Airports Company South Africa. Photo: Armand Hough / Independent Newspapers
Airports Company South Africa (Acsa) will be turning its gaze towards India and China, as well as regional markets in Africa, to ramp up its traffic development strategy over the next decade as the domestic market is expected to continue to struggle.
Although Acsa has made significant strides to recover, the company admits that domestic air traffic recovery seems to have peaked, despite this market segment not reaching pre-Covid passenger traffic volumes.
Acsa expects to return to profitability this year, after narrowing its after-tax loss of R142 million last year. This is a significant improvement on the R1 billion loss posted in the prior year, owing to the implementation of its recover and sustain strategy and a revised financial plan.
In an interview with Business Report on Friday, Acsa’s acting group manager for traffic development, Mpho Rambau, said global geopolitical developments and South Africa’s sluggish economy will likely play a major role in reshaping Acsa’ traffic development strategy.
Rambau said the return of South African Airways from business rescue, plus a renewed investment in terms of new capacity into the domestic market by FlySafair and Airlink had ameliorated the gaps left by Mango, Comair and British Airways.
“So we got to a point where we had enough capacity to actually service the domestic market, but I think we've gotten to a point where it almost seems like we've peaked in terms of our recovery,” Rambau said.
“Peaking means it looks like we've hit the maximum that we can actually recover to, and we are still below pre-Covid, which is a big concern.
“And part of what actually explains that is the restructuring and the corporate market that we've seen, where corporates are now travelling less and less due to the rapid development of virtual conferencing and meeting platforms that have made it easier for those people to conduct business without travelling.”
Domestic traffic accounts for a large portion of Acsa’s traffic volumes but an inferior portion in terms of revenue generation, whereas international traffic is about 28% by volume but contributes the majority of Acsa’s aeronautical revenue.
The reason for this is domestic tariffs are way lower than international tariffs.
Though Europe constitutes almost 50% of Acsa’s international traffic, Rambau said they wanted to grow their market share in the East by lobbying for air connectivity with these markets and leveraging on airlift.
“Internationally, North America, Western Europe, are our core markets and we're looking at enhancing our connectivity there. But in terms of real growth markets that we think will swing the dial are markets such as China, markets such as India, because these are crazy big markets.
“Just growing our presence of market share in the China market to one percent might translate into us just getting over a million passes because of the sheer size of the market.
“Currently, we have visa requirements for China and for India, and these are markets that we are looking for growth. We are looking at certain concepts around having a BRICS visa, something like the Schengen visa kind of thing for the BRICS bloc, and how that could literally lead to an explosion of inter-bloc travel, which will then go into supporting our airlift initiative.
“Those were all articulated and found expression in the overall report of the BRICS business council aviation working group, which was adopted at the BRICS summit last year.”
Rambau also said the biggest opportunity for Acsa, one which it sees as low-hanging fruit, was to develop connectivity within the African continent.
He said this had been difficult in the past, largely because of restrictive policies and because many countries in Africa did not even have national carriers or carriers that had the capacity to operate outside their borders.
“Africa is a growing market, but we still have an issue of connectivity. And the connectivity issue is much more challenging and complex compared to India and China,” Rambau said.
“So, Africa is growing, but maybe not as fast. There are potential opportunities for us to actually look at Africa, which we are doing. And so what we are now doing is we're looking for inventive ways to actually create new routings that are feasible.
“But I think in terms of sheer scale, India and China are going to be the big swingers, whereas Africa is still a main focus. And we sort of see that evolving to a point where, in line with the economic growth, we are actually anticipating Africa to be one of the biggest markets.”
BUSINESS REPORT