date sion to listing of the notes on the of approval of this report, public regulated market organised and shareholders held a 54.9% inter- managed by the Irish Stock Ex- est and private shareholders a change, the Company qualified 45.1% interest. as a Public Interest Entity (PIE) as

Annual Report 2017 • 7 KEY FIGURES AND GENERAL INFORMATION

Corporate Boards

Board of Directors (three-year period 2016/2018, appointed by the Shareholders’ Meeting of May 4, 2016)

Chairperson Pietro Vitale Antonio Modiano

Directors Armando Brunini (1) (2) Salvatore Bragantini (3) (4) Michaela Castelli (2) (5) Stefano Mion (3) Susanna Stefani (3) Susanna Zucchelli (2)

Board of Statutory Auditors (three-year period 2016/2018, appointed by the Shareholders’ Meeting of May 4, 2016)

Chairperson Rosalba Cotroneo

Statutory Auditors Rosalba Casiraghi Andrea Galli Paolo Giovanelli Giacinto Gaetano Sarubbi

Alternate Auditors Anna Maria Allievi Andrea Cioccarelli

Independent Audit Firm Deloitte & Touche SpA

(1) Vice Chairman. (2) Member of the Control and Risks Committee. (3) Member of the Remuneration and Appointments Committee. (4) Member of the Ethics Committee. (5) Member of the Supervisory Board.

Note: The Shareholders’ Meeting of May 3, 2017 appointed Michaela Castelli to the Board of Directors, replacing Arabella Caporello. On September 21, 2017, the Board of Directors, following the resignation of Ms. Zucchelli from the role of Chairperson of the Control and Risk Committee, appointed Director Salvatore Bragantini as a member of the Remuneration and Appointments Committee, in replacement of the Director Michaela Castelli, appointing her as Chairperson of the Control and Risks Committ.

Annual Report 2017 • 8 KEY FIGURES AND GENERAL INFORMATION

2017 Key Financial Highlights & other indicators

The key consolidated highlights from the financial statements are illustrated below.

OPERATING RESULTS

(Euro thousands) 2017 2016 Change Revenues 725,979 700,134 25,845 EBITDA (1) 243,006 234,403 8,603 Operating Profit 127,890 149,999 (22,109) Profit before taxes 118,116 141,037 (22,921) Discontinued Operations profit/(loss) (2) 1,556 (130) 1,686 Group Net Profit 84,070 93,619 (9,549)

(1) EBITDA is calculated as the difference between total revenues and total costs, excluding provisions and write-downs. (2) The “Discontinued operations net result” includes the net result of the company SEA Handling SpA in liquidation, as per IFRS 5.

FINANCIAL DATA

at December 31, at December 31, (Euro thousands) Change 2017 2016 Fixed assets (A) 1,319,249 1,317,157 2,092 Net Working Capital (B) (183,837) (188,683) 4,846 Provisions for risks and charges (C) (169,935) (174,061) 4,126 Employee provisions (D) (47,834) (49,220) 1,386 Other non-current payables (E) (17,588) (17,588) Net capital employed (A+B+C+D+E) 900,055 905,193 (5,138) Group Net Equity 391,154 375,264 15,890 Minority interest net equity 23 566 (543) Net financial debt 508,878 529,363 (20,485) Total sources of financing 900,055 905,193 (5,138)

(A) Fixed assets, including those falling under IFRIC 12, are expressed net of those funded by State and European Union contributions. At December 31, 2017, they amounted to Euro 504,383 thousand and Euro 7,019 thousand respectively (at December 31, 2016, Euro 503,601 thousand and Euro 5,517 thousand respectively).

Annual Report 2017 • 9 KEY FIGURES AND GENERAL INFORMATION

at December 31, at December 31, (Euro thousands) Change 2017 2016 Tangible and intangible asset investments 72,140 69,487 2,653

OTHER INDICATORS

at December 31, 2017 at December 31, 2016 NFP/EBITDA 2.09 2.26 HDC Employees 2,837 2,866

TRAFFIC (COMMERCIAL AND GENERAL AVIATION)

Passengers (.000.000) Movements (.000) Cargo (.000 tons)

29.0 31.6 285.4 296.7 549.4 588.5 11.9 12.6 9.5 9.7 118.5 117.7 2.6 11.3 39.1 (+8.9%) (+4.0%) (+7.1%) 536.9 576.5 22.0 19.3 166.8 179.0

2016 2017 2016 2017 2016 2017

Malpensa Linate

Annual Report 2017 • 10 2017 Directors’ Report 2017 DIRECTORS’ REPORT

Significant events in 2017

Alitalia in Extraordinary ber 2017. SEA filed an application Liquidation of for admittance to liabilities within Administration the deadlines set by the Court of SEA Handling SpA Civitavecchia which, with the rul- The decree of the Minister of With the Shareholders’ Meeting ing of May 11, 2017, declared Al- Economic Development of May of July 10, 2017, the liquidation of italia in Extraordinary Administra- 2, 2017 declared the opening of SEA Handling SpA, which started tion’s insolvency status. the Extraordinary Administration on July 1, 2014, was completed Procedure of Alitalia SAI SpA pur- following the decision taken by suant to Art. 2, paragraph 2 of the Extraordinary Shareholders’ Decree-Law No. 347/2003. Mr. Liquidation of Malpensa Meeting of SEA Handling held Luigi Gubitosi, Prof. Enrico Laghi Construction Consortium on June 9, 2014. The decision to and Prof. Stefano Paleari were liquidate the company was the appointed as Extraordinary Ad- On February 22, 2017, the Board alternative execution plan of the ministrators. A first interest-bear- of Directors of SEA SpA resolved European Commission’s Decision ing loan of Euro 600 million and to authorise the dissolution and of December 19, 2012 concern- a second loan of Euro 300 million liquidation of the Malpensa Con- ing the alleged State aid granted were granted with Decree No. 55 struction Consortium. On March to SEA Handling. The company’s of May 2, 2017 laying down urgent 15, 2017, the Consortium’s Board Shareholders’ Meeting approved measures to ensure the continuity of Directors passed a resolution ap- the liquidation financial state- of the service provided by Alitalia proving dissolution and liquidation. ments at June 30, 2017 and the SpA. The full amount of sums lent The liquidation of Consorzio Mal- associated distribution plan, au- must be repaid by September 30, pensa Construction was concluded thorising the Liquidator to re- 2018 in pre-deduction with pri- on October 31, 2017 with the pres- quest that SEA Handling SpA in ority over any other debt in the entation and approval of the liqui- liquidation is removed from the procedure as envisaged by the De- dator’s final statement of accounts competent Companies Register. cree-Law on tax approved in Octo- and shareholders’ distribution plan. The Liquidator was also given a mandate to sign all the necessary and resultant documents. The liquidator has arranged to pay the sole shareholder SEA SpA the sum of Euro 8,376,054 resulting from the distribution plan.

Acquisition of SEA Prime SpA shares

On September 7, 2017, SEA SpA acquired an additional 150,431 shares of SEA Prime SpA, which it already controlled, increasing its stake to 99.91%.

Annual Report 2017 • 12 2017 DIRECTORS’ REPORT

the loan, the Proceedings in the between Terminal 1 and Termi- Court of Bari - being the man- nal 2 and the railway station. The agement company owned by an project, designed to improve Apulian group that entered into Malpensa Terminal 2’s connectiv- an arrangement with creditors ity with the centre of Milan saw in 2010, the new operator which the development of the Termi- acquired the management com- nal station by SEA and the rail- pany freed from the debt relating way connection constructed by to the property’s construction Ferrovienord. The T1-T2 railway and which signed the lease con- link represents the project’s first tract with SEA, and Marriott/Star- phase and connects Malpensa air- wood, the holder of the brand’s port to the main railway network. contract of use and the associated hotel management contract signed with the Sheraton Malpen- sa’s management company.

Restyling of Milan Linate Airport

Restyling works on the Milan Li- SEA’s acquisition of nate Airport commenced in July the Sheraton Malpensa 2017. The project, which will be completed in 2022, envisages a property diluted investment plan over the years for a total amount of Euro The transaction through which 60.3 million. The first phase was SEA acquired ownership of the launched in the first half of the Sheraton Malpensa building was year and involved the redesign finalised on December 18, 2017. of the facade as the main inter- vention. Completion is scheduled The property acquired by SEA for April 2018. The first phase was simultaneously leased to the also includes the complete ren- company that manages the ho- ovation of the arrivals area and tel, which was in turn acquired the baggage claim area through by a new entity in full operational the installation of new false ceil- continuity. With the proceeds of ings and stoneware lined walls the sale and SEA’s waiver of ex- to improve the perception of the isting receivables amounting to air terminal’s height and width. Euro 6,287 thousand, together Works are carried out through with other financial transactions, micro-construction sites, with day the management company was and night activities for minimum therefore able to pay (with the impact on airport operations. write-off of part of the initial debt) the four banks which had financed the construction of the building in 2007. For the trans- “Project of the Year” action’s conclusion, it was nec- Award at the Global essary to reach an agreement AirRail Awards 2017 between all the numerous actors involved in the hotel’s manage- SEA and Ferrovienord were ment, namely, the banks - which awarded the Project of the Year had financed the construction Award in the “Travelport Project and accepted the writing off of of the Year” category for the link

Annual Report 2017 • 13 2017 DIRECTORS’ REPORT

Economic overview

Economic growth re-emerged in omies. Global trade grew 3.5%, tem GDP forecast, growth of 2017, although was not accom- with strong imports in the Euro- 2.3% is indicated (2.4% in 2017). panied by significant inflation, zone and the emerging econo- which remains weak. mies of Asia (excluding China). Deflationary expectations have reduced, however inflation re- The short-term outlook is favour- Inflation in the major advanced mains low (1.4% in December); able, although risks remain for economies remains contained, the baseline component remains the global economy in view of while remaining moderate in the weak, slowed by still moderate possible increased volatility on major emerging economies. salary growth for many zone the financial markets on the back economies. The Board of the of an unexpected heightening of According to the OECD’s Novem- ECB recalibrated its monetary geo-political tensions and uncer- ber forecast, global GDP was policy instruments, while howev- tainty regarding economic poli- 3.6% and is expected to grow er maintaining highly expansive cies which may impact household slightly in 2018 (reaching 3.7%). monetary conditions going for- and business confidence. ward which remain necessary for The pick up in global growth over sustained inflation at levels lower Despite the reaching of an agree- the last two years appears to than but close to 2%. ment during the first phase of have been driven mainly by the the United Kingdom’s negotia- advanced economies. The Italian economy picked up in tions for exiting the European Q3 2017 on the back of both do- Union, the uncertainty regarding From the end of September mestic and overseas demand. The future relations between the two 2017, the upward trend of oil most recent economic indicators economies remains heightened. prices continued, driven by buoy- point to continued GDP expan- The outcome of the latest meet- ant global demand and the main- sion of 0.4% in the fourth quar- ing between the North American tenance of the agreement to con- ter, supported by an increase in Free Trade Agreement members tain supply among the major oil the value added by industry and (NAFTA) for its review introduces producing countries. The gradual services. Manufacturing activity a degree of unpredictability with reabsorption of global oil stocks continued to grow in the fourth regards to future international and geo-political tensions in the quarter of 2017, although to a trade agreements. The effects Middle East and in Venezuela lesser degree than the major ex- of the United States tax reform also contributed to this rise. At pansion of the summer. Business approved on December 20 last the end of November last, OPEC confidence remained high across (Tax Cuts And Jobs Act), reduc- and Russia announced a further the main sectors of the econo- ing tax rates for households and extension of the agreement until my, while the demand outlook of businesses, may however act as a 2018. Rising prices gave a fresh businesses further improved for stimulus for global growth. boost to US non-conventional en- industry and services, with invest- ergy production, increasing in No- ment conditions confirmed as In the third quarter of the year, vember last to historic highs. highly favourable. economic activity in the major advanced economies continued In the Eurozone, growth contin- According to the workforce pre- to expand, while the recovery in ued at a sustained pace, particu- liminary figures, the number of train from the first half of 2017 larly driven by overseas demand. those employed rose slightly in the continued for the emerging econ- According to the latest Eurosys- October-November period, while

Annual Report 2017 • 14 2017 DIRECTORS’ REPORT

contractual salaries were still con- Cargo business also performed quantity of cargo, shows signs of tained, although the first signs of a well in each region analysed. Asia, recovery with a growth of 12.4%. gradual improvement emerged. which moves the greatest quan- In the ranking reported by ACI tity of cargo (37 million tonnes), World, Malpensa places 44th in Although producer prices in- reports growth of 8.5 percentage terms of the quantity of cargo creased and some favourable points compared to 2016; Europe handled among the leading air- signs on salaries emerged, con- registered +8.7%, North America ports in the cargo sector (91 air- sumer inflation remains weak +7.3% and the Middle East +6.0%. ports transporting at least 200 (1.0% in December). Africa, while moving a modest thousand tons of cargo).

Air transport and airports

Global air transport performance - 2017 GLOBAL AIR TRAFFIC 2017 1 The global passenger traffic -per formance in 2017, on a sample of 1,056 airports, indicated growth Passengers (6.711 billion) ACI World ranking volumes of 6.4 points compared to 2016.

The market is growing in all areas; Europe registered the highest increase in percentage terms (+8.5%), followed by Asia (+7.8%), Africa (+5.9%) - recovering from last year, the Middle East (+4.7%), Central/South America (+4.3%) and North America (+3.5%). AFR ASP EUR LAC MEA NAM ACI Total 155.7 1,939.7 2,086.3 554.2 241.9 1,733.2 6,710.9 The world rankings classify Atlan- ta in North America, an area that handles 1.7 billion passengers, as the top airport for passenger traffic served (104 million passen- Cargo (100.9 million tonnes) 2017 ACI World ranking volumes gers, including 92 million linked to domestic traffic). In second place is Beijing (96 million passengers, including 74 million for domestic destinations) in Asia, an area that carries 1.9 billion passengers. In third place is Dubai (88 million passengers served), which represents the Middle East’s main hub with a 36% market share on a total of AFR ASP EUR LAC MEA NAM ACI Total 242 million passengers. 1.9 37.2 19.7 4.8 7.7 29.7 100.9

At global level (on a sample of 711 airports), cargo traffic increased 7.9 percentage points compared Key: AFR (Africa), ASP (Asia Pacific), EUR (Europe), LAC (Latin America), MEA (Middle East), to 2016, with 100.9 million tonnes NAM (North America). handled. 1 Source: ACI World (Pax Flash & Freight Flash).

Annual Report 2017 • 15 2017 DIRECTORS’ REPORT

European airport umes handled (576.5 thousand the national total: Milan Malpen- 2 tonnes) and in the top five, it sa contributed with 22.2 million, performances - 2017 ranks as second airport in terms Linate 9.5 million and Orio al Ser- of percentage growth (+7.4%) af- io airport 12.3 million. Overall growth in passenger traf- ter London Heathrow (+10.2%). fic for European airports associ- In the north-east, Venice and ated with ACI Europe was 6.2% Treviso carried 13.4 million pas- when compared to 2016, with 1.1 sengers (8% of the national to- billion passengers served. 2017 Italian airport traffic performance5 tal) and in Central Italy, Pisa and Florence 7.9 million passengers The main hubs3 , representing 36% (4% of the national total). In of total passenger traffic in asso- Air traffic for the 38 airports as- Apulia, the airport system (Bari, ciated airports, grew 4.8% on last sociated with Assaeroporti is in Brindisi, Foggia and Taranto) year; highlighted are Amsterdam continuous growth; in fact, 175.4 served 7 million (4% of the na- (+7.7%), Zurich (+6.3%), Frankfurt million passengers (+6.4%) were tional total), while Sicily (Catania, (+6.1%) and Madrid (+5.9%). Mal- reported for 2017 - 10.7 million Comiso, Lampedusa, Palermo pensa, with a growth of 14.2% more than the previous year. This and Trapani) and Sardinia (Al- over the previous year, stands out result is due to growth in interna- ghero, Cagliari and Olbia) served among the airports that handle tional traffic to both EU (+8.5%) 16.9 million (10% of the national ‘point-to-point’ traffic, followed and non-EU (+7.9%) countries total) and 8.3 million (5% of the by Brussels (+13.6%), Manches- and the increase in domestic traf- national total), respectively. ter (+8.6%), Barcelona (+7.1%) fic (+3.0%). and Dublin (+6.0%); Copenhagen re-confirmed last year’s results, 1.6 million aircraft movements while Berlin registered a decline (+3.2%) and 1.1 million tonnes of (-3.7%). cargo (+9.2%) were achieved.

Cargo traffic increased 7.2%, with Rome Fiumicino, followed by Mi- a total of 11.9 million tonnes han- lan Malpensa and Bergamo, are dled. listed in descending order in the 2 Source ACI Europe Rapid Data Exchange ranking of Italian airports in terms Programme (42 associated airports), Among the top five European of passenger numbers. Passenger arrivals+departures+transits. airports4 in terms of freight vol- 3 Airport hubs: Frankfurt, Amsterdam, Paris umes, Frankfurt is first with over The Rome airport system re- Charles de Gaulle, Zurich, Rome Fiumicino, Madrid and London Heathrow. 2.1 million tonnes, followed by ported a slight decrease (-0.6% 4 Excluded: Luxembourg, Cologne and Liege Paris Charles de Gaulle with 2.0 compared to 2016), with 46.9 which generate higher volumes of cargo million tonnes, Amsterdam with million passengers served. The transport than Malpensa, since not included 1.8 million and London Heathrow Lombardy airport system saw in ACI Europe’s Rapid Data Exchange Programme. with 1.7 million. Malpensa airport growth of 9.4% to reach 44 mil- 5 Source Assaeroporti (commercial aviation + ranks fifth in terms of cargo vol- lion passengers, equal to 25% of general aviation).

Annual Report 2017 • 16 2017 DIRECTORS’ REPORT

Regulatory framework

Setting of new fees In October 2017, ENAC published may entail more significant chang- the new fee levels applicable es: in particular, the main regu- The consultation process with air- from January 1, 2018, which indi- latory issues may be addressed port users was formally launched cate an average increase of 0.9% with this procedure, including the in July 2017 for the setting of the compared to those in effect in the assessment of Airport Operators’ new regulated fees for the year year 2017 - under the forecast in- market power, cost-efficiency fac- 2018. During the consultation, flation rate (1.7%, as reported in tors and their elasticity levels, the which also included two public the Update to the 2017 Economy determination of the rate of re- hearings with Linate and Mal- and Finance Document published turn on capital employed (WACC), pensa users in September, traffic by the Ministry for the Economy the treatment of the margin of trends, investment and service and Finance in September 2017). commercial activities and the de- quality and environmental pro- velopment of the Operator/Users tection parameters - alongside Negotiation Model. all the other elements that con- Revision of airport fee tribute to the setting of new tar- regulation models SEA does not apply the ART’s iffs - were presented to users. No regulation models since it is reg- appeals with regard to the above On July 7, 2017, the Italian Trans- ulated by the Supplementary fees were presented to ENAC (the port Regulation Authority (ART) Regulatory Agreement entered Italian Civil Aviation Authority) on published the new airport fee into with ENAC in 2011, pursuant conclusion of the consultations. regulation models. These models, to Article 17, paragraph 34-bis of which came into effect on pub- Decree-Law No. 78/2009, as con- lication, are the last act of a revi- verted with amendments by Law sion process that started with the 102 of August 3, 2009. “Call for input” in September 2016 and ended with the launch of the public consultation last April. The New significant domestic main changes contained in the and EU regulations new models drawn up by the ART at the end of the process and af- As regards the EU regulatory ter having acquired the contri- framework, in 2016 the European butions of various stakeholders Commission - DG MOVE - initiated refer to: the representativeness an assessment phase for Direc- and majority criteria within the tive 2009/12/EC of the European consultation, operators and us- Parliament and of the Council of ers’ disclosure obligations and the March 11, 2009 on airport fees, in rate of return calculation method order to verify the consistency of (WACC). the Directive’s application with its objectives and to consider wheth- The ART also proposed the start er the analysis requires the de- of a new additional procedure ployment of corrective measures. for the definition of an Innovative Regulatory Model, scheduled for As part of the Directive’s assess- implementation from 2019, which ment initiatives, the Commission

Annual Report 2017 • 17 2017 DIRECTORS’ REPORT

appointed a consultancy firm lation. Of particular interest for The combined two regulations (Steer Davies Gleave) to measure airport operators, Art. 10 con- do not guarantee any reimburse- the effectiveness and suitability cerns violations to the respec- ment to SEA from the successor of the applicable provisions. The tive competences, linked both at the end of the concession as consultancy firm began an open to the conditions of the Airport regards state-owned property consultation with airports, airlines Certificate (in the case of expiry, forming part of the Linate and and national regulators on certain suspension or revocation) and to Malpensa airports or for works relevant topics (tariffs, consul- infringements of other applicable and the infrastructures that SEA tations, regulatory authorities/ provisions, such as regulatory pro- built on them. bodies, etc.), by sending a ques- visions and/or requirements, and tionnaire in March to all European the procedures set out in the Air- The above two December meas- airports with traffic exceeding 5 port Manual. ures amended the fifth paragraph million passengers, airlines and of Art. 703 of the Navigation national regulators. SEA received The company’s progress on com- Code, establishing the right of the questionnaire and submit- pliance audits continues as part of outgoing concession holders to ted its position to Steer Davies EU Regulation No. 139/2014’s im- obtain a takeover value from the Gleave. plementation in collaboration be- incoming concession holder on tween the Legal and CMM (Com- the concession’s natural expiry. In December, the Commission pliance Monitoring Manager) It also established its calculation announced that the decision on Department, in view of the obser- methods. the possible amendment of the vations raised occasionally by the Directive will be postponed to a ENAC Inspection Team responsi- In particular, the amendments in later period after the end of the ble for supervisory functions. In question defined the scope for current Commission’s term (April this regard, Airport Manuals are calculating the takeover value 2019). In the meantime, it activat- constantly updated, and SEA also (buildings and fixed installations ed a new public consultation (In- introduced Airport Safety courses standing on the airport grounds), ception Impact Assessment - IIA), for third parties, specifically pro- the reimbursement’s valuation in view of the findings of Steer vided to all staff accessing airside criteria (value of the works at the Davies Gleave’s study to gather areas. takeover date, net of deprecia- additional evidence concerning tion and any public contributions the Directive. SEA also participat- resulting from regulatory cost ed in this consultation by sending New regulation accounting) and the requisites its position on the matter, which for inclusion in the calculation. In is published alongside the other concerning the takeover particular, assets attributable to contributions on the Commis- value at the end of the regulated services must be includ- sion’s website. concession ed in the Regulatory Agreement and be approved by ENAC, while Pending the expected amend- Decree-Law No. 148 of October the construction or acquisition of ments to the Navigation Code for 16, 2017 (Decree Law on Tax), assets destined for the provision the full transposition of the provi- coordinated with converting Law of commercial activities, as such sions laid down by EU Regulation No. 172 of December 4, 2017 and not subject to tariff regulation, No. 139/2014, and Legislative Law No. 205 of December 27, must have been authorised by Decree No. 173/2017, in force 2017 (Budget Law 2018) signifi- ENAC since they are functional to since December 20, 2017, it intro- cantly innovated the regulation airport activities and the airport’s duced a system of penalties for concerning the takeover value at development. violations of EU Regulation No. the end of the concession, set at 216/2008 and the related imple- May 4, 2041 for SEA. The measures in question also menting rules, including Regula- regulate reimbursements in cases tion 139. Therefore, any infringe- Prior to these measures, the take- where the concession is terminat- ment of the obligations imposed over value was governed by two ed before the expiry date. by law will incur an administrative regulations, one of a general na- fine which will be determined by ture (Art. 703 of the Navigation Assessments on the new legisla- the Authority (ENAC) between a Code - fifth paragraph) and one tion’s accounting impacts are cur- minimum and maximum amount specifically related to SEA, the rently being undertaken by the established for the type of vio- ENAC-SEA Agreement of 2001. company.

Annual Report 2017 • 18 2017 DIRECTORS’ REPORT

SEA and SEA Energia’s is expected for the SEA Group in relation to airport electricity request for qualification grids, with the need to arrive at as Existing Systems an assessment on the possibili- Equivalent to Efficient ty of qualifying as a CDS (Closed Systems for Users Distribution System). This system, (SEESEU) while maintaining and improving the benefits and reducing SEESEU qualification obligations, would On September 29, 2015, SEA make it possible to operate as a and SEA Energia’s qualification “Distributor”, under a simplified as Existing Systems Equivalent regulation and qualifying as a to Efficient Systems for Users sole referent entity for any future (SEESEU) was requested from airport development in terms of GSE. Obtaining the SEU or SEESEU electricity grids. qualification entails maintaining favourable tariff conditions on All aspects arising from this possi- self-produced electricity, with ble choice in legal, economic and high efficiency and not drawn organisational terms are being from the electricity grid and limit- examined. ed to the variable parts of the general system and network charges, Furthermore, it should be noted as envisaged by Legislative De- that with Resolution 894/2017/R/ cree No. 115/08 and Article 25-bis EEL of December 21, 2017, the of Decree-Law No. 91/14 convert- Regulatory Authority for Electric- ed with Law No.116/14. ity, Gas and Water made changes tivity is classified as the electricity to the definition of the Consump- end user and provides services, In May 2017, the company re- tion Unit for simple produc- not electricity, to the parties perceived GSE’s acceptance of its tion and consumption systems forming the secondary activities: application and was, therefore, and closed distribution systems therefore, an internal activity granted this qualification. In which, in the case of SEA, concern for the sale of electricity cannot this regard, it should be noted the SEESEU and CDS structure, re- be classified and there may not that with the conversion of De- spectively. be any billing for electricity con- cree-Law 244/2016 (common- sumption. ly known as the “Milleproroghe The measure clarifies that, if on Decree”), converted into Law the same site next to an activi- In view of the abovementioned 19/2017, the legislature decided ty for the production of goods legislation, the Group is con- to postpone the application of and/or services intended as the sidering which of the options system charges starting from Jan- main or “core business”, there envisaged by the legislation it uary 1, 2018. The annual report are real estate units provided to will implement, despite having recognises the positive effect of third parties to carry out activities commenced the technical and Euro 1,298 thousand resulting (secondary activities) primarily for economic activities necessary to from the application of the new the provision of goods or services adapt to both options. Decree, in relation to the provi- to support the abovementioned sioned amounts in the financial main activity, it is possible to es- years 2015 and 2016. tablish a single consumption unit that includes both the real es- Following the abovementioned tate units intended for the main Decree-Law, the legislature im- activity and the real estate units plemented a regulatory change intended for secondary activities, that sees the considerable re- independently of the parties that duction of economic advantages manage them, notwithstanding linked to obtaining the SEESEU the territorial proximity con- qualification; currently, a further straint. In these cases, the legal change in the legal framework person performing the main ac-

Annual Report 2017 • 19 2017 DIRECTORS’ REPORT

Operating and financial overview

Traffic data

MILAN MALPENSA AND MILAN LINATE AIRPORT TRAFFIC PERFORMANCE

Movements Passengers (1) Cargo (2)

2017 % vs 2016 2017 % vs 2016 2017 % vs 2016

Malpensa 174,754 7.4% 22,037.2 14.1% 576,539 7.4%

Linate 96,467 -1.4% 9,503.1 -1.4% 11,937 -4.9%

Total commercial traffic 271,221 4.1% 31,540.3 9.0% 588,476 7.1%

Linate General Aviation (3) 21,263 2.7% 44.3 1.2% - -

SEA Group Airport System 292,484 4.0% 31,584.6 8.9% 588,476 7.1%

(1) Arriving+departing passengers (‘000). (2) Arriving+departing cargo in tonnes. (3) General Aviation Source: Linate-SEA Prime.

The Milan Airport System in 2017 increase in passenger numbers riod (+8.2% annual average). Mal- served a total of 31.6 million pas- (+1.4%) on 2016. Despite a strong pensa currently manages 52% of sengers, up 8.9% on 2016. first quarter (+4.3%), with the be- the total cargo moved in Italy and ginning of the summer season the is therefore the country’s leading The significant increase in com- airport was impacted by the trans- airport. mercial aviation passengers fer of KLM and Air France flights (+2.6 million) was ahead of the to Malpensa, previously operated General aviation traffic at Milan national average (+6.4%) and en- from Linate under a commercial Linate grew 2.7% in 2017 on the tirely related to the strong per- agreement with Alitalia which previous year. The slight fall off formance of Malpensa which re- permitted carriers to use the latin the first half of 2017 (-1.0%), ported growth of 14.1% on the ter’s slots. The contraction was attributable to the Champions previous year. On the one hand further impacted by the cancella- League final in May 2016, was off- this stems from greater capacity tion of Air Berlin operations from set by a decisively positive perfor- put on stream by carriers at the the winter season. mance in the second half of the Varese-based airport, with more year (+6.0%). The average size of movements (+7.4%) and larger av- Cargo traffic handled by the Mi- aircraft transiting at the airport erage aircraft size (+9.8% in seats lan Airport System exceeded 588 increased from 15 to 16 tons, re- offered), and on the other higher thousand tonnes (+7.1%). Mal- sulting in a total +2.8% tonnage load factors (+3%). pensa reported an expansion of increase. 7.4%, continuing the growth re- Linate airport reported a slight ported over the last five-year pe- Milan Linate Airport confirmed

Annual Report 2017 • 20 2017 DIRECTORS’ REPORT

its sixth-place standing in Europe The consolidation scope at De- pensa Construction in liquidazi- in terms of average daily takeoffs cember 31, 2017 altered on De- one, SEA subsidiaries held respec- (29 departures), after the airports cember 31, 2016 with the acqui- tively 100% and 51%, in addition of Paris Le Bourget, Geneva, Nice, sition by SEA SpA of an additional concluded in 2017. London Luton and Zurich. stake in SEA Prime SpA of 1.57% (of which SEA SpA already held Operating revenues in 2017 grew control). The SEA Prime holding is 6.8%, mainly due to the strong Income Statement currently 99.91%. With this acqui- passenger and cargo perfor- sition, the holding in the associate mance, in addition to the non-avi- The accounting policies applied in Signature Flight Support Italy Srl ation activities, the contribution preparing the 2017 consolidated therefore increased from 39.34% of commercial aviation - which on figures are in line with those uti- to 39.96% (in 2016 however fully completion of the terminal restyl- lised for the 2016 consolidated consolidated until March 31). The ing can provide exclusive and top financial statements. liquidation of SEA Handling SpA in quality services to customers - and liquidazione and of Consorzio Mal- the energy business which suc-

Cge. (Euro thousands) 2017 % 2016 % 2017/2016 Operating revenues 697,698 96.1% 653,512 93.3% 6.8% Revenue for works on assets under concession 28,281 3.9% 46,622 6.7% -39.3% Total revenues 725,979 100.0% 700,134 100.0% 3.7% Operating costs Personnel costs (210,743) -29.0% (182,971) -26.1% 15.2% Other operating costs (246,224) -33.9% (239,646) -34.2% 2.7% Total operating costs (456,967) -62.9% (422,617) -60.4% 8.1% Costs for works on assets under concession (26,006) -3.6% (43,114) -6.2% -39.7% Total costs (482,973) -66.5% (465,731) -66.5% 3.7% EBITDA [1] 243,006 33.5% 234,403 33.5% 3.7% Provisions & write-downs (32,218) -4.4% (5,497) -0.8% 486.1% Restoration and replacement provision (13,602) -1.9% (17,193) -2.5% -20.9% Amortisation & Depreciation (69,296) -9.5% (61,714) -8.8% 12.3% Operating profit 127,890 17.6% 149,999 21.4% -14.7% Investment income/(charges) 8,135 1.1% 9,842 1.4% -17.3% Financial charges (18,167) -2.5% (18,940) -2.7% -4.1% Financial income 258 0.0% 136 0.0% 89.7% Profit before taxes 118,116 16.3% 141,037 20.1% -16.3% Income taxes (35,667) -4.9% (47,263) -6.8% -24.5% Continuing Operations profit 82,449 11.4% 93,774 13.4% -12.1% Discontinued Operations profit/(loss) 1,556 0.2% (130) 0.0% -1296.9% Minority interest profit/(loss) (65) 0.0% 25 0.0% -360.0% Group Net Profit 84,070 11.6% 93,619 13.4% -10.2%

(1) EBITDA is calculated as the difference between total revenues and total costs, excluding provisions and write-downs.

Annual Report 2017 • 21 2017 DIRECTORS’ REPORT

thousand (Euro 15,892 thousand in 2016).

The improvement of Euro 44,186 thousand on the previous year (+6.8%) was supported in 2017 by non-recurring revenues of Euro 2,929 thousand (Euro 2,429 thousand from the Anti-trust Authori- ty review of the penalty imposed on SEA in 2015 following the acquisition of SEA Prime - previously ATA Ali Trasporti Aerei and Euro 500 thousand from the collection of a supplier penalty), while in 2016 including revenues from the company Signature Flight Support Italy Srl (previously Prime Aviation Services) and refuelling operations - no longer included in the Group consolidation scope - of Euro 1,274 thousand. Net of cessfully tapped into the market company entered extraordinary these items, revenues grew Euro recovery, boosting energy sales to administration (May 2, 2017). 42,531 thousand (+6.5%). the market, while also contracting This performance is principally methane gas at the lows of 2016. Group Net Profit - benefitting based on: Euro 1,556 thousand from the ◼◼ Aviation operations for Euro EBITDA was Euro 243,006 thou- liquidation of SEA Handling and 32,910 thousand, mainly due sand, up 3.7% on 2016, although impacted by the extraordinary to the boost in traffic volumes including Euro 23,923 thousand of items indicated above - amounts both in the passengers’ seg- non-recurring costs for post-em- to Euro 84,070 thousand, con- ment - benefitting from addi- ployment benefits under the tracting Euro 9,549 million on the tional airline capacity and load Framework Agreement signed previous year. factor growth - and the cargo on July 22, 2016 with the Trade segment; Unions. Excluding these costs, The main income statement ac- ◼◼ Non Aviation operations for counts are broken down as fol- and net of extraordinary revenue Euro 9,238 thousand, growing lows. items of Euro 2,929 thousand, across all the main business EBITDA was Euro 264,044 thou- segments, including Shops, sand, up 10.1% on 2016 (which Food & Beverage, Car Rental, also included non-recurring reve- Revenues Parking and Cargo; nue and cost items and reported ◼◼ the Energy business, whose rev- net EBITDA of Euro 5,392 thou- Operating revenues in 2017 (revenues contracted Euro 1,243 sand). enues net of works on assets un- thousand. Despite good elec- der concession) of Euro 697,698 tric and thermal energy sales This good performance stems thousand include Aviation reve- on the basis of favourable sales from strong revenue growth and nues of Euro 443,593 thousand prices and increased volumes, prudent operating cost manage- (Euro 408,970 thousand in 2016), revenues decreased with the ment. Non Aviation revenues of Euro conclusion of the Green certif- 227,263 thousand (Euro 216,900 icates benefit at Linate; EBIT of Euro 127,890 thousand thousand in 2016), General Avi- ◼◼ the General Aviation business - was impacted by the Euro 25,252 ation business revenues of Euro at like-for-like scope - for Euro thousand write-down of the Ali- 12,124 thousand (Euro 11,750 1,626 thousand, principally talia SAI receivable for unsettled thousand in 2016) and Energy due to non-regulated oper- invoices in the year before the business revenues of Euro 14,718 ations (entry into use of the

Annual Report 2017 • 22 2017 DIRECTORS’ REPORT

new Hanger and better parking In 2016, Euro 4,019 thousand containment of other operat- management), while regulated were earmarked for early retire- ing costs. operation results were in line ment incentive payments, Euro with the previous year. 1,508 thousand for the closure of the litigation on State Aid, while Costs for works on assets Revenues for works on assets the costs of Prime Aviation Servic- under concession under concession decreased es’ refuelling activities amounting to Euro 1,138 were still present from Euro 46,622 thousand in Costs for works on assets under within the Group’s consolidation 2016 to Euro 28,281 thousand in concession decreased from Euro scope. 2017 (-39.3%). These revenues re- 43,114 thousand in 2016 to Euro fer to construction work on assets 26,006 thousand in 2017. These Net of one-off items, the increase under concession increased by a costs refer to the costs for the in costs of Euro 17,048 thousand mark-up representing the best es- works undertaken on assets un- mainly relates to: timate of the remuneration of the der concession. This movement internal cost for the management is strictly related to investment ◼◼ Group personnel costs, which of the works and design activities activities. undertaken, which corresponds to increased Euro 8,229 thousand (+4.6%) compared to 2016, in- a mark-up which a third-party gen- As a result of the above dynamics, creasing from Euro 178,591 eral constructor would request to EBITDA stood at Euro 243,006 thousand in 2016 to Euro undertake such activities. This ac- thousand compared to Euro 186,820 thousand in 2017. The count is strictly related to invest- 234,403 thousand for 2016, up increase was mainly due to the ment activities on assets under 3.7% (+Euro 8,603 thousand). Net introduction of a reward con- concession. of the non-recurring items high- tribution linked to the achieve- lighted above, EBITDA amount- ment of company performance ed to Euro 264,044 thousand, up objectives. It also included the 10.1% compared to 2016 (Euro Operating costs portion allocated for the Na- 239,794 thousand). tional Collective Labour Agree- Operating costs for the year ment’s renewal, which was amount to Euro 456,967 thou- signed in 2014 and expired at sand, up Euro 34,350 thousand the end of 2016. Provisions on the previous year (+8.1%). On a like-for-like consolidation and write-downs These include non-recurring costs basis, thus excluding Prime Avi- of Euro 23,966 thousand (Euro ation Services’ workforce from In 2017, provisions and write- 23,923 thousand of which leaving 2016, the workforce numbered downs show an increase of Euro incentive payments). Therefore, 2,766 Full-Time Equivalents 26,721 thousand, from Euro 5,497 net of these items, compared to and compares with 2,792 units thousand in 2016 to Euro 32,218 the year 2016 which, in turn, incor- for 2016. thousand in the year under review. porated non-recurring costs for a ◼◼ Other operating costs in- These relate to Euro 1,494 thou- total of Euro 6,665 thousand, the creased by Euro 8,818 thousand in net provisions for future increase amounts to Euro 17,048 sand (+3.7%) compared to charges (Euro 1,035 thousand at thousand (4.1%). 2016, increasing from Euro December 31, 2016) and Euro 237,362 thousand in 2016 30,724 thousand in net provisions Non-recurring items in 2017 to Euro 246,181 thousand in for doubtful debt (Euro 4,379 mainly refer to leaving payments 2017. This was due to the in- thousand at December 31, 2016). related to the Project Framework crease in costs directly linked Agreement concluded with the to revenues and traffic of Euro “Provisions for future charges” in- Trade Unions on July 22, 2016. 14,501 thousand (public fees, clude Euro 3,441 thousand in pro- Euro 5,768 thousand were dis- commercial costs and parking visions relating to the current year bursed in 2017, while Euro 17,971 management fees), partly off- for litigations with the GSE on the thousand relates to the early re- set by a reduction in other core assignment of Green Certificates tirement incentive programme costs of Euro 5,683 thousand, and White Certificates, provisions for a pre-defined maximum num- mainly as a result of lower en- for employment, revocatory risks ber of workers who will reach ergy costs following a careful and insurance deductibles, par- pensionable age by August 2023. procurement policy and the tially offset by the release of pre-

Annual Report 2017 • 23 2017 DIRECTORS’ REPORT

vious years’ provisions for risks Restoration and fixed assets on the basis of the and charges of Euro 1,947 thou- useful life estimated by the Group, sand, as a result of the elimination replacement provision however not exceeding the con- of some ongoing disputes. cession’s duration and, on the oth- “Credit risk provisions” show a During the year, the provision er, the acceleration of deprecia- net effect of Euro 30,724 thou- went from Euro 17,193 thousand tion on x-ray equipment which will sand (Euro 4,379 thousand at in 2016 to Euro 13,602 thousand be replaced in the coming years as December 31, 2016), due to net in 2017, with a decrease of Euro required by the applicable legisla- provisions for trade receivables 3,591 thousand. In view of a pro- tion, and of the turbine located in amounting to Euro 27,498 thou- vision of Euro 15,093 thousand the Malpensa cogeneration plant sand (Euro 2,743 thousand in in 2017 (Euro 17,193 thousand in which will be replaced in 2019. The 2016), net releases of other re- 2016), a release of the provision main investments that contributed ceivables amounting to Euro 250 amounting to Euro 1,491 thou- to the increase in the above-men- thousand (Euro 1,636 thousand sand was recorded (nil in 2016), tioned amortisation and deprecia- in 2016) and net provisions for in order to adjust the provision to tion are those made on the Cargo other financial assets amounting new industry regulations on x-ray City area, Terminal 1 and Terminal to Euro 3,476 thousand (item not equipment. 2’s railway station, in addition to present in 2016). more investment for the purchase of new de-icing machines. The total provision for trade re- Amortisation ceivables is almost all related to & Depreciation a past loan (prior to May 2, 2017) Investment income and to Alitalia SAI in Extraordinary Amortisation and depreciation in- charges Administration, for an amount of creased by Euro 7,582 thousand Euro 25,252 thousand. There is compared to 2016 (+12.3%), from In 2017, net income from invest- currently no guarantee on its col- Euro 61,714 thousand to Euro ments decreased Euro 1,707 thou- lection. 69,296 thousand. Amortisation sand, from Euro 9,842 thousand and depreciation movements in in 2016 to Euro 8,135 thousand In relation to other receivables in the periods reflect, on the one in 2017. Equity-accounted in- 2016, a provision was made for hand, the depreciation and amor- vestments and other income and Euro 307 thousand for receiv- tisation of tangible and intangible charges are included. ables from SEA Energia’s 2015 green certificates. Following the settlement of the dispute with GSE, Euro 57 thousand of the provision made in 2016 was used in 2017 and the remaining Euro 250 thousand released.

The year 2017 also includes the write-down of the financial receivable relating to equity financial instruments and Airport Handling’s equity value transferred to the Trust and the subject of the contract with dnata for Euro 3,476 thousand, in anticipation of the probable review of the sale price on the expiry of the call option ex- ercisable by dnata.

Further information is available in Note 9.6 of the Consolidated Fi- nancial Statements.

Annual Report 2017 • 24 2017 DIRECTORS’ REPORT

The share of the result of Eq- Income taxes Group Net Result uity-accounted associates was positive at Euro 8,204 thousand Taxes for the year 2017 amounted As a result of the above move- in 2017 (Euro 6,986 thousand in to Euro 35,667 thousand, down ments, the Group’s net profit 2016). The increase, amounting to on 2016 (Euro 47,263 thousand), decreased Euro 9,549 thousand Euro 1,218 thousand, is primarily due to the effect of the reduction - from Euro 93,619 thousand in attributable to the improvement in pre-tax profit and the entry 2016 to Euro 84,070 thousand in of the results achieved by some into force of the lower IRES rate 2017. associates. of 24%.

Other income decreased Euro A detailed analysis of the compo- 2,925 thousand. This reduction is nents that contributed to this net attributable to the presence of result and their comparison with non-recurring revenues in 2016. 2016 is available in Note 9.12 of These include SEA Prime capital the Consolidated Financial State- gains on the sale of the 60% stake ments. in Signature Flight Support Italy Srl (previously Prime Aviation Ser- vices SpA) amounting to Euro 955 thousand, and dividends for Euro 1,901 thousand, approved by the Discontinued Operations Shareholders’ Meeting of Airport profit/(loss) Handling SpA on May 6, 2016 for the allocation of net profit for the The net result from discontinued financial year 2015 in relation to operations relating to the com- the Financial Instruments of Par- mercial aviation handling sector ticipation held by SEA. shows a net profit of Euro 1,556 thousand against a net loss of Euro 130 thousand in the previous Financial income year. The item includes the result of SEA Handling SpA, for which and charges the liquidation procedure was concluded on June 30, 2017 lead- In 2017, net financial charges re- ing to the settlement of payables duced to Euro 895 thousand, from and receivables that are still open. Euro 18,803 thousand in 2016 to On July 10, 2017, the Sharehold- Euro 17,909 thousand in 2017. ers’ Meeting approved the final liquidation financial statements This is mainly due to: (i) lower in- and the company’s relative distri- terest paid on medium/long-term bution plan, whose total shares loans for Euro 380 thousand, due were held by SEA SpA. to the reduction in the average gross debt and the contraction A detailed analysis of the compo- of the average cost of debt; (ii) nents that contributed to this net lower commissions on loans for result and their comparison with Euro 50 thousand; (iii) a reduction 2016 in the context of the appli- in other interest charges for Euro cation of IFRS 5 is available in the 429 thousand which mainly affect Explanatory Notes 7.2 and 9.13 to lower charges on derivatives for the Consolidated Financial State- the continuation of the relative ments. notional amount’s repayment; (iv) an increase in financial income of Euro 122 thousand.

Annual Report 2017 • 25 2017 DIRECTORS’ REPORT

Reclassified balance sheet

at December 31, at December 31, (Euro thousands) Change 2017 2016 Intangible assets 998,182 1,011,111 (12,929) Property, plant & equipment 204,971 190,276 14,695 Investment property 3,394 3,398 (4) Investments in associates 54,054 51,597 2,457 AFS Investments 26 26 0 Deferred tax assets 51,152 43,665 7,487 Other non-current financial assets 7,190 16,776 (9,586) Other non-current receivables 280 308 (28) Fixed assets (A) 1,319,249 1,317,157 2,092 Inventories 4,104 4,141 (37) Trade receivables 111,077 86,968 24,109 Tax receivables 14,941 14,800 141 Other receivables 9,200 18,563 (9,363) Other current financial assets 13,300 7,190 6,110 Current assets 152,622 131,662 20,960 Assets-held-for-sale - 10,732 (10,732) Trade payables 153,497 161,530 (8,033) Other payables 174,592 160,327 14,265 Tax payables 8,370 6,841 1,529 Current liabilities 336,459 328,698 7,761 Liabilities related to Assets-held-for-sale - 2,379 (2,379) Net Working Capital (B) (183,837) (188,683) 4,846 Provisions for risks and charges (C) (169,935) (174,061) 4,126 Employee provisions (D) (47,834) (49,220) 1,386 Other non-current payables (E) (17,588) - (17,588) Net capital employed (A+B+C+D+E) 900,055 905,193 (5,138) Group Net Equity (391,154) (375,264) (15,890) Minority interest net equity (23) (566) 543 Net financial debt (508,878) (529,363) 20,485 Total sources of financing (900,055) (905,193) 5,138

All fixed assets, including those falling under IFRIC 12, are expressed net of those funded by State and European Union contributions. At De- cember 31, 2016, these amounted to Euro 504,383 thousand and Euro 7,019 thousand respectively (at December 31, 2016, amounting to Euro 503,601 thousand and Euro 5,517 thousand respectively).

Annual Report 2017 • 26 2017 DIRECTORS’ REPORT

bles to employees and associated Net working capital of -Euro social security contributions, re- 183,837 thousand, increased by corded as a result of the mobility Euro 4,846 thousand over Decem- procedure’s commencement on ber 31, 2016. This trend is mainly December 27, 2017. Through the attributable to i) the increase in mobility procedure, early retire- other receivables/payables which ment incentive payments were include lower receivables from established for a pre-determined GSE for green and white certif- number of workers who will qual- icates, higher tax payables and ify for pension benefits by August higher payables for fire-fighting 2023 (early retirement or old age services, ii) the increase in trade pension). The agreement with receivables mainly as a result of Trade Unions covering this pro- higher revenues in the year under cedure was signed on January 15, review, iii) the decrease in trade 2018. payables, almost completely offset by the change in assets/lia- Non-current assets of Euro bilities connected to assets that 1,319,249 thousand increased are to be sold and the exit of SEA Euro 2,092 thousand compared Handling SpA from the consolida- to December 31, 2016, mainly tion scope following its liquida- due to i) net investments for the tion; iv) the increase in other cur- year of Euro 72,130 thousand rent financial assets following the (net of the use of the recovery reclassification of the 40% share, provision), partially offset by the net of the write-down in 2017 depreciation for the year amount- amounting to Euro 3,476 thou- ing to Euro 69,296 thousand; ii) sand, and to be sold to dnata. Net capital employed at Decem- the increase in net deferred tax assets of Euro 7,487 thousand; The following table illustrates ber 31, 2017 amounted to Euro iii) the increase in financial assets the principle components of Net 900,055 thousand, with a de- as a result of the equity valuation Working Capital. crease of Euro 5,138 thousand of investments in associates for over December 31, 2016. This Euro 2,457 thousand; iv) the re- reduction is linked, in addition to classification from non-current to the performance of non-current current of 40% of other financial assets and net working capital assets, the sale of which is regu- described below, to the entry of lated by the call option, in antici- the item “Other non-current pay- pation of the conclusion of nego- ables”, with reference to paya- tiations with dnata by 2018.

at December 31, at December 31, (Euro thousands) Change 2017 2016 Inventories 4,104 4,141 (37) Trade receivables 111,077 86,968 24,109 Trade payables (153,497) (161,530) 8,033 Other receivables/(payables) (158,821) (133,805) (25,016) Other current financial assets 13,300 7,190 6,110 Assets-held-for-sale - 10,732 (10,732) Liabilities related to Assets-held-for-sale - (2,379) 2,379 Total net working capital (183,837) (188,683) 4,846

Annual Report 2017 • 27 2017 DIRECTORS’ REPORT

in tangible and intangible fixed Net financial assets for Euro 84,995 thousand Reconciliation position (net of contributions amounting between equity to Euro 2,848 thousand and gross of IFRIC remuneration and finan- of the Parent and The “Net financial position” cial charges) and the payment of consolidated equity amounting to Euro 508,878 thou- dividends of Euro 70,304 thousand improved by Euro 20,485 sand. The reconciliation between the thousand over December 31, net equity of the Parent Company 2016 (Euro 529,363 thousand). SEA SpA and the consolidated net The positive cash flow generated equity is shown below. by current operations also made it possible to finance investment

Shareholders’ Shareholders' Net profit / equity at Equity OCI Reserve equity at (Euro thousands) (loss) December 31, movements December 31, 2016 2017

Parent Company Financial Statements 326,689 (70,300) 1,893 76,946 335,228

Share of net equity and net profit of the consolidated subsidiaries attributable to 14,955 (250) - 4,215 18,920 the Group, net of the carrying amount of the relative investments

Adjustments for measurement at equity 40,696 - - 2,533 43,229 of associates

Other consolidation adjustments (6,510) - - 311 (6,199)

Consolidated Financial Statements 375,830 (70,550) 1,893 84,004 391,177

Annual Report 2017 • 28 2017 DIRECTORS’ REPORT

SEA Group investments

The SEA Group in 2017 contin- Euro 84,995 thousand, net of ad- velopment activities were carried ued its commitment to support vances to suppliers, with evidence out in 2017. investments in line with the proof new investment (Euro 72,140 grammed development plan. thousand) and recovery actions The following table details the (Euro 12,855 thousand). It should investments made in 2017 of be noted that no research and de-

New Restoration (Euro thousands) Total installations investments Flight infrastructure 9,178 3,189 12,367 Air terminals 15,763 4,604 20,367 Cargo 5,457 180 5,637 Misc. buildings, roadways, parking 18,378 1,585 19,963 Networks & plant 5,233 3,297 8,530 Ecology 5 - 5 ICT Systems / Projects 10,677 - 10,677 Other equipment 7,449 - 7,449 Total investments 72,140 12,855 84,995

Amounts are inclusive of the 6% remuneration in accordance with IFRIC 12 (Euro 2.3 million) and the share of financial charges (Euro 0.04 million).

Investments made in 2017 in- in the second half of December. Arrivals Level was also finished, clude the expansion and restyling while the restyling works on the operations at Milan Malpensa and During the year, works were con- Schengen Baggage Claim area are Linate, works in the Malpensa car- cluded on the installation of new still in the start-up phase. go area and the construction of controlled access for staff passage, the new hangar in Linate for gen- the restyling of the Remote North As regards Milan Malpensa Termi- eral aviation. Schengen gates and the reconfig- nal 2, the design for the construc- uration of the South Commercial tion of new departure gates con- More significant investments in area with the construction of new cluded, while the design for the Milan Malpensa were Terminal 1’s shops. Fittings for the Lufthansa construction of a new building in functional upgrading and restyl- VIP hall and works for the con- the Departure Terminal’s internal ing with the construction of new version of the former south Du- courtyard which will accommo- commercial areas, the homogeni- fry store in the commercial areas date new shops and restaurants sation of the existing finishes, and were also completed. is in progress. This was designed the acquisition of the Sheraton as the routing hub for departure Hotel property which took place The restyling of the Satellite B passengers.

Annual Report 2017 • 29 2017 DIRECTORS’ REPORT

Works for the construction of a Information Technology invest- and actions targeted to increase second warehouse to be used by ment was focused on setting up protection levels and overall in- Cargo operators are underway in the Digital Transformation. The ternal awareness on Cyber risk. the Milan Malpensa Cargo area. commencement of projects and The warehouse will consist of an experiments in IOT - Internet of Finally, the SEA020 project, which area of about 15,000 sq. m. Things with regard to the Passen- is the result of the experience ger Experience, ever-increasing gained during the EXPO 2015 For Linate airport, the most sig- dematerialisation in support of with the E015 ecosystem, initiat- nificant investment is related to corporate operating and admin- ed an information management works on the Terminal’s functional istrative processes, the launch of process through ecosystem con- upgrading and restyling. The main a multi-year plan for the adop- cepts and API - Application Pro- objectives of operations consist tion of BIM - Building Informa- gramming Interface to optimise in improving the perceived quali- tion Modelling methodologies in data management both internally ty and architectural image of the design and maintenance and the and towards stakeholders. Air Terminal’s facade, land side ac- increasing use of Cloud Solutions, cess, the arrivals hall, the baggage are only some examples of the on- claim hall and the Leonardo SEA going investment in innovation. and Welcome Alitalia VIP Loung- es. Expansion works are under The development of Web envi- design for the improvement of ronments also continued through operational spaces for the gates important advances in Internet and the enlargement of commer- Sites and Mobile Apps, providing cial areas (for retail and food & new e-commerce features and beverage). new mobility services through innovative and modern payment At both Malpensa and Linate flight systems. infrastructure plant upgrades continued for the implementa- Great attention was also paid to tion of the ASMGCS (Advanced the resilience and operational Surface Movement Guidance and continuity of systems, through Control System) systems, which the now consolidated set-up of a will enable a clearer indication of real infrastructural “campus”, con- paths to be followed by aircraft sisting of three internal Data Cen- during the taxiing of aircraft, in tres (one at Linate and two at Mal- addition to an improved use of pensa) and two external IBM Data lights on the taxiing runways, with Centres dedicated to Manage- a consequent reduction in the ment and Administrative systems time in which lights are switched (SAP ERP - Enterprise Resource on, limiting therefore light pollu- Application in a HANA - High Per- tion and resulting in further ener- formance Analytic Appliance envi- gy savings. ronment) and application systems in a virtualised environment. This At Linate, an important project brings the Milan Airports’ Infor- was the North apron area which mation Technology in line with provides an extension of the air- the most modern adoptions of craft apron by about 22,000 sq. the Cloud paradigm combined m, making it possible to use three with virtualisation. new aprons for contemporary de-icing operations, rationalising Also highlighted is the attention the current layout of the area and commitment given to the south of the apron and improving priority issue of Cyber Security, the areas available for the parking through the definition of a Refer- and movement of aircraft, vehi- ence Framework which enabled a cles and equipment. holistic approach to the issue. This was accompanied by investment

Annual Report 2017 • 30 2017 DIRECTORS’ REPORT

Subsequent events

Meridiana establishes its flights from Milan Malpensa and the best companies in the world in departing from Rome, Naples, the area of Human Resources and, Hub at Malpensa Palermo, Catania and Lamezia particularly, those which constant- Terme as from May 1. Next Sep- ly strive to improve and optimise Following the acquisition of 49% tember, Air Italy will begin the their Human Resource processes. of its shares by Qatar Airways, Me- Milan-Bangkok connection with SEA’s certification process com- ridiana, now Air Italy, announced four flights a week and three ad- menced in 2017 through a strict that it is to establish its hub at ditional long-haul connections will and thorough audit process - the Malpensa. It also presented a plan be announced before the end of HR Best Practices Survey - in which to expand its fleet with 50 new the year. The strategic plan also in- SEA reached the required stand- aircraft and increase its passen- cludes the increasing of short-haul ard levels to obtain the recogni- gers from 2.5 to 10 million over tion of Top Employer and which flights and the reaching of 50 des- 5 years. The network will also ex- was officially recognised in 2018. tinations served in a year by 2022. pand gradually, through destinations that will support new long- Certification of the haul routes from Milan Malpensa Management System for to New York and Miami. These two Top Employers Italy 2018 new routes which will be launched Certification Preventing Corruption next June will be preceded by The certification process of SEA’s new domestic routes operated in The annual research conducted by Management System for Prevent- connection with intercontinental Top Employers Institute certifies ing Corruption concluded positively, pursuant to the UNI ISO 37001:2016 “Antibribery Manage- ment Systems” Standard, with the issue of the certificate by TUV Ita- lia Srl on March 8, 2018. The certificate is valid for three years and is subject to an annual monitoring audit.

Annual Report 2017 • 31 2017 DIRECTORS’ REPORT

Outlook

In the first two months of 2018, come of the process of selling General Aviation terminal in Mal- passenger traffic continued to Alitalia, which could temporarily pensa. grow, rising by 6.9% at the air- affect traffic at Linate airport, no ports managed by the SEA Group, significant impacts are expected Management remains committed compared with average growth in 2018, also considering the air- to further developing the various for Italian airports of 6.2%6. line’s plans, which essentially rep- business areas and to pursuing op- resent the continuation of its operating efficiency with the aim of The current year will continue erations in 2017. improving company processes. to see passenger traffic growth, driven by the consolidation of The infrastructure development On this basis, operating results both short-to-medium-haul and plan for 2018 includes the com- in 2018 are expected to continue intercontinental traffic at Mal- pletion of the work begun in 2017 the positive trend of recent years. pensa airport, owing in part to to restyle the Linate Terminal, the gradual positioning of Air Ita- further progress on the project ly, which will shift from primarily to expand and renovate commer- focusing on tourism to operating cial areas in Malpensa Terminal 2 exclusively full-service flights to to include two additional gates, southern Italy among short-haul the continuing restyling of Mal- destinations, to Cairo and Moscow pensa Terminal 1 (arrivals floor among medium-haul destinations satellite B and Schengen baggage and to New York, Miami, Bangkok, return area), the completion of Shenzen and Lagos/Accra among the e-Gates project involving new intercontinental destinations. passport-reading equipment in the three terminals and breaking With regard to the possible out- ground on construction of a new 6 Source: Assaeroporti.

Annual Report 2017 • 32 2017 DIRECTORS’ REPORT

Operating performance - Sector analysis

Commercial Aviation parties, of commercial services General Aviation for passengers, operators and vis- The Commercial Aviation busi- itors to the Airports, in addition The General Aviation business in- ness includes Aviation and Non to the real estate segment. The cludes the full range of services Aviation operations: the former revenues from this area consist relating to business traffic at the includes the management, devel- of the market fees for activities western apron of Linate airport. opment and maintenance of air- directly carried out by the Group The comparative figures from port infrastructure and plant and and from activities carried out by 2016 also include the results of the the offer to SEA Group customers third parties under license and of handling and general aviation busi- of services and activities related royalties based on a percentage ness, consolidated line-by-line until to the arrival and departure of air- of revenues generated by the li- March 31, 2016. craft, in addition to airport safety censee, usually with the provision services. The revenues generated of a guaranteed minimum. by these activities are established Energy by a regulated tariff system and This segment includes also income from warehouse, space and comprise airport fees, fees for The energy business includes the office rental to Cargo business the use of centralised infrastruc- generation and sale of electricity operators, such as cargo handlers, ture, in addition to security fees and heat to the market and third transport companies and couri- and tariffs for the use of check-in parties. desks and spaces by airlines and ers. handlers. The Non-Aviation busi- The main results of each of the ness however provides a wide and above businesses are presented segregated offer, managed both below. directly and under license to third

Commercial General Aviation Energy Consolidated (Euro thousands) Aviation 2017 2016 2017 2016 2017 2016 2017 2016 OPERATING REVENUES 670,856 625,870 12,124 11,750 14,718 15,892 697,698 653,512 EBITDA 233,435 226,076 7,867 6,727 1,704 1,600 243,006 234,403 EBIT 121,800 144,873 5,481 4,907 609 219 127,890 149,999

The EBITDA shown above includes the IFRIC margin.

Annual Report 2017 • 33 2017 DIRECTORS’ REPORT

Commercial Aviation

Traffic data

MILAN MALPENSA AND MILAN LINATE AIRPORT TRAFFIC

Movements Passengers (1) Cargo (tonnes) (2)

cge. % vs cge. % vs cge. % vs 2017 2017 2017 2016 2016 2016

Malpensa 174,754 7.4% 22,037.2 14.1% 576,539 7.4%

Linate 96,467 -1.4% 9,503.1 -1.4% 11,937 -4.9%

Total commercial traffic 271,221 4.1% 31,540.3 9.0% 588.476 7.1%

(1) Arriving+departing passengers (‘000). (2) Arriving+departing cargo in tonnes.

The Milan airport system man- Year 2017 cge. % 2016 % of total aged by the SEA Group enjoyed a significant increase in volumes in 1 LONDON 2,423.2 7.2% 8% 2017 to 31.5 million passengers, 2 PARIS 1,871.9 11.3% 6% an improvement of 9.0% on the previous year. 3 CATANIA 1,542.8 29.6% 5% 4 ROME 1,265.3 -14.5% 4% This performance was due entirely to Malpensa airport, which ex- 5 AMSTERDAM 1,195.3 7.2% 4% ceeded 22 million passengers, an 6 NAPLES 864.7 -1.4% 3% increase of 14.1% compared with 2016, whereas Linate posted a 7 MADRID 829.8 0.9% 3% decline of 1.4% in terms of both 8 FRANKFURT 826.1 7.7% 3% passengers and flights. 9 BARCELONA 825.5 9.7% 3% The growth at Malpensa was driv- 10 NEW YORK 818.7 -2.7% 3% en by the rise in traffic at Termi- 11 CAGLIARI 810.0 12.5% 3% nal 1 (+18.4%), which served 2.3 million additional passengers, 12 PALERMO 764.0 11.8% 2% and the growth recorded by easy- 13 DUBAI 660.8 12.5% 2% Jet in Terminal 2 (+6.1%), which reached 7.2 million passengers. 14 OLBIA 647.9 4.9% 2% 15 BRUSSELS 644.4 31.0% 2% All traffic segments grew at- Ter minal 1: Ryanair contributed 813 Others 15,549.9 10.6% 49% thousand more passengers than Total 31,540.3 9.0% 100% in 2016, whereas the transfer of KLM and Air France from Linate London: Heathrow, Gatwick, City, Luton and Stansted; Paris: Charles de Gaulle, Orly; Rome: brought an increase of 517 thou- Fiumicino, Ciampino; New York: New York and Newark. sand passengers.

Together, the other low-cost carriers recorded growth of 306

Annual Report 2017 • 34 2017 DIRECTORS’ REPORT

thousand passengers (+17.6%), The following is a breakdown of Main airlines by passengers of which Vueling contributed 140 passenger traffic within the Milan served by the Milan airport thousand passengers (+20.9%). airport system by major destina- system (thousands) The intercontinental segment tions served and the main airlines easyJet remained the num- added 311 thousand passengers present. ber-one carrier in terms of traf- (+5.7%) and the other legacy car- fic volume served at the Milan riers also grew (+677 thousand Major destinations by number airports (Linate and Malpensa), passengers, +6.7%). of passengers served by with market share of 24.9% of to- the Milan airport system tal passengers served (compared There were 5.8 million total in- (thousands) with 25.5% in 2016). Alitalia, the tercontinental passengers at In 2017 London remained the number-two carrier, had market Malpensa airport. Airlines serving number-one destination in Eu- share of 19.2% (down from 21.5% long-haul areas other than North rope, with over 2.4 million pas- in the previous year). Lufthansa Africa carried 5.1 million passen- sengers served. Paris (Charles de remained in third place, followed gers in 2017, an increase of 4.3%. Gaulle and Orly) was in second by Ryanair in fourth place, with place, followed by Amsterdam 1.5 million passengers served at The decline in traffic volumes and Madrid. New York and Dubai Malpensa only (up from eighth at Linate was chiefly due to the remained the top two intercon- place in 2016). transfer of the KLM and Air France tinental destinations. At the do- flights to Malpensa starting in the mestic level, Catania pulled ahead summer (-440 thousand passen- of Rome, which continued to ac- gers compared with the previous count for a declining share of traf- year), in addition to the cancel- fic, to become the top destination lation of flight operations by Air served from Milan, while Naples Berlin starting in the winter. remained number-three.

