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Africa|Aviation|Financial|Service|transport
Africa|Aviation|Financial|Service|transport
africa|aviation|financial|service|transport

ACSA warns of Covid-19 impacts and that it might need government guarantees

18th May 2020

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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The State-owned Airports Company South Africa (ACSA) has warned the Parliamentary Portfolio Committee on Transport that the effects of the Covid-19 pandemic and the efforts to counter it would significantly affect it. The company’s Corporate Plan for the 2020/21 to 2022/23 financial years had been approved by its board and by the Department of Transport in late February, but it was now having to be recalibrated.

The pandemic had resulted in border closures, travel bans, flight bans and aircraft groundings, ACSA pointed out. It was expecting revenue losses proportional to traffic losses. Also, there would also be declines in its non-aeronautical revenues from its airports.

It noted that a survey of 76 economists had forecast that South Africa’s gross domestic product would decline by between 1.8% and 7% as a result of Covid-19. A world-wide recession was expected. 

African airports were predicted to suffer a fall of 32.5% in passenger numbers and 35% in revenues this year. According to the International Civil Aviation Organisation (a specialist agency of the United Nations) global international passenger seat capacity in March was 32% down on what had originally been planned; the figure for Africa was 23%.

The start of the national lockdown on March 26 had a number of major effects on ACSA. All domestic and international flights had been cancelled, although the repatriation of foreigners from South Africa (with conditions) was allowed, as was the repatriation of South Africans abroad. Provided they met strict requirements, technical flights were allowed. The disembarkation of air cargo flight crew was allowed, on certain conditions. And certain, identified, airports had to have operational staff on standby to handle aircraft in distress.

It took seven years for full recovery to be achieved following the 2009 financial crisis. The recovery from the Covid-19 crisis could take more than ten years. If so, ACSA traffic volumes in 2026 could still be 20% below this year’s levels. 

Under the company’s base case, operational expenditure would likely decline from R4.8-billion this year to R3.6-billion in 2023, a fall of 23%. Capital expenditure would be only R1-billion a year. Traffic volumes next year would be down 30%, but 2022 would see a 9% recovery and 2023 to 2026 would see annual growth of 2%. Regarding non-aeronautical revenues, these would be 40% down next year (in comparison to this year) and 33% down in 2022 (also in relation to this year). ACSA’s other scenarios were worse.

The company was still evaluating its options. The paramount concern was cash preservation. There would be no recruitment for three months, no incentive bonuses would be provided for, and only essential expenditure for the year would be allowed. The company would make no future commitments or investment decisions during the next three to six months. For this year, variable costs would be reduced and service levels cut. 

Assuming a reduction in traffic of 50%, capital expenditure restricted to R800-million a year and a reduction in operating expenditure of R1.2-billion, ACSA would still need to borrow R10-billion to R11-billion over the next five years. This would require government guarantees of some R3-billion over this period.

Edited by Creamer Media Reporter

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