ACSA seeks to prevent regulator from awarding lower tariff hike: report

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The Airports Company SA (ACSA) is trying to prevent the economic regulator from publishing its final permission in which the tariff hike granted for the 2010/11 government financial year has dropped to 40.7% from the 60% that was proposed in the draft permission.

Business Report newspaper says Mohammed Sizwe, the chairman of the economic regulator for ACSA last week told it he had received correspondence from the state-owned enterprise’s attorneys stopping the regulator from publishing the permission, saying the Minister of Transport had not yet approved it. “The minister does not have to approve the permission. I think there is a misunderstanding about how the act works. I forwarded the letter to our legal team and we will see how it goes,” Sizwe said.

ACSA yesterday confirmed to the broadsheet that it had taken the matter under legal review and said a statement would be issued today. ACSA had asked for a 133% increase for passenger service charges and aircraft parking and landing fees, a move that has been condemned by the International Air Transport Association (IATA) and airlines. Sizwe said the tariff for 2010/11 was revised down because there were transactions which had not been taken into consideration when the regulator made the draft determination. In addition to the 2010/11 hike, ACSA has been given a 25.6% raise for 2011/12 and 16.2% in 2012/13. The hikes for 2013/14 and 2014/15 are unchanged at 5.5% and 5.6%, respectively.

The parastatal warned that it would ask for hefty increases when the regulator changed the funding model to say the firm must deliver infrastructure before asking consumers to pay for it. ACSA has spent about R16 billion upgrading its airports and building a new one in Durban.

Business Report in January reported that Sizwe was opposed to the increase in order to “protect passengers and struggling airlines.” IATA last year added ACSA to its “hall of shame” for proposing the increases at a time global airlines are struggling, with the industry expected to post a loss of over US$2.8 billion this year, after losses last year of about US$9 billion and US$8 billion in 2008.

Sizwe then said the regulator rejected ACSA’s proposed hikes because there were costs that the state-owned airports company wanted to pass on to the public that the regulator felt should not be borne by passengers, such as the R415 million cost to open the new La Mercy airport earlier than scheduled. There were also cost escalations that the public would end up having to pay for. “While we understand that because of the World Cup Acsa needed to open the airport earlier, that should not be paid for by the public. (ACSA) should talk to the shareholder [the government],” he added. “In relation to contract escalations, we will understand if costs go up by say 20%, but not 100% and more, which was the case with ACSA,” he said in January.

The regulator two years ago changed ACSA’s funding model, saying the company should deliver new infrastructure first and then recover the money. The state-owned enterprise had warned that this might mean asking for hefty increases later.

Chris Zweigenthal, the chief executive of the Airlines Association of Southern Africa, said even though there would be relief in the first year, the cumulative increase over the first three years was still the same as the draft permission. “The cumulative increase over three years in the draft permission was about 107% and in the final permission it is 105%… It is disappointing and we are still considering our position and perhaps a response to the regulator,” said Zweigenthal.



Vimla Maistry, the acting head of group corporate affairs at SAA, said: “Any increase by the regulator of airport charges will have an impact on the customer as this charge will be passed onto the customer… We hope that improvements to the infrastructure at our airports will ultimately result in improved customer satisfaction.”