Airports Company SA (Acsa), which was one of the few profitable state-owned enterprises (SOEs) before Covid-19 struck, says it is firmly on the road to recovery after slashing its operating expenses and disposing of some of its noncore assets.
“Compared to last year [2020], Acsa is in a much better place. It is not necessarily because our operating environment has improved, we are still dealing with a lot of uncertainty at the moment,” Acsa CFO Siphamandla Mthethwa told MPs on Wednesday.
He was briefing MPs on the company’s strategic and annual performance plan for 2022-2024.
Acsa, which runs SA’s airports, has been a rare bright spot among SOEs, having been profitable for most of its close to three decades in business. The company, however, hit turbulence in 2020 when the Covid-19 crisis grounded airlines, depriving it of landing fees, passenger service charges and aircraft parking fees.
It reported a R1.47bn loss in the first half of its financial year, from a profit of R125m, as revenue collapsed to R685m, from R3.5bn.
Mthethwa said by disposing of some of Acsa’s noncore assets and issuing preference shares, the company had managed to reduce additional borrowing to R600m over the medium term, down from about R4.1bn.
Acsa has an asset base of more than R30bn.
In March, the company announced it had concluded the issuance of the “A” preference shares worth just over R2.3bn, with the department of transport as the majority shareholder.
Preference shareholders are prioritised in dividend payments, both when the business is operating normally and in the event of it entering liquidation.
Acsa also had a 10% equity holding in Mumbai International Airport Limited (MIAL) dating back to 2006, the recent sale of which generated about R1.2bn. Mthethwa said the transaction significantly improved the company’s cash flow.
Acsa cut its operating costs over the past year by R1.2bn, including employee overheads. This is an almost 20% decrease on the 2019/2020 expenditure levels.
Mthethwa said capital expenditure would be reduced from about R17bn to R3bn over the period, “without necessarily compromising our licence to operate”.
“We are very much confident that we are on a sustainable path in a way that we can emerge post-Covid-19 with an entity that can still contribute meaningfully in the aviation sector,” Mthethwa said, adding that the company was projecting it would break even in 2023/2024.
“However, from a cash flow [perspective] we will be fine,” he said.
Acsa CEO Mpumi Mpofu said the recovery of the aviation sector will be crucial to kick-start the broader economy.
She said, however, Covid-19 will be the catalyst for rapid consolidation of the airline industry.
“Southern Africa has too many airlines for such a small market, thus consolidation is inevitable.”
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