[TOP STORY] Acsa’s R21bn capital programme puts infrastructure back in focus

0:00Money will be a big hit for all your up-to-date stories. The airport's company South Africa says its latest annual results reflect a business that is recovering strongly, investing more in infrastructure and also trying to improve the passenger experience across the entire airport network. Passingger numbers have risen, that's good news. Capital spending has increased and access is pushing further into digital services, property retail and other non-aeronautical activities, all well and good. But I think the bigger question is whether that stronger financial and strategic position is actually translating into better day-to-day performance for airlines and travelers. I'm in discussion now with Luzuka Maboccia, who is the chief financial officer at the airport's company. Luzuka, welcome to you. So what has improved most noticeably in access operational performance over the past year? The print looks good. I think for the year 2025-26, so what has been the notable improvement in our performance

1:02definitely our traffic, which has actually increased to 98% to pre-COVID, not yet achieving the pre-COVID numbers, but we are seeing good traction there in the traffic growth. You've literally pointed out the growth also in the non-aeronautical revenue, so that speaks to revenue diversification. We are actually pushing that quite aggressively in the next coming years, having lent lessons from COVID years where there was no traffic, we then adopted a strategy that intended to then diversify our revenue. So we are actually starting to see fruits of those strategies, Jeremy, but I think overall, we quite pleased with the results, positive indicators financially across our financial disability. Obviously, there's always room for improvement in any company's performance. Luzuka, where do you think performance is still falling short of the standard that you want?

2:02In other words, what a pass and just telling you still remains the biggest frustration at your airports. Now, thanks, Jeremy. Definitely maintenance of our airports. I think this is a phenomenon that is a global phenomenon, in fact. So during COVID, you would have noticed that most airports had to slow down on infrastructure due to shortage of liquidity, and as a result, there's a huge backlog. This is not unique to South Africa. It's a huge backlog for infrastructure across the various airports. So what we are seeing is the slow pace in actually implementing our maintenance programs to really get our airports running at an maximum and optimal speed. It has been an area of concern, but we are putting in place the right to versions to fast track the rehabilitation, maintenance of infrastructure and also align with our

3:04innovation strategy. The part of our strategy would say it's to innovate, grow and sustain. The innovation piece really speaks to digitalization, it speaks to customer experience, improving customer experience. We have, I must indicate, that perhaps not performed as expected in the last financial year, but we certainly are prioritizing those interventions. All of course about the money are Axis airports generating enough cash to fund their own expansion, or will taxpayers ultimately have to help finance this investment or this next investment cycle that you're talking about. Yeah, I am quite pleased that we indicate that we are quite liquid as an entity. We've actually closed the air with a more than six billion of cash in the bank, and that has been aimed precisely for the Capex project that you are leading to. You'd know that we're between one billion overall, Capex program, half of that will be financed

4:07through debt, and then half will obviously then be financed through our cash generated from operations. So passengers must not be alarmed or rather discouraged. We do have enough cash flows to then find our business without necessarily getting any additional tariffs from them. Which parts then of the airport infrastructure in your opinion now need the most urgent attention? I think most what we are prioritizing in all customer facing infrastructure, and that cuts really across security, for instance, we have huge Capex that is planned specifically for security. One, to strengthen our security and our airports, two, to also fast track the facilitation of our passengers through our security gates. So there's about maybe a wrong game, but just over three billion of investment that is

5:11earmarked for security checks. And the rest really speaks to your parking equipment. I also speak to some of the people-movers, your escalators, etc. So there's really a big focus on customer's simplicity in the next couple of years. I understand the importance of diversification. It happens to airports the world over, but does this diversification make access a better airport operator rather than simply abroad a business? Is a fine line a balance that you've got to draw there, right? Yeah, 100 percent. I mean, if you look at some of the global airports, the leading airports, Britain, Singapore, and Dubai, you would start to notice that there's a big drive for revenue diversification where airports, yes, they want to capture your aeronautical traffic, revenue-related activities, but there's also a huge focus on non-erronautical, which is your retake.

6:14So airports are actually now shopping centers. You will often also hear the term a retropolis, which is six to basically creating, or rather changing our airports to become economic hubs. And that's precisely what we are also pushing in our network. Let me ask you a question about the airlines themselves. Airport charges ultimately feed into the price of flying. Again, I've used the expression balance. This is another question about balance. How much more can you realistically extract from airlines and passengers before you start damaging demand? Are you at that point yet? Not yet. In fact, most of the season to add that our airport charges probably amount to less than 10 percent of the actual ticket price that our passengers pay a bulk of that actually comes from what the airlines actually charge.

7:14Now our strategy again is to try and use even move shift from the 10 percent to even lower than what we are currently charging. And in doing so, the revenue-day specification strategy six to the next address that was the more non-erronautical revenue we generate, the less than tariff they knew we expect from our passengers. So one, there's still a huge headroom for us then to develop our non-erronautical which will ultimately then benefit our passengers. Just a final one and again, I guess it's about risk management, but if passenger growth disappoints over the next two or three years, what gets cut first? Is it infrastructure spending? Is it maintenance? Is it staffing? Or do you just readjust your financial targets? It then becomes a cap-expan because how it works is we plan our cap-ex in advance. For future traffic growth, for instance, we are now building to cater for traffic that

8:15will only experience let's say in five years time. Now if that traffic is not realized, if the current traffic is not expected traffic now or growth is not realized, we then tend to slow down then on the cap-ex in the future. And that really then addresses to your point where there is no performance in traffic, how do we then manage that risk? But again, maybe going back again to non-erronautical, I really want to reiterate, when we drive non-erronautical, it really speaks to then revenue diversification. So it means that we want to be less relying rather on the traffic, erronautical, tariff set and so forth. So our strategy then, you know, assist us in minimizing that exposure. So one, we would cut down on cap-ex, two, we would then grow our non-erronautical, which will then enable us to even meet the financial targets that we set.

9:18I'm going to leave it there with my thanks, Luzuka Mabotcha, is the chief financial officer at the airport's company.