Air­fare price shock looms

Acsa spending to spark ticket price hike, air­line warns

Weekend Argus (Saturday Edition) - - BUSINESS - LEILA SAMODIEN

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.

Ku­l­ 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 Ku­l­ 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.

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