The COVID-19 pandemic has changed the way in which the world lives, works and plays. For Airports Company South Africa, it precipitated the greatest business challenge in our history and we continue to have to manage its impact.
MESSAGE FROM THE CHAIRMAN OF THE BOARD
Adv Sandile Nogxina
Chairman of the Board
The COVID-19 pandemic has changed the way in which the world lives, works and plays. For Airports Company South Africa, it precipitated the greatest business challenge in our history and we continue to have to manage its impact.
Various levels of lockdown around the world continued to disrupt air travel and transportation dramatically throughout the reporting period and, as a result, the aviation industry as a whole continued to be one of the hardest hit by the pandemic. Recovery was slow and disrupted throughout the year, with restrictions being eased at times only to be upscaled again as new variants emerged. s I said in my message for the previous period, we have a long road to recovery ahead of us, however, as a business, we have also proven to be adaptable and resilient to unexpected shocks like these. This places us in a strong position to remain sustainable in the short-term and to develop and grow in the medium- and long-term.
I am confident that we have robust fundamentals in place. Leadership stability, solid strategic pillars, a sound recovery plan, adaptable operations procedures, a well-managed financial base and strong relationships with our stakeholders give us the solid foundation we need to respond to changing conditions as well as to plan for the future.
The revised Strategy, Financial Plan and Corporate Plan put into place in immediate response to the pandemic continue to provide the framework within which we are currently managing our business.
Notwithstanding the challenges we have faced and continue to face, we strive to be not only an ethical and sustainable business, but one that contributes in meaningful ways to the economic transformation of the country. As the largest network of airports under a single operating authority in the world, we recognise our role as a change agent and take this role with seriousness.
LEADERSHIP STABILITY
In 2020, we welcomed a new CEO and CFO on board and they have given us the leadership stability we needed as a business to weather the COVID-19 storm and the other major events we have had to face over the past two years. They have responded to the impact of the pandemic by defining clear priorities and by making swift and necessary decisions in time of great uncertainty.
The CEO has led the review of our strategy and the implementation of our response to the pandemic without losing focus on strategic fundamentals, our future vision and our role in society. With the support of the Board, the CEO and her management team have created a culture of agility and decisive action that has not only enabled us to chart a steady course over the past two periods, but which has positioned us to develop into an even stronger, more diversified business in the years to come.
A STRATEGIC APPROACH
Our Recover and Sustain Strategy, which is the framework we are using to manage the business through the pandemic and its immediate aftermath, was put into
place in the previous period after rigorous engagement with our investors and lenders, Moody’s, the Regulating Committee, our shareholders, the Portfolio Committee on Transport and our employees. All of these stakeholders have been unfailing in their support of our efforts and that has enabled us to navigate through the unprecedented challenges we have had to face successfully.
In line with the review of our Investment Strategy, which was undertaken at the same time we reviewed our corporate strategy and financial plan, we continue to dispose of our offshore investments and monetise non-core assets.
The sale of our share in Mumbai International Airport Private Limited (MIAL) was concluded in February 2021 and the sale of our stake of the Guarulhos International Airport is currently in progress.
The decision to dispose of the MIAL asset has given us the liquidity we have needed to continue managing the business at a time when there was little or, in some periods, no revenue.
Our liquidity has been further supported by the issuing of "A" preference shares valued at R2.3 billion to the majority shareholder, the Department of Transport, in March 2021. This transaction also gave a clear sign of government’s confidence in and support for our business.
While our core strategies and plans had to be reviewed and adjusted in response to the pandemic, our approach has remained centred on our three strategic pillars: Run Airports, Develop Airports and Grow Footprint. In the short-term, we are continuing to focus on our core business of running airports in order to secure financial and operational sustainability. Within the framework of existing infrastructure and capabilities, we are also focusing on diversifying our revenue streams to offset the impact the pandemic has had on aeronautical revenue.
We have approved a Growth Strategy and strategic initiatives in support of the Growth Strategy. As markets open up, we are focused on developing our footprint on the African continent, where we have identified significant growth potential.
We also continue to focus on development through digitisation, remaining ever-responsive to advancements in technology and the benefits they can offer to both passengers and other users of the facilities at our airports. Our intent here is to be in a strong position to identify and counteract the growing number of cyber-attacks that have become evident worldwide since the start of the pandemic, driven partly by the widespread move to remote and hybrid work.
