The airport economic regulator that is mandated to determine the tariffs of both the Airports Company SA (ACSA) and the Air Traffic and Navigation Service (ATNS) is a “phantom regulator” that will cost South Africa dear. That’s the message from International Air Transport Association (IATA) CE Giovanni Bisignani.
The combative airline association chief was in South Africa this week for the World Economic Forum Africa. He also met Minister of Transport Sibusiso “S’bu” Ndebele and told him he was concerned that the regulator would even entertain the increases ACSA and the ATNS wanted to pass on to airlines and ultimately airline passengers.
ACSA had wanted an “outrageous” 190% increase in airport taxes for the period 2010-2015 to pay for World Cup related airports improvements, including the R7.2 billion King Shaka International Airport (KSIA) outside Durban, which many airlines described as unnecessary. The ATNS wanted 77% more over the same period. “The regulator said that was too much, and granted 71% instead,” Bisignani said at a media conference in Sandton yesterday. He also slammed the regulator for granting ACSA a 129% hike.
He said the cost would amount to some US$1.2 billion that would hardly encourage tourism, a central plank of the government’s New Growth Path economic plan. “ACSA is taking legal action to ensure they get 190% because they believe it is reasonable. Unfortunately a monopoly provider can play this game,” he said. “When you have a monopoly and there is no competition you need a regulator that is independent, that is effective,” he said. “There is no situation in the world that is like this,” Bisignani said.
“I told the minister that it can’t go on like this.” The tariff increases will make OR Tambo in Johannesburg one of the most expensive airports in the world for its size, Bisignani added. The increases are needed because ACSA performed “poorly” in the previous regulated period, and the company built the “unneeded” KSIA, he said.
Business Day reports ACSA warned earlier this month that it will make a loss — its first since its establishment in 1993 — of R500 million for this past financial year. The loss was the result of a delay in the sale of the old Durban airport and uncertainty over the tariff increase. The state-owned operator of 11 South African airports spent R17 billion upgrading airports and building new ones ahead of the Soccer World Cup that was hosted last year in June.
Bisignani also spoke out against a proposed South African airline carbon tax. “We’re against those types of taxes,” he said. He added they were “allowed but not the best way to attract tourists”. The IATA CE added that he had written to the minister some weeks ago to reconsider the move. He had far harder words for the European Union’s (EU) emission trading scheme, which he called a violation of the 1944 Chicago Convention that underlies the regulation of global civil aviation. “It is illegal,” he added. There are concerns the scheme would hijack popular concern for the environment to raise more taxes to assist governments left cash strapped after the 2008 banking crisis.
The IATA chief noted that global aviation was to blame for 2% of global carbon emissions, versus 18% for motor vehicles and 38% for electricity generation. Bisignani avered that although airlines were just a small contributor to global warming, it has for some time been working to reduce its footprint through the promotion of biofuel and improving efficiencies, including working with governments to shorten air routes. IATA has also long proposed the integration of European airspace, with the EU setting 1995 as implementation date. But the idea, which would have a direct impact on the environment, has remained just talk.