IATA chief puts Acsa on carpet over 38% tariff hike

Airports Company SA (Acsa) has been criticised directly by the International Air Transport Association (IATA) for its steep tariff increase.

Speaking to hundreds of airline delegates from around the world attending its two-day annual general meeting and World Air Transport Summit in Istanbul, Turkey, IATA directorgeneral William Walsh singled out the SA utility for what he called its “unacceptably high” tariff increases.

“SA’s airports are demanding a 38% tariff increase, only to be outdone by an ATC [air traffic control] demand for a 63% increase,” he said. ATC charges are managed by the stateowned Air Transport Navigation Services (ATNS).

The steep tariffs will make it more costly to fly as airlines pass on the costs to passengers — inevitably affecting their own viability too.

Acsa has dismissed IATA’s accusation about airport tariffs being high as unfounded.

“We have applied for a tariff increase in line with the regulatory framework which results in 17.5% in the first year, 17.5% in the second year and 0% for the rest of full-year 2023/24 to 2027/28 permission,” the utility said in a statement on Monday.

“The increases are driven by Acsa’s underlying costs and the independent traffic forecast that was approved by the regulating committee. It is important to note the increases are also coming off a low base caused by clawbacks in the previous permissions where Acsa saw tariffs reduce 35.5% in financial year 2017/18.

“It is therefore entirely incorrect to claim that Acsa is simply shifting costs to airlines. Any research conducted by Walsh will show that Acsa airport tariffs continue to be one of the lowest when compared to our international counterparts.”

The statement noted that the IATA director-general had made “similar accusations” in 2021.

Acsa explained that airport tariffs include aircraft landing fees, parking fees and a passenger service charge. These tariffs are set by the regulating committee in the department of transport. This committee recommends tariffs to the transport minister, who makes the final decision.

In the 2021/22 financial year to end-March Acsa made a profit of R1bn on revenue and other operating income of R3.9bn compared to the pandemic-hit year before when it made a loss of R0.6bn on revenue of R2.2bn.

Responding to Walsh’s comments, Aaron Munetsi, CEO of the Airlines Association of Southern Africa, said a 38% tariff increase would be exorbitant and far too high, and would create a challenge for the airline industry.

“The airlines are still recovering from the Covid-19 pandemic,” Munetsi said, noting that even before the pandemic the financial performance of airlines was under stress. Reaching prepandemic levels in terms of the number of passengers was only expected in 2024.

“The costs of operating are very high,” Munetsi said, pointing to the low exchange rate of the rand against major foreign currencies in which aircraft lease

agreements and spare parts are denominated. Fuel costs are also very high.

“Any additional costs that are going to be imposed on the airlines are going to cripple the airline industry,” Munetsi said.

Walsh took aim at Schiphol Airport in the Netherlands as well for high tariff increases of 27%. These costs mean tariffs now account for 33% of international ticket prices and have increased them globally.

“Now you’d expect good performance but delays are triple those anticipated,” he said.

“But with airlines just making [profits of] $2.25 per passenger on average, repairing damaged balance sheets and providing investors with sustainable returns on their capital will continue to be a challenge for many airlines,” said Walsh.

IATA warned that regulatory cost burdens are worsening with increasingly interventionist regulators. In particular, the industry could face rising costs of compliance for increasingly punitive passenger rights regimes and regional environmental initiatives.

Acsa announced a new rates schedule in February 2023.

Passenger service fees are to rise to R97.38, including VAT for local travel and just R266.05 for international destinations.

Plane parking fees have also risen. Airlines collect these fees on behalf of the state-owned regulators, then pay them over on a regular basis.

Airlink CEO and MD Rodger Foster said the tariff rises come at a bad time.

“Airlines operate on thin margins and any sudden shock increases in our input costs — including airport and air navigation service charges — will only serve to increase the cost of air travel,” he said.

“It comes at a time when airlines and other commercial players in the air transport value chain are doing everything to mitigate rising costs to keep fares affordable,” Foster said. This is “even more so in SA’s environment present high”inflation . economic

Other issues under discussion at this year’s IATA conference are the production of sustainable aviation fuel and the increased risk posed by a possible global recession and higher interest rates.

Management teams from the world’s airlines have gathered in the Turkish capital along with government administrators and media as part of the annual conference.

It is the first time in three years that the conference is 100% in-person, a sign that recovery from the Covid-19 pandemic continues apace.

However, aviation is struggling to come to terms with the pace of the recovery because of a shortage of skills and a lack of capacity.

Meanwhile, SA Civil Aviation Authority director Poppy Khoza received IATA’s Inspirational Role Model award at a ceremony on Monday.

ANY SUDDEN SHOCK INCREASES IN OUR INPUT COSTS ... WILL ONLY SERVE TO INCREASE THE COST OF AIR TRAVEL

Rodger Foster Airlink CEO and MD