Year 2017 cge. % 2016 % of total 1 Easyjet 7,869.3 6.4% 25% 2 Alitalia 6,054.1 -2.9% 19% 3 Lufthansa 1,519.6 9.1% 5% 4 Ryanair 1,477.7 122.2% 5% 5 Meridiana Fly 1,224.2 3.9% 4% 6 Emirates 918.2 8.6% 3% 7 British Airways 815.0 17.3% 3% 8 Vueling Airlines S.A. 806.9 20.9% 3% 9 Neos 604.8 18.6% 2% 10 Air France 559.7 9.7% 2% 11 Iberia 437.4 2.2% 1% 12 Turkish Airlines 427.9 6.6% 1% 13 Blue Panorama 422.8 37.1% 1% 14 Klm 415.0 7.7% 1% 15 Aeroflot 373.5 19.8% 1% Others 7,614.3 8.5% 24% Total 31,540.3 9.0% 100%

Annual Report 2017 • 35 2017 DIRECTORS’ REPORT

COMPOSITION OF PASSENGER TRAFFIC IN 2017 AT MALPENSA AIRPORT BY GEOGRAPHICAL AREA (THOUSANDS)

vs 2016 Domestic 14% 3.2 17.5% Domestic

26% Europe Intercontinental 13.1 17.4% Total 22,0 14.1%

Intercontinental 5.8 5.7% 60% Europe

Malpensa Zadar, Lublino and Fuerteventura destinations in the area (Emir- In 2017, Malpensa served more - recording a significant increase ates, Turkish Airways, Atlas than 22 million passengers, an in- in European traffic of 5.7%, due Global, EasyJet, Elal and Oman crease of 14.1%. to the increase in the average size Air) reported increases, where- of the aircraft and a higher load as the traffic generated by Domestic traffic increased by factor, as the number of flights re- Qatar Airways and Etihad Air- 17.5%, due almost entirely to Rya- mained unchanged. ways remained essentially un- nair, which in November 2017 add- changed and Alitalia cancelled ed services to Palermo and Lame- Vueling increased the number of its flight to Abu Dhabi starting zia Terme, in addition to Comiso flights to Barcelona and enhanced in September. (December 2015) and Catania (No- service to Paris Orly and Amster- ii) Far East (20% of the total seg- vember 2016). Air Italy (formerly dam. ment, +9.0% on 2016): this Meridiana Fly) increased by 58%, result was driven by both an contributing 51 thousand passen- In 2017 a total of 5.8 million pas- increase in capacity and the gers, making it the number-two sengers travelled to interconti- number of flights, in addition carrier by number of passengers nental destinations, an increase of to a higher load factor. For Chi- served, with increases in service 5.7% or 311 thousand more pas- na, Neos added three destina- to Cagliari and Olbia. sengers than in 2016. tions in summer 2017, and Air Italy (formerly Meridiana Fly) Long-haul traffic (North Africa one in August. Air China, Air European traffic increased by not included) stood at 5.1 million India and Cathay reported pos- 17.4%. In addition to consolidating passengers served, +4.3% on the itive results. Alitalia posted a services to previous destinations, previous year. A breakdown of decline (Tokyo Narita). Ryanair expanded its network in passengers by geographical area iii) North America (20% of the to- November 2017, adding flights is provided below: tal segment, +1.5% on 2016): to Valencia, Liverpool, Alicante this result was shaped by the and Katowice. European traffic i) Middle East (45% of the total greater number of flights and growth was significantly influ- segment, +4.8% on 2016): this seats available, while the load enced by the transfer from Linate result was driven by an increase factor fell. Delta Airlines regis- to Malpensa of flights to Amster- in the average load factor of tered growth, moving up the dam and Paris Charles de Gaulle the aircraft from 68% to 72%. launch of summer services to operated by KLM and Air France. The capacity available fell, in Atlanta by one month, as did EasyJet introduced services to terms of both the average size American Airlines and Air Cana- six new destinations - Stockholm, of the aircraft and the number da, which increased the size of Granada, Santiago de Compostela, of flights. All players who serve the aircraft used for flights to

Annual Report 2017 • 36 2017 DIRECTORS’ REPORT

Miami and Toronto, respective- North Africa (12% of the intercon- All-cargo traffic processed 421 ly, during the summer. United tinental segment, +17% on 2016), thousand tons of goods, register- Airlines declined due to a lower which had suffered from geopo- ing a growth of 8.8% compared to load factor. litical instability in the previous 2016, with the main contributions iv) Central/South America (10% year, reversed the trend in 2017, coming from companies such as of the segment total, -5.3% on with an increase of 100 thousand Cargolux Group (+12.6%), Turkish 2016): passengers fell due to passengers to almost 700 thou- Cargo (+64.7%) and Saudi Airlines a decline in flights and seats sand served. Air Italy (formerly Cargo (+ 54.4%). available, while the load factor Meridiana Fly) contributed signifi- remained largely unchanged. cantly to this result, doubling the Within the all-cargo segment, the TAM served fewer passengers number of passengers carried to main courier carriers (Federal Ex- due to a reduction in the capac- Egypt. press, DHL and Aerologic) han- ity offered, with a decrease by dled 72 thousand tons of goods Blue Panorama as well, where- Malpensa Cargo (+2.2%), representing about 17% as Neos increased passengers In 2017, cargo traffic through of processed cargo. carried to destinations in the Malpensa Airport, the confirmed Caribbean. nerve centre for goods distribution Belly traffic, with 155 thousand v) Central/South Africa (5% of in Italy, once again demonstrates tons of transported goods, grew the segment total, +16.8% on the positive trend of recent years by 3.8%. Emirates confirmed itself 2016): this result was shaped with an increase of 7.4%, moving as the main carrier by quantity of by the increase in the number 577 thousand tons of processed goods handled, while, consider- flights and larger average- air cargo - import growth of 9.3% and ing the growth in absolute values craft, whereas the load factor an export growth of 6.1%. the main contributions came from fell. Air Italy (formerly Merid- Qatar Airways, American Airlines, iana Fly) remained the major Geographical distribution showed Oman Air, Air India, Air China and player in the area, primarily greater traffic to Asian regions, the Etihad. serving the leisure segment. Middle East and Europe.

2017 FREIGHT TRAFFIC BY GEOGRAPHICAL AREA - SEA MANAGED AIRPORTS

180.000.000 Goods in tons.

160.000.000

140.000.000

120.000.000

100.000.000

80.000.000

60.000.000

40.000.000

20.000.000

Middle East Far East Europe North C/S North C/S 9.9% 10.1% 5.9% America America Africa Africa Domestic 2.4% -30.1% 53.2% 78.0% -12.7%

The % change refers to a comparison with the previous year.

Annual Report 2017 • 37 2017 DIRECTORS’ REPORT

2017 TRAFFIC COMPOSITION FOR LINATE AIRPORT (THOUSANDS)

vs 2016

48% Europe 4.6 Europe -3.4%

Total 9.5 -1.4%

Domestic 4.9 0.6% 52% Domestic

Linate of 2.7% to Paris Charles de Gaulle, Prime amounting to Euro 2,337 Linate airport handled 9.5 million Amsterdam and Brussels, slight- thousand. Moreover, a penalty of passengers, down on the previous ly offset by the cancellation to Euro 500 thousand was enforced year (-1.4%). flights to Berlin from November. in the year under review for late EasyJet increased load factors on delivery by a supplier. Net of these Domestic traffic was substantially all routes served (Paris Charles de items, revenue growth compared in line with 2016 (+0.6%). Alita- Gaulle, London Gatwick, Paris Orly to the previous year was Euro lia recorded a 2.9% growth from and Amsterdam). British Airways 42,148 thousand (+6.7%). This the destinations of Cagliari, Bari, increased passenger numbers on growth mainly results from: Palermo, Alghero and Pescara, all three connections to London, making up for a fall in traffic from mainly London City and London ◼◼ Aviation activities for Euro Reggio Calabria and Comiso. Stansted, which started running 32,910 thousand (from Euro in April. Growth was also seen by 408,970 thousand in 2016 to The Linate-Fiumicino shuttle ser- Lufthansa to Frankfurt and Brus- Euro 441,880 thousand in 2017). vice retained substantially the sels Airlines to Brussels. Higher traffic volumes of Euro same traffic as the previous year, 30,300 thousand primarily con- once again achieving around 1.2 tributed to this increase (+7.4%) million passengers (-0.4%). The re- (including higher revenues from sult recorded by Air Italy (formerly Revenues de-icing services), together with Meridiana Fly), down 21.1%, was the increase in airport tariffs of mainly due to the cancellation of In the year 2017, the Commer- Euro 2,524 thousand and higher flights to Catania from September cial Aviation business generated revenues from regulated spaces on. a total operating income of Euro for Euro 95 thousand. 670,856 thousand, up by Euro ◼◼ Non-Aviation activities for Euro European traffic decreased by 44,986 thousand over the previ- 9,239 thousand (from Euro 3.4%, mainly due to the transfer ous year (Euro 625,870 thousand) 216,900 thousand in 2016 to of Air France and KLM to Mal- corresponding to +7.2%. Euro 226,139 thousand in 2017). pensa beginning in summer 2017 This performance was mainly (down 440 thousand passengers, The financial year 2017 includes due to good results in the Retail from 822 thousand passengers in non-recurring revenues for a total divisions (Shops, Food & Bever- 2016 to 382 thousand in 2017). of Euro 2,837 thousand, mainly age, Car Rentals and Banks) for The result was also affected by due to the partial reimbursement Euro 5,042 thousand (+5.6%) the winding down of Air Berlin in of the fine imposed by the Italian and Parking for Euro 3,832 thou- November. Competition Authority (AGCM) sand (+6.4%). Revenues were relating to proceedings initiated in line with the previous year, In contrast, Alitalia saw a growth following the acquisition of SEA +Euro 158 thousand as regards

Annual Report 2017 • 38 2017 DIRECTORS’ REPORT

the Premium Services division Euro 233 thousand over the year (-Euro 5,720 thousand) and (VIP lounges and Fast Track) previous year (+2.5%), mainly the decrease in operating costs and Advertising, while the Real attributable to favourable Tax of Euro 1,756 thousand (and, in Estate business decreased over Refunds and bureaux de change particular, maintenance and en- 2016 by Euro 727 thousand. This activities. In general, Linate and tertainment costs). These were was mainly due to the re-nego- Malpensa recorded an increase partially offset by higher costs of tiation of some contracts with in revenues from commercial Euro 470 thousand related to se- State Bodies. Revenues from activities to the B2B and B2C curity activities, Euro 1,103 thou- the Cargo division amounted markets despite the impact of sand in chemical products for the to Euro 15,295 thousand, an in- subway line 4’s construction de-icing service and snow man- crease of Euro 2,606 thousand site on Linate. The performance agement services and Euro 714 compared to 2016 (+20.5%) due of parking management at the thousand in costs to public bodies. to the entry into service of the Bergamo Orio al Serio airport new FedEx and DHL warehous- was also strong, driven by the Costs directly linked to revenues es. On the other hand, revenues increase in online sales. and traffic, amounting to Euro from services fell by Euro 1,672 14,500 thousand, rose on the pre- thousand over 2016, due to the vious year. closure of ticketing services and Operating costs the end of the agreement with “Puerta del Sur” airport. Operating costs for the Commer- EBITDA and EBIT cial Aviation business rose from In the Retail division, revenues Euro 403,303 thousand in 2016 to As a result of the trends outlined from Shops registered growth Euro 439,696 thousand in 2017, above, EBITDA was Euro 233,435 of Euro 2,440 thousand (+5.2%). an increase of Euro 36,393 thou- thousand (Euro 226,076 in 2016) The improvement of the com- sand (+9.0%). and registered an increase of Euro mercial offer in Terminal 1, through the optimised position- 7,359 thousand over the previous ing of shops and the opening of Net of non-recurring cost items year, equivalent to 3.3%. new sales outlets, contributed amounting to Euro 23,912 thou- to this result. Revenues from sand in 2017 and Euro 5,459 thou- Net of non-recurring items, the Food & Beverage segment sand in 2016, operating costs in- the 2017 EBITDA stood at Euro grew by Euro 1,013 thousand creased by Euro 17,940 thousand 254,510 thousand (Euro 231,535 (+5.3%). In particular, good per- (+4.5%). thousand in 2016), up Euro 22,975 formances were returned by thousand over 2016 (+9.9%). “Ferrari Spazio Bollicine” and Personnel costs, excluding non-re- the adjacent Panino Giusto. curring items (Euro 23,716 thou- Amortisation and depreciation, The excellent general catering sand in 2017 and Euro 4,019 and net provisions for recovery, performance at Malpensa Ter- thousand in 2016 related to staff risks and charges and doubtful minal 1 is worth noting. This mobility incentives), were up Euro debt, are higher than the previ- was further strengthened by 8,629 thousand (+4.9%), due to ous year by Euro 30,432 thousand, the reconversion of an area of the recognition of a reward contri- mainly as a result of the provisions approximately 1,000 sq. m in bution linked to the achievement related to the past loan (prior to the Schengen boarding area. of company performance objec- May 2, 2017) to Alitalia SAI in Ex- Revenues from the Car Rent- tives. It also included the relative traordinary Administration, for an al division returned growth of allocation for the National Collec- amount of Euro 25,252 thousand. Euro 1,618 thousand over 2016 tive Labour Agreement’s renewal There is currently no guarantee on (+11.0%), mainly due to the signed in 2014 and which expired its collection. good performance of Malpensa at the end of 2016. operators through the creation A write-down of Euro 3,476 thou- of new parking spaces and the Operating and material costs, net sand was recognised in order to opening of new spaces inside of non-recurring items, increased adjust the assets related to Air- Terminal 2’s railway station, overall by Euro 9,311 thousand. port Handling. thus making the entry of new This was caused by the reduction operators possible. Revenues in methane costs due to lower unit As a result, EBIT for the Commer- from Banking Services grew prices compared to the previous cial Aviation business amounts to

Annual Report 2017 • 39 2017 DIRECTORS’ REPORT

Euro 121,800 thousand, down by ◼◼ in July 2017, premises located acy short, medium and long-haul Euro 23,073 thousand (-15.9%) in the Malpensa T1 Schengen carriers, for example by increas- over the previous year and equiv- boarding area were handed ing food and beverage offerings alent to Euro 144,873 thousand. over to Lufthansa to build a rather than shops, similar to renew lounge, which will replace cent trends in travel retail and Not considering non-recurring the current facility; shopping centres, in pursuit of items which at the EBIT level in ◼◼ new premises were acquired increasingly varied, diversified, 2017, in addition to the items men- by Ernest for use as offices and modern and international offer- tioned above, also include Euro ticketing desks and by Neos ings. 25,252 thousand related to Alitalia for use as a new Crew Briefing doubtful debt provisions, the 2017 Centre. The construction work focused EBIT stands at Euro 171,605 thou- on the Schengen boarding area, sand, up Euro 21,273 thousand or Retail development where the commercial plaza was 14.2%, while in 2016 amounting to Retail traffic development bene- fully renovated in the second half Euro 150,332 thousand. fited from the increase in passen- of the year, installing new furnish- ger traffic. The most noteworthy ings and changing the foot traffic event in 2017 from a commercial layout. In 2017 some stores such Other information standpoint was the gradual trans- as Moleskine, Mandarina Duck, formation of the passenger foot Venchi, Unieuro and Coccinelle moved to bigger new locations, Investments/Aviation Spaces traffic layout and retail stores in whereas Boggi completely re- Development the Malpensa Terminal 1 Schen- styled its shop. The trend in the demand for gen boarding areas, a project that premises at the airport that be- represented the culmination of The completion of the restyl- gan in recent years continued in the restructuring process that ing project also brought in new 2017, with a decline in demand had begun in 2013. brands such as Blue Spirit/Morel- for spaces zoned for office use, as lato, Benetton, Bottega Verde, The retail profile of Terminal 1 forecast in the budget. Nau Ottica, Daniel Wellington was completely redesigned to and, most recently, Carpisa Go. A summary of major events relat- suit the various segments of de- ing to the development of airport mand created by the shared use In the non-Schengen boarding premises in 2017 is provided be- of the same passenger boarding area, an agreement was reached low: areas by low-cost airlines and leg- late in the year with Loro Piana, a part of the LVMH Group, which will open a shop in early 2018, and in November DoDo - a Kering Group brand - opened a kiosk. In addition, the Gucci brand watch and jewellery kiosk doubled its floor space and updated its image in October.

New store openings at Linate included DoDo in February and the Tumi/Samsonite store in Septem- ber, in the airside area.

Self-service bag drop All airlines operating at the airports have been presented with various options for adopting the technology at the Linate and Malpensa airports, with the aim of obtaining feedback as to their

Annual Report 2017 • 40 2017 DIRECTORS’ REPORT

preferences in the matter, on the routes, in addition to an increase basis of which SEA will design a in destinations. project to introduce a self-service bag drop that is as suited to the In June the bilateral agreement airlines’ needs as possible. with Australia was revised to include the new option of operat- Ground travel connections ing all-cargo flights and the - par Various ground transport initia- tial deregulation of the capacity tives are currently being analysed of flights operated in codesharing and developed with the aim of via third countries and with the broadening the airport’s catch- Russian authorities for the in- ment area and improving custom- crease of flights on various routes er service. The main such initia- from Moscow and the expansion tives include collaboration with of destinations. various airlines and other road and rail transport providers and In December twelve new bilater- the distribution of connecting al agreements were signed, some flights on the various sales chan- with countries with which there nels. Another such initiative is the was no prior aviation agreement, project involving Busitalia, a com- others involving an increase in pany owned by Ferrovie dello Sta- flights and destinations. to that in February 2018 began to offer bus services on the routes trol of business handling and re- Liguria-Malpensa and Trieste-Mal- General Aviation fueling activities with the transfer pensa-Turin. of 60% of the shares of Signature Traffic data Flight Support Italy Srl (formerly Destination management Prime Aviation Services SpA) to and co-marketing activity the Signature Group. The compa- Collaborative efforts with the General aviation traffic in Europe ny was fully deconsolidated from Ministry of Cultural Heritage and recorded 3.9% growth in 2017 April 1, 2016. In order to better Activities and Tourism, Ministry over the previous year. Milan Li- illustrate the industrial trend, re- for Economic Development, Fed- nate Airport confirmed its sixth- sults are commented on without erturismo, Assolombarda, the place standing in Europe in terms the cost and revenue components Chamber of Commerce, the Mu- of average daily takeoffs (29 de- of discontinued operations and nicipality of Milan and the Region partures), after the airports of non-recurring items. of Lombardy continued in 2017 Paris Le Bourget, Geneva, Nice, with the aim of increasing the London Luton and Zurich. international visibility of Milan’s airports and the local area. The General aviation traffic at Milan Revenues initiatives related to Citi2City pro- Linate grew 2.7% in 2017 on the jects, candidacy for international previous year. The slight fall off General Aviation business reve- events, planning and circulation in the first half of 2017 (-1.0%), nues amounted to Euro 12,124 of the Destination Newsletter attributable to the Champions thousand, an increase of Euro (B2C and B2B) to promote Milan League final in May 2016, was off- 374 thousand (+3.2%) compared and Lombardy and organisation set by a decisively positive perfor- to Euro 11,750 thousand in the of events at Malpensa to intro- mance in the second half of the previous year. duce new airlines. year (+6.0%). The average size of aircraft transiting at the airport On a like-for-like basis (thus ex- Bilateral Agreements increased from 15 to 16 tons, re- cluding the 2016 revenues of In May negotiations were con- sulting in a total +2.8% tonnage Signature Flight Support Italy Srl ducted with Russian aviation au- increase. - formerly First Aviation Servic- thorities, resulting in the signing es, which is excluded from the of a new agreement that calls General aviation business results Group’s consolidation scope, and for greater frequency of service are not comparable, due, on April the portion of the Anti-trust Au- to Moscow and trans-Siberian 1, 2016, to the group’s loss of con- thority repayment in 2017 of Euro

Annual Report 2017 • 41 2017 DIRECTORS’ REPORT

23 thousand), revenues are up Energy Revenues Euro 1,626 thousand (from Euro 10,475 thousand in 2016 to Euro Quantitative data In 2017, the Energy business re- 12,101 thousand in 2017). turned revenues of Euro 14,718 thousand (Euro 15,892 thousand in In 2017, electricity production This mainly follows higher com- 2016), down Euro 1,174 thousand grew by 6.7% (22.6 million kWh) mercial revenues, including the (-7.4%). leasing of the new hangar in Li- over 2016 up to 361.2 million kWh. This increase was due to a nate, the start of operations of Net of non-recurring items greater electricity production of the parking system in front of the (amounting to Euro 69 thousand in both plants. Linate terminal, and increased 2017), revenues fell by Euro 1,243 “follow-me” and aircraft towing thousand. activities. These have more than Electricity production for the compensated for lower revenues group’s own uses, including an- This reduction is mainly due to the from regulated activities caused cillary services, losses and imbal- loss in revenues of Green Certifi- by the decline in traffic. ances, amounted to 204.9 million cates, related to the Linate cogen- kWh, while that destined to third eration plant following the end of parties came in at 156.3 million the incentive period, amounting to Operating costs kWh. Euro 4,698 thousand. This was partially offset by the positive trend in Electricity allocated to the Energy In 2017, operating costs fell Euro electric and thermal energy sales Exchange recorded an increase 765 thousand (-15.2%) while, of Euro 5,941 thousand. of 17% (+18.8 million kWh) com- net of non-recurring activities, pared to 2016, achieving a total increasing Euro 204 thousand of 129.3 million kWh, while sales (+5.3%) compared to 2016. Operating costs through bilateral contracts decreased (-0.8 million kWh). Non-recurring items in 2017 are Operating costs amounted to attributable to mobility incentives Euro 13,014 thousand and are In 2017, thermal energy produc- for Euro 186 thousand, while in down when compared to the pre- tion increased by 10.5% on 2016 2016, they were due to Prime Avi- vious year (Euro 14,293 thousand (+38.1 million kWh) to 402.5 mil- ation Services activities for Euro in 2016, -8.9%). lion kWh - of which over 73% serv- 1,137 thousand and legal fees for ing the needs of Linate and Mal- Euro 18 thousand. Non-recurring costs in 2017 stood pensa airports. at -Euro 132 thousand and refer to mobility incentives for Euro Sales to third-party customers EBITDA e EBIT 21 thousand and the write-off of increased by more than 10.1 mil- system charges for Euro 153 thou- lion kWh (+10.6% on 2016), up to sand. EBITDA amounted to Euro 7,867 105.5 million kWh. This increase thousand, up Euro 1,140 thousand in production resulted from the In 2016, non-recurring costs stood (+16.9%) over the previous year consolidation of supplies to civil- at Euro 51 thousand and relate to (+Euro 1,422 thousand, +21.5% on ian users adjacent to the Linate legal fees. a like-for-like basis and excluding airport area. Indeed, from the be- non-recurring items). ginning of 2015, the power plant was connected to the A2A-owned EBIT is up by Euro 574 thousand Canavese plant, near to the Viale (+11.7%) due to the develop- Forlanini road, in order to provide ments described above. supplementary heat energy to Net of non-recurring activities and the city of Milan. on a like-for-like basis, the 2017 EBIT stood at Euro 5,644 thousand, with an increase of Euro 855 thousand over 2016 (+17.9%) where it amounted to Euro 4,788 thousand.

Annual Report 2017 • 42 2017 DIRECTORS’ REPORT

EBITDA and EBIT came to a close in 2016. White Certificates

As a result of the above trends, Regarding legal proceedings for In 2013, the Italian grid operator EBITDA registered an increase green certificates assigned from (Gestore dei Servizi Energetici - over the previous year amount- 2010 to 2014, it should be noted GSE) awarded the Malpensa plant ing to Euro 104 thousand, from a that the 17,106 green certificates the ‘High Energy Cogeneration’ value of Euro 1,600 thousand in requested by the Italian grid op- (HEC) (Cogenerazione Alto Rendi- 2016 to Euro 1,704 thousand in erator, Energy Services Manager mento - CAR) industrial combined 2017. EBITDA net of non-recur- (Gestore dei Servizi Energetici - heat and power qualification that ring items decreased by Euro 147 GSE), of which 12,435 came under exempts it from the obligation to thousand. the responsibility of the company acquire green certificates. and 4,671 under that of A2A, were EBIT improved by Euro 391 thou- offset with green certificates allo- The HEC qualification process pro- sand when compared to the pre- cated for the year 2015. SEA En- gressed regularly in 2017 also for vious year. EBIT amounted to ergia, through its legal team, filed the Linate cogeneration plant. Euro 609 thousand due to lower an opportune appeal within the provisions for risks and charges legal deadline. In March 2017, an addendum was related to disputes over white signed to the contract with A2A certificates. The incentive for the year 2016 Calore e Servizi relating to the was regularly assigned and col- heat supply of the Linate cogen- EBIT stood at Euro 409 thousand lected. The amount, just as the eration plant. when excluding non-recurring amount received for 2015, is not amounts, an increase of Euro 139 considered definitive, since GSE, Through this addendum, SEA En- thousand compared to 2016. in line with assessments for the ergia committed to qualifying period 2010-2014, may request and maintaining its cogeneration the return of a portion. Conse- units as HEC, in all cases except Green Certificates quently, a provision was allocated for force majeure, for the entire for future charges of Euro 490 duration of the contract (i.e. un- In 2017, the company did not thousand, given that the certifi- til September 30, 2020). Further- accrue the envisaged incentives cates were already collected at more, SEA Energia undertook to for ‘district heating green certif- the reporting date. guarantee a cogeneration energy icates’, as the recognition period production quota to the specif-

Annual Report 2017 • 43 2017 DIRECTORS’ REPORT

ic requirements of A2A Calore e the atmosphere without payment. Servizi, through an annual program with intra-year adjustments Where the rights allocated an- in relation to the overall operation nually concerning the plant are of the East Milan district heating not sufficient to cover emissions, system. these may be purchased on the market. In 2017, SEA Energia did not accrue the envisaged incentives for Conversely, where the rights al- ‘white certificates’, as the recog- located are in excess of the emis- nition period came to a close in sions produced, the rights not uti- 2016. lised may be sold.

To date, 2,915 white certificates, For 2017, the overall production for 2016, have been assigned for of CO2 by the company amount- the Combined Cycle 2 H2O seg- ed to 192,190 tonnes, of which ment, with white certificates for 127,073 tonnes generated by the other Combined Cycle 1 seg- the Malpensa station and 65,117 ment still pending. tonnes produced by the Linate plant.

SEA Energia in 2017 produced, on Emission trading its own account, 156,515 tonnes of CO2. Therefore, to offset the In accordance with European Di- Ministry of Environment for the rective 2003/87/EC, from January 192,190 tonnes produced, 35,675 1, 2005, plant operators which CO2 quotas must be purchased on emit CO2 into the atmosphere the market. must avail of an authorisation issued by the competent national authority. Each plant, in addition, must receive special “rights” per- mitting the emission of CO2 into

Annual Report 2017 • 44 2017 DIRECTORS’ REPORT

Risk Management Framework

The SEA Group pays utmost at- ly should risk events occur. SEA Group risk factors tention to risk management in its business activities and has adopt- On September 21, 2017, the The risks to which SEA Group is ed specific monitoring and miti- Board of Directors approved the exposed can be grouped into four gation processes and procedures Enterprise Risk Management main categories: external risks, aimed at guaranteeing airport Policy, which defined an ERM di- operational risks, financial risks safety and service quality, provision, under the responsibility and legal and compliance risks. tecting tangible and intangible of the Chief Financial and Risk assets of interest to stakeholders Officer, as a second level of risk External Risks and creating value over the long management control to support SEA Group operates as an airport term. corporate structures in the iden- manager under a fully regulated tification and management of regime, however, the Group’s In 2016, in order to support ex- business risks, through the devel- earnings and financial results are isting measures, management opment of tools, frameworks and significantly influenced by world- decision-making processes and methodologies, and to guarantee wide socio-political, macroeco- stakeholder assurance, the SEA periodic reporting to middle and nomic and competitive dynamics. Group initiated an Enterprise top management on the evolu- Risk Management (ERM) project tion of the risk profile. The following are the main strate- designed to build a model for gic risks that can have particularly the identification, classification, This means that, with the support significant effects on SEA Group measurement, monitoring and of risk specialists and the ERM performance. homogeneous and transversal as- division, corporate and line man- sessment of operational risks. agements are the primary owners Airline strategies of the identification, assessment As for the other airport opera- The SEA Risk Model was thus de- and management of the risks tors, the future development of fined as an annual assessment for which they are responsible. activities depends significantly to involve management and ar- Top management then periodi- on the strategic choices of air- ea-specific risk specialists and en- cally reviews the overall compa- lines, which are dependent also sure compliance with regulations ny risk profile and opportunely on the global economic-financial and applicable reference stand- orients the management of the performance. Over recent years ards. main emerging risks, approving a significant shift has also taken proposed response plans in line place in demand, generated by This model aims to identify and with the strategic objectives and the increased presence of low assess the main business risks and corporate risk propensity de- cost airlines with a consequent define specific mitigation plans as fined by the Board of Directors. increase in terminal competition. required. The result of this activity Finally, the Internal Audit team provides the Board of Directors, independently verifies the effec- The volume of passenger traffic the Control and Risk Committee tiveness and effective implemen- and cargo in transit at the Lin- and management with an over- tation of the complete risk man- ate and Malpensa airports repre- view of the main risks SEA is ex- agement system. sents a key factor in the results posed to, facilitating mitigation, achieved by the Group. Any re- monitoring and the definition of duction or interruption to flights actions to be implemented rapid- by one or more airlines operating

Annual Report 2017 • 45 2017 DIRECTORS’ REPORT

out of the airports may result in along these routes may lead to a flagged through the filling out a reduction in such traffic, with reduction in air traffic through Li- of a Ground Safety Report. consequent impacts on activities nate airport. and Group results. Ground Safety Report e Safety Operating and business risks Key Performance Indicators In this context, the restructuring/ The operating risk factors are As in previous years, in 2017 the sale of Alitalia may result in a re- strictly related to the carrying safety events highlighted during duction in flights at the Group’s out of airport activities and may the year were appraised and clas- airports, although SEA expects impact the short and long-term sified, based on the rules defined this risk to be mitigated by the performances. and communicated also with oth- probable redistribution of pas- er operators at the periodic meet- senger traffic between airlines Safety & security ings of the Safety Committee. operating on the market and the The occurrence of accidents The main event indicators, as capacity to attract new airlines. would have consequent impacts per guidelines for aeronautical Any redistribution of traffic may on group activity and may also im- events classification, did not high- require a certain period of time, pact passengers, local residents light any particular criticality in temporarily influencing Group re- and employees. terms of maintaining good levels sults. of aeronautical safety. In order to monitor, mitigate and Development of SEA’s regulatory identify the action plans in the Activity and Service Interruptions framework and of the airport case of emergencies, theSafety Group activities may be interrupt- sector Management System continues ed through: strikes by personnel, SEA Group activities, as is the to operate, consolidating and by those of the airlines, of per- case for all Italian Airport Man- further improving the results sonnel dedicated to air traffic agers, are subject to a high level achieved in previous years. The control services and of the pub- of regulation which impacts in guideline principles of the SEA lic emergency service operators; particular the allocation of slots, airport Safety policy have re- the incorrect and non-punctual the control of air traffic and the mained unaltered in their consist- provision of services by third par- establishment of fees concerning ency and suitability: ties; adverse weather conditions services offered (airport fees, se- (snow, fog etc.). curity control fees, fees for the ◼◼ guarantee design compliance, use of common use assets and the construction and mainte- Natural events, such as lightning, centralised infrastructure for nance of flight infrastructure and overload short circuits may, handling services). Any change and plant and equipment satis- for example, cause electrical to the regulatory framework may fying the highest sector stand- blackouts with the consequent impact the Group’s results. ards; shutdown of information sys- ◼◼ ensure a review of operating tems, affecting displays and lead- Competition processes to achieve the high- ing to departure delays. The strategic choices of other est compliance possible with operators representing an alter- national and international reg- Corporate procedures have been native to air transport, if not co- ulations concerning Safety; readied to optimize the manage- herently integrated into a broad- ◼◼ monitor the maintenance of ment of such events. In addition, er connectivity vision, may pose a safety standards for all opera- risk transfer actions have been ac- threat to the domestic develop- tors and external parties of any tivated where possible, through ment of traffic at the Milan- air type within the airport sites; opportune insurance plans. ports. ◼◼ guarantee ongoing and appropriate training of personnel, Supplier Reliability In particular, the technological with priority for operational Any bankruptcy or operational development of fast rail trans- staff, placing particular focus difficulties of individual or- dif port has made it possible to re- on the requirements and the ficult-to-replace suppliers may duce travel times from Milan to consequent actions for an im- have an impact on the Group in Rome and Naples, and has made it proved level of Safety; operational and economic-finan- easier to reach even more distant ◼◼ guarantee education and com- cial terms. destinations by rail. The increase munication, so that all events in frequency of high-speed trains which may affect Safety are In order to minimize exposure to

Annual Report 2017 • 46 2017 DIRECTORS’ REPORT

Group may, by their particularly to aviation operations, and on the critical nature, increase the risk of other consequences of geopoliti- vulnerability of airport informa- cal events which impact upon the tion and technology systems. air transport sector (wars, epidemics, atmospheric events, rise SEA pays great attention to the in oil prices and economic/finan- protection of its IT systems and cial crises). telecommunications infrastructure from unauthorized access In order to control this risk, the and cyber attacks that may cause SEA Group has implemented pro- the temporary suspension or cedures and actions to monitor hindering of operational servic- the expected cash flows and re- es. Periodic vulnerability assess- covery actions. ments and penetration testing are performed on systems using In accordance with the internal the most advanced technologies policy on receivables the client is and methodologies, and a dedi- required to provide guarantees: cated information security divi- this typically relates to bank guar- sion has been established within antees issued by primary credit the ICT Department. Activities institutions or deposit guaran- are underway for obtaining ISO tees. 27001 certification and a Cyber such risk, the company is imple- Risk framework is being defined In relation to the payment terms to monitor all corporate technical menting a structured supplier applied for the majority of the and conduct requirements. qualification and performance clients, credit terms are largely monitoring system. concentrated within 30 days from Financial Risks the relative invoicing. The management of financial Human resources risks is carried out by the Parent The reaching of Group objectives Trade receivables are reported in Company which identifies, eval- depends on internal resources the financial statements net of uates and implements actions and relations with employees. doubtful debt provisions, which to prevent and limit the conse- The non-ethical or inappropriate are prudently made based on the quences of the occurrence of the behaviour of employees may have above-stated risk factors. underlying disputes at the bal- legal and financial consequences ance sheet date. The doubtful on company activities. The body Credit risk debt provision necessary to ad- of procedures, also in compliance The credit risks represent the ex- just the nominal value to the re- with the 231 Model adopted by posure of the SEA Group to po- alisable value is determined ana- the Group, the Ethics Code (now tential losses deriving from the lysing all receivables and utilising the Conduct Code), training and non-compliance of obligations by all available information on the in-house education on these is- trading and financial partners. debtor. The SEA Group, against sues, together with the talent overdue receivables, receivables development plans and the on- This risk is primarily of an eco- in dispute, or for which there is a going cooperation and dialogue nomic/financial nature, or rather legal or administrative procedure, with the trade unions, support an the possibility of the default of a utilises the same write-down per- organisation which minimises the counterparty, and also factors of centages. risks related to human resource a technical/commercial or admin- management. istrative/legal nature. Market risks The market risk to which the SEA Information Technology For the SEA Group the credit risk Group is exposed comprises all The increasing aggressiveness exposure is largely related to the types of risks directly and indi- and pervasiveness of cyber at- deterioration of a financial nature rectly related to market prices. In tacks on a global level and new of the principle airline companies 2017, the market risks to which Digital Transformation technol- which incur on the one hand the the SEA Group were subject were: ogy initiatives involving the SEA effects of the seasonality related

Annual Report 2017 • 47 2017 DIRECTORS’ REPORT

a. Interest rate risk reducing the risk originating this risk as the amounts in cur- The SEA Group is exposed to from the volatility of the rates. rencies other than the Euro are the risk of changes in interest We highlight that these deriv- insignificant and the relative rates in relation to the neces- ative contracts, underwritten receipts and payments gener- sity to finance its operating ac- exclusively for the purposes of ally offset one another. tivities and the use of available hedging market rate volatility, liquidity. The changes in inter- are recorded through the cash c. Commodity risk est rates may impact positively flow hedge method. The SEA Group is exposed to or negatively on the results of At December 31, 2017 the price variations, relative ex- the SEA Group, modifying the gross financial debt of the SEA change rates and energy com- costs and returns on financial Group was comprised of medi- modities (gas and marginally, and investment operations. um/long-term loans (medium/ electricity). In this respect, The SEA Group manages this long term portions of loans) it should be noted that the risk through an appropriate and short-term loans (exclu- Group’s electricity production mixture between fixed and var- sively the medium/long-term is predominantly intended iable rate loans, with the objec- portion of loans maturing for internal needs (56.7% of tive to mitigate the economic within 12 months. At this date energy sold), while the heat effect of the volatility of the SEA did not make recourse to produced is partly intended interest rates. short-term debt). for airport uses (73.8%) and partly transferred to third par- Variable interest loans expose b. Currency risk ties (26.2%). The Group mainly the SEA Group to a risk origi- The SEA Group, with the ex- procures gas in order to feed nating from the volatility of the ception of the currency risk the two cogeneration plants interest rates (cash flow risk). related to the commodity risk, for the production of electric- Relating to this risk, for the is subject to a low currency ity, heat and cooling. The SEA purposes of the relative hedg- fluctuation risk as, although Group, limited to only SEA En- ing, the SEA Group makes re- operating in an international ergia, is exposed to changes in course to derivative contracts, environment, the transactions prices, and the relative curren- which converts the variable are principally in Euro. There- cy fluctuations, of the energy rate to a fixed rate or limits the fore, the SEA Group does not commodities utilised i.e. gas. fluctuations in variable rates consider it necessary to imple- These risks derive from the over a range, in this manner ment specific hedging against purchase of the above-mentioned energy commodities, which are principally impacted by fluctuations in the prices of the underlying fuels, denominated in US Dollars. At the SEA Group, these fluctuations are absorbed through formulas and indexing for the pricing structures adopted under the sales contracts. In 2017, the SEA Group did not undertake any hedging of this risk, although not excluding the possibility in the future.

Liquidity risk The liquidity risk for the SEA Group may arise where the financial resources available are not sufficient to meet the financial and commercial commitments within the agreed terms and conditions.

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12 months in the payment of the - including: i) SEA Handling’s liq- The liquidity, cash flows and fi- fee due by SEA, or in the case of a uidation and definitive exit from nancial needs of the SEA Group declaration of bankruptcy by SEA. the market, ii) the incorporation are managed through policies The conformity of the processes of Airport Handling to continue and processes with the objective and procedures to national and offering ground handling - ser to minimise the liquidity risk. Spe- international standards leads to vices at arm’s length, with other cifically, the SEA Group: the consideration that the risk of handling companies and in abso- non-compliance with the conces- lute economic discontinuity with ◼◼ centrally monitors and man- sion rules is remote. SEA Handling, iii) the assignment ages, under the control of the of the entire stake in the share Group Treasury, the financial In this regard, European certifica- capital of Airport Handling into resources available, in order tion for adjustment to EU Regu- a trust called the “Milan Airport to ensure an efficient manage- lation 139/2014 establishing the Handling Trust”, in order to ex- ment of these resources, also technical requirements and ad- clude any form of SEA control in forward budgeting terms; ministrative procedures for EU over Airport Handling and conti- ◼◼ maintains adequate liquidity in airports was obtained. nuity between SEA Handling and treasury current accounts; Airport Handling, iv) the sale of ◼◼ obtains committed credit lines Risk related to the European 30% of Airport Handling shares (revolving and non) which cov- Commission Decision of to a third operator with the op- ers the financial commitments December 19, 2012 concerning tion, under certain conditions, of the Group in the coming 12 presumed State Aid to SEA to purchase an additional 40% of months deriving from the in- Handling and the Decision the shares. vestment plan and debt repay- of July 9, 2014 to explore ments; the establishment of a newly In relation to the above-men- ◼◼ monitors the liquidity position, incorporated and capitalised tioned decision three independ- in relation to the business plan- company Airport Handling ent appeals were made before ning. the European Union Court, by the (a) Proceedings regarding the Italian State, by SEA Handling and For further information, refer- European Commission decision by the Milan Municipality. ence should be made to para- of December 19, 2012 graph 4 “Risk management” of With decision of December 19, However, with the liquidation the Explanatory Notes to the 2012, the European Commission of SEA Handling having been Consolidated Financial State- judged that the share capital concluded in the meantime and ments. increases carried out by SEA in the company having sold all re- favour of its subsidiary SEA Han- maining assets and defined all its Legal and compliance risks dling in the 2002-2010 period for assets and liabilities, following The Group operates in a sector approx. Euro 360 million, consti- the approval of the final liquida- regulated at a national, EU and tuted State Aid incompatible with tion financial statements by the international level. the internal market, and conse- shareholders’ meeting on July quently imposed upon the Italian 10, 2017, the company filed an A significant part of SEA Group State the obligation to demand application to be removed from revenues derives from the ac- restitution of the presumed State the Companies Register. tivities carried out based on the Aid from SEA Handling. agreement signed between Soci- By reason of the changed de fac- età per Azioni Esercizi Aeroportu- As more fully described in the An- to and de jure situations relating ali SEA and ENAC, with duration nual Financial Report 2016, SEA, to SEA Handling, the Court of the until May 4, 2041. The Agree- in the context of a formal ‘alter- European Union, at the request ment provides for a series of ob- native execution’ project of the of the European Commission and ligations relating to the manage- decision, without prejudice to SEA Handling, ascertained by Or- ment and development of the any reservations and objections der of January 22, 2018 that the Milan airport system, in addition on the decision’s unlawfulness, matter of the dispute concerning to advanced withdrawal in the has taken a series of measures - in SEA Handling’s appeal has ceased case of serious non-fulfilment by the framework of the discussions to exist since the appellant com- SEA and dissolution conditions in between the Italian authorities pany was dissolved. As a result, the case of a delay for more than and the European Commission the Court found that there was

Annual Report 2017 • 49 2017 DIRECTORS’ REPORT

no longer a need to adjudicate on the incorporation and capitalisa- ◼◼ The closing of the transaction the appeal brought by SEA Han- tion of this company. took place on March 23, 2016, dling. after the decision of the An- The decision was published in the ti-trust Authority which, in In parallel, having taken note of Official Journal of the European the transaction in question the Italian Government’s obser- Communities dated December 1, and pursuant to Article 6, par- vations regarding SEA Handling’s 2017. agraph 1 of Law No. 287/90, dissolution, it ordered the cancel- did not recognise the estab- lation of the case relating to the In the absence of appeals within lishment or strengthening of a appeal brought by the Govern- the time limits envisaged by EU dominant market position such ment against the Commission’s law, the Commission’s decision as to eliminate or substantially decision. became res judicata and final. and indefinitely reduce competition. As a result of this, it re- Given the above, the only appeal Meanwhile, the process of SEA’s classified the portion of other currently pending against the divestment of control over Air- financial assets held by SEA un- Commission’s decision is that port Handling was completed: der the proposed sale as “cur- brought by the Municipality of rent”; Milan. The hearing was held on ◼◼ In December 2014, jointly with ◼◼ Dnata’s investment in Airport February 28, 2018. A decision is the Milan Airport Handling Handling led to the company’s expected during the current fi- Trust’s Trustee, SEA conferred valuation of Euro 25 million. nancial year. a mandate to an independent The amount confirmed the as- financial advisor in order to sets recorded in the Balance (b) Proceedings relating to identify potential investors in- Sheet up to the previous half- the commencement of the terested in acquiring a stake in year report. The transaction, European Commission’s Airport Handling; in view of the sale of the first preliminary investigation of ◼◼ In September 2015, the Trus- 30%, led to the payment of July 9, 2014 tee signed a binding agree- Euro 7.5 million by dnata as a On July 9, 2014, the European ment with dnata, a leading lien for a predetermined peri- Commission launched a formal international company in the od of time, and provided for investigation, under the powers Emirates Group active in the the additional payment of Euro conferred upon it with regard to airport handling sector, for 10 million for the acquisition State aid, to get a better insight the sale of 30% of the Airport of the additional 40% stake on certain aspects concerning Handling shares, and a similar (amounts to be divided propor- the economic discontinuity rela- percentage of the Financial tionally between shares and tionship between SEA Handling Instruments of Participation FIPs respectively, held by the and Airport Handling, and the (FIPs) held by SEA in Airport Trustee and SEA). possible existence of (additional) Handling, with the assignment alleged State aid in SEA’s capitali- to dnata, on closing, of the ma- On the basis of current forecasts sation of the new company. jority of members of the board regarding the negotiations un- of directors and, therefore, of derway for the sale of the further By decision of July 5, 2016, sent Airport Handling’s Governance; share in Airport Handling through to SEA by the Ministry of Trans- ◼◼ The agreement also provides the Trust, the directors consid- port on July 19, 2016, the Eu- for an option in favour of dna- ered it appropriate to reduce the ropean Commission concluded ta for the purchase of an ad- value of the assets recorded in the investigation proceedings ditional 40% of shares (call the balance sheet for Euro 3,476 initiated in relation to the incor- option) and a corresponding thousand. Moreover, estimat- poration and capitalisation of Air- share of EFIs, upon the occur- ing that these negotiations will port Handling SpA, noting: i) the rence of certain conditions. be concluded by 2018, the 40% absence of economic continuity The European Commission’s share of other financial assets un- between SEA Handling SpA and positive decision with regard der negotiation were reclassified Airport Handling SpA, ii) the ab- to the July 2014 investigation from “non-current” to “current”. sence of the transfer to Airport no longer made it possible for Handling SpA of the obligation to dnata to exercise a put option Risk connected to the repay the incompatible State aid, provided in the event of an un- Extraordinary Administration and iii) the absence of State aid in favourable decision; Procedure of Alitalia SAI SpA

Annual Report 2017 • 50 2017 DIRECTORS’ REPORT

pursuant to Art. 2, paragraph 2 ment of liabilities. ue to be executed until such time of Decree-Law No. 347/2003 In the absence of an indication as the dissolution right is exer- The decree of the Ministry of Eco- and recognition of the right, the cised. nomic Development of May 2, debt is admitted to the unse- 2017 declared the opening of Alita- cured creditors’ list. It will then Only after the Alitalia Proce- lia SAI SpA’s extraordinary adminis- be settled proportionally to the dure’s execution programme is tration procedure pursuant to Art. receivable admitted and on the authorised can the contracting 2, paragraph 2 of Decree-Law No. basis of the remaining assets. party give written notice to the 347/2003 (“Alitalia in Extraordinary Claims accrued post-May 2, 2017 Administrators to make their de- Administration Procedure 2017” or are paid in pre-deduction by the cisions on the contract known “Alitalia Procedure”). Extraordinary Administration within thirty days from receipt of Procedure 2017. the notice; the contract is consid- Status of the Procedure ered to be dissolved should the An appeal may be presented pur- time limit pass. Applications for admittance to suant to Art. 111-bis of the Insol- liabilities - general terms vency Law only in the event of the In the case of dissolution, or Applications for admittance to debt’s non-admission or in the should the Administrators take liabilities in the Alitalia in Extraor- case of a dispute on the quantifi- over the contracts that are in pro- dinary Administration Procedure cation or recognition of the right gress at the date of the Alitalia 2017, pursuant to Art. 93 of the by the Procedure. in Extraordinary Administration Insolvency Law, must be submit- Procedure 2017’s opening (May ted by all Alitalia creditors: work- Pending legal proceedings 2, 2017), the rights of the other ers, suppliers and anyone having All legal proceedings pending at contracting party are regulated a claim against Alitalia, accrued the date of the opening of the by the provisions of Section IV, prior to May 2, 2017. Procedure to which Alitalia is a Chapter III, Title II of the Insolven- Party will be declared interrupt- cy Law. Applications for admittance to ed, pursuant to Art. 43 of the In- liabilities in the Alitalia in Extraor- solvency Law and, therefore, may The SEA Group has receivables dinary Administration Procedure be resumed within 90 days from arising prior to May 2, 2017 (“Ex- 2017 must contain the require- the date of May 2, 2017. isting Receivables”) for: i) landing ments referred to in Art. 93 of and take-off fees and apron and the Insolvency Law and must cov- Contracts in progress hangar fees; ii) duties on the load- er all “insolvency” claims accrued All contracts that are unexecut- ing and unloading of air cargo; iii) prior to May 2, 2017. ed or not fully executed by both passenger fees; iv) fees for secu- parties at the time of the opening rity services and control; v) surtax Secured creditors must indicate of the Alitalia in Extraordinary Ad- and charges; vi) space and park- the type of right in their applica- ministration Procedure 2017 will ing fees; vii) sundry fees. tion, the applicable rule and any continue, but the extraordinary assets on which the right is to administrators (“Administrators”) With particular reference to the be exercised. Recognition of the may dissolve any contracts not Existing Receivables, right entails a preference in the deemed necessary. percentage and payment order a) In the event of takeover by the of claims admitted to the state- Contracts in progress will contin- Administrators (which must

Annual Report 2017 • 51 2017 DIRECTORS’ REPORT

be expressly declared), the 1023 of the Navigation Code; tional rights and Euro 437,257.38 company, also on the basis of ◼◼ Euro 25,133,700.27 (Euro for various invoices. legal advice obtained by SEA, 2,527.77 of which are for in- believes that they must be ful- terest accrued up to May 2, By means of the certified email ly paid pursuant to Art. 74 of 2017) as an unsecured debt, communication of February 7, the Insolvency Law by treating formulating an express appli- 2018, the Administrators in- them as Current Receivables; cation to pre-deduction admis- formed creditors that they had b) Should the Administrators fail sion for the amount of Euro filed a request with the Court of to takeover, insolvency rules 1,562,565.78 (Euro 1,131.68 of Civitavecchia to split the state- will follow, through which SEA which are for interest accrued ment of liabilities, starting with may invoke the recognition of up to May 2, 2017), should the an examination of the section for a special chattel lien referred Extraordinary Administrators workers and, at the same time, to in Art. 1023 of the Naviga- decide to takeover the Service scheduling a series of hearings tion Code with reference to Contracts; (starting with the one already set the secured receivables. ◼◼ Euro 9,622,397.82, in pre-de- for February 21, 2018) in which to duction for the supply of ser- verify the proof of debt. With the application for admit- vices and activities in favour of tance to liabilities sent to the the A.S. Procedure (between Given that the Administrators Administrators on December 5, May 2 and October 31, 2017). stated that they intend to first 2017 (Registry No. 06275), SEA address the workers’ applica- requested admittance to Alitalia’s Following admittance to liabili- tions, SEA’s application, regis- liabilities for the total amount of ties, SEA SpA received payments tered under No. 06275, could Euro 41,050,979.58, of which: from Alitalia in Extraordinary therefore be included in the ex- Administration amounting to a pected “fourth partial project of ◼◼ Euro 6,294,881.49 in addition total of Euro 4,592,611.44 relat- the statement of liabilities”, to be to the interest accrued and ing to pre-deducted receivables filed by October 22, 2018. matured up to the sale of the post-May 2 (originally amount- aircraft (including related ap- ing to Euro 9,622,397.82). Thus, At the same time, however, the purtenances and separable the receivables admitted to Administrators have announced parts pursuant to Art. 1023 of pre-deduction amounted to Euro that, in any case, they want the Navigation Code) on a pref- 5,029,786.38 at March 16, 2018, to reserve the right to assess erential basis pursuant to Art. of which Euro 4,592,529 for addi- whether to split the statement

Annual Report 2017 • 52 2017 DIRECTORS’ REPORT

of liabilities project further “to available, that the current uncer- enable them to more efficiently tainty and risk profiles have been examine homogeneous classes assessed in the broader context of creditors (e.g.: passengers and of the overall assessment of airports, suppliers, institutions trade receivables. The update of and banks)”. It follows that SEA’s estimates has been provided to application could again be post- obtain more complete informa- poned to a date later than Octo- tion, even ahead of the above- ber 22, 2018. mentioned events.

It should also be noted that Public information on Alitalia’s claims arising post-May 2, 2017 economic and financial context and up to June 30, 2017 have does not exclude the possibility been fully paid to-date, save for of losses of a significant extent the amount of Euro 513,362 in emerging in relation to the re- relation to which an analysis is un- ceivables registered. derway between the parties, and the amount of Euro 1,804,346 for SEA set aside Euro 25,252 thou- unpaid surtax. sand as doubtful debt provision With regard to the valuation of (referring to the existing receiv- receivables, it should be consid- ables prior to May 2, 2017), for ered, however, that - in view of which there is currently no guar- current circumstances - there are antee on collection. no recorded defaults or non-payments by Alitalia in relation to It should be noted that lodged Current Receivables that are claims also include surtax on pre-deductible and holding pref- boarding fees amounting to erential claims. In view of the Euro 6,173 thousand for which overall behaviour and statements SEA acts as a withholding agent. made by the Administrators, These have a corresponding debt there are no elements suggesting entered as a liability toward Insti- that these will not take over the tutions (INPS and Ministry of the current contracts with SEA once Interior) for which the carrier is the Administrators’ programme the debtor. No specific doubtful is approved. The treatment of ex- debt provision has been set up. isting receivables depends on this decision and it should be noted that a substantial part of these receivables hold preferential claims.

In the current state, taking into account the uncertainties related to i) the fact that the Admin- istrators’ Programme has not yet been approved and its implementation methods are not known ii) the Administrators have not yet declared the takeover of current contracts with SEA, with the consequent equalisation of the Existing Receivables to Current Receivables, it is believed, in view of present circumstances and on the basis of information currently

Annual Report 2017 • 53 2017 DIRECTORS’ REPORT

Main disputes outstanding at December 31, 2017

Update on litigation at Euro 936,320. Commission of December 19, 2012 concerning alleged State for alleged abuse in the On July 8, 2015, while the pro- Aid in favour of SEA Handling, re- procedure for acquiring ceedings before the Regional Ad- quested compensation for dam- ATA ministrative Court of Lazio were ages suffered as a result of the still pending, SEA paid the fine in above-stated aid, issued in the On December 20, 2013, the An- full, in addition to Euro 2,535.27 form of share capital increases, al- ti-trust Authority initiated pro- in default interest. Then on May leging that such gravely affected ceedings in response to the 9, 2017, it asked the Authority ATA Handling’s operations: it was complaint by Cedicor Sociedad to refund the amount of Euro alleged in fact that SEA Handling Anonima (“CEDICOR”), charging 2,428,680 that had been unduly through the systematic coverage SEA with abusing its dominant paid, in addition to reimbursing of losses applied significantly low- position in breach of article 102 the portion of interest that had er tariffs than those which would of the Treaty on the Functioning been charged based on a capital have been applied in the absence of the European Union (“TFEU”) whose amount was restated by of such aid. It was put forward in the course of tendering for the the Regional Administrative Court that ATA Handling was forced also acquisition of ATA (Ali Trasporti of Lazio and is now known to have to apply lower tariffs than would Aerei SpA - now SEA Prime SpA). been overpaid. Moreover, SEA have been applied in an undistort- requested payment of the legal ed market and on the other that On April 2, 2015, the Authority interest accrued on the amount ATA Handling was prevented from concluded the proceedings by paid. On May 30, 2017, the Au- acquiring a greater market share. upholding the complaint against thority confirmed the reassess- This situation, it was alleged, re- SEA and imposed a fine of Euro ment of the fine in the amount stricted ATA Handling from oper- 3,365,000. Although it paid the of Euro 936,320. It also reported ating under balanced conditions fine, SEA filed an appeal against that it had informed the Ministry and led to its liquidation. In Sep- the ruling with the Regional Ad- of the Economy and Finance that ministrative Court (“TAR”). The tember 2013 and, for a second it had no objection to refunding time in July 2014, ATA Handling above-stated appeal cites the le- the total sum of Euro 2,430,343 gitimacy and correctness of the requested compensation for (of which Euro 2,428,680 in fines Provision. damages due to alleged State Aid, and Euro 1,663 for default inter- although both these requests did est). We are now awaiting receipt By means of judgment no. 1188 not receive a response and thereof the larger amounts paid. of January 23, 2017, the Region- fore ATA Handling notified the al Administrative Court of Lazio citation, quantifying damages, upheld the appeal of SEA in part, through a differential analysis of striking down the part of the rul- Action brought by ATA two situations (SEA Handling with ing that imposes the fine and di- Handling share capital increases and SEA recting the Authority to reassess Handling without share capital in- its amount based on the new pa- In May 2015, ATA Handling in liq- creases), as Euro 93.1 million. SEA rameters indicated by the admin- uidation and subject to adminis- has already produced the docu- istrative court. Through an order tration notified SEA SpA and the mentary evidence disproving the dated April 27, 2017, the Author- Municipality of Milan of a citation, charge of predatory pricing. ATA ity reassessed the amount of the by which ATA Handling, referring Handling then challenged jurisdic- fine and set its new total amount to the decision of the European tion before the Supreme Court of

Annual Report 2017 • 54 2017 DIRECTORS’ REPORT

Appeal, asking the latter to rule on the loss of chance it sustained whether jurisdiction for damages because it was unable to re- pertained to the regular courts or sell the shares during the time to the administrative courts. The when their value was greater Supreme Court of Appeal ruled than the price then paid (USD that the regular courts had juris- 2 million). No damage amount diction, and the case was then re- was specified; ferred to the regular courts for a ◼◼ compensate Delta Group for decision on the merits. the expected profit that failed to materialise because Delta Once jurisdiction of the regular Group was not awarded con- courts had been ruled, ATA Han- cessions at three Argentine air- dling moved for resumption of ports. No damage amount was trial before the court, which ad- specified. journed the case until April 2018 as it still had no decision from the Once the evidentiary stage of the Court of the European Union. trial had ended, we awaited the announcement of the judgment. In line with the previously adopt- A new judge was appointed. ed closings in terms of the Eu- Noseda requested legal aid, which ropean Commission decision of was granted. SEA then proposed December 19, 2012, also for the a settlement in the amount of dispute taken by ATA Handling - USD 500,000 which was rejected. directly based on the above-stat- Noseda demanded the amount of Judgment 3553/2015 ed decision and to which it explic- USD 3.5 million plus court costs. entered by the Milan itly refers - no risks and charges Court of Appeal provisions were accrued in the On December 30, 2016 Commer- SEA financial statements. cial Court No. 2 of Buenos Aires The decision by the Milan Court entered judgment, which was of Appeal published in September served on February 2, 2017, dis- 2015 relates to the ongoing dis- Action brought by Emilio missing Mr. Noseda’s action to pute with customs for non-pay- compel fulfilment of the aforesaid Noseda before the Court ment of fees for the use of space commitments made in 1997, and made available to SEA. This deci- of Buenos Aires ordering him to pay court costs. sion confirms the grounds cited Mr. Noseda appealed against the in the judgment at trial, which In 2005, an action was filed judgment. Currently the case is ordered customs to pay SEA the against SEA by Mr. Emilio Noseda stayed at the Commercial Court sum of Euro 5,591,000. In Decem- before the Court of Buenos Aires pending appearance in court of ber 2016 customs appealed the to compel fulfilment of alleged the heirs of a third party whom aforementioned judgment to the commitments made in 1997 by the court summoned as the as- Supreme Court of Appeal, disput- SEA to Delta Group S.A., a Uru- signees of some of Delta Group’s ing the amount set by the appeal guayan company of which Mr. rights. court. Since not all levels of judg- Noseda had been legal represent- ment have been completed, no ative. Delta Group S.A. supported In its financial statements, SEA revenue has been posted in the SEA’s tender for the Argentine air- posted an adequate amount to present financial statements. ports concession. cover the risk in a provision for contingent liabilities. Mr. Noseda, as assignee of Delta Group’s rights, sought a judgment Civil litigation between ordering SEA to: SEA and ENAV

◼◼ transfer 2% of the shares of 1. These proceedings concern AA2000 against payment of SEA’s claim to assets mistakenly their current market value; assigned to ENAV by means of ◼◼ compensate Delta Group for provisional delivery memoranda

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in the course of 1983 and 1984. 14/11/2000; the hearing for final ness, and challenged the law both By overturning the judgment en- argument had been scheduled for before the Regional Administra- tered at trial, the Court of Appeal December 5, 2017 but was post- tive Court and before the regular granted SEA’s motion and voided poned to May 29, 2018. Court of Rome. the transfer of the aforementioned assets to ENAV. Judgment Over the years considerable case 3406/2015 acknowledges SEA’s Ruling on fees law has accumulated, some of right to use the state-owned for fire-fighting services which has become final. All judg- premises under concession at the ments have found that “the tax was instituted by the law as a airports of Milan Linate and Milan The law of 27/12/2006 no. 296 tax earmarked for a specific pur- Malpensa, and therefore tem- (2007 Finance Act) article 1, pose”. Until now the courts have porary ownership of the goods paragraph 1328, established a also observed that ever since law produced/benefits obtained. In fire-fighting fund financed by no. 2/2009 entered into force, all February 2016, both the Prosecu- airport companies in proportion monies in the fire-fighting fund tor’s Office on behalf of the Min- to the traffic generated by each, have been allocated to cover istries and ENAV appealed to the in the amount of Euro 30 million costs and purposes totally unre- Supreme Court of Appeal against a year, in order to reduce the lated to those initially intended, judgment on appeal 3406/2015, State’s expenses for the fire-fight- namely that of reducing the costs which granted SEA’s claims in full. ing service provided at airports by incurred by the State for firefight- In April 2016 SEA moved for ser- the National Fire-Fighting Service. ing services at airports. vice of the counter-appeal with However, as a result of the entry contingent cross-claims against into force of the provisions of par- It should be noted that the fol- both the Ministries and ENAV. agraph 3 bis of article 4 of Legisla- lowing provision was added to the Currently the dispute is pending tive Decree 185 of 29.11.2008, in- Stability Act of 2016, which came before the Supreme Court of Ap- troduced with the Conversion Act into force on January 1, 2016: peal, awaiting scheduling of the of 28/1/2009 no. 2, the resources hearing on the merits. of the fund were also allocated to “Article 39-bis, paragraph 1, of the purposes completely unrelated Decree-Law of October 1, 2007, 2. In addition a lawsuit is pend- to those initially envisaged by the no. 159, as converted with amend- ing before the Court of Milan on 2007 Budget. ments by the law of November 29, SEA’s claim against ENAV for the 2007, no. 222, after the words: ‘of assets covered by Ministry Decree SEA objected, alleging unlawful- the law of December 24, 2003, no. 350’ the following words are insert- ed: ‘and of fees charged to airport operating companies for fire-fighting services at airports, pursuant to article 1, paragraph 1328, of the Law of December 25, 2006, no. 296’.”

