ACSA, SAA & SA Express on 2010 World Cup risk management

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Public Enterprises

02 November 2009
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Meeting Summary

ACSA reported that they had completed their draft 2010 World Cup operational plan and were currently working with their service providers. Fuel, for example, was highlighted as a priority. Detailed plans would be drawn after the World Cup draw in early December and final plans would be drawn up in March 2010.

The replenishment of jet fuel during the World Cup was a matter of concern. Baggage mishandling had decreased significantly to within international norms when compared to three years ago. Other issues that received attention were the progress on airport infrastructure, wage agreements with airport employees and infection control.

The Committee said that they would engage in a process to get all airlines to report regularly their baggage-mishandling statistics including the percentage attributable to pilferage. They also wanted to research international benchmarks and regulatory frameworks. Similarly, the Committee wanted to establish international norms for airport taxes and their regulation. The Committee asked the Department and ACSA to provide a breakdown of the components of airport taxes and their justification.

South African Airways (SAA) said they would provide the information requested by the Committee about the 
court pleadings dealing with anti-trust violations in the United States and Europe.

Meeting report

Airports Company of South Africa (ACSA) on risk management with reference to 2010 World Cup
Mr Bongani Maseko, Director: Operations (ACSA), apologised for the absence of the managing director of ACSA who was out of the country. He said they had completed their draft 2010 operational plans for all the host city airports. All these airports would be slot controlled by ACL, a UK based company.

They were now working with their service providers to co-ordinate planning. Plans would only be finalised after the World Cup draw in early December, once it was known where teams would be playing and where they would be based. There were constraints in handling the anticipated volume at some airports. They would have to spread their peak hour traffic. Bloemfontein and Port Elizabeth would have temporary facilities erected to meet the demand.

There were detailed land traffic co-ordination plans for all the airports except OR Tambo airport. He stated categorically that jet fuel supply to OR Tambo was a matter of concern from a replenishment perspective. The airport had a storage capacity, inclusive of temporary facilities, of just under a week’s supply. Thus it would be imperative not to interrupt the supply of fuel during the World Cup. They were in discussions with Transnet to increase the rail cars carrying fuel from 204 to 280 and with Natref so that there would be no maintenance shutdowns to pipelines and refineries.

A statistical study of baggage mishandling had been instituted. It showed they were well within the international benchmarks. There had been significant improvements in the level of service provided and baggage pilferage claims when compared with their previous service provider Equity Aviation, during the past three years.

A baggage protection unit had been deployed to police the baggage handlers. The collective effort had resulted in a drop from 30 reported cases per day to 12 and they had set themselves a target of reducing it to 8 by the time of the World Cup.

Infrastructure upgrades at OR Tambo were complete and Cape Town would be opening their new departure hall on 14 November and the arrivals hall by March 2010. Durban’s new La Merci airport would be operational by 1 May 2010.

ACSA had a three year wage agreement which would take them beyond 2010 but he cautioned that 20 000 people worked at OR Tambo of which only 1000 worked for ACSA. They had encouraged all employers to negotiate agreements to avoid industrial action before and during the World Cup

All matters regarding public health were being dealt with by the Department of Health. The department had installed cameras to detect people with raised temperatures at OR Tambo. While they did regard swine flu as a matter of concern, they did not believe it was a major concern at this stage.

Mr Joseph Makoro, Chief Risk Officer: SAA tended the apology of the CEO of SAA. He said that they too had multi year wage agreements although some of them were coming to an end. They were confident of agreements being concluded by next year but also had contingency plans in place. They were dealing vigorously with baggage pilferage. Areas of concern for him was that AirChefs, the in-flight caterers would have to extend their network of catering suppliers, that there were constraints on the availability of aircrew, the possibility of an increase in on-line ticket sales fraud and possible drug smuggling.

Mr Alan Meyer, Manager: SA Express said they too had wage agreements in place. He said the energy companies should give some form of commitment to fuel supply during the World Cup. SA Express had leased additional aircraft for the World Cup. They had placed a moratorium on leave for the World Cup.

Discussion
Mr Van Dalen (DA) said baggage pilferage especially at OR Tambo was a problem and that the customer relationship service levels left a lot to be desired. He asked if the labour brokers used by ACSA were all BEE compliant and if not, why not.

Dr Ambrosini, in the light of figures indicating a relatively small percentage of tourists coming from America, Europe and Japan, asked if there were any plans to increase the airport taxes on the occasion of the World Cup as taxes formed part of the total cost of travel. He asked if the taxes were going to be used to recoup the cost of capital expenditure. If there were to be an increase, what would this be?

Ms G Borman (ANC) asked if shrink-wrapped baggage had had an impact on reducing pilferage. Which airlines had low pilferage rates and which ones had high rates and was OR Tambo the only airport with fuel supply constraints. Was the old airport at Durban going to be upgraded? Did the moratorium on leave extend to SAA as well? Would SAA staff capacity cope with the increased demand over the World Cup period and would they be expanding their aircrew? How friendly and helpful were airports in respect of passengers?

Mr C Gololo (ANC) asked if ACSA had plans to handle soccer hooligans, what provisions had been made for people with disabilities and did Mpumalanga International Airport have the capacity to handle the crowds expected.

Dr S Pillay, (ANC) commended SAA for their services, for the awards they were getting, for becoming profitable and for being on schedule. He wanted to remind them that the World Cup was an opportunity to present the country and its capabilities to the world and not to let this opportunity slip.

He wanted to know why ACSA were looking to consultants outside of South Africa to manage slot allocation. Was there no one capable in South Africa? If not, was a skill transfer going to take place and what future capacity building was taking place.

