Grow footprint

Overview

Growing our footprint is a fundamental aspect of our strategy and a response to changing opportunities in the domestic, regional and international air transportation markets. As we shift from our focus on post-pandemic recovery to a focus on innovation and growth, this remains a core objective that is vital to securing sustainable value creation.

We therefore continue to pursue our growth objectives, focusing in particular on increasing passenger numbers and expansion our route network. This includes the strengthening of our presence in the cargo segment, and implementing our Aerotropolis and Airport Cities strategic intervention. We also continue to seek opportunities to expand on our commercial interests and to offer advisory services to airports outside of our portfolio, both locally and internationally.

Globally, passenger traffic is edging closer to pre-pandemic levels with RPKs growing by 36.9% year-on-year in 2023. Despite ongoing macroeconomic risks, the aviation industry is expecting to reach a milestone in its recovery in 2024 and to secure 102.5% of pre-Covid-19 passenger levels. This positive trajectory is being fuelled by a robust demand for leisure travel, with a significant development in 2023 being the reopening of aviation markets in China.

Closer to home, passenger traffic on African airlines grew by 38.7% year-on-year in 2023 and passenger traffic in Africa reached 221 mill-ion(SABRE, ACSA 2024), translating to a 3.2% increase on 2019 figures. T-hismomentum is projected to continue, with the region set to see an incre-aseto 253 million passengers in 2024, which is equivalent to 110.6% of -the2019 benchmark. Key markets like Egypt, Morocco and Tunisia -areanticipated to be significant contributors to this growth.

While traffic recovery in the European and Asia-Pacific markets is likely to be less robust and while recovery in North America is expected to slow, a bullish growth trend is also expected to continue in Latin American and the Caribbean.

Driven by these trends, international passenger traffic at Cape Town International Airport was 125% above target in the 2024 financial year, making it an increasingly important hub for direct flights from destinations around the world. International passenger traffic at the other major airports in our portfolio also increased.

Further, while domestic traffic remains unpredictable, largely due to economic constraints, we continue to see a steady improvement in this market, which is resulting in greater passenger traffic through all of our airports. From a risk point of view, however, persistently low economic growth, high levels of inflation and high interest rates continue to limit consumer spending and to affect domestic travel, particularly in the leisure and ‘visiting friends and relatives’ (VFR) segments.

More generally, the IATA has noted that the global trends which supported such rapid growth in air transportation in second half of the 20th century are becoming less supportive for various reasons. Coupled with tepid international growth, the destabilising influence of geopolitical events and regulatory uncertainty at home, growth in aeronautical revenue is likely to remain unpredictable in the short term.

This scenario strongly supports our diversification strategy and our intent to create airports that attract not only passengers from additional segments of the South African population, but which also offer business, entertainment, conferencing, exhibition, accommodation and other attractions for a broader audience of airport users.

Route development

With these factors in mind, we continue to work closely with our partners to expand our route network in order to secure and grow passenger numbers. We also continue to collaborate with key stakeholders – from tourism authorities to local government and provincial structures – to ensure alignment with national trade, tourism and socio-economic development objectives.

ACSA’s network passenger recovery reached 88% in the 2024 financial year. Scheduled passenger traffic reached a recovery rate of 87%, with a total of 18 246 324 departing passengers. ACSA’s three main international airports collectively account for 85% of all air passenger traffic in South Africa. OR Tambo International accounts for 49% of departing passenger traffic, while Cape Town International continues to boast a high recovery rate.

All three market segments continue to outperform expectations, with both the domestic and international market segments continuing to lead recovery with an 88% and 87% recovery in relation to pre-Covid passenger levels respectively. The regional market segment recovered to 84% during the reporting period owing to the increased capacity from new routes and route expansions by airlines such as SAA, Eswatini Air, Airlink Cemair and Air Botswana.

