ATC140212: Report of the Portfolio Committee on Transport on the Oversight visit to the Airports Company South Africa (ACSA), dated 11 February 2014
THE PORTFOLIO COMMITTEE ON TRANSPORT ON THE OVERSIGHT VISIT TO THE AIRPORTS
COMPANY SOUTH AFRICA (ACSA), DATED 11 FEBRUARY 2014
The Portfolio Committee on Transport, having undertaken an oversight visit to the Airports Company South Africa at O R Tambo International Airport in Johannesburg on 18 September 2013, reports as follows:
Committee on Transport (the Committee), as mandated by the Constitution and
Rules of Parliament, undertook an
oversight visit to ACSA on
18 September 2013.
The Committee delegation consisted
Committee Chairperson, Ms N R Bhengu (ANC), Ms N J
Ngele (ANC), Ms N Mdaka (ANC), Ms RM Motsepe (ANC), Mr I Ollis (DA) and Mr P
Mbhele (Cope). The Committee was supported by the following parliamentary
Ms V Carelse, Committee
Secretary, Mr S Ngesi, Committee Researcher, and Ms D Martin, Committee
The Committee had previously been briefed by the
Department of Transport and low-fare airline operators on the cost pressures
facing low-fare airlines.
One of the
challenges faced by low-fare airlines was the high airport charges imposed by
ACSA that added to the pressure on their profitability.
Low-fare and full-service airlines were also
expected to operate in the same environment and were exposed to the same cost
drivers as full-service airlines.. The aim of the oversight visit was, firstly,
to ascertain how airport charges were determined and their impact on the
profitability of low-fare airlines and, secondly, to have discussions with ACSA
and the Department of Transport on how the playing field could be levelled for
stakeholders in the aviation industry. During the visit, the Committee would
also visit the facilities made available at O R Tambo International Airport for
low-fare and full-service airlines.
AIRPORTS COMPANY SOUTH
MANDATE OF ACSA
ACSA was formed in 1993 as
a public company under the Companies Act (No. 61 of 1973), as amended, and the
Airports Company Act (No. 44 of 1993), as amended. ACSA is majority-owned (70%)
by the South African Government through the Department of Transport. The Public
Investment Corporation (PIC) owns 20%, whilst black economic shareholders and
employees hold the remaining 10%.
ACSA was formed to own and
operate the nine principal South African airports, including the three main
international gateways of O R Tambo International, Cape Town International and
King Shaka International Airports. Pilanesberg International Airport was added
in 1998 under a 30-year concession with the North West province. However, ACSA
returned the operation of the airport to the province with effect from 1
October 2011. ACSA is responsible for processing approximately between 93 and
95% of all passengers departing on commercial airlines from the airports within
South Africa, which is in the region of around 17.5 million per annum. It
is estimated that the total departing passengers will reach around 20.5 million
by 2014/15 and approximately between 25 and 26 million by 2019.
ACSA plans to invest R45 billion
in capital over the next 10 years in the form of new capacity infrastructure
and maintenance and refurbishment projects.
More than 55 commercial airlines frequent ACSA airports. The largest
airline is still South African Airways (SAA) which contributes more than
35% of all
contributed an estimated
75 000 jobs
the South African economy, of which 23 000 were direct in nature and 52 000
indirect due to multiplier effects of linkages with other sectors. It
contributes an estimated
to the South African
gross domestic product (
an average annual basis. Expansion operations and traffic growth contributed an
to the South African economy
through company, personal and value-added taxes.
