Aspasia Karras
In the year ending 1992/93, the parastatal that ran the nine state airports was operating at a considerable loss. Dirk Ackerman, the recently appointed managing director of the Airport Company formed in August 1993, is clear about the reason: “Traditional bureaucratic inefficiency.”
Too many captains wanting to direct the ship resulted in three national departments — transport, public enterprise and the former South African Police (SAP) — all with an unequivocal say in strategic decision-making, which was further complicated by the close ties with South African Airways (SAA).
Compounding the problem was the typical public sector approach to raising revenue, which saw the company balancing its budget via the traditional airport route, through landing fees, parking costs and terminal rent from airlines as well as from passenger-handling fees.
When the company tables its results in cabinet this month, Ackerman claims they will not only improve on its 1994/95 pre-tax profit, but also completely dispel all memories of past inefficiency.
The move to create the single Airport Company under one line of authority, the Department of Transport, has cut some of the red tape. But the fact that it is still a public company, accountable to a regulating committee, which imposes a flat rate on aeronautical charges that is 2% below inflation, is still a limiting factor.
“That should prove that we are not an usurious bunch of moegoes [idiots],” explains Ackerman. “The airlines should realise they are getting preferential rates; we are supporting them and they in turn should play along to ensure that they stimulate tourism.”
Ackerman is also categorical that SAA does not benefit from any preferential treatment from the Airport Company. The relationship is based on a purely transparent business-customer relationship, he says. Ackerman believes the Department of Civil Aviation, in the Ministry for Public Enterprises, which controls SAA, should be accountable for whether the airline is playing fairly in the international market.
Nevertheless, new business with international airlines has ensured that both traffic and projected growth rates are increasing exponentially. Statistics show an average 8,2% increase in terms of total passenger growth this year and 7,3% growth in airline usage. More impressively, the Johannesburg International Airport figures show a 17% increase in passenger numbers and business from 66 new airlines.
Still, a recent international report shows that at the 5% growth rate in air travel, airports are being forced to question whether they are really geared to handle the traffic. The cost of inefficiency is more than $15-billion a year, while the International Civil Aviation Organisation argues that over $500-billion is needed to address the issue of safety and security, as well as to ensure adequate capacity.
Many airports internationally are being forced to re-examine their sources of revenue as well as the public sector link. The complete transformation of the British Airports Authority (BAA) has become the global icon of the potential success of outright consumerism in the airport industry.
The company is diversifying out of Heathrow and into bona fide shopping malls and international consultancy and partnerships. In fact, it is one of the loudest bidders to get a finger into the South African airports pie.
The South African picture looks like this: the company has first concentrated on an aviation master plan for the next 30 years that effectively maps and determines the infrastructural needs for the future, to be ready next month.
Next is a property development plan that will look at the commercial opportunities inherent in the airport, such as hotels, office blocks, freight parks and retail stores. Interest is already mounting as the Edgars clothing group, McDonald’s and the Brazilian Coffee Shop all vie for space in what is clearly a viable proposal, a large and potentially trapped clientele.
“We’re not a bunch of nog schleppers; we are planning strategically to deal with the future,” asserts Ackerman.
The strategic plans have been facilitated by BAA along with international consultants, Fischer and McDonald. “We are an entrepreneurial airports company, the vision is of giant shopping centres where aeroplanes park,” concludes Ackerman.
The game plan may be set, but the question is, will the R12,9-billion earmarked for upgrading in the next five years do the job? La Merci, scheduled for opening in 2010 to replace the Durban airport, has the potential to blow the budget before the plans are even put into gear. The new Denver Airport, for instance, cost three times its original budget, while Hong Kong’s new airport is projected to cost $20-billion.
On the security front, a mass televised exercise last week, simulating the Cathay 747 crash, satisfied the airport authorities that the systems in place are more than adequate. It led Ackerman to muse that “it is a problem to provide security at a place where you have so many interests converging. The Airport Company is almost a virtual organisation, facilitating an environment — which is why we see ourselves creating partnerships for airport service excellence.”
This brings us to the role of a strategic equity partner as a catalyst for transformation of parastatals. The Task Team on Airport Restructuring argued in November last year that this was the way to go, mainly because of the technology and skills transfers as well as the potential for a geographic, strategic alliance. The government and labour task team on transport is debating an option that has already been taken by the Austrian, Danish and Dutch governments and is being planned in Mexico, Bolivia and Argentina.
Ackerman is happy to wait out the negotiations. “My philosophy for this country is that we have to work closely with labour and use our assets favourably in the interests of all.”
The wait is certainly not harming the level of interest — more than 10 international companies are already banging at the door.