Acsa’s tariff hikes are above board

DEAR SIR — With reference to the article by David Gleason titled “Little comfort in Acsa’s expansion” (October 10), I would like to correct some of the misleading and inaccurate information contained in the article.

Contrary to Mr Gleason’s opinion that, “the fees charged followed a number of years during which these were deliberately held low,” the increase was not a unilateral decision imposed on the industry by Airports Company SA (Acsa).

The approval for the increase was granted to the company following an application to the duly authorised institution, the Regulating Committee. The decision was taken in consultation with the airline industry and other relevant industry stakeholders.

The Regulating Committee made a decision in 2007 that Acsa can only start levying tariffs once infrastructural developments were completed and in use. At the time we advised the industry that the result of this new approach would be a substantial increase in the first year of the fiveyear tariff cycle. Airlines knew the implications of the committee’s decision. For a three-year period, the aviation industry benefited from very low tariffs, while Acsa was using its balance sheet to borrow funds.

If the regulatory approach had not been changed from one where a level of infrastructure development prefunding was allowed for in the tariff determination framework, we would not be in this situation today.

Similarly, the tariff increase is CPIlinked and takes into account the effect of the sluggish economic conditions and high fuel prices affecting the aviation industry. Future tariff increases are not expected to rise above inflation, as the company has proposed a review of the revenue model, which will reduce our historical dependence on tariff increases as a key component of our income.

Contrary to Mr Gleason’s understanding of the capacity requirement projections at OR Tambo International Airport, it is important to note that when determining the optimum timing of infrastructure developments, Acsa engages reputable global forecast companies to develop an independent view of how future demand may evolve.

Such forecasts typically study the economy and its drivers to gauge the effect on aviation growth as well as airline plans around routes and fleets. The forecasts are constructed independently, with forecasters directly interacting with airlines and other industry role players.

Additionally, there is no single project called “Midfield terminal”. The midfield is an undeveloped site between the two runways of OR Tambo International Airport that has been identified as the preferred location for future airport capacity devel- opments, should the need arise. There is no construction under way at this point in time.

Like any other business, Acsa would like to diversify its revenue stream and take advantage of business opportunities in other jurisdictions and unregulated environments.

In order to grow the business, the company has to look beyond South African borders. In particular, we are focusing on emerging markets in Africa, India and Brazil.

To suggest that the company would have made these decisions without conducting the requisite due diligence is inaccurate. For the record, the investment is ring-fenced and will therefore not be funded by the South African aviation industry.

Given the tariff structure model of levying tariffs only once infrastructural developments are completed and in use, it was inevitable that OR Tambo International Airport might be considered expensive.

It is also important to point out that OR Tambo International, under the present economic regulatory model, subsidises the smaller airports, otherwise they would not be viable given the high operational costs of running an airport.

Last year, a study by Mott MacDonald to assess the appropriateness of the infrastructure of Acsa found the infrastructure to be appropriate and beneficial for SA’s economy.

Contrary to the claims made in the article, Acsa is not planning to approach its main shareholder for additional funds.

The company is generating sufficient cash flow to sustain its operations and obligations.

Bongani Maseko

MD: Acsa