ACSA has two distinct
revenue streams. The first source of revenue is aeronautical income which is
derived from regulated charges or tariffs. These charges comprise of aircraft
landing charges, parking charges, as well as passenger service charges. The second
source of revenue is referred to as the non-aeronautical income and is
generated from commercial undertakings and flows from retail operations, car
parking, car rental concessions, advertising, property leases and hotel
operations. Another component of non-aeronautical revenue is generated by
The Managing Director of
ACSA clarified the breakdown in ticket pricing, as required by National
Treasury as follows: Taxes, regulated charges, non- regulated charges and
airline costs. Taxes included value-added tax (VAT) and International departure
tax on regional and international departures. Regulated charges referred to ACSA
passenger service charges, which consist of the following: R120 for domestic
charges, R249 for regional charges and R328 for international charges. Airline
costs include fuel charges and insurance. The term airport taxes was incorrectly
used for taxes, charges and other costs recovered by way of the air ticket.
In April 2012, the Steering
Committee of the Economic Regulatory Review agreed to allow the current
permission to run until 31 March 2015. The Regulating Committee for the
aviation industry was appointed in March 2013. Following the appointment of the
Regulating Committee, the proposals with regard to the funding model could now
be considered. However, amendments to primary legislation (Airports Company
Act) were not foreseen to be finalised in time. Other challenges were the
absence of an appeals mechanism and regulations (pricing policy) by the
ACSA remained focused on
growing its existing business and
identifying and securing new business opportunities. The core areas identified for
sustained growth were:
management by im
proving airline punctuality, providing faster
connections, energy efficiency and generally doing more with less without
compromising safety, security or service;
creating long-term value for all stakeholders;
through growth of the
Managing and developing a
Finalisation of the economic
regulation legislation and
excellence and i
dentifying and securing
The following observations
were made during discussions with ACSA management and officials from the
Department of Transport:
The affordability of air transport
remains too high for ordinary citizens. Air travel was still the preserve of
the rich. Universal access to air travel was a challenge.
The Committee noted the arguments
put forth by ACSA on the ticket structure, but felt that more engagements were
needed with the Department and ACSA on how universal access could be achieved.
The Committee was particularly concerned about the lack of low-fare operators
in the aviation industry and how the current cost structure impacted on their
Committee noted the commitment of the Department of Transport to create
universal access in the aviation industry and its continuing efforts to
maintain services of high quality. However, the Committee was concerned about
the absence of a transformation strategy for the aviation industry. The
Committee noted the commitment of the Department to formulate the strategy in
2014. The Committee was of the opinion that there should be congruency between
the transformation strategy of the Department and that of ACSA.
The Committee noted that ACSAs retail
areas were occupied by established companies and that ACSA did not provide
business opportunities to SMMEs and cooperatives. The entity was not focusing
on implementing strategies that promoted the reduction of poverty. During
discussions, the Committee noted plans undertaken by ACSA to create awareness
of new business opportunities at its airports to increase participation of
youth, women and the previously disadvantaged.
After discussions, the
Committee undertook a visit of facilities at O R Tambo International Airport.
The following observations were made:
The facilities were in good condition.
Concern was expressed about bottlenecks at security access
O R Tambo
airport during peak hours. The Committee observed that the quality of customer
service on the part of ACSA staff had regressed from what had been provided
during the 2010 Soccer World Cup.
The Committee noted that longer walking
distances at the airport, among others, from check-in counters to the boarding
gates, might pose a challenge to the elderly and people with disabilities.
The Committee made the following recommendations to the Minister of
To continue a high quality of service,
ACSA should ensure that the training of its frontline staff should be of high
Appropriate transportation should be made
available, when needed, to assist with the mobility of people with disabilities
and the elderly at airports.
The Committee noted the challenges posed
to the aviation industry due to the absence of a transformation policy and
recommended that the Minister of Transport ensure that that the Department of
Transport and ACSA work closely on the formulation and finalisation of a
transformation policy for the aviation industry. The Committee will have ongoing
follow-up with the Department to discuss strategies and interventions that could
reduce the cost of air travel and level the playing field so that more
operators could enter the industry.
That the Department should put greater
effort into creating an economic and regulatory environment that is conducive
to the establishment and ongoing survival of low-fare airlines.
Report to be considered.
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