The international market segment has shown consistency in its recovery, which has been fuelled by reinstated international routes by SAA, LATAM, Cathay Pacific and Saudia Airlines. The additional capacity resulted in the segment recovering to 92% in February 2024, the highest network recovery level for the international market segment across the network.

In the 2024 financial year, ACSA added 37 new routes to its network, but also saw eight routes being discontinued. The routes added were:

ACSA is also a founding member of several route development structures that, in collaboration local government, facilitate wider access to air travel and transportation. Despite restrictions, most of these structures remained active throughout the Covid-19 pandemic and continue to remain active.

While activity has been concentrated around the country’s three largest airports during the past four periods, enabling connectivity between smaller communities and large cities remains a top priority.

We therefore continue to work closely with local government to explore various mechanisms that will enable smaller communities to plug into the national air transport network.

During the reporting period, the following structures were active:

Airport management and advisory services

Our primary focus in this area of the business is on providing comprehensive management and advisory services to local airports. We recognise the significance of these airports as vital transportation hubs within their respective regions. By offering specialised expertise and industry knowledge, we aim to assist them in navigating complex challenges, optimising their operations and achieving long-term success.

During the reporting period, we expanded our local footprint by entering into a five-year airport management service level agreement with Umhlathuze Municipality for the management of Richard’s Bay Airport. We also entered into a five-year agreement with the City of Tshwane to provide technical and advisory services for Wonderboom National Airport, North of Pretoria.

In addition, we concluded a memorandum of understanding with Gateway Airports Authority Limited (GAAL) for the management of Polokwane International Airport and potentially for other airports in Limpopo. The nature of the partnership with GAAL is to provide technical and advisory services related to planning, airport management and operations to ensure compliance with Civil Aviation regulations and standards. The partnership is also consistent with ACSA’s developmental mandate and the need to foster an integrated national air transport network to facilitate the seamless flow of people and goods across and beyond South Africa’s borders.

Finally, a memorandum of understanding regarding the management of Mkhuze Airport in KwaZulu-Natal is currently under consideration with the UMhlosinga Development Agency.

In the international arena, we concluded a five-year Airport Commercial Master Services Agreement with the Democratic Republic of Congo’s (DRC’s) air transportation authority, Regie des Voies Aeriennes (RVA), which provides for the development of airports across the DRC. RVA oversees a network of 54 airports in the country and nine of these have been identified as priorities for intervention and development. This includes the development of key airport master plans, runways and access roads planning, terminal buildings development, airport commercial interventions, and the training of personnel in various technical areas.

The initial implementation phase, which involved site assessments for Kinshasa N’djili International Airport in Ndolo and Lubumbashi International Airport were concluded in the second quarter of the year. In the final quarter, we presented a due diligence report and intervention proposals to RVA for discussion and subsequent negotiations with ACSA. The implementation of Phase One commenced in the first quarter of the 2025 financial year.

ACSA Training Academy

In order to capitalise on the opportunities available to diversify our revenue streams, we are in the process of commercialising our training academy and transforming it into an industry-wide African regional aviation training centre of excellence. The centre is a stand-alone entity that leverages our human capital, institutional knowledge and experience to offer tailored programmes for both internal and external clients.

Outlook

Uncertainties within both the global and national environments continue to pose a risk to our growth objectives, but we expect to be able to expand our route network significantly in the 2025 financial year.

Uncertainty relating to South African aviation policy nevertheless continues to erode confidence among airlines, and constraints on bilateral air-service agreements will continue to limit growth potential.

We will nevertheless continue to pursue our innovation and growth objectives and to implement critical capacity expansion projects. We will simultaneously focus our ‘Grow Footprint’ objective on leveraging capacity that will support the diversification of revenue streams. We will also continue to focus on planning for the implementation of our Aerotropolis Strategy and for expansion into potentially high-growth markets in Africa.

Our ultimate goal is to establish connections to every major city in Africa, thereby diversifying our international source market portfolio and supporting Africa’s broader regional integration objectives in line with the Abuja Treaty of 1991.