Improving coordination of tourism development, growth and job creation: ACSA briefing

Committee: Tourism

Chairperson: Mr D Gumede (ANC)

Date of Meeting: 12 Sep 2011

Summary

The Chairperson highlighted issues of concern to the Committee. The charges at South African airports  were high. Airlines had complained that there had been a 70% increase in airport charges. The high level of baggage theft taking place at OR Tambo International Airport was a serious concern. South African Airways had alleged that baggage theft was out of control.

The Airports Company of South Africa briefed the Committee on plans to improve coordination in respect of tourism development, growth and job creation and the challenges thereof. The Company had undertaken to upgrade airports because five to six years ago domestic passenger volumes had doubled. International passenger volumes had also increased. The 2010 FIFA World Cup had not solely been the reason for the airport infrastructure upgrade. Five to seven years ago the Company had service issues. It had since then come a long way to address those issues. Detail on the impact that the three major airports - Cape Town International Airport, King Shaka International Airport and OR Tambo International Airport - had on the creation of jobs linked to the tourism sector was provided. Based on a University of Johannesburg Study, the total impact of on-airport businesses at the three major airports in 2006 was R85.65 billion. An analysis by Mott MacDonald a global management, engineering and development consulting firm indicated that total employment impact by the three airports to be 330 000 jobs. Approximately 150 000 new jobs would be created in the South African economy by accommodating forecast passenger and cargo demand. This employment forecast assumed that sufficient airport capacity would be provided as a prerequisite for the accommodation of unconstrained traffic growth.  The projection increase in traffic activity would lead to increase in job creation over the next nine years up until 2019. Generally traffic numbers had continued to grow. At present the Company was handling 32 million passengers and felt that it had sufficient capacity. By 2016/2017 it would reach the 50 million mark. The Company believed that gross domestic product growth was a key driver for traffic volume growth. Even though the Company had had tariff increases, traffic numbers had continued to increase. South African Airways, for example, showed a 77% increase in its net profit despite 33% tariff increases at airports. South African Airways' traffic volumes had also increased. The Committee was introduced to the concept of prefunding. When prefunding was introduced tariff increases took place in spikes. Increases that were smooth would have been preferred. What was prefunding? Prefunding meant that the Company was not allowed to charge for infrastructure that was still under construction. The Company felt that the issue of prefunding needed to be reconsidered. The Department of Transport was embarking on a roadmap to improve the Company’s regulatory framework. A study by Jacobs Consultancy had shown that OR Tambo was ranked 40th out of 50 airports on charges. The Company did not understand why it was believed by some that OR Tambo was one of the most expensive airports. The Company reiterated that airport tariff increases did not hugely impact upon traffic volumes. The Mott Macdonald study had shown that a 132.9% increase in tariffs would only have a once-off negative growth impact of 5% on domestic traffic volumes and no impact on international traffic volumes. The Company pointed out that there were other factors other than airport tariffs that affected ticket prices.

The Company also spoke on the issue of baggage pilferage at South African airports. There was a reduction in baggage pilferage at South African airports. Increased security measures had been implemented by airports and airlines. Legislation had also been introduced to prosecute offenders. Internationally, baggage pilferage was classified within mishandled baggage.  In 2010 there were a total of 25 million incidences of mishandled baggage worldwide. There was, however, no international benchmark for baggage pilferage. The Company also responded to perceptions that the Company's figures on baggage pilferage were inaccurate and that the baggage theft issue at OR Tambo International Airport was out of control. The latter was alleged by South African Airways.  The Company insisted that the data sets from which ACSA worked were credible. If indeed the situation of baggage pilfering at OR Tambo International Airport was “out of control” the Company would be willing to work from the benchmarks that had been used in making that assessment. The figures which the Company had on baggage pilferage were reported cases by airlines. In South Africa there was no legislative requirement for airlines to report baggage pilferage. The Company had no alternative but to rely on airlines to report cases of baggage pilferage. In as far as it was the Company's responsibility it did provide baggage infrastructure. It also handled the licensing of ground handling companies which provided their services to airlines. Airlines contracted directly with ground handling companies. The Company had also installed overt and covert cameras. It was spending R7 million per annum on a baggage reaction team. The Company together with domestic airlines was represented on a baggage review committee.  Some of the challenges related to baggage pilferage were that there were no regulations in place to force airlines to report cases of baggage pilferage. Greater transparency amongst airlines was needed. The complainant whose bags had been pilfered was not always available for the successful prosecution of perpetrators. During the 2010 FIFA World Cup everything had worked smoothly as there had been an oversupply of staff and security which made baggage pilferage difficult. It was difficult to replicate the scenario on a regular basis. The total number of dismissals for baggage pilferage in 2010 was 35 and in 2011 it was 30 thus far. Baggage pilferage was not only occurring in South Africa but in Europe and the United States of America as well. Service quality was also high on the agenda of airports in South Africa. Airports were still recording service quality ratings well within the excellent category. Service quality at airports covered the performance of the Company, airports, car rental companies, retailers and others. The Company also measured the on-time performance of airlines. The world norm for efficiency for on-time performance was 80% or higher. All the Company’s airports far exceeded this target.

