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GROW FOOTPRINT

Responding to changes and opportunities in domestic, regional and international air transport markets extends our footprint, enhancing sustainable value creation. In our current ‘recovery and sustain’ frame of mind, we will be considering new ways to grow, re-evaluating strategic investments while nurturing existing growth areas. Expanding and strengthening our presence in the right markets allows us to grow our core business activities and revenue.

OVERVIEW

Our focus in FY2020/21 was on growing liquidity to support the business in building financial sustainability in response to the challenges posed by the context of the pandemic.

COVID-19 had a severe negative impact on the market conditions, which resulted in low business activity in the procurement of airport services, concessions and training. In FY2020/21, we relied on existing contracts for the generation of non-core revenue, which was the Mumbai International Airport Limited performance fees and Kenneth Kaunda International Airport Operational Readiness and Airport Transfer contracts. Despite the unfavourable environment for all airport companies across the world, we secured new advisory and consultancy work during the year.

REALISATION OF EQUITY INVESTMENTS

A key focus was monetising our equity investments in Mumbai International Airport Limited in Mumbai, India and Guarulhos International Airport in São Paulo, Brazil. The decisions to sell these investments preceded COVID-19. 

The poor performance of both companies further strengthened the decision to dispose of our equity shares. Amid the pandemic, we received a new offer for the Mumbai International Airport shares and were able to execute and conclude the sale in February 2021. The sale proceeds amounted to R1.27 billion. During the same period, we received an offer for our shares in Guarulhos International Airport. We accepted and have agreed on a sale and purchase agreement with the buyer, Invepar. These transactions will not only improve our liquidity position, but will also eliminated our exposure to the contingent liability and potential equity injection obligations embedded in both concessions. Owing to the severe liquidity crunch we experienced, further investment in airport concessions was put on hold for review in the future.

BUSINESS DEVELOPMENT

Our dedicated network of planning experts, statisticians, economists and marketers have a finely honed understanding of airline planning and route performance. We work closely with our partners to identify, validate and perform route opportunity analysis for expansion and retention.

Further collaboration with key stakeholders – from tourism to municipal and provincial structures – occurs to ensure alignment with the trade and tourism agenda. Our performance is set out below, focusing on expanding our international reach, stimulating regional growth and collaborative partnership developments.

TRAFFIC DEVELOPMENT

We started FY2020/21 in Level 5 lockdown, which necessitated a total shutdown of the country’s airspace except for the air cargo operations. The gradual easing of restrictions allowed us to operate but with almost non-existent demand. We lost significant capacity across all our markets; domestic, regional and international. Many of the world’s airlines suspended international flights, including to South Africa. Qantas, Cathay Pacific, Air Austral from the Indian Ocean island of Réunion, Air Mauritius and Air Namibia stopped flying to South Africa at the start of the pandemic. At the beginning of 2021, the prevalence of the highly infectious new COVID-19 variant in South Africa compelled governments in various countries to impose travel bans. This led to several airlines temporarily halting their operations to South Africa including Turkish Airlines, British Airways, Virgin Atlantic, Emirates Airlines, Austrian Airlines, Air Seychelles and Edelweiss Air.

Pre-COVID-19, several airlines in North America, Europe and sub-Saharan Africa announced their intention to commence direct services into South Africa. This reflects the importance of our market for global airlines that recognise the growth opportunities with high returns. We have been engaging with these airlines over the past two years in partnership with trade and tourism organisations. However, all planned services in FY2020/21, existing and intended, were deferred to the second half of 2021 except for Air Peace (Nigerian carrier) – which started the service in December of 2020 – and Pro-Flight Zambia. The links planned and deferred included:

Long-haul North America and Europe:

  • TAP Portugal: seasonal non-stop service between Lisbon and Cape Town International, expected to start November 2021
  • United Airlines: a year-round service between Newark Liberty, New York and O.R. Tambo International
  • Delta Airlines: an extension of O.R. Tambo international service to Cape Town International

