According to Comair, the first is the value of dividends that the Airports Company of South Africa has paid to shareholders over the past five years. The latter is the increase in airport charges Acsa wants to slap onto your air ticket to ensure its investors reap the profits from a 2010 building boom.
If you thought the Eskom tariff hikes were obscene, brace yourself for steep hikes in the cost of your next airfare. While some capital investment can reasonably be funded by increased charges ? you get what you pay for, after all ? airlines are crying foul and suggest that Acsa could be shooting itself in the foot.
Yasas Sri-Chandana, chief financial officer of Comair Limited and a representative on Airlines Association of South Africa, says that the big red numbers on Acsa?s balance sheet, and the resultant request for a 133 percent increase in airport charges, threatens the growth of air travel in South Africa.
We need to reward investors
?Like Eskom, ACSA is calling on users of its airports to fund its financial shortfall,? says Chandana. ?In the past few years Acsa has made profit margins of over 24 percent and has paid billions of Rands worth of dividends to its shareholders ? which include government, the PIC and Acsa management.
In a statement released on Thursday Priscillah Mabelane, Acsa's executive finance director, said: "Our tariff application is simply based upon common financial principle of return on investment (ROI)."
"Allowing Airports Company SA to levy the proposed tariff increase of 132.9% for the 2010/2011 financial year will enable the company to reward its investors adequately for their investments," she said.
Look closer at airlines - Acsa
Mabelane says that with the proposed increase, the passenger service charge will increase from R42 to R99 on a single domestic trip.
However, Chandana says this does not include Landing Fees and other costs which would push the total to over R185 per passenger. Considering that a low cost flight between Johannesburg and Durban will likely set you back around R300, Acsa charges will make up more than half the cost of a ticket.
However, writing in the Business Report, Mabelane argues that ?the airline fuel surcharge, once again an amount charged differently by individual airlines? is the single largest component in the so-called ?airport taxes?, the very taxes for which Acsa is unfairly required to carry the blame.?
A fair point, and one that airlines should certainly answer given the drop in oil prices, but fuel surcharges and a 133% hike are a different issue altogether, and I imagine most travellers can tell the difference between the two costs anyway.
Chandana also has harsh words for unnecessary airport spending, which he says feeds directly into the need for increased revenue from airport charges.
?As airlines, we support the upgrading of terminals at OR Tambo and Cape Town International Airports which have been long overdue. However the level of spend on Acsa?s projects has been excessive, not only from a planning stage but also in terms of overspending relative to plan.
More competition is needed
?The clearest example is the new La Mercy Airport in Durban which, when completed, will have cost over R7-billion? against the original proposal which suggested a total cost of R3-billion, says Chandana. ?The current Durban Airport (DIA) is perfectly functional and has significant growth capacity.?
?Ultimately, only free competition will determine whether Acsa's rates are fair or not. Lanseria Airport offers Johannesburg and Pretoria-based travellers rates that are significantly lower than OR Tambo Airport. kulula currently operates more than half of its flights from the privately owned airport located to the north-west of Johannesburg.?
With the finishing touches being added to the new Durban airport at La Mercy, Comair is lobbying to purchase the current airport, which would provide for significant competition for airlines flying to Durban.
?The response so far from Acsa is that competition will not be allowed,? says Chandana. ?In a freely competitive environment it is unlikely that airports would be able to contemplate the proposed 133 percent tariff increase in an industry where margins are consistently under pressure, especially in the current economic environment.?
?Shortfall from shareholders, not air travelers?
Since pioneering the low-cost model in South Africa, kulula.com has brought air travel to hundreds of thousands of South Africans, but Chandana is adamant that a steep rise in airport charges could kill the golden goose of domestic tourism.
?Only with affordable air ticket prices and airport charges will more South Africans have the opportunity to travel by air. Our tourism industry? contributes eight percent to our GDP, also depends on the affordability of air travel into and around our country. Acsa?s financial shortfall should be funded by its shareholders, not air travellers.?
However, Mabelane suggests that travellers need to foot the bill for airport expansion, and ?any levy below the minimum that Acsa has applied for will frustrate the company's ability to maintain the capital expansion it considers vital if it is to stay abreast of growing demand.?
Obviously both the airlines and Acsa have their own agendas, and there?s merit in both arguments. I firmly believe that if we want an airport that?s a joy to use (and the new Cape Town and ORTIA terminals are just that) we need to be prepared to pay for it.
However, with airports such an essential piece in the jigsaw puzzle of the local economy, consumers can?t ? as we?ve been forced to do with Eskom ? be told to dig deep into their pockets while huge dividends and bonuses are paid out, and unnecessary billions are wasted. There?s fair return for investors, but there?s also fair pricing for consumers who ? let?s face it ? can rarely choose between competing airports.
Are the airlines right and Acsa wrong? Or vice versa. I?m not sure I know the answer, but I do know that a 133 percent increase in any fee is going to make me choke on my in-flight peanuts.
What do you think of the proposed hike... fair increase, or price-gouging? Post your comments below?