The amended law redefines the contribution to be paid to the fund as consideration for the service rendered by the fire bri- gade, in order to eliminate the objections concerning the nature of the tax that were raised by airport operators and to return the matter to the jurisdiction of the regular courts, notwithstanding the judgments previously entered on this issue. By a judgment published on January 26, 2018, the Court of Rome ruled that the reg-

Annual Report 2017 • 56 2017 DIRECTORS’ REPORT

ular courts have no jurisdiction During 2017 the Energy Servic- ment notice for 2011 concerning and that the case must revert to es Operator audited white cer- the VAT profiles in the matter. the Tax Commission. tificates assigned for the period An appeal was filed against the 2012-2015. The GSE assessed that assessment at the Provincial Tax The Supreme Court of Appeal, by no subsidies should be paid for Commission of Milan, which ruled order 27074/16, applied to the Con- heating and cooling energy used in favour of the Tax Agency on De- stitutional Court for review of the by certain internal departments; cember 11, 2017 in judgment no. constitutionality of this provision. as a result, a provision for future 6835/2017, against which an ap- charges of Euro 500 thousand peal was lodged with the Region- was recognised, since such certif- al Tax Commission. We expect to Report from the Energy icates had been fully collected at be informed of a hearing date. the end of the 2017 financial year. On August 8 2017, the Tax Agen- Services Operator as cy served four more assessment a result of an audit notices for the subsequent years of the green certificates Update on judgment from 2012 to 2015. The Compa- for district heating at 7241/2015 of the regular ny filed separate appeals against the Linate power plant Court of Milan each of them with the Provincial Tax Commission for Milan, once again stating that the underlying In December 2016, the Energy On January 26, 2017, the Milan tax claim was void. We expect to Services Operator (GSE) sent to Court of Appeal upheld trial court be informed of a hearing date. SEA’s energy subsidiary a report ruling 7241/2015 of the Court on its audit (carried out in March of Milan ordering the Ministry of 2016) to verify the information Transport to compensate SEA for provided for an application for Euro 31,618 thousand in addition Tax Agency - Notice green certification of the district to revaluations according to the of assessment for heating supplied by Linate pow- ISTAT [cost of living] indices and registration tax er plant. The GSE demanded the interest at the legal rate. An en- return of 17,106 green certifi- forceable copy of the judgment Several assessments were re- cates for the period 2010-2014 was served on the Ministry and ceived for registration tax relating (of which 12,435 for the Company the Prosecutor’s Office in Febru- to the refund of sums as ordered and 4,671 for A2A), as a result of ary 2017. On April 14 2017 the in the judgments entered by the which a provision for future charg- Ministry of Transport appealed regular Court of Milan. The Com- es in the amount of Euro 1,049 to the Supreme Court of Appeal, pany objected to the Tax Agency thousand was recognised, since reiterating the grounds stated in that the tax had been mistakenly those certificates were paid at the appeal without any substan- calculated as a proportional tax December 31, 2016. The Compa- tial change. instead of at a flat rate. The first ny, assisted by its lawyers, lodged appeal filed and argued at the an appeal in timely fashion. None- On June 9, 2017 SEA filed a re- Provincial Tax Commission of Mi- theless in May 2017 it returned sponse and a cross-appeal at the lan was granted. The Company’s the green certificates requested Supreme Court of Appeal. request was deemed reasonable by the agency and recognised an and the Tax Agency was ordered additional provision to cover the to reimburse the expenses. On green certificates for the period Tax Agency - VAT December 28, 2017, the Tax 2015-2016, which had been fully assessment notices Agency lodged an appeal with the paid at the end of the 2017 finan- Regional Tax Commission, where- cial year. The local customs office at Linate upon the Company joined the and Malpensa airports audited proceedings. Regarding the other SEA to ascertain whether excise notices of assessment challenged Audit by the Energy duty had been correctly paid on by the Company, we expect to be Services Operator on the electricity used to operate informed of the dates for both Linate and Malpensa airports. As the first and second level - hear the assignment of white a result of this audit and of the ings. certificates for the period notes, on November 16, 2016, 2012-2015 SEA received service of an assess-

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Tax Agency - Corporate submitted a tax settlement proposal, since it did not consider the income tax assessment grounds adduced by Inland Reve- notice nue as completely cogent. In May 2017 the tax settlement proceed- In December 2016, as is known, ings concluded with a favourable SEA received a corporate income outcome for the Company, since tax assessment notice for the the initial tax claim was substan- 2011 tax year, concerning the al- tially reduced in view of the per- legedly incorrect application of suasive arguments that the Com- the PEX tax scheme [tax exemp- pany had submitted, even in a tion of capital gains] with specific situation where both the law and reference to the capital gains that the standard procedures were accrued from the sale of the equi- ambivalent. ty holding in Aeropuertos Argen- tina 2000. The sum total of the aforesaid contingencies and those relat- In 2017, the Company requested ing to the disputes with the Tax an internal review. While await- Agency were fully reflected in the ing its outcome, and solely in or- provision for tax risks set aside for der not to miss the deadline for these items. an amicable resolution before going to trial, the Company also

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Other information

Consolidated passenger experience at Group ty), except for Malpensa, London managed airports. Heathrow and London Gatwick. Non-Financial Report The European segment with The consolidated non-financial Quality of airport services the greatest delays in the first report (“Consolidated NFR”) of delivered: European context quarter (average delays in min- Società per Azioni Esercizi Aero- and ranking of our airports utes per departing flight), was portuali - SEA SpA, drawn up as Data on punctuality 2017 col- Amsterdam-London Heathrow, per Legislative Decree 254/16, is a lected from the members of the significantly impacted by winter separate report to this Directors’ weather conditions; the European Report, pursuant to art. 5, para- working group ACI Europe-EAPN (European Airport Punctuality Net- segment with the highest delays graph 3(b) of Legislative Decree in the second quarter (average 254/16, and it is available on the work) highlight a slight deterioration in punctuality both for de- delays in minutes per departing website www.seamilano.eu in the flight) was Palma di Majorca-Co- “Sustainability” session. partures and arrivals compared to 2016. On average, the punctuality logne, due to internal airline of departing flights in November problems; the European segment with the highest delays in the Customer Care was 75.7% compared to 77.9% recorded in the previous year, third quarter (average delays in minutes per departing flight) was with significant monthly fluctua- The SEA Group, always keenly London Gatwick-Barcelona fol- tions ranging from 83% in March aware of the opinion of its us- lowed by Palma di Majorca - Co- and November, to 66% in July. ers - passengers, accompanying logne due to intense traffic occur- Arriving flights recorded average persons, visitors and employees - ring over Spain. continued in 2017 to implement a punctuality of 78.6%, slightly reducing on last year (80.6%), with monitoring and improvement pol- Linate, with 86%7of punctual de- monthly fluctuations similar to icy of the quality level of servic- parting flights, ranks as the lead- those for departing flights. es offered to the various parties er in terms of punctuality across which interact with the Group. all the airports in this category, The improvement of the “Pas- The first quarter of the year saw ahead of the other comparable senger Experience” is assuming the highest yearly values record- Italian airports of Bologna and across the airport industry an in- ed per airport category, whilst the Naples. creasingly significant role, in that third quarter, characterised by an Quality Perception, which is the overall increase in summer traf- With departure punctuality con- principal measurement, is recog- fic, on the contrary, recorded the firmed at around 80.3%8, Malpen- nised as an essential element to lowest yearly values both for ar- sa ranks above the average Euro- support business profitability. riving and departing flights, high- pean and is the best amongst the lighting airport capacity problems European airports of similar size The SEA Group has therefore fol- or difficulties experienced by the within its group (15-to 25 million lowed, in line with European best European airport traffic control- passengers) (including Vienna practice, an approach which iden- lers in managing system capacity. and Athens). It is also far ahead in tifies and intervenes on the more crucial aspects in relation to pas- Average European departure de- senger expectations, introducing lays increased in comparison to 7 Source EAPN. new services which improve the arrivals (downturn in punctuali- 8 Source EAPN.

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comparison to the main larger air- in 2017 against a required Results are stable compared to port hubs such as Rome Fiumici- standard of 7’50”. Breakdown 2016 at the Malpensa Terminals no, Munich and Frankfurt. of the values for both Termi- and could be considered positive nals is as follows: taking into account a robust in- Detailed data from a performance crease in traffic to the airport. The analysis of both airports, solely for ◼◼ Terminal 1: 8’19’’ vs 7’00’’ negative data for Linate is justifia- passenger flights, is shown below: ◼◼ Terminal 2: 6’05” vs 8’00” ble due to the disruptions caused by the launch of the 1st phase of Malpensa Linate facade restructuring works. ◼◼ At Malpensa, departing flight ◼◼ Linate airport closes 2017 with 2017 also saw the continued use punctuality for 2017 was 82%9 punctuality values for passen- of the new perceived-quality mon- with a recovery of punctuali- ger flights at 86.8%10, com- itoring instrument, introduced ty (difference between arriv- pared to punctuality for arrivals in 2015 and which collects infor- al punctuality and departure at 87%. mation on passenger satisfaction punctuality) of 3.1%. The anal- ◼◼ Delivery of the 1st bag with- for individual services 24/7, giving ysis by Terminals also shows in 17 minutes and the last bag them the opportunity to express a similar trend: Terminal 1 re- within 24 minutes was achieved their opinions, through dedicated ports departing punctuality of for 93.9% of the flights, with totems, immediately after using 81.8% (+2.9% recovery), with 95.4% of the flights in the sec- the service. There are 30 totems Terminal 2 indicating a year to ond case. Bags delivered after spread across the 3 Terminals, date value of 82.6% (+3.6% re- 45 minutes were 0.2%. monitoring security areas, san- covery). ◼◼ Data on misdirected luggage itary services, commercial busi- ◼◼ Performance in terms of bag- indicates 1.8 pieces of luggage nesses and general maintenance gage delivery times confirms, misdirected for every 1000 pas- areas and recorded 2,215,000 for this year also, values well sengers departing in 2017 (1.7 clicks in 2017. ahead of the values set out in bags in 2016). the Service Charter, which cov- Customer relationship and the ers 90% of cases: in Terminal 1 Overall passenger satisfaction: development of B2C services delivery of the first bag within assessment of perceived 22’50” was achieved for 95.2% Quality SEA’s customer relationship of the flights, whereas the de- The perceived quality perception management system livery of the last bag within of passengers, Customer Satisfac- In 2017, more than 2,110,000 35’50” was achieved in 94.5% tion with the services provided users were registered at the Cus- of cases; in Terminal 2, the at the SEA managed airports (as- tomer Relationship Management delivery of the 1st bag within sessed through CAPI interviews (CRM) platform, a 50% growth 26 minutes was achieved for by a leading Market Research rate from the previous year. This 97.6% of the flights, where- Institute). SEA used an interna- very encouraging trend was main- as the delivery of the last bag tionally utilised overall satisfac- within 37 minutes was achieved tion index11 - the CSI (ACSI model in 99.2% of the cases. - American Customer Satisfaction ◼◼ Regarding misdirected lug- Index), a sector and individual 9 Source: Services Charter/Masterplan. 10 gage, Terminal 1 recorded a business level parameter. The CSI Source: Services Charter/Masterplan. 11 The index is measured on a scale of 0-100, value of 2.19 misdirected bags 2016 Customer Satisfaction index for every 1000 departing pas- with 75 representing excellence and 60 of our airports was: indicating sufficiency. sengers (2.29 in 2016), whilst Terminal 2 recorded 0.33 misdirected bags for every 1000 departing passengers (0.48 in 2016). ◼◼ The hand baggage securi- CSI 2017 2016 ty screening waiting times were comfortably within that Malpensa Terminal 1 75 75 required by the Regulatory Malpensa Terminal 2 72 72 Agreement: 7’32” (weighted Linate 68 70 average of the two terminals)

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ly attributable to the Wi-Fi sys- pressed with its catering services, and was consolidated. tem and e-commerce. More than for its wide variety of shops and 1,485,000 subscribers agreed to for the efficiency of its passport Throughout the year at Malpen- receive newsletters and survey inspection. This last item is due sa and during the summer and questionnaires intended to keep to the efficiency achieved thanks Christmas holidays at Linate, SEA airport users informed and to sur- to SEA’s smooth cooperation with again proposed various services vey customer expectations and the border police to ease passen- offering passengers travelling opinions so as to guide our provi- ger flow. Another factor is the with children aged up to 12 years sion of airport services. adoption of the new passport in- a Family Friendly airport: spection procedures as required Perceived quality: satisfaction by the European Regulation start- ◼◼ priority security passage expressed by passengers and ing from April 7, 2017. through a “Family lane”, used the positioning of our airports by approx. 1,060,000 passen- internationally The rank of Malpensa Terminal 2 gers at Malpensa and 270,000 SEA continues taking part in the is improving in passengers’ esti- at Linate with a very high satis- ACI ASQ (Airport Service Quality) mations regarding transport to faction index level. programme that involves some and from the airport, thanks to ◼◼ distribution of 90,000 illustra- 320 airports worldwide and about the new railway station at Termi- tive brochures (with games for 110 in Europe, each of which sup- nal 2 which opened in December kids) featuring useful airport plies the interviews it conducts of 2016. services and procedures; departing passengers using a uni- ◼◼ games area with videos and in- form questionnaire. This enables Complaints teractive flooring; setting a single benchmark for the In 2017, 742 complaints were re- ◼◼ special priced menus for chil- degree of satisfaction expressed ceived and processed. The num- dren and dedicated shopping regarding the services received ber of complaints increased 5.7% promotions; at different airports worldwide, compared to 2016. It should be ◼◼ webpage dedicated to the in- to identify the highlights and noted that the Company also han- itiative and a mini-site with the most significant experiences dles complaints about the Orio al games; (best practice). Serio car parks. ◼◼ Pet Therapy.

In the data available for the third Dedicated services Autism project, a journey quarter of 2017, Malpensa Termi- Family Friendly Airport through the airport nal 1 stood out among European SEA’s initiative focused on fami- This project was designed by airports for the satisfaction ex- lies travelling together continued ENAC to assist travellers with

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autism. It allows them to make a media space saw development ing our common environmen- virtual visit to the airport before of the channels managed by our tal heritage; they travel, so they know what to call centre (currently Twitter, ◼◼ priority given to the purchase expect. SEA began offering this Facebook and the chat and recall of products and services which service in July 2017, after it had service which may be activated adopt similar environmental completed the requirements. It by app), requiring the continued sustainability parameters, with is intended to protect the rights presence of a dedicated operator: particular attention to energy of passengers and of people with the opening of a chat bot plat- saving, the reduction of atmos- disabilities. form and the WhatsApp channel pheric and noise emissions and are currently in progress. water conservation; Information screen system ◼◼ identification of sources and During the year 2017 the airport Contingency Plan and Airport controls of CO2 emissions pro- assistance service was strength- Helper service duced, both direct and indirect, ened by adding a video confer- Again in 2017, 2 informational through the involvement of the ence system: passengers can re- meetings were organised with stakeholders, in order to receive assistance directly from a SEA personnel involved in the duce greenhouse gas emissions customer service employee who Airport Helper project and those in line with the Kyoto protocol; talks to them from one of the 16 taking part in the Contingency ◼◼ a constant level of monitoring video screens in the two airports. Plan (APCP), a position united by and verification of the process- Comparing September 2015, the a single objective i.e. to offer as- es related to the energy, at- month in which the installation sistance to passengers in difficul- mospheric emission, noise and of all totems at the 2 airports was ty. In particular, the Contingen- water cycle aspects, and in gen- completed, with the same month cy structure (introduced by the eral the various phenomenon of 2017, video conference calls in- company in 2010) also demon- concerning interaction with the creased 20%. strated in 2017 its usefulness in ecosystem; intervening also in emergency ◼◼ a highly developed system of Customer Service for e-commerce situations due both to a regula- listening and communication customers and assistance through tory change, e.g. changes to the with a wide range of external the social media channels and Schengen code, and the higher actors to ensure transparency apps than expected traffic levels and and sharing. The call centre service in 2017 particular events, such as the visit reported a 20% increase in calls, of the Pope which required signif- The introduction of the Group en- indicating in percentage terms a icant levels of organisation and vironmental policy is based on the link with the general increase in security. commitment to a dedicated struc- traffic. ture which ensures maximum attention to the principal strategic Specifically, requests increased aspects and the operating impli- for information on flights (33%) The environmental cations, in addition to guarantee- and on parking (26%); the remain- dimension ing the daily inter-departmental ing 40% is broken down between involvement of all organisation- airport services and commercial, The SEA Group is strongly com- al units whose activities have a check-in and boarding informa- mitted to providing quality ser- direct or indirect impact on the tion, Lost & Found and baggage. vices in respect and protection of reaching of the environmental the environment, based on the objectives. From August, a daily transfer of following principles: calls was introduced to the out- Under this policy in 2004 an En- sourced call centre company for ◼◼ extensive compliance with reg- vironmental Management Sys- those concerning the lost and ulatory requirements; tem was drawn up, which in 2006 found service and connections to ◼◼ an ongoing commitment to im- achieved the ISO 14001 Certifi- and from the airport (from 800 to proving the environmental and cation, which was reconfirmed in more than 1000 calls a month), in energy performance; 2009, in 2012 and with renewal in order to recover the operating ca- ◼◼ education and involvement of 2015 for the subsequent three- pacity of the call centre staff. all actors involved in the airport year period. system for a commitment to- In fact, the success of SEA’s social wards respecting and protect- In July 2017, SEA passed the TUV

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Italia test, maintaining therefore its certification.

With a view to a constant and close monitoring of the environmental impact of its activities, the SEA Group works together with a number of external bodies with environmental and regional responsibilities.

The range of environmental aspects managed is particularly extensive: water, air, noise, climate change, energy, waste, electromagnetic fields, light pollution and landscape.

The extensive experience matured since 1998 with the incorporation of SEA Energia and its cogeneration (regeneration) plant has seen the formal consoli- creation of a plan designed to European project dation in October 2013 of the En- reduce emissions, focused on The involvement of the company ergy Management System of SEA the continual minimisation of in the international research and and its ISO 50001 certification by emission levels (scope 1 and innovation project environment CertiQuality. The current action is scope 2 application field). was further developed, principal- undertaken for improved integra- ◼◼ Optimisation - in addition to the ly focused on environmental and tion between the different certifi- level 1 (Mapping) and 2 (Reduc- safety/security issues. The pro- cation systems. tion) requirements, the calcula- jects introduced in 2017 are sum- tion of the airport emissions of marised below: Airport Carbon Accreditation the stakeholders and their in- and Carbon Neutrality of the volvement in the drawing up of ◼◼ TRANSFORMING TRANSPORT Milan airports an action plan (scope 3). is a project where the Kick-off SEA in relation to CO2 emissions ◼◼ Neutrality - in addition to levels Meeting took place in Madrid in has acted effectively in reducing 1, 2 and 3, the reaching of the the first six months of 2017. emissions and in particular those ◼◼ “Carbon Neutrality” objective DS-08 is a proposal regarding from activities under its direct for emissions under the direct cyber security, safety and the control or in which significant in- control of the airport manager environment. fluence is exercised (scope 1 and ◼◼ TALOS, focuses on issues of fu- (scope 1 and 2) with the acqui- 2). This is confirmed by the 2017 ture safety/security (in conjunc- sition of offsets. renewal of SEA’s classification of tion with the Milan Polytechnic “Neutrality” level with regards to Foundation). Airport Carbon Accreditation. ◼◼ Scope 1 - Direct emissions ◼◼ THESEUS is an innovative risk- - Emissions associated with based model to minimise vul- The Airport Carbon Accreditation sources owned or under the nerabilities as well as a new offers four possible levels for ac- control of the company. method for monitoring safety/ creditation: ◼◼ Scope 2 - Indirect Emissions security (in conjunction with - Emissions associated with the Milan Polytechnic Founda- ◼◼ Mapping - checking of emis- the generation of electricity tion). sions under the direct control or thermal energy acquired ◼◼ Further research was carried of the airport manager (scope or consumed by the compa- out to draft new proposals con- 1 and scope 2 application field). ny, which is physically emit- cerning territorial engagement ◼◼ Reduction - in addition to the ted within the corporate and the management of an en- level 1 (Mapping) requirements, scope. vironmentally sustainable plan

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for handling the transport of Human resources Regarding internal processes, to goods. keep in line with regulatory de- At December 31, 2017, SEA Group velopments, operating plans and Outlined below is a summary of employees numbered 2,837, de- methods governing goods and the projects launched in the previ- creasing by 29 on the end of 2016 services procurement were also ous years which are still ongoing, revised. In addition, consistent (-1.0%). or projects which ended in 2017: with the defined self-regulatory principles of corporate conduct The Full Time Equivalent total CASCADE: and ethics, the procedure for re- for 2017, compared to 2016, saw an important energy-manage- porting improper conduct (e.g. a decrease of 35 from 2,801 to ment project, completed in 2015. whistle-blowing) was fully formal- 2,766 employees (-1.2%). ized. DREAM: In line with and in support of the Females at the SEA Group repre- The project was completed in Industrial Plan objectives, SEA sented 28% of the Headcount at 2017. The project focuses on the launched a Business Process Inno- issue of energy, principally in- December 31, equally distributed vation Project to give continuity volves Malpensa and was under- across classifications. to the operational excellence al- taken to optimise consumption ready achieved in previous years. and to involve the various sourc- Organisation A Europrivacy Project was also es, including also, naturally, SEA During the period, the organiza- launched in order to set out an ef- Energia. tional structuring of personnel fective and timely action to adapt and lines was revised. This par- to the new European regulatory WATERNOMICS: ticularly concerned the Planning developments expected in 2018. a project launched in 2014 to im- and Control Department, the prove the water cycle in Linate Legal and Corporate Affairs De- Development and training airport and which recently came partment, the Non-Aviation Sales During 2017, SEA continued to to a close. Department, the Aviation Busi- present a full program of intense ness Development Department training initiatives, with particular OCTAVE: and the Operations Department. regard given to managerial skills a project launched in June 2015 A Compliance Monitoring De- and the strengthening of profes- focusing on the security process- partment was also introduced to sional skills for the main passen- es in biometric screening (vocal). guarantee compliance with EU ger-customer front-end roles. This project is in its final phase. Regulation No. 139. In 2017, the process for the divestment of air- Front-end initiatives included: Environmental port ticketing activities was com- management process pleted and the parking operation- 1. “The Value of Security”, ad- Master Plan Linate 2030: Decem- al management outsourcing was dressed to Security Officers, ber 2016 saw the completion of finalized. begun in 2016 and having the SIA (Environmental Impact Study) and also the preparation of the documentation to include voluntary additions by the SEA formally delivered to ENAC (Na- FTE PERSONNEL (AVERAGES) tional Civil Aviation Authority), who subsequently forwarded it to the Ministry of the Environment. 2016 2,801 Master Plan Malpensa: all the activities on topics concerning 322 1,768 711 nature/fauna, noise and air pollu- Executives & Managers White-coller Blue collar tion, in addition to activities managed by the appointed bodies to 327 1,754 685 conduct research on hydrogeo- 2017 2,766 logical-and aquifer topics have now ended.

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among its main objectives the improvement of role supervision and customer relations, in line with total compliance. The initiative promoted a growth in awareness of the value of the profession and in good team- work and involved approximately 500 employees in a total of over 2,800 training hours. 2. PRM Service staff training, to improve integrated transport assistance to passengers with reduced mobility at Linate and Malpensa, through an effective approach to customer care-oriented role supervision, team integration and personnel mo- tivation. 3. Training action for employees in the Customer Care Airport Information Area of Linate and Malpensa airports. The course, ize an outdoor day that would en- ◼◼ Mandatory Training of one-day duration on 5 occa- courage informal communication ◼◼ Recurrent Training. sions, involved approx. 50 per- and interaction in work group de- sons, including the new Shift velopment. a. Particular focus was given to Managers. the planning and scheduling Making good on progress made in of ground safety training in- Management oriented initiatives 2016, April saw the continuation terventions in close relation focused on: of linguistic skills initiatives for to the implementation of new personnel requiring a good level EU Regulation No.139/2014, 1. “Daily excellence” for per- of knowledge of business English. establishing aerodrome opera- sonnel managers and project Two project initiatives involved tor technical requirements and managers concerning the daily the Group HR team in elabo- procedures. This Professional management of operations. 80 staff were involved in 2017, rating Talent Management and Training and Education, with for a total of more than 1,000 Acquisition processes. The first initiatives to promote knowl- training hours. project defined the characteris- edge of the new legislation, 2. “Effective and Inclusive Leader- tics and skills of today’s talents, was aimed at developing Safe- ship”, aimed at developing and and imagined and defined those ty Management System con- promoting a culture of diversi- of tomorrow’s talents, in order tent for the dissemination and ty and gender integration, new to place value on existing skills communication of instruments leadership paradigms and the resources and develop those still such as the Airport Manual, enhancement of development lacking. The second project was Airport Regulation, Emergency tracks. aimed at facilitating the entry and Plan and the assistance and fire 3. “Alzare lo sguardo”, or “Look integration of new hires, both services. up”, an innovative initiative from universities and from the b. In this context, initial and recur- aimed at SEA’s young profes- general labour market. rent courses were given to Lin- sionals. Professional Training and Techni- ate and Malpensa airport main- cal Training initiatives in 2017 con- tenance personnel dedicated During the second half of 2017, firmed the group’s utmost atten- to the ENAC APT-10A circular several Team Building exercises tion to compliance with a focus on dealing with criteria for assess- were carried out across various the control and governance of or- ing runway surface conditions company departments. The goal ganizational processes consistent during periodic checks as part of each experience was to organ- with all activities of: of maintenance plans and dur-

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ing operations in the case of awareness of the risks of use of tact with the traveling public, wet or contaminated grounds. specific means and equipment, involving professional figures, c. Numerous practical training to knowledge of procedures of which 130 personnel from sessions, involving a total of in Airport Regulations and to Security, Airport Information 89 participants, were adminis- main invention methodologies. and Coordination, and employ- tered on the use of Vetter bags g. In 2017, in collaboration with ees of commercial operators and Goldhofer Aircraft Recov- Area Security managers, rede- present at the airport termi- ery Transport Systems for the ployment continued of several nals. removal of damaged aircraft, SEA professional roles from j. Again with a view to legisla- with the exceptional possibil- Airport Handling, through the tive, regulatory and standards ity of using a Meridian MD80 Sworn Security Guard (Guardia compliance, specific distance made available by Volandia. Particolare Giurata) qualifi- training continued on the ad- d. A theoretical confined space cation procedure. In addition ministrative responsibility of and work at altitude Personal to professional assessments legal entities, in relation to Ital- Protective Equipment (PPE) and sector-specific theoreti- ian Legislative Decree 231/01 Category III course was admin- cal-practical technical training, and the Organizational, Man- istered, involving 27 partici- sessions were administered, agement and Control Model pants, in relation to Italian Leg- involving 105 participants, in adopted by the company, ini- islative Decree 81/08 on Work English for Security, Work Safe- tially for administrative staff, Safety, pursuant to Italian Pres- ty, Radiation Protection, Air- followed by SEA operational idential Decree 177/11. side Safety, Firefighting, Dan- roles, completed by a total of e. Regarding Winter Operations, gerous Goods Regulations and 250 participants over the year. recurrent training was given Persons with Reduced Mobility k. At Linate and Malpensa, in col- on de-icing and anti-icing op- (PRM) assistance. laboration with the Infrastruc- erations, in line with Associa- h. Regarding the topic of Passen- ture Department and the Work tion of European Airlines (AEA) gers with Reduced Mobility Safety and Infrastructures Unit, Training Recommendations, (PRM), in addition to recurrent continuous professional train- involving over 300 Operations courses, in line with current ing courses were administered, Department personnel. In ad- legislation, regulations and in line with Italian Presiden- dition, initial and recurrent standards, Italian Consolidated tial Decree 137/2012, for the training courses were given to Law 81/2008, EC Regulation achievement of Professional 190 Integrated Transport and 1107/06 and European Civil Avi- Training Credits (Crediti Form- Airport Maintenance personnel ation Conference guidelines, ativi Professionali - CFP) aimed dedicated to Snow Emergency training courses were adminis- at updating and certifying the Management and the use of tered for the first time to new knowledge and skills of 146 various types of snow removal SEA PRM Assistance personnel. SEA professionals. Two ‘Pro- vehicles. The aim was to provide basic ject Manager’ courses were f. Firefighting training included skills and knowledge in mobil- also organized, divided into 4 four exam sessions, preceded ity methods, for application in meetings totalling 32 hours of by a complete theoretical-prac- the professional context with training. tical course, in line with current responsibility and awareness, legislation, given to more than and effective tools for commu- Welfare 43 new SEA employees certi- nication and the management Corporate welfare, increasingly fied for Security, Maintenance of interpersonal relationships, focusing, in 2017, on the needs and Airport Coordination emer- in line with the conduct guide- of individuals, saw the introduc- gency plans. Concurrently, nu- lines indicated in ECAC Docu- tion of new initiatives and activi- merous updating sessions were ment 30 Annex 5C - Part I - Sec- ties dedicated to employees and programmed and dedicated to tion 5/2014. 18 participants their families. The main objective personnel already certified as took part in this initial training. was to provide support in family firefighters, involving a total Over 190 participants took part care situations, to offer new skills of 173 participants. In addition, in recurrent training. acquisition opportunities in the Apron Fire Emergency Man- i. In compliance with the ENAC educational orientation of de- agement training, involving circular GEN 02A, PRM Training pendent children and to promote 110 participants, was aimed at courses were held at Linate and guidelines for a healthy lifestyle Specialist Drivers dedicated to Malpensa for personnel in con- and well-being.

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Alongside the programming of in 2017, including scholarships at Company level as well as specif- the usual initiatives included in rewarding exemplary class exam- ic Division-level issues were ongo- the annual welfare plan (e.g. ination passes and ‘Learn to study ing. home-work mobility, health, risk with SEA’ study methodology prevention, social services and courses dedicated to middle and These discussions specifically led initiatives organized with the high school children. The ‘Push to the signing, on January 3, 2017 NoiSea association, such as sum- to Open’ initiative for the orien- of a voluntary redundancy agree- mer activities and camps and the tation of high-school students ment, in accordance with Legis- Bono Befana scheme), various continued, as did the ‘Talent Days’ lation 223/91, aimed at reducing new projects were proposed in laboratory classes for recent grad- employee numbers. The agree- 2017, including the ‘Fragibilità’ uates. ‘Intercultura’ study abroad ment formalised the positive out- service, offering support in the scholarships were increased, with come of the mobility procedure care of elderly and disabled fam- the addition of a further sum- launched in November 22, 2016, ily members, and the ‘Word from mer scholarship for Finland. The implementing the first part of the a Nutritionist’ initiative, aimed at ‘Work-Study Alternation’ project, Draft Framework Agreement of promoting well-being through launched the previous year, also July 22, 2016. guidelines for a healthy nutrition continued with the involvement and lifestyle. of 29 young people in a three- On March 6, 2017, an agreement week ‘Summer Job’ experience. was reached regarding multi-skill Adding to initiatives for the edu- training for Linate and Malpensa cation and employability develop- Finally, comparison and bench- Airport Coordination staff. As a ment of employee’s children, as marking activities continued on result of changes in the opera- part of the ‘Future Lab’ project, corporate welfare and work-life tional and technological events was the implementation of a new balance with external companies recorded over the years, the role service aimed at twelve to four- and institutions, in collaboration of the Apron Operator, Terminal teen-year-old school pupils, the with Valore D, the IEP ‘Enterprises Operator and Driver Coordinator ‘Push to Open Junior’ orientation and People’ Network and Jointly. were incorporated into the new course for parents and children multi-skilled role of Airport Spe- on making a conscious and appro- Industrial relations cialist. priate choice of secondary school. In the first six months of 2017, Other initiatives dedicated to the discussions with the Trade Unions On June 12, 2017, following the children of employees continued regarding both macro procedures rationale of improving efficiencies

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On December 4, 2017, an agreement was signed between the SEA and the Trade Unions to introduce new welfare initiatives by establishing a “welfare bonus” as well as by introducing new innovative “work life balance” tools. This “welfare bonus” specifically related to 2017 as a one-off bonus awarded at the end of a number of shared efficiency initiatives, in terms of aspirational principles under the Draft Frame- work Agreement of July 22, 2016 and was effectively implemented in that year. The welfare bonus is implemented through our IT platform, a platform which provides a range of welfare services. With regard to the work-life balance, the following arrangements and increasing productivity, the to improve the management of were introduced to improve the SEA and the Trade Unions signed the client relations role as well balance between private life and an agreement to redefine the as client relations (“the value of work: helping shift-workers use role of the PRM assistant, who in security/taking care of the peo- their holidays, management of per hour ROLs (Reduced working addition to managing passengers ple who take care”); to create a hours), flexible hours for non- with reduced mobility carried out community that could reinstate shift workers, facilitation of part- BHS-related tasks, and who would the corporate value of continuous time demands, parental supports, be in a position to assist Drivers by innovation (“blue sky vision”/”in- the consistent allocation of ROL driving certain vehicles, e.g. am- novate the world”). hours and holidays by inputting bulifts, ambulances etc.). them into a time database to sup- On October 30, 2017, again with port staff with specific problems. It was also agreed to relocate the the purpose of improving effi- clock-in units, used by the drivers ciencies and increasing productiv- Again within the scope of the and the PRM operators at the Lin- ity, the SEA and the Trade Unions direction taken under the Draft ate and Malpensa Airports, close signed an agreement to redefine Framework Agreement signed to their workstations, as well as the Security organisational struc- with the Trade Unions on July 22, agreeing to establish 15-minute ture by introducing new roles (Se- 2016, regarding restructuring in- shifts to maximise work efficien- curity Coordinator, Security and itiatives to support the SEA’s In- cies. SEA also committed to as- On-site Monitoring Managers, dustrial Plan, on January 15, 2018 sessing and to potentially rede- Security compliance Operator). It an Agreement was signed to end signing the current configuration was also agreed to relocate the the mobility procedure launched of changing-rooms, car parks, and staff clock-in units in Linate close on December 27, 2017 which es- break rooms. to the workstations (similar to tablished early-leave incentives the lay-out in Malpensa), as well for a maximum of 235 employees, Following specific agreements as planning new 30-minute shifts who, by August 2023, will have ac- with the Trade Unions, again in with 15-minute frequencies to quired pensionable status (early the first half of 2017, funding maximise work efficiencies. SEA retirement or old age pension). was provided for several training also agreed here to assessing and projects for approximatively 400 to potentially redesigning the Workplace health and safety employees, with the aim of devel- current configuration of chang- In 2017 the SEA Group confirmed oping a culture of gender integra- ing-rooms, car parks, and break its commitment to workplace tion (“the other side of the coin”); rooms. safety with a view to continual im-

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provement of health and safety in the workplace environment. in the contractual clauses for all conditions of activities carried out the retail-space concessionaires within the airport, also through Maintaining the BS OHSAS to send to SEA, every 6-months, the promotion of a culture based 1801/2007 standard will also pro- a declaration signed by the Busi- on increased awareness and in- vide, for 2017, immediate entitle- ness Manager and by their Health volvement of all parties, at all lev- ment to the annual reduction of and Safety Manager declaring els, on prevention issues. the INAIL insurance premium. compliance with the Fire Preven- tion Regulations. The Company’s In 2017, the SEA Group maintained Workplace accidents and on com- Prevention and Protection Ser- the certification of its Workplace mute accidents registered a slight vice collects, verifies and stores Health and Safety Management increase compared to the previ- these documents. System, issued in 2012 by TÜV Ita- ous year. It is important to high- lia - Accredited in line with the BS light that only 40% of workplace In 2017, in 2 airports, 25 Emergen- OHSAS 18001/2007 regulation, as accidents are directly linked to cy and Evacuation Plan drills were established by Article 30 of Legis- specific work activities, whereas carried out, in addition to alarm lative Decree 81/08 for effective the remainder are related to gen- and fire detection drills, involv- organisational models in line with eral scenarios which have very lit- ing the Emergency Management Legislative Decree 231/2001. tle or nothing to do with the work Staff (AG) as well as employees carried out by the operators/em- from the various relevant build- The SGSSL (Integrated Environ- ployees, and which are predom- ings. The outcomes of the drills mental and Safety Management inantly related to walking about were positive both from a drill System) was monitored by: (trips, slips, sprains, bumps, etc..). handling point of view as well as in terms of the measures imple- ◼◼ 10 internal audits carried out In relation to the Fire Prevention mented to date. Again in terms of by specifically trained and au- and Emergency management ac- emergency evacuation, 28 “evac- thorised company employees, tivities, in 2017, specific internal uation chairs” were purchased resulting in follow-up interven- audits were carried out to verify and placed in the main ancillary tions with the relevant Man- the correct implementation of buildings in Linate and Malpensa agers of the audited areas; by and compliance with Fire Preven- to assist the evacuation of per- virtue of this process, issues tion Standards already described sons with motor or mobility diffi- highlighted by the SEA audi- by the SEA in its Fire Prevention culties. tors were solved and some im- Regulations, for the spaces allo- provements were identified to cated to commercial retail opera- The internal staff for the Preven- reduce and control OSH risks; tors (shops, depots) located inside tion and Protection Service up- ◼◼ a 5-day audit carried out by the terminal. Similar to the audits dated the Risk Evaluation Docu- certified TUV Italia auditors. carried out in the Malpensa Termi- ments through: The audit covered all the oper- nals T1 and T2, these audits were ational areas of the Company, carried out in the spaces allocated ◼◼ analysing the conclusive data confirming the validity of the in the Linate Terminal. from 2016 regarding work-recurrent certificates, renewed in lated stress indicators in ac- November 2015. To facilitate the dissemination cordance with INAIL guidelines. and improve the awareness across From this, substantial evidence In particular, the reports con- all the retail and non-retail Oper- emerged of an insignificant lev- firmed that the System is correctly ators of the Fire Prevention Doc- el of risk relating to Company implemented, maintained opera- umentation drafted by the SEA roles; tional and is functional in achiev- in association with the Non-Avi- ◼◼ conducting temporary assessing the corporate objectives. ation Commercial Board and the ments of noise-induced risks re- Aviation Business Development garding individual tasks due to The process of consultation and Board, a specific area (workplace changes in the organisational/ participation, launched by the safety and fire prevention) was work process or due to the in- SGSSL, allowed for the active set up on-site with all the indi- troduction of new equipment; involvement of employees and vidual documents (regulations, ◼◼ updating the risk-assessment their Managers and proved that emergency plans) which are also for several Company Divisions effective collaboration is crucial available in English. Furthermore, where new chemical products in preventing and managing risks there is a mandatory requirement had been introduced;

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◼◼ updating the risk assessment the standards indicated in the tions involved. of “ionising radiation” for the 2 reference standards. Company Terminals; Assisted by Certified Radiopro- ◼◼ drafting appropriate opera- In addition to the above, support tection Experts, employee safety tional safety procedures as well is also given to the functions re- monitoring activities were con- safety operation instructions sponsible for drafting the DUVRIs tinued with the use of specific for worker health and safety, for preventative interference environmental and personal do- for example, following the in- risk-management inherent to simeters, to monitor ionising ra- troduction of new equipment/ the various activities conducted diation related to the transit of work installations; by third-party contractors in the radioactive packages through the ◼◼ updating the mapping of the airports. Particular emphasis was Airports as well as the use of x-ray electromagnetic fields with placed on activities carried out in equipment. Still within the scope compliance to the new stand- confined environments or envi- of radioprotection, a significant ard introduced into Legisla- ronments presenting a potential number of environmental dosim- tive Decree 81/08. Moreover, pollution risk under the provisions eters were put in place to detect specific risk assessments were of Legislative Decree 177/11. the potential presence of radon conducted in relation to all gas in underground and base- Company equipment (welding Relations continue with the public ment work areas. This monitoring equipment, fixed installations, entities on issues of occupational continues for long periods (up mobile devices, radio transmit- safety (ATS (Health and Safety Au- to 12 months), although results ters, etc.) used by Company thority), INAIL, (National Institute within the regulatory limits are employees, especially for em- for the prevention of workplace expected to be confirmed. ployees with implanted medi- accidents), DTL (Local Directorate cal devices. The data collected of Labour), and from time to time The monitoring of the Occupa- confirms full compliance with they support the corporate functional Health & Safety of specific

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SEA employees exposed to health vices etc.), that can be read and for the preventative management risks with visits to the Compa- downloaded and which relate to of interference risks inherent in ny-appointed doctors also con- the various company roles and the various tasks carried out by tinued, in addition to inspections workplace environments, as well third-party contractors and to of the workplace environments in as providing reporting modules conduct regular Company Health each airport. In addition, in order and related guidelines. This infor- and Safety meetings pursuant to to offset the risks related to the mation was used by an increasing Legislative Decree 81/08. use of equipment and machines number of employees, contribut- introduced to support workplace ing to an increased awareness and activities, the preventative evalu- knowledge of the topics. ation and analysis on their acquisition continued, carried out within As for SEA Prime, risk assessment the internal testing commission documents and several safety which the SEA Prevention and operational procedures were up- Protection Service participates. dated in order to redefine and implement, for every company role, In order to improve the manner standard and revision health and in which we communicate and in- safety training programmes, with form employees on Occupational topic-based content, as well as Health & Safety topics, a function organising the duration and the was set up on the Company In- frequency of the programmes, to tranet (Occupational Safety) to redefine and implement some of provide a number of documents the Emergency Evacuation Plans, (safety procedures, safety instruc- to support the competent functions, individual protection de- tions in the drafting the DUVRIs

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Corporate Governance System

This section contains, among by the Corporate Governance jority of whom independent. The other issues, the information re- Committee of Borsa Italiana SpA prerogatives of the Committees quired by Article 123-bis, para- (the “Self-Governance Code” or are established by motions of the graph 2, letter b) of Legislative De- the “Code”). Although compliance Board of Directors, based on the cree No. 58 of February 24, 1998 with the Code is voluntary, SEA recommendations and principles (“CFA”). The company, not having applies a significant portion of the of the Self-Governance Code; at issued shares admitted to trading recommendations in order to en- the Committee meetings minutes on regulated markets or on mul- sure an effective corporate gov- are prepared and maintained by tilateral trading systems, avails of ernance system which appropri- the Company. the option under paragraph 5 of ately assigns responsibilities and Article 123-bis of the CFA to not powers and supports a correct The Shareholders’ Meeting is the publish the information required balance between management body that, through its resolutions, of paragraphs 1 and 2 of Article and control. expresses the shareholders wish- 123-bis of the law, except for that es. The Shareholders’ Meeting required by the above-stated par- The Company therefore annually approves the most important de- agraph 2, letter b). prepares on a voluntary basis the cisions of the Company, among Corporate Governance and own- which, the appointment of the The Corporate Governance Sys- ership structure report, which Corporate Boards, the approval tem of Società per azioni Eserci- outlines the Corporate Govern- of the financial statements, and zi Aeroportuali S.E.A. (“SEA” or ance structure adopted by SEA any changes to the Company By- the “Company”) involves a set of and provides information on the laws. rules which meet applicable legal means for the implementation and regulatory requirements. The of the recommendations of the The Board of Directors shall have Corporate Governance system of Self-Governance Code. The report the widest powers of adminis- the company is based on the tra- is available on the website www. tration over the company: it in ditional administration and con- seamilano.eu. particular may carry out any and trol model as per Articles 2380-bis all acts it deems appropriate for and subsequent of the Civil Code, The company is not subject to attaining the corporate scope, therefore with two corporate management and co-ordination with the sole exclusion of those boards appointed by the Share- pursuant to Article 2497 and sub- attributed by law and the by-laws holders’ Meeting - the Board of sequent of the Italian Civil Code. exclusively to the shareholders’ Directors, which undertakes the The Board of Directors of SEA has meeting. The Board of Statutory management of the Company, set up internally two Committees Auditors is the company’s Con- and the Board of Statutory Audi- established under the Self-Gov- trol Board. The Board of Statu- tors, which is required to ensure ernance Code undertaking pro- tory Auditors verifies compliance financial control, together with posing and consultation functions with law and the By-Laws and the the Shareholders’ Meeting itself, for the Board of Directors (the principles of correct administra- which represents the common in- Control and Risks Committee and tion and in particular on the ade- terests of Shareholders. the Remuneration and Appoint- quacy of the administration and ments Committee). accounting organisation adopted SEA has complied with since June by the Company and on its correct 27, 2001 the Self-Governance The Committees comprise functioning. The accounting con- Code for listed companies issued non-executive Directors, the ma- trol functions are assigned to the

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Internal Control and Risk Management System

Introduction The Internal Control and Risk Man- agement System is represented by the set of instruments, rules, procedures and corporate organisational structures to ensure compliance with regulatory provisions, the By-Laws, reliable and ac- curate financial reporting and the safeguarding of corporate assets in line with the corporate objectives defined by the Board of Di- rectors. The latter is responsible for the internal control and risk management system which, on the basis of information provided to the Chairman and to the Con- trol and Risk Committee by the departments/bodies responsible Independent Audit Firm appoint- principal aim of preventing the for internal control and the man- ed by the Shareholders’ Meeting. offenses set out by the applicable agement of business risks, estab- The Board of Directors and the regulation. The Model is constant- lishes the guidelines, verifies their Board of Statutory Auditors in ly updated in line with legislative suitability and effective function- office at the date of the present amendments regarding the intro- ing and ensures the identification report were appointed by the duction of new offenses. and correct management of the Shareholders’ Meeting of May 4, The Corporate Governance Sys- main business risks. 2016 in accordance with the Com- tem of SEA also involves proce- pany By-laws and remain in office dures governing the activities The procedures and organisation until the approval of the 2018 An- of the various company depart- subject to the internal control and nual Accounts. ments, which are consistently risk management system is imple- subject to verification and updat- mented in order to ensure: The Internal Control and Risk ing in line with regulatory developments and altered operating Management System is based ◼◼ compliance with the laws, reg- on the recommendations of the practices. ulations, By-Laws and policies; Self-Governance Code and appli- ◼◼ the safeguarding of the compa- cable best practice. Therefore, The share capital amounts to ny’s assets; Euro 27,500,000.00 fully paid-in, one of the instruments adopted ◼◼ the efficiency and effective- by the company is the Organi- consisting of 250,000,000 shares ness of the business processes; - of a nominal value of Euro 0.11 sation and Control Model as per ◼◼ the reliability of financial dis- Legislative Decree 231/01. SEA each. The shares are nominative closure. and its subsidiaries have there- and indivisible. The shares are not fore each drawn up a “Mapping traded on the regulated markets. One of the tools implemented to of risks” in order to adopt organ- At December 31, 2017, the com- achieve the Internal Control and isation, management and control pany did not hold treasury shares Risk Management System’s ob- models as per Legislative Decree and the share capital was broken jectives is the Organisation and 231/2001 (separately the “Mod- down as reported in the “Share Management Model pursuant to el” and collectively the “Models”), capital structure” paragraph. Legislative Decree 231/01. effective and adequate in view of the specific needs of the respective companies and the particular nature of their business, with the

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Main features of the risk SEA separate financial state- Control and Risks Committee management and internal ments and the SEA Group con- Functions control systems in relation to solidated financial statements, The Committee performs adviso- the financial reporting process taking qualitative and quan- ry and recommendation functions contained in the financial titative aspects into account to the Board of Directors on in- statements and in the half-year primarily for the selection of ternal control and risk manage- report the relevant companies to be ment. The CRC identifies business SEA’s Internal Control System on included in the analysis and, risks and submits them for ex- financial reporting ensures the thereafter, of significant trans- amination by the Board of Direc- exchange of data and information actions. tors, and finally implements the with its subsidiary companies and 2. Assessment of risks on financial Board’s guidelines through the in- implements its coordination. In reporting: risks are assessed in ternal control system’s definition, particular, this activity is carried terms of the potential qualita- management and monitoring. out through the dissemination, tive and quantitative impact. The Control and Risk Committee by the SEA parent company, of Risk assessment is carried out also examines and approves the regulations on the application of at both the individual company Annual Audit Plan. the accounting policies for the and specific process levels. preparation of the SEA Group 3. Identification of controls im- The Committee also fulfils the consolidated financial statements plemented to mitigate previ- functions of Related Parties Com- and the procedures regulating ously-identified risks, both at mittee (except for transactions the drafting of annual and con- the individual company and concerning matters that are the solidated financial statements process levels. exclusive prerogative of the Re- and half-year financial statements muneration and Appointments and reports. The setting of con- In 2017, the Board of Directors Committee). trols occurs at the end of a pro- approved the Enterprise Risk cess carried out by the SEA parent Management Policy, which de- Internal Audit Manager company according to a targeted fined an ERM division, under the The audit on the suitability and approach to identify the individ- responsibility of the Chief Finan- functionality of the Internal Con- ual organisational entities’ typi- cial and Risk Officer, as a second trol and Risk Management System cal critical issues that could have level of risk management control is entrusted to the Internal Audit significant impacts on financial to support corporate structures Department. The Internal Audit reporting. in the identification and manage- Manager reports to the Chairman ment of business risks, through and to the Control and Risk Com- Description of the risk the development of tools, frame- mittee; he/she is not responsible management and internal works and methodologies, and to for any operational area and does control systems’ main features guarantee periodic reporting to not hierarchically report to any in relation to the financial middle and top management on manager responsible for opera- reporting process the evolution of the risk profile. tional areas, including the admin- As regards the financial report- istration and finance areas. The ing process, the risk management The described Internal Control Internal Audit Manager audits the system should not be considered and Risk Management System’s functionality and suitability of the as distinct from the internal con- components are mutually coor- internal control and risk manage- trol system. The System is intend- dinated and interdependent and ment system and compliance with ed to ensure the trustworthiness, the System as a whole involves internal procedures issued for this accuracy, reliability and timeliness - with different roles and accord- purpose. The Internal Audit Man- of financial reporting. ing to a rationale of collaboration ager has autonomy in expendi- and coordination - administrative ture and extends his/her activities The Risk Management and Inter- bodies, supervisory and control to all the companies in the SEA nal Control System’s monitoring bodies, and the company and Group through specific service process over financial reporting is SEA Group management. The contracts. Similarly, the SEA In- divided into the following phases: SEA Board of Directors has not ternal Audit Department reports appointed an executive director hierarchically to the Chairman 1. Identification of risks on finan- responsible for overseeing the and functionally, to the Board of cial reporting: the activity is car- functionality of the internal con- Directors. The Internal Audit De- ried out with reference to the trol and risk management system. partment is entrusted with audit-

Annual Report 2017 • 74 2017 DIRECTORS’ REPORT

ing the effectiveness, suitability Independent Audit Firm ecutive member of the Board of and upkeep of the Organisation Deloitte & Touche SpA is the Inde- Directors, Michaela Castelli, ap- and Management Model pur- pendent Audit Firm appointed to pointed by the Board of Directors suant to Legislative Decree No. audit the separate and consolidat- on May 25, 2017. 231/2001, on the instructions of ed annual financial report, to peri- the SEA Supervisory Boards and odically verify corporate account- On January 25, 2018, the Board the subsidiary companies. ing practices and to carry out the of Directors appointed, in place limited audit of the SEA consoli- of Luigi Ferrara, an independent In accordance with “Standards dated half-year financial report. external member, Giovanni Maria for the Professional Practice of The appointment was conferred Garegnani, who was subsequent- Internal Auditing” requirements by the Shareholders’ Meeting on ly appointed as Chairman of the as defined by the “Institute of In- June 24, 2013 and extended to Supervisory Board on February 8, ternal Auditors”, the Internal Au- financial year 2022 by the Share- 2018. dit Department has completed holders’ Meeting of May 4, 2016. the “Quality Assurance Review” The Board of Statutory Auditors The Supervisory Board regularly process for its activities (renew- and the Independent Audit Firm reports to the Board of Directors al of the “Independent External regularly exchange information on the Model’s effectiveness, its Validation” obtained in 2011) for and data in relation to the con- suitability and upkeep. It sends the development and implemen- trols carried out. a written report to the Board of tation of a “Quality Assurance and Directors every six months on the Improvement Programme”. Supervisory Board as per 231 Model’s implementation sta- Legislative Decree 231/2001 tus and, in particular, on controls The process ended in February The Supervisory Board in office at and audits performed and on any 2017 with the issue of an inde- December 31, 2017 is composed critical issues that emerged. pendent external endorsement of four members, three of whom by a qualified company on the in- were appointed by the Board of The Supervisory Board has auton- ternal self-assessment carried out Directors on May 4, 2016 (two omous powers of initiative, con- by the Internal Audit Department. external independent members, trol and expenditure. This assessed general compliance Luigi Ferrara - Chairman - and Al- with the Standards and Ethics berto Mattioli, and the Director Organisation, Management Code issued by the “Institute of of the Internal Audit Department, and Control Model pursuant to Internal Auditors”. Ahmed Laroussi) and a non-ex- Legislative Decree 231/2001 SEA has adopted an Organisation and Management Model pursuant to Legislative Decree 231/2001 - which lays down the “Rules on the administrative liability of legal persons, companies and associ- ations, including those without legal status” (the “Decree”) to prevent the offences envisaged by the Decree. The Model is, therefore, adopted in compliance with the Decree’s provisions. The Model was adopted by the SEA Board of Directors by resolution of December 18, 2003 and more recently amended and supple- mented by the resolution of the Board of Directors of September 21, 2017. The Model is currently being updated with respect to the amendments introduced in the Decree in November and Decem-

Annual Report 2017 • 75 2017 DIRECTORS’ REPORT

ber 2017. The Model consists of of the broader “Ethics System” No. 58/1998 require a description a “General Section” and a “Special adopted by the Board and defines of the Company’s policies on the Section”. The administrative bod- the framework of the reference composition of the administra- ies of SEA’s subsidiary companies values and principles which the tive, management and governing have adopted their own Organ- SEA Group proposes to adopt in bodies taking into account aspects isation and Management Model the corporate decision-making such as age, gender, professional pursuant to Legislative Decree process. and educational background. For 231/2001. cases where no policy has been The main duties of the Ethics Com- adopted, there is a requirement Related Party Transactions mittee, composed of a member of to explain this decision which we Policy the SEA Board of Directors and now outline below. The company has adopted a Re- the “Human Resources and Or- lated Parties Transactions Policy ganisation”, “Legal and Corporate SEA’s By-Laws, in compliance with (the “RPT Policy”) in effect since Affairs” and “Audit” departmental the legislative provisions, compre- February 2, 2015. managers, is to promote the Code hensively cover gender diversity of Conduct’s dissemination and to within the Board of Directors and The RPT Policy is also available on monitor compliance thereof. Board of Statutory Auditors; no the company’s website: policy on diversity was adopted www.seamilano.eu. Anti-Corruption Focal Point with regard to the two aforemen- With effect from January 31, tioned aspects of age and pro- In assessing the substantial and 2014, the company identified fessional and educational back- procedural correctness of trans- an anti-corruption focal point in ground. actions with related parties, the the person of the Legal & Corpo- Board of Directors is assisted by rate Affairs Director who is also a Adopting a diversity policy could the Related Parties Committee member of the Ethics Committee. however be reviewed given that which is identical to the Control the SEA corporate bodies are and Risk Committee or the Remu- The anti-corruption focal point subject to renewal for the 2019 neration and Appointments Com- deals with any communication financial year with the approval mittee, depending on the matters on corruption, including toward of the financial statements at De- dealt with from time to time. third parties; the role, prerog- cember 31, 2018. This is also the atives and responsibilities are first renewal taking place after Code of Conduct therefore not comparable with the implementation of the afore- The applicable Code of Conduct those provided for by applicable mentioned legal provision. was approved by the Board of legislation in relation to the An- Directors on December 17, 2015 ti-Corruption Manager (namely, The Board of Directors, therefore and is an integral part of the the person in charge pursuant to at its Board meeting of February Organisation and Management Law 190/2012). 22, 2018 decided to research the Model pursuant to Legislative option of adopting a policy on Decree 231/2001. Diversity policies diversity based the above condi- The obligations of article 123(a), tions. The Code of Conduct forms part paragraph 2 of Legislative Decree

Annual Report 2017 • 76 2017 DIRECTORS’ REPORT

Board of Directors’ proposals to the Shareholders’ meeting

The Board of Directors approves ◼◼ Euro 70,300,000 as dividend to the 2017 Financial Statements of Shareholders, in the amount of SEA SpA, prepared in accordance Euro 0.2812 per share; with IFRS, which report a net prof- ◼◼ Euro 6,645,174.47 to the exit of Euro 76,945,174.47. traordinary reserve.

The Board of Directors propos- The Chairman es to the Shareholders’ Meeting of the Board of Directors to allocate the 2017 net profit of Euro 76,945,174.47 as follows: Pietro Modiano

Shareholders’ Meeting motions

The Shareholders’ Meeting, held amount of Euro 0.2812 per on May 3, 2018: share; ◼◼ Euro 6,645,174.47 to the ex- 1. Approved the Directors’ Report traordinary reserve. prepared by the Board of Direc- 3. Fixed the dividend payment tors, the Financial Statements deadline as June 21, 2018, with at December 31, 2017 and the any rounding on payment allo- explanatory notes thereto, as cated to the extraordinary re- proposed by the Board of Di- serve. rectors. 2. Approved the allocation of the 2017 net profit of a total The Chairman amount of Euro 76,945,174.47, of the Board of Directors as follows: ◼◼ Euro 70,300,000.00 as divi- Pietro Modiano dend to Shareholders, in the

Annual Report 2017 • 77 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

SEA Group Consolidated Financial Statements

Annual Report 2017 • 78 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements

Consolidated Statement of Financial Position

at December 31, 2017 at December 31, 2016 of which of which (Euro thousands) Note Total Total related parties related parties Intangible assets 8.1 998,182 1,011,111 Property, plant & equipment 8.2 204,971 190,276 Investment property 8.3 3,394 3,398 Investments in associates 8.4 54,054 51,597 AFS Investments 8.5 26 26 Deferred tax assets 8.6 51,152 43,665 Other non-current financial assets 8.7 7,190 16,776 Other non-current receivables 8.8 280 308 Total non-current assets 1,319,249 0 1,317,157 0 Inventories 8.9 4,104 4,141 Trade receivables 8.10 111,077 9,419 86,968 7,522 Tax receivables 8.11 14,941 14,800 Other current receivables 8.11 9,200 18,563 Other current financial assets 8.7 13,300 7,190 Cash and cash equivalents 8.12 67,194 47,236 Total current assets 219,816 9,419 178,898 7,522 Assets held-for-sale 6 10,732 Elimination of discontinued receivables and payables (1,091) TOTAL ASSETS 1,539,065 9,419 1,505,696 7,522 Share capital 8.13 27,500 27,500 Other reserves 8.13 279,584 254,145 Net Profit 8.13 84,070 93,619 Group Shareholders’ equity 391,154 375,264 Minority interest shareholders’ equity 8.13 23 566 Group & Minority interest shareholders’ equity 391,177 375,830 Provision for risks and charges 8.14 169,935 174,061 Employee provisions 8.15 47,834 49,220 Non-current financial liabilities 8.16 546,289 549,069 Other non-current payables 8.17 17,588 Total non-current liabilities 781,646 772,350 Trade payables 8.18 153,497 4,519 161,530 3,465 Income tax payables 8.19 8,370 6,841 Other payables 8.20 174,592 160,327 Current financial liabilities 8.16 29,783 27,530 Total Current Liabilities 366,242 4,519 356,228 3,465 Liabilities related to assets held-for-sale 6 2,379 Elimination of discontinued receivables and payables (1,091) TOTAL LIABILITIES 1,147,888 4,519 1,129,866 3,465 TOTAL LIAIBILITIES & SHAREHOLDERS’ EQUITY 1,539,065 4,519 1,505,696 3,465

Annual Report 2017 • 79 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Income Statement

2017 2016

of which of which (Euro thousands) Note Total Total related parties related parties

Operating revenues 9.1 697,698 40,493 653,512 37,834

Revenue for works on assets under concession 9.2 28,281 46,622

Total revenues 725,979 40,493 700,134 37,834

Operating costs

Personnel costs 9.3 (210,743) (182,971)

Consumable materials 9.4 (32,287) (37,805)

Other operating costs 9.5 (213,937) (201,841)

Costs for works on assets under concession 9.7 (26,006) (43,114)

Total operating costs (482,973) (13,858) (465,731) (12,241)

EBITDA 243,006 26,635 234,403 25,593

Provisions & write-downs 9.6 (32,218) (5,497)

Restoration and replacement provision 9.8 (13,602) (17,193)

Amortisation & Depreciation 9.9 (69,296) (61,714)

EBIT 127,890 26,635 149,999 25,593

Investment income/(charges) 9.10 8,135 8,135 9,842 9,842

Financial charges 9.11 (18,167) (18,940)

Financial income 9.11 258 136

Pre-tax profit 118,116 34,770 141,037 35,435

Income taxes 9.12 (35,667) (47,263)

Continuing Operations profit 82,449 34,770 93,774 35,435

Discontinued Operations profit/(loss) 6/9.13 1,556 0 (130) 0

Minority interest profit/(loss) (65) 25

Group Net Profit 84,070 34,770 93,619 35,435

Basic net result per share (in Euro) 9.14 0.34 0.37

Diluted net result per share (in Euro) 9.14 0.34 0.37

Annual Report 2017 • 80 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Comprehensive Income Statement

2017 2016

of which of which (Euro thousands) Total Total related parties related parties

Group Net Profit 84,070 34,770 93,619 35,435

- Items reclassifiable in future periods to the net result:

Fair value measurement of derivative financial instruments 2,435 1,425

Tax effect from fair value measurement of derivative financial (584) (438) instruments

Total items reclassifiable, net of tax effect 1,851 987

- Items not reclassifiable in future periods to the net result:

Actuarial gains/(losses) on post-employment benefits 56 (1,813)

Tax effect on actuarial gains/(losses) on post-employment (13) 653 benefits

Total items not reclassifiable, net of tax effect 43 (1,160)

Total other comprehensive income items 1,894 (173)

Total comprehensive profit 85,899 93,471

Attributable to:

- Parent company shareholders 85,964 93,446

- Minority interest (65) 25

Annual Report 2017 • 81 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Cash Flow Statement 2017 2016 of which of which (Euro thousands) 2017 2016 related parties related parties Cash flow from operating activities Pre-tax profit 118,116 141,037 Adjustments: Amortisation, depreciation and write-downs 69,296 61,803 Net change in provisions (excl. employee provision) (2,557) (2,721) Changes in employee provisions (2,016) (1,079) Net changes in doubtful debt provision 27,248 4,378 Write-down of other financial assets 3,476 - Net financial charges 17,909 18,804 Investment income/charges (8,135) (9,842) Anti-trust penalty (exc. interest portion) (2,429) - Other non-cash items 15,289 (3,547) Cash generated (absorbed) from operating activities before changes in working 1,556 (622) capital of discontinued operations Cash flow from operating activities before changes in working capital 237,753 208,211 Change in inventories (102) 465 Change in trade and other receivables (42,579) (1,897) (5,461) 3,315 Change in other non-current assets 28 33 Change in trade and other payables 5,614 1,054 14,519 520 Cash generated (absorbed) from changes in working capital of discontinued operations 2,151 Cash flow from changes in working capital (37,039) (843) 11,707 3,835 Income taxes paid (39,307) (68,050) Cash generated (absorbed) from operating activities of discontinued operations 849 Cash flow from operating activities 161,407 (843) 152,717 3,835 Investments in fixed assets: - intangible assets (*) (34,772) (47,138) - tangible assets (35,770) (19,523) Divestments from fixed assets: - tangible assets 107 1,647 Dividends received 7,801 7,801 2,935 2,935 Cash generated (absorbed) from investing activities of discontinued operations (798) 301 Cash flow absorbed from investing activities (63,432) 7,801 (61,778) 2,935 Inventories 9 Trade receivables and other current assets 644 Trade payables and other current liabilities (842) Risk provisions and post-employment benefits (592) Intangible assets 2 Property, plant & equipment 122 Non-current assets, net of non-current liabilities 23 Deferred tax assets 150 Financial debt 767 Gain on amount collected over net equity 872 Cash flow from operation for sale of 60% of Prime AviationServices SpA 0 0 1,155 0 Change in gross financial debt - increase/(decrease) of short & medium-term debt 289 (16,122) Changes in other financial assets/liabilities (28) (1,587) Change in shareholders' equity (250) Dividends distributed (70,307) (62,817) Interest and commissions paid (16,908) (17,188) Interest received 9 33 Cash generated (absorbed) from financing activities of discontinued operations - - Cash flow absorbed from financing activities (87,195) (97,681) Increase/(decrease) in cash and cash equivalents 10,780 6,958 (5,587) 6,770 Opening cash and cash equivalents 56,414 62,001 Closing cash and cash equivalents 67,194 56,414 - of which cash and cash equivalents of discontinued operations 0 9,178 Cash and cash equivalents at year-end reported in financial statements 67,194 47,236 (*) The investments in intangible assets are net of the utilisation of the restoration provision, which in 2017 amounted to Euro 12,855 thousand (Euro 16,386 thousand in 2016).