The Committee appreciated the comprehensive nature of the briefing in that it also tried to respond to certain perceptions and statements made over certain issues like the baggage theft at OR Tambo International Airport being “out of control”, that tariff hikes affected traffic volumes, that the Company’s baggage theft figures were inaccurate, and that service levels at airports were not good enough. Members concluded that it was no use blaming one another but rather that the Company, the airlines and everyone else involved at airports should work together to come up with common solutions to problems.

The Committee also adopted its Committee Draft Programme Fourth Term 2011. Members also agreed to cancel their planned study tour to Malaysia, due to an apparent lack of cooperation with the Malaysian authorities, and to consider alternative destinations.


Minutes

Introduction
The Chairperson at the outset of the meeting highlighted issues of concern to the Committee. The charges at airports in South Africa (SA) were apparently high. Airlines had complained that there had been a 70% increase in airport charges. A major concern was the high baggage theft that was taking place at OR Tambo International Airport. He proceeded to read, word for word,  a newspaper article that had appeared in the Daily News of 12 September 2011.  Some of the issues raised in the article were that the baggage theft figures were much higher than what was claimed. The Airports Company of South Africa (ACSA)’s figures were not accurate. ACSA also disagreed with South African Airways (SAA)’s claim that the baggage theft issue was out of control at OR Tambo International Airport. ACSA had alleged that baggage theft had decreased from 36 incidences per day to 14 incidences. The baggage theft figures were questionable, given that airlines were not required by law to disclose baggage losses. Another fact was that travellers did not always report baggage theft as it was sometimes too much of an effort. 

He noted that baggage theft at OR Tambo was a problem and that it did not help if all parties laid the blame with each other. Teamwork was needed in order to solve the problem. The problem was that baggage handling was not overseen properly. For example, at baggage carousels there was no one to assist if your bags did not emerge.

Airports Company of South Africa (ACSA)
The ACSA delegation comprised of Mr Bongani Maseko, Director: Airports Operations, ACSA, and Mr Deon Cloete, General Manager: Cape Town International Airport at ACSA. The briefing was undertaken by Mr Maseko. ACSA had undertaken to upgrade airports because five to six years ago domestic passenger volumes had doubled. International passenger volumes had also increased. The 2010 FIFA World Cup had not solely been the reason for the airport infrastructure upgrade. He added that five to seven years ago ACSA also had service issues. It had come a long way to address those issues. He referred to 'the tyranny of distance'. It was uncommon to have major centres of population so dispersed. The Cape Town to Johannesburg route was equivalent to London-Madrid or Amsterdam-Rome routes. OR Tambo International Airport generated 70% of ACSA’s business. He continued with detail on the impact that the three major airports - Cape Town International Airport, King Shaka International Airport and OR Tambo International Airport - had on the creation of jobs linked to the tourism sector. Based on a University of Johannesburg Study, the total impact of on-airport businesses at the three major airports in 2006 was R85.65 billion. An analysis by Mott MacDonald, a global management, engineering and development consulting firm, which had been commissioned by the Regulating Committee in 2009 to review airport infrastructure development in South Africa and to review ACSA's tariff application, indicated that total employment impact by the three airports to be 330 000 jobs. Approximately 150 000 new jobs would be created in the South African economy by accommodating forecast passenger and cargo demand. This employment forecast assumed that sufficient airport capacity would be provided as a prerequisite for the accommodation of unconstrained traffic growth.  The projection increase in traffic activity would lead to increase in job creation over the next nine years up until 2019. ACSA had the capacity to handle 55 million passengers. Generally traffic numbers had continued to grow. At present ACSA was handling 32 million passengers and felt that it had sufficient capacity. By 2016/2017 it would reach the 50 million mark. ACSA expected to see growth in the next four to five years and with the best in its class infrastructure was now well positioned to handle forecast passenger growth in the medium term.

