Civil Aviation Authority; Airports Company South Africa: budget briefing

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Transport

08 May 2002
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Meeting report

TRANSPORT PORTFOLIO COMMITTEE

TRANSPORT PORTFOLIO COMMITTEE
8 May 2002
CIVIL AVIATION AUTHORITY; AIRPORTS COMPANY SOUTH AFRICA: BUDGET BRIEFING

Chairperson:
Mr J Cronin (ANC)

Documents handed out:
ACSA Presentation
CAA Presentation
[please email
info@pmg.org.za for a copy]
CAA Budget for 2002/2003
CAA Income Statement 1998-2005
Research Proposal on the National Land Transportation Transitional Act [Appendix 1]
Article on Awareness Campaign for General Aviation in South Africa [Appendix 2]

SUMMARY
The presentation by the Airports Company of South Africa discussed its shareholding, performance and retail analysis, past, present and projected capital expenditure, passenger volumes, major projects in 2001/2 and its income statement.

The discussion on this presentation focused primarily on:
- the development and status of the King Shaka Airport;
- the airports' rental and retail turnover;
- security at airports, and measures to improve these; and
- the decision to outsource certain services.

The Civil Aviation Authority of South Africa (CAA) presentation highlighted the background to the establishment of the CAA, its financing initiatives, staff profile, financial projections, the costing study and its revenue and expenditure projections.

The discussion dealt largely with the following issues:
- clarity on the proposed user pay profile fees;
- the problem with its staff complement and the measures to remedy this;
- ensuring aircrafts abide by their licenses as far as safety is concerned;
- accident investigations; and
- CAA's role in sanctioning contraventions of safety standards.

MINUTES
The Chair commenced proceedings by welcoming all present, and drew Members' attention to the Research Proposal on the National Land Transportation Transitional Act with which they should familiarise themselves with.

Briefing by Airports Company of South Africa
Ms Monhla Hlahla, Managing Director of ACSA, introduced the members of the ACSA delegation: Ms Michelle North, Group Manager: Finance, Mr Vernon Naidoo, Acting General Manager: Finance and Mr Monwabisi Kalawe, General Manager: Cape Town International Airport (CTIA). The presentation sought to explain the shareholding of ACSA, so that Members could better understand the recent and current directions in which the ACSA budget is moving. Every year when ACSA reviews and composes its annual budget it is faced with two distinct aims: achieving sustainable and successful financial position and profits, so that the foreign investors are satisfied, and on the other hand identifying and developing areas to improve the standards of South African airports in terms of the national directive.

The "AdR" on the slide entitled "Shareholding" refers to ACSA's Italian funder and shareholder, which owns a 20% share of ACSA.

The following slide, "Summary of Performance", indicates that not only has its financial performance been consistent but ACSA's annual turnover is always increasing. This has been largely influenced by its expenditure patterns.

The slide entitled "Retail Analysis" suggests that an airport is very much like a local municipality, as it also contains several basic amenities such as a pharmacy, food and clothing stores, bookstores, restaurants and so forth. The revenue graph illustrates that revenue generated from these "core retail" outlets has been increasing consistently since 1996, which goes into ACSA's coffers. ACSA has recognised the importance of these facilities, as they ensure travelers have a comfortable waiting time at the airport.

The slide also indicates a growth in revenue generated by car parking from 1996 to 1997, and it continues to grow to 2002 as well. The greater the amount of revenue generated by the car parking sector, the more funds are available to ACSA to improve its infrastructure. The slide also illustrates that the advertising sector exhibited marginal growth, but ACSA believes this sector is underachieving because the airports have so much advertising space that could be better utilised in this regard.

The slide entitled "Capital Expenditure" shows a continual growth from 1996 to the "dip" in 2001, but 2002 once again exhibits an increase.

Ms North explained that the "dip" in 2001 is attributable to the fact that at that time ACSA was reconsidering its capital expenditure patterns in terms of whether they do in fact best serve the interests of its customers. For this reason certain projects that did not meet this requirement were delayed until 2002, and the growth indicated after the "dip" shows the resumption of these projects.

Ms Hlahla referred to the slide entitled "Dependency on Aeronautical" and informed Members that the income derived from the aeronautical sphere alone is gradually declining, but the growth of retail spheres as suggested on previous slides is increasing. This is "balanced out" by the drop in aeronautical depreciations. This decline merely illustrates less dependence by ACSA on aeronautical revenue, and a conscious shift towards investing in entrepreneurship.

Mr Naidoo added that this clearly illustrates a strategic objective taken by ACSA to decrease its dependence on aeronautical income, so that is may achieve its goal of decreasing the costs of travel, especially air travel.

Ms Hlahla explained that "Regional" in the slide entitled "Passenger volumes" refers to the other African states in the Southern Africa Development Community (SADC). The slide also indicates that the flow of international traffic has and is growing consistently, which, together with the regional flow growth, is important to ACSA. The domestic flow has experienced a slight decline from 2001 to 2002, and this has to be addressed.

The "ATM volumes" slide deals with landings at South African airports, and illustrates that 2002 has experienced more domestic landings because of the emergence of companies such as Kalula.Com. An additional factor in this regard is the dependence on business travel, such as Parliamentarians flying between Cape Town, Johannesburg and Pretoria. Furthermore, the fact that more landings have been recorded for 2002 does not necessarily mean the volume of passengers has increased, as each flight and landing might not have its full passenger complement.

