Airport management company says it may need R10 billion in government guarantees

Airports Company SA (Acsa), which manages and operates nine airports in SA, says it expects it will need about R10 billion in government guarantees over the next five years in order to obtain bank loans to continue operating. 

The airport management company and the SA Civil Aviation Authority on Tuesday briefed Parliament's portfolio committee on transport on their strategic plans for the 2020/21 financial year.

Acsa predicts it will need about R1 billion in government guarantees for the 2020/2021 financial year and about R3 billion over the next three years.

Current sentiment and flight bans brought about by the coronavirus pandemic, as well as Acsa's and South Africa's sovereign debt downgrade to sub-investment grade by Moody's in March, was threatening its ability to raise funding, it said. 

Although Acsa expects that it would be able to repay loans once flight operations start to expand again, it foresees that banks will not be willing to lend it money at the moment unless the loans are backed by some form of government guarantee.

Interventions to save money in light of the pandemic's impact - such as a freeze on recruitment for the next three months and the disposal of non-core investments - will not bring about enough savings.

Acsa and Sacaa both told the committee that when they compiled their strategic and performance plans earlier in the year, the state of the aviation sector and their financial positions were totally different. Since March the pandemic has led to widespread flight bans that have just about halted SA's aviation industry. Only repatriation and cargo flights are currently being undertaken.

The airport management company told MPs it is compiling a new business strategy to deal with the expected "new normal" after flight bans are lifted or partially lifted again. It foresees that passenger volumes could fall by over 50%.

Some of the measures it expects to put in place at the country's airports once flights restart include restricted meet and greet areas, health screenings, increased hygiene checks at baggage areas and physical distancing in waiting areas.

"We are observing what airports in countries like Ghana, where domestic flights are already allowed, are doing and we will learn every day as we go along once our operations are allowed to expand again," its CEO Nompumelelo Mpofu said. 

Once domestic flights are again allowed, Acsa said its focus would be on the so-called 'golden triangle' of Johannesburg, Cape Town and Durban. It predicts that flights would initially only be allowed during specific times in the early morning and late afternoon, but not at night.

It added that even six years from now passenger volumes may still be about 20% lower than in 2019. 

Commenting after the portfolio committee presentation, Mpofu said that, outside of the healthcare sector, the aviation industry is being hit hardest by the reduction of commercial flying both in South Africa and around the world.
 
"Airports are complex operations where fewer than 10% of the people working there are directly employed by Airports Company South Africa," she commented.
 
"We are therefore acutely aware of the Covid-19 impact on our entire ecosystem. Our efforts to mitigate the business impact of Covid-19 are essential if we are to help preserve the livelihoods of thousands of people in the sector."
 
She says Acsa believes the aviation sector's most critical issue is the sustainability of airlines worldwide. Domestically the situation is rather unclear with SAA and Comair in business rescue and SA Express in provisional liquidation.

Acsa has made proposals on the resumption of domestic services, but the decision lies with the Department of Transport when it issues regulations for Level 3 arrangements.

Civil aviation

SA Civil Aviation Authority's CEO, Poppy Khoza, told the committee that aviation is one of the sector's hardest hit by the coronavirus, and the authority's financial health and stability depends on air passenger volumes.

Sacaa's mandate is to regulate civil aviation safety and security in the country to ensure the sustainable development of the industry.  

Khoza said Sacca hopes that limited domestic air activity might be able to start during level 3 of the lockdown. 

The authority is busy revising its initial performance plan due to the negative impact of the pandemic. It had no revenue in April and May, but from its cash reserves it estimates it could sustain itself for about 7 months of lockdown before it would need government aid.

As an essential service provider, it has issued guidelines for protocols when regular operations start again. More than 70% of its revenue comes from passenger safety charges and about 70% of its fixed costs are staff related.

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