Developing world-class airport infrastructure that responds to the needs of our customers and our industry supports our vision of being a world-leading airport business. The severe impact of the pandemic on our revenues and financial sustainability have curtailed our ability to fund capital projects. Before the crisis, the focus of our capital projects was on increasing the capacity at our airports and projects focused on improving the passenger experience through enhanced facilities, efficiency and harnessing innovation. All our planned projects remain in our capital programme for development once a business case is evident and funds are available. We are committed to improving and expanding airport infrastructure to unlock our airports’ developmental potential and grow our footprint, providing significant regional and national economic benefits.
At the start of FY2020/21, we were about to embark on our largest capital investment programme since the inception of Airports Company South Africa. The bulk of our capital investment was earmarked for projects that would provide additional capacity to meet future demand. Our project selection processes were in place and we were at the point of awarding major contracts. With the onset of the COVID-19 pandemic, we had to swiftly re-evaluate our capital portfolio and adjusted it in accordance with the Company’s sustainability parameters.
Our capital programme is managed through our Enterprise Project Management (EPM) Office through the institutionalisation of project management best
practice, which enabled the Company to evaluate, respond and realign the portfolio with business continuity in a centralised manner. The rapid reprioritisation of our capital expenditure plan was critical. The EPM structures in place enhanced our agility to reprioritise projects and adjust our business plan to align with imperatives that were emerging within the rapidly changing business environment. We deferred the entire capital programme that was not committed. We are continuing projects in which the value on completion exceeds the cost of completion.
A significant reduction in demand is expected in the short, medium and long term, with a full recovery in the sector expected only in eight to 10 years. As a result, our approach to the development of our airports has shifted from capacity expansion towards a focus on innovation, alignment, integration and replication of successful developments.
Enterprise Project Management Office
The adoption of a gate-controlled project management lifecycle supported by a full suite of EPM frameworks to guide employees in managing projects enabled our rapid response to the challenges we faced this year. The EPM Office established a repository of project management expertise with a mandate to ensure capital projects contribute towards economic growth and job creation.
The maturity of our enterprise project management function facilitated the reprioritisation of our capital expenditure portfolio at enterprise level to meet the short-term financial objectives of the Company.
We adopted project prioritisation principles that enabled the reduction of the annual plan from R1.47 billion to under R810 million with the five-year plan being reduced from R30 billion to under R5 billion.
This is reflected in the adoption of project pipelines and capital allocation targets managed at enterprise level rather than at divisional project management offices. The centralisation of project reporting and EPM control supported timeous management decisions and responses in an efficient manner.
The Enterprise Project Management Office implemented 32 project management frameworks that support the adopted lifecycle management methodology that aligns all its project management office functions in IT, maintenance and engineering, security, major infrastructure and fleet. As a result, the Company’s project management maturity is expected to significantly improve, realising increased efficiencies and cost containment. The online training solution has been finalised to allow project managers and project related resources at the Company to continuously develop and maintain their skills and capacity.
Innovation, being an agile process, requires organisations to adapt to changing conditions and stay abreast of global best practice to maintain their success and competitive edge. To this extent, we embarked on several initiatives to pursue innovative solutions to improve our level of efficiency and effectiveness. Such initiatives include the self-service programme which runs in parallel with the IATA Fast Travel programme that focuses on providing an automated service to passengers especially in light of the new normal and the impact of COVID-19.
Integrated technology is the new era of aviation security, responding to the current and evolving threats while resolving the demand of airports and passengers for a robust, swift and smooth process; supporting flexible use of resources; and also improve the security outcome. Integrated security technology will provide for streamlined security asset management and will help achieve a safer and seamless passenger journey and better prepare airports for the post-pandemic recovery.
Multiple energy-efficiency initiatives are being investigated across different airport sites: geothermal, gas to power, solar and wind power, waste to power, green building initiatives and geyser sleeves to responsibly and effectively optimise the use of energy.
An innovation idea generation portal has been developed and will be implemented, allowing employees to register innovative ideas and potential solutions in an independent manner that aims at resolving problems and inefficiencies which currently exist. This initiative will further enhance Airports Company South Africa’s position in adopting an innovation hub approach most suitable to Airports Company South Africa’s internal and external constituents, and consequently, improve its level of service to passengers.
Integrated Airport Planning
Our Aerotropolis strategy aims to foster economic growth and development for the benefit of the Company, the regions in which the airports operate and South Africa. The macroeconomic objective is to support the National Agenda and, from our perspective, to increase competitiveness, maximise revenues and ensure improved connectivity and accessibility of our airports.
Following extensive research on the Aerotropolis concept, its local and international application, and a review of South African Policies and Development Frameworks, our strategy can be translated as follows:
Figure 1: Aerotropolis strategy for Airports Company South Africa
The successful execution of the strategy is dependent on the following:
- Strategic partnerships: Pursue strategic public and private partnerships, considering the current financial position and limited available resources
- Critical success factors: A focused approach to critical success factors
- Investment opportunities: Seek investment opportunities, develop partnership models, incentivise investors and achieve investment-ready status
- Regulatory framework: Develop a responsive regulatory framework
We have applied the Aerotropolis concept across the airport regions in varying degrees to deliver on multiple strategic objectives, and the outcomes and recommendations made have been informed by the context presented by each region. To date, Aerotropolis master plans for the cities of Ekurhuleni and Durban have been concluded, while an Aerotropolis feasibility study has been conducted for Cape Town. Outcomes have served as input into our Aerotropolis strategy and informed our recommendations.
PROPERTY AND INFRASTRUCTURE ASSET MANAGEMENT
New corporate offices
The construction of our new head office on a site adjacent to O.R. Tambo International Airport was well underway with completion expected by March 2021. The 33 000m2 project comprises three buildings that will house Airports Company South Africa, the SACAA and a prospective tenant. As the first major development undertaken by the Company in the past 10 years, this project is a testament to our ability to manage a large infrastructure development project.
Other smaller projects have continued, such as the extension of the FedEx cargo facility at Cape Town International Airport. These projects are backed by a compelling business case for investment.
Enterprise asset management
As part of our cost-cutting initiatives, we will use and repurpose existing infrastructure and equipment until the end of their working life; develop airports biased to investments that reduce the cost of doing business; prioritise opportunities that were adjacent and complementary to its existing business such as conference facilities, transportation nodes, cargo and logistics platforms; and put on hold capital expenditure projects that were dependent on the increase in passenger traffic.
We expect the funding constraints and changing business environment to continue to create pressure on our capital programme. We will continue to robustly prioritise projects to minimise the business risks and be able to rapidly respond to the changing business demands. The costmanagement initiatives will necessitate ongoing mitigation from a business planning perspective. The limited funding availability will have to be balanced to manage competing demands for business-critical projects.