Mr Naidoo added that this slide also illustrates a 0% growth on international flights from 2000 to 2002. Yet it has to be acknowledged that this definitely is a positive result if one considers that the global trend in this regard, especially due to the September 11 events, has shown a marked decline. In fact, some countries have even exhibited a 20-25% decrease in international flights, with air traffic to the Americas being rerouted to Africa. A growth of 2% in international traffic and 1% for domestic traffic is forecast for the 2002/2003 financial year. Perhaps aggressive marketing or the introduction of healthy competition within the air travel industry could stimulate growth in this regard, so that demand may be increased.

Ms Hlahla added that the "dip" in domestic and international flights has been "made up" between September 2001 and February 2002.

The slide entitled "ACSA Income Statement" indicates an increase in the projected revenue to be generated under "Other", and includes a commitment by ACSA to spend more resources on advertising so that it gradually weans itself of dependency on aeronautical income. The sale of the NATCOS property to SASOL is largely responsible for the Total Revenue growth from R1,305min 2002 to R1,617m in 2003.

ACSA is conscious of the manner in which it spends its funds, and aims to ensure that it provides world class service to its customers. In this regard it has marked 2002 as the first benchmark for the setting of efficiency and productivity standards.

As far as the "Expenses" on the same slide are concerned, "Personnel Costs" have exhibited a small growth from 2001 to 2003, and the "huge" increase in "Insurance" expenses from 2002 to 2003 was unanticipated. There has also been an increase in "Rates & Taxes" over the last two years, with a total growth of 29% to R997m in EBITDA in 2003.

Mr Naidoo added that if one excludes the NATCOS sale the 2002/2003 budget exhibits a 14% increase in revenue, and this is identical to the growth rate during the 2001/2002 financial year. The real EBITDA growth for 2002/2003, apart from the NATCOS sale, stands at 13%, compared to the 16% growth in 2001/2002. This shows that South Africa is moving into a "lean environment" which calls upon ACSA to be more entrepreneurial, and to focus more on cost control that cost leadership.

After the September 11 events ACSA had to pay R7 billion in liability insurance to the United States, which marked a 700% increase since the previous year. Furthermore, ACSA has also experienced an increase in costs to the South African Weather Service to R6m per year, for the provision of weather forecasts. ACSA aims to fix its cost-income ratio between 40-45%, and this rate has remained stable since 1995 because of a "definitive management intervention".

Ms Hlahla referred to the slide entitled "Capital Expenditure to 2006/7" and informed Members that the nine smaller international South African airports have been grouped under "National Airports", such as the Upington, George and Bloemfontein airports. These may be smaller than their neighbours in Cape Town, Johannesburg and Durban, but nevertheless provide an important service to South African air travel. Efforts are still being made to improve Johannesburg International Airport (JIA) which, despite popular belief, is the busiest airport in Africa, with Cairo International Airport falling second to it. JIA thus has very large amounts of commuters passing through its halls, and thus ACSA has to ensure that it has the necessary infrastructure to meet international standards.

The national airports have not been ignored or marginalised and ACSA is continuing to devote expenditure for their improvement, as indicated on the slide. This committee would no doubt be aware that a complete remodeling of the Durban International Airport (DIA) has been completed, and the projected expenditure provided on this slide indicates the maintenance expenditure for 2003/2004.

Under "What lies ahead?" Members should be made aware that the "major projects" listed on this slide are not the only projects in which ACSA will be involved in future, but there a number of smaller initiatives that are as important, such as the maintenance of runways, etc.

The slide entitled "In conclusion" summarises the key points communicated by the presentation. In this regard, there are the primary challenges that ACSA is faced with:
- ensuring and improving traffic growth: in this regard ACSA "would have to partner with nearly everyone" in the air travel industry to achieve this objective, and a bold strategy is needed here;
- the development of the GauTrain, which provides a rail link between JIA and Sandton;
- developing the King Shaka Airport, which has not been reflected in the budget presentation; and
- significant contributions to the growth of South Africa: every year ACSA makes a good contribution to the improvement of the living standards of South African people, and is continually trying to improve this contribution.

Discussion
Mr J Slabbert (IFP) requested clarity on the actual position with regard to the development of the King Shaka Airport and, if it is realised, the consequent fate of the recently improved DIA.

Secondly, is it really necessary for ACSA to invest in advertising?

Ms North responded that R4,5m was spent on advertising, as part of ACSA's social responsibility component of its marketing project, which aims at uplifting local communities, marketing and branding.

Thirdly, surely amenities mentioned with regard to the retail income generated at airports only refers to rental income and not turnover. Indeed, as the turnover increases so too would the rental, and this is the reason for the high prices charged at the duty-free stores.

Mr Naidoo replied that a majority of the concession revenue generated by these retail stores are structured on a minimal revenue and a percentage of the turnover basis. Therefore, if they do well, so too does ACSA. As far as the prices charged by these duty-free operators is concerned, ACSA has entered into lease agreements with them and does identify certain products with inflationary prices, so that retailers are forced to conform with the terms and conditions of their contracts with ACSA.

