Taking off – ACSA

2017 was a significant year for the Airports Company South Africa (ACSA) as they planned new corporate strategies and saw an increase in revenue. The airports management company hopes for a similar trajectory in 2018.

ACSA plays a major role in the world of South African aviation. The company operates nine airports across South Africa, including three of the main ones: Tambo International, Cape Town International and King Shaka International. ACSA also has a presence in Brazil, India and Ghana. The majority shareholder is the South African Government (74.6%).

ACSA’s service in South Africa and beyond has gone from strength to strength; last year’s review of the company’s assets indicates that ACSA’s revenues increased by 6.8% to R8.3-billion in 2016, compared with R7.8-billion in 2015. Annual profit rose by 20.3% from R1.6-billion to R1.96-billion. Additionally, interest-bearing borrowings declined by 13.1% from R11.3-billion to R9.8-billion and capital expenditure decreased by 31.3% to R893m.

Finally, but importantly, the company managed to reach 96% of its performance indicators, in regard to financial metrics, customer metrics and process metrics.

Reasons for ACSA’s successful turnaround are plentiful. Last year’s great performance was boosted by three main factors. One was the introduction of new routes with Kenya Airways and Ethiopian Airlines. ACSA also increased flight frequencies on existing routes: notably with British Airways and Emirates Airlines. The second factor of success was the notable increase in passenger numbers, up from the previous year.  Finally, there was an increase in revenues from the company’s nonaeronautical (mainly commercial sector) activities and return on equity was 11.3% compared to 11.5% in the previous period.

On top of this, the Acting Chief Financial Officer, Dirk Kunz, revealed that ASCA has managed to significantly reduce its debt levels throughout 2017. Mr Kunz said reducing debt levels has been a deliberate strategy of the company over the last few years. Speaking to Fin24, he said:

We have adapted this debt reduction strategy early and used every potential opportunity to achieve this goal. The real impact was to have strengthened our balance sheet so that, if further infrastructure investments are needed, we will have the capacity to fund those

According to Mr Kunz, the overall financial position of the company remains healthy despite regulatory uncertainty and difficult economic conditions. He said:

“In spite of the economic climate, we have seen growth in revenues, especially from international passengers. On the back of that we could get increased turnover. We are proud of our performance.”

Now that company revenue is on the rise, new airports are being created, expanded and developed. The CEO of ACSA, Bongani Maseko, offered a leading example. He said:

“We’re on the verge of signing a contract to run Mthatha Airport, and we’re doing work at Wonderboom Airport.”

ACSA’s overall strategy is to expand the company’s footprint. On speaking to the press, the CEO suggested that the company’s target areas were Africa, Latin America and Asia, which encompasses “an offering for the rest of the continent.” Mr Maseko took this sentiment further, saying: “We have an offering for the rest of the world.” He cited the company’s success at São Paulo International Airport in Brazil, which was ranked first in terms of transported passengers, aircraft operations, and cargo handled in 2012. To this day, São Paulo remains the second busiest airport in Latin America by passenger traffic (38,985,000 in 2015) after Mexico City International Airport.

São Paulo provides a small piece of a much larger picture for ACSA and its international airport progress. Last year, International arrivals increased by 3.91%, which translates to an extra 55,990 passengers, bringing the total to 1,486,352 passengers. International departures rose by 6%, with an increase of 83,593 passengers, totaling 1,477,089 passengers.

Figures of passenger numbers have been obtained through the Aviation Barometer that was released for the third quarter of 2017. The Aviation Barometer is published quarterly by Airports Company South Africa to provide an indication of current air travel trends in South Africa. The Barometer is based on the count of passengers using the network of nine airports owned and managed by the company in South Africa, where the figures compare arrivals and departures in the latest quarter with the same quarter in the previous year.

The final results from the Aviation Barometer are as interesting as they are impressive. ACSA found an overall marked increase of 5% in the number of arriving and departing passengers over the quarter, with 2.5 million people passing through the doors.

The passenger figures for King Shaka International Airport was underpinned by an 8.7% rise in domestic arrivals and an 8.3% increase in departures, more than offsetting a decline of 3% in international passengers.

Cape Town International continued to enjoy strong growth in international arrivals, up by 20.4%, and international departures, up by 22.5%.

Among regional airports, George Airport continued to experience strong growth, with total passenger numbers rising by 8.5%. O. R. Tambo International Airport, operating off a higher base of more than 20 million passengers a year, saw total passenger numbers rise by 2.9%, an increase of 154,445 passengers;

After a difficult second quarter, the domestic air travel category recovered with arrivals up by 4.6% and departures rising by 4.9%.

Lastly, the strongest performers were King Shaka International Airport and Cape Town International Airport, with increases of 7.9% and 6.6% respectively.

Although ASCA have been receiving positive data on their many airports, future custom, and further increases in revenue, can be optimised further according to the 2025 Corporate Strategy. The 2025 vision is to be ‘the most sought-after partner in the world for the provision of sustainable technical advisory and consultancy services by 2025.’ It involves a three-pillar strategy to be implemented and maintained at all times- namely to run airports, develop airports and grow their footprint sustainably. The aims and goals have been specifically noted in the strategy. By the year 2020, the company will ‘extend and defend’ their business. By 2025, they will ‘build emerging businesses and drive medium-term growth’. Beyond this, they will ‘create viable options to ensure the Company’s success in the future’.

As well as providing a world class service in airplane transportation infrastructure, the 2025 Corporate Plan also ‘remains committed to the transformation imperatives of the National Development Plan’. It will ‘seek to aid the eradication of poverty through various programmes and initiatives.’ The Strategic Direction page on ACSA’s website reveals that, socially, they ‘position [them]selves in a manner that guides development while embodying equality and fairness. The Company’s and country’s needs inform our transformation model and activities, which directly relate to our strategy.’  

ACSA stated:

Our outlook remains positive, primarily due to the effort placed in supporting our growth using our governance framework and operating model to drive our strategy which is aligned to the impact on business, people and society and the environment towards achieving Vision 2025 statement.”

In fact, achieving the vision is looking ever more possible, as ACSA has started to implement elements of its new operational strategy, according to the Chairperson Skhumbuzo Macozoma. First, the company allocated R4.5 billion for 2017 to 2019 to fund the new plans. Then, it started to recruit for some of the 50,000 jobs that will be available in the the next nine years. This is part of a new corporate strategy to grow the airport management company. According to Mr Maseko, “the job opportunities will be created from our capital expenditure without outside help”.

Subsequent steps are now being put in place, and the start of a new year and the new strategy can only mean promising things for South Africa’s major airport management company.