Comair challenges Acsa spending and tariff hikes

Johannesburg – Monday 9 February 2009. Comair Limited (Comair), the JSE-listed aviation company which operates British Airways Domestic and Regional and has challenged the Airports Company of South Africa’s (Acsa) recently-announced tariff hikes of over 18% with even higher increases on the horizon.

Comair is of the opinion that Acsa should be borrowing money for its capital expenditure projects from the South African government as its shareholder and not receiving the money for projects from the public through its increased passenger service charge. This is particularly impudent of the airport operator given that it has in the past declared dividends to its shareholder. The increase which is set to come into effect in May will mean that the levies charged by Acsa will constitute almost 20% of an air fare.

In addition, not all of Acsa’s projects are warranted, particularly La Mercy airport which is being built just outside Durban at a cost of R8 billion as opposed to a spend of R1 billion had they just upgraded the current Durban International Airport.

Furthermore, the market demand is currently down 10% year on year and according to Gidon Novick, the airline’s joint CEO, “this increase will be a further threat to air travel in an already squeezed market given the current economic environment.”

A respected international industry publication, Airline Business, ranked Acsa as one of the top 100 airport groups globally by revenue with an operating margin of 35.7% in 2007 and an even higher margin of 45.8% in 2006, making it one of the most profitable entities in the country. These high returns can be attributed to Acsa’s monopoly of major airports in South Africa; a practice which has seen other airport operators like the Spanish-owned British Airports Authority being forced to sell off Gatwick airport after coming under heavy fire for its monopoly in the UK and associated high profits gained from passenger and airline levies as well as retail rentals.

Novick concluded by commending Acsa for some of the infrastructure improvements undertaken at OR Tambo and Cape Town International airports. “The terminal buildings’ improvements in preparation for 2010 and beyond will go a long way in making our customers’ air travel experiences that much more enhanced. However, that said, Acsa needs to be more responsible in its spending in general.” said Novick.