Ms Hlahla added that there will necessarily be a discrepancy in the price of "Venda clay pots" sold in Venda, as opposed to those sold at JIA. This is largely attributable to the tourist factor present at South African airports.

The Chair stated that a balance does however need to be established and maintained here, so that South Africa does not receive a "bad reputation" internationally.

Mr Pillay (DP) requested clarity on what exactly the "Other Expenses", the actual assets sold under "Profit on sale of Assets" and "Outsourced Services" on the "ACSA Income Statement" slide entails.

Ms North explained that "Other Expenses" refers to repair and maintenance expenses of R85m, R40m on security, R22m on Information Technology (IT), electricity and water facilities of R41m and cleaning services of R22m.

"Outsourced Services" refers to R6m paid to the South African Weather Service for weather forecasts and R3,3m in carpark management fees, such as at the Cape Town International Airport (CTIA).

"Profit of sale of assets" refers to the profit generated from a series of financing arrangements. These essentially are securitised loans that have been procured during the financial year, as ACSA has identified, assets owned by ACSA, which the bank is prepared to securitise. The asset is this then sold to bank, who in turn leases it back to ACSA. It is therefore nothing more than a sale and lease-back agreement.

Secondly, Ms Hlahla stated that the development of the King Shaka Airport would challenge the budget, and she is requested to explain the implications of this. It seems that the sole reason for the establishment of the King Shaka Airport is that someone merely wants a South African airport to be named after King Shaka and, if this is the case, would it not be more feasible to just rename DIA as "King Shaka Airport"?

Ms Hlahla responded to this question as well as the first question posed earlier by Mr Slabbert by stating that the ACSA board decided that when DIA reached a point at which it did not have the requisite capacity to handle the demands placed on it, it would have to move somewhere. ACSA does own land that it is holding on to so that when the time comes that DIA is unable to handle its freight and landing demands, it would move to this land. Cabinet has just approved a proposal of an entire economic strategy for a trade port, that would include rail and air travel services. Thus air travel and presence forms just one component of this development strategy. The only difficulty being experienced here is that the KwaZulu Natal Province differs with ACSA on the precise timing of the introduction of this initiative.

Cabinet has called for the establishment of a subcommittee consisting of this Portfolio Committee as well as its Finance and Trade and Industry counterparts and the KZN provincial authorities, so that they may devise a strategy on how to approach this matter. ACSA's contribution in this process is aimed at ensuring that a viable and useful infrastructure is established, that would benefit not only the KZN Province but also the country as a whole.

The Chair reiterated that ACSA is of the opinion that it is as yet too soon to move to development of a King Shaka Airport.

Mr Slabbert commended Ms Hlahla on her reply, but suggested that she is actually saying that King Shaka Airport "is just a dream".

The Chair informed Mr Slabbert that ACSA is in fact saying that it is committed to the King Shaka Airport, but timing is the vital issue here, and it is of the opinion that it is presently too soon for its establishment because DIA still has life left in it. From ACSA's point of view it has not yet reached its full capacity at all.

Mr Pillay thanked Ms Hlahla for the frank response and stated that it is clear that Members should not question her on a matter out of her control.

Mr G Schneeman (ANC) asked ACSA to explain whether it interacts with South African Airways (SAA) at all on the air fare rates.

Mr Naidoo informed Members that only 4% of the air fare is paid to airport costs, which is payable to ACSA, and it is therefore for ACSA to intervene on possible cost reduction negotiations. International experience in this regard, especially in Europe, has shown that the domestic travel sector has highly competitive prices. This has caused an significant growth in the low cost sector, such as Rhine Air, which attained a bigger market cap than British Airways during 2001/2002.

Secondly, there has been a visible improvement in the condition of South African airports, and this has changed the general flying experience. Yet SAA services have deteriorated, such as the now non-existent security presence at the check-in points, and only the airport itself can be faulted for this decline. How does ACSA plan to address the matter of its interaction with SAA, if it is able to?

Mr Naidoo explained that ACSA is essentially an asset management company that contracts out many services, such as baggage handling. Acceptable performance standards are only achieved via service level agreements, and none of these agreements were in existence when ACSA was established in 1993. Over the last three years ACSA has set conditions of these agreements to regulate the standard of service throughout South African airports, and it is currently weeks away from signing these agreements. It is not certain whether these will solve the problem with check-ins raised by Mr Schneeman, as there is no agreement between ACSA and SAA regarding check-in time. ACSA does however conduct service studies and surveys to check compliance with international standards, and these reports are shared with the airlines so that a common service culture may be entrenched. These studies indicate which airlines are not conforming to the standards, and some sort of reward or prize-giving initiative for those who have excelled has been planned.

SAA did approach ACSA for assistance in decreasing the turnaround time to thirty minutes. The result was that the docking bays were moved closer to one another, which caused a 30-50% increase in efficiency and a 20% decrease in finance costs, because SAA now needed less planes to navigate a single route.

Thirdly, the retail stores at the airports are of a high caliber, but are any efforts being made to accommodate the smaller "up and coming" businesses?