Annual Report 2017 • 82 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Statement of changes in consolidated shareholders’ equity

Other reserves Derivative Actuarial Consolidat- Minority Group & and retained contracts Share Legal gains/ Net ed share- interest Minority earnings hedge capital reserve (losses) profit holders’ capital & int. share. (accumulated accounting (Euro thousands) reserve equity reserves equity losses) reserve

Balance at December 31, 2015 27,500 5,500 240,654 (5,045) (7,791) 83,850 344,668 541 345,209

Transactions with shareholders

Allocation of 2015 net profit 83,850 (83,850) 0

Dividend approved (62,850) (62,850) (62,850)

Other movements

Other comprehensive income (1,160) 987 (173) (173) statement items result

IFRS initial conversion (4,947) 4,947 0 0 reclassification reserve

Net profit 93,619 93,619 25 93,644

Balance at December 31, 2016 27,500 5,500 256,707 (1,258) (6,804) 93,619 375,264 566 375,830

Transactions with shareholders

Allocation of 2016 net profit 93,619 (93,619) 0

Dividend approved (70,300) (70,300) (70,300)

Acquisition SEA Prime shares 228 228 (478) (250)

Other movements

Other comprehensive income 42 1,850 1,892 1,892 statement items result

Net profit 84,070 84,070 (65) 84,005

Balance at December 31, 2017 27,500 5,500 280,254 (1,216) (4,954) 84,070 391,154 23 391,177

Annual Report 2017 • 83 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Annual Report 2017 • 84 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements

1 General information serve the requirements of its air- distribution plan. ports and for sale on the external Consequently, in 2016 and 2017 Società per Azioni Esercizi Aero- market. the Handling business only con- portuali SEA is a limited liability cerned the general aviation han- company, incorporated and dom- Through SEA Handling SpA, a dling of the associated company iciled in Italy according to Italian subsidiary of SEA and liquidated Signature Flight Support Italy Srl Law (the “Company”). in 2017, the SEA Group provided (held indirectly 39.96% by SEA) also land-side assistance services and of the associated company The Company’s headquarters are for aircraft, passengers, baggage, Malpensa Logistica Europa SpA located at Milan Linate Airport in cargo and mail (commercial avia- (held 25%), which operates out- Segrate (Milan). tion handling business) until Au- side of the commercial aviation gust 31, 2014. In particular, as de- handling business. The Company and its subsidiaries scribed in the Directors’ Report in (jointly the “Group” or the “SEA relation to the negotiations with On February 22, 2017, the Board Group”) manage Milan Malpen- the European Union in the sec- of Directors of SEA SpA resolved sa Airport and Milan Linate Air- tion “Risk Management Frame- to authorise the dissolution and port under the 2001 Agreement work”, SEA took the decision in liquidation of the Malpensa Con- signed between SEA and ENAC 2014 to dispose of the commer- struction Consortium, in which with a forty-year duration (re- cial aviation Handling business, SEA held 51% of the share capital. newing the previous agreement proceeding on the one hand with On March 15, 2017, the Consorti- of May 7, 1962). the liquidation of SEA Handling um’s Board of Directors passed a SpA - on July 1, 2014 (with pro- resolution approving dissolution SEA and the Group companies, in visional operations until August and liquidation. The liquidation of the running of the airports, are 31, 2014) - and on the other as- Malpensa Construction Consor- involved in the management, de- signing on August 27, 2014 the tium was concluded on October velopment and maintenance of investment in Airport Handling 31, 2017 with the presentation the infrastructure and plant at Srl to the Milan Airport Handling and approval of the liquidator’s the airports and offer customers Trust. The above-mentioned de- final statement of accounts and all flight related services and ac- cisions therefore resulted in the shareholders’ distribution plan. tivities, such as the landing and exit from the consolidation scope departure of aircraft and the air- of Airport Handling, as the as- The Group also holds the follow- port security services (Aviation signment to the Trust resulted in ing investments in associates and business); these companies in ad- the loss of control of SEA on the measured under the equity meth- dition provide a wide and special- company and, pursuant to IFRS 5, od: (i) Dufrital (held 40%) which ised range of commercial services the inclusion of the commercial undertakes commercial activities for passengers, operators and vis- aviation handling sector under at other Italian airports, including itors, both managed directly and discontinued operations, as illus- Bergamo, Florence, Genoa and outsourced (non-Aviation busi- trated in the comparative figures Verona; (ii) Malpensa Logistica ness). for 2016. On July 10, 2017, the Europa (held 25%) which under- Shareholders’ Meeting of SEA takes integrated logistics activi- The SEA Group, through the com- Handling approved the final liq- ties; (iii) SEA Services (held 40%) pany SEA Energia, produces elec- uidation financial statements at which operates in the catering tric and thermal energy both to June 30, 2017 and the relative sector for the Milan airports and

Annual Report 2017 • 85 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

(iv) Disma (held 18.75%) which the tables included in the explan- ities at December 31, 2016. No manages a plant for the storage atory notes are prepared in thou- Statement of Financial Position and distribution of aviation fuel sands of Euro. amounts are present at Decem- at Milan Malpensa Airport. ber 31, 2017 as the company SEA 2.1 Basis of preparation Handling was liquidated during The Company has a shareholding The Consolidated Financial State- 2017. of 30.98% in SACBO, which man- ments includes the Consolidated ages the Bergamo airport, Orio al Statement of Financial Position, A specific paragraph of the pres- Serio. the Consolidated Income State- ent Explanatory Notes, to which ment, the Consolidated Compre- reference should be made (Par- The activities carried out by the hensive Income Statement, the agraph 6 Assets and liabilities SEA Group, as outlined above, Consolidated Cash Flow State- held-for-sale and Discontinued Op- are therefore structured into the ment, the Statement of Changes erations profit/(loss)), illustrates business units Commercial Avia- in Consolidated Shareholders’ Eq- the Discontinued Operations’ tion, General Aviation and Ener- uity and the relative Explanatory accounts presented in the consolidated income statement, the gy, with the Group sourcing reve- Notes. consolidated Statement of Finan- nues as illustrated in paragraph 7 cial Position and the consolidated “Operating segments”. Similar to the financial statements for the year 2016, IFRS 5 cash flow statement. is applied to the commercial avi- The consolidated financial state- 2 Summary of ation handling sector which is not ments at December 31, 2017 accounting principles included in the 2017 results line- were prepared in accordance adopted by-line for each cost and revenue with IFRS in force at the approval item, but the total result of the date of the financial statements The main accounting principles business is recorded on a sepa- and the provisions enacted as adopted in the preparation of rate line in the account “Discon- per Article 9 of Leg. Decree No. the consolidated financial state- tinued Operations profit/(loss)”; 38/2005. The term IFRS includes ments at December 31, 2017 are the same treatment is applied to all of the International Financial reported below. the assets and liabilities related Reporting Standards, all of the to the commercial aviation han- International Accounting Stand- The consolidated financial state- dling sector, recorded in separate ards and all of the interpretations ments at December 31, 2017 and accounts under assets and liabil- of the International Financial Re- porting Interpretations Commit- tee (IFRIC) previously called the Standing Interpretations Com- mittee (SIC) approved and adopted by the European Union.

In relation to the presentation method of the financial statements “the current/non-current” criterion was adopted for the Statement of Financial Position while the classification by nature was utilised for the comprehensive income statement and the indirect method for the cash flow statement.

The consolidated financial statements were prepared in accordance with the historical cost convention, except for the measurement of financial assets and

Annual Report 2017 • 86 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

liabilities, including derivative in- particular in the next 12 months. ments were audited by the audit struments, where the obligatory In the preparation of the Consol- firm Deloitte & Touche SpA, the application of the fair value crite- idated Financial Statements at auditor appointed by the Compa- rion is required. December 31, 2017, the same ac- ny SEA SpA and the Group. counting principles were adopted The Consolidated Financial State- as in the preparation of the Con- 2.2 IFRS accounting standards, ments were prepared in accord- solidated Financial Statements at amendments and interpreta- ance with the going concern December 31, 2016. Following tions applied from January 1, concept, therefore utilising the the issue on a regulated market 2017 accounting principles of an oper- of the “SEA 3 1/8 2014-2021” The international accounting ating business. Company Manage- bond, IFRS 8 and IAS 33 concern- standards, amendments and in- ment evaluated that, although ing segment reporting and earn- terpretations which must be ob- within a difficult economic and ings per share were utilised. ligatory applied from January 1, financial environment, there are 2017, following completion of no uncertainties on the going For a better presentation of the the relative approval process by concern of the business, consid- financial statements, the income the relevant authorities, are il- ering the existent capitalisation statement was presented in two lustrated below. The adoption of levels and there are no financial, separate statements: a) the con- these amendments and interpre- operational, management or oth- solidated income statement and tations has not had any impact on er indicators which could indicate b) the consolidated comprehen- the financial position or on the difficulty in the capacity of the sive income statement. result of the companies of the company to meet its obligations Group. in the foreseeable future, and in The Consolidated Financial State-

Publication Effective date as Effective date Description Date approved in the Official per the standard applied by SEA Gazette Amendment to IAS 7 Disclosure Periods which begin Nov. 6, 2017 Nov. 9, 2017 Jan 1, 2017 initiative from Jan 1, 2017 Amendment to IAS 12 Recognition Periods which begin of deferred tax assets for Nov. 6, 2017 Nov. 9, 2017 Jan 1, 2017 from Jan 1, 2017 unrealized losses

Annual Report 2017 • 87 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

2.3 Accounting standards, accounting standards, interpreta- already endorsed by the European amendments and tions and amendments to existing Union, but not mandatory and not interpretations not yet accounting standards and inter- adopted in advance by the compa- applicable and not adopted in pretations, or specific provisions nies of the Group: advance by the Group within the standards and interpre- Below we report the international tations approved by the ISAB and

Approved at the date of Description Effective date as per the standard the present document IFRS 9 Financial instruments YES Periods which begin from Jan 1, 2018 IFRS 15 Revenue from contracts with customers YES Periods which begin from Jan 1, 2018 IFRS 16 Leases YES Periods which begin from Jan 1, 2019 Amendment to IFRS 2 Clarification and measurement NO Periods which begin from Jan 1, 2018 of share-based payment transactions Annual improvements cycles 2014-2016 NO Periods which begin from Jan 1, 2018 IFRIC 22 Foreign currency transactions and advance NO Periods which begin from Jan 1, 2018 consideration Amendment to IAS 40 Transfers of investment NO Periods which begin from Jan 1, 2018 property IFRIC 23 Uncertainty over income tax treatments NO Periods which begin from Jan 1, 2019 IFRS 9 Prepayment features with negative NO Periods which begin from Jan 1, 2019 compensation IAS 28 Long term interests in associates and joint NO Periods which begin from Jan 1, 2019 ventures Annual improvements cycles 2015-2017 NO Periods which begin from Jan 1, 2019 IFRS 17 Insurance Contracts NO Periods which begin from Jan 1, 2021

No accounting standards and/or and measurement, impairment reclassified as “Financial as- interpretations were applied in and Hedge Accounting. The SEA sets/liabilities measured at FV advance whose application is ob- Group adopted the full applica- through Profit or Loss”, and ligatory for periods commencing tion of the standard as of Janu- assets relating to Equity Fi- after December 31, 2017. ary 1, 2018, despite the fact that nancial Instruments currently Any effects that the new account- the standard provides for the classified as assets measured ing standards, amendments and possibility of applying the new at amortised cost as “Finan- interpretations to be applied may rules for Hedge Accounting as of cial assets/liabilities measured have on the financial disclosure January 1, 2019. The three IFRS at FV through Profit or Loss”, of the companies of the Group 9 application areas are analysed since they do not conform to are illustrated below. below, highlighting the impact on the SPPI test, which requires the SEA Group: that for an asset to be record- IFRS 9 ed at amortised cost, it should The new IFRS 9 standard, in ef- a. Classification and measure- only provide for the repayment fect since January 1, 2018 in- ment: assets currently clas- of the capital and interest and cludes the rules relating to the 3 sified as “Financial assets with fixed time limits for the accounting phases: classification available for sale” must be capital’s repayment;

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b. Impairment of trade receiva- forward-looking elements that as from January 1, 2018. Differ- bles: a key element of the new allow management to value ent types of contracts from the standard is the transition from the expected loss. Group’s various business sectors the concept of ‘Incurred Loss’ c. Hedge Accounting: according were analysed in order to identi- to that of ‘Expected Loss’: the to the rules laid down by IAS fy specific cases requiring man- doubtful debt provision must 39, derivative instruments in agement, according to IFRS 15 be determined by taking into hedge accounting are to be requirements, that is different to account the risks of non-col- accounted for by specifically the one currently being applied. lection related not only to applying the cash flow hedge past-due receivables but also model (hedging expected cash The main issues envisaged by the on those falling due. There is, flows). As a result of the appli- standard that could have poten- therefore, a need to determine cation of this accounting treat- tial impacts on the SEA Group are a ‘risk ratio’, representative of ment, derivatives’ intrinsic val- listed below: the riskiness of commercial ue variations are recorded in counterparties, which varies a Shareholders’ Equity reserve ◼◼ Combination of contracts: according to the credit posi- (cash flow hedge reserve) and according to paragraph IFRS tion (performing or expired, time value variations are si- 15.17 “the entity must group with different bands for those multaneously recorded in the two or more contracts con- that expired based on overdue Income Statement. Hedging cluded simultaneously (or al- days). There is also the need treatment is supported by the most) with the same client and to include forward-looking el- preparation of special hedg- record them as a single con- ements when determining the ing documentation (Hedging tract in the accounts, if one or ‘risk ratio’. The analysis for the Relationship Documentation) more of the following criteria purposes of the IFRS 9 stand- and the implementation of ‘ef- are met: ard was based on the results of fectiveness tests’ as required a. Contracts are negotiated for a previous project, which also by IAS 39. According to IFRS a single commercial objec- took place in the year 2017 9, the accounting treatment tive; with the aim of splitting clients to be used is that which fol- b. The amount of fees payable up into rating classes and cov- lows hedge accounting cri- under one of the contracts ering 98% of SEA’s turnover teria as defined for the cash is dependent on the price with this classification. A provi- flow hedge model, but both or performance of the other sion matrix was therefore con- the intrinsic value variations contract; structed for the write-down of and the time value variations c. The goods or services prom- trade receivables. This matrix must be recorded in two dif- ised in the contracts are a provides rating classes in rows ferent Shareholders’ Equity single “obligation to act”. and the different bands of reserves. At the date of first past-due or falling due in col- application, the derivative’s ◼◼ Transaction price: IFRS-15.47 umns. The calculated risk ratio time value should therefore be defines the “Transaction Price” represents the probability that recognised within a special OCI as the payment amount which the client does not honour its reserve and the amount from the entity considers it is enti- debt and the percentage of the extraordinary reserve re- tled to in exchange for trans- credit, obtained from a histori- classified. It is calculated that ferring the promised goods cal analysis, with the possibility as at January 1, 2018, reclassi- or services to the client. The of the client being in default. fication for the SEA Group will payment promised in the con- The above matrix was creat- amount to Euro 720. At sub- tract with the client may in- ed during the analysis phase, sequent reporting dates, time clude fixed amounts, variable and the difference calculat- value variations should con- amounts or both. ed on the write-down provi- tinue to be recognised in the ◼◼ Collectability: according to par- sion by applying the method same OCI reserve. agraph 9 of IFRS 15, the entity currently used in the Group. shall account for the client con- IFRS 15 tract falling within the scope of The matrix is immaterial. In the year 2017, the company im- this Standard’s application only This result is justified by the plemented an analysis project to if all the following criteria are fact that the current evalua- identify the impacts of the new met: tion model in use also includes obligatory standard’s application a. The contracting parties ap-

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proved the contract and are rangements for a third party to 2.4 Consolidated method committed to fulfil their re- provide the promised goods or and principles spective obligations; services. The financial statements of the b. The entity may identify the companies included in the consol- rights of each of the parties The project’s conclusions showed idation scope were prepared as with respect to the goods or that the current structure of ac- at December 31, 2017 and were services to be transferred; tive contracts linked to various appropriately adjusted, where c. The entity can identify the SEA Group businesses and asso- necessary, in line with Group ac- payment conditions for ciated accounting are compliant counting principles. the goods or services to be with the changes introduced by transferred; the new accounting standard. The consolidation scope includes d. The contract has com- The only change is related to the the financial statements at De- mercial substance (that is, reclassification of some commer- cember 31, 2017 of SEA, of its the entity’s risk, timing or cial costs, which will be subjected subsidiaries, and of those subsid- amount of future cash flows to a direct reduction in revenues iaries upon which it exercises a will change as a result of the as from the financial year 2018. significant influence. contract); e. It is likely that the entity will IFRS 16 In accordance with IFRS 10, companies are considered subsidiar- receive the fees to which it is As of January 1, 2019, the new IFRS 16 standard will replace ies when the Group simultane- entitled in exchange for the IAS 17. Each contract for finance ously holds the following three goods or services that will lease payables, including those elements: be transferred to the client. now considered as operating ◼◼ Principal vs Agent: the stand- (for example, rentals), will be a. power over the entity; ard requires the evaluation classified as finance leases. Only b. exposure, or rights, to variable of transactions between the finance lease payables whose du- returns deriving from involve- parties if the entity acts as the ration is of less than 12 months or ment with the same; “Principal” and is therefore re- which refer to goods whose indi- c. the capacity to utilise its pow- sponsible for the service ren- vidual value is less than US Dollars er to influence the amount of dered or as the “Agent” in the 5,000 can be excluded from the these variable returns. event that the performance application of the new standard. obligation to which the party The Group has identified all the The subsidiary companies are is held consists in making ar- long-term contracts in effect to- consolidated using the line-by- date and involving the payment line method. The criteria adopted of a fee for the use of assets of for the line-by-line consolidation a various nature, excluding those were as follows: classifiable as “low value” or “short-term lease”, and assets in- ◼◼ the assets and liabilities and volving the payment of a fee for the charges and income of the the use of software licences and companies fully consolidated has defined the duration of the are recorded line-by-line, at- “ lease” on the basis of the contributing to the minority share- tractual terms. As a result of this holders, where applicable, the analysis, these contracts were share of net equity and net revalued through an “overall recal- sult for the period pertaining culation” that would determine a to them; this share is recorded value of ‘Right of Use” and “Liabil- separately in the net equity ity”. Since the company opted to and in the consolidated income adopt the standard as of January statement; 1, 2019 and opted out of early ◼◼ business combinations are rec- adoption, the analyses will be up- ognised according to the ac- dated in 2018 in order to define quisition method. According to the re-opening values that are to this method, the amount trans- be recorded in the financial state- ferred in a business combina- ments on January 1, 2019. tion is valued at fair value, cal-

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culated as the sum of the fair ciprocal payables and receiv- value of the assets transferred ables, costs and revenues, as and the liabilities assumed by well as financial income and the Group at the acquisition charges are also eliminated if date and of the equity instru- significant; ments issued in exchange for ◼◼ the gains and losses deriving control of the company ac- from the sale of a share of the quired. Accessory charges to investment in a consolidated the transaction are generally company which results in the recorded to the income state- loss of control are recorded in ment at the moment in which the income statement for the they are incurred. At the acqui- amount corresponding to the sition date, the identifiable as- difference between the sales sets acquired and the liabilities price and the corresponding assumed are recorded at fair fraction of the consolidated value at the acquisition date; net equity sold. the following items form an exception, which are instead Associated Companies valued according to the appli- Associated companies are compa- cable standard: nies in which the Group has a sig- ◼◼ deferred tax assets and liabil- nificant influence, which is alleged ities; to exist when the percentage held ◼◼ employee benefit assets and is between 20% and 50% of the changes of the companies val- liabilities; voting rights. ued under the equity method ◼◼ liability or equity instruments The investments in associated not recognised through the relating to share-based pay- companies are measured under income statement are record- ments of the company ac- the equity method. The equity ed directly as an adjustment to quired or share-based pay- method is as described below: equity reserves; ◼◼ ments relating to the Group the book value of these in- ◼◼ the significant gains and loss- issued in substitution of con- vestments is in line with the es not realised generated on tracts of the entity acquired; adjusted net equity, where operations between the Par- ◼◼ assets held-for-sale and dis- necessary, to reflect the appli- ent Company and subsidiary continued operations; cation of IFRS and includes the companies and investments ◼◼ the acquisition of minority recording of the higher value valued under the equity meth- shareholdings relating to en- attributed to the assets and od are eliminated based on the tities in which control already liabilities and to any goodwill share pertaining to the Group exists are not considered as identified at the moment of in the investee; the losses not such, but rather operations the acquisition; realised are eliminated, except with shareholders; the Group ◼◼ the Group gains and losses are when they represent a reduc- records under equity any dif- recorded at the date in which tion in value. ference between the acquisi- the significant influence be- tion cost and the relative share gins and until the significant in- 2.5 Consolidation scope and of the net equity acquired; fluence terminates; in the case changes in the year ◼◼ the significant gains and loss- where, due to losses, the com- The registered office and the es, with the relative fiscal -ef pany valued under this method share capital (at December 31, fect, deriving from operations indicates a negative net equi- 2017 and December 31, 2016) between fully consolidated ty, the carrying value of the of the companies included in the companies and not yet realised investment is written down consolidation scope under the with third parties, are elimi- and any excess pertaining to full consolidation method and eq- nated, except for the losses the Group, where this latter uity method are reported below: not realised and which are not is committed to comply with eliminated, where the transac- legal or implicit obligations of tion indicates a reduction in the the investee, or in any case to value of the asset transferred. cover the losses, is recorded in The effects deriving from re- a specific provision; the equity

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Share capital Share capital Company Registered office at 12/31/2017 at 12/31/2016 (Euro) (Euro) Malpensa Airport - Terminal 2 - SEA Handling S.p.A. - Liquidated (1) - 10,304,659 Somma Lombardo (VA) SEA Energia S.p.A. Milan Linate Airport - Segrate (MI) 5,200,000 5,200,000 SEA Prime S.p.A. (2) Viale dell'Aviazione, 65 - Milan 2,976,000 2,976,000 Signature Flight Support Italy S.r.l. (3) Viale dell'Aviazione, 65 - Milan 420,000 420,000 Consorzio Malpensa Construction - Via del Vecchio Politecnico, 8 - Milan - 51,646 Liquidated (4) Dufrital S.p.A. Via Lancetti, 43 - Milan 466,250 466,250 SACBO S.p.A. Via Orio Al Serio, 49/51 - Grassobbio (BG) 17,010,000 17,010,000 SEA Services S.r.l. Via Caldera, 21 - Milan 105,000 105,000 Malpensa Logistica Europa S.p.A. Milan Linate Airport - Segrate (MI) 6,000,000 6,000,000 Disma S.p.A. Milan Linate Airport - Segrate (MI) 2,600,000 2,600,000

The companies included in the consolidation scope at December 31, 2017 and the respective consolidation methods are reported below:

Group % Group % Company Consolidation Method at 12/31/2017 holding at holding at 12/31/2017 12/31/2016 SEA Handling S.p.A. - Liquidated (1) Liquidated 0% 100% SEA Energia S.p.A. Line-by-line 100% 100% SEA Prime S.p.A. (2) Line-by-line 99.91% 98.34% Consorzio Malpensa Construction - Liquidated 0% 51% Liquidated (4) Signature Flight Support Italy S.r.l. (3) Net Equity 39.96% 39.34% Dufrital S.p.A. Net Equity 40% 40% SACBO S.p.A. Net Equity 30.979% 30.979% SEA Services S.r.l. Net Equity 40% 40% Malpensa Logistica Europa S.p.A. Net Equity 25% 25% Disma S.p.A. Net Equity 18.75% 18.75%

(1) SEA Handling SpA was liquidated on June 30, 2017. The Extraordinary Shareholders’ Meeting of SEA Handling S.p.A. in liquidation on June 9, 2014 approved the advance winding up of the Company and its placement into liquidation from July 1, 2014, while also authorising the provisional exercise of operations after July 1, for the minimum period necessary (the provisional exercise was confirmed in the Shareholders’ Meeting of SEA Handling in liquidation of July 30, 2014 for the period July 1 - August 31, 2014). The decision to dispose of the commercial aviation handling business did not result in the exit from the consolidation scope of the Group but the application of IFRS 5 as discontinued operations. (2) On September 7, 2017, SEA SpA acquired 150,431 ordinary shares of SEA Prime SpA from third parties for the amount of Euro 250 thousand and with a nominal value of Euro 0.31 each. (3) Associate company of SEA Prime SpA (60% of the shares were sold on April 1, 2016). (4) The liquidation of Malpensa Construction Consortium was concluded on October 31, 2017 with the presentation and approval of the liquidator’s final statement of accounts and shareholders’ distribution plan.

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2.6 Translation of foreign management of the works and de- Where events arise which indicate currency transactions sign activities undertaken by the a reduction in the value of these The transactions in currencies oth- group which is a mark-up a third intangible assets, the difference er than the operational currency party general contractor would between the present value and of the company are converted request for undertaking the same the recovery value is recognised in into Euro using the exchange rate activities, in accordance with IFRIC the income statement. at the transaction date. 12. The determination of the fair value results from the fact that (b) Industrial patents and The foreign currency gains and the lessee must apply paragraph intellectual property rights losses generated from the closure 12 of IAS 18 and therefore if the of the transaction or from the fair value of the services received Patents, concessions, licenses, translation at the Statement of Fi- (specifically the right to utilise trademarks and similar rights nancial Position date of the assets the asset) cannot be determined Trademarks and licenses are amor- and liabilities in foreign curren- reliably, the revenue is calculated tised on a straight-line basis over cies are recognised in the income based on the fair value of the con- the estimated useful life. statement. struction work undertaken. Computer software 2.7 Accounting policies The construction work in progress Software costs are amortised on at the Statement of Financial Po- a straight-line basis over three Intangible assets sition date is measured based on years, while software programme An intangible asset is a non-mon- the state of advancement of the maintenance costs are charged to etary asset, identifiable and with- work in accordance with IAS 11 the income statement when in- out physical substance, control- and this amount is reported in the curred. lable and capable of generating income statement line “Revenues future economic benefits. These for works on assets under conces- Intangible assets with definite assets are recorded at purchase sion”. useful life are annually tested for and/or production cost, including losses in value or where there is an the costs of bringing the asset to Restoration or replacement works indication that the asset may have its current use, net of accumulat- are not capitalised and are includ- incurred a loss in value. Reference ed amortisation, and any loss in ed in the estimate of the restora- should be made to the paragraph value. The intangible assets are as tion and replacement provision as below “Impairments”. follows: outlined below. Property, plant & equipment (a) Rights on assets under Assets under concession are am- Tangible fixed assets include concession ortised over the duration of the property, part of which under the The “Rights on assets under con- concession, as it is expected that scope of IFRIC 12, and plant and cession” represent the right of the the future economic benefits of equipment. Lessee to utilise the asset under the asset will be utilised by the concession (so-called intangible lessee. Property asset method) in consideration of Property, in part financed by the the costs incurred for the design The accumulated amortisation State, relates to tangible assets ac- and construction of the asset with provision and the restoration and quired by the Group in accordance the obligation to return the asset replacement provision ensure the with the 2001 Agreement (which at the end of the concession. The adequate coverage of the follow- renewed the previous concession value corresponds to the “fair val- ing charges: of May 7, 1962). The 2001 Agree- ue” of the design and construction ment provides for the obligation assets increased by the financial ◼◼ free devolution to the State at of SEA to maintain and manage charges capitalised, in accordance the expiry of the concession of airport assets for the undertaking with IAS 23, during the construc- the assets devolved freely with of such activities and the right to tion phase. The fair value of the useful life above the duration undertake structural airport works, construction work is based on the of the concession; which remain the property of SEA costs actually incurred increased ◼◼ restoration and replacement until the expiry of the 2001 Agree- by a mark-up of 6% representing of the components subject to ment, i.e. May 4, 2041. The fixed the best estimate of the remuner- wear and tear of the assets un- assets in the financial statements ation of the internal costs for the der concession. are reported net of State grants.

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Depreciation of property is The expenses incurred for the ed useful life. Where this latter charged based on the number maintenance and repairs of an is beyond the date of the end of of months held on a straight-line ordinary and/or cyclical nature the concession, the amount is de- basis, which depreciates the as- are directly charged to the in- preciated on a straight-line basis set over its estimated useful life. come statement when they are Where this latter is beyond the incurred. The capitalisation of the until the expiry of the concession. date of the end of the conces- costs relating to the expansion, Applying the principle of the com- sion, the amount is depreciated modernisation or improvement of ponent approach, when the asset on a straight-line basis until the owned tangible assets or of those to be depreciated is composed of expiry of the concession. Apply- held in leasing, is made only when separately identifiable elements ing the principle of the compo- they satisfy the requirements to nent approach, when the asset whose useful life differs signifi- be separately classified as an asset to be depreciated is composed of cantly from the other parts of the or part of an asset in accordance separately identifiable elements with the component approach, in asset, the depreciation is calculat- whose useful life differs signifi- which case the useful life and the ed separately for each part of the cantly from the other parts of the asset, the depreciation is calculat- relative value of each component asset. ed separately for each part of the is measured separately. asset. The depreciation rates for owned Depreciation is charged to the assets, where no separate specific For land, a distinction is made be- income statement based on the components are identified are re- tween land owned by the Group, number of months held on a classified under property, plant straight-line basis, which depre- ported below: and equipment and not subject to ciates the asset over its estimat- depreciation and expropriated areas necessary for the extension of the Malpensa Terminal, classified Category % depreciation under “Assets under concession” Loading and unloading vehicles 10.0% and amortised over the duration of the concession. Runway equipment 31.5%

The free granting of assets is rec- Minor equipment 25.0% ognised at market value, accord- Furniture and fittings 12.0% ing to independent technical ex- pert opinions. Transport vehicles 20.0% Motor vehicles 25.0% Plant & Equipment These are represented by tangible EDP 20.0% fixed assets acquired by the Group which are not subject to the obligation of free devolution.

Plant and equipment are recorded at purchase or production cost and, only with reference to owned assets, net of accumulated depreciation and any loss in value. The cost includes charges directly incurred for bringing the asset to their condition for use, as well as dismantling and removal charges which will be incurred consequent of contractual obligations, which require the asset to be returned to its original condition.

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The useful life of property, plant down compared to the relative no longer exist, the book value and equipment and their residual book value in the income state- of the asset (or of the cash-gen- value are reviewed and updated, ment. The recoverable value of erating unit) is restated through where necessary, at least at the an asset is the higher between the income statement, up to the end of each year. the fair value less costs to sell value at which the asset would and its value in use, where this be recorded if no write-down had Investment property latter is the fair value of the esti- taken place and amortisation and This account includes owned mated future cash flows for this depreciation had been recorded. buildings not for operational use. asset. For an asset that does not Investment property is initially generate sufficient independent Financial assets recognised at cost and subse- cash flows, the realisable value On initial recognition, the finan- quently measured utilising the is determined in relation to the cial assets are classified in one of amortised cost criteria, net of ac- cash-generating unit to which the the following categories based on cumulated depreciation and loss asset belongs. In determining the the relative nature and purpose in value. fair value consideration is taken for which they were acquired: of the purchase cost of a specific Depreciation is calculated on a asset which takes into account a ◼◼ financial assets at fair value straight-line basis over the useful depreciation coefficient (this co- through profit or loss; life of the building. efficient takes into account the ◼◼ loans and receivables; ◼◼ available for sale financial as- effective conditions of the asset). sets. Impairments In defining the value in use, the At each Statement of Financial expected future cash flows are The financial assets are recorded Position date, the property, plant discounted utilising a discount under assets when the company and machinery, intangible assets rate that reflects the current becomes contractually party to and investments in subsidiaries market assessment of the time the assets. The financial assets and associated companies are value of money, and the specific sold are derecognised when the analysed in order to identify any risks of the activity. A reduction in right to receive the cash flow is indications of a reduction in val- value is recognised to the income transferred together with all the ue. Where these indications exist, statement when the carrying risks and benefits associated with an estimate of the recoverable value of the asset is higher than ownership. value of the above-mentioned as- the recoverable amount. When sets is made, recording any write the reasons for the write-down Purchases and sales of financial assets are recognised at the valuation date of the relative transaction. Financial assets are measured as follows:

(a) Financial assets at fair value through profit or loss Financial assets are classified in this category if acquired for the purposes to be sold in the short- term period. The assets in this category are classified as current and measured at fair value; the changes in fair value are recognised in the income statement in the period in which they arise, if significant.

(b) Loans and receivables Loans and receivables are financial instruments, principally relating to trade receivables,

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non-derivative, not listed on an considered an indicator of loss in The fair value of traded financial active market, from which fixed value. instruments is based on the list- or determinable payments are ed price at the Statement of Fi- expected. Loans and receivables Derivative financial instruments nancial Position date. Where the are stated as current assets, ex- Derivative financial instruments market for a financial asset is not cept for amounts due beyond 12 are classified as hedging instru- active (or refers to non-listed se- months from the Statement of ments when the relation be- curities), the Group determines Financial Position date, which are tween the derivative and the fair value utilising valuation classified as non-current. These hedged item is formally docu- techniques which include: refer- assets are measured at amortised mented and the effectiveness of ence to advanced negotiations in cost, on the basis of the effective the hedge, periodically verified, course, references to securities interest rate. is high. When the hedged deriva- which have the same characteris- tives cover the risk of change of tics, analyses based on cash flows, When there is an indication of a the fair value of the instruments price models based on the use of reduction in value, the asset is hedged (fair value hedge; e.g. market indicators and aligned, as reduced to the value of the dis- hedge in the variability of the fair far as possible, to the assets to be counted future cash flows obtain- value of asset/liabilities at fixed valued. able. The losses in value are rec- rate), these are recorded at fair ognised in the income statement. value through the income state- Trade and other receivables When, in subsequent periods, the ment; therefore, the hedging in- Trade and other receivables are reasons for the write-down no struments are adjusted to reflect initially recognised at fair val- longer exist, the value of the as- the changes in fair value associat- ue and subsequently measured sets are restated up to the value ed to the risk covered. When the based on the amortised cost deriving from the application of derivatives hedge a risk of chang- method net of the doubtful debt the amortised cost. es in the cash flows of the instru- provision. When there is an indi- ments hedged (cash flow hedge), cation of a reduction in value, the (c) AFS financial assets the hedging is designated against asset is reduced to the value of The AFS assets are non-derivative the exposure to changes in the the discounted future cash flows financial instruments explicitly cash flows attributable to the obtainable. designated in this category or are risks which may in the future im- not classified in any of the previ- pact on the income statement. Indicators of loss in value include, ous categories and are classified The effective part of the change among others, significant con- under non-current assets unless in fair value of the part of the de- tractual non-compliance, signif- management has the intention rivative contracts which are des- icant financial difficulties, insol- to sell them within 12 months ignated as hedges in accordance vency risk of the counterparty. from the Statement of Financial with IAS 39 is recorded in an equi- Receivables are reported net of Position date. These financial as- ty account (and in particular “oth- the provision for doubtful debts. sets are measured at fair value er items of the comprehensive in- When in subsequent periods the and the valuation gains or losses come statement”); this reserve is reduction in the value of the asset are allocated to an equity reserve subsequently transferred to the is confirmed, the doubtful debt under “Other comprehensive in- income statement in the period in provision is utilised; otherwise, come”. They are recognised in which the transaction hedged im- where the reasons for the previ- the income statement only when pacts the income statement. The ous write-down no longer exist, the financial asset is sold, or, in ineffective part of the change in the value of the asset is reversed the case of negative cumulative the fair value of the part of the up to the recoverable amount changes, when it is considered derivative contracts, as indeed derived from applying the amor- that the reduction in value al- the entire change in the fair value tised cost method where no write ready recorded under equity can- of the derivatives which are not down had been made. For further not be recovered. designated as hedges or which information, reference should be do not comply with the require- made to Note 4.1. In the case of investments classi- ments of the above-mentioned fied as investments available for IAS 39, are recognised directly in Inventories sale, a prolonged or significant the income statement in the ac- Inventories are measured at the decline in the fair value of the in- count “financial income/charges.” lower of average weighted pur- vestment below the initial cost is chase and/or production cost and

Annual Report 2017 • 96 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

net realisable value or replace- does not provide for the recog- sion funds. The contributions are ment cost. The valuation of inven- nition of a physical asset but a recorded as personnel costs in ac- tories does not include financial right, must be recognised in accordance with the accruals princi- charges. cordance with IAS 37 - “Provisions ple. The advanced contributions and potential liabilities” – which are recorded as an asset which Cash and cash equivalents establishes recognition to the will be repaid or offset against fu- Cash and cash equivalents in- income statement of a provision ture payments where due. cludes cash, bank deposits, and and the recording of a provision other short-term forms of invest- for charges in the balance sheet. A defined benefit plan is a plan ment, due within three months. not classified as a contribution At the Statement of Financial Po- The restoration and replacement plan. In the defined benefit pro- sition date, bank overdrafts are provision of the assets under con- grammes, the amount of the ben- classified as financial payables cession include, therefore, the efit to be paid to the employee is under current liabilities in the bal- best estimate of the present val- quantifiable only after the termi- ance sheet. Cash and cash equiv- ue of the charges matured at the nation of the employment service alents are recorded at fair value. Statement of Financial Position period, and is related to one or date for the programmed main- more factors such as age, years of Provisions for risks and charges tenance in the coming years and service and remuneration; there- The provisions for risks and charg- undertaken in order to ensure fore, the relative charge is recog- es are recorded to cover known the functionality, operations and nised to the income statement or likely losses or liabilities, the security of the assets under con- based on actuarial calculations. timing and extent of which are cession. The liability recorded in the ac- not known with certainty at the counts for defined benefit plans Statement of Financial Position It should be noted that the resto- corresponds to the present value date. They are recorded only ration and replacement provision of the obligation at the State- when there exists a current obli- of the assets refers only to fixed ment of Financial Position date, gation (legal or implicit) for a fu- assets within the scope of IFRIC net, where applicable, of the fair ture payment resulting from past 12 (assets under concession clas- value of the plan assets. The ob- events and it is probable that the sified to intangible assets). ligations for the defined benefit obligation will be settled. This plans are determined annually by amount represents the best esti- Employee provisions an independent actuary utilising mate less the expenses required Pension provisions the projected unit credit method. to settle the obligation. The Companies of the Group The present value of the defined have both defined contribution benefit plan is determined dis- Possible risks that may result in a plans (National Health Service counting the future cash flows at liability are disclosed in the notes contributions and INPS pension an interest rate equal to the ob- under the section on commit- plan contributions) and defined ligations (high-quality corporate) ments and risks without any pro- benefit plans (Post-Employment issued in the currency in which vision. Benefits). the liabilities will be settled and takes into account the duration Restoration and replacement A defined contribution plan is a of the relative pension plan. The provision of assets under plan in which the Group partici- Group already adopted at De- concession pates through fixed payments to cember 31, 2012 the accounting The accounting treatment of the third party fund operators, and choice within IAS 19 which pro- works undertaken by the lessee in relation to which there are no vides for actuarial gains/losses on the assets under concession, legal or other obligation to pay to be recorded directly in equity as per IFRIC 12, varies depending further contributions where the and consequently, the entry into on the nature of the work: nor- fund does not have sufficient as- force of IAS 19 Revised which mal maintenance on the asset is sets to meet the obligations of eliminates alternative treatments considered ordinary maintenance the employees for the period in to those already adopted by the and therefore recognised in the course and previous periods. For Group does not have any impact income statement; replacement the defined contribution plans, on the comparative classification work and programmed mainte- the Group pays contributions, of the accounts. nance of the asset at a future voluntary or established contrac- date, considering that IFRIC 12 tually, to public and private pen- We report that, following amend-

Annual Report 2017 • 97 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

demnity programme. tution and cash in the amount before maturity. Financial liabilities Financial liabilities and other com- Invoice payment terms are non-in- mitments to be paid are initially terest bearing as they do not in- measured at fair value, net of di- volve further extensions agreed rectly allocated accessory costs, upon between the supplier and and subsequently at amortised the Group. cost, using the effective interest rate. When there is a change in In this context, the relationships the expected cash flows and it for which the primary obligation is possible to estimate them re- is maintained with the supplier liably, the value of the payables and any extension, where grant- is recalculated to reflect this ed, do not involve a change in change, based on the new pres- payment terms, retain their na- ent value of the expected cash ture and therefore remain classi- flows and on the internal yield fied as commercial liabilities. initially determined. The financial liabilities are classified under cur- Revenue recognition rent liabilities, except when the Revenues are recognised at fair Group has an unconditional right value of the amount received for to defer their payment for at least the services from the ordinary ments made to the leaving in- 12 months after the Statement of activities. They are calculated fol- demnity regulations by Law No. Financial Position date. lowing the deduction of VAT and 296 of December 27, 2006 and discounts. subsequent Decrees and Regu- Purchases and sales of financial The revenues, principally relating lations issued in the first half of liabilities are recognised at the valuation date of the relative to the provision of services, are 2007, the leaving indemnity pro- transaction. recognised in the accounting pe- vision due to employees in ac- riod in which they are provided. cordance with Article 2120 Civil Financial liabilities are derecog- Code is classified as defined ben- nised from the Statement of Fi- Rental income and royalties are efit plans for the part matured nancial Position when they are recognised in the period they before application of the new settled and the Group has trans- mature, based on the contractual legislation and as defined contri- ferred all the risks and rewards agreements underwritten. bution plans for the part matured relating to the instrument. after the application of the new Handling activity revenues are regulation. Trade and other payables recognised on an accruals basis, Trade and other payables are ini- according to the number of pas- Post-employment benefits tially recognised at fair value and sengers in the year. Post-employment benefits are subsequently measured based on paid to employees when the em- the amortised cost method. Revenues from electric and ther- ployee terminates his employ- mal energy production are rec- ment service before the normal Reverse factoring transactions - ognised on an accruals basis, ac- pension date, or when an employ- indirect factoring cording to the effective quantity ee accepts voluntary termination In order to ensure easy access to produced in kWh. The tariffs are of the contract. The Group re- credit for its suppliers, the Group based on the contracts in force - cords post-employment benefits has entered into reverse factor- both those at fixed prices and in- when it is demonstrated that the ing or indirect factoring agree- dexed prices. termination of the employment ments (with recourse). Based contract is in line with a formal on the contractual structures in Green certificates, white certifi- plan which determines the ter- place, the supplier has the pos- cates and emission quotas mination of the employment ser- sibility to assign the receivables The companies which produce vice, or when the provision of the claimed from the Group at its electricity from renewable sourc- benefit is a result of a leaving in- own discretion to a lending insti- es receive green certificates from

Annual Report 2017 • 98 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

the Energy Service Operator costs of the management of the The incentives granted to airlines, (GSE). Revenues are recognised works and design activities un- and based on the number of pas- on an accruals basis, both in re- dertaken by the SEA Group, the sengers transported, invoiced by lation to certificates issued on a mark-up which would be applied the airlines to the Company for i) preliminary basis and final certif- by a general contractor (as estab- the maintenance of traffic at the icates issued. On the recognition lished by IFRIC 12). airport or ii) the development of of the revenues a receivable is re- traffic through increasing existing corded from the GSE and on the Government Grants routes or launching new routes, sale of the certificates this is then Public grants, in the presence of are considered commercial costs recorded as a customer receiva- a formal resolution, are recorded and, as such, classified under ble. on an accrual basis in direct cor- “Operating costs” and recognised relation to the costs incurred (IAS in correlation to the revenues to White certificates allocated by 20). which they refer. In particular, the GSE are handled in a simi- in the opinion of management lar manner (for the first time in Capital grants which monitors the effectiveness 2013, for the years 2012 and Capital public grants relating to of these commercial initiatives 2013), following the recognition property, plant and equipment together with other marketing of the Malpensa station as a high are recorded as a reduction in the initiatives classified under com- yield cogeneration plant. acquisition value of the assets to mercial costs, although these in- which they refer. centives are allocated to specific Revenue for works on assets un- revenue accounts proportionally, der concession Operating grants because of their contribution to Revenues on construction work Operating grants are recorded traffic and to the growth of the are recognised in relation to the directly in the income statement. airport, from an operating view- state of advancement of works point they must be considered in accordance with the percent- Recognition of costs together with all costs incurred age of completion method and Costs are recognised when relat- by the Company through com- on the basis of the costs incurred ing to assets or services acquired mercial and marketing activities for these activities increased by or consumed in the year or by sys- and are therefore reported in the a mark-up of 6% representing tematic allocation. Management Accounts and val- the remuneration of the internal ued in the company KPI together

Annual Report 2017 • 99 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

with marketing costs. Therefore, cover the amounts. The deferred 3 Estimates the decision was taken to classify taxes are calculated utilising the these incentives in the annual fi- tax rates which are expected to and assumptions nancial reporting in line with their be applied in the years when the The preparation of the financial operating objectives. temporary differences will be realised or settled. Deferred tax statements requires the directors Financial income assets are recorded when their to apply accounting principles and Financial income is recognised recovery is considered probable. methods that, in some circum- on an accruals basis and includes stances, are based on difficulties interest income on funds invest- Current and deferred income and subjective valuations and esti- ed, foreign currency gains and taxes are recorded in the income mates based on the historical ex- income deriving from financial statement, except those relating perience and assumptions which instruments, when not offset by to accounts directly credited or are from time to time considered hedging operations. Interest in- debited to equity, in which case reasonable and realistic under come is recorded in the income the fiscal effect is recognised di- the relative circumstances. The statement at the moment of ma- rectly to equity and to the Com- application of these estimates turity, considering the effective prehensive Income Statement. and assumptions impact upon the yield. Taxes are compensated when ap- amounts reported in the financial plied by the same fiscal authority, statements, such as the balance Financial charges there is a legal right of compensa- sheet, the income statement and Financial charges are recorded tion and the payment of the net the cash flow statement, and on on an accrual basis and include balance is expected. the disclosures in the notes to the interest on financial payables cal- accounts. culated using the effective inter- Other taxes not related to in- est method and currency losses. come, such as taxes on property, The accounting principles which The financial charges incurred on are included under “Other oper- relating to the Group, require investments in assets for which a ating costs”. greater subjectivity by the Direc- significant period of time is usu- tors in the preparation of the es- ally needed to render the assets Within the fiscal consolidation, timates and for which a change in available for use or sale (quali- each company transfers to the the underlying conditions or the fying assets) are capitalised and consolidating company the tax assumptions may have a signifi- amortised over the useful life of income or loss; the consolidat- cant impact on the consolidated the class of the assets to which ing company records a receivable financial statements are briefly they refer in accordance with the with the company that contrib- described below. provisions of the new version of utes assessable income equal to IAS 23. the income tax to be paid. For (a) Impairments companies contributing a tax The tangible and intangible as- Income taxes loss, the parent company recog- sets and investments in associ- Current income taxes are calcu- nises a payable. ated companies and property lated based on the assessable investments are verified to as- income for the year, applying the Dividends certain if there has been a loss in current tax rates at the State- Payables for dividends to share- value which is recorded by means ment of Financial Position date. holders are recorded in the year of a write-down, when it is con- in which the distribution is ap- sidered there will be difficulties Deferred taxes are calculated proved by the Shareholders’ in the recovery of the relative on all differences between the Meeting. net book value through use. The assessable income of an asset verification of the existence of or liability and the relative book The dividends distributed be- the above-mentioned indicators value, with the exception of tween Group companies are elim- requires the Directors to make goodwill. Deferred tax assets for inated in the income statement. valuations based on the informa- the portion not compensated by tion available within the Group deferred tax liabilities are recog- and from the market, as well as nised only for those amounts for historical experience. In addition, which it is probable there will be when it is determined that there future assessable income to re- may be a potential reduction in

Annual Report 2017 • 100 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

value, the Group determines this these issues, it is difficult to pre- on facts and expectations which through using the most appropri- dict with certainty any future pay- may change over time and which ate technical valuation methods ments required. may, therefore, have significant available. The correct identifica- effects compared to the present tion of the indicators of the ex- Therefore, Management, having estimates made by the Directives istence of a potential reduction consulted with its legal and tax for the preparation of the Group in value as well as the estimates advisers, recognises a liability consolidated financial state- for their determination depends against these disputes when a ments. on factors which may vary over financial payment is considered time impacting upon the valua- probable and the amount of the (e) Financial assets tions and estimates made by the losses arising may be reasonably The valuation of the recovera- Directors. estimated. In the case in which a bility of the financial receivable payment is considered possible, from the Milan Airport Handling (b) Amotisation & depreciation but is not yet determinable, such Trust arising from the assignment Depreciation represents a signifi- is reported in the explanatory of the investment Airport Han- cant cost for the Group. The cost notes. dling to the above-mentioned of property, plant and equipment Trust and the subscription of eq- is depreciated on a straight-line Provisions are recorded against uity financial instruments issued basis over the estimated useful risks of a legal and tax nature and by Airport Handling subsequent life of the relative assets and com- employee disputes. The amount to the assignment to the Trust ponents. The useful life of the of the provisions recorded in the is made on the basis of the best fixed assets of the Group isde- financial statements relating to estimates of the outcome of the termined by the Directors when these risks therefore represents sales operations of the company the fixed assets are purchased. the best estimate at that date by the Trust, with the valuation This is based on the historical ex- made by the Directors. This esti- of the residual interest after the periences for similar fixed assets, mate results in the adoption of above-mentioned sale and is market conditions and consider- assumptions concerning factors therefore subject to the normal ations relating to future events which may change over time and uncertainties of negotiating pro- which could have an impact on which may, therefore, have sig- cesses in the disposal of financial the useful life, such as changes in nificant effects compared to the investments, as well as the future technology. Therefore, the effec- present estimates made by the Di- profitability potential of the in- tive useful life may be different rectors for the preparation of the vestment. from the estimated useful life. separate financial statements. In The Group periodically evaluates addition, the restoration and re- technological and sector changes placement provision of the assets to update the residual useful life. under concession, recorded in ac- 4 Risk Management Any change in the residual useful cordance with IFRIC 12, includes life could result in a change in the the best estimate of the charges The risk management strategy of depreciation period and there- matured at the Statement of Fi- the Group is based on minimising fore in the depreciation charge in nancial Position date for sched- potential negative effects relat- future years. uled maintenance in future years ed to the financial and operating in order to ensure the functional- performance. Some types of risk (c) Provisions for risks ity, operations and security of the are offset through recourse to and charges assets under concession. derivative instruments. The Group companies may be subject to legal disputes, in rela- (d) Trade receivables The management of the tion to taxation or employment Where there are indications of above-mentioned risks is under- issues, based on particularly com- a reduction in value of trade re- taken by the parent company plex circumstances of varying de- ceivables these are reduced to which identifies, evaluates and grees of uncertainty, according their estimated realisable value undertakes hedging of financial to the facts and circumstances, through a doubtful debt provi- risks, in close collaboration with jurisdiction and laws applicable sion. The doubtful debt provision other entities of the Group. to each case. represents the best estimate at the reporting date made by the 4.1 Credit risk Considering the inexact nature of Directors. This estimate is based The credit risks represent the ex-

Annual Report 2017 • 101 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

posure of the SEA Group to po- demics, atmospheric events, rise Trade receivables are reported in tential losses deriving from the in oil prices and economic/finan- the financial statements net of non-compliance of obligations by cial crises). doubtful debt provisions, which trading and financial partners. are prudently made based on In order to control this risk, the the underlying disputes at the This risk is primarily of an eco- SEA Group has implemented pro- Statement of Financial Position nomic/financial nature, or rather cedures and actions to monitor date. The doubtful debt provision the possibility of the default of a the expected cash flows and re- necessary to adjust the nominal counterparty, and also factors of covery actions. value to the realisable value is a technical/commercial or admin- determined analysing all receiva- istrative/legal nature. In accordance with the internal bles and utilising all available in- policy on receivables the client is formation on the debtor. The SEA For the SEA Group the credit risk required to provide guarantees: Group, against overdue receiva- exposure is largely related to the this typically relates to bank guar- bles, receivables in dispute, or for deterioration of a financial nature antees issued by primary credit in- which there is a legal or admin- of the principle airline companies stitutions or deposit guarantees. istrative procedure, utilises the which incur on the one hand the same write-down percentages. effects of the seasonality related In relation to the payment terms to aviation operations, and on the applied for the majority of the A summary of the trade receiv- other consequences of geopoliti- clients, credit terms are largely ables and the relative doubtful cal events which impact upon the concentrated within 30 days from debt provisions is reported be- air transport sector (wars, epi- the relative invoicing. low:

TRADE RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade receivables - customers 203,516 159,619 - of which overdue 121,048 80,991 Doubtful debt provision - customers (101,858) (80,173) Trade receivables - associates 9,815 7,612 Doubtful debt provision - associates (396) (90) Total net trade receivables 111,077 86,968

Annual Report 2017 • 102 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The aging of the overdue receivables is as follows:

TRADE RECEIVABLES - CUSTOMERS

(Euro thousands) at December 31, 2017 at December 31, 2016 less than 180 days 22,661 6,015 more than 180 days 98,387 74,976 Total trade receivables overdue 121,048 80,991

The table below illustrates the the breakdown of receivables from of the bank and insurance sureties gross trade receivables at Decem- counterparties under administra- and deposit guarantees provided. ber 31, 2017 and 2016, as well as tion and in dispute, with indication

TRADE RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade receivables - customers & associates 213,331 167,231 (i) receivables from parties subject to administration 95,965 44,573 procedures (ii) receivables subject to dispute 21,098 23,327 Total trade receivables, net of the receivables at points 96,268 99,331 (i) and (ii) Overdue receivables, other than at points (i) and (ii) 3,985 13,091 Sureties and deposits 74,177 74,274 % of receivables guaranteed by sureties and deposits vs total trade receivables, net of the receivables at points (i) 77.1% 74.8% and (ii)

4.2 Market risks a) Interest rate risk through an appropriate mixture The market risk to which the SEA The SEA Group is exposed to the between fixed and variable rate Group is exposed comprises all risk of changes in interest rates in loans, with the objective to miti- types of risks directly and indi- relation to the necessity to finance gate the economic effect of the rectly related to market prices. In its operating activities and the use volatility of the interest rates. 2017, the market risks to which of available liquidity. The changes the SEA Group were subject were: in interest rates may impact posi- Variable interest loans expose the tively or negatively on the results SEA Group to a risk originating a. interest rate risk; of the SEA Group, modifying the from the volatility of the interest b. currency risk; costs and returns on financial and rates (cash flow risk). Relating to c. commodity risk, related to the investment operations. this risk, for the purposes of the volatility of the energy com- relative hedging, the SEA Group modity prices, in SEA Energia. The SEA Group manages this risk makes recourse to derivative con-

Annual Report 2017 • 103 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

tracts, which converts the variable At December 31, 2017 the gross debt at December 31, 2017 is rate to a fixed rate or limits the financial debt of the SEA Group reported in the following table, fluctuations in variable rates over was comprised of medium/long- which shows each loan at the a range, in this manner reducing term loans (medium/long term nominal value (which includes a portions of loans) and short-term the risk originating from the vol- spread of between 0.20% and loans (exclusively the medium/ 1.62%, not considering the hedg- atility of the rates. We highlight long-term portion of loans ma- ing operations and any accessory that these derivative contracts, turing within 12 months. At this guarantees): underwritten exclusively for the date SEA did not make recourse to purposes of hedging market rate short-term debt). volatility, are recorded through the cash flow hedge method. The medium/long term financial

MEDIUM/LONG TERM LOANS

at December 31, 2017 at December 31, 2016

(Euro thousands) Average Average Maturity Amount rate Amount rate Bonds 2021 300,000 3.125% 300,000 3.125% from 2017 to Bank loans - EIB funding 261,849 1.08% 261,538 1.22% 2037 o/w at Fixed Rate 51,557 3.89% 57,895 3.89% o/w at Variable Rate(*) 210,292 0.39% 203,643 0.45% Other bank loans 2020 154 0.50% 176 0.50% o/w at Fixed Rate 154 0.50% 176 0.50% o/w at Variable Rate Medium/long-term gross financial debt 562,003 2.17% 561,714 2.24%

(*) Includes: (i) variable rate tranche subject to interest rate hedge (ca. 32% at 31.12.2017 & 36% at 31.12.2016); (ii) Euro 80 million of EIB loans with specific bank guarantee

The total value of medium/long- uation of the repayment process average cost of debt amounts to term financial debt at December of other loans for Euro 19,710 2.78%, down from 2.83% at the 31, 2017 amounts to Euro 562,003 thousand. The average cost of end of December 2016 (-5 basis thousand, almost unchanged this debt was reduced by 7 basis points). when compared to December 31, points, reaching 2.17% at Decem- 2016. This is due to the combined ber 31, 2017. Also considering the At December 31, 2017 the Group effect of the disbursement of hedging transactions against the has the following bond issue with Euro 20 million EIB lines at the end interest rate risk and the cost of a total nominal value of Euro 300 of June 2017, offset by the contin- bank guarantees on EIB loans, the million.

Listing Term Par value Annual Description Issuer ISIN Code Maturity Coupon market (years) (in million of Euro) rate

SEA SpA 3 Irish Stock XS Fixed SEA SpA 7 04/17/2021 300 3.125% 1/8 04/17/21 Exchange 1053334373 annual

Annual Report 2017 • 104 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the Group bank ing the spot rate for each con- other than the Euro are insignifi- and bond medium/long-term debt tractual maturity, extrapolated cant and the relative receipts and at December 31, 2017 amounted from the market rate. payments generally offset one an- to Euro 593,482 thousand (Euro other. 596,283 thousand at December The following table reports the 31, 2016). This value was calculat- derivative instruments utilised by c) Commodity risk ed as follows: the SEA Group to cover the inter- The SEA Group, limited to only SEA est rate risk (measured based on Energia, is exposed to changes in ◼◼ for the loans at fixed interest the cash flow hedge method). prices, and the relative currency rates, the capital portion and fluctuations, of the energy com- interest were discounted utilis- The fair value of the derivative fi- modities utilised i.e. gas. These ing the spot rates for each con- nancial instruments at December risks derive from the purchase tractual maturity, extrapolated 31, 2017 and at December 31, of the above-mentioned energy from the market rates; 2016 was determined in accord- commodities, which are princi- ◼◼ for the bond listed on a regulat- ance with IFRS 13. pally impacted by fluctuations in ed market, reference was made the prices of the underlying fuels, to the market value at Decem- b) Currency risk denominated in US Dollars. In the ber 31, 2017; The SEA Group, with the excep- SEA Group, these fluctuations are absorbed through formulas and ◼◼ for the loans at variable inter- tion of the currency risk related est rates, the interest portion to the commodity risk, is subject indexations utilised in the pricing structures adopted in sales con- was calculated utilising the es- to a low currency fluctuation risk tracts. timate of the expected rates at as, although operating in an inter- the end of each contractual ma- national environment, the trans- In 2017, the SEA Group did not turity, increased by the spread actions are principally in Euro. undertake any hedging of this risk, defined contractually. The in- Therefore, the SEA Group does although not excluding the possi- terest portion defined as -out not consider it necessary to imple- bility in the future. lined above and the capital on ment specific hedging against this maturity was discounted utilis- risk as the amounts in currencies

INTEREST RATE HEDGES

Notional Residual (Euro Date of Fair value at Fair value at at signing Notional at Start Maturity thousands) signing 12/31/2017 12/31/2016 date 12/31/2017 10,000 8,387 5/18/2011 9/15/2012 9/15/2021 (1,020.4) (1,351.4) 5,000 4,194 5/18/2011 9/15/2012 9/15/2021 (510.2) (675.7) 15.000 11,379 5/18/2011 9/15/2012 9/15/2021 (1,342.3) (1,793.5) IRS 10,000 6,786 6/6/2011 9/15/2012 9/15/2021 (751.5) (1,014.2) 11,000 7,207 6/6/2011 9/15/2012 9/15/2021 (796.9) (1,075.6) 12,000 7,448 6/6/2011 9/15/2012 9/15/2021 (811.7) (1,099.9) 12,000 7,448 6/6/2011 9/15/2012 9/15/2021 (811.7) (1,099.9) 10,000 6,786 6/6/2011 9/15/2011 9/15/2021 (596.6) (810.3) Collar 11,000 6,828 6/6/2011 9/15/2011 9/15/2021 (586.8) (800.3) Total 66,462 (7,228.0) (9,720.7)

“-” indicates the cost for the SEA Group for advance settlement of the operation. “+” indicates the benefit for the SEA Group for advance settlement of the operation.

Annual Report 2017 • 105 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

4.3 Liquidity risk ◼◼ obtains committed credit lines requirements. The liquidity risk for the SEA Group (revolving and non) which cov- may arise where the financial re- ers the financial commitments The SEA Group has available com- sources available are not suffi- of the Group in the coming 12 mitted and uncommitted credit cient to meet the financial and months deriving from the in- lines which guarantee the cover- commercial commitments within vestment plan and debt repay- ing of future financial needs and the agreed terms and conditions. ments; current operational needs, with ◼◼ monitors the liquidity position, an average maturity of medium/ The liquidity, cash flows and fi- in relation to the business plan- long-term debt above 5 years, in- nancial needs of the SEA Group ning. cluding the bond issued in 2014. are managed through policies and If the bond loan is excluded, the processes with the objective to At December 31, 2017, the SEA remaining debt has a maturity of minimise the liquidity risk. Specif- Group had irrevocable unutilised approximately 7 years (19% over ically, the SEA Group: credit lines of Euro 180 million, 10 years). of which Euro 120 million relating ◼◼ centrally monitors and man- to a revolving line available until The tables below illustrate for ages, under the control of the April 2020 and Euro 60 million re- the SEA Group the breakdown Group Treasury, the financial lating to a EIB line, of which utili- and maturity of the financial debt resources available, in order sation is expected by December (capital, medium/long-term inter- to ensure an efficient manage- 2018, for duration until December est, financial charges on deriva- ment of these resources, also in 2037. At December 31, 2017, the tive instruments and leasing) and forward budgeting terms; SEA Group also had a further Euro trade payables at December 31, ◼◼ maintains adequate liquidity in 158 million of uncommitted credit 2017 and December 31, 2016: treasury current accounts; lines available for immediate cash

LIABILITIES AT DECEMBER 31, 2017

>1 year >3 years (Euro millions) < 1 year > 5 years Total < 3 years < 5 years Gross financial debt 35.4 75.0 368.0 169.1 647.5 Trade payables 153.5 153.5 Total payables 188.9 75.0 368.0 169.1 801.0

LIABILITIES AT DECEMBER 31, 2016

>1 year >3 years (Euro millions) < 1 year > 5 years Total < 3 years < 5 years Gross financial debt 35.4 70.9 375.0 170.0 651.3 Trade payables 161.5 161.5 Total payables 196.9 70.9 375.0 170.0 812.8

Annual Report 2017 • 106 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2017, loans due b. Calculation method: within one year relate to the cap- ◼◼ the remuneration of the bank ital portion to be paid on some of deposits is related to the in- the EIB loans and interest due on terbank rates. In order to es- the total debt. The loan repay- timate the increase/decrease ment scheduling reflects the ca- of interest income to chang- pacity of the SEA Group funding to es in market conditions, the cover medium/long-term needs. change was assumed as per point a) on the average annu- 4.4 Sensitivity al balance of bank deposits In consideration of the fact that for of the SEA Group; the SEA Group the currency risk is ◼◼ the loans measured were almost non-existent, the sensitivi- those at variable interest ty analysis refers to Statement of rates, which incur interest Financial Position accounts which payable linked to the Euribor could incur changes in value due at 6 months. The increase/ to changes in interest rates. decrease of the interest payable to changes in market In particular, the analysis consid- conditions was estimated ap- ered: plying the changes assumed as per point a) on the capital ◼◼ bank deposits; portion of the loans held dur- ◼◼ loans; ing the year; The results of the sensitivity analy- ◼◼ interest risk derivative hedge ◼◼ the interest risk derivative sis are reported below: instruments. hedge instruments were measured both in terms of The assumptions and calculation cash flows and fair value (in methods utilised in the sensitivi- terms of changes compared ty analysis undertaken by the SEA to the same period of the Group were as follows: previous year). In both cases, the values were estimated a. Assumptions: applying the changes as per the effect was analysed on the point a) to the forward curve SEA Group income statement expected for the period. for 2017 and 2016 of a change in market rates of +50 or of 50 basis points.

