Covid-19 clipped Airports Company South Africa’s wings, but the ‘worst is over’
For more than two decades, the Airports Company South Africa (Acsa), a majority state-owned entity that manages the country’s nine biggest airports, has been profitable and successfully operated without taxpayer-funded bailouts.
Acsa was a rare beacon in a universe of basket-case state-owned entities that are unprofitable, depend on bailouts for survival and often undermine South Africa’s chances of economic recovery.
But over the past year, the wheels have come off at Acsa. After Covid-19 burrowed its way into South Africa in early 2020, the airports’ operator recorded a financial loss and was forced to ask the government for financial assistance for the first time in its 28-year history.
Acsa reported an after-tax loss of R2.6-billion for the year ending March 2021, from a profit of R1.4-billion over the same period in 2020. It was only the second financial loss for Acsa since it was incorporated in 1993.
Acsa’s operations, which depend on travel and tourism activity, were hit by Covid-19-related lockdowns that shut borders and forced airlines around the world to ground their planes.
Acsa generates revenue from the fees that it charges airlines to land or park their aircraft at its nine airports, which include OR Tambo International in Gauteng, Cape Town International in the Western Cape and King Shaka International in KwaZulu-Natal. It also generates revenue from retail space and advertising at airports, parking fees that passengers pay and shareholdings in airports around the world.
The start of the Covid-19 lockdown resulted in no flight or passenger activity at Acsa airports, which negatively affected its financial position.
Acsa’s revenue for the year ending March 2021 was down 69.8% to R2.2-billion, compared with R7.1-billion in the previous year – dragged down by Acsa being unable to generate much revenue from aircraft landing and parking fees. Fewer aircraft landings at Acsa airports mean that the company won’t generate sufficient revenue.
Underscoring this is that Acsa recorded 248,519 aircraft landings at its airports during the 2019/20 financial year (before the start of the pandemic), which dropped to 86,434 in the 2020/21 financial year (the height of the pandemic in South Africa).
The number of passengers travelling also declined.
As aircraft landings and passenger numbers withered, so did Acsa’s balance sheet. Acsa’s management believes that the company remains a going concern, as its assets exceed its liabilities by R20.7-billion. In early 2020, Acsa moved to raise debt from lenders to improve its liquidity profile and asked the government for help – a first for the entity that is 74.6% owned by the government.
Acsa wanted to raise new debt of between R10-billion and R11-billion for the next five years, and to do this it required government guarantees from the National Treasury. A government guarantee is an agreement between the government and lenders that the former (or the SA taxpayer) would be on the hook for payments if a state-owned entity (like Acsa) defaults on debt payments.
But Acsa found other ways to raise funding. It increased its debt levels to R9.3-billion during the reporting period from R6.4-billion in 2019. It raised R810-million in funding from the Development Bank of Southern Africa and issued R4.9-billion in bonds under its Domestic Medium Term Note Programme.
The programme is a debt instrument used by a company – at its discretion – to fund operational activities. To raise money in the open market, a company issues debt or notes to lenders with a promise of paying back the money with a fixed and floating interest rate at a later stage.
To raise more money, Acsa issued preference shares worth just over R2.3-billion to shareholders, the shares of which receive priority in dividend payments, and sold its shareholding in India’s Mumbai International Airport. This freed up R1.27-billion in proceeds.
Acsa group chief financial officer Siphamandla Mthethwa said the “worst is over” regarding the financial impact of the Covid-19 pandemic on the company’s operations. He was encouraged by a recent improvement in passenger figures after the government relaxed South Africa’s lockdown regulations.
SA’s removal from the UK’s travel red list would also have a positive spin-off for the arrival of international travellers in South Africa ahead of the usually busy summer holiday period, he said.
Acsa’s revenue for the year ending March 2021 was down 69.8% to R2.2billion, compared with R7.1-billion in the previous year