Mr Naidoo responded that ACSA's board has set specific Black Economic Empowerment (BEE) targets, one of which deals with the retail concession which currently stands at 23%. Over the last two years ACSA has endeavoured to increase this to 50 plus 1%, as with the JIA and CTIA. Yet this initiative does pose some risk as it could be challenged Constitutionally, but it nevertheless clearly indicates ACSA'a intention in this regard. ACSA aims to balance BEE and commercial viability and success.

Mr A Ainslie (ANC) stated that ACSA mentioned that R40m had been spent on the provision of security at airports, and requested ACSA to clarify on its proportion to the annual budget as well as whether this amount marks an increase from previous years. This is especially relevant in view of the September 11 events.

Ms North responded that the capital expenditure on security for 2002/2003 stands at R32m to be rolled out over a five year cycle, which amounts to R81m to be deployed to improve the existing security infrastructure.

Mr Naidoo added that these funds form part of a plan to regulate airport security, and the use of an additional R55m worth of capital expenditure has been planned but has not been budgeted for. The aim is to phase this is over a five year period.

Furthermore, the security costs of the operators stands at R41m which marks an 8% increase from the budget of the previous year.

Secondly, is ACSA able to assure the public that South African air travel is safe, and that security at the airports are at an acceptable standard.

Ms Hlahla assured Mr Ainslie that she has, in her capacity as Managing Director, done her best to provide the best standard of safety and security possible. Yet without the requisite intelligence to keep ACSA on its toes there will be gaps, and it is hoped that the new strategy will help.

Thirdly, it has been reported that in March this year CTIA conducted a simulated emergency drill which did not go according to plan. ACSA is requested to clarify this.

Mr Kalawe replied that two conflicting newspaper reports on this incident were published, with the Cape Times printing a negative depiction of the events, whereas the Argus recognised that the purpose of the drill is to identify areas of improvement, and agreed that this purpose was served. Indeed, the internationally respected instructor who co-ordinated the event and Mr Trevor Abrahams of the Civil Aviation Authority were satisfied with the results obtained. A response has since been forwarded to the Cape Times to sort out this matter. Members and the public are assured that CTIA is ready to handle emergency situations.

Ms Hlahla added that ACSA conducts tests on each airport to ensure every emergency plan is complied with, and she was impressed by the support provided by the local municipalities.

Mr Schneeman stated that he has personally experienced problems with the provision of docking stairs for passengers to disembark the aircraft, and the pilot made it clear that this was ACSA's responsibility. It just so happened that the Minister of Transport was also on that flight, and he in turn stated that it was not ACSA's responsibility. ACSA is requested to explain the measures it has taken in this regard so as to dispel the negative impact this may have on passengers.

Mr Kalawe stated that the reality of the situation is that most people at South African airports do not understand the difference between ACSA, SAA and the apron services at South African airports. In this regard an advertising campaign should be embarked upon to increase such awareness.

Mr Naidoo added that the airlines contracts directly with the service providers, and not with ACSA. In fact, ACSA only provides the infrastructure to facilitate the movement of aircrafts. With regard to the relationship with the apron services, the ramp handling license regulates the manner in which business is conducted on the ramp, and this forms the biggest risk because of the tremendous value of the aircrafts.

Ms Hlahla added that because of this license, the stakeholders have communicated to her that they do not care who the contract is awarded to, but it does not fall within ACSA's responsibility.

Mr Pillay reminded Members that during a previous meeting with ACSA he had raised the problem with the security scanners at the airport check-in points, and he was told at that time that new equipment had been ordered and its delivery was awaited. Yet he has just recently experienced the same problem. Could ACSA clarify this matter?

Mr Kalawe responded that ACSA is in the process of approving the tender for the provision of this equipment, and this will be finalised by Wednesday 15 May 2002, with delivery expected in three to five months time. Equipment that is not performing according to the prescribed standard is constantly being calibrated to ensure proper functioning.

Secondly, ACSA is requested to inform Members of any litigation it might currently be engaged in and how this is catered for in the budget.

Mr Naidoo replied that R6m has been allocated in the budget for legal fees, but these are not to be used to settle litigation claims against ACSA, but rather on operational costs. The only litigation in which ACSA is currently involved is an arbitration matter with a security firm, set down for the second week in June.

Ms M Coetzee-Kasper (ANC) inquired whether the decision to outsource was merely an attempt by ACSA to save costs, or whether the primary aim here was to provide a high standard of service.

Mr Naidoo informed the Member that ACSA currently outsources only three service areas. The first is the cleaning of airports, which has been outsourced since 1993. Secondly, the outsourcing of hard security which covers perimeter access points and provides a presence at carparks, as well as those areas except the manning of the x-ray machines. The third is carpark management, which is provided at CTIA only, but was introduced at JIA and DIA last year in an attempt to understand the cost structure involved. ACSA has not, however, increased these tariffs since it took over control of this service.

As far as the decision on which services would be outsourced, the carpark service was inherited, but only those that do not form part of ACSA's core business are outsourced, such as cleaning, because they pose a low risk to its core business. Security services have been outsourced because ACSA does not have the necessary technology and ability to provide an acceptable standard of service here. The decision was therefore not motivated by a desire to save money, as suggested by the Member, but rather from a recognition that ACSA cannot play around with security if it is at the core of its business.

