Airlines expect a draft decision to be released soon from the Independent Economic Regulator on Airport Company South Africa’s (Acsa) proposed 133% tariff increase, a move considered to be a threat to air travel in the country.
Currently, Acsa fees, including passenger charge, landing fees and rentals, amount to R81 per passenger. Should Acsa’s application be granted, this would rise to over R185 per person per single trip.
The proposed hike has caused a furore in the industry with the International Air Transport Association (Iata) announcing recently it had added Acsa to the air transport industry's "hall of shame" for the proposed fee increase.
"This is just in time to greet all of the visitors who will be coming to the next Soccer World Cup," said Iata Director General and CEO, Giovanni Bisignani.
Airline representatives agree that Acsa’s early implementation of the new charges are indeed aimed at catching some of the 2010 World Cup traffic.
In a note to the Tourism Ministry, airline representatives said they believed the hike was an “attempt to improve the visitor and media perception of the country through grand and impressive ports of entry and to provide capacity for a single event with a duration of one month at the expense of airlines as the majority of the cost increases are in the form of increases to the airlines themselves”.
Highlighting what they call “a widely publicised smoke screen”, airlines say the increased user fees and taxes, which are levied on airlines operating to and from South Africa rather than passed on directly to the passenger by Acsa, allow the organisation to “show in rand terms that the passenger contribution to Acsa is only a fraction of the real cost”.
The note alleges that people are often told that Acsa charges (shown as tax on the ticket) are “minuscule in comparison to the airline fees and surcharges”, but this is “not reality”. According to the note, “the true cost of what airlines pay to Acsa forms part of the ticket price” and is hence in any case passed on to the passenger, who has a “real choice” in buying an air ticket and can choose not to fly with a carrier they believe is overcharging and to fly with a carrier that is “subsidised to counter the effects of the increased cost of doing business”.
Iata hit out at Acsa last year over the proposed increase, warning the increase would further damage an industry buckling under financial pressure.
Aasa (Airlines Association of Southern Africa) too has added its voice. Acsa executive Finance Director, Priscillah Mabelane, and Comair Chief Financial Officer, Aasa member, Yasas Sri-Chandana, were embroiled in a public war of words in December over the proposed hike.
Mabelane argued that the proposed increase would enable the company to reward its investors adequately for their investments.
She said the company had previously warned the Independent Economic Regulator it would need to prefund its R19 billion infrastructure development, resulting in sudden steep increases.
“Like Eskom, Acsa is calling on users of its airports to fund its financial shortfall. For the past few years Acsa has made profit margins of over 24% and has paid billions of rands worth of dividends to its shareholders,” Yasas retorted.
“When you consider a low-cost flight between Johannesburg and Durban costs on average R300, Acsa charges will make up more than half the cost of a ticket,” he said.
1time ceo, Rodney James, says the proposed increase is “crazy”. “Increasing tariffs by 133% to adequately reward its investors is not enough reason to stifle the recovery of domestic air travel in South Africa. What a fantastic business. A captive market and you can turn on the profit tap whenever you feel like it!”
What the increase will mean:
The current passenger charge will increase from R49 to R114
Landing fees will increase from R29 to R68
Rentals and other costs will remain at R3
Percentage of low-cost domestic fares will increase from 27% to 62%
Percentage of average domestic fares will increase from 11% to 25%
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