ACSA records worst first-half results in history

By Khulekani Magubane for Fin24

Airports Company South Africa (ACSA) says while it saw some recovery from the Covid-19 pandemic in the second half of 2021, global air traffic is unlikely to recover fully until 2025.

ACSA released its annual financial results on Tuesday morning, announcing a net loss of R2.6-billion and negative earnings before interest tax debt and amortisation (ebitda). However, the company managed to unlock funding through preference shares, staff reductions and the disposal of non-core assets, it said.

As a sector that was volatile before the Covid-19 pandemic, aviation has been rocked by the cascade of lockdowns and restrictions on movement that gripped the world last year with the advent of the novel coronavirus.

‘Worst performance in our history’

In ACSA’s case, hard lockdown in the first half of 2020 posed a significant financial threat as travel was only limited to essential services. The company noted a recovery as lockdown levels eased, but with the second wave restrictions escalated again, having a knock-on effect on travel.

ACSA CFO Sphamandla Mthethwa said 2020 and 2021 were difficult years for airport companies globally, as these businesses are estimated to have lost up to $125 billion for the year.

“For us as ACSA it is our worst performance in our history and a second loss. However, the profits that we have made in previous years enabled us to go into the pandemic with a strong balance sheet. As we sit here today, we are in a much stronger position,” said Mthethwa.

Mthethwa said the first half captured in the 2021 financial results were the worst first-half results in ACSA’s history. He said the second half saw the opening of international travel before a second wave triggered a heightening of lockdown restrictions.

“We started the year on hard lockdown and ended in March on adjusted level 3. We had ups and downs that affected aeronautical and non-aeronautical revenues. In the hard lockdown we had no international travel and some limited domestic travel, restricted to business and essential services,” Mthethwa said.

He said lockdown pressure meant that the 21-million departures in the first half of 2019 were down to 4-million in the first half of 2020. However, Mthethwa said, ACSA managed to raise R810-million in long-term debt raised.

“The second half started positive, but we started having difficulties at the end of the year. There is an appreciation for the operating environment. We had supply chain interruptions, capital project delays, regulatory changes, workforce changes and reduced staff numbers,” said Mthethwa.

He said R2.3 billion in preference shares were unlocked as a debt instrument. ACSA also disposed of its Indian investment to raise R260 million and another R3 billion in facilities was used to get ACSA through the first half of the year.

Job cuts

“From a long-term sustainability perspective, we changed KPIs to reflect the forecast and implemented a staff reduction which gave us savings of R300 million, and [we] negotiated to contain capex,” he said.

Mthethwa said ACSA would work on limiting operating expenditure to R3.9 billion. He attributed a 3.3% increase in employee costs to R1.88 billion to a once-off R243 million that was spent on voluntary severance package payments.

“Our total assets came into R31.6 billion and [we] hope to push our gearing up to 65%. Even in our forecast, we don’t anticipate coming close to 65%. We still have a grip on our balance sheet in an environment that is progressively improving,” Mthethwa said.

He said despite the uncertain environment, ACSA finished the year with R2.3 billion in cash, an unqualified audit option from the office of the Auditor General, and would remain a going concern.

ACSA CEO Mpumi Mpofu said the company’s financial position was aided through headcount rationalisation through voluntary severance packages, the disposal of assets in Brazil and India, and the use of preference shares for funding. However, she said, a full recovery will take a long time.

“The overall recovery is being seen in the local market and in the international markets it is still very sluggish. Two scenarios are given. A baseline with 2023 recovery and a long road at 2024. Recovery is being led by domestic traffic and international traffic remains a little behind with recovery expected only in 2024,” said Mpofu.

Mpofu said the picture for domestic air travel looked much more positive with domestic air traffic bouncing back as Covid-19 national lockdown levels eased after the third wave. However, the southern African regions’ recovery has been slower than west Africa and developed economies.

“We saw our network lose 78.2% of passengers, but our traffic indicators show a return to pre-pandemic levels only in 2025. East London and George in terms of domestic numbers are performing better than other airports, with Kimberly and Gqeberha performing well,” Mpofu said.

Mpofu said ACSA would continue implementing its strategy, which includes developing airports, growing its footprint in line with its global and growth strategies, as well as consolidating in advisory services, diversifying revenue and continental growth.

Mthethwa said the Brazilian asset disposal was still in progress and should be finalised by April next year, with the selling price still subject to negotiations.

Mpofu said while ACSA approached government for a guarantee before the pandemic, it was government that indicated that assistance in the form of preference shares would be more a more appropriate to bolster liquidity for the entity.

