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Airport tariffs may soar more than 40,7%

posted Apr 4, 2011, 2:46 AM by Rowan Hewitt

Airline industry concerned after it emerged that airport tariffs may rise more than 40,7%.


Published: 2011/04/01 06:37:34 AM

THE airline industry is concerned about the implications of further cost increases, after it emerged yesterday that airport tariffs are likely to be increased by more than the 40,7% initially approved by the regulator.

Regulator Mohammed Sizwe confirmed that, while a final figure had yet to be determined, early indications were that the increase would be greater than the 40,7% initially put forward by the airport regulating committee, if it excluded the R2bn sale of the old Durban airport, which is yet to be concluded, and the financial effects of delays in introducing the new tariff.

In the meantime, Airports Company SA (Acsa) told Parliament during a presentation of its 2011- 14 corporate plan this week , that it expected to announce a R568m loss in the year to end-March — the first loss in its 17-year history.

One of the reasons given was the delay in the implementation of the new tariff regime.

Chris Zweigenthal, CEO of the Airlines Association of Southern Africa, said yesterday that the airline industry "was very concerned" about a tariff rate increase alongside other proposed increases in the sector, and worried how this would affect passengers and airlines.

"We were already concerned about a 40,7% increase and viability of airlines. On top of this, the sector faces an increase in a civil aviation authority safety charge which is still to be finalised, but at the moment is set to increase from R12 to R18 per passenger and this will affect ticket pricing," said Mr Zweigenthal.

Added to this are increased petrol costs, he said.

The regulator initially dropped its proposed tariff hike from 59,9% after consultation .

Mr Zweigenthal is hopeful that both the regulator and the civil aviation authority will continue to consult with the industry.

Acsa has never been happy with the proposed 40,7% increase, having requested a 133% tariff increase, and Transport Minister S bu Ndebele appointed a review committee to avoid legal action.

The committee has since submitted its review to the Mr Sizwe. In the meantime, Acsa has implemented a 33% increase.

Acsa documents presented to Parliament this week indicated that apart from a R17bn debt caused by infrastructure development of three major airports ahead of the Soccer World Cup, and lower than expected numbers of travellers during the tournament, the company had seen significant erosion of its earnings because of delays in the implementation of the new tariff.

The documents — presented by Acsa finance director Priscillah Mabelane and other officials — noted that "the prevailing economic regulatory regime remains the biggest threat to a sustainable business".

Mr Sizwe said the task team had found the regulator had acted properly, but that a review of the tariff proposal was required to exclude the projected R2bn sale of land at the old Durban airport and losses in cash flows suffered by Acsa as a result of delays in finalising the appropriate tariffs . Although the calculations had not been completed, tariff rates were likely to rise, he said.

MPs learnt that Acsa does not plan to add new capacity over the next three years, only providing for R3bn for refurbishment over that period.

"A clear regulatory pricing policy is required that would enable investment in new capacity infrastructure," Ms Mabelane said.