The Chair stated that the security issue is an important concern, and Cabinet has ensured that the South African Police Services (SAPS) play a more active role in this regard, in line with international developments in this area, especially the lessons learnt from the United States and its failed attempts at outsourcing security services.

Mr Slabbert inquired as to what precisely went wrong with the security services in the link to Johannesburg, along which a spate of robberies took place.

Ms Hlahla replied that this happens at the best of airports, and in each case the capacity of the particular airports has to be evaluated to ensure its security is sufficiently tight. The United States government has taken over complete control of the provision of airport security, which is an extreme reaction. As mentioned earlier by the Chair, the introduction of a specialised unit to ensure security is being evaluated, and ACSA welcomes its introduction. Yet such introduction will face its own challenges in terms of ensuring that the focus, management and structure of this unit is adequate to deal with international security standards. Whether it will succeed on all counts is not certain.

The Chair stated that Mr Sullivan, the head of ACSA security, was suspended but has recently been reinstated. ACSA is requested to clarify this matter.

Ms Hlahla responded that she herself suspended Mr Sullivan, and the resumption of his office is an internal matter. It is good that he is back.

Secondly, it was discovered during 2001/2002 that ACSA would have recovered the AdR shareholding investment within three years. The question which then arises is what AdR is actually continually investing in ACSA, if anything at all, as well as the actual value of its 20% investment in ACSA. In other words are they truly investing in ACSA to improve the standard of South African air travel, or is there sole aim to just cash in?

Ms Hlahla replied that she would only be able to offer a limited comment because this is essentially a shareholder issue. However, as far as operations is concerned, AdR does capacitate the airports to run more efficiently, and its approach to planning has enriched the South African approach. AdR has also developed the ACSA team, largely African, and is very good. The Minister would really be able to provide more information on this subject.

The Chair stated that ACSA cannot be faulted for the Goselani disaster, but how was the decision to concession them reached, and who made this decision?

Ms Hlahla responded that there should reflection from everyone, especially the ACSA executive structure, as to how the matter could have been handled better. It is hoped that the introduction of the new specialised unit would afford ACSA the opportunity to improve this situation.

Mr Ainslie reminded the ACSA delegation that, at the last meeting, ACSA had reported that SAPS officials would be redeployed to South African airports. ACSA is requested to explain whether this has in fact come to pass.

Ms Hlahla answered in the affirmative, and thanked this Committee as well as the former Minister of Safety and Security and National Commissioner Selebi for the support offered to ACSA during that process. Additional support is needed for specialised airport security skills training of these officials.

Mr Slabbert encouraged co-operation between the relevant role-players to ensure safety and security at South African airports, but expressed concern at the fact that, as raised in a previous meeting with ACSA, he had trouble checking in because he had a tweezer on his person. Surely this is going too far.

Ms Hlahla replied that the aim is to secure a minimum risk for passenger safety, and in this regard a no tolerance approach has been adopted.

Mr Kalawe added that passengers are required to complete a form at the check-in desks which requests them to disclose belongings accompanying them on the flight, and this list includes tweezers.

Briefing by Civil Aviation Authority (CAA)
Mr Trevor Abrahams, Commissioner of CAA, provided the background to the establishment of the CAA, and the international trends that called for its introduction. The slide entitled "CAA Financial History and Projections" should be read with the document entitled "CAA Income Statement 1998-2005", and noted that it has inherited five aging aircrafts which have since been consolidated into a single aircraft, thus actually comprising capital under the current balance.

The slides entitled "Activity Based Costing Study" and "ABC Study Outcomes" indicate that a component model was devised to generate the costs of activities, which forms an important management tool. It has also raised strategic management questions relevant to government policy and the issue of financial viability of the CAA.

The slide entitled "2002-3 Budget Revenue Projections" should be read with the document entitled "CAA Budget for 2002/2003".

Under "2002-3 Budget Expenditure Projections" it is evident that the bulk of CAA expenditure falls with staff costs. This is due to the fact that CAA is largely an inspectorate body, which travels throughout the country to conduct these inspections.

The slide entitled "CAA Financial History and Projections" indicates that income has, for the most part, exceeded expenditure. This has been projected for 2003/2004 and 2004/2005 largely because of the new fee setup and staff structure.

Under the slide entitled "Key Issues" the CAA's "financial sustainability" depends largely on the new fees regime, but CAA has received major resistance from the industry. The fact of the matter is that 40-60% of the costs of operations are dollar-based and, if one considers that the strength of the Rand has dropped by 40%, it illustrates just how tough the market is. This, in turn, forces CAA to be cautious of those operators who now decide willfully to cut corners because they cannot afford the full provision necessary for the service. For this reason the User Pay Principle (UPP) was introduced to address this problem, but this might not totally cure the problem with the cutting of corners due to insufficient funds, and CAA has to be mindful of the impact of UPP.

It also has to consider how best to treat "Non-Commercial Aviation" because these operators have the same burden placed on them, and measures have to be devised to treat this sector differently.

With regard to "Fines", the CAA has to be given more teeth so that it may force South African airports to pay substantially for contraventions. The United States' Federal Aviation Authority is authorised to impose fines of $250 000 for single contraventions.