Local airports shut down plane guidance system

By Hanno Labuschagne for MyBroadband

The South African Civil Aviation Authority has confirmed that two Instrument Landing Systems (ILSs) at OR Tambo have been switched off, and the same systems at a number of other airports have also been downgraded or switched off.

Pilots landing at certain South African airports may be forced to do so without an essential ground-based system used to guide planes safely towards the ground in low visibility.

This is according to various notices to airmen (NOTAMs), including one issued on Monday 10 August, which was posted on aviation forum Avcom.

According to the notice, the Instrument Landing Systems (ILSs) used for OR Tambo’s two runways – 03R/21L and 03L/21R – would be switched off as they were due for calibration.

“Instrument Landing System JS 03R/21L will be switched off today because it has reached its calibrations expiry date, 25 days extension, and 180 days exemption today,” the notice stated.

“Instrument Landing System JS 03L/21R also reaches its 90 days exemption period today; we have applied for the extra 90 days exemption, however, the CAA has not yet signed; if not signed by 16:00 today (10 August) we will have to switch off these ILS’s as well,” it continued.

NOTAMs are filed with an aviation authority to alert aircraft pilots of possible hazards along their flight route or at a location that could affect the safety of the flight.

ILS employs ground-based antennae which provide pilots with their location relative to a particular landing strip.

This is particularly important during periods of bad weather, where clouds or mist may impede the pilots’ ability to view their approach to the airport.

As required by the International Civil Aviation Organisation (ICAO), a runway’s ILS needs to be calibrated regularly to ensure continued accuracy and safe use.

In South Africa, this responsibility lies with the South African Civil Aviation Authority (SACAA), which uses specially-equipped aircraft to perform the calibration.

More airports affected
According to another member of Avcom, OR Tambo is not the first South African airport to be affected.

Citing multiple previous NOTAMs, the member said that King Shaka, George, and Kruger airports have no ILS or VOR (another orientation system) due to calibration expiry.

The member added that Cape Town airport had been downgraded, likely due to calibration exemptions.

SACAA confirmed that the ILS at the George and Kruger airports had been turned off, while King Shaka had been downgraded.

Solidarity Trade Union Deputy General Secretary Marius Croucamp also addressed the issue in a tweet on Tuesday morning.

The union represents numerous pilots in the industry.

Calibration aircraft crash
Croucamp’s tweet refers to one of the aircraft SACAA had previously used for calibration, which crashed after take-off from George airport.

The Cessna Citation II – carrying three SACAA crew members – was due to conduct calibration work for the airport’s navigation systems.

Captain Thabiso Tolo (49), first officer Tebogo Lekalakala (33) and Gugu Mguni (36), a flight inspector, died in the crash.

SACAA is still investigating the cause of the incident, an issue which has been met with scepticism from aviation experts, who don’t believe SACAA can investigate its own conduct in such a case.

SACAA’s financial woes
SACAA is facing a financial battle as it struggles with the impact of the COVID-19 pandemic on the aviation industry.

The initial lockdown regulations meant that the vast majority of domestic, regional, and international flights were grounded for several months.

SACAA draws its income from passenger safety fees, a fuel levy, and user-related charges, which include licensing, approval, and other regulatory service fees.

It previously warned Parliament that it would only be able to continue paying salaries until the end of the year or early 2021 should restrictions on flights remain for five to seven months.

MyBroadband contacted SACAA and the Airports Company of South Africa for a response to the NOTAMs and comments on the forum, but we did not receive feedback by the time of publication.

SACAA statement
SACAA has provided a statement addressing the switching off of its ILSs at South African airports, which is included below.

It has come to the South African Civil Aviation Authority’s (SACAA) attention that there are circulating reports that inaccurately suggest that aviation activities in South Africa are about to come to a screeching halt as a result of the airport’s instrument landing systems calibration status expiring at some airports.

The SACAA states the following facts to provide clarity and answers to questions that may emanate around this matter.

In providing such clarity, it is prudent to preface this by explaining what an Instrument Landing System (ILS) is and the purpose thereof in relation to the flying of an aircraft.

In a nutshell, an ILS is a ground-based navigational instrument system that provides guidance to an aircraft when approaching or landing on a runway when the pilot cannot see the runway due to bad weather.

Regulated safety protocols require that when an Instrument Landing System is not functioning, or its certification had expired, the affected airport must be downgraded to a lower instrument usage level.

In addition, and as international protocol dictates, the status of the facilities at the affected airport are published via a notice to airmen (NOTAM), and this is aimed at assisting pilots to plan their flights safely, prior to departure.

