Airport Management Services and Logistics for Airports in South Africa and Globally (ACSA)

Interview with Deon Cloete, General Manager of Airports Company South Africa (ACSA)

ACSA announced a 7.5 billion rand expansion plan for Cape Town International Airport last year that included the upgrading of its domestic and international terminal as well as the realignment of its runway. Can you tell us what the core of the project is about?

This development program has initiated the single biggest project which is the runway project. That’s just over 3 billion rand of this investment. We have a runway that has been serving this airport very successfully for many years but it is aging and it has to be replaced. Besides the fact that this runway is too close to the main terminal we also need to move it to the eastern side to create more space between the runway and terminal in order for us to expand the terminal in a more efficient manner as opposed to an elongated development where you have long walking distances the goal is to narrow it in and to create far more efficiencies transitions between terminals and between processes. It will also create the ability to bring in additional spaces for aircraft parking and other runway infrastructure on the airfield. This development won’t just enable the runway but the full precinct over time. Notwithstanding the fact that we have a runway that has aged, the new runway will also give us additional capacity so we will move from effectively 30 flights per hour and we will step that up to 45 flights per hour that will give us a 50 per cent increase in capacity which is absolutely vital for the growth of the region. Lastly it will also give us the ability to accommodate the A380 new generation large aircraft on the new runway that we currently cannot do. In essence this project is about enabling growth for the airport, the City and the region as a whole.

What is the lifespan of the runway?

A runway could last for many years. This runway is fifty years old. It has to be refurbished to make sure that it remains in good condition and in that regard three years ago we did a full refurbishment on the runway to make sure that it will carry us through this process of applying, doing the environmental approvals, doing all the necessary applications that we need to do to get a project approved and then obviously providing for a two year construction period. For us it is critically important that the runway will continue to serve and give predictability in operations so that we don’t experience a failure of runway that would have an impact on the operations and services.

If everything goes according to plan the physical construction for the project will take place towards the latter part of 2017?

That is correct. We are effectively looking at a two year construction period.

Certainly for us getting involved in the international market some years ago first in India, Mumbai and then subsequently Brazil, Guarulhos was a very exciting development because we do consider ourselves a global player.

What will change and happen at Cape Town international airport?

The first big opportunity is that we will have additional capacity every hour of the day. There are certain hours of every day where we are currently at maximum capacity. It will allow us to bring in additional flights and support the growth initiative. Up to now we have had very good growth and we wish to continue that into the future and in order to do that we do need this new runway. That will change. Obviously this runway isn’t just a new runway but there will also be a realignment of the runway. The noise, contours and the flight routes will change hence this need for us to have gone through a very extensive public consultation process through the EIA that we’ve been doing that for the last two to three years.

According to the most recent statistics that we have Cape Town International Airport saw a 14.5 per cent increase in African air arrivals and a 5 to 6 per cent growth in overseas arrivals during 2014. This was despite the overall tourism numbers for South Africa dropping in 2013 by quite a significant 6.8 per cent. To what do you attribute this remarkable growth in the face of such adversity?

We’ve been very pleased with the performance of the airport and the region in terms of traffic growth. I think the first big positive impact and reason why we have seen this growth is due to the airlines giving the destination a high vote of confidence. We have seen many airlines that have brought in additional frequencies. We have seen airlines that used to do tag flights where they would route via Johannesburg now flying direct and we’ve also seen new services and new routes. Key to this development and growth initiative has been a collaboration between the airports company of South Africa, the western cape province and the city of Cape Town where there’s a collaboration to understand what routes are currently serviced, which ones have potential and how we will be able to attract new routes and new operators into this space.

To what extent do you believe that the key to success in South Africa’s overall aviation sector is a level playing field for all the carriers? To what extent are regulatory factors hampering the industry at present?

I believe that the regulatory environment is not a constricting factor at this stage. The services and the frequencies that are up for offer are adequate and there are also some that are not used. So that has not been a restricting factor. I think that what has been more of an issue is obviously airlines being very critical, rightly so, of understanding the routes, the viabilities and the profitability of a route to decide whether they will operate it or not. It is really incumbent on all regions such as the tourism sector and the business sector to make sure that a particular destination is a destination of choice which will allow for a demand that will support airline capacity to happen. That is really the main focus.

Wesgro has also officially launched the Cape Town air access initiative which is aimed at international air route development in the Western Cape. This is collaboration between the Western Cape provincial government, the city of Cape Town and you (ACSA) and Cape Town Tourism as well as Wesgro and to some extent the private sector. Can you tell us what the primary mandate of the air access team will be?

The air access team is very powerful and what makes it so powerful is the three tier collaboration with the city of Cape Town, the Western Cape Province and the airports company which is a national competency. So you have three tiers of government collaborating to really make sure firstly, that those airline that already operate at this airport be retained and that the conditions are such that they can grow and expand. Secondly, we are also very keen on working hard in countering what is called the seasonality impact. We have an off peak season during winter where unfortunately many of our frequencies fall away purely because there is no demand in that time. With this collaboration a big focus is to also have those services pick up and continue right through the year. We have already seen some very good early success stories in that regard. Then the third goal is having new routes, new players and new markets. The role that the airports company play in this collaboration is really crunching the numbers, assessing the routes and understanding the viabilities to make sure that we ultimately bring together a model that will allow us to say which routes are preferable and which airlines would really be successful in this space.

This signing of the MOU between so many stakeholder and different spheres of incorporations is indicative of the level of support and the importance attached to the role which air access plays to the overall growth investment in the Western Cape Province.