As far as "Safety Promotion" is concerned the CAA is of the view that prevention is the preferred option, so that the flying public may be encouraged, especially the private, non-commercial and recreational aviation sectors. In this regard, it was recently reported in the media that two helicopters collided in mid-air while performing an unauthorised stunt at the V&A Waterfront. The CAA has dealt with this errant operator, and has shut it down, as it will do to all who willfully disregard the stipulated safety standards.

Lastly, "Staff Development and Retention" needs attractive salaries to be offered to current and prospective CAA officials, so that the services of competent staff may be retained at CAA. In fact, CAA has just recently lost personnel to the Department of Public Service and Administration, indicative of the harsh reality of the labour market. This is made especially hard when one considers that the CAA has trained these personnel, but they are then snapped up by more lucrative offers, which the CAA is not currently in a position to match.

The highlighted portions in the document entitled "Awareness Campaign for General Aviation in South Africa" illustrates the racist bodies with apartheid mindsets that are still active within the industry. Yet the truth of the matter is that CAA has very skilled staff, and has achieved transformation without sacrificing capacity and competence and now possesses one of the most skilled CAA's on the continent and the world.

Discussion
Ms Coetzee-Kasper inquired as to the contribution made to CAA by the smaller flights as far as the maintenance of safety is concerned.

Mr Abrahams replied that their contribution to the budget is smaller than their larger counterparts, but this is because the cost is determined by the weight of the aircraft. Yet the increase in their contribution has been significant. Most accidents involve smaller aircrafts, and approximately 160 such accidents are handled annually. April 2002 experienced the highest number of accidents in thirteen years, yet this statistic has not received much media attention because the fatality rate was very low. This is an important concern because the smaller aircrafts share the same space as the jumbos.

Secondly, it does not seem necessary to simply follow the American model, as the South African aviation industry is capable of doing things its own way. Furthermore, the implementation of the America system could prove too costly.

Mr Abrahams responded that the CAA is not as independent an institution as the Federal Aviation Authority in the United States, and does not have the necessary resources to attract the skilled personnel when they are lured away. The CAA has however jacked u" its oversight function during 2001. The Member is correct that South Africa cannot follow blindly, but our aviation industry has to recognise the positive developments and elements of those systems, and incorporate them into our own unique and individualised context.

Mr Schneeman requested clarity on the resistance encountered with the proposed increase of fees, and the progress made in this regard.

Mr Abrahams answered that it is hoped that this would be introduced in August 2002, and CAA will be conducting a workshop with industry players on this matter. The results of this workshop will be published. The rate of inflation since 1998 currently stands at 33%, and it has been proposed that an average rate of 10% be phased in over a seven year period.

Secondly, during 2001 CAA also raised the problem with its staff complement, and is asked to explain whether the persistence of this problem is impacting on the potential safety and functioning of the CAA.

Mr Abrahams replied that CAA is not satisfied as it is not doing its job as well as it would like, but it is functioning to the best of its ability, taking into account the limited staff complement.

Thirdly, several incidences of aircrafts flying at very low altitudes over the Randburg residential areas have been reported, as well as training exercises. CAA is asked to explain the party responsible for overseeing such activity.

Mr Abrahams responded that these are clearly illegal activities because aircrafts are required to observe a minimum altitude of 1000 ft in built-up areas. The CAA does receive numerous complaints from citizens, and some even manage to get the errant aircraft's tail registration details. They are then called in to account, and either have their licenses suspended or they are forced to re-write their flight examination.

Mr Slabbert asked who received the airport tax.

Mr Abrahams replied that currently three charges on an airline ticket: airport tax, 100% of the baggage screening cost and a R4 passenger tax. Only the last is paid to CAA, and it has been proposed that this be increased to R7 as of August 2002.

Secondly, how frequently are the carriers, such as British Airways and SAA, checked to monitor and ensure compliance with safety standards, and is the CAA responsible for conducting these checks?

Mr Abrahams replied that all carriers have to comply with CAA tests and regulations, and tests and checks are conducted annually every six months. The foreign carriers, however, have their own tests and regulations to which they are bound to comply.

Mr Pillay requested CAA to explain how often the Lansaria and Randburg airports are inspected, and whether these findings are announced.

Mr Abrahams responded that there is the mandatory annual check for compliance with the terms and conditions of the license, but CAA also conducts ad hoc inspections. The Lansaria airport has improved greatly, and Randburg airport has very little as far as aviation policies is concerned. The Minister was informed of this, and this matter has to be addressed. This airport has gone into a steady decline since its international status was withdrawn, and it is contended that this was the incorrect decision.

Secondly, how many aviation accident investigations are currently ongoing?

Mr Abrahams replied that the exact number is not certain, but an average of 165 accidents are dealt with per annum, and the CAA also deals with paper investigations.

Thirdly, would it be possible for this Committee to witness the conducting of an inspection?

Mr Abrahams welcomed this visit, and extended an open invitation to the Committee.

Mr Ainslie requested further clarity regarding the proposed increase in fees.

Mr Abrahams replied that these fees are based on the activity based costing study referred to earlier, and the increase will be phased in over a seven year period, and the R4 to R7 increase in passenger tax should be implemented in August 2002.

Secondly, how does the current fees rate and its proposed increase compare to international trends in this regard?

