Friday, 6 January 2017

SOUTH AFRICA: Passenger Tax Cut Is Not All

The reduction in Acsa tariffs is welcome relief to airlines and the flying public, but does not go far enough, says operator of kulula, Comair's CEO Erik Venter.

On Thursday Acsa confirmed it will be decreasing aircraft landing fees, aircraft parking fees and the passenger service charges by 35.5% as of 1 April 2017.

The new passenger service charges (with prior year passenger service fees) are as follows and include VAT:

- Passenger service charge per departing domestic passenger: R82 (R127);

- Passenger service charge per departing passenger for an airport within Botswana, Lesotho, Namibia or Swaziland: R169 (R263)

- Passenger service charge per departing international passenger: R223 (R346).

While the reduction is long overdue in terms of the regulating formula in the Acsa Act that determines Acsa’s revenue, Venter says it "does not address the super profits Acsa has made over the past two years, when it underspent its capex budget but continued to collect tariffs at exorbitant rates set for the World Cup.

"These World Cup increases saw tariffs rise by around 160%."

'Claw back super profits of world cup and R2bn sale of Durban airport'

Venter says, "There is provision in the Acsa Act for the regulator to claw back excess profits resulting from over-collection of tariffs or under-spending on budget. We hope that this legal provision is applied and the claw back is used to offset future increases in the passenger tax and landing fees to the benefit of airlines and customers.

"The claw back must also address the sale of Durban International Airport to Transnet for approximately R2 billion. This went directly to ACSA’s bottom line, despite the fact that airlines and their customers paid for the airport, as well as its replacement, King Shaka."

"Finally the claw back should also consider interest earned on the super-profits as well as proceeds from the sale of Durban Airport."

However along with the cut for 2017, Acsa confirmed it would again increase 5.8% in the 2018/19 financial year and 7.4% in the 2019/20 financial year.

For 2016 Acsa reported a profit of R1.9bn. The state-owned enterprise's earnings before interest, taxes, depreciation and amortisation (Ebitda) was up 7.1% to R5.2bn. It also showed revenue increased 6.8% to R8.3bn as a result of the introduction of new routes, growing passenger numbers from Europe and Asia and the performance of its non-aeronautical operations.

Bongani Maseko, the Chief Executive of Airports Company South Africa says, “It is important to note that the Final Permission is in line with Airports Company South Africa’s expectations and what was proposed to the Regulating Committee. We anticipated this outcome for some time, and factored it into our financial and business planning,” says Maseko.

Concern about future constraint of passenger growth

The Board of Airline Representatives South Africa (BARSA) says it is pleased the two-year delay will no longer affect infrastructure developments and improvements, the most significant of which is the Cape Town international Airport Project.

“The Cape Town International Airport Project will see the realignment of the runway and several other associated projects including terminal improvements and additional parking bays with A380 capacity. Such projects take several years and will limit traffic growth if not accelerated now," says BARSA CEO June Crawford.

Cape Town International is poised for the first time surpassed the 10 million passenger mark following the December-January period. Crawford believes that this is especially important since the pattern of additional flights to Cape Town that were seen in 2016, are expected to continue in 2017.

“While South African Tourism’s current focus is on domestic tourism, this reduction will help to stimulate domestic travel and comes at a perfect time when SA Tourism focuses on its strategy to boost domestic tourism.

"There is no doubt that the economic value of the international airlines operations is significant,” says Crawford.

FlySafair Head of Sales and Distribution Kirby Gordon welcomed the decrease saying, “This is excellent news for South African flyers and the economy as a whole."

“Overall pricing of tickets is a complex issue where we need to consider a number of factors. Fuel alone can account for 40% of direct costs, so our exposure to the rising price of oil and a weakening rand tends to have a stronger influence on fares. That said, the decrease in these tariffs is great and is a saving that we will most certainly seek to pass onto our customers,” says Gordon.

“There’s no doubt that the reduction in this tariff is excellent news for the industry and the consumer collectively."