Why pain of airport tariffs was delayed
Air Travel Costs | Acsa MD Bongani Maseko explains how the recent series of increases came about
AIRPORTS Company of South Africa boss Bongani Maseko, who delivered a respectable set of results last week, says he is tired of being the bad guy.
Unfortunately, it comes with the job. It does not matter what your individual credentials are, as head of Acsa, you are going to be in the firing line. And why not?
Acsa is a government monopoly that owns and runs all South Africa’s major airports. Much like Eskom prices, airport tariffs have rocketed — up 33% in 2010, 34.8% in October 2011, 5% last year, 5.6% this year and a further 5.5% next year.
This has hit everybody, from passengers to low-cost airlines already struggling to survive against unfair competition from SAA and Mango.
The low-cost carriers warned in 2010 that tariff increases would stem the growth of air travel and do untold damage to tourism and the local economy as a whole.
The Airlines Association of Southern Africa warned that airlines and consumers could not afford the tariff increases. The International Air Transport Association added Acsa to its “hall of shame” for demanding tariff increases in the midst of a global economic crisis when airlines were struggling.
Maseko, 46, does not need to be told this stuff.
He grew up in exile after his politically active parents felt it wise to leave apartheid South Africa, was educated at Waterford in Swaziland and ma-
Who is going to decide not to fly to Cape Town because of an extra R120? — CEO Bongani Maseko on the high airport taxes We did not want to lose credibility with our funders — on why the Airports Company asked for a 133% increase in airport taxes in 2010 We were the first to say that airport could have been delayed for two years, but there was a cabinet decision — on the decision to push ahead to finish the King Shaka Airport in Durban Maybe the others would have listened if we’d taken his plane and dragged it off the tarmac into the mud somewhere — on the arrogance of Fifa boss Sepp Blatter, who blocked Durban airport in 2010
triculated in Dar es Salaam, Tanzania. After working as a “runner” for the ANC — and, no, he did not do any running to OR in those days: “I wasn’t allowed anywhere near him” — he completed a four-year degree in airport and airline management at Embry-Riddle Aero- nautical University in Florida in the US and worked in the industry there before joining Acsa in 1999.
He was managing director of OR Tambo International Airport before becoming director of airport operations for Acsa and then managing director in May this year.
He knows all about the consequences of tariff increases in the industry, although he denies that there is a correlation between Acsa’s tariff increases and falling passenger numbers. You may think ticket prices are high, but Acsa pockets only R120 from a one-way ticket between OR and Cape Town International Airport, he says. “And who is going to decide not to fly to Cape Town because of an extra R120?”
A far greater chunk of the ticket prices that passengers complain so bitterly about goes to the Civil Aviation Authority and a plethora of other entities that all exact taxes from the airlines, he says.
“It is unfortunate that a lot of non-Acsa charges are put under the airport tax bracket.”
It may be small comfort, but if tariff increases of 33% and 34% make Acsa look bad, it would have been much worse had Acsa got its way. In 2010, it actually demanded an increase of 133%. When the regulator turned it down and offered 40% instead, Acsa took it to court.
“We had no option”, says Maseko. Acsa had borrowed R16.5-billion to pay for infrastructure updates and a spanking new airport outside Durban and now it was payback time. It was time for passengers and airlines using its new improved facilities to cough up.
“We did not want to lose credibility with our funders.”
He agrees that a 133% tariff “spike” was not a good way to do this kind of thing. In fact, it was the worst possible way. But the regulator left Acsa with no choice.
Between 2006 and 2010, its pleas for tariff increases to fund the infrastructure updates fell on deaf ears. The regulator re- fused Acsa any tariff increases during that period. It would have to get the infrastructure up and running first before it could expect any funding from tariff increases.
“The regulator said that was fine if we needed that infrastructure, but they would not allow us to start charging for this infrastructure until it had been built and was in use.”
Acsa repeatedly warned the regulator of the disastrous consequences of such a short-sighted policy but was ignored.
“We warned the regulator that they were only delaying the pain.”
Acsa was going through the biggest capital expansion programme in its history and the regulator was saying, “Don’t expect us to help you fund it.” That was madness, he says. “You cannot have a capital expenditure project like this and have no tariff increase.
“They made us go to the capital market in spite of us warning back in 2006 that it would cause sharp spikes later.”
Those who are vilifying Acsa for these spikes now never wondered during those years of no tariff increases where the money for SA’s glittering new airports would come from — least of all that all-knowing bunch, the same people who gave us the Eskom disaster, sitting around the cabinet table.
“Everybody was quiet because there were no tariff increases for quite a period. But it was just delaying the pain. We will be the first to say we don’t want tariff increases of 35% to 40% because that is unsustainable.”
And wholly unnecessary, he adds.
Take the newly built Terminal 5 at Heathrow, for example, he says. The regulating committee in Britain allowed for a measure of pre-funding to “smooth out” an unnecessary spike in the tariff. Of precisely the kind we have seen in South Africa from 2010.
There is a popular conception, of course, that the only reason for Acsa’s exorbitantly expensive, and unfunded, infrastructure programme was to make the government look good for 2010 Fifa World Cup. In other words, it was all about the ego of a few politicians.
Should Acsa not have told them to get knotted?
Maseko argues that the World Cup had nothing to do with it.
South Africa had had 35 consecutive quarters of GDP growth under Thabo Mbeki, he says.
“And when the economy is doing well, we have to provide more capacity.” World Cup or no World Cup.
“All the World Cup did was confirm that we needed to finish the infrastructure upgrade in time for the World Cup. But we weren’t upgrading the airports for the World Cup.” What about King Shaka? “We were the first to say that airport could have been delayed for two years, but there was a cabinet decision.”
He denies that it was a vanity project.
“This airport had been planned from 1972,” he says, as though the dinosaurs in charge of these matters then were averse to vanity projects.
Instead of squeezing its customers for the R7-billion King Shaka bill, why didAcsa not sell the old Durban International Airport to Comair and use the money for the new airport? Instead, of course, the old airport, valued at R2-billion, went to Transnet for a “dugout port”.
Comair said it wanted to buy it but never made an offer, says Maseko.
“Transnet pursued us more aggressively.”
Talking of which, the 2010 World Cup fiasco at King Shaka International, which made Acsa such a laughing stock, might have been avoided with the use of a bit more aggression on its part, he says.
He reckons it all started because Fifa boss Sepp Blatter’s plane refused to move along after disembarking its self-important cargo. Other planes followed its example and blocked the airport to incoming planes, whose occupants missed the World Cup semifinal as a result.
“We should have been more forceful,” says Maseko. “Maybe the others would have listened if we’d taken his plane and dragged it off the tarmac into the mud somewhere.”
Acsa could have been everyone’s darling, for once.