Acsa’s R21bn capital programme puts infrastructure back in focus

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JEREMY MAGGS: The Airports Company South Africa (Acsa) says its latest annual results reflect a business that is recovering strongly, investing more in infrastructure and also trying to improve the passenger experience across the entire airport network.

Passenger numbers have risen. That’s good news. Capital spending has increased and Acsa is pushing further into digital services, property, retail and other non-aeronautical activities.

Read: Acsa launches upgrade project to ease congestion at Gqeberha airport

All well and good, but I think the bigger question is whether that stronger financial and strategic position is actually translating into better day-to-day performance for airlines and travellers.

I’m in discussion now with Luzuko Mbotya, who is the chief financial officer at the Airports Company. Luzuko, welcome to you, what has improved most noticeably in Acsa’s operational performance over the past year? The print looks good.

LUZUKO MBOTYA: I think for the year 2025/26, what has been the notable improvement in our performance is definitely our traffic, which has actually increased to 98% to pre-Covid, not yet achieving the pre-Covid numbers, but we are seeing good traction there in the traffic growth.

You’ve neatly pointed out the growth also in the non-aeronautical revenue. So that speaks to revenue diversification. We are actually pushing that quite aggressively in the next coming years.

Having learned lessons from Covid years, where there was no traffic, we then adopted a strategy that intended to then diversify our revenue.

So we are actually starting to see the fruits of those strategies, Jeremy. But I think overall we’re quite pleased with the results, positive indicators financially across our financial (1:52 …).

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JEREMY MAGGS: Obviously there’s always room for improvement in any company’s performance. Luzuko, where do you think performance is still falling short of the standard that you want? In other words, what are passengers telling you still remains the biggest frustration at your airports?

LUZUKO MBOTYA: Yeah, thanks, Jeremy. Definitely maintenance of our airports. I think this is a phenomenon that is, it’s a global phenomenon, in fact. So during Covid, you would have noticed that most airports had to slow down on infrastructure, due to shortage of liquidity, and as a result, there is a huge backlog.

This is not unique to South Africa, it’s a huge backlog of infrastructure across the various airports.

So what we are seeing is the slow pace in actually implementing our maintenance programmes to really get our airports running at a maximum and optimal speed.

It has been an area of concern, but we are putting in place the right interventions to fast-track the rehabilitation and maintenance of infrastructure and also align with our innovation strategy. Part of our strategy seeks to innovate, grow and sustain.

The innovation piece really speaks to digitalisation, it speaks to customer experience, improving customer experience. We, I must indicate, perhaps not performed as expected in the last financial year. But we certainly are prioritising those interventions.

JEREMY MAGGS: All of course, about the money, are Acsa’s airports generating enough cash to fund their own expansion, or will taxpayers ultimately have to help finance this investment or this next investment cycle that you’re talking about?

LUZUKO MBOTYA: Yeah, I am quite pleased that we indicate that we are quite liquid as an entity. We’ve actually closed the year with more than R6 billion cash in the bank, and that has been earmarked precisely for the capex (capital expenditure) project that you are alluding to.

We have a R21 billion overall capex programme, half of that will be financed through debt and then half will obviously be financed through cash generated from operations.

Read:

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So passengers must not be alarmed or rather, discouraged. We do have enough cash flows to then fund our business without necessarily getting any additional tariffs from them.

JEREMY MAGGS: Which parts then of the airport infrastructure, in your opinion, now need the most urgent attention?

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LUZUKO MBOTYA: I think what we are prioritising is all customer-facing infrastructure. That cuts across security, for instance, we have huge capex that is planned specifically for security.

We want to strengthen our security at our airports to fast track the facilitation of our passengers through our security gates.

So there is about – I may be wrong here – but just over R3 billion of investment that is earmarked for security checks.

The rest really speaks to parking equipment. It also speaks to some of the people movers, escalators and so on. So there’s really a big focus on customer centricity in the next couple of years.

JEREMY MAGGS: I understand the importance of diversification. It happens to airports the world over. But does this diversification make Acsa a better airport operator rather than simply a broader business? There’s a fine line, a balance that you’ve got to draw there, right?

LUZUKO MBOTYA: Yeah, 100%. If you look at some of the global airports, the leading airports, between Singapore and Dubai, you’d start to notice that there’s a big drive for revenue diversification where airports, yes, they want to capture your aeronautical traffic revenue related activities, but there’s also a huge focus on non-aeronautical, which is your retail.

Read: Acsa finally reveals R10bn overhaul of Cape Town International Airport

So airports are actually now shopping centres, and you will often also hear the term aerotropolis, which seeks to basically changing our airports to become economic hubs. That’s precisely what we are also pushing in our network.

JEREMY MAGGS: Let me ask you a question about the airlines themselves. Airport charges ultimately feed into the price of flying. Again, I’ve used the expression balance, this is another question about balance. How much more can you realistically extract from airlines and passengers before you start damaging demand? Are you at that point yet?

LUZUKO MBOTYA: Not yet. In fact, I must hasten to add that our airport charges probably amount to less than 10% of the actual ticket price that our passengers pay. The bulk of that actually comes from what the airlines actually charge.

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Now, our strategy again is to try and reduce or shift from the 10% to even lower than what we are currently charging.

In doing so, the revenue diversification strategy seeks to address that because the more non-aeronautical revenue we generate, the less tariffs that we expect from our passengers.

So there’s still huge headroom for us then to develop our non-aeronautical which will ultimately then benefit our passengers.

JEREMY MAGGS: Just a final one, and again I guess it’s about risk management, but if passenger growth disappoints over the next two or three years, what gets cut first? Is it infrastructure spending, is it maintenance, is it staffing or do you just readjust your financial targets?

LUZUKO MBOTYA: It then becomes capex spend. Because how it works is we plan our capex in advance for future traffic growth. For instance, we are now building to cater for traffic that we will only experience, let’s say, in five years’ time.

Now, if that traffic is not realised, if that expected traffic now or growth is not realised, we then tend to slow down on the capex in the future. That really then addresses, to your point, where there is no performance in traffic, how do we then manage that risk?

Read: Fight over billions heads to court after Acsa cancels smart security tender

But again, maybe going back to non-aeronautical, I really want to reiterate, when we drive non-aeronautical, it really speaks to then revenue diversification. It means that we want to be less reliant on the aeronautical tariffs and so forth.

Our strategy then assists us in minimising that exposure. So, one, we would cut down on capex, and two, we would then grow our non-aeronautical, which will then enable us to even meet the financial targets that we set.

JEREMY MAGGS: I’m going to leave it there with my thanks. Luzuko Mbotya is the chief financial officer at the Airports Company.

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