In doing this, we remain mindful of our responsibilities and role as a catalyst for the recovery in air passenger travel, the growth in air cargo volumes, economic recovery and development of our country. We continue to work with our strategic partners, stakeholders and government agencies to realise these objectives. Our primary objective at present is to restore our financial position to relative stability and sustainability by the end of the 2024 financial year. Our approach to innovation, growth and development remains aligned to the United Nations Sustainable Development Goals.
For further information on our strategy, please see the CEO’s Message.
COLLABORATING WITH OUR STAKEHOLDERS
A positive outcome of the pandemic has been the ongoing cementing and strengthening of relationships with our stakeholders. Building on strong existing relationships, our engagement with stakeholders and the implementation of stakeholder plans has created considerable value and will continue to do so into the future. We remain committed to building win-win partnerships with all our stakeholders in a way that will benefit both our country’s aviation sector and the economy.
TRANSFORMATION
We remain deeply committed to transformation at business level and throughout society. Our focus on sustainability and growth will always be supported by a parallel focus on economic transformation because we believe that our success as a business depends on the degree to which we deliver value in society. We therefore continue to play a critical role in the transformation of the aviation and supporting industries by maximising commercial opportunities in the short- and medium-term and by planning to make capital investments in long-term growth and stability.
We also continue on a purposeful, values-driven journey to enhance procurement from black-owned businesses, to facilitate their development, and to support new entrants into our precincts. While uncontracted capital development projects remain on hold due to the impact of the pandemic, we intend to resume these projects in line with our revised Corporate Plan. Flagship projects in commercial operations remain in progress.
GOVERNANCE
Our governance processes have proven their strength and agility over the past two periods, not least in the seamless transition to holding meetings virtually.
Apart from the regular schedule of Board and Board Committee meetings, special meetings were held throughout the reporting period to deal with evolving challenges, including threats to business continuity, compliance with Covid-19 regulations, the implementation of cost-saving measures, liquidity management and the assessment of developing market risks such as the impact of the war in Ukraine on jet fuel prices and therefore on air ticket prices.
Our executive and management teams continue to operate in an interconnected and interdisciplinary way that helps us to identify and mitigate risks timeously, operate effectively and plan for future growth.
LOOKING AHEAD
The global economic outlook remains uncertain due to the impact of the pandemic, the possibility that new variants could reduce the effectiveness ofexisting vaccines, and the effects of the war in Ukraine, among other factors. Together with disruptive global shifts in living, working and travelling patterns as well as operational constraints in key markets in Europe, these continue to affect the recovery in global air traffic volumes. In response to this, we are focusing on diversifying our revenue streams and on re-defining the role of airports within the broader city or metropolitan environment. Planning for the implementation of our Aerotropolis Strategy is continuing within the framework of current financial constraints and capital projects related to this strategy will be commissioned as revenue allows.
At home, consumers remain under considerable pressure, with unemployment levels still at historic highs and with the cost of living rising rapidly, largely due to fuel price increases and hikes in electricity tariffs.
While domestic and regional traffic volumes continue to recover at a faster pace than international traffic volumes, these factors will undoubtedly reduce disposable income which, in turn, will undermine domestic recovery.
Astute management of risk, expenditure and operational capability to meet changing demands will continue to be fundamental to our recovery and sustainability as a business in the short- and medium-term.
APPRECIATION
As in the previous period, many lives were lost and affected by the pandemic during the 2022 financial year. On behalf of the Board, I would like to extend my deepest condolences to the employees and stakeholders who lost loved ones during this period. Special thanks are also due to our employees, who faced many challenges over the past year, marked as it was by so much uncertainty. Your commitment to our purpose and values as an organisation is recognised and appreciated. Above all, helping to make the airport environment safe for passengers and other users has been essential to enabling us to recover in the way that we have.
I would also like to thank the CEO, CFO and the executive management for their wisdom and insight during the period, as well as for keeping a steady hand on the business throughout such a turbulent time. Your astute and incisive leadership and considered decision-making has been critical to maintaining our sustainability.
Finally, thanks are due to our shareholders, investors, business partners and suppliers for your unwavering support at such a difficult time. As a business, we look forward to sustained recovery and a return to pre-COVID-19 operating and financial levels over the next two years.
Adv Sandile Nogxina
Board Chairman