"Airlines warn against airport operators fee hike"

Monday, August 20, 2007

Airlines warn against airport operator's fee hike
"The situation where airports spend and airlines pay is not the basis for a
successful partnership," says IATA director-general and CEO Giovanni
Bisignani.
By Khulu Phasiwe
South Africa - Business Day


THE 11,4% increase in passenger service charges planned by the Airports
Company of South Africa (Acsa) will push up air fares and deter tourists,
says the Board of Airlines Representatives of SA (Barsa). 

The organisation, which represents all airlines operating in and out of SA,
says the planned tariff increases, which will be effective from October
until 2012, are "unacceptably high".

Barsa chairman Peter Barry says: "These substantial increases basically mean
that the end consumer, that is the passenger, is going to be hit twice with
increased fees - both in terms of the passenger service fees and with an
increase in ticket prices due to the fact that the airlines have no choice
but to incorporate the Acsa increased tariffs into the price of the ticket."

Acsa says the tariffs will be used to fund part of its R19,3bn capital
investment over the next five years. About R12bn of this will be raised
through the bond markets. 

Acsa CEO Monhla Hlahla says more than half of the R19,3bn will be used to
build a new terminal at OR Tambo International Airport. A further R5,8bn
will be used to build a new airport at La Mercy, north of Durban. The new
airport, to be known as King Shaka International Airport, will replace the
current Durban International. 

The remainder will be used to upgrade the other eight airports in Acsa's
network.

Barry, who is also a GM for Virgin Atlantic Airways, says Barsa is worried
that passengers and airlines are going to subsidise the building of King
Shaka airport.

Although Acsa has told passengers that the "user-pays" practice will ensure
passengers only pay for the airports they use, the principle does not apply
to airline tariff increases.

The user-pays principle is an internationally accepted aviation business
practice which dispenses with the single-till regime. This means tariffs
collected at one airport cannot be used to cross-subsidise the development
of another airport.

Barry says most Barsa members, most of which are international airlines, do
not fly to Durban and will therefore not use King Shaka airport when it
opens in 2010.

"All but four of our members use only OR Tambo and Cape Town international
airports, while billions of rands are being used to build a new
international airport in KwaZulu-Natal which 99% of our members do not, and
have said they will not, utilise," says Barry.

Barsa CEO June Crawford says Acsa's high tariff increases could have
unintended consequences on tourism.

She says the airline industry is already "experiencing crippling rises in
fuel costs", which have negatively affected airline ticket prices.

"SA is already perceived as an expensive destination. Long-haul access has
improved but remains limited, and an increase in ticket prices will prevent
greater numbers of tourists visiting our shores," says Crawford.

Acsa had originally applied for a staggering 17% tariff increase, but this
was reduced to a "still unacceptably high" 11,4% after intervention of the
regulating committee and Barsa.

Acsa said last week the regulating committee had also clawed back R228m of
the R1,3bn cash that Acsa generated from operations last year.

Hlahla said last week that the new passenger service charges for domestic
travellers would increase to R32,46 from R26,32 a trip. 

Regional tickets would cost R66,67 (from R53,51) while international tickets
would rise to R87,72 from R70,18. 

The Geneva-based airlines lobby group, the International Air Transport
Association (IATA), says it is unfair that airlines and passengers had to
pay for costs incurred by airport operators.

IATA says infrastructure charges by airport operators are now the
second-largest external cost to airlines, after fuel. Airlines and
passengers pay about $43,5bn a year to airports and air navigation service
providers.

"The situation where airports spend and airlines pay is not the basis for a
successful partnership," says IATA director-general and CEO Giovanni
Bisignani.

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