BEYOND COVID-19 AND INTO THE FUTURE

Business context

In 2023, the global aviation industry continued its path to recovery following the severe disruptions caused by the Covid-19 pandemic. According to IATA, total air traffic measured in Revenue-Passenger Kilometres (RPKs) surged by 36.9% compared to 2022. For the full year, 2023 traffic reached 94.1% of pre-pandemic (2019) levels, demonstrating a robust recovery trajectory. In December 2023 alone, total traffic rose by 25.3% compared to December 2022, nearing 97.5% of the December 2019 level.

Despite these positive indicators, the industry faced ongoing challenges such as inflation, which remained a significant issue throughout the reporting period, impacting disposable incomes and thereby affecting travel expenditures across major markets.

Moreover, geopolitical events such as the conflict in Russia-Ukraine and the Israeli-Hamas conflict over Palestine has extended into the Strait of Hormuz, intensifying complexities by impacting energy and air freight prices, along with the global cost of living. These factors have influenced travel decisions and contributed to uncertainties within the industry.

Moving into early 2024, the global aviation sector continued to show robust recovery across both domestic and international segments. According to UN Tourism, international tourist arrivals reached 97% of pre-pandemic levels in the first quarter of 2024, underscoring a strong rebound for the tourism sector. Between January and March 2024, over 285 million tourists travelled internationally, marking a 20% increase compared to the same period in 2023, with projections suggesting a full recovery surpassing 2019 levels by 2% in 2024.

Despite higher ticket prices in major markets during the reporting period, air travel rebounded strongly with a 13.8% year-on-year growth in traffic reported in March 2024, driven primarily by robust international traffic. Passenger load factors (PLF) improved compared to previous years, and local and international airlines expanded seat capacity in response to rising demand (UN Tourism).

In March 2024, the African aviation industry showed significant performance metrics compared to March 2019 levels. Available Seat Kilometres (ASK)/Capacity for total services rose by 7.7%, and traffic surged by 25.5%. International services saw ASK increase by 8.7% and RPK by an impressive 30.0%, UN Tourism report conclude.

While the industry has made remarkable strides in recovery, sustaining this growth trajectory will depend on effectively navigating ongoing challenges such as inflationary pressures and geopolitical uncertainties. The resilience and adaptability demonstrated by airports and airlines globally will be crucial in maintaining momentum and capitalising on the resurgence in travel demand.

Recover and sustain

During the 2021 financial year, we undertook a major review of our strategy coined it Recover and Sustain. The strategy defined three time horizons as a guiding framework for the group to deal with the effects of the Covid-19 pandemic until the end of 2023 business cycle. It was used to guide ACSA’s recovery efforts in the second half of the 2021 financial year and throughout the 2022 and 2023 financial years, taking the Group to the end of the 2023 business cycle.

As the Group was planning for 2024 financial year, the need to review the strategy became evident to align with market conditions, and also to transition from the initial strategic horizon focusing on Recovery to the second phase. This shift represents a significant organisational pivot to adapt to the continuously changing operating environment.

Vision 2030

The impact of Covid-19 pandemic accelerated the company’s Vision 2025 timeline to 2030, thus shifting focus from recovery to the Innovate, Grow, and Sustain strategy from 2024 onwards. By prioritising innovation, we aim to drive sustainable growth and contribute to transforming our operational landscape. Over the past four years, global industry and labour markets have undergone significant structural changes, resulting in higher labour costs due to heightened competition for talent and increased energy prices. Changes in business travel behaviours, spurred by technologies such as video conferencing and virtual platforms, highlight the urgency for rapid adaptation.

The aviation sector swiftly adapted to cater to the growing demand for leisure travel. As an airport operator, we are enhancing our infrastructure and services to support this trend. Substantial enhancements in our cargo handling capabilities are planned over the next five to eight years, aligned with the implementation of our Aerotropolis and Airport Cities strategic initiative. Furthermore, with the Africa Continental Free Trade Agreement (AfCFTA) in effect, there is a renewed focus on enhancing connectivity and logistics capabilities to facilitate trade across the continent. This agreement presents opportunities for airports to play a pivotal role in supporting regional economic integration and enhancing air connectivity across the African continent.

A detailed analysis of the Vision 2030 strategy and the process of implementing it is given in the Strategy and value creation section.

Into the future

Stakeholder engagement

As an airports Group, we operate within a complex ecosystem and all of our stakeholders are an intrinsic part of our business.

The Covid-19 pandemic represented the greatest disruption ever experienced by the aviation industry and resulted in the partial or total collapse of many aviation-related businesses and markets. Throughout the past four reporting periods, we have focused on maintaining airport operations and on recovering from pandemic-related travel restrictions. As part of this process, we have remained committed to supporting our stakeholders by seeking to understand them and their businesses and by reaching agreements that reflect our ongoing commitment to them. They, in turn, have actively supported us throughout the necessary process of organisational change.

As a result, our partnerships with our stakeholders have evolved in a very positive way and these vital relationships have been re-energised by working together to face a number of significant local and global crises.