- Airports Company South Africa continues to progress with its drive to enhance liquidity and to secure its long-term sustainability.
- ACSA has an asset base of more than R30 billion. It includes an investment property portfolio of R7.7 billion.
- The company said in the past it needs at least R11 billion to again operate at pre-Covid-19 levels.
The adverse impact of Covid-19 on the aviation industry - both globally and locally - has led to Airports Company South Africa (ACSA) revising its strategy and financial plan as far back as April 2020, the company said on Thursday. But its employees will not bear the brunt of the pandemic and no retrenchments are on the cards.
The strategy revision was necessitated by global travel bans and border closures, which led to no passenger flights for four months.
ACSA is a public company and, although majority owned by the SA government, is legally and financially autonomous and operates under commercial law. It owns and manages a network of nine airports in SA, including the three main international gateways of OR Tambo International, Cape Town International and King Shaka International airports.
The company says it continues to make progress in its drive to enhance liquidity and to secure its long-term sustainability. This is done through transactions that monetise assets and activities that significantly reduce both operational and capital expenditure.
For example, ACSA has recently announced the sale of its 10% equity holding in Mumbai International Airport for approximately R1.2 billion. The investment was made in 2006. According to chief financial officer Siphamandla Mthethwa, the sale was a profitable exit.
"From the outset in 2006, ACSA provided management expertise to the airport and supported its infrastructure development and expansion. We are proud of the achievements [of supporting] Mumbai International Airport over the past 15 years," says Mthethwa.
ACSA spokesperson Refentse Shinners confirmed on Thursday that there are currently no retrenchments under way at the company. It has, however, had to significantly reduce its operating expenditure, including employee costs, to cushion its sustainability against the devastating impact of Covid-19.
"The company has to date offered employees early retirement and voluntary severance. We are, therefore, not contemplating retrenchments," explained Shinners.
Owing to revenue losses because of the impact of the Covid-19 lockdowns, ACSA estimated last year that it would need about R11 billion over six years to get back to its performance levels before the pandemic struck. Government, which is ACSA's majority shareholder, has since provided support in the form of an issuance of preference shares and by securing credit facilities from lenders.
ACSA has an asset base of more than R30 billion. It includes an investment property portfolio of R7.7 billion.
According to the company, properties in this portfolio have consistently performed well above the cost of capital, thereby subsidising landing fees for airlines and passenger service charges for passengers. Furthermore, the company has already reduced annual operational expenditure by R1.2 billion, while capital expenditure of R14.5 billion has been deferred.
ACSA has issued a request for proposals for transaction advisory services to assist with the monetisation of some of its investment property portfolio. It expects the monetisation process to involve a variety of mechanisms. At the same time, ACSA says it has no intention to sell or otherwise dispose of any investment property assets.
"In responding effectively to the devastating impact of the pandemic we have adapted our strategy to focus on enhancing ACSA's core aeronautical activities. Our strategic response includes a process to release wealth associated with non-core assets," explains Mthethwa. "The monetisation of non-core investment properties will make cash available for core business activities as well as reduce the budget allocation to non-core activities."
In May 2020, ACSA presented its revised financial plan to Parliament's Portfolio Committee of Transport. It detailed the company's plan of exploring various options to mitigate the financial challenges caused by the Covid-19 impact.
"These and other strategic responses to the impact of Covid-19 that have been adopted by the company are vital to our long-term sustainability. This is a strategic process that ACSA is undertaking. We have to act now to minimise job losses and to ensure ACSA's viability over the next three to five years," says Shinners.
"In the process we are confronting tough choices and difficult decisions. However, we believe that our response is necessary to sustain [ACSA] through the recovery in aviation, which will take at least three to five years."