Medium-haul sub-Saharan Africa

  • ASKY from Togo: a direct link between Lomé Togo and O.R. Tambo International with the intention of connecting this to Ethiopian Airlines’ service out of Lomé to Newark Liberty New York, adding another travel option for North America-bound travellers
  • Air Cote D’Ivoire: a direct link between Abidjan and O.R. Tambo International 
  • Air Peace from Nigeria: a direct link between Lagos and O.R. Tambo international, which started the service in December 2020
  • Air Uganda: a direct link between Entebbe and O.R. Tambo International
  • Pro-Flight from Zambia: a link between Lusaka and O.R. Tambo International

ROUTE DEVELOPMENT STRUCTURE

We are a founding member of route development structures across the country that coordinate airlift efforts in collaboration with partners at various local governments. Despite the pandemic, all the structures – Durban Connect, Gauteng Air Access, Cape Town Air Access, Nelson Mandela Airlift – are active. The activities at smaller airports are not as extensive as the Golden Triangle because of limited route opportunities as demand for air travel is concentrated around the three main airports. However, enabling mobility of goods and passengers through traffic development as a mechanism to enhance airlift between smaller communities and large cities remain a top priority. We are working closely with local governments to explore various mechanisms that ensure smaller communities become an integral part of the national air transport network.

The following structures are active:

  • Western Cape (Cape Town Air Access): in partnership with Wesgro (trade and investment agency), Cape Town Tourism, Department of Economic Development and Tourism, South African Tourism and private sector partners (mainly for funding purposes

  • KwaZulu-Natal (Durban Direct): in partnership with Dube Tradeport, KwaZulu-Natal, Department of Economic Development, Tourism and Environmental Affairs
  • Western Cape (Garden Route Airlift): in partnership with George municipality, and Garden Route district municipality
  • Gauteng (Gauteng Air Access): the Department of Tourism actively drives route development for O.R. Tambo International, in partnership with the City of Ekurhuleni, Gauteng Tourism Agency, Gauteng Growth and Development Agency, South African Tourism
  • Eastern Cape (Nelson Mandela Bay Airlift): in partnership with Nelson Mandela Bay metropolitan, Eastern Cape Development Corporation (ECDC), Eastern Cape Parks and Tourism Agency (ECPTA), Nelson Mandela Chamber of Commerce
  • Northern Cape (Upington Airlift): in partnership with Dawid Kruiper local municipality, DoT, Department of Economic Development and Tourism and the local Chamber of Commerce.

NON-CORE REVENUE

Our non-core revenue, from business development advisory and consultancy, for the year under review generated R20 million. In Zambia, we are involved in the Operational Readiness and Airport Transfer project for the new passenger terminal and associated infrastructure at Kenneth Kaunda International Airport, in Lusaka, for Zambia’s National Airports Corporation Limited. The company has approached us to conduct audits for its Simon Mwansa Kapwepwe International Airport, which is under construction and scheduled for completion in August 2021.

Developing expertise in advisory services

The current business model is based on leveraging our expertise in airport management, technical advisory, business services and the training academy. However, in the current environment, there is limited demand for technical expertise.

Our current approach is to partner with external advisors and/or consultants with the requisite experience and skills to address any expertise gaps in the provision of advisory services. In the long term, any material gap in skills will be developed in line with sustained demand from the market.

Commercialising our training academy

Capitalising on the opportunity to diversify our revenue streams, we plan to transform our current training academy into an industry-wide African regional aviation training centre of excellence. The fully fledged training academy will be a stand-alone entity that will leverage our human capital, institutional knowledge and experience to offer structured and aviation services tailored programmes for internal and external clients.

OUTLOOK

We expect air passenger traffic to almost double to approximately 19 to 20 million in FY2021/22. The envisaged growth is not attributable to strengthening fundamentals but reflects the low base effect established in FY2020/21, due to stricter lockdowns in the first half of the year. Realisation of this forecast also pivots greatly on the success of the vaccination roll-out plan, which will serve not only to boost domestic traveller confidence, but that of non-residents considering South Africa as a tourist destination of choice.