Annual Report 2019 The business year 2019 This is a courtesy translation of the German original of the DFS Annual Report 2019. It is provided solely for your information and for the convenience of English-speaking readers. In the event that the English and German versions permit different interpretations, the German text shall prevail. 3 DFS Deutsche Flugsicherung GmbH Report of the Supervisory Board Type and scope of review and consultation In the business year 2019, the Supervisory Board performed its functions as prescribed by law and the Articles of Association. It regularly advised and monitored the Board of Managing Directors and was involved in decisions of fundamental importance to the company. In fulfilling its tasks, the Supervisory Board was supported by the audit committee, the committee for the commercial business, the personnel committee, the project committee and the conciliation committee. The committees thoroughly discussed the resolutions to be adopted and prepared recommendations for the decisions to be taken at the plenary meetings. The committee for the commercial business also provides general advice to the Board of Managing Directors on the further development of the commercial business. To this end, the committee was continuously informed about important projects in the commercial business. In the business year 2019, there were no changes to the composition of the Supervisory Board. The Board of Managing Directors reported to the Supervisory Board on the basis of quarterly reports in accordance with Article 90(1)(3) of the German Stock Corporation Law (AktG). The Supervisory Board was informed on important issues on an ad hoc basis. The Board of Managing Directors reported to the Supervisory Board in due form. During the business year 2019, the Supervisory Board held four ordinary meetings to discuss the situation and development of the company. There were two extraordinary meetings, in which the appointment of a fourth managing director and the early departure of the Managing Director Operations, Mr Robert Schickling, were discussed. The Supervisory Board specifically dealt with the following topics at its meetings: x the 2018 annual financial statements and consolidated financial statements, the management report, the group management report as well as the audit report on the 2018 annual financial statements and consolidated financial statements x the 2020 group economic plan, with the associated investment and financial plan x the traffic development and capacity situation x the commercial business strategy x the DFS programme for the future, Sprint2024 x the tender submitted by DFS Aviation Services GmbH (DAS) for the provision of air navigation services at regional airports in Spain In addition, the Supervisory Board approved the follow-on investment for the remote tower control (RTC) project. 4 Result of the review The Supervisory Board observed that the course of consolidation adopted continued to prove its worth in the year under review. Measures to increase capacity partially negated this success in 2019. However, the cost-cutting measures are proving to be sustainable in all other respects. The Group's strategy programme (five-point programme) has achieved the intended effect in its other elements as well. It should be emphasised that the traffic growth in 2018 and 2019 had not been predicted. On the basis of the audit report prepared by the auditors Mazars GmbH & Co. KG, the Supervisory Board discussed the 2018 annual financial statements and consolidated financial statements and the management report including conclusions in accordance with Article 53 of the German Budgetary Principles Act (HGrG) as well as the group management report. The audit committee met for discussions in advance. The comprehensive control and risk management system established in the company was included in the audit. The auditors were present at the discussions. They gave an account of the key results of their report and were available to answer questions. The Supervisory Board found no exceptions to be taken against the audit report and the auditors' findings. It proposed that the Shareholder Meeting approve the annual financial statements and the consolidated financial statements. The Supervisory Board reviewed the proposal of the Board of Managing Directors on the use of profits and agreed to it. The Supervisory Board would like to thank the Board of Managing Directors for its work in the interests of the company and the successes achieved in 2019. Moreover, these successes were made possible thanks to the commitment shown by all members of staff and the staff councils. The Supervisory Board Dr Martina Hinricher Chairperson Dr Martina Hinricher 5 DFS Deutsche Flugsicherung GmbH Members of the Supervisory Board Chairperson Deputy Chairperson Dr Martina Hinricher Markus Siebers Ministerialdirektorin (retired) Air traffic controller Frank Best Carmen von Bornstaedt-Radbruch Colonel (G.S.) Ministerialrätin Federal Ministry of Defence Federal Ministry of Defence Antje Geese Dr Angelika Kreppein Ministerialdirigentin Regierungsdirektorin Federal Ministry of Transport and Digital Federal Ministry of Finance Infrastructure Sabrina Leitzbach Dr Carl-Stefan Neumann Air traffic controller Bagus Neumann GbR Peter Schaaf André Vöcking Air traffic controller ANS engineer Andrea Wächter Jörg Waldhorst Head of Hamburg Tower Senior expert air navigation obstacles Correct at 31 December 2019 6 Members of the Advisory Council Chairperson Steffen Bilger Member of the German Bundestag Parliamentary State Secretary Dr Constantin Alsheimer Frank Annuscheit Chairperson of the Management Board Member of the Board of Managing Mainova AG Directors Commerzbank AG Dr Jürgen Bierbaum Chris Fischer Hirs Alternate Member of the Boards Group Chief Executive Officer ALTE LEIPZIGER – HALLESCHE Group Allianz Global Corporate & Specialty AG Ingo Gerhartz Prof Dr Elmar Giemulla Chief of Staff, Air Force President German Air Force Command Aircraft Owners and Pilots Association (AOPA Germany) Winfried Hermann ( Member of the Harry Hohmeister Land Parliament ) Member of the Executive Board Minister Deutsche Lufthansa AG Ministry of Transport (Member of the Advisory Council until Baden-Württemberg March 2019) Michael Hoppe Dr Detlef Kayser Chairperson Member of the Executive Board BARIG – Board of Airline Deutsche Lufthansa AG Representatives in Germany e.V. (Member of the Advisory Council from March 2019) Daniela Ludwig Kirsten Lühmann Member of the German Bundestag Member of the German Bundestag (Member of the Advisory Council until October 2019) Oliver Luksic Prof Dr Bernd Sanner Member of the German Bundestag Medical Director AGAPLESION BETHESDA KRANKENHAUS WUPPERTAL gGmbH Dr Stefan Schulte Ralf Teckentrup President President German Airports Association (ADV) German Airline Association (BDF) Chairperson of the Executive Board CEO of the Executive Board Fraport AG Condor Flugdienst GmbH Klaus Thiemann Correct at 31 December 2019 7 Group management report 1 Group organising principles ............................................................................................... 10 2 Report on economic position ............................................................................................. 21 3 Segment reporting ............................................................................................................. 45 4 Personnel .......................................................................................................................... 54 5 Compliance ........................................................................................................................ 59 6 Risk report ......................................................................................................................... 61 7 Outlook .............................................................................................................................. 67 Consolidated financial statements Consolidated statement of comprehensive income ........................................................... 76 Group balance sheet ......................................................................................................... 78 Group statement of changes in equity ............................................................................... 80 Consolidated cash flow statement ..................................................................................... 81 Notes ................................................................................................................................. 82 Notes to the statement of comprehensive income ............................................................ 108 Notes to the balance sheet ................................................................................................ 117 Additional disclosures ........................................................................................................ 149 Independent Auditor's Report ............................................................................................ 177 Acronyms and abbreviations ............................................................................................. 182 8 Group management report for the business year 2019 9 Group management report 2019 1 Group organising principles 1.1 Structure of the Group DFS Deutsche Flugsicherung GmbH (DFS) manages the DFS Group as the ultimate parent company and carries out operational activities itself. The subsidiary and investment entities