Acsa set to collect limited rental income
Airports Company SA (Acsa) has entered into payment arrangements with its commercial partners, such as retailers, which could see the company collecting a limited amount of rental income.
Airports Company SA (Acsa) has entered into payment arrangements with its commercial partners, such as retailers, which could see the company, whose main revenue streams have been cut because of a blanket flight ban, collecting a limited amount of rental income.
Acsa, one of the few profitable state-owned enterprises, told parliament this week it is facing plunging revenue due to Covid-19 travel restrictions. The company, which does not have any government-guaranteed debt, has said it could need government-backed debt of up to R11bn over the next five years.
It collects a significant amount of its total income from renting out space to retailers at the country’s airports, such as OR Tambo.
Retail revenue for 2017/2018 was up 1% to R1.2bn, making up the biggest chunk of non-aeronautical revenue at 36%. Nonaeronautical revenue relates to lease income and other revenue, including from advertising, parking and car hire.
The grounding of airlines as part of the government’s stringent measures to control the spread of Covid-19 has left most of the retail space unused.
“For retailers, we have removed the minimum rental component and are charging rental based on a percentage of turnover,” Acsa spokesperson Gopolang Peme said on Wednesday.
Peme said since the travel restrictions have been in effect, the majority of the retailers had not had any rentals payable “if they themselves were not generating revenue”.
Limited domestic air travel, with a restriction on the number of flights per day, will only be possible at level 3, which President Cyril Ramaphosa has said will come into force by the end of May. But even then, it is unlikely retailers will be able to operate at maximum capacity.
On Monday, Acsa’s executives told MPs about R3bn of guarantees will be required in the next three years. CFO Siphamandla Mthethwa said the number would rise to R10bnR11bn over the next five years.
Mthethwa told MPs lenders are jittery about providing funding to the aviation sector in general, so government support would be required.
Acsa is just the latest business to stall due to the economic effect of the nationwide lockdown that has pushed two of its biggest clients, Kulula operator Comair and SAA into business rescue. Acsa said in its most recent results that one of its clients accounted for R857m of its revenue, or about 10%.
The company’s woes come at a time when the government’s finances are looking bleak, with economists forecasting that the budget deficit for 2020 could hit double figures, significantly higher than the 6.8% tabled in the February budget. Even before the coronavirus outbreak, ratings agencies had raised concern about the growing number of guarantees to state-owned entities, saying these were the biggest risk to the economy.