December 31, 2017 December 31, 2016 (Euro thousands) -50 bp +50 bp -50 bp +50 bp Current accounts (interest income) -8.73 302.57 -31.37 336.79 Loans (interest charges)(1) 394.50 -1,039.74 677.69 -1,085.99 Derivative hedging instruments (flows)(2) -361.96 361.96 -439.92 439.92 Derivative hedging instruments (fair value)(3) -1,012.61 984.17 -1,398.54 1,342.50

(1) + = lower interest charges; - = higher interest charges (2) + = revenue from hedge; - = cost of hedge (3) amount entirely allocated to net equity given full efficacy of hedges

Annual Report 2017 • 107 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The results of the sensitivity anal- In addition, some loans include At the present moment the SEA ysis undertaken on some accounts covenant conditions, relating to Group is not aware of any default of the previous tables are impact- the capacity of the SEA Group to situations related to the loans ed by the low level of the market meet annual and/or half year finan- held or violations of any of the interest rates. By applying a varia- cial commitments (net of financial above-mentioned covenants. tion of -50 basis points to the cur- resources available and receivables rent market interest rate curve, from the State) from operating ac- 5 Classification of the financial the cash flow corresponding to tivities. For some loans, non-com- instruments current accounts and loans would pliance of the covenant terms The following tables provide a be opposite to those provided for results in, for the following half- breakdown of the financial assets by the related types of contracts; year period, the application of a and liabilities by category at De- in these cases, these cash flows correlated predetermined spread cember 31, 2017 and at December are set at zero. (in accordance with a contractually 31, 2016 of the Group. defined pricing grid).

at December 31, 2017 Financial Invest- Financial assets and Loans and ments AFS finan- liabilities liabilities receiva- Total held to cial assets at amor- (Euro thousands) at fair bles maturity tised cost value AFS Investments 26 26 Other non-current financial assets 16,776 16,776 Other non-current receivables 280 280 Trade receivables 111,077 111,077 Tax receivables 14,941 14,941 Other current receivables 9,200 9,200 Other current financial assets 7,190 7,190 Cash and cash equivalents 67,194 67,194 Total - - 226,658 26 - 226,684 Non-current financial liabilities 7,228 539,061 546,289 -of which payables to bondholders 298,441 298,441 Other non-current payables 17,588 17,588 Trade payables 153,497 153,497 Tax payables 8,370 8,370 Other current payables 174,591 174,591 Current financial liabilities excl. 29,781 29,781 leasing Current financial liabilities for 3 3 leasing Total 7,228 - - - 922,891 930,119

Annual Report 2017 • 108 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

at December 31, 2016 Financial Invest- Financial assets and Loans and ments AFS finan- liabilities liabilities receiva- Total held to cial assets at amor- (Euro thousands) at fair bles maturity tised cost value AFS Investments 26 26 Other non-current financial assets 16,776 16,776 Other non-current receivables 308 308 Trade receivables 86,968 86,968 Tax receivables 14,800 14,800 Other current receivables 18,563 18,563 Other current financial assets 7,190 7,190 Cash and cash equivalents 47,236 47,236 Total - - 191,841 26 - 191,867 Non-current financial liabilities 9,721 539,348 549,069 - of which payables to bondholders 298,008 298,008 Trade payables 161,530 161,530 Tax payables 6,841 6,841 Other current payables 160,327 160,327 Current financial liabilities excl. 27,499 27,499 leasing Current financial liabilities for 31 31 leasing Totale 9,721 - - - 895,576 905,297

The values resulting from the utili- measure the fair value. The meth- indirectly; sation of the amortised cost methods applied are broken down into ◼◼ level 3: other information. od approximates the fair value of the following levels, based on the the category. information available, as follows: The following table shows the Group assets and liabilities meas- 5.1 Disclosure on fair value ◼◼ level 1: prices practiced on ac- ured at fair value at December 31, In relation to financial instruments tive markets; 2017 and at December 31, 2016: measured at fair value, the table ◼◼ level 2: valuation techniques below reports information on the based on observable market method chosen by the Group to information, both directly and

Annual Report 2017 • 109 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

at December 31, 2017 (Euro thousands) Level 1 Level 2 Level 3 AFS Investments 26 Derivative financial instruments 7,228 Total 7,228 26

at December 31, 2016 (Euro thousands) Level 1 Level 2 Level 3 AFS Investments 26 Derivative financial instruments 9,721 Total 9,721 26

6 Assets and liabilities the total result of the business of the discontinued operations is recorded on a separate line in in 2016 and 2017 and the assets held-for-sale and the account “Discontinued Op- and liabilities of the discontinued Discontinued Operations erations profit/(loss)”. The same operations in 2016 concern SEA profit/(loss) treatment is applied to the assets Handling liquidated on June 30, and liabilities related to the com- 2017, given that Airport Handling The present section reports a mercial aviation handling sector is not included in the consolida- breakdown of the Discontinued at December 31, 2016, recorded tion scope due to the allocation Operations’ accounts present- in separate accounts under assets to the Milan Airport Handling ed in the Income Statement, the and liabilities. Trust on August 26, 2014. There Statement of Financial Position are no limits on the comparabili- and the Consolidated Cash Flow In relation to the cash flow state- Statement. ment, all cash flows concerning ty of the two financial years since Discontinued Operations are pre- SEA Handling was a non-operat- With the application of IFRS 5, sented under the operating ac- ing company in both years. the income statement of the tivities, investing activities and commercial aviation handling financing activities of the consoli- The breakdown of the Discontin- sector is not included in the 2016 dated cash flow statement. ued Operations results is present- and 2017 results line-by-line for ed below: each cost and revenue item, but It is recalled that the net result

Annual Report 2017 • 110 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

DISCONTINUED OPERATIONS INCOME STATEMENT

2017 2016 (Euro thousands) Total Total Change Change % Operating revenues 299 383 (84) -21.9% Total revenues 299 383 (84) -21.9% Operating costs Personnel costs (10) (120) 110 -91.7% Other operating costs (369) (547) 178 -32.5% Total operating costs (379) (667) 288 -43.2% EBITDA (80) (284) 204 -71.8% Provisions & write-downs 1,636 194 1,442 743.3% EBIT 1,556 (90) 1,646 -1828.9% Financial income 2 (2) -100.0% Pre-tax result 1,556 (88) 1,644 -1868.2% Income tax (42) 42 -100.0% Discontinued Operations profit/(loss) 1,556 (130) 1,686 -1296.9%

Operating income for the year 2017 vided by SEA S.p.A.. Furthermore, reversals for receivables of Euro amounts to a total of Euro 299 losses incurred due to the closure 125 thousand, considered to be ir- thousand and mainly includes prior of irrecoverable credit positions recoverable in the past, as a result year income generated from the liq- were recorded. of their collection in 2017. uidation of the payables. Provisions and write-downs pos- Taxes, amounting to Euro 42 thou- Operating costs incurred in the year itively impacted the income state- sand at December 31, 2016, refer 2017 amount to Euro 379 thousand ment for Euro 1,636 thousand and to the reversal effect of deferred and include: i) Personnel costs for include: i) the release of the future tax assets recorded at December Euro 10 thousand, associated with charges provision and the release 31, 2015. legal costs linked to the settlement of the deductibles provision due to of disputes relating to employment having reached the periods of limi- The assets and liabilities related to contracts; ii) Other operating costs tation, also considering that the loss the discontinued Operations at De- for Euro 369 thousand related main- of the seizable asset by the party cember 31, 2017 and December 31, ly to costs for professional and legal that suffered the damage, cancels 2016 are reported below: consultancy services, remuneration the risk of a request for compensa- for the Board of Statutory Auditors tion (Euro 1,511 thousand); ii) the and the administrative service pro- recognition of impairment losses

Annual Report 2017 • 111 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

DISCONTINUED OPERATIONS BALANCE SHEET

at December 31, 2017 at December 31, 2016 (Euro thousands) Total Total ASSETS Property, plant & equipment 32 Deferred tax assets 0 Total non-current assets 0 32 Trade receivables 0 Other receivables 1,522 Cash and cash equivalents 9,178 Total current assets 0 10,700 Total assets held-for-sale 0 10,732 LIABILITIES Share capital 10,305 Other reserves (1,822) Net loss (130) Shareholders’ Equity 0 8,353 Provision for risks and charges 1,704 Total non-current liabilities 0 1,704 Trade payables 645 Income tax payables 7 Other payables 23 Total current liabilities 0 675 Total liabilities related to assets held-for-sale 0 2,379 Total liabilities related to assets held-for-sale 0 10,732 & shareholders’ equity

“Total assets held-for-sale” and 2017 amount to zero as a result of “Total liabilities related to assets the liquidation that took place on held-for-sale” at December 31, June 30, 2017.

Annual Report 2017 • 112 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The cash flows relating to the Discontinued Operations were as follows:

DISCONTINUED OPERATIONS CASH FLOW STATEMENT

(Euro thousands) 2017 2016 Cash flow from operating activities Pre-tax profit/(loss) of discontinued operations 1,556 (88) Adjustments: Net change in provisions (excl. employee provision) (1,636) (131) Net changes in doubtful debt provision 0 (31) Net financial charges 0 (1) Other non-cash items (137) (372) Cash generated (absorbed) from operating activities before changes in working capital of discontinued (217) (623) operations Change in trade and other receivables (195) 2,309 Change in trade and other payables (418) (157) Cash generated (absorbed) from changes in working (613) 2,152 capital of discontinued operations Receipt of tax benefit, net of income taxes paid 0 848 Cash flow generated (absorbed) from operating (830) 2,377 activities of discontinued operations Divestments from property, plant & equipment 32 301 Divestments from intangible assets 0 0 Divestments from financial assets Cash generated (absorbed) from investing activities 32 301 of discontinued operations Repayment final settlement to shareholder SEA (8,380) 0 Interest received 0 1 Cash flow from financing activities of discontinued (8,380) 1 operations Increase/(decrease) in cash and cash equivalents (9,178) 2,679 Opening cash and cash equivalents 9,178 6,499 Closing cash and cash equivalents 0 9,178

Annual Report 2017 • 113 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

In 2017, operating activities of ties undertaken by the Group, the directly carried out by the Group discontinued operations ab- factor “traffic” effects the results and from activities carried out by sorbed liquidity for Euro 830 of all activities. The SEA Group third parties under license and of thousand, mainly for payments to has identified three operating royalties based on a percentage suppliers and for disbursements segments, as further described of revenues generated by the li- resulting from the settlement of in the Directors’ Report and spe- censee, usually with the provision civil disputes. cifically: (i) Commercial Aviation, of a guaranteed minimum. (ii) General Aviation, (iii) Energy. In 2017, “Cash flows generated This representation may differ at General Aviation: the business from investing activities” reflect individual legal entity level. The includes the full range of services the income collected in March information currently available relating to business traffic at the 2017 for assets sold by SEA Han- concerning the principal business western apron of Linate airport. dling to SEA S.p.A. in January operating sectors identified is The General Aviation business 2017 and are identified in the presented below. included the handling activity car- contract signed in December ried out at the Linate, Malpensa, 2016 for a total value of Euro 32 Commercial Aviation: this in- Venice Tessera and Rome Ciampi- thousand. cludes Aviation and Non Avia- no airports up to March 31, 2016. tion: the former concerns the This business was consolidated “Cash flows from financing activ- management, development and on a line-by-line basis up to March ities of discontinued operations” maintenance of infrastructure 31, 2016, the date on which the were virtually nil in 2016, while and plant and the offer to SEA sale of the 60% stake previously in 2017 they amounted to Euro Group customers of services and held by the Group in this segment 8,380 thousand and are related activities related to the arrival was finalised. to the final liquidation repayment and departure of aircraft, in ad- in favour of the sole shareholder dition to airport safety services. Energy: the business includes the SEA S.p.A.. The revenues generated by these generation and sale of electricity activities are established by a reg- and heat on the market. ulated tariff system and comprise 7 Disclosure by airport fees, fees for the use of The main results of each of the operating segment centralised infrastructure, in ad- above businesses are presented dition to security fees and tariffs below. Following the issue of the fixed for the use of check-in desks and rate bond of Euro 300 million in spaces by airlines and handlers. The following tables present the April 2014, the Parent Company The Non-Aviation business how- segment income statements and joins the category of companies ever provides a wide and segre- balance sheets, reconciled with with listed securities on regulat- gated offer, managed both di- the figures presented in the Di- ed markets required to provide rectly and under license to third rectors’ Report. disclosure as per IFRS 8. There- parties, of commercial services fore, the present Annual Report for passengers, operators and vis- includes the figures for the op- itors to the Airports, in addition erating segment in 2017 and the to the real estate segment. The relative comparative figures for revenues from this area consist 2016. Due to the type of activi- of the market fees for activities

Annual Report 2017 • 114 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

SEGMENT DISCLOSURE: INCOME STATEMENT & BALANCE SHEET AT DECEMBER 31, 2017

Consolidated Commercial General IC (Euro thousands) Energy Financial Aviation Aviation Eliminations Statements Revenues 678,826 16,231 37,597 (34,956) 697,698 of which Intercompany (7,970) (4,107) (22,879) 34,956 Total operating revenues 670,856 12,124 14,718 0 697,698 (third parties) EBITDA 233,435 7,867 1,704 243,006 EBIT 121,800 5,481 609 127,890 Investment income/(charges) 8,135 Financial charges (18,167) Financial income 258 Pre-tax result 118,116 Fixed asset investments 64,729 5,964 1,447 72,140 Tangible assets 32,273 2,054 1,447 35,774 Intangible assets 32,456 3,910 0 36,366

SEGMENT DISCLOSURE: INCOME STATEMENT & BALANCE SHEET AT DECEMBER 31, 2016

Consolidated Commercial General IC (Euro thousands) Energy Financial Aviation Aviation Eliminations Statements Revenues 634,109 15,891 41,897 (38,385) 653,512 of which Intercompany (8,239) (4,141) (26,005) 38,385 Total operating revenues (third 625,870 11,750 15,892 0 653,512 parties) EBITDA 226,076 6,727 1,600 234,403 EBIT 144,873 4,907 219 149,999 Investment income/(charges) 9,842 Financial charges (18,940) Financial income 136 Pre-tax result 141,037 Fixed asset investments 62,663 5,647 1,177 69,487 Tangible assets 14,931 3,429 1,177 19,537 Intangible assets 47,732 2,218 0 49,950

More information on operating busi- erating Performance - Sector Analy- ness activities is available in the “Op- sis” section in the Directors’ Report.

Annual Report 2017 • 115 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

8 Notes to 8.1 Intangible assets cember 31, 2017 and 2016 relat- The following tables illustrate the ing to intangible assets. the Balance Sheet changes for the years ended De-

at Increases Reclassi- Amort. & at Destruct./ (Euro thousands) December in the fications/ deprec./ December sales 31, 2016 period transfers write-downs 31, 2017 Gross value Rights on assets under concession 1,447,809 1,059 29,131 (50) 1,477,949 Rights on assets under concess. 33,614 25,625 (25,750) (1,003) 32,486 in prog. & advances Patents and right to use intellectual 63,543 9,338 72,881 property & others Assets in progress and advances 7,993 9,596 (8,837) 8,752 Other 18,744 86 (1,885) 16,945 Total Gross Value 1,571,703 36,366 1,997 (1,053) 0 1,609,013 Accumulated amortisation Rights on assets under concession (488,341) 13 (45,012) (533,340) Rights on assets under concess. in prog. & advances Patents and right to use intellectual (55,609) (6,554) (62,163) property & others Assets in progress and advances Other (16,642) 1,380 (66) (15,328) Total accumulated amortisation (560,592) 0 1,380 13 (51,632) (610,831) Net value Rights on assets under concession 959,468 1,059 29,131 (37) (45,012) 944,609 Rights on assets under concess. 33,614 25,625 (25,750) (1,003) 32,486 in prog. & advances Patents and right to use intellectual 7,934 9,338 (6,554) 10,718 property & others Assets in progress and advances 7,993 9,596 (8,837) 8,752 Other 2,102 86 (505) (66) 1,617 Total net value 1,011,111 36,366 3,377 (1,040) (51,632) 998,182

Annual Report 2017 • 116 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

gress on concession assets, not Industrial patents and intellectual yet completed at December 31, property rights and other intan- 2017. The increase of Euro 25,625 gible assets, amounting to Euro thousand is expressed net of the 10,718 thousand at December State contribution amounting to 31, 2017 (Euro 7,934 thousand at Euro 2,364 thousand, collected in December 31, 2016), relate to the 2017, for the construction of the purchase of software components Malpensa Terminal 2 railway sta- for the airport and operating IT tion. systems. Specifically, the investments in 2017 principally related The main works carried out during to the development and imple- the year at Malpensa amounted mentation of the administrative to Euro 13,415 thousand and are and airport management systems, mainly related to: (i) the continu- of which Euro 8,837 thousand ation of restyling works at Airport principally relating to previous Terminal 1, with the construction years and recorded in the account of new commercial areas, remote “Assets in progress and advanc- Schengen boarding areas in the es” which at December 31, 2017 north zone, the shifting of gate record a residual amount of Euro counters to create pre-boarding 8,752 thousand and, relating to areas, the completion of the south software developments in pro- commercial area’s reconfigura- gress. As per IFRIC 12, rights on assets tion with the construction of new In consideration of the results re- under concession amount to Euro commercial areas and the fitting ported and the business outlook, 944,609 thousand at December out of a new VIP area to be dedi- as well as the definition of the air- 31, 2017 and Euro 959,468 thou- cated to an operator; (ii) the construction of a second warehouse port tariffs contained in the Reg- sand at December 31, 2016. These in the Cargo area (with a surface ulatory Agreement, at December rights are amortised on a straight- area of about 15,000 sq. m) to be 31, 2017 the Group did not identi- line basis over the duration of the allocated to Cargo operators. In fy any impairment indicators. concession from the State, as they Linate, works amounted to Euro will be returned to the grantor at 12,203 thousand and are mainly The changes in intangible assets the end of the concession. The related to the commencement during 2016 were as follows: amortisation for the year 2017 of functional upgrading works, amounts to Euro 45,012 thou- the Terminal’s restyling and the sand. The increases in the year of construction of a new de-icing Euro 30,190 thousand mainly de- area in the North Apron which rive from the entry into use of in- envisages the aircraft apron’s ex- vestments made in previous years tension by about 22.000 sq. m. A and recorded under “Assets under number of flight infrastructure concession in progress and ad- plant upgrades continued at both vances” and from reclassifications Malpensa and Linate for the im- and transfers between intangible plementation of the Advanced and tangible fixed assets. Surface Movement Guidance and Control System, which will enable For assets under concession, SEA a clearer indication of paths to be has the obligation to record a res- followed by aircraft during the toration and replacement provi- taxiing of aircraft, in addition to sion, in relation to which reference an improved use of lights on the should be made to Note 8.14. taxiing runways. The reclassifications to assets under concession, The account “Assets under con- principally relate to the gradual cession in progress and advances”, entry into service of the works on amounting to Euro 32,486 thou- Terminal 1 and the baggage recla- sand, refers to the work in pro- mation area at Terminal 2.

Annual Report 2017 • 117 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Reclas- at Change Increases Amort. & at sifica- Destruct./ (Euro thousands) December consol. in the deprec./ December tions/ sales 31, 2015 scope period write-downs 31, 2016 transfers

Gross Value

Assets under concession 1,385,102 896 63,435 (1,624) 1,447,809

Assets under concession in 54,044 40,301 (60,731) 33,614 progress & advances Industrial patents and 54,910 8,633 63,543 intellectual property rights

Assets in progress and advances 7,898 8,753 (8,658) 7,993

Others 19,090 (9) 25 (362) 18,744

Total Gross Value 1,521,044 (9) 49,950 2,704 (1,986) 0 1,571,703

Accumulated amortisation

Assets under concession (451,198) (74) 1,122 (38,191) (488,341)

Assets under concession in progress & advances Industrial patents and (48,537) 1 (7,073) (55,609) intellectual property rights

Assets in progress and advances

Others (16,877) 6 362 (133) (16,642)

Total Accumulated (516,612) 7 0 (74) 1,484 (45,397) (560,592) amortisation

Net value

Assets under concession 933,904 896 63,361 (502) (38,191) 959,468

Assets under concession in 54,044 40,301 (60,731) 33,614 progress & advances Industrial patents and 6,373 1 0 8,633 (7,073) 7,934 intellectual property rights

Assets in progress and advances 7,898 8,753 (8,658) 7,993

Others 2,213 (3) 0 25 (133) 2,102

Total net value 1,004,432 (2) 49,950 2,630 (502) (45,397) 1,011,111

The movement relating to the Prime AviationServices SpA), fol- change in the consolidation scope lowing the sale of the 60% stake refers to the loss of control over previously held by SEA Prime SpA the investee company Signature to the Signature Group. Flight Support Italy Srl (formerly,

Annual Report 2017 • 118 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

8.2 Property, plant & equipment and equipment between Decem- The following tables summarises ber 31, 2016 and December 31, the movements in property, plant 2017.

at Increases Reclassi- Amort. & at Destruct./ (Euro thousands) December in the fications/ deprec./ December sales 31, 2016 period transfers write-downs 31, 2017 Gross value Property 206,872 14,955 2,871 (179) 224,519 Plant and machinery 107,510 306 358 (4) 108,170 Industrial and commercial 38,690 5,828 2 (331) 44,189 equipment Other assets 62,521 2,612 4,200 (23) 69,310 Assets in progress and advances 8,489 12,073 (10,808) 9,754 Total Gross Value 424,082 35,774 (3,377) (537) 455,942 Accumulated depreciation & write-downs Property (88,386) 142 (6,213) (94,457) Plant and machinery (65,362) 4 (2,556) (67,914) Industrial and commercial (31,600) 330 (3,403) (34,673) equipment Other assets (48,458) 22 (5,490) (53,926) Assets in progress and advances Total accumulated depreciation & (233,806) 498 (17,662) (250,970) write-downs Net value Property 118,486 14,955 2,871 (37) (6,213) 130,062 Plant and machinery 42,148 306 358 (2,556) 40,256 Industrial and commercial 7,090 5,828 2 (1) (3,403) 9,516 equipment Other assets 14,063 2,612 4,200 (2) (5,490) 15,383 Assets in progress and advances 8,489 12,073 (10,808) 9,754 Total net value 190,276 35,774 (3,377) (40) (17,662) 204,971

Annual Report 2017 • 119 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The investments relate to the de- ploughs for Euro 5,149 thousand, ported and the business outlook, velopment of the Aviation sector gate counters and control sta- as well as the definition of the air- which, as already reported, in actions for Euro 205 thousand, new port tariffs contained in the Reg- cordance with IFRIC 12 are classi- aircraft towing tractors for Euro ulatory Agreement, at December fied as assets under concession 1,235 thousand and new video 31, 2017 the SEA Group did not and current airport concessions terminals for Euro 380 thousand. identify any impairment indica- and those in the Non Aviation tors. sector, amounting to Euro 2,871 On November 22, 2017, the Board thousand at December 31, 2017, of Directors of SEA Energia SpA All fixed assets, including those principally related to the restyl- approved the purchase of a new falling under IFRIC 12, are ex- ing work at Terminal 1 of Malpen- turbine with the simultaneous dis- pressed net of those funded by sa. Finally, increases in the item posal of the current TGC turbine State and European Union contri- “property” include the acquisition in early 2019. Following this deci- butions. These latter at Decem- of ownership of the Sheraton Mal- sion, the depreciation of the Mal- ber 31, 2017 amounted to Euro pensa building, finalised on De- pensa plant’s turbine was recalcu- 504,868 thousand and Euro 7,019 cember 18, 2017. lated with an assumption for this thousand respectively. turbine’s recovery value amount- Increments in “Tangible fixed as- ing to Euro 1 million. The changes in tangible fixed assets” also include the purchase of sets during 2016 were as follows: new de-icer equipment and snow In consideration of the results re-

Annual Report 2017 • 120 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Reclassi- Amorti- at Change Increases Destruc- at fications/ zation/ (Euro thousands) December consol. in the tions / December Internal write- 31, 2015 scope period Sales 31, 2016 Transfers downs

Gross Value

Land and Buildings 201,565 661 4,792 (151) 5 206,872

Plant ad machinery 111,590 (753) 782 (13) (4,096) 107,510

Industrial and commercial 37,728 (36) 6,265 19 (5,286) 38,690 equipment

Other assets 107,932 (260) 1,876 2,373 (49,400) 62,521

Assets in progress and advances 8,411 9,953 (9,875) 8,489

Total Gross Value 467,226 (1,049) 19,537 (2,704) (58,933) 5 424,082

Accumulated depreciation and write-downs

Land and Buildings (82,221) 125 (6,290) (88,386)

Plant ad machinery (67,392) 708 73 3,848 (2,599) (65,362)

Industrial and commercial (35,089) 17 (22) 5,200 (1,706) (31,600) equipment

Other assets (91,599) 207 23 48,723 (5,812) (48,458)

Assets in progress and advances

Total accumulated depreciation (276,301) 932 0 74 57,896 (16,407) (233,806) and write-downs

Net value

Land and Buildings 119,344 661 4,792 (26) (6,285) 118,486

Plant ad machinery 44,198 (45) 782 60 (248) (2,599) 42,148

Industrial and commercial 2,639 (19) 6,265 (3) (86) (1,706) 7,090 equipment

Other assets 16,333 (53) 1,876 2,396 (677) (5,812) 14,063

Assets in progress and advances 8,411 9,953 (9,875) 8,489

Total net value 190,925 (117) 19,537 (2,630) (1,037) (16,402) 190,276

Annual Report 2017 • 121 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

8.3 Investment property Information on investment property is provided below:

INVESTMENT PROPERTY

(Euro thousands) at December 31, 2017 at December 31, 2016 Gross value 4,118 4,125 Accumulated depreciation (724) (727) Net total investment property 3,394 3,398

MOVEMENT ACCUMULATED DEPRECIATION

(Euro thousands) at December 31, 2017 at December 31, 2016 Opening balance (727) (736) Decreases 5 11 Depreciation (2) (2) Closing balance (724) (727)

The account includes buildings Against the backdrop of uncer- 8.4 Investments not utilised in the operated activi- tainty related to the real estate ties of the Group (apartments and market there was no loss in value in associates The changes in the account “in- garages). of real estate investments at De- vestments in associates” at De- cember 31, 2017. cember 31, 2017 and December 31, 2016 are shown below.

INVESTMENTS IN ASSOCIATES

Movements at future charges at increases / decreases/ (Euro thousands) December 31, on investments December 31, revaluations write-downs 2016 provision 2017 SACBO SpA 33,839 4,915 (2,128) 36,626 Dufrital SpA 12,034 2,056 (1,679) 12,411 Disma SpA 2,605 262 (234) 2,633 Malpensa Logistica Europa SpA 2,682 477 (1,236) 1,923 SEA Services Srl 381 704 (624) 461 Signature Flight Support Italy Srl 56 152 (208) Total 51,597 152 8,414 (6,109) 54,054

Annual Report 2017 • 122 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The companies held are all resi- and the measurement of invest- (Euro 51,597 thousand at Decem- dent in Italy. ments as per IAS 28. ber 31, 2016).

The net equity of the associates The SEA Group share of adjusted 8.5 AFS Investments was adjusted to take account of net equity at December 31, 2017 The investments available-for-sale the Group accounting principles amounts to Euro 54,054 thousand are listed below:

AFS INVESTMENTS

% Holding Company at December 31, 2017 at December 31, 2016 Consorzio Milano Sistema in liquidation 10% 10% Romairport Srl 0.227% 0.227% Aereopuertos Argentina 2000 SA 8.500% 8.500% Sita Soc. Intern. De Telecom.Aereneonautiques 6 shares 6 shares (Belgian reg. company) (*)

(*) The Board of Directors of SEA SpA, in the meeting of January 25, 2018, authorised the formalisation of the request for withdrawal from SITA SC.

The tables below report the changes in the investments available for sale during 2017:

AFS INVESTMENTS

Movements increases / at December 31, decreases/ at December 31, (Euro thousands) revaluations / 2016 write-downs 2017 reclassifications Consorzio Milano Sistema in 25 25 liquidation Romairport Srl 1 1 Aereopuertos Argentina 2000 SA 0 0 Sita Soc. Intern. De Telecom. Aereneonautiques 0 0 (Belgian reg. company) (*) Total 26 - - 26

(*) The Board of Directors of SEA SpA, in the meeting of January 25, 2018, authorised the formalisation of the request for withdrawal from SITA SC.

Annual Report 2017 • 123 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

For the investment in Aeropuer- 8.6 Deferred tax assets tos Argentina 2000 SA, reference The changes in the net deferred should be made to the separate tax assets for the year 2017 are financial statements of SEA. shown below:

NET DEFERRED TAX ASSETS

Released / at December 31, Released / at December 31, (Euro thousands) allocated to 2016 allocated to P&L 2017 Equity Restoration prov. as per IFRIC 12 33,802 803 34,605 Write-downs tan. assets 14,288 14 14,302 (impairment test) Provisions for risks and charges 10,172 3,665 13,837 Non-deductible doubtful debt 8,657 (1,058) 7,599 provision Labour dispute 3,320 1,749 5,069 Fair value measurement 2,149 (584) 1,565 of derivatives Post-em. bens. prov. discounting 945 (15) (13) 917 (IAS 19) Ord. main. on assets under 2,921 2,921 concession Amortisation & Depreciation 1,665 180 1,845 Other 3,890 (65) 3,825 Total deferred tax assets 81,808 5,273 (597) 86,484 Amortisation & Depreciation (32,912) 2,488 (30,424) Allocation gain acquisition SEA (5,337) 218 (5,119) Prime Other 106 106 211 Total deferred tax liabilities (38,143) 2,812 0 (35,332) Total deferred tax assets, 43,665 8,085 (597) 51,152 net of liabilities

The IRAP tax rate for the Parent panies fully consolidated by the Company SEA SpA is equivalent Group this is 3.9%. The IRES rate to 4.2%, while for the other com- for Group companies is 24%.

Annual Report 2017 • 124 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

8.7 Other current and non- current financial assets Other current and non-current financial assets are shown in the table below:

OTHER CURRENT AND NON-CURRENT FINANCIAL ASSETS

(Euro thousands) at December 31, 2017 at December 31, 2016 Other non-current financial assets 7,190 16,776 Other current financial assets 13,300 7,190 Other current and non-current financial assets 20,490 23,966

Other current and non-current subsequent tranches were paid tal increase of Airport Handling. financial assets relate to the by SEA in June 2014 (Euro 710 This was undertaken without any capital paid in favour of Airport thousand) and July 2014 (Euro consideration and in accordance Handling less write-downs made 1,290 thousand), on the request with the Trust Deed. Subsequent in 2013 and 2014 totalling Euro of the Board of Directors of Air- to this transfer of ownership, on 1,034 thousand, against the loss- port Handling. August 27, 2014, Airport Han- es generated before the disposal dling Srl was converted into a lim- to the Trust. On June 30, 2014, the Board of ited liability company, with the Directors of SEA SpA approved appointment of new corporate The company was incorporat- the incorporation of the “Milan boards and the issue of 20,000 ed on September 9, 2013 with Airport Handling Trust”, regis- Financial Instruments of Partici- a share capital of Euro 10 thou- tered in Jersey, Channel Islands, pation (FIP) of a value of Euro 1 sand, fully paid-in by the sole in order to adopt the best possi- thousand each, subscribed by SEA shareholder SEA on September ble procedure to implement the SpA, with the approval of the sole 27, 2013. On October 30, 2013, discontinuation of the handling shareholder Milan Airport Han- the Extraordinary Shareholders’ activities, previously undertaken dling Trust. These instruments Meeting of Airport Handling ap- by SEA Handling SpA, in accord- are equity-based (therefore not proved the share capital increase ance with the terms and condi- subject to any repayment obliga- up to a maximum of Euro 90 thou- tions of the incorporation deed tion of the amount contributed), sand, to be offered as options to of the Milan Airport Handling without administrative rights the shareholder SEA - entirely Trust. but similar to shares in terms of subscribed with the payments equity rights; in particular these in November 2013 and February On August 27, 2014, the Share- instruments provide profit-shar- 2014. holders’ Meeting of the Airport ing and reserve rights and rights Handling Srl approved the share to other equity items, also on On April 3, 2014, the Ordinary capital increase to Euro 5,000 the winding up of the company. Shareholders’ Meeting of Airport thousand through the use of On August 28, 2014, SEA execut- Handling approved the share cap- future share capital payments. ed the payment of Euro 20,000 ital increase up to a maximum On the same date, SEA, the sole thousand. On March 23, 2016, of Euro 2,500 thousand to be shareholder of Airport Handling, the sale was completed of 30% offered as options to the share- with the signing of the Trust of Airport Handling shares, and holder SEA. The first tranche Deed transferred to the “Milan a similar percentage of the FIPs of Euro 500 thousand was sub- Airport Handling Trust”: i) the en- held by SEA in Airport Handling, scribed at the shareholders meet- tire nominal investment of Euro with the assignment to dnata, on ing and paid-in simultaneously by 5,000 thousand; ii) all rights to this closing, of the majority of mem- the shareholder SEA. The two latter relating to the share capi- bers of the board of directors

Annual Report 2017 • 125 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

and, therefore, of Airport Han- 7.5 million by dnata as a lien for ue of the assets recorded in the dling’s Governance. Therefore, a predetermined period of time, Statement of Financial Position the portion of other financial as- and provided for the additional for Euro 3,476 thousand. Moreo- sets held under the proposed sale payment of Euro 10 million for ver, estimating that these negoti- were reclassified as “current”. the acquisition of the addition- ations will be concluded by 2018, al 40% stake (amounts to be di- the 40% share of other financial Dnata’s investment in Airport vided proportionally between assets under negotiation were Handling led to the company’s shares and FIPs respectively, held reclassified from “non-current” to valuation of Euro 25 million. The by the Trustee and SEA). On the “current”. amount confirmed the assets re- basis of current forecasts regard- corded in the Statement of Finan- ing the negotiations underway 8.8 Other non-current cial Position up to the previous for the sale of the further share receivables half-year report. The transaction, in Airport Handling through the The table below shows the break- in view of the sale of the first Trust, the directors considered down of other non-current re- 30%, led to the payment of Euro it appropriate to reduce the val- ceivables:

OTHER NON-CURRENT RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Other receivables 280 308 Total other non-current receivables 280 308

Other receivables, amounting change significantly and mainly re- 8.9 Inventories to Euro 280 thousand at Decem- lates to employee receivables and The following table reports the ber 31, 2017 (Euro 308 thousand deposit guarantees. breakdown of the account “Inven- at December 31, 2016) did not tories”:

INVENTORIES

(Euro thousands) at December 31, 2017 at December 31, 2016 Row material, ancillaries and consumables 4,607 4,585 Inventory obsolescence provision (503) (444) Total Inventories 4,104 4,141

The account includes consumable with the realisable value or re- the relative provision. materials for airport activities; no placement necessitated an ob- goods held in inventories com- solescence inventory provision The changes in the obsolescence prised guarantees on loans or con- amounting to Euro 503 thousand provision in 2017 are shown be- cerning other commitments. at December 31, 2017 (Euro 444 low: thousand at December 31, 2016). The comparison of inventories The amounts are reported net of

Annual Report 2017 • 126 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

MOVEMENTNS IN INVENTORY OBSOLESCENCE PROVISION

(Euro thousands) at December 31, 2017 Opening balance (444) Provisions (139) Utilisations 80 Final value inventory obsolescence provision (503)

8.10 Trade receivables The breakdown of the trade receivables is reported in the table below:

TRADE RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade receivables - customers 101,658 79,446 Trade receivables - associates 9,419 7,522 Total net trade receivables 111,077 86,968

Trade receivables, shown net of The criteria for the adjustment are described in the previous para- the doubtful debt provision, main- of receivables to their realisable graphs 2.7 and 4.1, to which refer- ly include receivables from clients value takes account of valuations ence should be made. and provisions for invoices and regarding the state of the dispute The changes in the doubtful debt credit notes to be issued. and are subject to estimates which provision were as follows:

DOUBTFUL DEBT PROVISION

(Euro thousands) at December 31, 2017 at December 31, 2016 Opening provision (80,263) (83,619) (Increases)/releases (27,248) (2,744) Utilisations 5,257 6,022 Change in scope - 78 Total doubtful debt provision (102,254) (80,263)

Annual Report 2017 • 127 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Allocation provisions are shown These provisions mainly refer the investee company Signature net of reversals and amount to to the full write-down of exist- Flight Support Italy S.r.l. (former- Euro 27,248 thousand in 2017 ing receivables, prior to May 2, ly, Prime AviationServices S.p.A.). (Euro 2,744 thousand at Decem- 2017, claimed from Alitalia SAI ber 31, 2016). in Extraordinary Administration. 8.11 Tax receivables and other The utilisations refer to the clo- current receivables The doubtful debt provision was sure during the year of disputes The following table provides the calculated to take into account in which the provisions were ac- breakdown of other current re- the risk in deterioration of the fi- crued to cover such risks in pre- ceivables: nancial positions of the principle vious years. “Change in scope” operators with which disputes refers to the deconsolidation exist and write-downs for re- which occurred as of April 1, 2016 ceivables under administration. following the loss of control over

TAX RECEIVABLES AND OTHER CURRENT RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Tax receivables 14,941 14,800 Other current receivables 9,200 18,563 Total tax receivables and other current receivables 24,141 33,363

Tax receivables of Euro 14,941 On March 27, 2018, the Tax Agen- thousand at December 31, 2017 cy communicated to SEA SpA that mainly refers to: submissions were being accepted for issue of the IRES receivable ◼◼ for Euro 10,402 thousand (Euro concerning the deduction of IRAP 10,414 thousand at December from IRES for the financial years 31, 2016) the recalculation of from 2007 to 2011 (“click day”). IRES income tax for the years 2007-2011 following the rec- The account “other current re- ognition of the deductibility for ceivables”, reported net of the IRES purposes of IRAP regional tax relating to personnel costs relative provision, is broken down in accordance with Article 2, as follows: Paragraph 1, of Legislative De- cree No. 201/2011 (converted into Law No. 214/2011) with consequent presentation of the request for reimbursement; ◼◼ for Euro 873 thousand (Euro 2,873 thousand at December 31, 2016) current income tax receivables; ◼◼ for Euro 2,902 thousand (Euro 909 thousand at December 31, 2016) VAT receivables; ◼◼ for Euro 764 thousand (Euro 604 thousand at December 31, 2016) other tax credits.

Annual Report 2017 • 128 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

OTHER CURRENT RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Receivables from GSE for white & green certs. 1,120 9,530 Other receivables 6,813 6,391 Misc. receivables 821 278 Receivables from insurance companies 206 232 Employee & soc. sec. receivables 236 203 Post & tax stamps 4 25 Receivables for dividends 1,901 Receivables from Ministry for Communications for 3 radio bridge Total other current receivables 9,200 18,563

“Other current receivables” (Euro 8,717 thousand at Decem- at December 31, 2017 mainly re- amount to Euro 9,200 thousand ber 31, 2016). Euro 57 thousand fer to receivables from payments at December 31, 2017 (Euro from the corresponding write- by Telepass, credit card and POS 18,563 thousand at December down provision was utilised while which have not yet been credited 31, 2016) and is comprised of the the surplus amounting to Euro in the bank account. accounts outlined below. 249 thousand was released. In 2017, the company did not accrue Other receivables principally con- Receivables from GSE, claimed the envisaged incentives for ‘dis- cern accrued income related to by the SEA Group for white and trict heating green certificates’, revenues accrued in the year and green certificates, amount to as the recognition period came to costs relating to future years. The Euro 1,120 thousand. At Decem- a close in 2016. balance as at December 31, 2017 ber 31, 2017, this amount includ- includes Euro 2,429 thousand re- ed the receivables claimed by SEA Receivables from the State under lating to the reimbursement of a Energia from the Energy Service SEA/Ministry for Infrastructure portion of the penalty imposed Operator relating to the estimate and Transport case, following the on SEA by the Anti-Trust Author- of 2016 “white certificates”. As judgement of the Court of Cas- ity (AGCM) in 2015 following the commented upon in the Direc- sation, which recognised to the acquisition of SEA Prime – for- tors’ Report to which reference Company the non-adjustment merly, ATA Ali Trasporti Aerei. The should be made, in 2017 the of handling tariffs for the period account also includes supplier ad- company did not accrue the en- 1974-1981, in addition to inter- vances, operating grants and oth- visaged incentives for ‘green est and expenses incurred by the er minor positions. certificates’, as the recognition Company, for Euro 3,889 thou- period came to a close in 2016. sand at December 31, 2017 and At the date of the financial state- entirely covered by the doubtful The change in the other current ments, the company had not yet debt provision. This receivable receivables doubtful debt provi- received the white certificates ac- was related to the residual cred- sion is as follows: crued in 2016 and was subjected it position that was not collected to an audit by the Energy Service from the Ministry of Infrastruc- Operator in respect of white cer- ture and Transport, in addition tificates assigned for the period to interest up to December 31, 2012 - 2015. At December 31, 2014. 2017, receivables from the En- ergy Service Operator for green Receivables for sundry income certificates were collected in full amounting to Euro 821 thousand

Annual Report 2017 • 129 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

OTHER RECEIVABLES DOUBTFUL DEBT PROVISION

(Euro thousands) at December 31, 2017 at December 31, 2016 Opening provision (4,196) (4,045) (Increases)/releases 307 (307) Change in scope 156 Total other receivables doubtful debt provision (3,889) (4,196)

The “Change in scope” item refers 8.12 Cash and cash equivalents to the loss of control over the in- The breakdown of the account vestee company Signature Flight “Cash and cash equivalents” is Support Italy Srl (formerly, Prime shown in the table below. AviationServices SpA).

CASH AND CASH EQUIVALENTS

(Euro thousands) at December 31, 2017 at December 31, 2016 Bank and postal deposits 67,120 47,178 Cash in hand and similar 74 58 Total 67,194 47,236

Cash and cash equivalents at De- tion on the movements to cash 8.13 Shareholders’ Equity cember 31, 2017 increased Euro and cash equivalents, reference At December 31, 2017, the share 19,958 thousand compared to the should be made to the Cash Flow capital of the Company amounted previous year. The account at year Statement. to Euro 27,500 thousand. end comprises bank and postal deposits on demand for Euro 64,667 It should be noted that at Decem- The par value of each share was thousand (Euro 45,558 thousand ber 31, 2017 and December 31, Euro 0.11. at December 31, 2016), restrict- 2016, liquidity does not include ed bank deposits of Euro 2,453 the escrow account in which Euro The changes in shareholders’ eq- thousand, principally to cover the 6,000 thousand are deposited in uity in the year are shown in the quota of European Investment respect of income from the sale statement of financial position. Bank loans due in the coming 12 price of 30% of the Equity Finan- months (Euro 1,620 thousand cial Instruments held by the SEA The reconciliation between the at December 31, 2016) and cash Group in Airport Handling. net equity of the Parent Company amounts for Euro 74 thousand SEA SpA and the consolidated net (Euro 58 thousand at December equity is shown below. 31, 2016). For further informa-

Annual Report 2017 • 130 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Shareholders' Shareholders' equity at Equity Net profit / equity at (Euro thousands) OCI Reserve December 31, movements (loss) December 31, 2016 2017 Parent Company Financial 326,689 (70,300) 1,893 76,946 335,228 Statements Share of net equity and net profit of the consolidated subsidiaries attributable to the Group, net of 14,955 (250) 4,215 18,920 the carrying amount of the relative investments Adjustments for measurement at 40,696 2,533 43,229 equity of associates Other consolidation adjustments (6,510) 311 (6,199) Consolidated Financial 375,830 (70,550) 1,893 84,004 391,177 Statements

8.14 Provision for risks and charges The breakdown of the account “Provisions for risks and charges” is shown in the table below:

PROVISIONS FOR RISKS AND CHARGES

at December Provisions/ Utilisations / at December (Euro thousands) Releases 31, 2016 Increases reclassifications 31, 2017 Restoration and replacement 136,966 15,093 (12,855) (1,491) 137,713 provision Provision for future charges 37,095 3,441 (6,367) (1,947) 32,222 Total provision for risks 174,061 18,534 (19,222) (3,438) 169,935 and charges

The restoration and replacement tured relating to the maintenance utilisations in the year refer to provision on assets under con- on assets under concession from the restoration works carried out cession, created in accordance the State which will be undertak- covered by the provisions made in with IFRIC 12, amounting to Euro en in future years. The provision previous years. 137,713 thousand at December for the year takes into account 31, 2017 (Euro 136,966 thousand the updated long-term scheduled The breakdown of the provision at December 31, 2016), refers to maintenance and replacement for future charges is shown in the the estimate of the amount ma- plans on these assets, while the table below:

Annual Report 2017 • 131 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

PROVISION FOR FUTURE CHARGES

at December Provisions/ Utilisations / at December (Euro thousands) Releases 31, 2016 Increases reclassifications 31, 2017 Labour provisions 6,895 366 (2,453) (100) 4,708 Insurance excesses 3,136 355 (390) (1,591) 1,510 Tax risks 2,500 (324) (193) 1,983 Green & white certificates 1,049 990 (1,049) 990 Future charges on investments 152 152 provision Other provisions 23,515 1,730 (2,303) (63) 22,879 Total provision for future charges 37,095 3,441 (6,367) (1,947) 32,222

The employee provisions relate amount allocated for the dispute ing of February 26, 2018, the to the expected streamlining ac- with the Energy Service Operator shareholders’ meeting of Signa- tions to be undertaken on opera- over green certificates is of Euro ture Flight Support Italy S.r.l., re- tions. The utilisations in the year 490 thousand. In May 2017, the solved to cover losses of Euro 923 are related to the incentivised de- company refunded 17,106 green thousand and to recapitalise the partures for which a specific pro- certificates for the period 2010 - company as follows: vision was made in the accounts 2014 (of which 12,435 pertained in 2016. to the company and 4,671 per- ◼◼ To cover losses by cancelling tained to A2A) as requested by the share capital of Euro 420 The “Tax risk” account mainly in- the GSE on December 19, 2016; thousand and reserves - net of cludes: the company, assisted by its legal losses carried forward - of a to- advisers, filed an appeal within tal Euro 240 thousand. ◼◼ Euro 483 thousand is related the prescriptive deadlines. The al- ◼◼ To recapitalise the share cap- to the provision for disputes location refers to a provision for ital through an increase up to currently underway with the incentives accrued during the pe- a nominal Euro 420 thousand, competent tax judicial bodies riod 2015-2016, already collected with a total share premium of over VAT resulting from the but provisionally allocated by the Euro 263 thousand, equivalent tax audit by the Customs Agen- GSE. In 2017, an amount of Euro to the residual losses, to be cy in respect of the resale of 500 thousand was also allocated offered for subscription to all electricity and registration tax for the dispute with the Ener- shareholders in proportion to applied on the transactions in gy Service Operator over white the shares held. accordance with a number of certificates since an audit is un- civil judgments; derway in relation to white cer- The account “Other provisions” ◼◼ Euro 1,500 thousand for the tificates assigned for the period for Euro 22,879 thousand at De- amount allocated by SEA Prime 2012-2015. cember 31, 2017 is mainly com- SpA, to cover liabilities related posed of the following items: to the non-payment of Group The “Future charges on invest- VAT by the former parent com- ments provision” of Euro 152 ◼◼ Euro 10,509 thousand for legal pany for the years 2011 and thousand at December 31, 2017 disputes related to the opera- 2012. was allocated against the valu- tional management of the air- ation of the stake in Signature ports; The item “Green and white cer- Flight Support Italy Srl, which has ◼◼ Euro 8,000 thousand relating tificates” amounting to Euro a negative shareholder’ equity at to charges from the acoustic 990 thousand at December 31, the same date. In this regard, it zoning of the peripheral areas 2017 refers to SEA Energia. The should be noted that in its meet- to the Milan Airports (Law No.

Annual Report 2017 • 132 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

447/95 and subsequent Minis- ◼◼ Euro 3,000 thousand for vari- 8.15 Employee provisions terial Decrees). It is reported ous legal disputes; The changes in the employee pro- that the Airport Commission ◼◼ Euro 523 thousand for risks visions are shown below: of Malpensa has not yet given relating to revocatory actions the final approval, unlike the taken against the Group and Airport Commission of Linate; relating to airline companies ◼◼ Euro 847 thousand for dis- declared bankrupt. putes with ENAV;

EMPLOYEE PROVISIONS

(Euro thousands) at December 31, 2017 at December 31, 2016 Opening provision 49,220 48,239 Change in scope (399) Financial (income)/charges 686 645 Utilisations (2,016) (1,079) Actuarial losses/(profits) (56) 1,814 Total employee provisions 47,834 49,220

The actuarial calculation of the ECONOMIC-FINANCIAL TECHNICAL PARAMETERS employee leaving indemnity takes into account the effects of the reform of Law No. 296 of December at December 31, 2017 27, 2006 and subsequent decrees Annual discount rate 1.30% and regulations. Annual inflation rate 1.50% The item “Change in scope” re- Annual increase in employee leaving indemnity 2.63% fers to the effects resulting from the deconsolidation of Signature Flight Support Italy Srl (formerly, Prime AviationServices SpA) as of April 1, 2016, the date of loss of control and the transition from full consolidation to equity valuation.

The principal actuarial assumptions, utilised for the determination of the pension obligations, are reported below:

Annual Report 2017 • 133 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The annual discount rate, utilised CHANGE for the present value of the bond, was based on the Iboxx Eurozone (Euro thousands) Corporate A index. at December 31, 2017 + 1 % on turnover rate 46,485 The sensitivity analysis for each of - 1 % on turnover rate 47,014 the significant assumptions at De- + 1/4 % on annual inflation rate 47,437 cember 31, 2017 is shown below, indicating the effects that would - 1/4 % on annual inflation rate 46,048 arise on the post-employment + 1/4 % on annual discount rate 45,634 benefit provision. - 1/4 % on annual discount rate 47,878

The average duration of the finan- AVERAGE DURATION OF THE OBLIGATION cial obligation and scheduled payments of the benefits are reported in the following tables: (in years) at December 31, 2017 Duration of the plan 10.3

EXPECTED DISBURSEMENTS

(Euro thousands) at December 31, 2017 Year 1 2,224 Year 2 1,887 Year 3 2,488 Year 4 2,755 Year 5 3,713

Annual Report 2017 • 134 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

8.16 Current and non-current financial liabilities at Decem- financial liabilities ber 31, 2017 and December 31, The table below provides a break- 2016. down of current and non-current

at December 31, 2017 at December 31, 2016 Non-current Non-current (Euro thousands) Current portion Current portion portion portion Long-term loans 19,766 240,532 19,688 241,207 Loan charges payable 1,153 1,140 Derivatives fair value 7,228 9,721 Bank payables 20,919 247,760 20,828 250,928 Payables to bondholders 298,441 298,009 Payables for charges on bonds 6,627 6,627 Lease payables 3 31 Payables for subsidised loans 66 88 44 132 Other financial payables 2,169 Payables to other lenders 8,865 298,529 6,702 298,141 Total current and non-current 29,784 546,289 27,530 549,069 liabilities

The financial debt of the Group at At the Statement of Financial Po- mits SEA Energia to transfer a part year-end, as illustrated in the table sition date, a debt of Euro 2,169 of the incentives to A2A Calore below, is almost exclusively com- thousand is recorded toward A2A & Servizi, since the investment prised of medium/long-term debt Calore & Servizi. This is equivalent linked to the heat distribution net- - of which over half concerning the to the value of the incentives for work was fully carried out at the “SEA 3 1/8 2014 -2021” bond issue green certificates generated by expense and responsibility of A2A. (expressed at amortised cost). the management of the Linate The remainder of the debt is com- plant in 2015 and 2016, provision- The breakdown of the Group net prised of Euro 154 thousand EIB ally allocated in 2017 by the GSE debt at December 31, 2017 and subsidised loans (of which 56% and regularly collected by SEA En- December 31, 2016 is reported with maturity beyond 5 years and ergia SpA. This debt is recorded on below: 8% due in the next 12 months). the basis of a contract that com-

Annual Report 2017 • 135 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

NET FINANCIAL DEBT

(Euro thousands) at December 31, 2017 at December 31, 2016 A. Cash and Cash Equivalents (67,194) (47,236) B. Other cash equivalents C. Securities held for trading D. Liquidity (A)+(B)+ (C) (67,194) (47,236) E. Financial receivables F. Current financial payables 7,780 7,767 G. Current portion of medium/long-term bank payables 19,832 19,732 H. Other current financial payables 2,172 31 Payables and other current financial liabilities I. 29,784 27,530 (F) + (G) + (H) J. Net current financial debt (D) + (E) + (I) (37,410) (19,706) K. Non-current portion of medium/long-term bank payables 240,531 241,207 L. Bonds issued 298,441 298,008 M. Other non-current financial payables 7,316 9,854 Payables and other non-current financial liabilities N. 546,288 549,069 (K) + (L) + (M) O. Net Financial Debt (J) + (N) 508,878 529,363

At the end of December 2017, the b. the continuation of the repay- of Euro 478 thousand, connect- net debt of Euro 508,878 thou- ment of part of the EIB loans ed to the EIB disbursement of sand decreased Euro 20,485 thou- (principal repaid in the year to- June 2017 and iii) lower paya- sand on the end of 2016 (Euro talling Euro 19,689 thousand); bles for leasing amounting to 529,363 thousand). c. greater liquidity of Euro 19,958 Euro 28 thousand. thousand deriving from the The net debt was affected by a favourable cash flows from The following is a breakdown number of factors, including: current operations which also of the variations of current and made it possible to cover in- non-current financial assets and a. the drawdown at the end of vestment needs; liabilities, with a separate indica- June 2017 of new medium/ d. lower IAS adjustments of Euro tion of cash flows recorded in the long-term loans of Euro 20 mil- 2,984 thousand primarily due year 2017 and other variations. lion from the EIB at variable to: i) the improvement of the interest rates and for duration fair value of derivatives for of twenty years (grace period 4 Euro 2,493 thousand, ii) the am- years); ortised cost’s positive impact

Annual Report 2017 • 136 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Derivative Lease pay- Other Loans Bond loans Total liabilities ables liabilities Balance at Dec. 31, 2016 268,838 298,009 9,721 31 0 576,599 Cash flows 289 (28) 261 Other changes: - Amortised cost (910) 432 (478) - Fair value change (2,493) (2,493) - Accruals 14 14 - Payable to A2A for green certs. 2,169 2,169 2015 & 2016 Balance at Dec. 31, 2016 268,231 298,441 7,228 3 2,169 576,072

The table below shows the reconciliation between the finance lease payables and the future lease instalments at December 31, 2017.

(Euro thousands) at December 31, 2017 Future lease instalments until contract maturity 3 Implied interest (1) Current value of lease instalments until contract maturity 2 Amounts for invoices not paid 1 Total leasing payables (current and non-current) 3

8.17 Other non-current payables The table below reports the breakdown of the account “Other non-current payables”.

OTHER NON-CURRENT PAYABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Employee payables 14,946 Social security institutions 2,642 Total 17,588 -

Annual Report 2017 • 137 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The item includes payables to and associated social security tirement or old age pension). The employees and the correspond- contributions, recorded as a re- agreement with Trade Unions cov- ing obligation due to the INPS sult of the mobility procedure’s ering this procedure was signed resulting from the signing of ear- commencement on December 27, on January 15, 2018. ly retirement agreements in the 2017. Through the mobility proce- context of the Personnel Restruc- dure, early retirement incentive 8.18 Trade payables turing Industrial Plan 2018-2023. payments were established for a The breakdown of trade payables pre-determined number of work- is follows. “Other non-current payables” re- ers who will qualify for pension fers to payables to employees benefits by August 2023 (early re-

TRADE PAYABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade payables 141,353 151,042 Advances 7,625 7,023 Payables to associates 4,519 3,465 Total trade payables 153,497 161,530

Trade payables (which includes should be noted that in Decem- 709 thousand (Euro 686 thou- invoices to be received of Euro ber 2016, the Customs Agency sand at December 31, 2016) and 109,445 thousand at December challenged this judgement be- other taxes for Euro 32 thousand 31, 2017 and Euro 83,154 thou- fore the Cassation Court and (Euro 26 thousand at December sand at December 31, 2016) re- contested the ruling of the Court 31, 2016). fers to the purchase of goods and of Appeal. Since not all levels of services relating to operations judgment have been completed, 8.20 Other payables and Group investments. no revenue has been posted in The table below reports the the present consolidated finan- breakdown of the account “Other The payables for advances at De- cial statements. payables”. cember 31, 2017 amounting to Euro 7,625 thousand (Euro 7,023 Payables to associated compa- thousand at December 31, 2016) nies relate to services and oth- principally refer to advances from er charges; reference should be clients and the balance is in line made to Note 10. with the previous year. 8.19 Income tax payables With regard to payments received Payables for income taxes in the year 2014 and classified un- amounting to Euro 8,370 thou- der payables for advances follow- sand at December 31, 2017 (Euro ing Judgment No. 12778/2013 of 6,841 thousand at December 31, the Court of Milan (confirmed by 2016), mainly relate to employ- the Court of Appeal of Milan with ee and consultant’s withholding Judgment No. 3553/2015) with taxes for Euro 5,626 thousand which the Customs Agency was (Euro 5,095 thousand at Decem- ordered to pay a total of Euro ber 31, 2016), IRAP payables for 5,631 thousand in relation to dis- Euro 1,306 thousand (Euro 1,034 putes relating to the occupation thousand at December 31, 2016), of spaces located in the Linate IRES tax payables for Euro 697 and Malpensa airport grounds, it thousand, VAT payables for Euro

Annual Report 2017 • 138 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

OTHER PAYABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Airport fire service 59,040 53,088 Payables for additional landing rights 46,131 46,011 Other payables 21,845 15,768 Employee payables for amounts matured 16,179 13,632 Payables to the state for concession fee 13,634 12,198 Payables to social security institutions 12,968 12,039 Employee payables for vacations not taken 2,625 2,881 Third party guarantee deposits 1,179 1,277 Payables to ministry CO2 quotas 301 81 Payables to others post-em. ben. 253 265 Payables to BoD & Boards of Statutory Auditors 207 197 Payables to the state for concession fee security 83 85 service Payables to shareholders for dividends 77 95 Payables to third parties for ticketing collections 70 414 Payables to A2A for Green Certificates - 2,296 Total 174,592 160,327

In relation to the SEA Group’s sand at December 31, 2017 (Euro payables for airport fire protec- 15,768 thousand at December tion services, the appeal made 31, 2016), mainly relates to de- before the Rome Civil Court by ferred income from clients for the Parent Company against the future periods and other minor payment of this contribution is payables. still pending. For further details, reference should be made to the The payables to A2A for green Directors’ Report in the section certificates amounting to Euro “Risk factors of the SEA Group”. 2,296 thousand in 2016 and zero in 2017 related to the estimate “Payables for additional landing of the value of the green certifi- rights” represent the addition- cates matured in 2015 at the Li- al charges created by Laws No. nate plant. As already described, 166/2008, No. 350/2003, No. in 2017 SEA Energia SpA did not 43/2005 and No. 296/2006. accrue the envisaged incentives for ‘district heating green certif- The account “Other payables”, icates’, as the recognition period amounting to Euro 21,845 thou- came to a close in 2016.

Annual Report 2017 • 139 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

9 Income Statement the years 2017 and 2016. These which the Group operates. There- data, as shown in Note No. 7 “Dis- fore, these data differ with re- 9.1 Operating revenues closure by operating segment” spect to those presented at the The table below shows the break- reflect the operational and man- level of the individual legal entity. down of operating revenues for agerial view of the businesses in

OPERATING REVENUES

(Euro thousands) 2017 2016 Commercial Aviation Operating Revenues 670,856 625,870 General Aviation Operating Revenues 12,124 11,750 Energy Operating Revenues 14,718 15,892 Total operating revenues 697,698 653,512

Commercial Aviation Operating Revenues The breakdown of aviation operating revenues is reported below.

AVIATION OPERATING REVENUES

(Euro thousands) 2017 2016 Fees and centralised infrastructure 385,043 351,088 Revenues from security controls management 45,609 45,150 Use of regulated spaces 12,941 12,732 Total Aviation operating revenues 443,593 408,970

Aviation operations growth, sengers’ segment - benefitting The breakdown of Non Aviation amounting to Euro 34,623 thou- from additional airline capacity operating revenues is reported sand, is mainly due to the boost and load factor growth - and the below. in traffic volumes both in the pas- cargo segment.

Annual Report 2017 • 140 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

NON AVIATION OPERATING REVENUES

(Euro thousands) 2017 2016 Retail 95,392 90,088 Parking 64,234 60,226 Cargo 15,838 12,688 Advertising 10,495 10,451 Premium services 18,066 17,874 Real estate 2,458 3,179 Services and other revenues 20,780 22,394 Total Non Aviation operating revenues 227,263 216,900

“Services and other revenues” service activities and other income. mainly relate to income from the The breakdown of retail revenues design services, ticketing services, is reported below.

RETAIL REVENUES

(Euro thousands) 2017 2016 Shops 49,510 47,070 Food & Beverage 20,052 19,039 Car Rental 16,379 14,761 Bank services 9,451 9,218 Total Retail 95,392 90,088

For further information, reference cludes the full range of services over the previous year). should be made to the Operating relating to business traffic at the Segments section of the Direc- western apron of Linate airport Energy Operating Revenues tors’ Report. and the handling activities relat- The breakdown of Energy operated to this traffic. Revenues from ing revenues is reported below. General Aviation Operating the General Aviation business Revenues amounting to Euro 12,124 thou- The General Aviation business in- sand registered an increase (3.2%

Annual Report 2017 • 141 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

ENERGY OPERATING REVENUES

(Euro thousands) 2017 2016 Sale of Electricity 9,769 7,599 Sale of Thermal Energy 4,222 2,986 Other Revenues & Services 727 5,307 Total Energy operating revenues 14,718 15,892

For an analysis of revenues, refer- by a mark-up of 6% representing ments, reference should be made ence should be made to the Direc- the best estimate of the remuner- to Note 8.1. tors’ Report. ation of the internal cost for the management of the works and de- In the account “Costs for works on 9.2 Revenue for works on assets sign activities undertaken by the assets under concession” (Note Company, which corresponds to a under concession 9.7), a decrease was reported due Costs for works on assets under mark-up which a general construc- to lesser work on assets under concession decreased from Euro tor would request to undertake concession. 46,662 thousand in 2016 to Euro such activities. 28,281 thousand in 2017. This account is strictly related to 9.3 Personnel costs These revenues, as per IFRIC 12, investment and infrastructure up- The breakdown of personnel costs refer to construction work on as- grading activities. For further in- is as follows. sets under concession increased formation on the principal invest-

PERSONNEL COSTS

(Euro thousands) 2017 2016 Wages, salaries & social security charges 171,061 163,041 Post-employment benefits 7,881 7,888 Other personnel costs 31,801 12,042 Total 210,743 182,971

The average number of employees by category in the two-year period (Full Time Equivalent) is as follows:

Annual Report 2017 • 142 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

AVERAGE FULL TIME EQUIVALENT

January- January- % % December 2017 December 2016 Executives 57 2.1% 55 2.0% Managers 270 9.8% 267 9.5% White-collar 1,754 63.4% 1,768 63.1% Blue-collar 657 23.8% 688 24.6% Total full-time employees 2,738 99% 2,778 99% Temporary workers 28 1.0% 23 0.8% Total employees 2,766 100% 2,801 100%

Group personnel costs, which in- ment of corporate performance posed to 2,801 in 2016. creased Euro 27,772 thousand objectives and the partial alloca- (+13.2%) compared to 2016, in- tion of the National Collective La- The net decrease in staff is attrib- creased from Euro 182,971 thou- bour Agreement’s renewal signed utable to terminations generated sand in 2016 to Euro 210,743 in 2014 and which expired at the by the voluntary early retirement thousand in 2017. end of 2016 (further information procedure, partially offset by re- on the agreements may be viewed cruitment in operations due to the The increase is a result of the in the Directors’ Report, “Human increase in passenger traffic. signing of early retirement agree- Resources” section); this result- ments under the Personnel Re- ed in higher costs of Euro 24,986 9.4 Consumable materials structuring Industrial Plan 2018- thousand. The breakdown of the account 2023. The increase also includes “Consumable materials” is as fol- the recognition of a reward con- Average Full-Time Equivalent staff lows: tribution linked to the achieve- numbered 2,766 in 2017 as op-

CONSUMABLE MATERIALS

(Euro thousands) 2017 2016 Raw materials, ancillaries, consumables and goods 32,250 37,149 Change in inventories 37 656 Total 32,287 37,805

Consumable materials decreased ane and electricity from third tion (+Euro 1,341 thousand com- from Euro 37,805 thousand in parties (-Euro 6,220 thousand pared to the previous year). 2016 to Euro 32,287 thousand in compared to the previous year), in 2017, a decrease of Euro 5,518 part offset by higher costs for the 9.5 Other operating costs thousand (-14.6%). The reduction purchase of de-icing and anti-icing The breakdown of “Other operat- mainly relates to lower costs in- chemical products utilised in the ing costs” is as follows: curred for the purchase of meth- event of snow and/or ice forma-

Annual Report 2017 • 143 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

OTHER OPERATING COSTS

(Euro thousands) 2017 2016 Commercial costs 53,508 44,458 Public fees 31,868 31,134 Ordinary maintenance costs 26,956 27,832 Terminal services provided by handling company 22,609 22,985 Cleaning 13,898 13,414 Other costs 11,344 11,801 Parking management 14,572 11,737 Professional services 8,813 9,318 Utilities & security expenses 8,438 7,243 Tax charges 7,451 7,134 Hardware and software fees & rental 4,654 4,763 Disabled assistance 3,608 3,633 Hire of equipment & vehicles 3,626 3,418 Insurance 1,710 1,671 Emoluments & costs of Board of Statutory Auditors & BoD 819 898 Losses on disposal of assets 63 402 Total other operating costs 213,937 201,841

Other operating costs, amounting 24,648 thousand (Euro 23,538 by Legislative Decree No. 115/08 to Euro 213,937 thousand in 2017, thousand in 2016); ii) costs for and Article 25-bis of Decree-Law increased Euro 12,096 thousand fire-fighting services at the- air No. 91/14 converted with Law on the previous year mainly due to ports for Euro 5,951 thousand No.116/14. higher commercial costs for Euro (Euro 6,374 thousand in 2016); 9,050 thousand, related to higher iii) concession fees to the tax au- With the conversion of De- incentive charges to carriers. In thorities for security services of cree-Law 244/2016 (commonly addition, against: higher costs re- Euro 1,064 thousand (Euro 975 known as the “Milleproroghe De- lated to the management of pas- thousand in 2016); other fees to cree”), the legislature decided to senger services (parking fees) for various entities for Euro 205 thou- postpone the application of sys- Euro 2,835 thousand, higher se- sand (Euro 247 thousand in 2016). tem charges starting from January curity costs (+Euro 472 thousand) 1, 2018. Moreover, as regards the and higher utility costs (+Euro In May 2017 SEA Energia SpA ob- application of system charges, and 723 thousand), lower costs were tained the SEU qualification for by virtue of the abovementioned recorded in the year for ordinary the Linate and Malpensa plant. decree, associated fees will again maintenance (-Euro 876 thou- Obtaining the SEU qualification be applied to energy drawn from sand), professional service fees entails maintaining favourable the grid based on consumption. (-Euro 505 thousand) and costs for tariff conditions on self-produced the management of snow emer- electricity, with high efficiency gencies. and not drawn from the electricity grid and limited to the variable The Public fees include: i) conces- parts of the general system and sion fees to the State for Euro network charges, as envisaged

Annual Report 2017 • 144 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

9.6 Provisions and write-downs The breakdown of provisions and write-downs is as follows:

PROVISIONS AND WRITE-DOWNS

(Euro thousands) 2017 2016 Write-downs / (releases) of current receivables & cash 27,248 4,379 and cash equivalents Write-downs of financial assets 3,476 Provisions/(releases) for future charges 1,494 1,035 Write down of fixed assets 83 Total provisions and write-downs 32,218 5,497

Provisions and write-downs in- Euro 3,476 thousand, includes the 9.7 Costs for works on assets un- creased Euro 26,721 thousand write-down of the financial receiv- der concession from Euro 5,497 thousand in 2016 able relating to the equity finan- Costs for works on assets under to Euro 32,218 thousand in 2017. cial instruments and the Airport concession decreased from Euro Handling shares transferred to the 43,114 thousand in 2016 to Euro The doubtful debt provision in the Trust and subject of the contract 26,006 thousand in 2017. This year was calculated to take into with dnata, in anticipation of the movement is strictly related to in- account the risk in deterioration probable review of the sale price vestment activities, for which ref- of the financial positions of the on the expiry of the call option ex- erence should be made to Notes principle operators with which dis- ercisable by dnata. 8.1 and 8.2. putes exist and write-downs for receivables under administration. The net provisions for future These costs refer to the costs for risks and charges, amounting to the works undertaken on assets The higher doubtful debt provi- Euro 1,494 thousand (Euro 1,035 under concession. The margin for sion is almost all related to past thousand at December 31, 2016), work on assets under concession receivables (prior to May 2, 2017) refers principally to adjustments are included in the Commercial from Alitalia SAI in Extraordinary on valuations related to legal dis- Aviation business. Administration, for an amount of putes concerning the operational Euro 25,252 thousand. There is management of the Milan Air- 9.8 Restoration and replacement currently no guarantee on its col- ports. For further information ref- provision lection. erence should be made to Note The breakdown of the restoration 8.14. and replacement provision is as The write-down of other finan- follows: cial receivables, amounting to

RESTORATION AND REPLACEMENT PROVISION

(Euro thousands) 2017 2016 Refurbishment and replacement provision 13,602 17,193

Annual Report 2017 • 145 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

This account includes the provi- sand is reported, from Euro 9.9 Amortisation & Depreciation sion for the year relating to the 17,193 thousand in 2017 to Euro The account “Amortisation & de- scheduled replacement and main- 13,602 thousand in 2017, follow- preciation” is comprised of: tenance of the assets within the ing the updating of the long-term so-called “Concession Right”. scheduled replacement and maintenance plan of the assets within A decrease of Euro 3,591 thou- the so-called “Concession Right”.