It believed that gross domestic product (GDP) growth was a key driver for traffic volume growth. Even though ACSA had had tariff increases, traffic numbers had continued to increase. SAA, for example, showed a 77% increase in its net profit, despite 33% tariff increases at airports. SAA’s traffic volumes had also increased. Mr Maseko introduced the Committee to the concept of prefunding. He noted that when prefunding was introduced tariff increases took place. Tariff increases were in spikes and increases that were smooth would have been preferred. What was prefunding? Prefunding meant that ACSA was not allowed to charge for infrastructure that was still under construction. ACSA had incurred a R17 billion investment expenditure up until 2010. Hence thereafter there was a spike in tariff increases. For the last five to six years there had been no tariff increases. Tariff increases had a shock effect. The next wave of expenditure at OR Tambo International Airport would be in the region of R40 billion. Thereafter, a spike in tariff increases could be expected. The issue of prefunding need to be looked at again. The Department of Transport was embarking on a roadmap to improve ACSA’s regulatory framework. A study by Jacobs Consultancy had shown that OR Tambo was ranked 40th out of 50 airports on charges. ACSA did not understand why it was believed by some that OR Tambo was one of the most expensive airports. ACSA reiterated that airport tariff increases did not hugely impact upon traffic volumes. The Mott Macdonald study had shown that a 132.9% increase in tariffs would only have a once-off negative growth impact of 5% on domestic traffic volumes and no impact on international traffic volumes. He pointed out that there were factors other than airport tariffs that affected ticket prices.

Mr Maseko spoke on the issue of baggage pilferage. There was a reduction in baggage pilferage at SA airports. Increased security measures had been implemented by airports and airlines. Legislation had also been introduced to prosecute offenders. He stated that there was an international benchmark for baggage pilferage and it was classified within mishandled baggage.   In 2010 there were a total of 25 million incidences of mishandled baggage worldwide. There was, however, no international benchmark for baggage pilferage. He wished to address the perception that the figures which ACSA had on baggage pilferage were inaccurate. The figures which ACSA had on baggage pilferage were reported cases by airlines. In SA there was no legislative requirement for airlines having to report baggage pilferage. ACSA had no alternative but to rely on airlines to report cases of baggage pilferage. In as far as it was ACSA’s responsibility, it did provide baggage infrastructure. It also handled the licensing of ground handling companies which provided their services to airlines. Airlines contracted directly with ground handling companies. ACSA had also installed overt and covert cameras. It was spending R7 million per annum on a baggage reaction team. ACSA together with domestic airlines was also a member of a baggage review committee to deal with baggage issues.  Some of the challenges related to baggage pilferage was that there were no regulations in place to force airlines to report cases of baggage pilferage. Greater transparency amongst airlines was needed. The complainant whose bags had been pilfered was not always available for the successful prosecution of perpetrators. Between Cape Town International Airport, King Shaka International Airport and OR Tambo International Airport there were 6 million arriving bags per month. During the 2010 FIFA World Cup everything had worked smoothly as there had been an oversupply of staff and security. It was difficult to replicate the scenario on a regular basis. The total number of dismissals for baggage pilferage in 2010 was 35 and in 2011 it was 30 thus far. He wished to point out that baggage pilferage was not only occurring in SA but in Europe and the United States of America (USA) as well. Service quality was also high on the agenda of airports in SA. Airports were still recording service quality ratings well within the excellent category. Service quality at airports covered the performance of ACSA, airports, car rental companies and retailers, etc. ACSA also measured the on-time performance of airlines. The world norm for efficiency for on-time performance was 80% or higher. All ACSA’s airports far exceed this target.

Discussion
Mr G Krumbock (DA) referred to ACSA's deriving value from its non-aeronautical revenue streams such as real estate development and asked what was meant by it. He was concerned that within the space of two weeks the Committee had received two briefings which had said different things. SAA’s briefing had been unambiguous and had stated that luggage pilfering at OR Tambo International Airport was out of control. ACSA was now stating that the situation was not out of control and that things were improving. It made it hard for the Committee to know what was actually going on.

On the non-reporting of baggage pilfering, he could only wonder how many people had not reported baggage pilfering as they had no expectation that the case would ever be resolved. Many simply just gave up and did not bother reporting incidents. Persons only reported cases for insurance purposes. It was thus evident that there was a great deal of under reporting. So could it be presumed that there was not a real improvement in the incidents of baggage pilfering as ACSA claimed but rather that many of the cases were simply not reported?

