ACSA reports R220 million loss


The Airports Company of South Africa has made a R220 million loss over the 2011 financial year, after recording a R901 million operating profit last year. The company says it expects to return to profitability next year, mostly by raising tariffs.

On Monday the company announced a ‘lower than expected’ net loss of R220 million for the year ending March 31. Its revenue grew by a third to R4.6 billion in the 2011 financial year. The non-aeronautical revenue component (retail, advertising, parking, car rental, property and consultancy) rose by 22% to R2.23 billion, the company said. The rest of its revenue (aeronautical) derived from things like passenger service, aircraft landing and parking charges.

ACSA’s loss comes in the wake of its largest ever infrastructure expansion programme that was implemented to cater for the 2010 Soccer World Cup. The multibillion rand programme saw the opening of the King Shaka International Airport in Durban and the refurbishment of ACSA’s countrywide network of airports.

ACSA’s Managing Director, Monhla Hlahla, said that the year under review was an endorsement of ACSA’s expansion programme and ability to support the world-class infrastructure with outstanding customer service. However, ACSA admitted that the massive level of capital expenditure since 2006 ‘has caused a structural shift in the balance sheet’ as the investments were mainly financed through debt.

Acsa is R16 billion in debt following its massive R17 billion infrastructure investment project. The new Central Terminal at OR Tambo International cost R2.2 billion while the new King Shaka International Airport cost R6.8 billion, according to ACSA.

Fortunately for ACSA, it has seen an increase in passenger movement during the 2011 financial year, with year-on-year traffic growing by 6% to 17.5 million passengers. “This improvement in traffic is attributable to the global economic recovery (i.e. the increase in disposable income and improvement in the global real GDP rate) and most certainly to the 2010 FIFA World Cup,” ACSA said.

In spite of the ‘tough operating climate’ ACSA expects to return to profitability next year, especially now that its expenses have come down dramatically – during the year under review, capital expenditure dropped 90% to R500 million.

Assisting its recovery will be its tariff increases, which it has been struggling to push through. “With the regulatory regime partially resolved, we are confident that the business will return to profitability and stronger financial position for the 2012 financial year,” said Priscillah Mabelane, ACSA’s Finance Director.

From October 1, ACSA will increase passenger service, landing and aircraft parking charges by almost 70%. This follows a 34.8% increase approved by the ACSA Regulator effective April 1, but delayed for implementation until October 1 following the issuing of final permission by the Regulator in May, PoliticsWeb reports. ACSA originally requested a 133% hike for 2010 and 2011.

A 33% increase in tariffs was granted on April 1 last year while a 5% increase will be implemented next year, a 5.6% increase in 2013 and a 5.5% increase in 2014, resulting in a cumulative increase of 161% over five years.

The increases have caused a lot of concern for passengers and those in the aviation industry, who say they were not consulted about the matter. “Our greatest concern is the ultimate impact on the local travelling public,” said Chris Zweigenthal, CEO of the Airlines Association of Southern Africa (AASA). “Prevailing competitive pressure, against a backdrop of an already weak state of the industry, makes it highly unlikely that airlines will be able to continue absorbing the costs from their already small margins. They will have to recover the costs from passengers by increasing airfares for both domestic and international customers.”
“The regulatory processes over the past few years, which have resulted in this unacceptable situation, have been acknowledged by all parties including the Airline industry, ACSA, the Regulator and the Department of Transport as being unacceptable,” Zweigenthal told PoliticsWeb. “All parties have therefore committed to working together over the next six months to review the current regulatory process.”

Hlahla said that, in anticipation of the next Regulatory Permission, which is due to start on April 1, 2013, the Department of Transport has developed a roadmap to address the shortcomings in the regulatory process, as well as the creation of regulations to support the intentions of the Airports Company and Air Traffic and Navigation Services Acts. The roadmap also aims to review the funding model for both companies.