Profitable Acsa on big infrastructure drive

Airports Company South Africa (Acsa) will be spending about R20 billion on infrastructure in the next three years at three of its major airports.

The biggest projects have been funded and are ready to go on tender, Acsa CEO Bongani Maseko told Moneyweb.

Maseko was speaking at the announcement of Acsa’s annual results for the year ended March 31, 2018. The company recorded revenue of R6.6 billion, down 20% from the previous year due to a 35.5% drop in aeronautical tariffs.

These tariffs are determined by the regulator and the drop followed an over-recovery in the previous years. The tariffs provided for the recovery of infrastructure spend that Acsa planned to do, but which was delayed, says Maseko.

Acsa’s non-aeronautical revenue, from streams like parking, retail, advertising and property rental, balanced the lower tariffs. The lower tariffs were further mitigated by cost containment, improved performance from operations outside South Africa, the appreciation of the investment portfolio and improved passenger numbers at Cape Town and King Shaka International Airports.

Nevertheless, Maseko says some non-aeronautical portfolios could have performed better. “We are investigating the drivers in those portfolios to understand how we can improve their performance,” says acting financial director Dirk Kunz.

Acsa’s profit for the period dropped by 58% to R843 million. Its gearing ratio improved from 48 in 2014 to 22 in the reporting period.

Acsa’s Mumbai operations made a positive contribution while losses from the Guarulhos International Airport in Brazil narrowed by R481 million.

Maseko said Acsa will be funding the infrastructure drive from its own balance sheet for the next three years. Acsa does not currently have any government guarantees. It has an investment grade rating from credit rating agency Moody’s.

The construction programme includes a R4.5 billion realignment of the runway at Cape Town International as well as the construction of a new domestic arrivals terminal to the value of R750 million. The international departures terminal will also be redeveloped to increase capacity, strengthen security and enhance retail, commercial and passenger lounge facilities.

At OR Tambo International Airport near Johannesburg, Acsa will increase aircraft parking facilities at a cost of R2 billion and expand Terminal A arrival facilities at a cost of about R1 billion. Plans are also underway to develop the airport’s western precinct and midfield cargo terminal to accommodate growing demand. The estimated cost for this amounts to about R2 billion.

A smaller project at King Shaka International will expand the runway and provide for increased aircraft parking.

Aircraft landing volumes grew by 1% for domestic flights and 3% for international flights. Acsa reported a total of 20.2 million departing passengers (2017: 19.3 million) from the nine airports it owns and operates.

Domestic passenger growth was 4%, with the number of departing international passengers growing by 5%.

Maseko says this growth was largely due to the successes of the air access initiatives for Cape Town International and King Shaka International. Acsa has been in touch with the Gauteng government and, as a result, similar initiatives are planned for OR Tambo, he says.

In the current year the aeronautical tariffs have increased by 5.8% and in the coming two years there will not be any increase. Maseko says Acsa is in consultation with the regulator about ways to smooth the tariff path as airlines object to tariff volatility.

Maseko’s employment contract has been extended to the end of November and the new Acsa board has started engaging him about the position thereafter.

Maseko confirmed that Acsa’s results have not been approved by the Annual General Meeting (AGM). The meeting was scheduled to take place earlier this week, but was postponed to October 12. He says AGM approval is, however, not a legislated requirement and that board approval is adequate and has been obtained.

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