AMORTISATION & DEPRECIATION

(Euro thousands) 2017 2016 Amortisation of intangible assets 51,632 45,397 Depreciation of tangible assets & investment property 17,664 16,317 Total amortisation & depreciation 69,296 61,714

The depreciation of tangible fixed the “Concession Right”, consider- 9.10 Investment income and assets reflects the estimated use- ation is taken of the concession charges ful life made by the Group while, duration. The breakdown of investment infor the intangible assets within come and charges is as follows:

INVESTMENT INCOME (CHARGES)

(Euro thousands) 2017 2016 SACBO SpA 4,915 4,992 Dufrital SpA 2,056 1,199 Disma SpA 262 244 Malpensa Logistica Europa SpA 477 294 SEA Services Srl 702 359 Signature Flight Support Italy Srl (208) (102) Valuation at equity of investments 8,204 6,986 Other income (charges) (69) 2,856 Total income (charges) from investments 8,135 9,842

Annual Report 2017 • 146 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Net investment income decreased Construction Consortium for Euro receive the dividend approved from Euro 9,842 thousand in 2016 92 thousand, ii) income deriving by the Shareholders’ Meeting as to Euro 8,135 thousand in 2017 (- from SEA Handling following the holder of the Equity Financial In- Euro 1,707 thousand). liquidation of this latter for Euro struments. The amount was re- 23 thousand. ceived in 2017. Income from the measurement of associates at equity increased In 2016 other income derives the 9.11 Financial income and charges Euro 1,218 thousand from Euro sale of the 60% stake in Signature The breakdown of the account “Fi- 6,986 thousand in 2016 to Euro Flight Support Italy Srl amounting nancial income and charges” is as 8,204 thousand in 2017. to Euro 955 thousand, and divi- follows: dends for Euro 1,901 thousand, In 2017 the account “Other in- approved by the Shareholders’ come/(charges)” derives from the Meeting of Airport Handling SpA net effect between: i) charges on May 6, 2016 for the allocation (attributable to third parties) for of net profit for the financial year the liquidation of the Malpensa 2015. SEA SpA holds the right to

FINANCIAL INCOME (CHARGES)

(Euro thousands) 2017 2016 Exchange gains 11 103 Other financial income 247 33 Total financial income 258 136 Interest on medium/long term loans (12,413) (12,793) Commissions on loans (1,603) (1,553) Exchange losses (14) (28) Other interest charges: (4,137) (4,566) - financial charges on post-em. bens. (686) (645) - financial charges on Leasing (1) (13) - financial charges on Derivatives (2,505) (2,820) - Other (945) (1,088) Total financial charges (18,167) (18,940) Total financial income (charges) (17,909) (18,804)

Annual Report 2017 • 147 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Net financial charges in 2017 gross debt and the contraction come increased by Euro 122 thou- amount to Euro 17,909 thousand, of the average cost of debt; (ii) sand. a decrease of Euro 895 thousand lower commissions on loans for on the previous year, against a de- Euro 50 thousand; (iii) a reduction 9.12 Income taxes crease in gross financial charges of in other interest charges for Euro The breakdown of the account is Euro 773 thousand. 429 thousand which mainly affect as follows: lower charges on derivatives for This is mainly due to: (i) lower in- the continuation of the relative terest paid on medium/long-term notional amount’s repayment. loans for Euro 380 thousand, due to the reduction in the average In the same period financial in-

INCOME TAXES

(Euro thousands) 2017 2016 Current income taxes 43,752 48,574 Deferred income taxes (8,085) (1,311) Total 35,667 47,263

Reconciliation between theoretical income tax rate and effective income tax rate is shown in the table below:

(Euro thousands) 2017 % 2016 % Continuing operations profit 118,116 141,037 before taxes Discontinued operations profit 1,556 (89) (loss) before taxes Profit before taxes 119,672 140,948 Theoretical income taxes 29,555 24.0% 38,761 27.5% Permanent tax differences effect (1,016) -0.2% (131) -0.1% IRAP 7,378 6.2% 7,154 5.1% Others (250) -0.2% 1,521 1.1% Total 35,667 29.8% 47,305 33.6% Income taxes on continuing (35,667) (47,263) operations Income taxes on discontinued 0 (42) operations Total Group income taxes (35,667) (47,305)

Annual Report 2017 • 148 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Income taxes in 2017 amount to For further details, reference 10 Transactions Euro 35,667 thousand compared should be made to Note 6. to Euro 47,263 thousand in 2016. with Related Parties The transactions with related par- The main reasons for the differ- 9.14 Earnings per share ties are not atypical or unusual and ence in income taxes in the two The basic earnings per share is form part of the ordinary business periods is due to the significant calculated by dividing the Group activities of the companies of the reduction in the pre-tax profit in net profit by the weighted - aver Group. 2017 and the effects arising from age number of ordinary shares the reduction in the nominal IRES outstanding in the year. For the They are regulated at market con- rate from 27.5% in 2016 to the diluted earnings per share, as no ditions and take account of the current 24%. equity instruments were issued by characteristics of the goods and the parent company, the weight- services provided. 9.13 Discontinued Operations ed average of the shares in circu- profit/(loss) lation is the same as that utilised The following tables show the The net result from discontinued for the establishment of the basic balances with related parties at operations relating to the com- earnings per share. December 31, 2017 and at De- mercial aviation handling sector cember 31, 2016 and the income shows a net profit of Euro 1,556 Therefore, the basic earnings per statement amounts for the years thousand against a net loss of share in 2017 was Euro 0.34 (net 2017 and 2016, with indication of Euro 130 thousand in the previous profit for the year of Euro 84,069 the percentage of the relative ac- year. thousand/number of shares in cir- count. culation 250,000,000). The item includes the result of SEA Handling SpA, for which the The basic earnings per share in liquidation procedure was con- 2016 was Euro 0.37 (net profit for cluded on June 30, 2017 leading the year of Euro 93,619 thousand/ to the settlement of payables and number of shares in circulation receivables that are still open. 250,000,000).

Annual Report 2017 • 149 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

GROUP TRANSACTIONS WITH RELATED PARTIES

at December 31, 2017 Operating costs Trade Trade Operating (excl. costs for works (Euro thousands) Receivables payables revenues on assets under concession) Investments in associates

SACBO(*) 276 510 838 10,496 Dufrital 5,542 1,149 31,103 21 Malpensa Logistica Europa 1,840 1,046 4,277 10 SEA Services 1,137 1,714 3,115 3,331 Disma 117 99 215 0 Signature Flight Support Italy 507 1 944 0 Total related parties 9,419 4,519 40,492 13,858 Total book value 111,078 153,497 697,698 456,968 % on total book value 8.48% 2.94% 5.80% 3.03%

(*) The account “Operating costs” relating to transactions with SACBO, equivalent to Euro 10,496 thousand, does not include that invoiced by SEA to the final clients and transferred to the associate.

at December 31, 2016 Operating costs Trade Trade Operating (excl. costs for works (Euro thousands) Receivables payables revenues on assets under concession) Investments in associates SACBO (*) 138 342 866 9,518 Dufrital 5,469 1,173 29,297 19 Malpensa Logistica Europa 1,029 986 4,116 0 SEA Services 354 834 2,548 2,569 Disma 130 98 230 0 Signature Flight Support Italy 402 32 777 135 Total related parties 7,522 3,465 37,834 12,241 Total book value 86,968 161,530 653,512 422,617 % on total book value 8.65% 2.15% 5.79% 2.90%

(*) The account “Operating costs” relating to transactions with SACBO, equivalent to Euro 9,518 thousand, does not include that invoiced by SEA to the final clients and transferred to the associate.

Annual Report 2017 • 150 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

The table below shows the cash and December 31, 2016, with in- flows from the transactions of the dication of the percentage of the Group with related parties for the relative account: years ended December 31, 2017

GROUP CASH FLOWS WITH RELATED PARTIES

at December 31, 2017 Total Investments Investments in transactions Consolidated (Euro thousands) in other % associates with related balance companies entities A) Cash flow from operating (843) (843) 161,407 -0.5% activities B) Cash flow from investing 7,552 7,552 (63,432) -11.9% activities C) Cash flow from financing (87,195) 0.0% activities

at December 31, 2016 Total Investments Investments in transactions Consolidated (Euro thousands) in other % associates with related balance companies entities A) Cash flow from operating 3,835 3,835 152,717 2.5% activities B) Cash flow from investing 2,935 2,935 (61,778) -4.8% activities C) Cash flow from financing (97,681) 0.0% activities

The transactions between the riving from the concession for idends to SEA for Euro 2,128 Group and related parties for the the distribution of fuel (Dis- thousand. year ended December 31, 2017 ma); mainly related to: ◼◼ supply by SEA Energia of elec- Dufrital SpA tricity to Dufrital; In 2017, Dufrital distributed divi- ◼◼ parking management transac- ◼◼ revenue for administration dends to SEA for Euro 1,679 thou- tions at Orio al Serio-Bergamo services, as well as payments sand. airport (SACBO); and concessions issued by SEA ◼◼ commercial transactions with Prime for the supply of fuel; Malpensa Logistica Europa SpA reference to the recognition push back costs (Signature In 2017, Malpensa Logistics dis- to SEA of royalties on sales Flight Support Italy). tributed dividends to SEA for Euro (Dufrital and SEA Services); 1,236 thousand. ◼◼ rental of premises (Malpensa Other transactions with related Logistica Europa); parties Disma SpA ◼◼ supply to SEA of catering ser- In 2017, Disma distributed divi- vices (SEA Services); SACBO SpA dends to SEA for Euro 234 thou- ◼◼ commercial transactions de- In 2017, SACBO distributed div- sand.

Annual Report 2017 • 151 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

SEA Services Srl 12 Statutory auditors’ fees amounted to Euro 191 thousand In 2017, SEA Services distribut- for audit services and Euro 88 ed dividends to SEA for Euro 624 In 2017, the remuneration for the thousand for other services. thousand. Board of Statutory Auditors, including welfare and accessory charges, amounted to Euro 290 thousand 14 Commitments 11 Directors’ fees (Euro 295 thousand in 2016). and guarantees

In 2017, the remuneration for 14.1 Investment commitments the Board of Directors, including The Group has investment con- welfare and accessory charges, 13 Independent Audit tract commitments of Euro 36,315 amounted to Euro 529 thousand Firm fees thousand at December 31, 2017 (Euro 603 thousand in 2016). (Euro 22,433 thousand at Decem- The audit fees recognised by the ber 31, 2016), which are reported company SEA SpA and its subsid- net of the works already realised iaries to the audit firm Deloitte and invoiced to the Group, as fol- & Touche SpA for the year 2017 lows.

BREAKDOWN PROJECT COMMITMENTS

(Euro thousands) at December 31, 2017 at December 31, 2016 Design and extraordinary maintenance civil works 21,532 6,403 and plant at Linate & Malpensa Design and construction of new warehouse at Cargo 4,006 7,582 City of Malpensa Redesign of land side frontage and new shelters Linate 3,381 Executive design and extraordinary maintenance 3,466 telecommunications and AVL Extraordinary maintenance for civil works and general 1,480 2,212 aviation plant Design and extraordinary maintenance flight 1,148 3,201 infrastructure and roadways at Linate and Malpensa New de-icing area at north apron Linate 777 Design and works Lambro general aviation 400 1,542 Final phase new changing rooms, air side area general 100 aviation Hangar general aviation 25 1,270 Runway vehicles 104 Framework agreement for design support of general 100 aviation plant Framework agreement security co-ordination general 20 aviation Total 36,315 22,434

Annual Report 2017 • 152 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

14.2 Commitments for rental software and hardware compo- payments on the contracts of the contracts nents for the airport IT system, Group at December 31, 2017 is as At December 31, 2017, the SEA the rental of airport buses and the follows: Group has commitments on rent- motor vehicles fleet. al contracts totalling Euro 24,592 thousand, principally relating to The breakdown of the minimum

(Euro thousands) at December 31, 2017 Within 12 month 7,088 Between 1 and 5 years 17,504 Total 24,592

14.3 Guarantees ◼◼ surety of Euro 2,000 thousand favour of the supplier Contract The secured guarantees, amount- in favour of the Ministry of De- GmbH for the rental of airport ing to Euro 2,348 thousand at fence as guarantee of the obli- buses; December 31, 2017, relate to the gations pursuant to the techni- ◼◼ surety by Banca Popolare di lien on receivables against loans cal agreement of June 4, 2009 Milano in favour of the Milan provided by credit institutions on following the advance delivery Customs Agency as guaran- European Investment Bank funds. of the “Cascina Malpensa” area; tee of the correct payment of ◼◼ surety by Banca Popolare di consumption taxes for Euro 69 At December 31, 2017, the sure- Milano to Terna (National Elec- thousand; ties in favour of third parties were tricity Grid) as guarantee of the ◼◼ surety of Euro 75 thousand in as follows: provision of electricity for Euro favour of the Milan 3 Customs 1,214 thousand; Office (General aviation); ◼◼ two bank sureties, equal re- ◼◼ guarantee by Banca Popolare ◼◼ surety by Banca Popolare di spectively to Euro 42,000 thou- di Milano to ENAL Distribution Sondrio in favour of UTF as sand and Euro 46,000 thou- for the transport of energy for guarantee of the correct pay- sand, as guarantee on funds Euro 902 thousand: ment of consumption taxes for drawn down in June 2015 and ◼◼ guarantee by Banca Popolare di Euro 52 thousand; June 2017 on the EIB line sub- Milano to GESAC for the supply ◼◼ Euro 420 thousand for other scribed in December 2014; of electricity to the Naples air- minor sureties. ◼◼ surety of Euro 25,000 thousand port for Euro 228 thousand; to Banca Popolare di Milano to ◼◼ guarantee by Banca Popolare di guarantee credit lines received Milano to GESAC for the partic- 15 Seasonality from companies within the cen- ipation in a tender for the sup- tralised treasury system; ply of electricity to the Naples, The Group business is character- ◼◼ surety of Euro 24,096 thousand Turin and Algeria airports for ised by revenue seasonality, which in favour of ENAC, as guarantee Euro 210 thousand. In February are normally higher in the periods of the concession fee; 2018, a part of the commitment of August and December due to ◼◼ surety of Euro 3,500 thousand equal to Euro 112 thousand ex- increased flights by the airlines at in favour of A2A Trading Srl as pired; its airports. It should be noted that guarantee of the obligations ◼◼ guarantee by Banca Popolare di the airports of Milan Malpensa and under the provision of the nat- Milano to SAGAT for the supply Milan Linate are to a certain degree ural gas contract signed be- of electricity to the Turin air- complementary from a seasonality tween A2A Trading Srl and SEA port for Euro 210 thousand; viewpoint, in view of the different Energia SpA; ◼◼ guarantee by Banca Popolare di profile of the indirect custom- ◼◼ surety of Euro 2,000 thousand Milano to Unareti for the trans- ers (i.e. leisure vs. business). This in favour of SACBO as guaran- port of energy for Euro 173 feature limits the seasonal peaks tee for the parking manage- thousand; from an overall consolidated oper- ment at Bergamo airport; ◼◼ surety of Euro 102 thousand in ational and financial viewpoint.

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16 Contingent liabilities by Cedicor Sociedad Anonima 1,556 thousand in the discon- (“CEDICOR”), contesting that tinued operations net result Reference should be made to SEA abused its dominant posi- and Euro 23 thousand of oth- the explanatory notes in relation tion in violation of Article 102 er investment income for pay- to receivables (Note 8.10) and of the Treaty on the functioning ments received concerning SEA operating risks (Note 8.14). of the European Union (“TFUE”) Handling following liquidation in relation to the tender proce- were recorded. dures for the disposal of ATA Ali Trasporti Aerei SpA (now SEA 17 Contingent assets Prime SpA), for the amount of Euro 936,320 and the commu- 20 Subsequent events With reference to Judgment nication to the Ministry for the 7241/2015 of the Milan Court, Economy and Finance of the ap- Reference should be made to the confirmed by the Milan Court proval of the refunding of the Directors’ Report. of Appeal with Judgment No. total amount of Euro 2,430,343 331/2017, as not all appeals have (of which Euro 2,428,680 in been made this contingent asset fines and Euro 1,663 for default was not recognised in the income interest). While awaiting pay- The Chairman of the Board statement as per IAS 37. ment of this amount the com- of Directors pany recorded income amount- For further information reference ing to Euro 2,430,343. Pietro Modiano should be made to “Subsequent ◼◼ With the conversion of De- events to the year-end” in the di- cree-Law 244/2016 (commonly rectors’ report. known as the “Milleproroghe Decree”), the legislature decided to postpone the application 18 Transactions relating of system charges starting from to atypical or unusual January 1, 2018. Therefore, the operations amounts accrued in the years 2015 and 2016 were reversed. In accordance with Consob Com- ◼◼ On July 10, 2017, the Ordinary munication of July 28, 2006, the Shareholders’ Meeting of SEA Company did not undertake any Handling SpA in liquidation transactions deriving from atyp- approved the final liquidators ical or unusual operations, as set accounts at June 30, 2017 and out in the communication. the relative division plans, authorising the Liquidator to request the cancellation of the company (cancellation on July 19 Significant 25, 2017). The liquidator has non-recurring events arranged to pay the sole share- and transactions holder SEA SpA the sum of Euro 8,376 thousand resulting Pursuant to CONSOB Communica- from the distribution plan. The tion of July 28, 2006, in the view company SEA SpA recorded in of Directors, in 2017 the compa- the separate financial state- nies of the Group undertook the ments income under “Invest- following non-recurring signifi- ment Income and Charges” of cant operations: Euro 1,705 thousand as the difference between the carry- ◼◼ On May 30, 2017, the Authority ing amount of the subsidiary confirmed the re-assessment of at December 31, 2016 and the the fine, issued by AGCM on the value of the assets liquidated. conclusion of the procedure In the Consolidated Financial following the claim brought Statements, a net profit of Euro

Annual Report 2017 • 154 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Auditors’ Report

Annual Report 2017 • 155 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Annual Report 2017 • 156 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Annual Report 2017 • 157 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Annual Report 2017 • 158 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Annual Report 2017 • 159 SEA GROUP CONSOLIDATED FINANCIAL STATEMENTS

Annual Report 2017 • 160 SEA SpA Separate Financial Statements SEA SPA - SEPARATE FINANCIAL STATEMENTS

Financial Statements

Statement of Financial Position

at December 31, 2017 at December 31, 2016 of which of which (Euro) Note Total Total related parties related parties Intangible assets 6.1 971,029,047 989,635,259 Property, plant & equipment 6.2 152,090,253 135,320,523 Investment property 6.3 3,394,393 3,398,255 Investments in subsidiaries and associates 6.4 43,255,694 51,252,774 AFS Investments 6.5 26,164 26,164 Deferred tax assets 6.6 52,271,311 45,172,548 Other non-current financial assets 6.7 7,189,871 16,776,367 Other non-current receivables 6.8 212,302 240,268 Total non-current assets 1,229,469,035 0 1,241,822,158 0 Inventories 6.9 4,090,966 4,129,886 Trade receivables 6.10 108,611,501 12,168,396 82,964,904 10,259,311 Current financial receivables 6.11 20,630,136 20,630,136 43,532,446 43,532,446 Tax receivables 6.12 12,405,721 14,173,775 Other current financial assets 6.7 13,300,000 7,189,871 Other current receivables 6.13 7,646,227 8,111,205 Cash and cash equivalents 6.14 67,128,750 46,997,934 Total current assets 233,813,301 32,798,532 207,100,021 53,791,757 Assets held-for-sale 0 0 0 0 TOTAL ASSETS 1,463,282,336 32,798,532 1,448,922,179 53,791,757 Share capital 6.15 27,500,000 27,500,000 Other reserves 6.15 230,782,330 211,333,111 Net Profit 6.15 76,945,175 87,856,117 SHAREHOLDERS’ EQUITY 335,227,505 0 326,689,228 0 Provision for risks and charges 6.16 166,110,866 170,173,114 Employee provisions 6.17 46,735,743 48,095,310 Other non-current payables 6.21 17,588,430 Non-current financial liabilities 6.18 546,289,193 549,068,737 Total non-current liabilities 776,724,232 0 767,337,161 0 Trade payables 6.19 146,833,655 8,890,142 161,771,089 18,815,005 Income tax payables 6.20 7,227,118 41,010 6,045,654 1,069,028 Other current payables 6.21 169,657,859 155,002,525 Current financial liabilities 6.18 27,611,967 32,076,522 4,577,217 Total Current Liabilities 351,330,599 8,931,152 354,895,790 24,461,250 Liabilities related to assets held-for-sale 0 0 0 0 TOTAL LIABILITIES 1,128,054,831 8,931,152 1,122,232,951 24,461,250 TOTAL LIAIBILITIES & SHAREHOLDRS’ EQUITY 1,463,282,336 8,931,152 1,448,922,179 24,461,250

Annual Report 2017 • 162 SEA SPA - SEPARATE FINANCIAL STATEMENTS

Income Statement

2017 2016

of which of which (Euro) Note Total Total related parties related parties

Operating revenues 7.1 676,167,121 47,390,858 632,013,412 44,918,346

Revenue for works on assets under concession 7.2 28,280,955 46,622,015

Total revenues 704,448,076 47,390,858 678,635,427 44,918,346

Personnel costs 7.3 (205,347,807) 687,815 (177,478,415) 656,718

Consumable materials 7.4 (10,219,347) (9,010,735)

Other operating costs 7.5 (233,551,601) (39,522,977) (223,013,053) (43,435,980)

Costs for works on assets under concession 7.6 (26,005,801) (43,113,724)

Total operating costs (475,124,556) (38,835,162) (452,615,927) (42,779,262)

EBITDA 229,323,520 8,555,696 226,019,500 2,139,084

Provisions & write-downs 7.7 (30,616,367) (3,444,241)

Restoration and replacement provision 7.8 (13,509,000) (17,100,000)

Amortisation & Depreciation 7.9 (65,480,105) (58,054,753)

EBIT 119,718,048 8,555,696 147,420,506 2,139,084

Investment income/(charges) 7.10 7,680,099 7,680,099 4,587,127 2,686,347

Financial charges 7.11 (18,160,321) (18,911,083)

Financial income 7.11 1,084,763 839,215 1,132,435 1,090,467

Pre-tax profit 110,322,589 17,075,010 134,228,985 5,915,898

Income taxes 7.12 (33,377,414) (46,372,868)

Continuing Operations profit 76,945,175 17,075,010 87,856,117 5,915,898

Discontinued Operations profit/(loss) 0 0 0 0

Net Profit 76,945,175 17,075,010 87,856,117 5,915,898

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Comprehensive Income Statement

(Euro) 2017 2016

Net Profit 76,945,175 87,856,117

- Items reclassifiable in future periods to the net result

Profit/(Loss) on fair value measurement of derivative financial instruments cash 2,434,925 1,425,627 flow hedge

Tax effect relating to profit/(loss) on fair value measurement of derivative financial (584,382) (438,139) instruments cash flow hedge

Total items reclassifiable, net of tax effect 1,850,543 987,488

- Items not reclassifiable in future periods to the net result:

Actuarial gains/(losses) on post-employment benefits 55,998 (1,813,454)

Tax effect relating to actuarial gains/(losses) on post-employment benefits (13,439) 653,389

Total items not reclassifiable, net of tax effect 42,559 (1,160,065)

Total other comprehensive income statement items 1,893,102 (172,577)

Total comprehensive income 78,838,277 87,683,540

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Cash Flow Statement

(Euro) 2017 2016

Pre-tax profit 110,322,589 134,228,985

Adjustments:

Amortisation, depreciation and write-downs 65,480,105 58,054,753

Net accruals to provisions & write-downs (including personnel provision) 22,568,726 (1,386,811)

Write-down of other financial assets 3,476,367

Net financial charges 17,075,558 17,778,648

Investment charges (income) (7,680,099) (4,587,127)

Repay. Anti-trust (exc. interest portion) (2,428,680)

Other non-cash items 15,381,230 (3,583,839)

Cash flow from operating activities before changes in working capital 224,195,796 200,504,609

Change in inventories (99,925) 419,804

Change in trade and other receivables (51,336,019) (2,867,411)

Change in trade and other payables 731,083 17,448,057

Cash flow from changes in working capital (50,704,861) 15,000,450

Income taxes paid (37,963,420) (66,121,028)

Cash flow from operating activities 135,527,515 149,384,031

Investments in fixed assets:

- intangible assets (*) (30,843,852) (44,920,502)

- tangible assets (32,268,400) (14,926,236)

- financial assets (250,500)

Divestments from fixed assets:

- tangible assets 98,479 1,647,454

- financial assets 30

Dividends received 7,801,363 2,934,878

Receipt from liquidation of SEA Handling SpA in liquidation 8,405,236

Receipt from liquidation of Consorzio Malpensa Construction in liquidation 93,196

Cash flow from investing activities (46,964,478) (55,264,376)

Change in gross financial debt

- net increase short & medium-long term debt 288,394 (14,894,526)

Net increase / (decrease) in other financial assets and liabilities 18,325,093 (6,841,200)

Dividends distributed (70,307,263) (62,816,559)

Interest and commissions paid (16,747,163) (17,871,600)

Interest received 8,718 31,658

Cash flow from financing activities (68,432,221) (102,392,227)

Increase/(decrease) in cash and cash equivalents 20,130,816 (8,272,572)

Opening cash and cash equivalents 46,997,934 55,270,506

Closing cash and cash equivalents 67,128,750 46,997,934

(*)The investments in intangible assets are net of the utilisation of the restoration provision, which in 2017 amounted to Euro 12,808 thousand (Euro 16,386 thousand in 2016).

Annual Report 2017 • 165 SEA SPA - SEPARATE FINANCIAL STATEMENTS

Statement of Changes in Shareholders’ Equity

IFRS ini- Cash Actuari- Total tial con- Extraor- Share AFS Flow al gains/ Legal Other Total Net Share- version dinary capital reserve Hedge (losses) reserve reserves reserves profit holders' (Euro) reserve reserve reserve reserve Equity (exc. OCI)

At January 1, 2016 27,500,000 23,686,390 1 (7,791,210) (5,044,705) 119,163,773 5,500,000 60,288,176 195,802,425 78,553,263 301,855,688

Transactions with shareholders

Allocation of 2015 net profit & distrib. 15,703,263 15,703,263 (78,553,263) (62,850,000) of dividends

Other movements

Other comprehensive 987,488 (1,160,065) (172,577) (172,577) income statement items result

IFRS initial conversion (8,872,439) 4,947,427 3,925,012 0 0 reclassification reserve

Net profit 87,856,117 87,856,117

At December 31, 2016 27,500,000 14,813,951 1 (6,803,722) (1,257,343) 138,792,048 5,500,000 60,288,176 211,333,111 87,856,117 326,689,228

Transactions with shareholders

Allocation of 2016 net profit & distrib. 17,556,117 17,556,117 (87,856,117) (70,300,000) of dividends

Other movements

Other comprehensive 1,850,543 42,559 1,893,102 1,893,102 income statement items result

Net profit 76,945,175 76,945,175

At December 31, 2017 27,500,000 14,813,951 1 (4,953,179) (1,214,784) 156,348,165 5,500,000 60,288,176 230,782,330 76,945,175 335,227,505

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Annual Report 2017 • 167 SEA SPA - SEPARATE FINANCIAL STATEMENTS

Notes to the Separate Financial Statements

1 General information signed between SEA and ENAC est and private shareholders a with a forty year duration (renew- 45.1% interest. Società per Azioni Esercizi Aero- ing the previous agreement of portuali SEA (the “Company” or May 7, 1962). Following the issuance of the bond “SEA”) is a limited liability compa- designated “SEA 3 1/8 2014-2021” ny, incorporated and domiciled in At December 31, 2017, SEA does on April 17, 2014 and the admis- Italy according to Italian Law. not hold treasury shares. The own- sion to listing of the notes on the ership structure is reported below. regulated market organised and The Company’s headquarters are managed by the Irish Stock Ex- located at Milan Linate Airport in On February 15, 2018, the shares change, the Company qualified Segrate (Milan). held by the Province of Varese as a Public Interest Entity (PIE) as were purchased by 2i Aeroporti defined in Article 16, paragraph 1, The Company manages Milan Mal- SpA. Accordingly, as at the date letter a) of Legislative Decree No. pensa Airport and Milan Linate Air- of approval of this report, public 39/2010. port under the 2001 Agreement shareholders held a 54.9% inter-

Holding Municipality of Milan 54.81% Province of Varese 0.64% Municipality of Busto Arsizio 0.06% Other public shareholders 0.08% Total public shareholders 55.59% 2i-Aeroporti SpA 35.75% F2i Sgr SpA 8.62% Other private shareholders 0.04% Total private shareholders 44.41% Total 100.00%

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2 Summary of “IFRS” refers to the International statement of financial position Accounting Standards (“IAS”) in while the classification by nature accounting principles force, as well as those of the IFRS was utilised for the income state- adopted Interpretation Committee, previ- ment and the indirect method for ously known as the International the cash flow statement. Where The main accounting principles Financial Reporting Interpreta- present the balances and trans- adopted in the preparation of the tions Committee (“IFRIC”), and actions with related parties are separate financial statements of before that the Standing Inter- reported. SEA for the year ended Decem- pretations Committee (“SIC”). ber 31, 2017 are reported below. The financial statement presenta- The financial statements are pre- The financial statements were tions utilised, as outlined above, sented in Euro while the tables prepared in accordance with IFRS are those which best represent included in the explanatory notes in force at the approval date of the equity and financial position are presented in thousands of the financial statements and the of the company. Euro. provisions enacted as per Article 9 of Leg. Decree No. 38/2005. For a better presentation of the 2.1 Basis of preparation financial statements, the income European Regulation (EU) No. In particular the IFRS were ap- statement was presented in two 1606/2002 of July 19, 2002 intro- plied in a consistent manner for separate statements: a) the induced the obligation, from the the periods presented in the doc- come statement and b) the com- year 2005, to apply Internation- ument. The financial statements prehensive income statement. al Financial Reporting Standards were prepared on the basis of the (“IFRS”) issued by the Internation- best information on the IFRS and The financial statements were al Accounting Standards Board taking into account best practice; prepared in accordance with the (“IASB”) and adopted by the Eu- any further orientations and in- historical cost convention, except ropean Union for the prepara- terpretative updates will be re- for the measurement of financial tion of the consolidated financial flected in subsequent years, in assets and liabilities, including de- statements of companies listed accordance with the provisions of rivative instruments, where the on regulated European markets. the accounting standards, as de- obligatory application of the fair Following the above-mentioned tailed below. value criterion is required. European Regulation, Legislative Decree No. 38 was enacted on The separate Financial State- The Company, following the “SEA February 28, 2005 which governs ments were prepared in accord- 3 1/8 2014-2021” bond issue on the option to apply IFRS for the ance with the going concern the market, adopted the account- preparation of the consolidated concept, therefore utilising the ing standards IFRS 8 “Operating financial statements of non-listed accounting principles of an oper- Segments” and IAS 33 “Earnings companies. SEA decided to apply ating business. Company Manage- per share”, to which reference this option for the preparation of ment evaluated that, although should be made to the Consoli- the consolidated financial state- within a difficult economic and dated Financial Statements Notes ments for the year end Decem- financial environment, there are 7 and 9.14. ber 31, 2006. The same Legisla- no uncertainties on the going tive Decree (fourth paragraph of concern of the business, consid- The present financial statements Article 4) also governs the option ering the existent capitalisation were audited by the independ- to apply IFRS for the preparation levels and there are no financial, ent audit firm Deloitte & Touche of standalone statutory financial operational, management or oth- S.p.A.. statements included in the con- er indicators which could indicate solidated financial statements in difficulty in the capacity of the accordance with IFRS. SEA decid- company to meet its obligations ed to apply this option from the in the foreseeable future, and in financial statements for the year particular in the next 12 months. ended December 31, 2011. For these separate financial state- In relation to the presentation ments, the transition date to IFRS method of the financial state- was identified as January 1, 2010. ments “the current/non-current” criterion was adopted for the

Annual Report 2017 • 169 SEA SPA - SEPARATE FINANCIAL STATEMENTS

2.2 Accounting standards, which must be obligatory applied adoption of these amendments amendments and interpretations from January 1, 2017, following and interpretations, where appli- adopted from January 1, 2017 completion of the relative approv- cable, has not had any impact on The International Accounting al process by the relevant author- the statement of financial position Standards and amendments ities, are illustrated below. The or on the result of the Company.

Publication Effective date Effective date Description Date approved in the Official Gazette as per the standard applied by SEA Amendment to IAS 7 Disclo- Periods which begin Nov. 6, 2017 Nov. 9, 2017 Jan 1, 2017 sure initiative from Jan 1, 2017 Amendment to IAS 12 Periods which begin Recognition of deferred tax Nov. 6, 2017 Nov. 9, 2017 Jan 1, 2017 from Jan 1, 2017 assets for unrealized losses

Annual Report 2017 • 170 SEA SPA - SEPARATE FINANCIAL STATEMENTS

2.3 Accounting standards, Accounting Standards, interpreta- which have not yet been approved amendments and tions and amendments to existing for adoption in Europe, or where interpretations not yet accounting standards and inter- adopted in Europe, at the approv- applicable and not adopted in pretations, or specific provisions al date of the present document advance by the Company within the standards and inter- were not adopted in advance by Below we report the International pretations approved by the IASB the Company:

Approved at the date Description Effective date as per the standard of the present document IFRS 9 Financial instruments YES Periods which begin from Jan 1, 2018 IFRS 15 Revenue from contracts YES Periods which begin from Jan 1, 2018 with customers IFRS 16 Leases YES Periods which begin from Jan 1, 2019 Amendment to IFRS 2 Clarification and measurement of share-based payment NO Periods which begin from Jan 1, 2018 transactions Annual improvements cycles 2014-2016 NO Periods which begin from Jan 1, 2018 IFRIC 22 Foreign currency transactions NO Periods which begin from Jan 1, 2018 and advance consideration Amendment to IAS 40 Transfers NO Periods which begin from Jan 1, 2018 of investment property IFRIC 23 Uncertainty over income NO Periods which begin from Jan 1, 2019 tax treatments IFRS 9 Prepayment features NO Periods which begin from Jan 1, 2019 with negative compensation IAS 28 Long term interests in associates NO Periods which begin from Jan 1, 2019 and joint ventures Annual improvements cycles 2015-2017 NO Periods which begin from Jan 1, 2019 IFRS 17 Insurance Contracts NO Periods which begin from Jan 1, 2021

No accounting standards and/or the Company’s various business “the entity must group two or interpretations were applied in sectors were analysed in order to more contracts concluded simul- advance whose application is ob- identify specific cases requiring taneously (or almost) with the ligatory for periods commencing management, according to IFRS same client and record them as after December 31, 2017. 15 requirements, that is differ- a single contract in the accounts, ent to the one currently being if one or more of the following IFRS 15 - Revenue from contracts applied. criteria are met: with customers a. Contracts are negotiated for In the year 2017, the company The main issues envisaged by the a single commercial objective; implemented an analysis project standard that could have potential b. The amount of fees payable to identify the impacts of the impacts on SEA are listed below: under one of the contracts new obligatory standard’s appli- is dependent on the price cation as from January 1, 2018. ◼◼ Combination of contracts: ac- or performance of the other Different types of contracts from cording to paragraph IFRS 15.17 contract;

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c. The goods or services prom- provide the promised goods or bles: a key element of the new ised in the contracts are a services. standard is the transition from single “obligation to act”. the concept of ‘Incurred Loss’ ◼◼ Transaction price: IFRS-15.47 The project’s conclusions showed to that of ‘Expected Loss’: the defines the “Transaction Price” that the current structure of ac- doubtful debt provision must as the payment amount which tive contracts linked to various be determined by taking into the entity considers it is enti- SEA businesses and associated account the risks of non-col- tled to in exchange for trans- accounting are compliant with lection related not only to ferring the promised goods the changes introduced by the past-due receivables but also or services to the client. The new accounting standard. The on those falling due. There is, payment promised in the con- only change is related to the re- therefore, a need to determine tract with the client may in- classification of some commercial a ‘risk ratio’, representative of clude fixed amounts, variable costs, which will be subjected to the riskiness of commercial amounts or both. a direct reduction in revenues as counterparties, which varies ◼◼ Collectability: according to from the financial year 2018. according to the credit posi- paragraph 9 of IFRS 15, the tion (performing or expired, entity shall account for the cli- IFRS 9 - Financial instruments with different bands for those ent contract falling within the The new IFRS 9 standard, in effect that expired based on overdue scope of this Standard’s appli- since January 1, 2018 includes the days). There is also the need cation only if all the following rules relating to the 3 accounting to include forward-looking el- criteria are met: phases: classification and meas- ements when determining the a. The contracting parties ap- urement, impairment and Hedge ‘risk ratio’. The analysis for the proved the contract and are Accounting. The Company adopt- purposes of the IFRS 9 stand- committed to fulfil their re- ed the full application of the ard was based on the results of spective obligations; standard as of January 1, 2018, a previous project, which also b. The entity may identify the despite the fact that the stand- took place in the year 2017 rights of each of the parties ard provides for the possibility of with the aim of splitting clients with respect to the goods or applying the new rules for Hedge up into rating classes and cov- services to be transferred; Accounting as of January 1, 2019. ering 98% of SEA’s turnover c. The entity can identify the The three IFRS 9 application areas with this classification. A provi- payment conditions for are analysed below, highlighting sion matrix was therefore con- the goods or services to be the impact on the SEA Group: structed for the write-down of transferred; trade receivables. This matrix d. The contract has com- a. Classification and measure- provides rating classes in rows mercial substance (that is, ment: assets currently clas- and the different bands of the entity’s risk, timing or sified as “financial assets past-due or falling due in col- amount of future cash flows available for sale” must be umns. The calculated risk ratio will change as a result of the reclassified as “Financial as- represents the probability that contract); sets/liabilities measured at FV the client does not honour its e. It is likely that the entity will through Profit or Loss”, and debt and the percentage of receive the fees to which it is assets relating to Equity Fi- credit, obtained from a histori- entitled in exchange for the nancial Instruments currently cal analysis, with the possibility goods or services that will classified as assets measured of the client being in default. be transferred to the client. at amortised cost as “Finan- The above matrix was created ◼◼ Principal vs Agent: the stand- cial assets/liabilities measured during the analysis phase, and ard requires the evaluation at FV through Profit or Loss”, the difference calculated on of transactions between the since they do not conform to the write-down provision by parties if the entity acts as the the SPPI test, which requires applying the method currently “Principal” and is therefore re- that for an asset to be record- used in the Group. The matrix is sponsible for the service ren- ed at amortised cost, it should immaterial. This result is justi- dered or as the “Agent” in the only provide for the repayment fied by the fact that the current event that the performance of the capital and interest and evaluation model in use also obligation to which the party with fixed time limits for the includes forward-looking ele- is held consists in making ar- capital’s repayment; ments that allow management rangements for a third party to b. Impairment of trade receiva- to value the expected loss.

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c. Hedge Accounting: according ration is of less than 12 months tion of the “ lease” on the basis of to the rules laid down by IAS or which refer to goods whose the contractual terms. As a result 39, derivative instruments in individual value is less than US of this analysis, these contracts hedge accounting are to be Dollars 5,000 can be excluded were valued through an “overall accounted for by specifically from the application of the new recalculation” that would deter- applying the cash flow hedge standard. The Company has iden- mine a value of ‘Right of Use” model (hedging expected cash tified all the long-term contracts and “Liability”. Since the company flows). As a result of the appli- in effect to-date and involving opted to adopt the standard as of cation of this accounting treat- the payment of a fee for the use ment, derivatives’ intrinsic val- of assets of a various nature, ex- January 1, 2019 and opted out of ue variations are recorded in cluding those classifiable as “low early adoption, the analyses will a Shareholders’ Equity reserve value” or “short-term lease”, and be updated in 2018 in order to (cash flow hedge reserve) and assets involving the payment of define the re-opening values that time value variations are si- a fee for the use of software li- are to be recorded in the financial multaneously recorded in the cences and has defined the dura- statements on January 1, 2019. Income Statement. Hedging treatment is supported by the preparation of special hedging documentation (Hedging Relationship Documentation) and the implementation of ‘effectiveness tests’ as required by IAS 39. According to IFRS 9, the accounting treatment to be used is that which follows hedge accounting criteria as defined for the cash flow hedge model, but both the intrinsic value variations and the time value variations must be recorded in two different Share- holders’ Equity reserves. At the date of first application, the derivative’s time value should therefore be recognised within a special OCI reserve and the amount from the extraordinary reserve reclassified. It is calculated that as at January 1, 2018, reclassification for the Company will amount to Euro 720. At subsequent reporting dates, time value variations should continue to be recognised in the same OCI reserve.

IFRS 16 - Leasing As of January 1, 2019, the new IFRS 16 standard will replace IAS 17. Each contract for finance lease payables, including those now considered as operating (for example, rentals), will be classified as finance leases. Only finance lease payables whose du-

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out physical substance, control- lable and capable of generating future economic benefits. With the exception of “Rights on assets under concession”, intangible assets are recorded at purchase and/or production cost, including the costs of bringing the asset to its current use, net of accumulated amortisation, and any loss in value. The intangible assets are as follows:

(a) Rights on assets under concession The “Rights on assets under concession” represent the right of the Lessee to utilise the asset under concession (so-called intangible asset method) in consideration of the costs incurred for the design and construction 2.4 Accounting policies Annually, or more frequently if of the asset with the obligation specific events or circumstances to return the asset at the end of Business combinations indicate the possibility of having the concession. The value corre- and goodwill incurred a loss in value, the good- sponds to the “fair value” of the In the case of the acquisition will is subject to an impairment design and construction assets from third parties of businesses test to identify any loss in value, increased by the financial charg- or business combinations, the as- in accordance with IAS 36 (Impair- es capitalised, in accordance with sets, the liabilities and the contin- ments); the original value is how- IAS 23, during the construction gent liabilities acquired and iden- ever not restored if the reasons phase. The fair value of the con- tifiable are recorded at their fair for the write-down no longer ex- struction work is based on the value at the date of acquisition. ist. costs actually incurred increased by 6%, representing the remuner- The positive difference between The goodwill is not revalued, ation of the internal costs for the the acquisition cost and the pres- even in application of specific leg- management of the works and ent value of these assets and li- islation. design activities undertaken by abilities are recognised as good- the Company which is a mark-up will and classified in the financial Any liabilities related to business a third party general contractor statements as an intangible asset combinations for payments sub- would request for undertaking with indefinite life. ject to conditions are recognised the same activities, in accordance at the acquisition date of the busi- with IFRIC 12. The determination Any negative difference (“bad- nesses and business units relating of the fair value results from the will”) is recognised in the income to the business combination. fact that the lessee must apply statement at the date of acquisi- Where all or part of a previously paragraph 12 of IAS 18 and there- tion. acquired company (whose acqui- fore if the fair value of the servic- sition produced goodwill) is sold, es received (specifically the right The costs related to business the corresponding residual value to utilise the asset) cannot be de- combinations are recognised in of goodwill is considered when termined reliably, the revenue is the income statement. calculating the capital gains or calculated based on the fair value losses generated by such sale. of the construction work under- Goodwill is initially recorded at taken. cost and subsequently reduced Intangible assets only for loss in value. An intangible asset is a non-mon- The construction work in progress etary asset, identifiable and with- at the statement of financial posi-

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tion date is measured based on (b) Industrial patents and intel- Where this latter is beyond the the state of advancement of the lectual property rights date of the end of the conces- work in accordance with IAS 11 sion, the amount is depreciated and this amount is reported in Patents, concessions, licenses, on a straight-line basis until the the income statement line “Rev- trademarks and similar rights expiry of the concession. Apply- enues for works on assets under Trademarks and licenses are am- ing the principle of the compo- concession”. ortised on a straight-line basis nent approach, when the asset over the estimated useful life. to be depreciated is composed of Restoration or replacement separately identifiable elements works are not capitalised and are Computer software whose useful life differs signifi- included in the estimate of the Software costs are amortised on cantly from the other parts of the restoration and replacement pro- a straight-line basis over three asset, the depreciation is calculat- vision as outlined below. years, while software programme ed separately for each part of the maintenance costs are charged asset. Assets under concession are am- to the income statement when ortised over the duration of the incurred. For land, a distinction is made be- concession on a straight-line basis tween land owned by the Com- in accordance with the expiry of Intangible assets with definite pany, classified under property, the concession, as it is expected useful life are annually tested for plant and equipment and not that the future economic bene- losses in value or where there is subject to depreciation and ex- fits of the asset will be utilised by an indication that the asset may propriated areas necessary for the lessee. Amortisation begins have incurred a loss in value. Ref- the extension of the Malpensa where the rights in question be- erence should be made to the Terminal, classified under “Assets gin to produce the relative eco- paragraph below “Impairments”. under concession” and amortised nomic benefits. over the duration of the conces- Property, plant & equipment sion. The accumulated amortisation Tangible fixed assets include provision and the restoration and property, part of which under the The free granting of assets is rec- replacement provision ensure the scope of IFRIC 12, and plant and ognised at market value, accord- adequate coverage of the follow- equipment. ing to independent technical ex- ing charges: pert opinions. Property Property, in part financed by the Plant & Equipment ◼◼ complete amortisation of the State, relates to tangible assets These are represented by tangi- assets under concession at the acquired by the Company in ac- ble fixed assets acquired by the end of the concession; cordance with the 2001 Agree- Company which are not subject ◼◼ restoration and replacement ment (which renewed the previ- to the obligation of free devolu- of the components subject to ous concession of May 7, 1962). tion. wear and tear of the assets un- The 2001 Agreement provides for der concession. the obligation of SEA to maintain Plant and equipment are record- and manage airport assets for the ed at purchase or production Reference should be made to the undertaking of such activities and cost and, only with reference to subsequent paragraph “Provision the right to undertake structural owned assets, net of accumulat- for risks and charges - Restoration airport works, which remain the ed depreciation and any loss in and replacement provision of as- property of SEA until the expiry value. The cost includes charges sets under concession”. of the 2001 Agreement, i.e. May directly incurred for bringing the 4, 2041. The fixed assets in the asset to their condition for use, Where events arise, which indi- financial statements are reported as well as dismantling and remov- cate a reduction in the value of net of State grants. al charges which will be incurred these intangible assets, the dif- consequent of contractual obli- ference between the present val- Depreciation of property is gations, which require the asset ue and the recovery value is rec- charged based on the number to be returned to its original con- ognised in the income statement. of months held on a straight-line dition. basis, which depreciates the asset over its estimated useful life. The expenses incurred for the

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maintenance and repairs of an Loading and unloading vehicles 10.0% ordinary and/or cyclical nature are directly charged to the in- Runway equipment 31.5% come statement when they are Various equipment 25.0% incurred. The capitalisation of the costs relating to the expansion, Furniture and fittings 12.0% modernisation or improvement Transport vehicles 20.0% of owned tangible assets or of those held in leasing, is made only Motor vehicles 25.0% when they satisfy the require- EDP 20.0% ments to be separately classified as an asset or part of an asset in accordance with the component approach, in which case the use- Investment property company has an obligation to ful life and the relative value of This account includes owned cover such losses, the investment each component is measured buildings not for operational use. is written down and the share separately. Investment property is initially of further losses is recorded as recognised at cost and subse- a provision for risks and charg- Depreciation is charged to the quently measured utilising the es under liabilities in the state- income statement based on the amortised cost criteria, net of ac- ment of financial position. If an number of months held on a cumulated depreciation and loss impairment loss is subsequently straight-line basis, which depre- in value. reversed, the increase in carrying ciates the asset over its estimat- amount (up to a maximum of pur- ed useful life. Where this latter Depreciation is calculated on a chase cost) is recognised through is beyond the date of the end of straight-line basis over the useful the income statement. the concession, the amount is de- life of the building. preciated on a straight-line basis Impairments until the expiry of the concession. Investments in subsidiaries At each statement of financial Applying the principle of the com- and associates position date, the property, plant ponent approach, when the asset The investments in subsidiaries and machinery, intangible assets to be depreciated is composed of and associates are measured at and investments in subsidiaries separately identifiable elements purchase cost (including any di- and associated companies are whose useful life differs signifi- rect accessory costs), reduced for analysed in order to identify any cantly from the other parts of the impairments in accordance with indications of a reduction in val- asset, the depreciation is calculat- IAS 36. ue. Where these indications exist, ed separately for each part of the an estimate of the recoverable asset. Any positive difference, arising value of the above-mentioned as- on acquisition from third parties, sets is made, recording any write The depreciation rates for owned between the purchase cost and down compared to the relative assets, where no separate specif- fair value of net assets acquired book value in the income state- ic components are identified are in an investee company is includ- ment. The recoverable value of reported below. ed in the carrying amount of the an asset is the higher between investment. the fair value less costs to sell The useful life of property, plant and its value in use, where this and equipment and their residual Investments in subsidiaries and latter is the fair value of the esti- value are reviewed and updated, associates are tested annually for mated future cash flows for this where necessary, at least at the impairment or more frequently asset. For an asset that does not end of each year. if evidence of impairment exists. generate sufficient independent Where an impairment loss ex- cash flows, the realisable value They are annually tested for loss- ists, it is recognised immediately is determined in relation to the es in value or where there is an in- through the income statement. cash-generating unit to which the dication that the asset may have Where the share of losses per- asset belongs. In determining the incurred a loss in value. Reference taining to the company in the fair value consideration is taken should be made to the paragraph investment exceeds the carrying of the purchase cost of a specific below “Impairments”. value of the investment, and the asset which takes into account a

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depreciation coefficient (this co- becomes contractually party to classified as non-current. These efficient takes into account the the assets. The financial assets assets are measured at amortised effective conditions of the asset). sold are derecognised when the cost, on the basis of the effective In defining the value in use, the right to receive the cash flow is interest rate. expected future cash flows are transferred together with all the discounted utilising a discount risks and benefits associated with When there is an indication of a rate that reflects the current ownership. reduction in value, the asset is market assessment of the time reduced to the value of the dis- value of money, and the specific Purchases and sales of financial counted future cash flows obtain- risks of the activity. A reduction in assets are recognised at the val- able. The losses in value are rec- value is recognised to the income uation date of the relative trans- ognised in the income statement. statement when the carrying action. Financial assets are meas- When, in subsequent periods, the value of the asset is higher than ured as follows: reasons for the write-down no the recoverable amount. When longer exist, the value of the as- the reasons for the write-down (a) Financial assets at fair value sets are restated up to the value no longer exist, the book value through profit or loss deriving from the application of of the asset (or of the cash-gen- Financial assets are classified in the amortised cost. erating unit) is restated through this category if acquired for the the income statement, up to the purposes to be sold in the short- (c) AFS financial assets value at which the asset would term period. The assets in this The AFS assets are non-derivative be recorded if no write-down had category are classified as current financial instruments explicitly taken place and amortisation and and measured at fair value; the designated in this category or are depreciation had been recorded. changes in fair value are recog- not classified in any of the previ- nised in the income statement in ous categories and are classified Financial assets the period in which they arise, if under non-current assets unless On initial recognition, the finan- significant. management has the intention cial assets are classified in one of to sell them within 12 months the following categories based on (b) Loans and receivables from the statement of financial the relative nature and purpose Loans and receivables are fi- position date. These financial as- for which they were acquired: nancial instruments, principal- sets are measured at fair value ly relating to trade receivables, and the valuation gains or losses ◼◼ financial assets at fair value non-derivative, not listed on an are allocated to an equity reserve through profit or loss; active market, from which fixed under “Other comprehensive in- ◼◼ loans and receivables; or determinable payments are come”. They are recognised in ◼◼ available for sale financial as- expected. Loans and receivables the income statement only when sets. are stated as current assets, ex- the financial asset is sold, or, in cept for amounts due beyond 12 the case of negative cumulative The financial assets are recorded months from the statement of changes, when it is considered under assets when the company financial position date, which are that the reduction in value al-

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ready recorded under equity can- designated as hedges or which had been made. For further in- not be recovered. do not comply with the require- formation, reference should be ments of the above-mentioned made to Note 4.1. In the case of investments clas- IAS 39, are recognised directly in sified as available for sale, a pro- the income statement in the ac- Inventories longed or significant decline in count “financial income/charges.” Inventories are measured at the the fair value of the investment lower of average weighted pur- below the initial cost is consid- The fair value of traded financial chase and/or production cost and ered an indicator of loss in value. instruments is based on the list- net realisable value or replace- ed price at the statement of fi- ment cost. The valuation of inven- Derivative financial instruments nancial position date. Where the tories does not include financial Derivative financial instruments market for a financial asset is not charges. are classified as hedging instru- active (or refers to non-listed se- ments when the relation be- curities), the Group determines Inventories are shown net of the tween the derivative and the fair value utilising valuation obsolescence provision to adjust hedged item is formally docu- techniques which include: refer- inventories to their realisable or mented and the effectiveness of ence to advanced negotiations in replacement value. the hedge, periodically verified, course, references to securities is high. When the hedged deriva- which have the same characteris- Cash and cash equivalents tives cover the risk of change of tics, analyses based on cash flows, Cash and cash equivalents in- the fair value of the instruments price models based on the use of cludes cash, bank deposits, and hedged (fair value hedge; e.g. market indicators and aligned, as other short-term forms of invest- hedge in the variability of the fair far as possible, to the assets to be ment readily available, due within valued. value of asset/liabilities at fixed three months. At the reporting rate), these are recorded at fair date, bank overdrafts are classi- value through the income state- Trade and other receivables fied as financial payables under ment; therefore, the hedging in- Trade and other receivables are current liabilities. Cash and cash struments are adjusted to reflect initially recognised at fair val- equivalents are recorded at fair the changes in fair value associat- ue and subsequently measured value. ed to the risk covered. When the based on the amortised cost derivatives hedge a risk of chang- method net of the doubtful debt Provisions for risks and charges es in the cash flows of the instru- provision. When there is an indi- The provisions for risks and charg- ments hedged (cash flow hedge), cation of a reduction in value, the es are recorded to cover known the hedging is designated against asset is reduced to the value of the exposure to changes in the the discounted future cash flows or likely losses or liabilities, the cash flows attributable to the obtainable. timing and extent of which are risks which may in the future im- not known with certainty at the pact on the income statement. Indicators of loss in value include, statement of financial position The effective part of the change among others, significant con- date. They are recorded only in fair value of the part of the de- tractual non-compliance, signif- when there exists a current obli- rivative contracts which are des- icant financial difficulties, insol- gation (legal or implicit) for a fu- ignated as hedges in accordance vency risk of the counterparty. ture payment resulting from past with IAS 39 is recorded in an equi- Receivables are reported net of events and it is probable that the ty account (and in particular “oth- the provision for doubtful debts. obligation will be settled. This er items of the comprehensive in- When in subsequent periods the amount represents the best esti- come statement”); this reserve is reduction in the value of the as- mate less the expenses required subsequently transferred to the set is confirmed, the doubtful to settle the obligation. income statement in the period in debt provision is utilised against which the transaction hedged im- charges; otherwise, where the Possible risks that may result in a pacts the income statement. The reasons for the previous write- liability are disclosed in the notes ineffective part of the change in down no longer exist, the value under the section on commit- the fair value of the part of the of the asset is reversed up to ments and risks without any pro- derivative contracts, as indeed the recoverable amount derived vision. the entire change in the fair value from applying the amortised cost of the derivatives which are not method where no write down

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Restoration and replacement provision of assets under concession The accounting treatment of the works undertaken by the lessee on the assets under concession, as per IFRIC 12, varies depending on the nature of the work: normal maintenance on the asset is considered ordinary maintenance and therefore recognised in the income statement; replacement work and programmed maintenance of the asset at a future date, considering that IFRIC 12 does not provide for the recognition of a physical asset but a right, must be recognised in ac- The liability recorded in the accordance with IAS 37 - “Provisions A defined contribution plan is a counts for defined benefit plans and potential liabilities” – which plan in which SEA participates corresponds to the present value establishes recognition to the through fixed payments to third of the obligation at the state- income statement of a provision party fund operators, and in re- ment of financial position date, and the recording of a provision lation to which there are no le- net, where applicable, of the fair for charges in the statement of gal or other obligation to pay value of the plan assets. The ob- financial position. further contributions where the ligations for the defined benefit fund does not have sufficient as- plans are determined annually by The restoration and replacement sets to meet the obligations of an independent actuary utilising provision of the assets under con- the employees for the period in the projected unit credit method. cession include, therefore, the course and previous periods. For The present value of the defined best estimate of the present val- the defined contribution plans, benefit plan is determined dis- ue of the charges matured at the SEA pays contributions, voluntary counting the future cash flows at statement of financial position or established contractually, to an interest rate equal to the ob- date for the programmed main- public and private pension funds. ligations (high-quality corporate) tenance in the coming years and The contributions are recorded issued in the currency in which until the end of the concession as personnel costs in accordance the liabilities will be settled and and undertaken in order to en- with the accruals principle. The takes into account the duration sure the functionality, operations advanced contributions are re- of the relative pension plan. and security of the assets under corded as an asset which will be The actuarial gains and losses, in concession. repaid or offset against future accordance with IAS 19R, are repayments where due. corded directly under equity in a It should be noted that the resto- specific reserve account “Reserve ration and replacement provision for actuarial gains/loss”. of the assets refers only to fixed A defined benefit plan is a plan assets within the scope of IFRIC not classified as a contribution We report that, following amend- 12 (assets under concession clas- plan. In the defined benefit pro- ments made to the leaving in- sified to intangible assets). grammes, the amount of the ben- demnity regulations by Law No. efit to be paid to the employee is 296 of December 27, 2006 and Employee provisions quantifiable only after the termi- subsequent Decrees and Regu- nation of the employment service lations issued in the first half of Pension provisions period, and is related to one or 2007, the leaving indemnity pro- The company has both defined more factors such as age, years of vision due to employees in ac- contribution plans (National service and remuneration; there- cordance with Article 2120 Civil Health Service Contributions and fore, the relative charge is recog- Code is classified as defined ben- INPS pension plan contributions) nised to the income statement efit plans for the part matured and defined benefit plans. based on actuarial calculations. before application of the new

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legislation and as defined contri- vice, or when the provision of the claimed from the Company at its bution plans for the part matured benefit is a result of a leaving in- own discretion to a lending insti- after the application of the new demnity programme. tution and cash in the amount be- regulation. fore maturity. Financial liabilities Post-employment benefits Financial liabilities and other com- Invoice payment terms are non-in- Post-employment benefits are mitments to be paid are initially terest bearing as they do not in- paid to employees when the em- measured at fair value, net of di- volve further extensions agreed ployee terminates his employ- rectly allocated accessory costs, upon between the supplier and ment service before the normal and subsequently at amortised the Company. pension date, or when an employ- cost, using the effective interest ee accepts voluntary termination rate. When there is a change in In this context, the relationships of the contract. The Company re- the expected cash flows and it is for which the primary obligation cords post-employment benefits possible to estimate them relia- is maintained with the supplier when it is demonstrated that the bly, the value of the payables is re- and any extension, where grant- termination of the employment calculated to reflect this change, ed, do not involve a change in contract is in line with a formal based on the new present value payment terms, retain their na- plan which determines the ter- of the expected cash flows and ture and therefore remain classi- mination of the employment ser- on the internal yield initially de- fied as commercial liabilities. termined. The financial liabilities are classified under current liabil- Revenue recognition ities, except when the Company Revenues are recognised at fair has an unconditional right to de- value of the amount received for fer their payment for at least 12 the services from the ordinary months after the statement of activities, in accordance with the financial position date. accruals principle. They are calculated following the deduction of Purchases and sales of financial VAT and discounts. liabilities are recognised at the valuation date of the relative The revenues, principally relating transaction. to the provision of services, are recognised in the accounting pe- Financial liabilities are derecog- riod in which they are provided. nised from the statement of fi- Rental income and royalties are nancial position when they expire recognised in the year of ma- and the Company has transferred turity, based on the underlying all the risks and rewards relating contractual agreements while to the instrument. the payments for green certificates are recognised annually in Trade and other payables accordance with the long-term Trade and other payables are ini- contracts and refer to the remu- tially recognised at fair value and neration of the internal networks subsequently measured based on within the airport. the amortised cost method. Revenue for works on assets Reverse factoring transactions - under concession indirect factoring Revenues on construction work In order to ensure easy access to are recognised in relation to the credit for its suppliers, the Com- state of advancement of works pany has entered into reverse fac- in accordance with the percent- toring or indirect factoring agree- age of completion method and ments (with recourse). Based on the basis of the costs incurred on the contractual structures in for these activities increased by a place, the supplier has the pos- mark-up of 6% representing the sibility to assign the receivables best estimate of the remunera-

Annual Report 2017 • 180 SEA SPA - SEPARATE FINANCIAL STATEMENTS

tion of the internal costs of the airport, from an operating view- temporary differences will be management of the works and point they must be considered realised or settled. Deferred tax design activities undertaken by together with all costs incurred assets are recorded when their SEA, the mark-up which would be by the Company through com- recovery is considered probable. applied by a general contractor mercial and marketing activities These assets and liabilities are (as established by IFRIC 12). and are therefore reported in the not recognised if the temporary Management Accounts and val- differences deriving from the Government Grants ued in the company KPI together goodwill or the initial recognition Public grants, in the presence of a with marketing costs. Therefore, (not in business combination) of formal resolution from the issuer, the decision was taken to classify other assets or liabilities in oper- are recorded on an accrual basis these incentives in the annual fi- ations do not have an impact on in direct correlation to the costs nancial reporting in line with their the accounting result or on the incurred (IAS 20). operating objectives. assessable fiscal result.

