Airports Company South AfricaPresentation to the Portfolio Committee on Tourism6 November 2012

“Airport taxes”

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The term airport taxes are incorrectly used for taxes, charges and other costs recovered by way of the air ticket

Description Example

Taxes • Value Added Tax (VAT)•International departure tax on regional and international departures

Regulated charges

• ACSA passenger service charge• Current - Domestic: R110, Regional: R227, International: R299• From 1 Sep – Domestic: R116, Regional: R242, International: R319

• SACAA security charge

Non-regulated charges

• ACS passenger charge (ACS is a company owned by the airlines associations)

Airline costs • Fuel surcharges• Insurance

National Treasury requires the following breakdown on air tickets:

South African Airport Sector

‘The Tyranny of Distance’

Uncommon to have major population centres so dispersed

Johannesburg-Cape Town equivalent to London-Madrid or Amsterdam-Rome

Domestic routes dominated by ‘The Golden Triangle’

The South African national (and regional) economy suffers from ‘the tyranny of distance’ and the three airports’ role in ameliorating this problem cannot be underestimated

Source: Mott MacDonald Ltd Analysis

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Airport Charges in Perspective

Leigh Fisher benchmarking:

2011 Review of Airport Charges

Based on charges effective on 31

December 2010

24th cheapest out of 50 airports

ACSA has increased charges by

69.6% since this study due to recovery

over six months of an annualised 34.8%

charges increase for 2011/12

Awaiting latest Leigh Fisher

benchmarking

A further increase of 8% became

effective on 1 October 2012

Johannesburg

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Evolution of Airport Charges

Introduction of pre-funding: charges

reduced

Economic Regulation

Lacks predictability, transparency and balance between the regulated entity and the users

Pre-funding introduced at commencement of major infrastructure investment in 2007

Price spikes inevitable within current framework

DoT has embarked on roadmap to improve regulatory framework

Price spike implication of pre-

funding

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Economic Regulatory Review

May 2011 amended permission No new capacity investmentsSmoothed tariff decrease

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Promulgated tariff increase 30.6% 5.5% 5.6%

Indicative tariff increase based on current approach -13.4% -13.4% -13.4%

Current changes considered for the economic regulatory framework in time for the next Tariff Application (“Permission” Application):Internal dispute resolution (before the regulatory decision) and Appeals mechanism (following a regulatory decision)No overlapping of Permissions – effective Permission of 5 yearsImproved flexibility to deal with uncertainty –

Triggers required for major infrastructure investments (Planning, Design, Phase 1 construction, etc)

Re-opening of Permission triggers, eg. demand growth, technological advances, regulatory compliance

Certainty regarding re-opening of Permission rulesCapacity of the Regulating Committee

If successful –•Re-assess the “no new capacity” assumption based on level of understanding of stakeholder expectations and the impact of key demand drivers

If unsuccessful –•Re-assess the “no new capacity” assumption based on the understanding of the change within the economic regulatory framework

The Real Driver of Traffic Volume Growth

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GDP growth is a key driver for traffic volume growthGDP growth is a key driver for traffic volume growth

0

10

20

30

40

50

60

Approximate group terminal capacity

Mill

ion

An

nu

al P

asse

ng

ers

1995

by 2006

by 2010

• Enhanced connectivity - world class gateways to the country and its regions

• Ability to deliver improved customer service and experience

• Robust non-aeronautical revenue base

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Current capacity

Airport capacity is a function of peak hour capacity (based on demand) and the duration of the peak

Behavioural changes within the South African aviation sector could lead to postponement of future capacity requirements, i.e. lead to the better use of current facilities

Airport Demographics

Airport Passenger throughput

(2012)

Total air traffic movements

(2012)

Approx. Annual passenger handling capacity

Public parking bays

O.R. Tambo 19 004 000 212 580 28 000 000 16 300

Cape Town 8 576 709 97 935 14 000 000 6 080

King Shaka (Durban)

5 040 094 55 194 7 500 000 4 500

Port Elizabeth 1 364 976 68 893 2 000 000 900

Bloemfontein 441 954 20 088 600 000 370

East London 681 529 32 587 1 200 000 550

George 575 799 33 479 900 000 415

Kimberley 140 248 12 347 200 000 90

Upington 52 224 7 826 100 000 100

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Departing passengers from ACSA Airports per Destination

Source: ACSA – data per financial year

Aircraft Landings at ACSA Airports per Origin

11Source: ACSA – data per financial year

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Thank you