The State-owned Airports Company South Africa (ACSA) published its results for the 2019/20 financial year on Tuesday. ACSA owns and operates nine South African airports, including Johannesburg’s OR Tambo International, Cape Town International, and Durban’s King Shaka International. It is also a member of the consortia that run Guarulhos (São Paulo) International Airport in Brazil and Chhatrapati Shivaji (Mumbai) International Airport in India. 

Unlike many other State-owned companies, since it was set up 26 years ago, ACSA has (except for one year) been, and remains, profitable and well run. Its financial year runs from April 1 to March 31, and the just published results cover the financial year that ended on March 31 this year. South Africa’s national lockdown against the Covid-19 pandemic commenced on March 27. However, other countries instituted travel bans and lockdowns earlier. 

For the reported period, ACSA achieved revenues of R7.12-billion and earnings before interest, taxes, depreciation and amortisation of R2.6-billion. Profits rose sharply from the R224-million in the previous (2018/19) financial year to R1.2-billion. However, this jump was the result of accounting adjustments, receiving R157-million in rates refunds and fair-value adjustments to investment properties that totalled R721-million. 

ACSA generated a cashflow of R2.5-billion, which allowed it to fund its operations, capital expenditure investments and debt servicing. It repaid R296-million in debt; as of the end of the 2019/20 financial year, the group’s total debt came to R6.4-billion, down from R6.5-billion at the end of the previous financial year. However, since 2012 ACSA’s debt has been reduced by R11-billion. In 2012, the group had a debt (‘gearing’) ratio of 60%; as of March 31 this year, that ratio was 17%.

Aeronautical revenues declined by 1.7%, but non-aeronautical revenues increased by 1.9%. But operating costs, driven largely by security and asset maintenance obligations, increased by 2% (to R2.6-billion). Commercial revenues rose 4%, retail revenues 1%, car rental revenues increased by 4%, property revenues by 9% and advertising revenues by 10%. Passenger traffic increased by 3.3% until the end of February 2020 (although cross-border traffic rose by only 0.3%, domestic traffic went up by 4.7%).

“The impact of Covid-19 and travel restrictions resulted in the company foregoing performance bonuses and reducing other operating expenses towards the end of the financial year in order to mitigate the liquidity challenges, but it also necessitated an increase of R270-million in provision for doubtful debts,” reported ACSA CEO Mpumi Mpofu. “Up to the end of the third quarter, we were able to withstand economic headwinds. Unfortunately, the pandemic and subsequent travel bans led to a drastic contraction in departing passengers and aircraft landings, resulting in an overall decline for the year.” (Departing passenger numbers went down by 1% and aircraft landings by 4%.)

“The onset of the Covid-19 pandemic caused our earnings to take a dramatic downturn and this trend is set to continue in the next financial year,” she highlighted. “We anticipate that the impact [of Covid-19] on traffic volumes and airline sustainability will be long term. Significant responses that have been introduced to mitigate the impact of the anticipated traffic volume decline include considerable reductions in operational and capital expenditure.” As a result, ACSA expected to have a funding requirement of up to R11-billion over the next five to six years, with R3.5-billion needed over the next three years.

“It is important to note that the financial position of the group was solid prior to Covid-19 in spite of the difficult operating environment,” she stressed. A major unknown for ACSA was the degree of resilience possessed by both domestic and international airlines. “Capacity rationalisation is inevitable, and we are prepared to look for new ways of diversifying our revenue. The Covid-19 pandemic has adversely impacted our outlook for the future. … The road to recovery will be difficult but we are in a good position not only to recover ourselves but to support a wider recovery across the aviation and tourism value chains.”