Most importantly, the ILS is just one of the few landing and take-off techniques that are used. This simply means that you can still land without an ILS, however, visibility on the runway must be determined first.

An Instrument Landing System can be non-functional for several reasons, which may include the following:

The ILS approval certificate is expired which demands that the system is switched off to avoid pilots depending on it to provide information for landing and take-off purposes, especially during bad weather; and
The ILS may be defective, in which case there may be a need to switch it off pending maintenance and calibration, even if the calibration certificate expiry date is not yet due. As such the airport management is expected to maintain and service the systems to ensure that they work at all times.
Would flying stop in the absence of an Instrument Landing System? No. An Instrument Landing System is mainly used by pilots when landing during inclement weather such as when there is reduced visibility due to fog, rain, snow, etc.

Assertions that suggests that all ILS’s at all South African airports are switched-off and not functioning are misguided. Regulations prescribe that ILS certificates are valid for 150 days with an automatic tolerance of 30 days without the requirement for an extension application. Thereafter, an airport operator can apply for a 25 days extension in accordance with applicable civil aviation regulations. After the expiry of the 25 days extension, if the calibration of the ILS has not taken place, the operator can apply for an exemption, which can be granted for up to 180 days, provided that the system has a history of being stable during previous calibration intervals and that certain additional maintenance and monitoring measures are in place. This is a perfectly acceptable practice and is in line with global standards and practices.

OR Tambo International Airport has four (4) ILS’s, and, as at 10 August 2020, two of these were switched-off because the exemption period lapsed. This airport therefore will neither be downgraded or closed as reported. In addition, King Shaka International Airport has been downgraded to a lower instrument meteorological usage level as a result of two ILS’s being switched-off. Other airports affected are Kruger Mpumalanga International Airport and George Airport whose exemptions have also expired. These are the only ones that have been switched off. The rest, even though they are also nearing expiry during the month of August, and later on in the year, are still operational.

In terms of bringing the expired ILS’s back to service, calibration will need to take place to perform the necessary adjustments to obtain the required performance accuracy.

Following the fatal accident involving the SACAA aircraft and crew late in January 2020, the SACAA appointed a service provider to calibrate the landing and navigation equipment in the country, through an open tender process as prescribed by the National Treasury Regulations. The service provider, which is a South African company, was appointed for this service and a Service Level Agreement was concluded on 17 April 2020. Due to the fact that the service provider was going to utilise an aircraft that is based in Europe, they experienced major delays in receiving a Foreign Operator’s Permit from the International Air Service Licensing Council, which was eventually granted on 19 June 2020. Due to further delays resultant from the Covid-19 lockdown restrictions, the crew work permits, and visas were eventually granted, and the SACAA was duly informed on 31 July 2020.

According to the assurances given to the SACAA by the service provider the aircraft is expected to arrive in the country by the end of this week following an earlier promise that the aircraft will most possibly arrive on 09 August 2020. The explanation provided by the service provider was that they needed to ensure that Flight Inspection System had to undergo some maintenance as it has been operating during the delay period.

As soon as the aircraft arrives the calibration programme will prioritise those airports which are negatively affected to date.

The SACAA wishes to reiterate that there has been constant communication with all affected stakeholders to ensure that aviation operations continued safely. Hence, to date, there has not been any interruption in flying activities despite the switching-off, in line with regulations, of the affected ILS at the indicated airports.


ACSA to spend R1.2bn digitising SA airports

Airports Company South Africa (ACSA) has set aside R1.2 billion to digitise the country’s airports, according to a recent article in ITWeb.

The announcement was made as the company released its financial results to 31 March.

Highlights include:

  • Profit fell by 58%, largely due to a 50% increase in security costs
  • R287-million was spent on data centre and network upgrades in 2018/19
  • The organisation says it has embarked on a five-year IT upgrade programme
  • The board has set aside R1.2-billion in capital expenditure to spend on IT infrastructure
  • Upgrades will focus on digitising local airports
  • R301-million will be spent on IT network optimisation
  • R142-million will go towards IT backup and storage solutions
  • R240-million will be spent on improving and upgrading the company’s physical IT infrastructure
  • Legacy equipment will be replaced
  • Paperless travel will require it to tightly integrate its passenger processing systems with databases residing with the Department of Home Affairs and Department of Transport, as well as with other airlines
  • Faster passenger processing will allow the retail component of the airport to generate more non-aeronautical revenue
  • A new mobile application will allow customers and passengers to interact with airports remotely

Image credit: ACSA

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