Acsa eyes Pan-African expansion as it sees record R2bn profit

2017-09-18 15:30 - Selene Brophy
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Cape Town - Growing international passenger arrivals and a move away from aeronautical-based revenue is how Acsa is expecting to keep itself within the financial black, after reporting some R2bn profit in 2016.

Acsa’s acting CFO, Dirk Kunz. says the company is very proud of its latest performance, which is expected to stand it in good stead as it undertakes a number of short-term investments in infrastructure enhancement and diversification.

The organisation is currently adjusting to a 35.5% passenger tax cut - in play since March this year.

“Operationally, we are adapting well to a new tariff regime from the regulator which required a 35.5% reduction for the 2018 financial year with increases in the following two years of 5.8% and 7.4%,” says Kunz.

Presently aeronautical revenue contributes an estimated 63% to Acsa's total revenue.

“The overall financial position of the company therefore remains healthy despite regulatory uncertainty and difficult economic conditions,” says Acsa CEO Bongani Maseko.

SEE: Comair: Acsa's 35% passenger tax cut is not enough

Key economic drivers for the airport

Speaking to Traveller24 both Maseko and Kunz. agree that the 2016 financial results success, “the best performance in the company’s history”, is due to large international passenger growth to South Africa. 

A total of 20.0 million (2016: 19.4 million) passengers departed from the nine airports it owns and operates.  While domestic passenger growth was subdued at 2.2%, the Company reported strong growth of 6.1% in international departing passengers. 

Cape Town International Airport’s record 10 million arriving and departing passengers for 2016, as well as King Shaka International Airport’s total of more than five million passengers for the first time, have all added to the kitty. 

SEE: More direct flight routes on the cards as Cape Town Air Access and SAT join forces

Route growth

According to Acsa, aircraft landing volumes were flat for domestic flights and up by 2.5% for international flights, indicating higher passenger utilisation of scheduled flights. 

Going forward, Acsa's strategy is to concentrate more on routes development. Maseko says that the Cape Town Direct routes Access initiative has been the most successful thus far.

It has been responsible for negotiating ten new routes and 11 route expansions since its inception in 2015, adding over 650 000 seats and thereby helping Cape Town International Airport (CTIA) reach the 10 million passengers mark for the first time in 2016. 

Maseko says it will also be working together with the Dube Ports Trade and Gauteng Route Development committee - together with South African Tourism, as part of its "deliberate strategy to steadily grow passenger traffic" from each of its key airports.

Added to this he says Acsa plans to drive best practice from these initiatives, to help benefit each city, "with key elements of information sharing already happening".

Diversification of non-aeronautical revenue

While Acsa has met 76% of its performance objectives in the period under review, which for the first time included additional measures such as reducing environmental impact, improving connectivity to the regions served, providing equitable access to safe airports, and leadership culture.

“We now have 17 measures of performance that underpin our three-pillar strategy to run airports, develop airports and to grow our footprint. This ensures that the drivers of performance are moving us in the desired direction and that all employees understand how they make a difference,” says Maseko.

The three-pillar strategy captures objectives of running airports efficiently and introducing innovations, improving capacity and infrastructure, and producing more impactful outcomes for the country.   

SEE: Acsa increases its global management presence

Kunz adds that Acsa has refined and enhanced its transformation strategy to focus on seven sectors which account for the bulk of its procurement. These sectors are information technology, construction, property, retail, advertising, car rental and baggage handling.  

According to Maseko, Acsa's Strategy 2025 to outgrow its non-aeronautical profits , which he says needs to be at 55% instead of the current 65%, will see less of a dependency on regulator tariffs.  

Citing success such as Ghana and Brazil, Maseko says Acsa is in discussion with three other African countries to manage and run airport operations.

"While airports are still seen as sovereign assets across most of Africa, Acsa sees development in air traffic across the continent as an opportunity for growth," says Maseko in light of 40 African Union-member states committing to Open Skies for Africa, signing the Yamoussoukro Decision.

SEE: Lucrative Africa airline industry 88% outsourced to international carriers

Infrastructure development

Maseko says Acsa expects to finally put the tender for the realignment of the Cape Town runway out to tender early in next year, with discussions still at the design stage.   

The re-aligned primary runway, Runway 18-36, will be 3 500 m in length and will be built to international specifications, allowing larger aircraft, like A380s and other Code F aircraft, to land here. The upgrade will amount to R3.18 billion, with the project expected to be completed by December 2021.

He also says plans to redo the Arrival Domestic terminal at Cape Town International should be out for tender towards the end of this year, with actual changes to the terminal expected to start happened in the new year.   

SEE: Cape Town's new runway a step closer after DEA green light

  • Added infrastructure changes on the cards to enhance growth and improve capacity:
  • - New Aprons for aircraft at OR Tambo
  • - Refurbish both international Terminals at Cape Town International and OR Tambo International.
  • - Taxi Way work being in King Shaka

"If the current growth at King Shaka is sustained, then Acsa expects to bring forward the expansion of its international terminal.  We’ve only got two wide-body stands and during certain days of the week when there are three wide-bodies it becomes quite mission to process passengers."

Maseko says Acsa only expects to action this within a year or two at best.

What to read next on Traveller24:

Acsa aviation barometer: New direct routes spike SA passenger growth

More direct flight routes on the cards as Cape Town Air Access and SAT join forces 

Subdued growth across SA's major airports - Acsa