Price shock for air passengers

Johannesburg - The Airports Company of South Africa (Acsa) hopes to recover the costs of its capital expansion programme through airport taxes next year.

This programme will require R19bn. To finance it, the cost of items such as passenger service tariffs could rise by as much as 200% over the next five years.

Acsa's managing director Monhla Hlahla says the company had to take on a great deal of debt to fund its capital projects. This is exerting great pressure on the company's balance sheet.

"Our total indebtedness is some R11.5bn. The company's debt obligations this year will amount to R1.4bn-odd," Hlahla declared on Thursday.

Erik Venter, joint chief executive of Comair, reckons Acsa is hopelessly undercapitalised. A company is undercapitalised when it has insufficient money to meet its obligations. Venter says Acsa has greatly overestimated passenger volumes and entered into a capital construction programme beyond its means.

"Acsa is now unable to borrow more money. Passenger volumes are falling and its shareholder (government) is reluctant to inject money into the company.

"Passengers now have to recapitalise Acsa through crazy tariffs."

Priscillah Mabelane, Acsa's financial director, says Acsa has received no financial support from government for its construction programme.

"Neither have we received government guarantees for further borrowings." In the past two years Acsa distributed a profit of R1.3bn as a dividend to its shareholder.

Venter says it is inconceivable that Acsa did not retain these profits within the company to strengthen its balance sheet. "The government has sucked all the profit out of Acsa and passengers now have to finance Acsa."

Hlahla declined to mention the percentage by which tariffs would increase. "We are still finalising the tariff model for the next five years."

Chris Zweigenthal, chief executive of the Airlines Association of South Africa (AASA), says airlines are expecting a shock.

"The existing tariffs were determined taking in account Acsa's previous R5bn capex programme. Clearly, R19bn is significantly more."

The impact of the new tariffs can seriously harm the industry, which is already under great pressure.

"Every 1% increase in ticket prices means a 1% decline in passenger volumes," explains Venter.

- Sake24.com