Capital grants Financial charges The carrying value of deferred Capital public grants relating to Financial charges are recorded tax assets is revised at the end of property, plant and equipment on an accrual basis and include the year and reduced to the ex- are recorded as a reduction in the interest on financial payables cal- tent that it is no longer likely that acquisition value of the assets to culated using the effective inter- there will be sufficient taxable in- which they refer. est method and currency losses. come against which to recover all The financial charges incurred on or part of the assets. Operating grants investments in assets for which a Operating grants are recorded in significant period of time is usu- Current and deferred income the income statement in the ac- ally needed to render the assets taxes are recorded in the income count “Operating income”. available for use or sale (quali- statement, except those relating fying assets) are capitalised and to accounts directly credited or Recognition of costs amortised over the useful life of debited to equity, in which case Costs are recognised when relat- the class of the assets to which the fiscal effect is recognised di- ing to assets or services acquired they refer in accordance with the rectly to equity and to the Com- or consumed in the year or by sys- provisions of the new version of prehensive Income Statement. tematic allocation. IAS 23. Taxes are compensated when applied by the same fiscal authority, The incentives granted to airlines, Income taxes there is a legal right of compensa- and based on the number of pas- Current IRES and IRAP income tion and the payment of the net sengers transported, invoiced by taxes are calculated based on the balance is expected. the airlines to the Company for i) assessable income for the year, the maintenance of traffic at the applying the current tax rates at Other taxes not related to in- airport or ii) the development of the statement of financial posi- traffic through increasing existing tion date. come, such as taxes on property, routes or launching new routes, are included under “Other oper- are considered commercial costs Deferred taxes are calculated ating costs”. and, as such, classified under on all differences between the “Operating costs” and recognised assessable income of an asset Dividends in correlation to the revenues to or liability and the relative book Payables for dividends to share- which they refer. In particular, value, with the exception of holders are recorded in the year in the opinion of management goodwill. Deferred tax assets for in which the distribution is ap- which monitors the effectiveness the portion not compensated by proved by the Shareholders’ of these commercial initiatives deferred tax liabilities are recog- Meeting. together with other marketing nised only for those amounts for initiatives classified under com- which it is probable there will be mercial costs, although these in- future assessable income to re- centives are allocated to specific cover the amounts. The deferred revenue accounts proportionally, taxes are calculated utilising the because of their contribution to tax rates which are expected to traffic and to the growth of the be applied in the years when the

Annual Report 2017 • 181 SEA SPA - SEPARATE FINANCIAL STATEMENTS

3 Estimates using the most appropriate tech- Therefore, Management, having nical valuation methods availa- consulted with its legal and tax ad- and assumptions ble. The correct identification of visers, recognises a liability against the indicators of the existence these disputes when a financial The preparation of the financial of a potential reduction in value payment is considered probable statements requires the Directors as well as the estimates for their and the amount of the losses aris- to apply accounting principles and determination depends on fac- ing may be reasonably estimated. methods that, in some circum- tors which may vary over time im- In the case in which a payment is stances, are based on difficulties pacting upon the valuations and considered possible, but is not yet and subjective valuations and esti- estimates made by the Directors. determinable, such is reported in mates based on the historical ex- Reference should be made in ad- the explanatory notes. perience and assumptions which dition to the previous paragraph are from time to time considered “Impairments”. Provisions are recorded against reasonable and realistic under risks of a legal and tax nature and the relative circumstances. The (b) Amortisation & depreciation employee disputes. The amount application of these estimates Depreciation represents a signif- of the provisions recorded in the and assumptions impact upon the icant cost for the Company. The financial statements relating to amounts reported in the financial cost of property, plant and equip- these risks therefore represents statements, such as the statement is depreciated on a straight- the best estimate at that date ment of financial position, the in- line basis over the estimated use- made by the Directors. This esti- come statement and the cash flow ful life of the relative assets and mate results in the adoption of statement, and on the disclosures components. The useful life of the assumptions concerning factors in the notes to the accounts. fixed assets is determined by the which may change over time and Directors when the fixed assets which may, therefore, have sig- The accounting principles which, are purchased. This is based on nificant effects compared to the relating to the Company, require the historical experiences for simi- present estimates made by the Di- greater subjectivity by the Direc- lar fixed assets, market conditions rectors for the preparation of the tors in the preparation of the es- and considerations relating to fu- financial statements. In addition, timates and for which a change in ture events which could have an the restoration and replacement the underlying conditions or the impact on the useful life, such as provision of the assets under con- assumptions may have a signifi- changes in technology. Therefore, cession, recorded in accordance cant impact on the financial state- the effective useful life may be with IFRIC 12, includes the best ments are briefly described below: different from the estimated use- estimate of the charges matured ful life. The Company periodically at the statement of financial po- (a) Impairments evaluates technological and sec- sition date for scheduled main- The tangible and intangible assets tor changes to update the residu- tenance in future years in order and investments in subsidiaries al useful life. This periodic update to ensure the functionality, oper- and associated companies and could result in a change in the de- ations and security of the assets property investments are verified preciation period and therefore in under concession. to ascertain if there has been a the depreciation charge in future loss in value which is recorded by years. (d) Trade receivables means of a write-down, when it is Where there are indications of considered there will be difficul- (c) Provisions for risks and charges a reduction in value of trade re- ties in the recovery of the relative The Company may be subject to ceivables these are reduced to net book value through use. The legal disputes, in relation to taxa- their estimated realisable value verification of the existence of tion or employment issues, based through a doubtful debt provi- the above-mentioned indicators on particularly complex circum- sion. The doubtful debt provision requires the Directors to make stances of varying degrees of un- represents the best estimate at valuations based on the informa- certainty, according to the facts the reporting date made by the tion available internally and from and circumstances, jurisdiction Directors. This estimate is based the market, as well as historical and laws applicable to each case. on facts and expectations which experience. In addition, when it is Considering the inexact nature of may change over time and which determined that there may be a these issues, it is difficult to pre- may, therefore, have significant potential reduction in value, the dict with certainty any future pay- effects compared to the present Company determines this through ments required. estimates made by the Directives

Annual Report 2017 • 182 SEA SPA - SEPARATE FINANCIAL STATEMENTS

for the preparation of the sepa- technical/commercial or adminis- rate financial statements. trative/legal nature.

(e) Financial assets For SEA the credit risk exposure The valuation of the recoverabili- is largely related to the deterio- ty of the financial receivable from ration of a financial nature of the the Milan Airport Handling Trust principle airline companies which arising from the assignment of incur on the one hand the effects the investment Airport Handling of the seasonality related to avia- to the above-mentioned Trust and tion operations, and on the oth- the subscription of equity finan- er consequences of geopolitical cial instruments issued by Airport events which impact upon the air Handling subsequent to the as- transport sector (wars, epidemics, signment to the Trust is made on atmospheric events, rise in oil pric- the basis of the best estimates of es and economic/financial crises). the outcome of the sales operations of the company by the Trust, In order to control this risk, SEA with the valuation of the residual has implemented procedures and interest after the above-men- actions to monitor the expected tioned sale and is therefore sub- cash flows and recovery actions. ject to the normal uncertainties of negotiating processes in the In accordance with the internal disposal of financial investments, policy on receivables the client is as well as the future profitability required to provide guarantees: potential of the investment. this typically relates to bank guarantees issued by primary credit institutions or deposit guarantees.

4 Risk Management In relation to the payment terms applied for the majority of the cli- The risk management strategy ents, credit terms are largely con- of the Company is based on min- centrated within 30 days from the imising potential negative effects relative invoicing. related to the financial and operating performance. Some types of Trade receivables are reported in risk are offset through recourse to the financial statements net of derivative instruments. doubtful debt provisions, which are prudently made based on the The management of the underlying disputes at the state- above-mentioned risks is under- ment of financial position date. taken through identifying, evalu- The doubtful debt provision nec- ating and undertaking the hedg- essary to adjust the nominal value ing of financial risks. to the realisable value is determined analysing all receivables 4.1 Credit risk and utilising all available informa- The credit risks represent the ex- tion on the debtor. SEA, against posure of SEA to potential losses overdue receivables, receivables deriving from the non-compliance in dispute, or for which there is a of obligations by trading and fi- legal or administrative procedure, nancial partners. utilises the same write-down percentages. This risk is primarily of an economic/financial nature, or rather the possibility of the default of a counterparty, and also factors of a

Annual Report 2017 • 183 SEA SPA - SEPARATE FINANCIAL STATEMENTS

A summary of trade receivables with third parties and the relative doubtful debt provisions is reported below.

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade receivables - customers, gross of doubtful 196,242 151,066 debt provision - of which overdue 119,956 79,003 Doubtful debt provision - customers (99,799) (78,360) Total trade receivables - customers 96,443 72,706

The increase in trade receivables the doubtful debt provision. sites remain on the statement of at December 31, 2017 is strictly re- financial position of the company, lated to the conclusion of the fac- Receivables transferred following even if legally transferred. In this toring operation in the first half factoring operations are eliminat- case a financial liability of a similar of 2017 which the company com- ed from the statement of financial amount is recorded under liabili- menced in the second half of 2015 position only when the related ties against advances received. and the extraordinary administra- risks and benefits of ownership tion procedure of the carrier Al- have been substantially trans- The breakdown of overdue receiv- italia SAI on May 2, 2017, which ferred. Non-recourse receivables ables at December 31, 2017 and resulted in a significant increase in which do not satisfy these requi- the previous year is shown below:

TRADE RECEIVABLES - CUSTOMERS

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade receivables - customers 196,242 151,066 Of which overdue 119,956 79,003 less than 180 days 23,505 5,908 over 180 days 96,451 73,095 % of overdue receivables 61.1% 52.3% % overdue less than 180 days 12.0% 3.9% % overdue over 180 days 49.1% 48.4%

Annual Report 2017 • 184 SEA SPA - SEPARATE FINANCIAL STATEMENTS

The table below illustrates the istration and in dispute, with indi- gross trade receivables at Decem- cation of the bank and insurance ber 31, 2017 and 2016, as well sureties and deposit guarantees as the breakdown of receivables provided. from counterparties under admin-

TRADE RECEIVABLES - CUSTOMERS

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade receivables - customers 196,242 151,066 (i) receivables from parties subject to administration 94,715 43,347 procedures (ii) receivables subject to dispute 20,625 22,814 Total trade receivables, net of the receivables 80,902 84,905 at points (i) and (ii) Overdue receivables, other than at points (i) and (ii) 4,616 12,842 Sureties and deposits 55,143 55,199 % of receivables guaranteed by sureties and deposits vs total trade receivables, net of the receivables at points 68.2% 65.0% (i) and (ii)

Annual Report 2017 • 185 SEA SPA - SEPARATE FINANCIAL STATEMENTS

4.2 Market risks SEA manages this risk through ed through the cash flow hedge The market risk to which SEA is ex- an appropriate mixture between method. posed comprises all types of risks fixed and variable rate loans, with directly and indirectly related to the objective to mitigate the eco- At December 31, 2017 the gross market prices. In 2017, the market nomic effect of the volatility of financial debt of SEA was com- risks to which SEA were subject the interest rates. prised of medium/long-term loans were: (medium/long term portions of Variable interest loans expose the loans) and short-term loans (the a. interest rate risk; Company to a risk originating from medium/long-term portion of b. currency risk; the volatility of the interest rates loans maturing within 12 months. c. price risk of commodities. (cash flow risk). Relating to this At the reporting date, the compa- risk, for the purposes of the rela- ny does not hold any short-term a) Interest rate risk tive hedging, SEA makes recourse debt. SEA is exposed to the risk of to derivative contracts, which con- changes in interest rates in rela- verts the variable rate to a fixed The medium/long term debt at tion to the necessity to finance its rate or limits the fluctuations in December 31, 2017 is reported in operating activities and the use variable rates over a range, in this the following table, which shows of available liquidity. The changes manner reducing the risk originat- each loan at the nominal value in interest rates may impact posi- ing from the volatility of the rates. (which includes a spread of be- tively or negatively on the results We highlight that these derivative tween 0.20% and 1.62%, not con- of the Company, modifying the contracts, underwritten exclusive- sidering the effect of the hedging costs and returns on financial and ly for the purposes of hedging operations and the cost of the rel- investment operations. market rate volatility, are record- ative guarantees):

MEDIUM/LONG-TERM LOANS AT DECEMBER 31, 2017 AND 2016

at December 31, 2017 at December 31, 2016

(Euro thousands) Average Average Maturity Amount rate Amount rate Bonds 2021 300,000 3.125% 300,000 3.125% from 2017 Bank loans - EIB funding 261,849 1.08% 261,538 1.22% to 2037 o/w at Fixed Rate 51,557 3.89% 57,895 3.89% o/w at Variable Rate(*) 210,292 0.39% 203,643 0.45% Other bank loans 2020 154 0.50% 176 0.50% o/w at Fixed Rate 154 0.50% 176 0.50% o/w at Variable Rate - - - - Medium/long-term gross financial debt 562,003 2.17% 561,714 2.24%

(*) Includes: (i) variable rate tranche subject to interest rate hedge (ca. 32% at 31.12.2017 & 36% at 31.12.2016); (ii) Euro 60 million of EIB loans with specific bank guarantee.

Annual Report 2017 • 186 SEA SPA - SEPARATE FINANCIAL STATEMENTS

The total value of medium/long- The average cost of this debt was term debt at a variable rate not term financial debt at December reduced by 7 basis points, reach- hedged by the Company at De- 31, 2017 amounts to Euro 562,003 ing 2.17% at December 31, 2017. cember 31, 2017 was approx. thousand, almost unchanged Also considering the hedging 25.6% of total debt. There was when compared to December transactions against the interest therefore no excess coverage on 31, 2016. This is due to the com- rate risk and the cost of bank guar- future cash flows subject to hedg- bined effect of the disbursement antees on EIB loans, the average ing (“overhedging”). of Euro 20 million EIB lines at the cost of debt amounts to 2.78%, end of June 2017, offset by the down from 2.83% at the end of At December 31, 2017, SEA has continuation of the repayment December 2016 (-5 basis points). the following bond issue with a to- process of other loans for Euro tal nominal value of Euro 300.000 19,710 thousand. Overall, the total medium/long- thousand.

Listing Term Par Value Annual Description Issuer ISIN Code Maturity Coupon market (Year) (in million of euro) rate

SEA SpA 3 Irish Stock XS Fixed SEA SpA 7 04/17/2021 300 3.125% 1/8 04/17/21 Exchange 1053334373 annual

The fair value of the overall bank lated market, reference was lated from the market rate. and bond medium/long-term made to the market value at SEA debt at December 31, 2017 December 31, 2017; The following table reports the amounted to Euro 593,482 thou- ◼◼ for the loans at variable inter- derivative instruments utilised sand (Euro 596,283 thousand at est rates, the interest portion by SEA to hedge the interest rate December 31, 2016) and was cal- was calculated utilising the es- risk (measured based on the cash culated as follows: timate of the expected rates flow hedge method). at the end of each contractu- ◼◼ for the loans at fixed interest al maturity, increased by the The fair value of the derivative fi- rates, the capital portion and spread defined contractually. nancial instruments at December interest were discounted utilis- The interest portion defined as 31, 2017 and at December 31, ing the spot rates for each con- outlined above and the capital 2016 was determined in accord- tractual maturity, extrapolated on maturity was discounted ance with IFRS 13. from the market rates; utilising the spot rate for each ◼◼ for the bond listed on a regu- contractual maturity, extrapo-

Annual Report 2017 • 187 SEA SPA - SEPARATE FINANCIAL STATEMENTS

INTEREST RATE HEDGES

Residual Notional Fair value at Fair value at (Euro Notional at Date at signing Start Maturity December December thousands) December of signing date 31, 2017 31, 2016 31, 2017 May 18, September September 10,000 8,387 (1,020.4) (1,351.4) 2011 15, 2012 15, 2021 May 18, September September 5,000 4,194 (510.2) (675.7) 2011 15, 2012 15, 2021 May 18, September September 15,000 11,379 (1,342.3) (1,793.5) 2011 15, 2012 15, 2021 June 6, September September IRS 10,000 6,786 (751.5) (1,014.2) 2011 15, 2012 15, 2021 June 6, September September 11,000 7,207 (796.9) (1,075.6) 2011 15, 2012 15, 2021 June 6, September September 12,000 7,448 (811.7) (1,099.9) 2011 15, 2012 15, 2021 June 6, September September 12,000 7,448 (811.7) (1,099.9) 2011 15, 2012 15, 2021 June 6, September September 10,000 6,786 (596.6) (810.3) 2011 15, 2011 15, 2021 Collar June 6, September September 11,000 6,828 (586.8) (800.3) 2011 15, 2011 15, 2021 Total 66,463 (7,228.1) (9,720.8)

“-” indicates cost for the SEA Group of any early closure of the operation “+” indicates gain for the SEA Group of any early closure of the operation b) Currency risk tioning service on behalf of the 4.3 Liquidity risk SEA is subject to a low currency fluc- parent company. These variations The liquidity risk for SEA may tuation risk as, although operating directly impact on the final price arise where the financial resourc- in an international environment, which SEA pays for the supply es available are not sufficient to the transactions are principally from the subsidiary SEA Energia. meet the financial and commercial in Euro. Therefore, SEA does not These risks derive from the pur- commitments within the agreed consider it necessary to implement chase of the above-mentioned en- terms and conditions. specific hedging against this risk as ergy commodities, which are prin- the amounts in currencies other cipally impacted by fluctuations in The liquidity, cash flows and finan- than the Euro are insignificant and the prices of the underlying fuels, cial needs of SEA are managed the relative receipts and payments denominated in US Dollars. These through policies and processes generally offset one another. fluctuations are absorbed through with the objective to minimise the formulas and indexations utilised liquidity risk. In particular SEA: c) Commodity risk in the pricing structures adopted SEA is exposed to the changes in sales contracts. ◼◼ centrally monitors and man- of the prices and the relative ex- ages, under the control of the change rates of the energy com- In 2017, SEA did not undertake Group Treasury, the financial modities (gas) utilised by SEA En- any hedging of this risk, although resources available, in order ergia for the procurement of the not excluding the possibility in the to ensure an efficient manage- electricity, heating and air-condi- future. ment of these resources, also in

Annual Report 2017 • 188 SEA SPA - SEPARATE FINANCIAL STATEMENTS

forward budgeting terms; expected by December 2018, for by SEA through careful working ◼◼ maintains adequate liquidity in duration until December 2037. At capital management which large- treasury current accounts; December 31, 2017, SEA also had ly concerns trade receivables and ◼◼ obtains committed credit lines a further Euro 158 million of un- the relative contractual conditions (revolving and non), which cov- committed credit lines available established. We highlight that ers the financial commitments for immediate cash requirements. the indirect factoring operations, in the coming 12 months deriv- as previously described in detail, ing from the investment plan SEA has available committed and does not change the contractual and debt repayments; uncommitted credit lines which payment conditions and therefore ◼◼ monitors the liquidity position, guarantee the covering of future does not result in dilution effects in relation to the business plan- financial needs and current opera- on the working capital. ning. tional needs, with an average maturity of medium/long-term debt The tables below illustrate for At December 31, 2017, SEA had above 5 years, including the bond SEA the breakdown and maturity irrevocable unutilised credit lines issued in 2014. If the bond loan of the financial debt (capital, me- of Euro 180 million, of which Euro is excluded, the remaining debt dium/long-term interest, financial 120 million relating to a revolv- has a maturity of approximately 7 charges on derivative instruments ing line available until April 2020 years (19% over 10 years). and leasing) and trade payables at and Euro 60 million relating to December 31, 2017 and Decem- a EIB line, of which utilisation is Trade payables are guaranteed ber 31, 2016:

LIABILITIES AT DECEMBER 31, 2017

>1 year >3 years (millions of Euro) < 1 year > 5 years Total < 3 years < 5 years Gross financial debt 35.4 75.0 368.0 169.1 647.5 Trade payables 146.8 146.8 Total payables 182.2 75.0 368.0 169.1 794.3

LIABILITIES AT DECEMBER 31, 2016

>1 year >3 years (millions of Euro) < 1 year > 5anni Total < 3 years < 5 years Gross financial debt 35.4 70.9 375.0 170.0 651.3 Trade payables 161.8 161.8 Total payables 197.2 70.9 375.0 170.0 813.1

The table does not include the of the EIB loans and interest due tivity analysis refers to statement short-term Group cash pooling on the total debt. The loan re- of financial position accounts debt, amounting to Euro 4.6 mil- payment scheduling reflects the which could incur changes in value lion at the end of 2016, against capacity of SEA funding to cover due to changes in interest rates. which a receivable of a similar na- medium/long-term needs. ture existed of Euro 43.5 million. In particular, the analysis consid- 4.4 Sensitivity ered: At the end of 2017 loans due with- In consideration of the fact that in one year mainly relate to the for the Company the currency risk ◼◼ bank debt and cash pooling po- capital portion to be paid on some is almost non-existent, the sensi- sition;

Annual Report 2017 • 189 SEA SPA - SEPARATE FINANCIAL STATEMENTS

◼◼ loans; deposits of SEA; ◼◼ interest risk derivative hedge ◼◼ the loans measured were those instruments. at variable interest rates, which incur interest payable linked to The assumptions and calculation the Euribor at 6 months. The in- methods utilised in the sensitivity crease/decrease of the interest analysis undertaken by SEA were payable to changes in market as follows: conditions was estimated applying the changes assumed as (a) Assumptions: per point a) on the capital por- ◼◼ the effect was analysed on tion of the loans held during the SEA income statement for the year; the years 2017 and 2016 of a ◼◼ the interest risk derivative change in market rates of +50 hedge instruments were meas- or of -50 basis points. ured both in terms of cash flows and fair value (in terms of (b) Calculation method: changes compared to the same ◼◼ the remuneration of the bank period of the previous year). In deposits and the cash pooling both cases, the values were es- positions is related to the inter- timated applying the changes bank rates. In order to estimate as per point a) to the forward the increase/decrease of inter- curve expected for the period. est income to changes in market conditions, the change was The results of the sensitivity analy- assumed as per point a) on the sis are reported below: average annual balance of bank

December 31, 2017 December 31, 2016 (Euro thousands) -50 bp +50 bp -50 bp +50 bp Current accounts (interest income) -8.72 302.27 -31.36 336.43 Cash pooling position (interest income) -159.03 159.03 -200.09 200.09 Loans (interest charges)(1) 394.50 -1,039.74 677.69 -1,085.99 Cash pooling position (interest charges) -11.66 -15.58 Fin. debt vs. subsidiaries (int. charges)(1) Derivative hedging instruments (flows)(2) -361.96 361.96 -439.92 439.92 Derivative hedging instruments (fair value)(3) -1,012.61 984.17 -1,398.54 1,342.50

(1) + = lower interest charges; - = higher interest charges (2) + = revenue from hedge; - = cost of hedge (3) amount entirely allocated to net equity given full efficacy of hedges

Annual Report 2017 • 190 SEA SPA - SEPARATE FINANCIAL STATEMENTS

The results of the sensitivity anal- SEA to meet annual and/or half lations of any of the above-men- ysis undertaken on some accounts year financial commitments (net tioned covenants. of the previous tables are impact- of financial resources available ed by the low level of the market and receivables from the State) interest rates. By applying a varia- from operating activities. For 5 Classification of the tion of -50 basis points to the cur- some loans, non-compliance of financial instruments rent market interest rate curve, the covenant terms results in, for the cash flow corresponding to the following half-year period, the The following tables provides a current accounts and loans would application of a correlated prede- breakdown of the financial assets be opposite to those provided for termined spread (in accordance and liabilities by category at De- by the related types of contracts; with a contractually defined pric- cember 31, 2017 and at December in these cases, these cash flows ing grid). 31, 2016: are set at zero. At the present moment, SEA is not Some loans include covenant con- aware of any default situations ditions, relating to the capacity of related to the loans held or vio-

at December 31, 2017

Financial Invest- Financial assets and ments Loans and AFS liabilities at financial Total liabilities at held to receivables amortised (Euro thousands) assets fair value maturity cost AFS Investments 26 26 Other non-current financial assets 7,190 7,190 Other non-current receivables 212 212 Trade receivables 108,612 108,612 Current financial receivables 20,630 20,630 Tax receivables 12,406 12,406 Other current financial assets 13,300 13,300 Other current receivables 7,646 7,646 Cash and cash equivalents 67,129 67,129 Total - - 237,125 26 - 237,151 Non-current financial liabilities exc. 7,228 539,061 546,289 leasing - of which payables to bondholders 298,441 298,441 Trade payables 146,834 146,834 Income tax payables 7,227 7,227 Other current and non-current paya- 187,246 187,246 bles Current financial liabilities excl. leasing 27,612 27,612 Current financial liabilities for leasing - - Total 7,228 - - - 907,980 915,208

Annual Report 2017 • 191 SEA SPA - SEPARATE FINANCIAL STATEMENTS

The values resulting from the utilisation of the amortised cost method approximates the fair value of the category.

at December 31, 2016

Financial Invest- Financial assets and Loans and AFS liabilities at ments financial Total liabilities at held to receivables amortised (Euro thousands) assets fair value maturity cost AFS Investments 26 26 Other non-current financial assets 16,776 16,776 Other non-current receivables 240 240 Trade receivables 82,965 82,965 Current financial receivables 43,532 43,532 Tax receivables 14,174 14,174 Other current financial assets 7,190 7,190 Other current receivables 8,111 8,111 Cash and cash equivalents 46,998 46,998 Total - - 219,986 26 - 220,012 Non-current financial liabilities exc. 9,721 539,348 549,069 leasing - of which payables to bondholders 298,008 298,008 Trade payables 161,771 161,771 Income tax payables 6,046 6,046 Other current and non-current paya- 155,003 155,003 bles Current financial liabilities excl. leasing 32,077 32,077 Current financial liabilities for leasing - - Total 9,721 - - - 894,245 903,966

5.1 Disclosure on fair value ◼◼ level 1: prices practiced on ac- The following table shows the In relation to financial instruments tive markets; Company assets and liabilities measured at fair value, the table ◼◼ level 2: valuation techniques measured at fair value at Decem- below reports information on the based on observable market ber 31, 2017 and at December 31, method chosen to measure the information, both directly and 2016: fair value. The methods applied indirectly; are broken down into the follow- ◼◼ level 3: other information. ing levels, based on the information available, as follows:

Annual Report 2017 • 192 SEA SPA - SEPARATE FINANCIAL STATEMENTS

at December 31, 2017 (Euro thousands) Level 1 Level 2 Level 3 AFS Investments 26 Derivative financial instruments 7,228 Total - 7,228 26

at December 31, 2016 (Euro thousands) Level 1 Level 2 Level 3 AFS Investments 26 Derivative financial instruments 9,721 Total - 9,721 26

Annual Report 2017 • 193 SEA SPA - SEPARATE FINANCIAL STATEMENTS

6 Notes to the Statement 6.1 Intangible assets The table below reports the chang- of financial position es in the year in intangible assets:

INTANGIBLE ASSETS

at Increases Reclassi- at Destruct./ Write- (Euro thousands) December in the fications/ Amort. December sales downs 31, 2016 year transfers 31, 2017

Gross value

Rights on assets under concession 1,419,510 26,573 (50) 1,446,033

Rights on assets under concess. 33,897 25,619 (26,024) (1,006) 32,486 in prog. & advances Patents and right to use intellectu- 62,030 7,243 69,273 al property & others

Assets in progress and advances 5,766 6,829 (7,243) 5,352

Gross value 1,521,203 32,448 549 (1,056) - - 1,553,144

Accumulated amortisation

Rights on assets under concession (477,589) 23 (44,003) (521,569)

Rights on assets under concess. in prog. & advances Patents and right to use intellectu- (53,979) (6,567) (60,546) al property & others

Assets in progress and advances

Accumulated amortisation (531,568) - - 23 (50,570) - (582,115)

Net value

Rights on assets under concession 941,921 26,573 (27) (44,003) 924,464

Rights on assets under concess. 33,897 25,619 (26,024) (1,006) 32,486 in prog. & advances Patents and right to use intellectu- 8,051 7,243 (6,567) 8,727 al property & others

Assets in progress and advances 5,766 6,829 (7,243) 5,352

Net value 989,635 32,448 549 (1,033) (50,570) - 971,029

Annual Report 2017 • 194 SEA SPA - SEPARATE FINANCIAL STATEMENTS

plant upgrades continued at both Malpensa and Linate for the implementation of the Advanced Surface Movement Guidance and Control System, which will enable a clearer indication of paths to be followed by aircraft during the taxiing of aircraft, in addition to an improved use of lights on the taxiing runways. The reclassifications to assets under concession, principally relate to the gradual entry into service of the works on Terminal 1 and the baggage recla- mation area at Terminal 2.

Industrial patents and intellectual property rights and other intan- As per IFRIC 12, rights on assets construction of the Malpensa Ter- gible assets, amounting to Euro under concession amount to Euro minal 2 railway station. 8,727 thousand at December 31, 924,464 thousand at Decem- 2017 (Euro 8,051 thousand at ber 31, 2017 and Euro 941,921 The main works carried out dur- thousand at December 31, 2016. ing the year at Malpensa amount- December 31, 2016), relate to These assets are amortised on a ed to Euro 13,416 thousand the purchase of software com- straight-line basis over the du- and are mainly related to: (i) the ponents for the airport and oper- ration of the concession from continuation of restyling works ating IT systems. Specifically, the the State. The amortisation for at Airport Terminal 1, with the investments in 2017 principally the year 2017 amounts to Euro construction of new commercial related to the development and 44,003 thousand. The increases areas, remote Schengen board- implementation of the adminis- in the year, amounting to Euro ing areas in the north zone, the trative and airport management 26,573 thousand, derive from shifting of gate counters to cre- systems, of which Euro 7,243 the entry into use of investments ate pre-boarding areas, the com- thousand principally relating to made in previous years and re- pletion of the south commercial previous years and recorded in corded under “Assets under con- area’s reconfiguration with the the account “Assets in progress cession”. construction of new commercial areas and the fitting out of a new and advances” which at Decem- For assets under concession, VIP area to be dedicated to an ber 31, 2017 record a residual SEA has the obligation to record operator; (ii) the construction of amount of Euro 5,352 thousand, a restoration and replacement a second warehouse in the Cargo relating to software develop- provision, in relation to which ref- area (with a surface area of about ments in progress. erence should be made to Note 15,000 sq. m) to be allocated to 6.16. Cargo operators. In consideration of the results reported and the business outlook, The account “Assets under con- as well as the definition of the air- cession in progress and advanc- In Linate, works amounted to Euro port tariffs contained in the Reg- es”, amounting to Euro 32,486 12,203 thousand and are mainly ulatory Agreement, at December thousand, refers to the work in related to the commencement 31, 2017 the Company did not progress on concession assets, of functional upgrading works, not yet completed at December the Terminal’s restyling and the identify any impairment indica- 31, 2017. The increase of Euro construction of a new de-icing tors. 25,619 thousand is expressed area in the North Apron which net of State and EU contributions envisages the aircraft apron’s ex- The changes in intangible assets amounting to Euro 2,364 thou- tension by about 22.000 sq. m. A during 2016 were as follows: sand, collected in 2017, for the number of flight infrastructure

Annual Report 2017 • 195 SEA SPA - SEPARATE FINANCIAL STATEMENTS

INTANGIBLE ASSETS

at Increases Reclassi- De- at (Euro thousands) Amorti- Write- December in the fications/ struct./ sation downs December 31, 2015 year transfers sales 31, 2016

Gross value

Rights on assets under concession 1,357,235 550 63,239 (1,514) 1,419,510

Rights on assets under concess. 54,327 40,301 (60,731) 33,897 in prog. & advances Patents and right to use intellectual 53,397 8,633 62,030 property & others

Assets in progress and advances 7,519 6,880 (8,633) 5,766

Gross value 1,472,478 47,731 2,508 (1,514) - - 1,521,203

Accumulated amortisation

Rights on assets under concession (441,392) 1,104 (37,301) (477,589)

Rights on assets under concess. in prog. & advances Patents and right to use intellectual (46,764) (7,215) (53,979) property & others

Assets in progress and advances

Accumulated amortisation (488,156) - - 1,104 (44,516) - (531,568)

Net value

Rights on assets under concession 915,843 550 63,239 (410) (37,301) - 941,921

Rights on assets under concess. 54,327 40,301 (60,731) - 33,897 in prog. & advances Patents and right to use intellectual 6,633 8,633 (7,215) - 8,051 property & others

Assets in progress and advances 7,519 6,880 (8,633) - 5,766

Net value 984,322 47,731 2,508 (410) (44,516) - 989,635

Annual Report 2017 • 196 SEA SPA - SEPARATE FINANCIAL STATEMENTS

6.2 Property, plant & equipment The table below reports the changes in the year in tangible fixed assets:

PROPERTY, PLANT & EQUIPMENT

at Increases Reclassi- Destruct./ Deprecia- at (Euro thousands) December fications/ December in the year sales tion 31, 2016 transfers 31, 2017

Gross value

Property 193,165 15,611 2,340 (179) 210,937

Plant and machinery 4,509 146 4,655

Industrial and commercial 38,511 5,793 (330) 43,974 equipment

Other assets 61,239 2,454 4,200 (22) 67,871

Assets in progress and advances 5,190 8,270 (7,099) 6,361

Gross value 302,614 32,274 (559) (531) - 333,798

Depreciation & write-downs

Property (84,945) 142 (5,903) (90,706)

Plant and machinery (3,381) (187) (3,568)

Industrial and commercial (31,494) 330 (3,386) (34,550) equipment

Other assets (47,473) 22 (5,433) (52,884)

Assets in progress and advances

Depreciation & write-downs (167,293) - - 494 (14,909) (181,708)

Net value

Property 108,220 15,611 2,340 (37) (5,903) 120,231

Plant and machinery 1,128 146 - (187) 1,087

Industrial and commercial 7,017 5,793 (3,386) 9,424 equipment

Other assets 13,766 2,454 4,200 - (5,433) 14,987

Assets in progress and advances 5,190 8,270 (7,099) 6,361

Net value 135,321 32,274 (559) (37) (14,909) 152,090

The investments relate to the de- and those in the Non Aviation “property” include the acquisition velopment of the Aviation sector sector, amounting to Euro 2,340 of ownership of the Sheraton which, as already reported, in ac- thousand at December 31, 2017, Malpensa building, finalised on cordance with IFRIC 12 are classi- principally related to the restyl- December 18, 2017. For further fied as assets under concession ing work at Terminal 1 of Malpen- information, reference should be and current airport concessions sa. Finally, increases in the item made to the Directors’ Report.

Annual Report 2017 • 197 SEA SPA - SEPARATE FINANCIAL STATEMENTS

Increments in “Tangible fixed as- In consideration of the results re- falling under IFRIC 12, are ex- sets” also include the purchase of ported and the business outlook, pressed net of those funded by new de-icer equipment and snow as well as the definition of the air- State and European Union contri- ploughs for Euro 5,149 thousand, port tariffs contained in the Reg- butions. These latter at Decem- gate counters and control sta- ulatory Agreement, at December ber 31, 2017 amounted to Euro tions for Euro 205 thousand, new 31, 2017 the Company did not 504,383 thousand and Euro 7,019 aircraft towing tractors for Euro identify any impairment indica- thousand respectively. 1,235 thousand and new video tors. terminals for Euro 380 thousand. The changes in tangible fixed as- All fixed assets, including those sets during 2016 were as follows:

PROPERTY, PLANT & EQUIPMENT

at Increases Reclassi- Destruct./ at (Euro thousands) December fications/ Deprecia- December in the year sales tion 31, 2015 transfers 31, 2016 Gross value Property 188,542 4,775 (152) 193,165 Plant and machinery 7,760 12 (3,263) 4,509 Industrial and commercial equipment 37,384 6,222 (5,095) 38,511 Other assets 105,170 1,760 2,379 (48,070) 61,239 Assets in progress and advances 7,916 6,936 (9,662) 5,190 Gross value 346,772 14,930 (2.508) (56,580) - 302,614 Depreciation & write-downs Property (79,196) 127 (5,876) (84,945) Plant and machinery (6,173) 3,027 (235) (3,381) Industrial and commercial (34,895) 5,095 (1,694) (31,494) equipment Other assets (89,174) 47,433 (5,732) (47,473) Assets in progress and advances Depreciation & write-downs (209,438) - - 55,682 (13,537) (167,293) Net value Property 109,346 4,775 (25) (5,876) 108,220 Plant and machinery 1,587 12 (236) (235) 1,128 Industrial and commercial 2,489 6,222 (1,694) 7,017 equipment Other assets 15,996 1,760 2,379 (637) (5,732) 13,766 Assets in progress and advances 7,916 6,936 (9,662) 5,190 Net value 137,334 14,930 (2,508) (898) (13,537) 135,321

Annual Report 2017 • 198 SEA SPA - SEPARATE FINANCIAL STATEMENTS

6.3 Investment property INVESTMENT PROPERTY The breakdown of investment property at December 31, 2017 is at December 31, at December 31, shown below: (Euro thousands) 2017 2016 Gross value 4,118 4,125 Accumulated depreciation (724) (727) Total investment property 3,394 3,398

The changes in the accumulat- MOVEMENT ACCUMULATED DEPRECIATION INVESTMENT ed depreciation provision of the PROPERTY property investments in 2017 is shown below: at December 31, (Euro thousands) 2017 Opening balance (727) Decreases 4 Depreciation (1) Final value accumulated depreciation investment (724) property

The account includes buildings Against the backdrop of uncer- not utilised in the operated activ- tainty related to the real estate ities (apartments and garages). market there was no loss in value of real estate investments at De- cember 31, 2017.

Annual Report 2017 • 199 SEA SPA - SEPARATE FINANCIAL STATEMENTS

6.4 Investments in subsidiaries associates” at December 31, 2017 and associates and at December 31, 2016 are The breakdown of the account shown below: “Investments in subsidiaries and

INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES

(Euro thousands) at December 31, 2017 at December 31, 2016 Sea Handling SpA in liquidation 8,226 SEA Energia SpA 7,026 7,026 SEA Prime SpA 25,451 25,200 Consorzio Malpensa Contruction 22 Investments in subsidiaries 32,477 40,474 SACBO SpA 4,562 4,562 Dufrital SpA 3,822 3,822 Malpensa Logistica Europa SpA 1,674 1,674 Disma SpA 421 421 SEA Services Srl 300 300 Investments in associates 10,779 10,779 Investments in subsidiaries and associates 43,256 51,253

On July 10, 2017, the Ordinary liquidators’ final accounts pre- sion of July 9, 2014 to explore the Shareholders’ Meeting of SEA pared at October 31, 2017. The establishment of a newly incor- Handling SpA in liquidation ap- liquidator has arranged to pay porated and capitalised company proved the final liquidators - ac the shareholder SEA SpA the sum Airport Handling counts at June 30, 2017 and the of Euro 93 thousand resulting relative division plans, authoris- from the above-mentioned distri- (a) Proceedings regarding the ing the Liquidator to request the bution plan and the completion European Commission decision cancellation of the company (can- of all the activities necessary for of December 19, 2012 cellation on July 25, 2017). The the cancellation of the Malpensa With decision of December 19, liquidator has arranged to pay Construction Consortium from 2012, the European Commission the sole shareholder SEA SpA the the company’s registrar (on De- judged that the share capital sum of Euro 8,376 thousand re- cember 14, 2017). increases carried out by SEA in sulting from the distribution plan. favour of its subsidiary SEA Han- For the economic effects deriving On September 7, 2017, the in- dling in the 2002-2010 period for from the liquidation of SEA Han- vestment held by the company approx. Euro 360 million, consti- dling SpA in liquidation reference in SEA Prime SpA increased to tuted State Aid incompatible with should be made to Note 7.10. 99.91% following the further ac- the internal market, and conse- quisition of 1.57% of the share quently imposed upon the Italian On November 23, 2017, the capital against a payment of Euro State the obligation to demand Board of Directors of SEA SpA 251 thousand. restitution of the presumed State noted and approved the proposal Aid from SEA Handling. of the Liquidator of the Malpensa Risk related to the European Com- Construction Consortium (which mission Decision of December 19, As more fully described in the An- was also approved by the share- 2012 concerning presumed State nual Financial Report 2016, SEA, holder MM SpA), contained in the Aid to SEA Handling and the Deci- in the context of a formal ‘alter-

Annual Report 2017 • 200 SEA SPA - SEPARATE FINANCIAL STATEMENTS

native execution’ project of the of the European Commission and absence of economic continuity decision, without prejudice to SEA Handling, ascertained by Or- between SEA Handling S.p.A. and any reservations and objections der of January 22, 2018 that the Airport Handling S.p.A., ii) the ab- on the decision’s unlawfulness, matter of the dispute concerning sence of the transfer to Airport has taken a series of measures - in SEA Handling’s appeal has ceased Handling S.p.A. of the obligation the framework of the discussions to exist since the appellant com- to repay the incompatible State between the Italian authorities pany was dissolved. As a result, aid, and iii) the absence of State and the European Commission the Court found that there was no aid in the incorporation and capi- - including: i) SEA Handling’s liq- longer a need to adjudicate on the talisation of this company. uidation and definitive exit from appeal brought by SEA Handling. the market, ii) the incorporation The decision was published in the of Airport Handling to continue In parallel, having taken note of Official Journal of the European offering ground handling - ser the Italian Government’s obser- Communities dated December 1, vices at arm’s length, with other vations regarding SEA Handling’s 2017. handling companies and in abso- dissolution, it ordered the cancel- lute economic discontinuity with lation of the case relating to the In the absence of appeals within SEA Handling, iii) the assignment appeal brought by the Govern- the time limits envisaged by EU of the entire stake in the share ment against the Commission’s law, the Commission’s decision capital of Airport Handling into decision. became res judicata and final. a trust called the “Milan Airport Handling Trust”, in order to ex- Given the above, the only appeal Meanwhile, the process of SEA’s clude any form of SEA control currently pending against the divestment of control over Air- over Airport Handling and conti- Commission’s decision is that port Handling was completed: nuity between SEA Handling and brought by the Municipality of Airport Handling, iv) the sale of Milan. The hearing was held on ◼◼ In December 2014, jointly with 30% of Airport Handling shares February 28, 2018. A decision is the Milan Airport Handling to a third operator with the op- expected during the current fi- Trust’s Trustee, SEA conferred tion, under certain conditions, nancial year. a mandate to an independent to purchase an additional 40% of financial advisor in order to the shares. identify potential investors in- (b) Proceedings relating to the terested in acquiring a stake in In relation to the above-men- commencement of the Europe- Airport Handling; tioned decision three independ- an Commission’s preliminary in- ◼◼ In September 2015, the Trus- ent appeals were made before vestigation of July 9, 2014 tee signed a binding agree- the European Union Court, by the On July 9, 2014, the European ment with dnata, a leading Italian State, by SEA Handling and Commission launched a formal international company in the by the Milan Municipality. investigation, under the powers Emirates Group active in the conferred upon it with regard to airport handling sector, for However, with the liquidation State aid, to get a better insight the sale of 30% of the Airport of SEA Handling having been on certain aspects concerning Handling shares, and a similar concluded in the meantime and the economic discontinuity rela- percentage of the Financial the company having sold all re- tionship between SEA Handling Instruments of Participation maining assets and defined all its and Airport Handling, and the (FIPs) held by SEA in Airport assets and liabilities, following possible existence of (additional) Handling, with the assignment the approval of the final liquida- alleged State aid in SEA’s capitali- to dnata, on closing, of the mation financial statements by the sation of the new company. jority of members of the board shareholders’ meeting on July of directors and, therefore, of 10, 2017, the company filed an By decision of July 5, 2016, sent Airport Handling’s Governance; application to be removed from to SEA by the Ministry of Trans- ◼◼ The agreement also provides the Companies Register. port on July 19, 2016, the Euro- for an option in favour of dna- pean Commission concluded the ta for the purchase of an ad- By reason of the changed de fac- investigation proceedings initi- ditional 40% of shares (call to and de jure situations relating ated in relation to the incorpora- option) and a corresponding to SEA Handling, the Court of the tion and capitalisation of Airport share of FIPs, upon the occur- European Union, at the request Handling S.p.A., noting: i) the rence of certain conditions.

Annual Report 2017 • 201 SEA SPA - SEPARATE FINANCIAL STATEMENTS

The European Commission’s the portion of other financial shares and FIPs respectively, positive decision with regard assets held by SEA under the held by the Trustee and SEA). to the July 2014 investigation proposed sale as “current”; no longer made it possible for ◼◼ Dnata’s investment in Airport On the basis of current forecasts dnata to exercise a put option Handling led to the company’s regarding the negotiations un- provided in the event of an un- valuation of Euro 25 million. derway for the sale of the further favourable decision; The amount confirmed the as- share in Airport Handling through ◼◼ The closing of the transaction sets recorded in the Statement the Trust, the directors consid- took place on March 23, 2016, of financial position up to the ered it appropriate to reduce the after the decision of the An- previous half-year report. The value of the assets recorded in ti-trust Authority which, in the transaction, in view of the sale the statement of financial posi- transaction in question and pur- of the first 30%, led to the tion for Euro 3,476 thousand. suant to Article 6, paragraph payment of Euro 7.5 million 1 of Law No. 287/90, did not by dnata as a lien for a prede- The key financial highlights at De- recognise the establishment or termined period of time, and cember 31, 2017 and for the pre- strengthening of a dominant provided for the additional vious year of the subsidiaries and market position such as to elim- payment of Euro 10 million for associated companies prepared inate or substantially and indef- the acquisition of the addition- in accordance with Italian GAAP initely reduce competition. As al 40% stake (amounts to be di- are shown below. a result of this, it reclassified vided proportionally between

AT DECEMBER 31, 2017 AND FOR YEAR ENDED DECEMBER 31, 2017 Pro-quota Profit/ (Euro thousands) Assets Liabilities Revenues Share. Share. % held (loss) Equity Equity Subsidiaries SEA Handling SpA in liquidation (*) 10,051 142 1,965 1,683 9,909 9,909 100.00% SEA Energia SpA 56,357 35,420 40,487 2,876 20,937 20,937 100.00% SEA Prime SpA 26,456 15,170 12,334 2,321 11,286 11,276 99.91% Consorzio Malpensa Contruction (**) 190 2 4 - 188 96 51.00% Associates Dufrital SpA 76,315 45,378 162,405 5,185 30,937 12,375 40.00% SACBO SpA 238,185 107,811 119,537 12,722 130,374 40,389 30.979% SEA Services Srl (***) 5,873 3,544 14,660 1,564 2,329 932 40.00% Malpensa Logistica Europa SpA 23,221 12,956 43,649 3,823 10,265 2,566 25.00% Disma SpA 10,644 5,035 6,364 712 5,609 1,052 18.75%

(*) Final liquidation accounts at 30/06/2017 (**) Final liquidation accounts at 31/10/2017 (***) Financial Statements at 30/09/2017

Annual Report 2017 • 202 SEA SPA - SEPARATE FINANCIAL STATEMENTS

AT DECEMBER 31, 2016 AND FOR YEAR ENDED AT DECEMBER 31, 2016 Pro-quota Profit/ (Euro thousands) Assets Liabilities Revenues Share. Share. % held (loss) Equity Equity Subsidiaries SEA Handling SpA in liquidation 10,732 2,506 587 (125) 8,226 8,226 100.00% SEA Energia SpA 79,295 61,234 46,267 627 18,061 18,061 100.00% SEA Prime SpA 25,950 16,984 11,373 2,105 8,966 8,817 98.34% Consorzio Malpensa Contruction 415 227 1 - 188 96 51.00% Associates Dufrital SpA 78,382 48,434 151,502 4,220 29,948 11,979 40.00% SACBO SpA 228,329 104,015 125,167 13,343 124,314 38,511 30.979% SEA Services Srl (*) 6,470 4,005 12,484 830 2,465 986 40.00% Malpensa Logistica Europa SpA 21,684 10,299 37,360 2,028 11,385 2,846 25.00% Disma SpA 12,144 5,998 6,072 601 6,146 1,152 18.75%

(*) Financial Statements at 30/09/2016

6.5 AFS Investments at December 31, 2016 are shown The breakdown of the “AFS invest- below: ments” at December 31, 2017 and

% Held % Held Company at December 31, 2017 at December 31, 2016 Aereopuertos Argentina 2000 SA 8.5% 8.5% Consorzio Milano Sistema in liquidation 10% 10% Romairport Srl 0.227% 0.227% Sita Soc. Intern. De Telecom.Aereneonautiques 6 shares 12 shares (Belgian reg. company)

Annual Report 2017 • 203 SEA SPA - SEPARATE FINANCIAL STATEMENTS

The following table reports the 2016 of the AFS investments: changes for the years 2017 and

AFS INVESTMENTS

(Euro thousands) at December 31, 2017 at December 31, 2016 Aereopuertos Argentina 2000 SA 0 0 Consorzio Milano Sistema 25 25 Romairport Srl 1 1 Sita Soc. Intern. De Telecom.Aereneonautiques 0 0 (Belgian reg. company) Total AFS Investments 26 26

AA2000 AA2000, equal to 21,973,747 ordi- At the date of the present doc- The investment of SEA in the nary Class A shares with 1 vote for ument, ORSNA had not yet for- share capital of Aeropuertos Ar- each share. malised the authorisation of the gentina 2000 (hereafter AA2000) sale of the investment in favour amounted to 8.5% following the The consideration paid was Euro of Cedicor and, therefore, still conversion, by the Argentinian 14,000,000 entirely received in holds 8.5% of the share capital government, of the bonds issued 2011. of AA2000; therefore, the invest- in 2008 by AA2000 into shares. ment of 1 Euro was maintained in The transfer of the shares will only the 2017 financial statements. On June 30, 2011, an agreement be completed with authorisation was signed with CEDICOR for the by the ORSNA regulator (Organis- sale of all the investment held mo Regulador del Sistema Nacion- by SEA in the share capital of al de Aeropuertos).

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6.6 Deferred tax assets tax assets for the year 2017 are The changes in the net deferred shown below:

NET DEFERRED TAX ASSETS

at December 31, Released / Released / at December 31, (Euro thousands) 2016 allocated to P&L allocated to Equity 2017 Restoration prov. as per IFRIC 12 33,750 790 34,540 Write-downs Tan. assets 14,101 14,101 (impairment test) Provisions for risks and charges 9,416 3,724 13,140 Non-deductible doubtful debt 8,281 (1,114) 7,167 provision Other receivables provision 319 319 Inventory obsolescence provision 125 17 142 Fair value measurement 2,149 (585) 1,564 of derivatives Post-em. bens. prov. discounting 944 (14) (13) 917 (IAS 19) Ord. main. on assets under 6,241 1,749 7,990 concession Other 132 (8) 124 Total deferred tax assets 75,458 5,144 (598) 80,004 Accel. amort. & deprec. & lower amort. & deprec. from initial app. 30,263 (2,530) 27,733 IFRS Other 23 (23) 0 Total deferred tax liabilities 30,86 (2,553) 0 27,733 Total deferred tax assets, 45,172 7,697 (598) 52,271 net of liabilities

6.7 Other current and non-current financial assets at De- non-current financial assets cember 31, 2017 and at the end of The breakdown of current and the previous year is reported below:

OTHER FINANCIAL ASSETS

at December 31, 2017 at December 31, 2016 Non-current Non-current (Euro thousands) Current portion Current portion portion portion Other financial assets 13,300 7,190 7,190 16,776 Total other financial assets 13,300 7,190 7,190 16,776

Annual Report 2017 • 205 SEA SPA - SEPARATE FINANCIAL STATEMENTS

Other current and non-current the terms and conditions of the assets held under the proposed financial assets relates to the incorporation deed of the Milan sale were reclassified as “current”. capital paid in favour of Airport Airport Handling Trust. Handling less write-downs made Dnata’s investment in Airport in 2013 and 2014 totalling Euro On August 27, 2014, the Share- Handling led to the company’s 1,034 thousand, against the loss- holders’ Meeting of the Airport valuation of Euro 25 million. The es generated before the disposal Handling Srl approved the share amount confirmed the assets re- to the Trust and the write-down capital increase to Euro 5,000 corded in the Statement of finan- in 2017 of Euro 3,476 thousand in thousand through the use of cial position up to the previous order to align the value of the as- future share capital payments. half-year report. The transaction, sets recorded in the accounts. On the same date, SEA, the sole in view of the sale of the first 30%, shareholder of Airport Handling, led to the payment of Euro 7.5 mil- The company was incorporated on with the signing of the Trust Deed lion by dnata, as a lien for a prede- September 9, 2013 with a share transferred to the “Milan Airport termined period of time, and pro- capital of Euro 10 thousand, ful- Handling Trust”: i) the entire nomi- vided for the additional payment ly paid-in by the sole shareholder nal investment of Euro 5,000 thou- of Euro 10 million for the acqui- SEA on September 27, 2013. On sand; ii) all rights to this latter relat- sition of an additional 40% stake October 30, 2013, the Extraordi- ing to the share capital increase of (amounts to be divided propor- nary Shareholders’ Meeting of Air- Airport Handling. This was under- tionally between shares and FIPs port Handling approved the share taken without any consideration respectively, held by the Trustee capital increase up to a maximum and in accordance with the Trust and SEA). The directors, on the ba- of Euro 90 thousand, to be of- Deed. Subsequent to this transfer sis of current forecasts concerning fered as options to the sharehold- of ownership, on August 27, 2014, the ongoing negotiations for the er SEA - entirely subscribed with Airport Handling Srl was convert- sale of a further holding in Airport the payments in November 2013 ed into a limited liability compa- Handling through the Trust, con- and February 2014. ny, with the appointment of new sidered it appropriate to reduce corporate boards and the issue of the value of the asset recorded On April 3, 2014, the Ordinary 20,000 Financial Instruments of in the accounts for Euro 3,476 Shareholders’ Meeting of Airport Participation (FIPs) of a value of thousand. Moreover, estimating Handling approved the share cap- Euro 1 thousand each, subscribed that these negotiations will be ital increase up to a maximum of by SEA SpA, with the approval of concluded by 2018, the 40% share Euro 2,500 thousand to be offered the sole shareholder Milan Airport of other financial assets under ne- as options to the shareholder SEA. Handling Trust. These instruments gotiation were reclassified from The first tranche of Euro 500 thou- are equity-based (therefore not “Non-current” to “current”. sand was subscribed at the share- subject to any repayment obliga- holders meeting and paid-in simul- tion of the amount contributed), taneously by the shareholder SEA. without administrative rights but 6.8 Other non-current similar to shares in terms of equity receivables The two subsequent tranches rights; in particular these instru- The breakdown of the “Other were paid by SEA in June 2014 ments provide profit-sharing and non-current receivables” is shown (Euro 710 thousand) and July reserve rights and rights to other below: 2014 (Euro 1,290 thousand), on equity items, also on the winding the request of the Board of Direc- up of the company. On August 28, tors of Airport Handling. 2014, SEA executed the payment of Euro 20,000 thousand. On On June 30, 2014, the Board of Di- March 23, 2016, the sale was com- rectors of SEA SpA approved the pleted of 30% of Airport Handling incorporation of the “Milan Air- shares, and a similar percentage port Handling Trust”, registered of the FIPs held by SEA in Airport in Jersey, Channel Islands, in order Handling, with the assignment to to adopt the best possible proce- dnata, on closing, of the majority dure to implement the discontin- of members of the board of di- uation of the handling activities, rectors and, therefore, of Airport previously undertaken by SEA Handling’s Governance. There- Handling SpA, in accordance with fore, the portion of other financial

Annual Report 2017 • 206 SEA SPA - SEPARATE FINANCIAL STATEMENTS

OTHER NON-CURRENT RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Receivables from the state for contributions as per Law 449/85 - - Other receivables 212 240 Total other non-current receivables 212 240

“Other non-current receivables” thousand at December 31, 2016), sa Airport. amount to Euro 212 thousand are entirely covered by the doubt- at December 31, 2017 (Euro 240 ful debt provision and concern Other receivables principally refer thousand at December 31, 2016) receivables based on the “Regula- to receivables from employees and is comprised of the accounts tory Agreement” between ENAC and guarantee deposits. outlined below. and SEA in January 1995 and revised in December 2004, which 6.9 Inventories Receivables from the State for establishes the partial funding, The table below reports the break- grants under Law 449/85, equal to pursuant to Law 449/85, of some down of “Inventories”: Euro 1,328 thousand (Euro 1,328 infrastructure projects at Malpen-

INVENTORIES

(Euro thousands) at December 31, 2017 at December 31, 2016 Raw material, ancillaries and consumables 4,594 4,574 Inventory obsolescence provision (503) (444) Total inventories 4,091 4,130

The account includes consumable Inventories were adjusted to their The changes in the obsolescence materials for airport activities; no realisable or replacement value provision in 2017 is shown below: goods held in inventories com- through an obsolescence provi- prised guarantees on loans or con- sion which at December 31, 2017 cerning other commitments. amounts to Euro 503 thousand.

MOVEMENTS IN INVENTORY OBSOLESCENCE PROVISION

(Euro thousands) at December 31, 2017 Opening balance (444) Provisions (139) Utilisations 80 Final value inventory obsolescence provision (503)

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6.10 Trade receivables The breakdown of “Trade receivables” at December 31, 2017 and for the previous year are shown below:

TRADE RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade receivables - customers 96,443 72,706 Trade receivables - subsidiaries 3,306 3,227 Trade receivables - associates 8,863 7,032 Total trade receivables 108,612 82,965

Trade receivables, shown net of The criteria for the adjustment ous paragraph 3, to which refer- the doubtful debt provision, main- of receivables to their realisable ence should be made. ly include receivables from clients value take account of valuations and provisions for invoices and regarding the state of the dis- The changes in the doubtful debt credit notes to be issued. pute and are subject to estimates provision were as follows: which are described in the previ-

DOUBTFUL DEBT PROVISION

(Euro thousands) at December 31, 2017 at December 31, 2016 Opening provision 78,450 81,891 Net increases (decreases) 26,897 2,581 Utilisations (5,506) (6,022) Final value doubtful debt provision 99,841 78,450

The net increase in the provision in Extraordinary Administration. For The increase in trade receivables the year amounted to Euro 26,897 further details, reference should from related companies on the thousand (Euro 2,581 thousand in be made to the Directors’ Report. other hand is substantially due 2016) and was calculated to take to invoicing maturity periods and into account the risk in deteriora- The utilisations relating to the year relative timing on collection of in- tion of the financial positions of 2017, amounting to Euro 5,506 voices. the principle operators with which thousand, refer to the closure dur- disputes exist and write-downs ing the year of disputes in which For receivables from subsidiaries for receivables under adminis- the provisions were accrued to cov- tration. This increase, amounting er such risks in previous years. and associated companies refer- to Euro 24,316 thousand, mainly ence should be made to Note 8, refer to the full write-down of ex- For details on the aging of the relating to transactions with relat- isting receivables, prior to May 2, receivables reference should be ed parties. 2017, claimed from Alitalia SAI in made to Note 4.1.

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6.11 Current financial sand at December 31, 2017 (Euro thousand at December 31, 2016) receivables 14,174 thousand at December and Euro 452 thousand of tax re- The account “Current financial 31, 2016) and refers for Euro ceivables recorded following the receivables” amounts to Euro 10,384 thousand to reimburse- liquidators distribution plan of the 20,630 thousand at December 31, ment requests made in March subsidiary SEA Handling SpA in liq- 2017 (Euro 43,532 thousand at 2013 for higher IRES paid against uidation. December 31, 2016) and relates the non-deductibility of IRAP re- entirely to financial receivables gional tax on personnel costs for On March 27, 2018, the Tax Agen- from subsidiaries. In particular the the years 2007/2011 (Euro 10,384 cy communicated to SEA SpA that balance at December 31, 2017 is thousand at December 31, 2016), submissions were being accepted comprised of cash pooling receiv- for Euro 873 thousand the IRES for issue of the IRES receivable ables from SEA Energia SpA and credit deriving from the higher concerning the deduction of IRAP SEA Prime SpA. Reference should payments on account paid in June from IRES for the financial years be made to Note 8 relating to and November compared to the from 2007 to 2011 (“click day”). transactions with related parties. 2017 charge (Euro 2,631 thousand at December 31, 2016), Euro 6.13 Other current receivables 6.12 Tax receivables 439 thousand to the VAT receiva- The breakdown of “Other current The account “Tax receivables” ble deriving from the payment on receivables” is shown below: amounts to Euro 12,406 thou- account in December (Euro 782

OTHER CURRENT RECEIVABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Other receivables 6,380 5,490 Misc. receivables 822 277 Employee & soc. sec. receivables 238 208 Receivables from insurance companies 206 232 Receivables for dividends - 1,901 Receivables from Ministry for Communications - 3 for radio bridge Receivables from the State for SEA / - - Ministry for Infrastructure and Transport case Total other current receivables 7,646 8,111

“Other current receivables” and other minor positions). The approval for the reimbursement amount to Euro 7,646 thousand balance at the end of 2017 in- of the amounts. at December 31, 2017 (Euro 8,111 cludes in addition receivables of thousand at December 31, 2016) Euro 2,430 thousand relating to Miscellaneous receivables amount- and is comprised of the accounts the reimbursement of a portion ing to Euro 822 thousand at outlined below. of the penalty imposed on SEA by December 31, 2017 (Euro 277 the Antitrust Authority (AGCM) in thousand at December 31, 2016) Other receivables, amounting to 2015 following the acquisition of mainly refer to receivables from Euro 6,380 thousand at December SEA Prime SpA (formerly ATA Ali payments by Telepass, credit card 31, 2017 (Euro 5,490 thousand Trasporti Aerei SpA); on May 30, and POS which have not yet been at December 31, 2016), includes 2017, the Authority confirmed the credited in the bank account. miscellaneous receivables (reim- reassessment of the penalties and bursements, supplier advances, communication to the Ministry for Employee and social security re- arbitrations with subcontractors the Economy and Finance of the ceivables, amounting to Euro 238

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thousand at December 31, 2017 Receivables from the State under The receivable recorded in the (Euro 208 thousand at December SEA/Ministry Infrastructure and financial statements in 2016 re- 31, 2016), mainly refer to the re- Transport case which amounts to lating to the dividends approved ceivable from INPS and the “Fon- Euro 3,889 thousand, following the by the Shareholders’ Meeting do Volo per la Cassa Integrazione judgement of the Cassation Court, of Airport Handling SpA on May Guadagni Straordinaria” paid to which recognised to the Company 6, 2016 and amounting to Euro employees on behalf of the insti- the non adjustment of handling 1,901 thousand, was received by tution and receivables from INAIL. tariffs for the period 1974-1981, the company in April 2017. in addition to interest and expens- Receivables from insurance com- es incurred, is entirely covered by 6.14 Cash and cash equivalents panies, amounting to Euro 206 the doubtful debt provision and The breakdown of the account thousand at December 31, 2017 relates to the residual amount not “Cash and cash equivalents” is (Euro 232 thousand at December yet received from the Ministry for shown in the table below: 31, 2016) relates to amounts paid Infrastructure and Transport, in on insurance policies in advance of addition to interest matured up to the period to which the cost refers. December 31, 2014.