Mr Maseko explained that there were two sides to ACSA’s business. There was firstly its regulated side which dealt with airlines and passengers and then there was its non-regulated side which was non-aeronautical. ACSA had, for example, large tracks of land near to Cape Town International Airport. Pick n Pay had a huge storage facility erected on such land.  
 
He did not give much credence to the statement by SAA that baggage pilferage at OR Tambo International Airport was “out of control” without there being a benchmark. As was earlier stated there was a committee at OR Tambo International Airport and not a single airline sitting on that committee had stated that they had a major baggage pilferage problem. ACSA could only report on what was reported to it.

Mr L Khoarai (ANC) asked for greater detail on the granting of licenses by ACSA. What was it all about? Was it correct that baggage handling companies were issued licenses by ACSA?

He also asked why cable ties were no longer handed out to passengers at airports. The high cost of baggage wrapping was an issue that ACSA should also look into. It was way too expensive and should be made more affordable.

Mr Maseko replied that, regarding the licensing process, there was a perception that everything at an airport was ACSA’s responsibility. ACSA compared itself to being a conductor of an orchestra. ACSA licensed entities to perform certain functions like catering and security. The licensing allowed these entities to operate in terms of international practice. Entities contracted with a specific airline for a specific service. ACSA had no control over the relationship between airlines and entities. The one place where one would find an ACSA employee was security.  Parking attendants and even boarding staff were not ACSA employees.  Cable ties had been supplied by a specific airline in the past. It was a relationship between the airline and the passenger. ACSA could not prescribe to airlines what they should provide to their passengers. ACSA would look into the issue of baggage wrapping costs.

Ms M Njobe (COPE) asked whether ACSA was discussing the issue of prefunding with the Department of Transport. If there was legislation put in place to force airlines to report baggage pilfering, what type of legislation it would be. Would it be of a national or regional nature? Was the issue being discussed with relevant departments?

She encouraged all travellers to report baggage pilfering. It was the only way to ensure that statistics was accurate.

At East London Airport the electronic displays did not show the destinations of flights. It was felt that staff at the airport was careless. She asked ACSA to look into the issue.

She also felt that the price of baggage wrapping was way too expensive.

There were instances where a bag had been opened but nothing had been taken. Were security personnel allowed to open bags without informing the owner of the bag? 

Mr Maseko stated that discussions were taking place between ACSA and the Department of Transport. The manner in which ACSA was currently regulated limited transparency and growth. The regulatory framework would be reviewed. ACSA sat on the committee dealing with the issue. It was hoped that the issue would be finalised by December 2011.

He felt that the reporting of baggage pilfering should be looked into by the SA Civil Aviation Society. ACSA would support a system that could measure how bad the situation at each airport was. More transparency was needed.

The issue of the electronic displays at East London Airport would be addressed.

Security personnel at airports were not allowed to open bags without the owner of that bag being present. Security officers at OR Tambo International Airport only scanned bags for threats. The bags were monitored on screen and personnel were not aware where the bag was in the system.

Ms V Bam-Mugwanya (ANC) commented that from the briefing it would seem that ACSA thought big. Some of the issues presented on were tariff spikes, international benchmarking, etc. For the traveller these things were irrelevant. What was traumatic for the traveller was lost baggage. Sometimes the attitudes of staff at airports were not good. Could ACSA not learn from the best practices of those airlines that had low baggage pilferage? How could baggage mishandling and baggage pilferage be seen to be the same? She was concerned about the training of staff at airports. It was accepted that there were many role players at airports but everyone was overseen by ACSA. The attitudes of staff, especially to disabled persons at Cape Town International Airport, was concerning. There was no reception section which received disabled persons. It was horrific. She asked ACSA to look into the matter. Attitudes of staff at airports generally were not great. They seemed to wallow around and were not interested in their jobs.

ACSA was also asked to look at the Passenger Assist Unit (PAU) buses that transported passengers from terminals to aircraft. She felt the buses to be horrible and compared them to trucks which transported carcasses from abattoirs.

Mr Maseko noted the concern over the attitude of staff. The issue had been discussed with airlines. ACSA unfortunately did not have control over the standards of service. The staff worked for the airlines. ACSA handled the licensing but did not regulate there standards. There was regulated training but the issue raised by the Member was about service quality over which ACSA had no control. Annually air service quality awards were held at airports. ACSA tried to encourage uplifting service quality. In Asia, for example, service quality levels were high. 