He asked if there was a planned integration between the various groups operating at the airport.

He was concerned that La Merci was being commissioned in the first week of May. Was it not a risk to leave so little time to overcome teething problems?

He asked ACSA to supply them with a document with their concerns that they could forward to Transnet and the Department of Energy so that they could be addressed in time.

Mr Maseko replied that baggage pilferage statistics given for OR Tambo were real and not diluted in any way. The statistics showed that they were not way beyond the international norm, as was the perception. The feedback from travellers was that their rights were not fully defended. There was no legislation or regulation committing airlines to give such statistics. The Association European Airports published baggage mishandling statistics per airline, per month on their website, to give their consumer a choice.


ACSA did not use labour brokers however there were many other stakeholders who relied on the services of labour brokers.

ACSA did not regulate airport tax fees and was concerned at the lack of regulation of airport taxes.

Port Elizabeth and Bloemfontein were the other airports with fuel supply constraints. Aircraft could fly from OR Tambo and take up a limited amount of fuel from these destinations. This would suffice as long as the supply to OR Tambo was not comprised.

La Merci would be operational by 1 May and this would be sufficient. Commissioning would start in phases in November. If the need arose to activate Durban airport, it would solely be to park aircraft.

ACSA also had a moratorium on leave during the World Cup.

They were not confident that they would be able to separate fans from different countries to control hooliganism so issues such as sky marshalls were being discussed.

Specific plans had been developed with their ramp handlers to assist disabled people and these would be published on their website.

Mpumalanga airport’s passenger handling capacity was limited. Their capacity of 600 passengers per hour meant that rail and road transport would have to meet the transport challenge.

The ACL, slot co-ordinating consultants, were recruited to decrease the risk by using the best manpower available, however they were being teamed with the local air traffic people to ensure skills transfer and capacity building.

The Aviation Sub Sector Task Team brought all stakeholders in the aviation sector and role players in the World Cup together to co-ordinate plans under the stewardship of the Department of Transport (DoT).

Mr Joseph Makoro said that SAA endeavoured to get misplaced bags to their owner on the next flight. He asked if he could be given time to get back to the Committee on the question of how much baggage theft there was and what the total in settlement claims amounted to.

There was no moratorium on leave but they were busy with scheduling scenarios. The main issue around extra aircrew would be the licensing requirements and the Civil Aviation Authority did this.

Mr Deena Pillay, Director: Public Entity Oversight (DOT), said that the cost of the new airports and upgrades amounted to R17,5 billion. The small increase in ACSA’s portion did not keep pace with its expenditure.

Mr Koornhof highlighted two issues the Committee might want to follow up: the statistics on baggage pilferage and the regulation of airport taxes.

Mr Ambrosini wanted a concrete decision to be taken that SAA and SA Express and Mango be asked to regularly supply pilferage statistics.

Mr S Pillay asked for it to include all airlines operating in South Africa. He requested the DoT to supply them with documentation detailing the breakdown of the utilisation of that money, their justification of the tax amounts, to give reasons why the taxes should not be regulated and to provide the Committee with international regulation standards and guidelines.

Mr D Pillay said he would facilitate the process with the relevant people in the DoT.

Mr Koornhof requested that the information be given by 12 November.

Mr S Pillay requested ACSA give the Committee the international norm for baggage pilferage and for the DoT to look at what was being done around the world in terms of reportage

Mr Maseko said the Association of European Airlines, made a mandatory regulation that statistics on mishandled bags (which included pilferage) be made available. It was not the practise in the USA. For purposes of clarity the ACSA portion of airport taxes including VAT was currently R49 for domestic flights, R102 to Botswana, Lesotho, Namibia and Swaziland (BLNS) countries and R135 for international flights. He suggested that between ACSA and the DoT, they agree on a mechanism to get the statistics to the Committee by 12 November.

Mr Van Dalen said the statistics should indicate what percentage of mishandled baggage was pilfered.

Mr M Nhanha (COPE) said his understanding of the World Cup was that a legacy (in the form of the 2010 infrastructure development) was to be left behind and that an opportunity was lost in not upgrading Port Elizabeth Airport’s facilities and queried the rationale behind that decision.

Mr Koornhof asked if Bloemfontein’s military facilities were going to be the only military facilities used.

Mr Maseko replied that they were looking at a number of facilities like Langebaan and Overberg, as diversion airports, should inclement weather close Cape Town’s airport.  As for the Port Elizabeth airport they did not want to over-invest in infrastructure that would be under utilised.

Mr Nhanha did not accept this argument, as all stadiums would also be under utilised after the World Cup.

Mr Gololo urged ACSA to contemplate investing in the Mpumalanga airport

Mr Maseko said all infrastructure development was done in consultation with the users of the facilities, the airlines. Their needs informed infrastructure plans. Investment recommendations such as Mpumulanga Airport should be addressed to ACSA shareholder, the DoT rather than ACSA.

Mr Makoro said SAA would supply the Committee the information requested. This would be in respect of the subpoena on anti-trust information as well as the figures for the amount of baggage theft and claims against the carrier. It was not their intention not to cooperate.

Note: At the beginning of the meeting, Dr M Oriani-Ambrosini (IFP) wanted to add two points to the draft agenda subject to the approval of the Committee. The first was the consideration of a subpoena in respect of South African Airways (SAA) as the Committee had repeatedly requested access to the court pleadings of anti-trust violations in the United States and Europe. This was so that the Committee could exercise oversight over it. Secondly, he asked about the possibility of holding public hearings into Eskom’s tariff increases.

It was agreed that the issue would be resolved by the management committee, represented by all political parties, after the meeting.

The meeting was adjourned.


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