Absolutely yes. Where initially it was collaboration reliant on good will, now it is formalised into a phase that makes sure that we start to regulate and structure this far better. That is also the preamble to further phases that we want to do in the future in order to strengthen this.

Given the significance of the Western Capes tourism industry and its distance from the key markets that it has in Europe and now increasingly Asia, how crucial is the aviation sector to the province’s economic sector?

There’s a direct correlation to between our airport and the economic state of our region and would be the case with any airport and the City or region it serves. Airports are major economic contributors and Cape Town Airport is no different. We recently concluded a study which shows that there are 3,000 jobs created for every direct and indirect regularly scheduled long-haul service and that a 10% increase in passenger numbers results in 2% regional job creation.

Air access is vital for any province but if you consider the remoteness, the distances and long-haul destinations, air access is absolutely critical to us. In addition to the air access and what it does at a traffic level which is a critical consideration but also what airports and airports of the future do is to create global connectivity. It allows a city such as the city of Cape Town to be able to compete effectively with other cities globally and if that is done properly it can only have a positive impact on the province and on the national perspective like South Africa PTY Limited.

What are the strategic markets that you are currently targeting particularly in terms of linking Cape Town to the other major global hubs?

We’ve been very excited about the growth that we’ve seen in the North American market. We believe that is the next big thing that will happen where we will secure a route in that regard. Not forgetting the bread and butter where we have had very good traditional support from Europe, UK, Germany and France and those are the markets that we will continue to strengthen and further expand upon but certainly looking at the growth market it will be North America and then also a bit closer to home on the continent there are a number of regional destinations where we think it’s an opportune time now to increase regional connectivity on the continent. Particularly what will be of interest will be Ghana, Nigeria and Addis Ababa and we have actually just had Ethiopian airlines recently commence and not only in terms of the initial schedule but they have also upped it now. The Dreamliner has two frequencies a week direct and the continental development and access on the continent is of critical importance for us.

ACSA also manages a number of other international airports such as in Mumbai and Sao Paulo. We understand you have recently signed a MOU with Ghana to help manage their airports. How vital a component is this to your business and what other bids are you currently eyeing?

Certainly for us getting involved in the international market some years ago first in India, Mumbai and then subsequently Brazil, Guarulhos was a very exciting development because we do consider ourselves a global player. We believe that type of exposure could only all go well for what we do at the home base and how we improve and develop our airports further and also for what it does in terms of creating potential city pairs. The Ghana agreement that we’ve signed is very exciting particularly because it is on the continent of Africa and all of this will just position and strengthen us as a company it will say; yes, we are strong locally but we are also a strong global player. We wish to expand further on that in the future. We’ve also recently concluded a sister agreement with Munich Airport which will see us share best practises and find opportunities to partner in varying ways. Extending our global footprint is firmly embedded in our business strategy.

Where will you go next?

That is a good question. Obviously in terms of the opportunities that we do consider, as and when they meet the necessary requirements that we have and also in terms of the partnerships that we wish to see those will evolve. However at this stage it is premature to talk about any new opportunities.

The ministers from the forty-four African countries agreed in Côte d’Ivoire to implement an open skies policy for aviation back in 1999. Do you think this aspiration will ever be realised?

I believe it will. There has been criticism saying that this is lagging and it could have happened much earlier but eventually it will and in doing so it will really liberate the air routes completely to the point  of really positively supporting growth on especially the continent of Africa.

So is it still pie in the sky now?

You could say it is pie in the sky but if you look at what’s happening it’s certainly a very different industry to what it was ten years ago. You still have huge opportunities for access and growth and there is a level of maturity that is coming into the industry which will shift. So yes, it hasn’t happened fully to the extent that it must happen but it is for the future and I believe it is something that will happen.

In terms of the various carriers — out of eleven private airlines that have been launched in the country since deregulations in 1991 ten have folded. To what extent do you think the founding model for the national carrier is damaging the aviation industry?

Every airline operation would operate on a business model that they would have carefully assessed before going into market and there are those that have done it successfully and those that have done it less successfully. But I think each of those have to be considered on their own merit in terms of their business model.

It does seem to be a bit of a graveyard. The question is basically, is there crowding out? Is there too much favouritism given to the flag carrier?

I don’t have a view of that being the case. I don’t believe we would have seen the continued growth that we have over the last ten years if it wasn’t for a market that is expanding, so yes, players have come and gone but the fact of the matter is that over time we have seen continued growth. We have more and more seats in the market. Not only in terms of the current players but new players too. So there are those airlines that have been very successful. The low cost start-ups, whether its Kulula or Mango has been very successful and we have also seen fly Safair and what they do. So each of those are running on business models that obviously they have to look at carefully, interpret and then make sure that they execute those. So from the airport company’s perspective we want to see an industry that goes from strength to strength and it’s in our interest to support all of the players that are in that market.

Notwithstanding the fiasco over the department of home affairs intransigence on the visa requirements for international visas, what would your message be to your often high end business and leisure travellers who are considering a trip to Cape Town?

Even in the midst of the whole controversy around the visas we have continued to see high growth and therefore the impact on us to a lesser extent. Industry has mobilised very strongly to ask; what does this mean and how do we give input. We have seen our authorities actually being very receptive to these inputs and we have seen some dramatic shifts. In addition to that I must commend our partners locally, regionally and on airport. Particularly the department of home affairs, customs and immigration who have all worked hard to make the best of the situation and in a very positive way support what we want to do and that is ultimately to grow the destination.

So, our message in essence would be, Cape Town is open for business. As a destination we have plenty to offer. We encourage you to come and see first-hand – you won’t be disappointed.

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