Mr Abrahams replied that a comparative study has been done, but it is difficult to establish the exact costs for foreign countries, because they have different pay regimes. On average South Africa is at the middle to low end of the scale.

Thirdly, co-ordination of airport security is at an unsatisfactory level, and what is being done to address this?

Mr Abrahams responded that the reaction by the United States to the September 11 events is an overreaction specific to that country, and the measures they have planned to step-up their security at their airports cannot be sustained. South Africa must adjust its measures commensurate with the perceived threat.

Mr Schneeman inquired whether the proposed increase in fees and passenger tax would cover the costs of the increase in staff, and whether CAA is satisfied with this?

Mr Abrahams responded that CAA has planned to increase its staff complement to 224, and the budget has to attract these personnel.

Secondly, greater efforts should be made to educate the public on aviation security.

Mr Abrahams replied that during 2001 CAA spent R6m on improving public safety. Yet funds do not have to spent in this regard, as passengers should simply obey the safety instructions given by the cabin crew because they are trained safety officers, and are not just "trolley dollies". There is also a policy that all cellular telephones must turned off once the aircraft's doors have closed. The United Kingdom has stated that the use of cellular telephones in flight poses a definite threat to safety, yet this remains a gray area in South Africa.

Mr Louw (ANC) inquired whether all the aircrafts that performed at the recent Potchefstroom air show were duly checked.

Mr Abrahams responded that he attended the airshow and a safety officer did check all the aircrafts. As mentioned earlier with regard to recreational aircrafts, these have to be properly rated and certain standards have to be fixed for them, such as ground boundaries.

Secondly, is Mafikeng airport still feasible, or is it only suitable for cargo transportation?

Mr Abrahams replied that this airport still has a valid license, and is authorised to receive large crafts.

Ms D Mbongo (ANC) asked whose duty it is to ensure that the doors of the aircraft are closed.

Mr Abrahams replied that this responsibility lies with the cabin crew, but the aircraft does have electronic sensors to alert the pilot that a door has not been closed. Yet these signals may be faulty, with the result that the aircraft has to return to the landing bay and close the doors properly, even though they may not actually have been open.

The Chair thanked the CAA for its presentation, and stated that the key points made are that the CAA needs to expand its staff complement in a careful way. The CAA is also flagging the introduction of the UPP approach, and it is suggested that the cost analysis is not properly informed. Furthermore, there are also increases on the cards which are not inline with inflation rates, but this is due to a need to catch-up with the escalation, and whether this is the correct or just or appropriate approach in terms of the international norms.

Mr Abrahams added a caveat that the UPP approach is based on the assumption that the South African government will step aside totally at some point, but it has not yet done this. Should a blanket rule be adopted in this regard, it could result in cost-cutting. There is thus some reservation as to whether a proper cost analysis was done on the ability to fund the CAA.

The meeting was adjourned.

Appendix 1

OVERSEEING THE PROGRESSIVE IMPLEMENTATION OF TRANSPORT PLANNING IN TERMS OF THE NATIONAL LAND TRANSPORT TRANSITIONAL ACT (2000)

Research Project Proposal for the Transport Portfolio Committee, National Assembly

Background

The NLTTA
After several years of refinement, Parliament finally passed the National Land Transport Transitional Act (NLTTA) in late 2000, and the Department of Transport (DoT) began to operationalise the Act from December 2000. The Act seeks to establish a coherent, developmentally-oriented approach to road public transport, drawing in all three spheres of government. A central feature of the Act is that it requires municipal and provincial-level transport planning to be the basis on which any future public transport operating licenses are awarded.

The legacy of chaos and relative anarchy in public transport in South African towns and cities is partly attributable to the fact that, historically, permits to operate public transport frequently had little connection whatsoever to any coherent planning.

This resulted in many anomalies, including -
a lack of transparency on the criteria for awarding public transport permits, with all the attendant dangers of actual or perceived corruption;
life-long permits to certain bus companies stifling any competition, not least from emerging (and therefore mostly black) operators;
incoherence, with too many operators competing for too few commuters on some routes, while other routes are under-serviced;
incoherence, also, in the sense that effective inter-modal connections have tended to be neglected - between, say, mini-buses on short routes and buses and trains on longer routes. Instead of complementing each other, we have wasteful competition.
And, generally, there has often been a lack of pro-active forward planning, with changing settlement patterns, housing and land-use developments not being adequately integrated into transport planning.

Problems with operationalising the NLTTA
Incomplete information available to the Portfolio Committee strongly suggests that little progress has been made over the last 16 months in the implementation of the NLTTA. Problems encountered seem to include:

Severe capacity and resource weaknesses, especially in the critical local government sphere;
A mis-match between transport plans and the actual life-span of existing operating licences - some operating licences are expiring, for instance, before plans are ready.

October 2001 amendment to NLTTA
These challenges have created many insecurities among operators and commuters, and it was for this reason that, in October 2001, the National Assembly amended the NLTTA to allow for some transitional flexibility. During hearings in the run-up to the amendment, the Portfolio Committee heard many complaints and concerns, and we committed ourselves, in the course of 2002, to conduct oversight work in this general area.

In the second half of 2002 the Committee will, indeed, conduct visits to metros and municipalities to gain a better first-hand understanding of the issues. However, the Committee has no independent research capacity, and any oversight work is liable to be somewhat superficial if not backed by research.

