Airfare price shock looms
Acsa spending to spark ticket price hike, airline warns
A SOUTH African airline has raised concerns that the Airports Company South Africa is in deep financial crisis because of its exorbitant spending and that this could increase the cost of tickets in the future.
Kulula.com and its parent company Comair Limited rang the alarm on a possible hike in fares in a recent statement, after the release of Acsa’s financial results.
They said the financial results showed a “massive shortfall” in funding for its R17 billion capital expenditure commitments. This included the new airport being built at La Mercy, near Durban, which has a R7.5bn price-tag.
Comair joint CEO Erik Venter said passengers would end up paying for Acsa’s spending by pumping up levy costs.
“We fully support the investment in necessary airport infrastructure, however, for the past few years the aviation industry has vehemently opposed Acsa’s excessive spend, to no avail,” he said. “Now passengers are going to be called on to pay for it.”
However, Acsa has denied these claims.
Responding to Weekend Argus questions, the airports operator said it had an “AA” Fitch credit rating – a good standing – and was therefore able to access debt from the debt capital market.
Since April, it had raised about R4.5bn of the R7.7bn in funding required by March 2010.
Acsa communications manager Solomon Makgale said the company had so far raised R6bn to finance its funding gap, and that it still had credit facilities with banks amounting to R9.5bn.
“As such Acsa has sufficient credit facilities to finance its capital expenditure programme,” he said.
But this has not eased Kulula.com and Comair’s worries.
In the airline’s statement, it said passengers would now have to bear the brunt of Acsa’s financial situation.
Passengers already pay Acsa a passenger service charge of R49, as well as R50 for landing fees and rentals – a levy cost of about R100 included in their ticket prices.
This amount was the highest in the world – but Acsa, the statement said, was considering doubling the charges.
“Acsa is proposing a doubling of these charges even though, relative to the ticket price, they are already among the highest in the world,” said Venter. “The proposal also comes at a time when travel volumes have already declined by 10 percent year-on-year and travellers are more price sensitive than ever before.”
Rodney James, CEO of 1time Airline, said that while 1time had seen a growth in passenger numbers, the overall market was down, therefore, a hike in airport charges would be “irresponsible”.
“Increasing costs to the airlines and the public will increase airfares and put more pressure on their declining passenger numbers.
“Having better airport facilities is all good and well, provided that the air tickets are affordable, and not levied with Acsa fees or charges to supplement cash shortfalls for the redevelopment.”
Acsa has remained quiet about the passengers’ service charge and additional fees for now.
Makgale said the company was preparing a permission application regarding charge increases for the next five years.
It is expected to be submitted to the Regulating Committee within the next few days.
“The Regulating Committee has not made a tariffs determination yet,” said Makgale.
“We render a service like any other business and the user pays for the service. Due to the fact that Acsa is a dominant player in the market, a Regulating Committee was set up to regulate the prices Acsa charges.”
Acsa was not allowed to recover capital expenditure through tariff increases until the assets were completed and commissioned, he said.
COMFORT ZONE: Acsa’s funding gap could mean higher ticket prices for airline passengers, a leading South African carrier has warned.