On the issue of ACSA learning from airlines doing well to curb baggage pilferage he noted that each airline had independent processes. ACSA could not prescribe to airlines what to do. It only had benchmarks which were prescribed by the International Air Transport Association (IATA).
He agreed to look into the issue of PAU buses. The situation was unique in that there was no one size fits all solution. There were different airlines which offered different services. There was the issue of competing commercial interests as well.
 
Ms J Manganye (ANC) stated that it was often a problem to report baggage pilfering as there was no one to report to. A year ago there were people to report to. She asked ACSA to ensure that there were people to report to.

She also informed members that on one occasion at Cape Town International Airport she waited three hours on a plane without being informed that the flight had been cancelled. It was common courtesy to inform passengers in such cases.

The Chairperson responded that delayed or cancelled flights should be taken up with the particular airline.

Mr Maseko noted the complaints by Members of being stuck on grounded flights without being informed that flights were cancelled. The issue would be taken up with airlines.

Ms C Zikalala (IFP) asked if baggage pilfering culprits were prosecuted. She also asked what caused delays at luggage carousels where passengers often had to wait 10-15 minutes. Where did one report damage to one's luggage? In the past she had been reimbursed for her damaged bag by Frasers International, a baggage company. She asked if it was compulsory for airports to provide passengers with cable ties.

Mr Maseko stated that indeed wrongdoers were prosecuted. The total number of dismissals for baggage pilferage in 2010 was 35 and for 2011 it was 30 thus far. He added that bags at carousels were monitored and managed in terms of the first bag and last bag availability times. On the issue of damaged bags it was a relationship between the airline and the passenger. In the case of the Member, SAA perhaps had an agreement with Frasers International to replace damaged bags.  Cable ties were supplied by certain airlines. Airlines could not be forced to supply cable ties.

Ms Bam-Mugwanya asked if ACSA’s employee structure was filled or if were there vacancies.

Mr Maseko stated that ACSA had a high turnover rate in lower paying jobs. ACSA’s vacancy rate was 3%-5% on an annual basis. Of the 30 000 persons employed at OR Tambo only 1200 worked for ACSA. At Cape Town International Airport, of the 20 000 persons employed, only 500 worked for ACSA.  

Ms Njobe referred to the 150 000 jobs to be created as was outlined during the briefing and asked if these were jobs created by ACSA and if so for what period.

The Chairperson stated that six months ago he had been stuck in a lift at Cape Town International Airport for over an hour. He had tried to call the emergency assist numbers displayed in the lift but it was to no avail. When ACSA licensed entities it had to ensure that it had control over them. The problem was that SA was too lax when it came to control.

The style of management in government departments in general was too lax. Employees did not take responsibility for their actions as they did not get fired when they messed up.

The problems identified could not be solved by ACSA alone, teamwork was needed. The divergent views of ACSA and SAA on information were also an issue which needed to be addressed. SAA and ACSA had to work together; they had no choice in the matter.

It was understood that during the 2010 FIFA World Cup there had been an oversupply of staff. A balance should be found in terms of what the correct number of staff should be. Between an under-supply and an oversupply of staff a middle ground needed to be found.

The issue of prefunding and price hikes also had to be addressed. They both had economic implications.
If the South African Police Service (SAPS) could not assist with security at airports then private security companies should be hired.

Mr Maseko noted the sentiments of the Committee. Some of the challenges that ACSA was facing now were as a consequence of planning that had been done in 2007.  Issues of service would be looked into as they affected ACSA, airlines, ground handlers and everyone else who worked at airports.
He insisted that the data sets from which ACSA worked were credible. If indeed the situation of baggage pilfering at OR Tambo International Airport was “out of control” ACSA would be willing to work from the benchmarks used in making that assessment.

The Chairperson stated that ACSA played an important role in SA as far as tourism was concerned. SA airports were tourists’ first experience of SA. He emphasised that first experiences tended to be lasting memories.

Committee Draft Programme Fourth Term 2011
The Chairperson guided the Committee through the Programme.

The Programme was adopted. 

Committee discussion on  the international study tour to Malaysia
The Chairperson pointed out that it would seem as if Malaysia was not ready for the Committee's visit. It was best that the trip be cancelled. There was too much uncertainty. It was advisable for the Committee to consider alternative destinations.

Ms Manganye suggested Japan as a possibility.

The Chairperson encouraged members to come up with further suggestions. All suggestions would be considered.

The meeting was adjourned.