Research Proposal

2.1 Areas to be covered
The research should
Involve a sample of two Metros and one rural municipality, and interviews should be conducted with the responsible local authorities, local public transport operators, relevant trade unions, and, where possible, representative commuter forums;
Assess whether transport plans are, indeed, completed and/or in the process of being completed, and develop an understanding of the challenges, difficulties and lessons learned;
Assess the extent to which transport planning (insofar as it is happening) is integrated into broader IDPs;
Assess the linkages between transport plans, IDPs and the actual provision/licensing of road public transport;
Assess whether the relevant provincial and national departments are playing an effective facilitating role; and
Assess whether the legislation, as it stands, needs reconsideration in any respect.

2.2 Research output
The research should result in
A report to be submitted to the Committee by the beginning of August 2002.

Appendix 2

AWARENESS CAMPAIGN FOR GENERAL AVIATION IN SOUTH AFRICA

This letter reaches you to raise awareness over the health and future of general aviation (GA) in our country and to invite you to an open meeting in your area (for details, see Foot of page). At this meeting you will be briefed on the issues and challenges Facing general aviation, and also given an opportunity to pledge your support to organisations representing the interests of GA.

The concern over the future of GA was discussed in some detail during a recent informal meeting between officials and office bearers of the Commercial Aviation Association of South Africa (CAASA). the Aircraft Owners and Pilots Association of South Africa (AOPA SA) the Aero Club of South Africa and Tom Chalmers, Editor of World Airnews, who convened the meeting. These organisations are in agreement that we nave to mobilise the entire GA community behind us. if we are to have any chance of securing and safeguarding our right to the skies and the future of GA.

General aviation is the cornerstone of the aviation industry in South Africa and all agencies and businesses related to aviation are dependent on its health for their own viability. More than 80% of all licensed pilots in South Africa are involved only in GA, and even airline pilots earned their wings in GA. The aviation maintenance, insurance and finance sectors are in business almost entirely due to the existence of general aviation.

We wish to highlight a number of significant developments in recent years, which have impacted and are still impacting most directly on pilots, aircraft owners and all businesses associated with general aviation in South Africa.

THE SOUTH AFRICAN CIVIL AVIATION AUTHORITY
As the controlling agency for aviation in South Africa, the commercialisation of this function has had the most far-reaching and severe impact on aviation in South Africa, since it has introduced user' charging into each and every aspect of aviation, from pilot licensing to the issuance and annual renewal of Certificates of Airworthiness. Overzealous transformation of this institution has furthermore led to a loss of functional capability and know-how in many areas, and as a consequence many inspection and related services are below the expectation of what the industry perceives itself to be paying for.

ATNS COMPANY
Also having been commercialised into a service agency with Government as its only shareholder, the ATNS Company is working towards a future scenario in terms of which it will have to fund itself entirely from user charges collected from all who use its services.

THE AIRPORTS COMPANY
All the State owned airports in South Africa have been privatised into the Airports Company of South Africa (ACSA). The company owns and operates the ten major airports serving the scheduled airlines in South Africa. With the exception of Johannesburg International Airport JlA, ail other ACSA owned airports in South Africa are important general aviation airports and as such are a major concern to general aviation.

SOUTH AFRICAN WEATHER SERVICE
The latest chapter in the user pays saga was recently added when the SA Weather Bureau was restructured into the South African Weather Service. Users now have to pay for specialist services such as aviation meteorological services.

APATHY OF THE FLYING COMMUNITY
Despite the many fundamental changes that are affecting GA, support for organisations representing general aviation is at an all time low. From all the statistics available it would appear that as much as 80% of licensed pilots in South Africa do not belong to any organisation that can represent their interests in a meaningful way. With the exception of the Airports Company all the aviation related agencies mentioned above are very keen to have ongoing and constructive interaction with organisations representing the interests of general aviation. In order to participate meaningfully in such forums these organisations require the resources necessary to do so. Resources can only be mobilised through membership, both in the form of direct membership fees and indirectly from the industry, provided that they have the leverage of substantial membership.

Vie hope that we have succeeded in raising your awareness of the important role you can play towards ensuring the future of general aviation. Most of us started flying in pursuit of a passion we probably had since childhood. Most of us have found enrichment from the experience of flying an airplane.
Now is the time to put your weight behind our efforts to ensure that this privilege is preserved for ourselves as well as for those who come after us.

Please register jour interest in attending a briefing in your area by faxing us at (031) 563-7115 or sending by email to
zasal10@iafrica.com giving us your name postal address, telephone number and email address and the meeting you wish to attend. Thank you.


MEETING TIMES AND PLACES

NELSPRUIT

Lowveld Aero club

17h30

Mon. Feb11

JOHANNESBURG

Placo Hangar 12 IRand)

17h30

Tues, Feb 12

BLOEMFONTEIN

Bloemfontein Flying Club

17h30

Mon, Feb 18

EAST LONDON

Border Aviation Club

17h30

Tues, Feb 19

PORT ELIZABETH

Algoa Flying Club

17h30

Wed, Feb 20

GEORGE

Lecture Room, Flight Training College

17h30

Thur, Feb 21

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