Airports Company South Africa (Acsa), the state company that controls nine of the country’s main airports, significantly narrowed its losses to R1 billion in the year to end-March and believes it “is on the road to recovery”.
It reported a R2.6 billion loss in its previous financial year.
Acsa CEO Mpumi Mpofu said on Thursday the year under review was filled with uncertainty and unpredictably, but Acsa has started the recovery “from the treacherous year of the Covid-19 pandemic in 2020/21”.
“Acsa has shown much resilience and agility, perseverance and responsiveness to the curve balls and twists that characterised the Covid-19 year.
“We are in a strong position with indicators showing an upward trajectory and recovery on the back of a very prudent strategy, tactics and tactical manoeuvres informed by world best practice,” she said.
Acsa chief financial officer Siphamandla Mthethwa said the current corporate plan indicates Acsa returning to profitability by 2023/24.
Mthethwa said the group is in a significantly better position than it was a year ago.
He said Acsa continues to limit its expenditure, focus on the business of running its airports, and has implemented a revised governance framework and operating model – which means it is “much leaner and much more fit for purpose as a group of companies”.
Mthethwa said Acsa launched a voluntary separation package and early retirement programme in the 2020/21 financial year, with the first phase completed in March 2021 and the second phase in March 2022.
He said Acsa’s headcount of 3 260 employees at the beginning of 2021 has now been reduced to 2 357.
Voluntary separation and early retirement accounted for 654 of the 903 employee terminations, with the balance due to resignations, normal retirement and death.
“The cost of separation packages during the two-year period was about R300 million. The savings in employee costs is R500 million per annum,” he said.
Mthethwa confirmed that Acsa is still engaging with the Public Investment Corporation (PIC) about possible shareholder financial support.
“We were still unfortunately unable to finalise that in the financial year and I cannot at this stage give any definite timeline on that. However, if you look at our financial plan for the next three years, we have factored that support into the plan.”
Providing background on the PIC engagements, Mthethwa said Acsa previously approached its shareholders, including government, the PIC and minorities, for financial support because of Covid-19 induced liquidity pressures.
He said Acsa at the time proposed the issuance of preference shares to all shareholders, with the company issuing R2.3 billion worth of preference shares to government in February 2021.
“Minority shareholders didn’t follow up on the expression of interest to participate.
“The PIC did express an interest to participate subject to a due diligence investigation to the satisfaction of the PIC,” he said.
Acsa’s gearing increased from 23% to 26% but Mthethwa stressed that this is not because the company had taken on more debt.
He said Acsa’s debt decreased in the year and attributed the increase in gearing to a reduction in the group’s asset value and the loss it was reporting.
Mthethwa said Acsa’s gearing is expected to stay in the 20% range.
Acsa group revenue increased by 81% to R3.9 billion in the year to end-March from R2.2 billion in the prior year.
Aeronautical revenue improved by 121.7% to R1.8 billion from R810 million due to the increase in aircraft landings and departing passenger numbers.
Non-aeronautical revenue increased by 57.1% to R2.1 billion from R1.3 billion.
This includes rental revenue reprieves of R591 million in the year, compared with R1.4 billion in 2021, granted to tenants to offset the negative impact of the pandemic.
Retail revenue increased by 95.8% to R607 million from R310 million due to increased traffic volumes.
Earnings before interest, tax, depreciation and amortisation (Ebitda) improved to R342 million from a negative R1.8 billion in the prior year.
Mthethwa said the positive Ebitda in a very difficult year indicates that the group of companies is cash positive from an operations perspective.
Operating expenditure increased by 3.9% to R2 billion from R1.9 billion, with cost reduction initiatives introduced in the previous financial year continuing to minimise operating costs, which have been maintained at 75.2% of pre-pandemic levels.
Demand up, local capacity an issue
Mpofu said the recovery in the reporting period was supported by a gradual and intermittent recovery in passenger numbers in comparison to the previous year.
She said the demand for air travel increased as severe travel restrictions began to be lifted both at home and abroad.
“The Acsa network recovered to 49% of its pre-Covid passenger throughput by 31 March 2022,” she said.
Domestic travel accounted for 83% of passenger traffic in the year, but the company is still experiencing 30% less volumes than pre-Covid-19.
However, Mpofu said the domestic market has been instrumental in driving Acsa’s performance in the reporting period.
“In contrast, international traffic, hampered by the impact of the Omicron variant in the third quarter of the financial year, only recovered to 28% of its pre-pandemic level,” she said.
Aircraft landings increased by 105% to 176 816 from 86 434 in the previous year and departing passenger numbers improved by 131% to 10.5 million from 4.6 million.
Mpofu said the recent liquidation of Comair, and other airlines which have faced grave difficulty in the domestic environment, such as SA Express which was placed in final liquidation this week, have had a negative impact on the domestic market, particularly in terms of reducing fleet capacity.
The Portfolio Committee on Public Enterprises was told on Thursday that 100% of Mango will be sold to a new investor in terms of the airline’s amended business rescue plan, which will mean it will no longer operate as a state entity.
Listen: CFO Siphamandla Mthethwa on Airports Company South Africa’s financial results