ACSA an ‘example of abuse’ due to planned hike in charges, global industry body warns | Fin24

Total confirmed airport and ANSP charges increases announced in 2021 globally have already reached $2.3 billion.

• Airports Company South Africa’s intention to increase its charges by 38% in 2022 is ‘an example of abuse’ by some aviation service providers to ‘mitigate losses due to the impact of the Covid-19 pandemic’.
• This is the view raised by the director-general of the International Air Transport Association.
• On the other hand, since the onset of the pandemic, airlines have undertaken drastic cost reductions.

The aviation industry as a whole has suffered due to the impact of the Covid-19 lockdowns and travel bans, but to mitigate losses, some providers are abusing their positions, Willy Walsh, director-general of the International Air Transport Association (IATA) said on Monday.

He listed Airports Company South Africa (ACSA) wanting to raise its charges by 38% in 2022 as an example as well as that of Ethiopia’s air navigation service provider (ANSP) raising charges 35% this year.

“The problem is that some airports and air navigation service providers are seeking a solution to shore-up their finances by recovering ‘lost revenue’ from their airline customers. They want to increase charges to recover the money that airlines could not spend with them during the crisis,” Walsh said in his opening address at the hybrid 77th Annual General Meeting in Boston.

“We all want to put Covid-19 behind us. But placing the financial burden of a crises of apocalyptic proportions on the back of your customers, just because you can, is a commercial strategy that only a monopoly supplier could dream up. Reducing costs – not increasing charges – must be at the top of everyone’s agenda.”

Total confirmed airport and ANSP charges increases announced in 2021 globally have already reached $2.3 billion. 

“It is unacceptable behaviour to benefit from your customers during good times and stick it to them in the bad times. It’s outrageous and, if unchecked, it will get worse. That’s why I am ringing the alarm. This must stop,” said Walsh. 

On the other hand, from the onset of the pandemic, airlines have undertaken drastic cost reductions. Operating costs were reduced by 35% compared to pre-crisis. This was supported by increased commercial borrowing and shareholder contributions as a means of survival.

“The connectivity aviation provides globally underpins $3.5 trillion of economic activity and 88 million jobs. This pandemic reminded us what a world with limited aviation is like. Disconnecting the planet is intolerable for people, businesses, and governments. Reconnecting the world and transitioning to sustainable energy sources are big challenges,” said Walsh.

“We expect 2021 losses to be nearly $52 billion – cut dramatically from the $138 billion lost in 2020. Losses will further reduce in 2022 to about $12 billion. In total, the Covid-19 crisis will cost aviation $201 billion in losses before we return to profitability in 2023.”

ACSA CFO Siphamandla Mthethwa said on Monday evening that it was not ACSA that made the final decision on tariffs. It only submits an application supported by business plans to the regulating committee. The final decision lies with the committee based on ACSA’s application.

ACSA has suggested an increase in tariffs of 35%. Given the forecast traffic, the 35% will allow ACSA to break even in the financial year 2022/23 after accumulating losses in the previous financial year and the current one.

In addition, ACSA’s tariffs were previously reduced by 35.5% in the financial year 2017/18.

“This is not a tariff application but merely a response to a request by the regulating committee, which took a decision to suspend the 2022 to 2026 permission application and thus run the 2019 to 2023 permission to the end. This decision came with a request from the committee for the regulated entities to submit proposals on how the committee could assist the regulated entities to be financially sustainable without placing a burden on the users,” explained Mthethwa.

* This article was updated with ACSA’s response on Monday evening at 19:53.