CASH AND CASH EQUIVALENTS

(Euro thousands) at December 31, 2017 at December 31, 2016 Bank and postal deposits 67,069 46,954 Cash in hand and similar 60 44 Total 67,129 46,998

The account at year end compris- by SEA in Airport Handling. the investment held by SEA in es bank and postal deposits on de- AA2000 based on the agreement mand for Euro 64,721 thousand 6.15 Shareholders’ Equity with Cedicor as described in Note (Euro 45,438 thousand at Decem- 6.5. ber 31, 2016), restricted bank Share capital deposits to cover the quota of At December 31, 2017, the share Cash Flow Hedge Reserve European Investment Bank loans capital of SEA is comprised of The balance of the reserve at due in the coming 12 months of 250,000,000 shares of a value of December 31, 2017, amounting Euro 2,348 thousand (Euro 1,516 Euro 0.11 each, with a total value to Euro -4,953 thousand (Euro thousand at December 31, 2016) of Euro 27,500 thousand. -6,804 at December 31, 2016), and cash amounts for Euro 60 relates to the change in the fair thousand (Euro 44 thousand at Legal and extraordinary reserve value of the effective part of the December 31, 2016). For further At December 31, 2017 the legal derivative hedge contracts listed information on the movements reserve of SEA amounts to Euro at Note 4.2. to cash and cash equivalents, ref- 5,500 thousand while the extraor- erence should be made to the dinary reserve amounts to Euro Actuarial gain/loss reserve Cash Flow Statement. 156,348 thousand (Euro 138,792 The balance of the reserve at De- thousand at December 31, 2016), cember 31, 2017, equal to Euro It should be noted that at De- with the increase of Euro 17,556 -1,215 thousand (Euro -1,257 cember 31, 2017 liquidity does thousand following the allocation thousand at December 31, 2016), not include the escrow account of the profit for the year 2016. represents the actuarial loss- in which Euro 6,000 thousand are es matured at the statement of deposited in respect of income AFS reserve (Available for sale) financial position date on the from the sale price of 30% of the The AFS reserve at December 31, Post-Employment Benefits provi- Equity Financial Instruments held 2017, equal to Euro 1, represents sion.

Annual Report 2017 • 210 SEA SPA - SEPARATE FINANCIAL STATEMENTS

Other reserves For the net equity movements, The other reserves, amounting to reference is made to the “State- Euro 60,288 thousand at Decem- ment of changes in Shareholders’ ber 31, 2017, refer entirely to the Equity”. reserves recorded in accordance with the revaluation laws 576/75, Available reserves 72/83 and 413/91. In accordance with Article 2427, No. 7-bis of the Civil Code, the eq- Distribution of dividends uity accounts and their availabili- On May 3, 2017, the Shareholders’ ty and possibility for distribution Meeting approved the distribution are reported below. of dividends of Euro 70,300 thousand and the carrying forward to reserves of Euro 17,556 thousand, relating to the allocation of the 2016 net profit, amounting to Euro 87,856 thousand.

at Possibility Quota Summary of utilisations (Euro thousands) December of use(*) available over last 3 years 31, 2017 Share capital 27,500 Legal reserve 5,500 B Extraordinary reserve 156,348 A,B,C 156,348 IFRS initial conversion reserve 14,814 - AFS reserve 0 Cash Flow Hedge Reserve (4,953) Actuarial gain/loss reserve (1,215) Other Reserves (1): - as per revaluation law 576/76 3,649 A,B,C 3,649 - as per revaluation law 72/83 13,557 A,B,C 13,557 - as per revaluation law 413/91 43,082 A,B,C 43,082 Total 258,282 216,636 - Total non-distributable amount 41,646

Key: (*) A: for share capital increase; B: for coverage of losses; C: for distribution to shareholders (1) Suspension of taxes reserve

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6.16 Provision for risks The changes in the “Provisions for and charges risks and charges” in the year are reported below:

PROVISION FOR RISKS AND CHARGES

at December Provisions/ Utilisations/ at December (Euro thousands) Releases 31, 2016 Increases Decreases 31, 2017 Restoration and replacement 136,782 15,000 (12,808) (1,491) 137,483 provision Provision for future charges 33,391 2,083 (5,006) (1,840) 28,628 Total provision for risks 170,173 17,083 (17,814) (3,331) 166,111 and charges

The restoration and replacement tured relating to the maintenance utilisations in the year refer to provision on assets under con- on assets under concession from the restoration works carried out cession, created in accordance the State which will be undertak- covered by the provisions made in with IFRIC 12, amounting to Euro en in future years. The provision previous years. 137,483 thousand at December for the year takes into account 31, 2017 (Euro 136,782 thousand the updated long-term scheduled The breakdown of the provision at December 31, 2016), refers to maintenance and replacement for future charges is shown in the the estimate of the amount ma- plans on these assets, while the table below:

PROVISION FOR FUTURE CHARGES

at December Provisions/ Utilisations/ at December (Euro thousands) Releases 31, 2016 Increases Decreases 31, 2017 Personnel provisions 6,584 171 (2,143) 4,612 Tax risks 1,000 (324) (193) 483 Other provisions 25,807 1,912 (2,539) (1,647) 23,533 Total provision for future charges 33,391 2,083 (5,006) (1,840) 28,628

The personnel provisions relate underway with the competent thousand at December 31, 2016) to the expected streamlining ac- tax judicial bodies over VAT re- is mainly composed of the follow- tions to be undertaken on opera- sulting from the tax audit by the ing items: tions. The utilisations in the year Customs Agency in respect of the ◼◼ Euro 9,281 thousand for legal are related to the incentivised de- resale of electricity and registra- disputes related to the opera- partures for which a specific pro- tion tax applied on the transac- tional management of the Mi- vision was made in the accounts tions in accordance with a num- lan Airports; in 2016. ber of civil judgments. ◼◼ Euro 2,405 thousand relating to disputes with insurance The “Tax risks” provision of Euro The account “Other provisions” companies for requests for in- 483 thousand is related to the for Euro 23,533 thousand at De- demnities; provision for disputes currently cember 31, 2017 (Euro 25,807 ◼◼ Euro 8,000 thousand relating

Annual Report 2017 • 212 SEA SPA - SEPARATE FINANCIAL STATEMENTS

to charges from the acoustic ◼◼ Euro 847 thousand for dis- opinion of the consultants repre- zoning of the peripheral areas putes with ENAV; senting the Company in the dis- to the Milan Airports (Law No. ◼◼ Euro 3,000 thousand for vari- putes, the provisions are consid- 447/95 and subsequent Minis- ous legal disputes. ered sufficient to cover potential terial Decrees). It is reported liabilities. that the Airport Commission Based on the updated state of of Malpensa has not yet given advancement of disputes at the 6.17 Employee provisions the final approval, unlike the preparation date of the present The changes in the employee pro- Airport Commission of Linate; report, and also based on the visions in 2017 are shown below:

EMPLOYEE PROVISIONS

(Euro thousands) at December 31, 2017 Opening provision 48,095 Financial (income)/charges 686 Utilisations (1,989) Actuarial losses / (profits) rec. to equity reserve (56) Total employee provisions 46,736

The actuarial calculation of the ECONOMIC-FINANCIAL TECHNICAL PARAMETERS employee leaving indemnity takes into account the effects of the reform of Law No. 296 of December at December 31, 2017 27, 2006 and subsequent decrees Annual discount rate 1.30% and regulations. Annual inflation rate 1.50% The principal actuarial assump- Annual increase in employee leaving 2.63% tions, utilised for the determina- indemnity tion of the pension obligations, are reported below:

The annual discount rate, utilised CHANGE for the present value of the bond, was based on the Iboxx Eurozone (Euro thousands) Corporate A index. at December 31, 2017 + 1 % on turnover rate 46,485 The sensitivity analysis for each of - 1 % on turnover rate 47,014 the significant assumptions at De- + 1/4 % on annual inflation rate 47,437 cember 31, 2017 is shown below, indicating the effects that would - 1/4 % on annual inflation rate 46,048 arise on the post-employment ben- + 1/4 % on annual discount rate 45,634 efit provision. - 1/4 % on annual discount rate 47,878

Annual Report 2017 • 213 SEA SPA - SEPARATE FINANCIAL STATEMENTS

EXPECTED DISBURSEMENTS

(Euro thousands) at December 31, 2017 Year 1 2,224 Year 2 1,887 Year 3 2,488 Year 4 2,755 Year 5 3,713

6.18 Current and non-current December 31, 2017 and at the financial liabilities end of the previous year is report- The breakdown of current and ed below: non-current financial liabilities at

at December 31, 2017 at December 31, 2016 (Euro thousands) Current Non-Current Current Non-Current Bank payables 20,919 247,760 20,829 250,929 Payables to other lenders 6,693 298,529 11,248 298,140 Total financial liabilities 27,612 546,289 32,077 549,069

Annual Report 2017 • 214 SEA SPA - SEPARATE FINANCIAL STATEMENTS

The breakdown of the accounts is shown below:

at December 31, 2017 at December 31, 2016 Non-current Non-current (Euro thousands) Current portion Current portion portion portion Long-term loans 19,766 240,532 19,689 241,208 Loan charges payable 1,153 1,140 Derivatives fair value 7,228 9,721 Bank payables 20,919 247,760 20,829 250,929 Payables to bondholders 298,441 298,008 Payables for charges on bonds 6,627 6,627 Subsidised rate loans 66 88 44 132 Financial payable to subsidiaries 4,577 Payables to other lenders 6,693 298,529 11,248 298,140 Total current and non-current 27,612 546,289 32,077 549,069 liabilities

As illustrated in the table above, pon of 3.125%; For further information on bank the Company debt primary con- ◼◼ Duration: 7 years, with single loans and derivative contracts un- sists of medium/long term bank repayment on maturity, except derwritten reference should be loans and the bond issued on April for advanced repayment pos- made to Note 4. 17, 2014, the “SEA 3 1/B 2014- sibilities established under the 2021”. Loan regulation and in line with For further information on loans market practices; received in 2017, the principal fea- The principal features of the bond ◼◼ Listing: Regulated market tures of these loans and Company are as follows: managed by the Irish Stock Ex- repayment schedules reference change; should be made to Note 4. ◼◼ Type of bond: Senior, unse- ◼◼ Covenant: typical international cured, non-convertible, in min- practice for the issue of such The breakdown of the Company imum denominations of Euro bonds, such as the Limitation of net financial debt at December 100 thousand and exclusively Indebtedness or rather to main- 31, 2017 and December 31, 2016, targeting qualified and institu- tain a Net Financial Position/ in accordance with CONSOB Com- tional investors; EBITDA maximum of 3.8. The munication of July 28, 2006 and ◼◼ Issue price: at par; covenant has been complied ESMA/2012/81 recommendations ◼◼ Value: Euro 300 million; with to date. are reported below: ◼◼ Interest rate: fixed annual cou-

Annual Report 2017 • 215 SEA SPA - SEPARATE FINANCIAL STATEMENTS

(Euro thousands) at December 31, 2017 at December 31, 2016

A. Cash and Cash Equivalents (67,129) (46,998)

B. Other cash equivalents - -

C. Securities held for trading - -

D. Liquidity (A) + (B) + (C) (67,129) (46,998)

E. Financial receivables (20,630) (43,532)

F. Current financial payables - 4,577

G. Current portion of medium/long-term bank payables 19,766 19,689

H. Other current financial payables 7,846 7,811

Payables and other current financial liabilities I. 27,612 32,077 (F) + (G) + (H)

J. Net current financial debt (D) + (E) + (I) (60,147) (58,453)

K. Non-current portion of medium/long-term bank payables 240,532 241,208

L. Bonds issued 298,441 298,008

M. Other non-current financial payables 7,316 9,853

Payables & other non-current financial liabilities N. 546,289 549,069 (K) + (L) + (M)

O. Net Financial Debt (J) + (N) 486,142 490,616

At the end of December 2017, the thousand) and that absorbed 20 millions from the EIB at varia- net financial debt amounted to from financing activity for the ble interest rates for a period of Euro 486,142 thousand, decreas- payment of dividends and interest twenty years; iii) the continuation ing by Euro 4,474 thousand com- and commissions (respectively of of the repayment of loans in place pared to the end of 2016 (Euro Euro 70,307 thousand and Euro amounting to Euro 19,711 thou- 490,616 thousand). 16,747 thousand); financing activ- sand. ities were impacted by the follow- As illustrated in the cash flow ing factors: i) increase in cash and The following is a breakdown statement, the level of net finan- cash equivalents by Euro 20,131 of the variations of current and cial debt was impacted by the fact thousand (Euro 67,129 thousand non-current financial assets and that the cash flow generated from at the end of 2017 compared to liabilities, with a separate indica- the operating activity of Euro Euro 46,998 thousand at the end tion of cash flows recorded in the 135,528 thousand was sufficient of 2016), ii) the disbursement year 2017 and other variations. to offset the cash flow absorbed at the end of June 2017 of new by investing activity (Euro 46,964 medium/long-term loans of Euro

Annual Report 2017 • 216 SEA SPA - SEPARATE FINANCIAL STATEMENTS

CURRENT & NON-CURRENT FINANCIAL ASSETS & LIABILITIES

Current & Payables Subsidised non-current for Financial loans (cur- Deriv- portion of Bond charges payables/ (Euro thousands) rent and ative Total medium/long- loans on loans receiv. to non-cur- liabilities term bank & bond subsid.e rent) loans loans

At December 31, 2016 (38,955) 537,614

Cash flows:

Issue new tranche of EIB loans 20,000 20,000

Repayments (capital portion) (19,689) (22) (19,711)

Cash pooling changes 18,325 18,325

Payment interest charges on bank loans & bond loans in FY (7,767) (7,767) 2016

Total cash flows 311 (22) (7,767) 18,325 10,847

Other changes:

Amortised cost effect (910) 433 (477)

Fair value change (2,493) (2,493)

Accrual on interest charges 7,780 7,780 on loan& bond loan

Total other changes (910) 433 7,780 (2,493) 4,810

At December 31, 2017 260,298 298,441 154 7,780 7,228 (20,630) 553,271

Annual Report 2017 • 217 SEA SPA - SEPARATE FINANCIAL STATEMENTS

6.19 Trade payables The breakdown of the “Trade payables” is shown below:

TRADE PAYABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Trade payables 130,362 135,537 Advances 7,582 7,419 Payable to subsidiaries 4,371 15,381 Payables to associates 4,519 3,434 Total trade payables 146,834 161,771

Trade payables of Euro 146,834 The payables for advances at De- ing to transactions with related thousand at December 31, 2017 cember 31, 2017 amounting to parties. refers to the purchase of goods Euro 7,582 thousand principally and services relating to the op- refer to advances from clients and 6.20 Income tax payables erating activity and investments. the balance is in line with the pre- Payables for income taxes amount- In order to optimise operations vious year. ing to Euro 7,227 thousand at with suppliers, trade payables at December 31, 2017 (Euro 6,046 December 31, 2017 include sums With regard to payments received thousand at December 31, 2016), ceded under indirect factoring in the year 2014 and classified un- mainly relate to direct taxes for contracts for Euro 4,218 thousand der payables for advances follow- Euro 1,142 thousand, employee (Euro 12,279 at December 31, ing Judgment No. 12778/2013 of and consultant’s withholding tax- 2016). the Court of Milan (confirmed by es for Euro 5,520 thousand (Euro the Court of Appeal of Milan with 4,972 thousand at December 31, Judgment No. 3553/2015) with 2016) and VAT “split payables” for which the Customs Agency was or- Euro 504 thousand. dered to pay a total of Euro 5,631 thousand in relation to disputes The balance at December 31, relating to the occupation of spac- 2016 included payables relating es located in the Linate and Mal- to higher IRES income tax paid by pensa airport grounds, it should the Subsidiaries (within the Tax be noted that in December 2016, Consolidation) and requests for the Customs Agency challenged reimbursement in March 2013 this judgement before the Cassa- through the consolidating compa- tion Court and contested the rul- ny, against the non-deductibility ing of the Court of Appeal. Since from IRES of the IRAP regional tax not all levels of judgment have on personnel costs relating to the been completed, no revenue has years 2007/2011, for Euro 1,028 been posted in the present sepa- thousand. rate financial statements. 6.21 Other current The remainder of payables on ac- and non-current payables count mainly relate to payments The breakdown of the account on account by clients. “Other current and non-current payables” at December 31, 2017 is For payables from subsidiaries and shown below: associated companies reference should be made to Note 8, relat-

Annual Report 2017 • 218 SEA SPA - SEPARATE FINANCIAL STATEMENTS

OTHER CURRENT PAYABLES

(Euro thousands) at December 31, 2017 at December 31, 2016

Payables to social security institutions 12,714 11,760

Employee payables for amounts matured 15,979 13,522

Employee payables for vacations not taken 2,536 2,749

Payables to the State for airport fire services 59,040 53,088

Payables to the State for concession fee 13,634 12,198

Payables to the state for concession fee security service 83 81

Payables for additional landing rights 46,131 46,011

Payables to third parties for ticketing collections 70 414

Third party guarantee deposits 968 1,110

Payables to the Board of Directors and Board of Statutory 190 187 Auditors

Payables to shareholders for dividends 77 88

Payables to others employee withholdings 251 265

Other 17,985 13,530

Total other current liabilities 169,658 155,003

“Other current liabilities” in- the traffic data; iv) increase in the creased by Euro 14,655 thousand, account “Others” for Euro 4,455 from Euro 155,003 thousand thousand. The account “Other at December 31, 2016 to Euro payables”, amounting to Euro 169,658 thousand at December 17,985 thousand at December 31, 2017. 31, 2017 (Euro 13,530 thousand at December 31, 2016), mainly This increase is mainly due to the relates to deferred income from offsetting of the following items: clients for future periods and oth- i) higher charges of Euro 5,952 er minor payables. The increase of thousand for the contribution of Euro 4,455 thousand is principally the Company to the airport fire due to the timing of invoicing by protection service under Law the company. No. 296 of December 27, 2006 ii) higher employee payables for In relation to the payable to the services matured, for Euro 2,457 State for airport fire services, in thousand, principally due to the judgment No. 1870/2018, the recognition, for the year 2017, Court of Rome ruled that the reg- of a bonus based on the results ular courts have no jurisdiction of the company, related to the and that the case must revert to achievement of company perfor- the Tax Commission. mances; iii) increase in payables to the State relating to the payment The breakdown of the account of concession fees, for Euro 1,436 “Other non-current payables” at De- thousand, following the change in cember 31, 2017 is shown below:

Annual Report 2017 • 219 SEA SPA - SEPARATE FINANCIAL STATEMENTS

OTHER NON-CURRENT PAYABLES

(Euro thousands) at December 31, 2017 at December 31, 2016 Employee payables 14,946 Payables to social security institutions 2,642 Total other non-current liabilities 17,588 -

“Other non-current payables” re- ers who will qualify for pension 6.22 Payables and receivables fers to payables to employees benefits by August 2023 (early re- beyond five years and associated social security tirement or old age pension). The There are no receivables over five contributions, recorded as a re- agreement with Trade Unions cov- years. sult of the mobility procedure’s ering this procedure was signed commencement on December 27, on January 15, 2018. Financial payables above five years 2017. Through the mobility proce- amount to Euro 147,670 thousand dure, early retirement incentive relating to the repayment of prin- payments were established for a cipal on medium/long-term loans pre-determined number of work- at December 31, 2017.

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7 Income Statement enues by business unit is reported below: 7.1 Operating revenues The breakdown of operating rev-

OPERATING REVENUES BY BUSINESS UNIT

(Euro thousands) 2017 2016 Aviation 448,688 415,942 Non-Aviation 227,479 216,071 Total operating revenues 676,167 632,013

The breakdown of Aviation operating revenues is reported below.

AVIATION OPERATING REVENUES

(Euro thousands) 2017 2016 Fees and centralised infrastructure 387,272 355,149 Security management revenues 45,495 45,209 Use of regulated spaces 15,921 15,584 Total Aviation operating revenues 448,688 415,942

Aviation revenue in 2017 in- and non-European routes; ii) the cellent performance of Malpensa creased Euro 32,746 thousand attraction of six new carriers; iii) (+7.4%) beating its historic record compared to the previous year, increase in seats offered by -car in the previous year in terms of from Euro 415,942 thousand in riers both at Malpensa and Lin- movements which amounted to 2016 to Euro 448,688 thousand in ate with total growth of approx. 577 tonnes of goods transported. 2017. This growth was supported 6.8% and, iv) signing of new bi- Reference should be made to the by the tariff adjustment defined lateral agreements and updating Directors’ Report for further de- in the Master Contract and the of some agreements already in tails. increase in passenger and cargo place. Passenger traffic recorded traffic thanks to: i) the activation increased movements of 4.1% and The breakdown of Non Aviation of thirteen new routes and in- passengers of 9%. Goods traffic operating revenues is reported creased frequencies on many ex- continued its strong growth with below. isting routes, both on European revenue up 7.1% thanks to the ex-

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NON AVIATION OPERATING REVENUES

(Euro thousands) 2017 2016 Retail 91,988 86,476 Parking 64,123 60,322 Cargo spaces 13,969 11,696 Advertising 10,328 10,316 Premium services 13,885 13,789 Real Estate 1,422 1,608 Services and other revenues 31,764 31,864 Total Non Aviation operating revenues 227,479 216,071

The breakdown of retail revenues is reported below.

RETAIL REVENUES

(Euro thousands) 2017 2016 Shops 47,610 45,174 Food & beverage 18,809 17,485 Car rental 16,204 14,652 Banking activities 9,365 9,165 Total Retail 91,988 86,476

Non-Aviation revenues grew of any destination with areas dif- on customer needs and season- Euro 11,408 thousand compared ferentiated by positioning and ality and ongoing renewal of the to the previous year, from Euro pricing. The retail profile of Mal- sales channels; iii) revenues from 216,071 thousand in 2016 to Euro pensa Terminal 1 was in fact com- cargo concessions grew Euro 227,479 thousand in 2017. This pletely resigned to better service 2,273 thousand benefitting from increase is mainly attributable to the various market segments re- the revenue deriving from the the following factors: i) retail rev- sulting from their compression in new warehouse in the Malpensa enues grew Euro 5,512 thousand the same departure area of low cargo area and those relating to thanks to higher royalties on the cost and short, medium and long- an area assigned to another car- concessions for sales directly to range legacy carriers; ii) park- go operator for the construction the public. In particular these ing revenues grew Euro 3,801 of a new warehouse. revenues grew thanks to the in- thousand due to a very intense crease in passenger traffic and commercial policy, featuring an “Services and other revenues” the gradual completion of the extremely strong management mainly relate to income from the restyling project of the commer- drive combining marketing and design services, service activities cial offer at Malpensa Terminal revenue management strategies and other income. The amount in 1, based on a single commercial based on continual communica- 2017 is substantially in line with gallery accessible to passengers tion to differentiate tariffs based the previous year due to the com-

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bined effect of: i) non-recurring period terminated in 2016. upgrading activities. For further income of Euro 2,429 thousand information on the principal in- relating to the reimbursement of 7.2 Revenue for works on assets vestments, reference should be a portion of the penalty imposed under concession made to Note 6.1. on SEA by the Anti-Trust Author- Costs for works on assets under ity (AGCM) in 2015 following the concession decreased from Euro acquisition of SEA Prime – for- 46,622 thousand in 2016 to Euro The account “Costs for work on merly, ATA Ali Trasporti Aerei. 28,281 thousand in 2017. assets under concession” (Note On May 30, 2017, the Authority 7.6) reflects the decrease in the confirmed the reassessment of These revenues, as per IFRIC 12, year due to lower work on assets the penalties as Euro 936 thou- refer to construction work on as- under concession. sand (compared to penalties paid sets under concession increased in 2015 of Euro 3,365 thousand) by a mark-up of 6%, representing 7.3 Personnel costs and communication to the Min- the best estimate of the remu- The breakdown of personnel istry of Economy and Finance of neration of the internal cost for costs is as follows: the approval of reimbursement the management of the works of the total sums; ii) reduction in and design activities undertaken revenues deriving from design by the Company, which corre- activities for Euro 1,268 thousand sponds to a mark-up which a gen- following the termination of the eral constructor would request to contracts; iii) lower gains deriving undertake such activities and are from the sale of fixed assets for included in the Aviation business Euro 400 thousand and iv) reduc- unit. tion in revenues related to the sale of green certificates for Euro This account is strictly related to 450 thousand as the recognition investment and infrastructure

PERSONNEL COSTS

(Euro thousands) 2017 2016 Wages and salaries 131,507 124,137 Social security charges 37,281 36,452 Post-employment benefits 7,649 7,642 Other personnel costs 28,911 9,247 Personnel costs 205,348 177,478

Personnel costs increased by al Plan 2018-2023. The increase thousand. For further informa- Euro 27,870 thousand (+15.7%), also includes the recognition of tion on the leaving incentive plan from Euro 177,478 thousand in a reward contribution linked to reference should be made to the 2016 to Euro 205,348 thousand the achievement of corporate Directors’ Report. in 2017. performance objectives and the allocation of the National Collec- The average number of FTE em- The increase is mainly related to tive Labour Agreement’s renewal ployees by category compared the leaving incentive plan agreed signed in 2014 and which expired to the previous year is reported with the trade unions under the at the end of 2016; this resulted below: Personnel Restructuring Industri- in higher costs of Euro 24,707

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AVERAGE FULL TIME EQUIVALENT

January - December 2017 % 2016 % Executives 54 2% 52 2% Managers 264 10% 261 10% White-collar 1,712 63% 1,720 63% Blue-collar 636 24% 660 24% Total full-time employees 2,666 99% 2,693 99% Temporary workers 28 1% 23 1% Total employees 2,694 100% 2,716 100%

The decrease in staff is attribut- increase in passenger traffic. able to terminations generated by the voluntary early retirement The employee Headcount (HDC) procedure, partially offset by re- at year-end in the parent company cruitment in operations due to the was as follows:

No. HDC (HEADCOUNT) EMPLOYEES (AT PERIOD END)

at December 31, 2017 at December 31, 2016 change HDC Employees (at period end) 2.771 2.792 (21)

7.4 Consumable materials The breakdown of “Consumable materials” is as follows:

CONSUMABLE MATERIALS

(Euro thousands) 2017 2016 Raw materials, ancillaries, consumables and goods 10,180 8,341 Change in inventories 39 670 Total consumable materials 10,219 9,011

The account “Consumable materi- 1,208 thousand compared to the 7.5 Other operating costs als” mainly includes the purchase previous year is principally due to The table below reports the break- of goods for airport activities the increase in the purchases for down of the account “Other oper- (chemical products for de-icing inventories of chemical products ating costs”: and de-snowing, clothing, spare for de-icing and anti-icing utilised parts, etc). The increase of Euro in the case of snow and/or ice.

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OTHER OPERATING COSTS

(Euro thousands) 2017 2016 Commercial costs 53,302 44,251 Public entity fees 31,848 31,132 Utilities & security expenses 29,840 34,059 Ordinary maintenance costs 24,629 24,224 Terminal services provided by handling company 22,546 22,899 Parking management 15,298 12,072 Cleaning 13,686 13,221 Professional legal, administrative and strategic services 8,282 8,784 Tax charges 6,671 6,459 Hardware & software use licenses 4,112 4,206 Disabled assistance 3,608 3,633 Hire of equipment & vehicles 3,540 3,326 Insurance 1,285 1,277 Emoluments & costs of Board of Stat. Auditors & BoD 650 701 Losses on disposal of assets 63 170 Rental charges 138 156 Other costs 14,054 12,443 Total other operating costs 233,552 223,013

In 2017, the account “Other op- thousand against an increase ◼◼ higher ordinary maintenance erating costs” increased by Euro in electricity costs of Euro 425 costs of Euro 405 thousand, 10,539 thousand compared to thousand. This change is strict- relating to programmed main- the previous year. This increase ly correlated to movements in tenance on property, plant and was principally due to the follow- the price of the raw materials. equipment; ing factors: It is also highlighted that the ◼◼ lower airport service costs by increase in electricity costs handling companies for Euro ◼◼ higher commercial costs of benefitted from the positive 353 thousand mainly related Euro 9,051 thousand, related effect, amounting to Euro to emergency/contingency principally to the increase in 1,298 thousand, deriving from services, snow emergency ser- traffic incentive charges; the cancellation of the costs vices and de-icing services; ◼◼ increase in concession fees to for system charges accrued in ◼◼ increase in parking manage- Public Entities for Euro 716 2015 and 2016 following the ment costs for Euro 3,226 thousand following the higher conversion of the so- called thousand following the out- concession fee which SEA must “Milleproroghe” Decree in sourcing of activities which in pay for the year 2017 to ENAC. which the legislator decided the previous year were directly This increase is strictly correlat- to delay the application from undertaken by the Company; ed to the traffic numbers; January 1, 2018. Security costs ◼◼ increase in cleaning costs of ◼◼ lower utility costs due to low- increased Euro 471 thousand Euro 465 thousand following er consumption of heating and following the increase in secu- the entry into service of new air-conditioning for Euro 5,399 rity filter control activities; areas in the third Malpensa sat-

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ellite; gers etc.) of Euro 392 thousand ed to postpone the application ◼◼ lower costs for professional le- (Euro 550 thousand in 2016), of system charges starting from gal, administrative and strate- landside transportation services January 1, 2018. gic services of Euro 502 thou- of Euro 846 thousand (Euro 846 sand following the efficiency thousand in 2016), association Therefore, in the account “Util- actions implemented by the contributions paid by the Compa- ities and security expenses” Company; ny of Euro 1,065 thousand (Euro the electricity cost includes the ◼◼ increase in the residual account 932 thousand in 2016), purchase positive effect of Euro 1,298 “Other costs” for Euro 1,611 and subscription of newspapers thousand resulting from the ap- thousand, principally related and magazines of Euro 440 thou- plication of the new Decree, in to higher costs for catering sand (Euro 467 thousand in 2016) relation to the amounts accrued services in the VIP lounges and and office running expenses. in 2015 and 2016. the write-off of receivables of non-aviation operators follow- The subsidiary SEA Energia SpA 7.6 Costs for works on assets ing settlements. presented a request to GSE on under concession September 29, 2015 to qualify as a Costs for works on assets under The residual account “Other SEESEU system contributor which concession decreased from Euro costs” includes fees recognised would permit subsidised tariffs on 43,114 thousand in 2016 to Euro by SEA for the collection of air- the electricity consumed and not 26,006 thousand in 2017. The port rights related to general taken from the grid equal to 5% change in the account is related aviation for Euro 4,088 thousand of the unitary amounts due and to the investment activities (Note (Euro 4,088 thousand in 2016), recharged to SEA. 7.2). catering service costs for the VIP lounges of Euro 3,104 thousand In May 2017, the subsidiary SEA These costs refer to the costs for (Euro 2,550 thousand in 2016), Energia SpA received GSE’s ac- the works undertaken on assets commission and brokerage costs ceptance of its application and under concession and concern of Euro 1,428 thousand (Euro was, therefore, granted this qual- the Aviation business unit. 1,374 thousand in 2016), other ification. With the conversion of industrial costs (principally certifi- Decree-Law 244/2016 (common- 7.7 Provisions and write-downs cation and authorisation charges, ly known as the “Milleproroghe The breakdown of provisions and reception and welcoming passen- Decree”), the legislature decid- write-downs is as follows:

PROVISIONS AND WRITE-DOWNS

(Euro thousands) 2017 2016 Provisions / (releases) of current receivables & cash 26,897 3,908 and cash equivalents

Write-down of other financial assets 3,476

Provisions/(releases) to provisions for future charges 243 (464)

Total provisions and write-downs 30,616 3,444

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In 2017 “Provisions and write- fer to the full write-down of past- should be made to Note 6.7. downs” increased Euro 27,172 due receivables, prior to May 2, thousand on the previous year 2017, claimed from Alitalia SAI in The net provisions for future risks (from Euro 3,444 thousand in Extraordinary Administration. For and charges, amounting to Euro 2016 to Euro 30,616 thousand in further information, reference 243 thousand refers principally to 2017). should be made to the Directors’ adjustments on valuations relat- Report. ed to legal disputes concerning The doubtful debt provision in the the operational management of year was calculated to take into The write-down of other financial the Milan Airports. account the risk in deterioration assets, amounting to Euro 3,476 of the financial positions of the thousand, relates to the realign- 7.8 Restoration and principle operators with which ment of the assets recorded in replacement provision disputes exist and write-downs the accounts on the measure- The breakdown of the restora- for receivables under administra- ment of the shares held in Airport tion and replacement provision is tion. This increase, amounting to Handling through the Trust. For as follows: Euro 22,989 thousand, mainly re- further information, reference

RESTORATION AND REPLACEMENT PROVISION

(Euro thousands) 2017 2016 Accrual/(release) restoration and replacement 13,509 17,100 provision Total accrual to restoration and replacement 13,509 17,100 provision

This account includes the provision for the year relating to the scheduled replacement and maintenance of the assets within the so-called “Concession Right”.

A decrease of Euro 3,591 thousand is reported, from Euro 17,100 thousand in 2017 to Euro 13,509 thousand in 2017, following the updating of the long-term scheduled replacement and maintenance plan of the assets within the so-called “Concession Right”.

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7.9 Amortisation & Depreciation The account “Amortisation & depreciation” is comprised of:

AMORTISATION & DEPRECIATION

(Euro thousands) 2017 2016

Amortisation of intangible assets 50,570 44,516

Depreciation of property, plant and equipment 14,909 13,537

Depreciation of real estate investments 1 2

Total amortisation & depreciation 65,480 58,055

The depreciation of tangible fixed within the “Concession Right”, 7.10 Investment income assets reflects the estimated consideration is taken of the con- and charges useful life made by the company cession duration. The breakdown of investment in- while, for the intangible assets come and charges is as follows:

INVESTMENT INCOME (CHARGES)

(Euro thousands) 2017 2016 Revaluation (Write-down) SEA Handling SpA in 1,705 (249) liquidation Revaluation (Write-down) Consorzio Malpensa 74 Construction in liquidation Dividends from SACBO SpA 2,128 1,801 Dividends from Dufrital SpA 1,679 Dividends from Malpensa Logistica Europa SpA 1,236 173 Dividends from SEA Services Srl 624 680 Dividends from Disma SpA 234 281 Other income 1,901 Total income (charges) from investments 7,680 4,587

Investment income amounts to Euro 2,935 thousand in 2016 to SpA in liquidation and the value Euro 7,680 thousand in 2017 Euro 5,901 thousand in 2017). of the assets liquidated to SEA compared to net investment in- following the approval of the fi- come of Euro 4,587 thousand in The account “Revaluation (Write- nal liquidators accounts of the the previous year. down) SEA Handling SpA in liqui- subsidiary at June 30, 2017 and dation”, amounting to Euro 1,705 the relative distribution plan; on Investment income concerning thousand, relates to the positive July 25, 2017 the Liquidator of dividends distributed by invest- effect deriving from the -differ SEA Handling SpA cancelled the ees increased Euro 2,966 thou- ence between the value of the company from the companies sand on the previous year (from investment held in SEA Handling register.

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The account “Revaluation (Write- tober 31, 2017 and the relative dling SpA. down) Consorzio Malpensa Con- distribution plan; on December struction in liquidation”, amount- 14, 2017 the Liquidator of Mal- For further information, refer- ing to Euro 74 thousand, relates pensa Construction in liquidation ence should be made to Note 6.4. to the positive effect deriving cancelled the company from the from the difference between the companies register. 7.11 Financial income value of the investment held in and charges Malpensa Construction in liquida- The previous year benefitted The breakdown of the account tion and the value of the assets from other income of Euro 1,901 “Financial income and charges” is liquidated to SEA following the thousand concerning income as follows: approval of the final liquidators matured on the Equity Financial accounts of the subsidiary at Oc- Instruments held in Airport Han-

FINANCIAL INCOME (CHARGES)

(Euro thousands) 2017 2016

Exchange gains 4 12

Other financial income 1,081 1,120

Total financial income 1,085 1,132

Interest charges on medium/long-term loans (12,413) (12,793)

Exchange losses (10) (2)

Other interest charges (5,737) (6,116)

Total financial charges (18,160) (18,911)

Total financial income (charges) (17,075) (17,779)

Net financial charges reduced The positive effect related to the Euro 704 thousand (from Euro decrease in interest expense on 17,779 thousand in 2016 to Euro derivatives for Euro 315 thousand 17,075 thousand in 2017). Against and on the commissions related substantially unchanged financial to the factoring operations for income, the financial charges re- Euro 310 thousand, in fact, is only duced with a reduction in costs of partially offset by the increase in Euro 751 thousand. expenses related to bank guarantees on the EIB loans on the line The reduction in financial charg- subscribed in December 2014. es of Euro 751 thousand is mainly due to: i) decrease in the average For further information on the cost of the medium/long-term change in the financial liabilities, debt, based on interest rate move- reference should be made to Note ments, and the decrease in the 6.18. gross debt, with lower interest expense of Euro 380 thousand; 7.12 Income taxes and ii) reduction in other interest The breakdown of the account “in- expenses of Euro 379 thousand. come taxes” is shown below:

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INCOME TAXES

(Euro thousands) 2017 2016 Current income taxes 41,074 47,013 Deferred tax charge/(income) (7,697) (640) Total income taxes 33,377 46,373

The reconciliation between the theoretical and effective tax rate for 2017 is shown below:

(Euro thousands) 2017 % Profit before taxes 110,323 Theoretical income taxes 26,477 24.0% Permanent tax differences effect (28) 0.0% IRAP 6,961 6.3% Other (33) 0.0% Effective taxes 33,377 30.3%

The “Other” account principally includes tax adjustments concerning both current and deferred taxes of previous years.

The principal permanent tax differences concern dividends from investees under the pex legislation received in 2017, the write- down of other financial assets held in Airport Handling and the recording of the income relating to the recognition of the higher amount paid in 2015 following the penalties issued by AGCM and reassessed in 2017, for which reference should be made for further details to Note 7.1 and the Directors’ Report.

8 Transactions with Related Parties The table below shows the balances and transactions of the company with related parties for the years 2017 and 2016 and an indication of the percentage of the relative account:

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TRANSACTIONS WITH RELATED PARTIES

at December 31, 2017 Trade Current financial Trade Income tax (Euro thousands) Receivables receivables Payables payables Subsidiaries SEA Energia SpA 409 20,253 3,201 41 SEA Prime SpA 2,897 377 1,170 Associates SACBO SpA 276 510 Dufrital SpA 5,430 1,149 Malpensa Logistica Europa SpA 1,840 1,046 SEA Services Srl 1,137 1,714 Signature Flight Support Italy Srl 63 1 Disma SpA 116 99 Total related parties 12,168 20,630 8,890 41 Total book value 108,612 20,630 146,834 7,227 % on total book value 11.20% 100.00% 6.05% 0.57%

Year ended December 31, 2017 Operating Other Personnel Net financial Investment (Euro thousands) revenues operating costs costs income (charges) income (charges) Subsidiaries SEA Handling SpA in liquidation (*) 10 8 1,705 SEA Energia SpA 440 21,822 (80) 839 Consorzio Malpensa Contruction (*) (8) 4 74 SEA Prime SpA 7,581 4,105 (566) Associates SACBO SpA (**) 921 10,440 (4) 2,128 Dufrital SpA 30,541 21 1,679 Malpensa Logistica Europa SpA 4,239 10 (38) 1,236 SEA Services Srl 3,331 3,113 624 Disma SpA 215 234 Signature Flight Support Italy Srl 121 Total related parties 47,391 39,523 (688) 839 7,680 Total book value 676,167 233,552 205,348 (17,075) 7,680 % on total book value 7.01% 16.92% -0.34% -4.91% 100.00%

(*) In 2017 SEA Handling SpA in liquidation and Malpensa Construction Consortium were removed from the companies register following the approval of the final liquidators’ accounts and the distribution plan. For further information, reference should be made to Notes 6.4 and 7.10. (**) The account “Other operating costs” relating to transactions with SACBO, equivalent to Euro 10,440 thousand, does not include that invoiced by SEA to the final clients and transferred to the associate.

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at December 31, 2016 Current and Current Trade Tax Trade Pay- non-current Income tax (Euro thousands) financial Receivables receivables ables financial payables receivables liabilities Subsidiaries SEA Handling SpA in liquidation 63 1,028 SEA Energia SpA 731 43,532 14,092 41 Consorzio Malpensa Contruction 156 248 SEA Prime SpA 2,277 1,041 4,577 Associates SACBO SpA 138 342 Dufrital SpA 5,350 1,173 Malpensa Logistica Europa SpA 1,029 986 SEA Services Srl 354 834 Signature Flight Support Italy Srl 30 1 Disma SpA 131 98 Total related parties 10,259 43,532 - 18,815 4,577 1,069 Total book value 82,965 43,532 161,771 581,145 6,046 % on total book value 12.37% 100.00% 0.00% 11.63% 0.79% 17.68%

Year ended December 31, 2016 Operating Other Personnel Net financial Investment (Euro thousands) revenues operating costs costs income (charges) income (charges) Subsidiaries SEA Handling SpA in liquidation 30 (2) (79) (249) SEA Energia SpA 803 27,244 (80) 1,090 Consorzio Malpensa Contruction SEA Prime SpA 7,607 4,088 (428) Associates SACBO SpA (*) 860 9,518 (6) 1,801 Dufrital SpA 28,695 19 Malpensa Logistica Europa SpA 4,076 (40) 173 SEA Services Srl 2,547 2,569 680 Disma SpA 230 281 Signature Flight Support Italy Srl 70 (24) Total related parties 44,918 43,436 (657) 1,090 2,686 Total book value 632,013 223,013 177,478 (17,779) 4,587 % on total book value 7.11% 19.48% -0.37% -6.13% 58.56%

(*) The account “Other operating costs” relating to transactions with SACBO, equivalent to Euro 9,518 thousand, does not include that invoiced by SEA to the final clients and transferred to the associate.

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Transactions with subsidiary well as the agreement for the aviation infrastructure and the companies provision, by the Company in verification and collection, on Commercial transactions between favour of SEA Energia, of ad- behalf of SEA, of airport and SEA and subsidiary companies are ministrative services (among security fees. An agreement is as follows: which legal, fiscal, planning also in place between the com- and control); pany and SEA Prime SpA for ad- i. the transactions between SEA iii. the transactions between the ministration services (including and SEA Handling SpA in liqui- Company and the Malpensa legal, tax and accounting ser- dation concern the provision Construction Consortium re- vices). to the subsidiary SEA Handling late to the provision of man- SpA in liquidation of some ad- agement services of the works Financial receivables and paya- ministration services (among for the expansion and improve- bles relate to centralised treasury which legal and administra- ment of the Milan Airports services (cash pooling) which SEA tion). These services were ter- which the Consortium under- undertakes on behalf of the sub- minated with the removal from takes on behalf of SEA. These sidiaries. the companies register of SEA services were terminated with Handling SpA in liquidation, on the removal from the compa- Transactions with associated July 25, 2017, following the nies register of Malpensa Con- companies completion of the liquidation sorzio Malpensa Construction The transactions between the procedure; in liquidation, on December Company and the associated ii. the transactions with SEA Ener- 14, 2017, following the com- companies, in the periods indicat- gia SpA concern the supply to pletion of the liquidation pro- ed below: the Milan Airports, of electric cedure; and thermal energy produced iv. the transactions with SEA Prime ◼◼ commercial parking manage- by the Co-generation plants, SpA concern the sub-conces- ment transactions at Orio al Se- located at the afore-men- sion contract for the General rio-Bergamo (SACBO) airport; tioned airports, for its energy Aviation management opera- ◼◼ commercial transactions with requirements, the agreements tions, at Linate airport, grant- reference to the recognition to relating to the division of the ed by SEA on May 26, 2008 and SEA of royalties on sales (Dufri- Green Certificates generated expiring on April 30, 2041. The tal); by the Co-generation plants contract concerns, specifically, ◼◼ rental of premises (Malpensa at the Milan Linate Airport, as the utilisation of the general Logistica Europa);

Annual Report 2017 • 233 SEA SPA - SEPARATE FINANCIAL STATEMENTS

◼◼ supply to SEA of catering ser- SEA SERVICES Srl thousand (Euro 220 thousand in vices (SEA Services); In 2017, SEA Services distribut- 2016). ◼◼ commercial transactions derived dividends to SEA for Euro 624 ing from the concession for the thousand. 11 Independent Audit distribution of fuel (Disma). DISMA SpA Firm fees The above-mentioned transac- In 2017, Disma distributed divi- The fees for the audit of the stat- tions were within the ordinary dends to SEA for Euro 234 thou- utory financial statements of SEA activities of the Group and under- sand. taken at market values. recognised to the independent audit firm Deloitte & Touche SpA Other transactions for the year 2017 amounted to 9 Directors’ fees Euro 102 thousand and Euro 53 with Related Parties thousand for other activities. In 2017, the remuneration for SACBO SpA the Board of Directors, including In 2017, SACBO distributed divi- social security contributions and dends to SEA for Euro 2,128 thou- 12 Commitments accessory charges, amounted sand. to Euro 428 thousand (Euro 481 and guarantees thousand in 2016). DUFRITAL SpA 12.1 Investment commitments In 2017, Dufrital distributed divi- The principal commitments for dends to SEA for Euro 1,679 thou- investment contracts under Con- sand. 10 Statutory sortium Regroupings are shown auditors’ fees below net of works already real- MALPENSA LOGISTICA EUROPA ised: SpA In 2017, the remuneration for In 2017, Malpensa Logistica Eu- the Board of Statutory Auditors, ropa SpA distributed dividends to including welfare and accessory SEA for Euro 1,236 thousand. charges, amounted to Euro 222

BREAKDOWN PROJECT COMMITMENTS

(Euro thousands) at December 31, 2017 at December 31, 2016 Design and extraordinary maintenance civil works and 21,532 6,403 plant at Linate & Malpensa Design and construction of new warehouses at Cargo 4,006 7,582 City of Malpensa Design and extraordinary maintenance of Linate & 3,465 Malpensa AVL plant

Construction of new frontage at Linate 3,381

Design and extraordinary maintenance flight 1,148 3,201 infrastructure and roadways at Linate and Malpensa

Construction of new de-icing area at Linate 777

Total project commitments 34,309 17,186

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12.2 Commitments principally relating to software The breakdown of the minimum for rental contracts and hardware components for the payments on the contracts of the At December 31, 2017, SEA has airport IT system, the rental of air- Company at December 31, 2017 is commitments on rental contracts port buses and the motor vehicles as follows: totalling Euro 24,526 thousand, fleet.

(Euro thousands) at December 31, 2017 Within 12 months 7,060 Between 1 and 5 years 17,466 Total 24,526

12.3 Guarantees At December 31, 2017, the sure- drawn down in June 2015 and The secured guarantees, amount- ties in favour of third parties June 2017 on the EIB line sub- ing to Euro 2,348 thousand at were as follows: scribed in December 2014; December 31, 2017, relate to the ◼◼ surety of Euro 25,000 thousand lien on receivables against loans ◼◼ two bank sureties, equal re- to Banca Popolare di Milano to provided by credit institutions on spectively to Euro 42,000 thou- guarantee credit lines received European Investment Bank funds. sand and Euro 46,000 thou- from companies within the sand, as guarantee on funds centralised treasury system;

Annual Report 2017 • 235 SEA SPA - SEPARATE FINANCIAL STATEMENTS

◼◼ surety of Euro 24,096 thousand 13 Contingent liabilities 15 Transactions relating in favour of ENAC, as guarantee of the concession fee; and disputes to atypical or unusual ◼◼ surety of Euro 3,500 thousand operations Reference should be made to the in favour of A2A Trading Srl as guarantee of the obligations explanatory notes in relation to In accordance with Consob under the provision of the nat- disputes on investments (Note Communication of July 28, 2006, ural gas contract signed be- 6.4 and Note 6.5), receivables the Company did not undertake tween A2A Trading Srl and SEA (Note 6.10) and operating risks any transactions deriving from Energia SpA; (Note 6.16). atypical or unusual operations, as ◼◼ surety of Euro 2,000 thousand set out in the communication. in favour of SACBO as guarantee for the parking manage- 14 Contingent assets ment at Bergamo airport; 16 Significant ◼◼ surety of Euro 2,000 thousand With reference to Judgment non-recurring events in favour of the Ministry of De- 7241/2015 of the Milan Court, and transactions fence as guarantee of the obli- confirmed by the Milan Court gations pursuant to the techni- of Appeal with Judgment No. Pursuant to CONSOB Commu- cal agreement of June 4, 2009 331/2017, as not all appeals have nication of July 28, 2006, in the following the advance delivery been made this contingent asset view of Directors, in 2017 the of the “Cascina Malpensa” area; was not recognised in the income Company undertook the follow- ◼◼ surety of Euro 102 thousand in statement as per IAS 37. ing non-recurring significant op- favour of the supplier Contract erations: GmbH for the rental of airport For further information refer- buses; ence should be made to “Subse- ◼◼ On May 30, 2017, the Authority ◼◼ Euro 370 thousand for other quent events to the year-end” in confirmed the re-assessment minor sureties. the Directors’ Report. of the fine, issued by AGCM in 2015 (totalling Euro 3,365

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thousand) on the conclusion accounts at June 30, 2017 of the Procedure contesting and the relative division plans, its dominant position in rela- authorising the Liquidator to tion to the tender procedures request the cancellation of for the disposal of SEA Prime the company (cancellation on SpA (formerly ATA Ali Traspor- July 25, 2017). The liquidator ti Aerei SpA), for the amount has arranged to pay the sole of Euro 936 thousand and the shareholder SEA SpA the sum communication to the Ministry of Euro 8,376 thousand result- for the Economy and Finance ing from the distribution plan. of the approval of the refund- The company recorded income ing of the total amount of Euro under “Investment Income 2,430 thousand (of which Euro and Charges” of Euro 1,705 1 thousand for default inter- thousand as the difference est). This income was recorded between the carrying amount in the account “Operating Rev- of the subsidiary at December enues” and under receivables 31, 2016 and the value of the until the actual collection; assets liquidated. ◼◼ With the conversion of De- cree-Law 244/2016 (commonly known as the “Milleproroghe Decree”), the legislature de- 17 Subsequent events cided to postpone the applica- to 2017 tion of system charges starting from January 1, 2018. There- Reference should be made to the fore, the amounts accrued in Directors’ Report. the years 2015 and 2016 were reversed; The Chairman of the Board ◼◼ On July 10, 2017, the Ordinary of Directors Shareholders’ Meeting of SEA Handling SpA in liquidation Pietro Modiano approved the final liquidators

Annual Report 2017 • 237 SEA SPA - SEPARATE FINANCIAL STATEMENTS

Board of statutory auditors’ report to the shareholders’ meeting of SEA – Società Esercizi Aeroportuali S.p.A. as per Article 2429, second paragraph, of the Civil Code

Dear Shareholders, rules for Boards of Statutory Au- It attended the Shareholders’ ditors, and also regarding the re- Meeting of May 3, 2017 and the during the year ended December sult for the year ended December meetings of the Board of Direc- 31, 2017, the Board of Statutory 31, 2017. tors, which met on 13 occasions, Auditors performed the super- noting that they were held in visory activities required by law, Oversight upon legal, compliance with the By-Laws in accordance with the Conduct regulatory and By-Law and the applicable legislative and rules for Boards of Statutory compliance regulatory provisions governing Auditors endorsed by the Italian The Board of Statutory Auditors their functioning. Accounting Profession (Consiglio oversaw compliance with law and Nazionale dei Dottori Commer- the By-Laws, maintaining con- In addition, the Board of Statuto- cialisti e degli Esperti Contabili). stant and adequate liaison with ry Auditors ensured the presence the Internal Audit Department of at least one of its members at The Board of Statutory Auditors and verified that this department the meetings of the committees also executed the role set out un- has the required capacity, auton- established within the Board. der Article 19 of Legislative De- omy and independence. It also cree No. 39 of January 27, 2010, verified that adequate collabora- Oversight upon compliance as the Internal Control and Audit tion and exchange of information with the principles of correct Committee, with SEA qualifying took place between the bodies administration and regarding as an Entity of Public Interest and departments undertaking related party transactions (EIP), as per Article 16, paragraph control functions. Reciprocal ex- In order to oversee compliance 1, letter a) of the stated Legisla- change of information also took with the principles of correct tive Decree No. 39/2010, as an place with the Board of Statutory administration, in addition to issuer of securities, i.e. the “SEA Auditors of the principle subsidi- attending, as stated above, all 3 1/8 2014-2021” bond listed on aries and associated companies. meetings of the Board of Direc- the market regulated and man- tors, the Board of Statutory Au- aged by the Irish Stock Exchange The Board of Statutory Auditors ditors: and as a company adopting a tra- met during the year 12 times to ditional governance model. carry out periodic verifications, ◼◼ received at its meetings infor- during which information was ex- mation from the Directors on The Board of Statutory Auditors changed on a regular basis with the general performance and in this Report outlines the activ- the heads of the company de- on the outlook, as well as on ities carried out during the year, partments and the Independent the most significant transac- broken down by each category Audit Firm. tions, in terms of size or nature, of oversight under the applicable carried out by the company

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and its subsidiaries. This in- Deloitte & Touche S.p.A, issued sued, finally, the Additional Re- formation is exhaustively out- on April 12, 2018 the reports as port for the Internal Control and lined in the Directors’ Report, per Article 14 of Legislative De- Audit Committee as per Article 11 to which reference should be cree 39/2010 and Article 10 of of Regulation (EC) No. 537/2014. made. On the basis of the in- Regulation (EC) No. 537/2014, formation made available, the respectively for the statutory fi- The Board of Statutory Auditors Board of Statutory Auditors nancial statements and for the oversaw compliance with the may reasonably consider that consolidated financial statements provisions of Legislative Decree these transactions carried out at December 31, 2017, prepared No. 254 of December 30, 2016 by the company comply with as per International Financial Re- concerning non-financial disclo- law and the By-Laws, and were porting Standards - IFRS – adopt- sure and information upon diver- not manifestly imprudent, in ed by the European Union. These sity, while the Independent Audit potential conflict of interest, reports indicate that the statutory Firm verified the preparation of hazardous or against the mo- financial statements and the con- the non-financial disclosure and tions undertaken by the Share- solidated financial statements of issued a limited assurance with holders’ Meeting, or such as to SEA provide a true and fair view regards to the consistency of compromise the integrity of of the statement of financial posi- the information provided against the company’s assets; tion of SEA S.p.A. and of the SEA that required by the Decree and ◼◼ did not note any atypical or un- Group at December 31, 2017 and against the reporting standards/ usual transactions with Group of the result and of the cash flows guidelines utilised for such disclo- companies, related parties or for the year ending at the same sure. third parties. The company date. With regards to the statu- does not hold treasury shares; tory financial statements and the The notes to the financial state- ◼◼ assessed the compliance of the consolidated financial statements, ments of the company indicate related party transactions with the independent audit firm stated the amount of fees accruing in the policy adopted by the com- that the Directors’ Report and the the year to the independent audit pany. The Board of Directors Corporate Governance and Own- firm and the amount regarding its in the Annual Report provid- ership Structure Report, limited network, including other services. ed exhaustive disclosure upon to the disclosure indicated at Ar- the transactions executed with ticle 123-bis, paragraph 4 of Leg- Taking account of the independ- subsidiaries and with other islative Decree No. 58 of February ence declarations issued by related parties, outlining the 24, 1998, are consistent with the Deloitte & Touche S.p.A. and the economic, equity and financial financial statements and were transparency report produced effects. prepared in compliance with law. by the former in accordance with Article 18 of Legislative Decree Oversight on the auditing of In addition, the Independent 39/2010 and published on its accounts and the independence Audit Firm, with regards to the website, in addition to the assign- of the Audit Firm statement as per Article 14, par- ments awarded to the company The Board of Statutory Auditors agraph 2, letter e) of Legislative and the companies belonging to held meetings with the manag- Decree No. 39 of January 27, its network by SEA S.p.A. and by ers of the Independent Audit 2010, concerning the identifica- the Group companies, the Board Firm, also as per Article 19, par- tion of significant errors in the of Statutory Auditors does not agraph 1 of Legislative Decree Directors’ Report, on the basis of indicate any critical aspects with No. 39/2010, during which it re- its knowledge and understanding regards to the independence of viewed the work plan adopted, of the company and the relative the Audit Firm. received information on the ac- overview acquired during the counting policies utilised, on the audit activities, declared to not Oversight of the internal accounting representation of the having any matters to report. It control and risk management main transactions carried out in indicated, as key aspects of the system and of the the year, in addition to the out- audit, the procedure concerning administrative and accounting come of the audit. It did not note the alleged State aid in favour of system any events or situations requiring Sea Handling and regarding the The Board of Statutory Auditors, indication in this Report. Restoration Provision for works also as the Internal Control and under concession. Audit Committee, as per Article The Independent Audit Firm, The Independent Audit Firm is- 19 of Legislative Decree No. 39 of

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27.01.2010, oversaw the adequa- assessment of operational risks, Observations and proposals cy of the internal control and risk in addition to their continuous with regard to the financial management system and of the monitoring, in support of the statements and their approval administrative-accounting sys- strategic choices and decisions In relation to that stated above, tem, in addition to the appropri- of management and for stake- on the basis of the activities car- ateness of this latter to correctly holder assurance. ried out in the year, the Board of reflect operating events. Statutory Auditors does not indi- Oversight of the adequacy of cate any reasons preventing ap- In this context, it requested and the organisational structure proval of the financial statements obtained all necessary information The Board of Statutory Auditors at December 31, 2017, as pre- from the Managers of the respec- acquired knowledge upon and pared by the Board of Directors tive Departments, undertaking all oversaw, to the extent of its re- and with regards to the motions verifications considered necessary mit, the adequacy of the organ- proposed regarding the alloca- through the direct examination of isational structure of the com- tion of the net profit. company documents. pany, reviewing and obtaining information of an organisational Milan, April 13, 2018 In particular: and procedural nature, through: THE BOARD OF STATUTORY AUDITORS ◼◼ it carried out investigations in ◼◼ the acquisition of information order to assess whether the from the managers of the com- Rosalba Cotroneo administrative-accounting sys- petent company departments; (Chairman) tem of the company is appro- ◼◼ meetings and exchanges of in- Rosalba Casiraghi priate to permit the presenta- formation with the Board of (Statutory Auditor) tion of a true and fair view in Statutory Auditors of the sub- Andrea Galli the financial statements of the sidiaries for the reciprocal ex- (Statutory Auditor) operating events; it periodical- change of data and information; Paolo Giovanelli ly oversaw the correct func- ◼◼ meetings with the Independ- (Statutory Auditor) tioning of the system through ent Audit Firm and the results Giacinto Sarubbi meetings with the managers of specific audit activities - car (Statutory Auditor) of the Administration, Finance ried out by the former; and Control Department; ◼◼ meetings with the Supervisory ◼◼ it examined the audit plans, Board set up as per Legislative the periodic reports and the Decree No. 231/2001. annual report prepared by the Auditing Department. These ******** reports do not indicate any critical issues and confirmed Other information that the at risk areas with re- The Board of Statutory Auditors gards to internal control have declares in addition to not having been recorded and monitored; received requests for the issue of ◼◼ it examined the periodic report opinions and was not required to of the Supervisory Board, set issue opinions on the basis of spe- up as per Legislative Decree cific regulations. No. 231/2001, which does not indicate events or situations In 2017, no petitions or notices which require highlighting in were made to the Board of Stat- this Report; utory Auditors as per Article 2408 ◼◼ it monitored the project activi- of the Civil Code. ties carried out in terms of risks, in particular the Enterprise Risk During the verifications, as de- Management (ERM) project described above, there were no signed to build a model for the more significant facts meriting identification, classification, mention in this Report. measurement, monitoring and homogeneous and transversal ********

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Auditors’ Report

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Annual Report 2017 • 247 Glossary GLOSSARY

Glossary

Bilateral Agreements Schengen Area ious parties through specific -ac Agreements which govern air Airport area in which direct flights tions (introduction of energy ef- traffic between two states, for to countries adhering to the ficiencies for example) and which destinations outside the Euro- Schengen Agreement operate, in receive an economic benefit, pean Union, established as fixed which systematic border controls therefore incentivising the reduc- arrangements and based on the have been abolished. tion of energy in relation to the principle of reciprocity. Through asset distributed. the signing of a bilateral agree- Currently the countries adher- ment, the maximum operable ing to the Schengen agreements Green Certificates capacity (in terms of flights and are: Belgium, France, Germany, Incentive structure for the use places offered), the number of Luxembourg, Netherlands, Italy, of renewable energy based on airlines permitted to operate Portugal, Spain, Austria, Greece, traded securities representing and the access points (in terms Denmark, Finland, Sweden, Ice- set quantities of CO2 emissions. of operable destinations) of the land, Norway, Slovenia, Estonia, The certificates are thereafter respective countries are estab- Latvia, Lithuania, Poland, Czech exchanged on the market by lished. Republic, Slovakia, Hungary, Mal- electricity producers in order to ta, Switzerland and Liechtenstein. correct imbalances in terms of ACI authorised carbon dioxide emis- Airports Council International. In- Business sions. ternational association of airport Sectors in which the SEA Group managers. The European head- operates: Commercial Aviation, Dual Till quarters are in Brussels. General Aviation, Energy. Tariff principle according to Airport Carbon Accreditation which fees are calculated, taking Certification promoted by ACI Eu- The various businesses are also account only of Aviation activi- rope with the technical support further divided by segment areas. ties, without therefore consider- of WSP Environmental (a leading ing Non-Aviation activities. London company involved in en- Services Charter vironmental consultancy), which Document containing informa- EBITDA establishes the introduction of a tion concerning the quality of ser- Earnings Before Interest, Taxes, series of actions for the control vices offered by airport managers Depreciation and Amortisation, and reduction of CO2 emissions and by airlines, which each man- equivalent to Gross Operating by airport managers, operators, agement company must prepare Margin. of aircraft and of those who work according to Presidential Decree at the airport. of December 30, 1998 and the It is calculated as the difference guidelines of ENAC in circular of between total revenues and to- A-SMGCS May 2, 2002 (ENAC Circular APT- tal costs, including provisions and Advanced Surface Movement 12). write-downs. Guidance and Control System: the system of ground guiding lights White Certificates ENAC which automatically bring aircraft White certificates, or more pre- The National Civil Aviation Au- from a pre-established point of cisely Energy Efficiency Securi- thority, the only Authority for entry to an expected point for ties, are securities which certify technical, certification, oversight take-off. energy savings achieved by var- and control regulation in the civ-

Annual Report 2017 • 249 GLOSSARY

il aviation sector in Italy, created ing and luggage distribution and Principal Cargo airlines under Legislative Decree of July reconciliation) and ii) passenger Airlines whose aircraft exclusively 25, 1997, No. 250. ENAC’s remit handling (Landside services, in- transport cargo. concerns the regulation of civil cluding Check-in and Lost&found) aviation, of control and oversight as well as iii) administration, re- Belly carrier of the application of regulations fuelling and catering, aircraft Airline company with mixed trans- and governs the administra- maintenance, goods and postal port configuration. tive-economic aspects of the air sorting. transport system. IATA FTE (Full Time Equivalent) International Air Transport As- The FTE is the monthly average sociation. International Organi- of all personnel administrated sation which represents interna- and seconded, re-proportioned tional airlines. according to category (part-time) and monthly hiring/departures Fifth freedom traffic rights movements. Rights for an airline from a country (for example “A”), which flies HDC (Headcount) from that country (“A”) to a third HDC includes all personnel at country (for example “B”) and year-end. from there undertakes a further flight to another country (for ex- HDE (Headcount Equivalent) ample “C”), to carry passengers The HDE is the monthly average and cargo, in addition from “A” to of all personnel administrated “B” and from “A” to “C”, also from and seconded, re-proportioned “B” to “C” and therefore between according to category (full-time two countries outside of its own or part-time) and monthly hiring/ country. departures movements. Single till Handler Tariff principle which determines The operator that undertakes the regulated tariff based on handling services, or rather all both Aviation and Non Aviation those ground assistance services activities. to carriers governed and listed in Attachment A of Legislative De- Slot cree No. 18 of January 13, 1999 – Permission, given by an airline, which enacts EU Directive 96/67/ to use the entire range of airport EU of October 15, 1996 – such as infrastructure necessary to oper- i) ramp handling services (Airside ate an air service, in a coordinat- services among which passenger ed airport, at a date and a time boarding and disembarking, lug- assigned to the same airline for gage and goods, aircraft balanc- landing and take-off.

Annual Report 2017 • 250 The SEA Group’s focus on environmental protection, through the adoption of targeted initiatives, has significantly reduced CO2 emissions.

Milan Malpensa and Milan Linate once again confirmed their exceptional record at European level, achieving “Neutrality” under the Airport Carbon Accreditation Initiative. SEA - Società per Azioni Esercizi Aeroportuali

Milan Linate Airport - 20090 Segrate, Milan Tax Code and Milan Companies Registration Office No. 00826040156 Milan REA No. 472807 - Share Capital Euro 27,500,000 fully paid-in www.seamilano.eu Annual Report 2017 • 253