THE POST-COVID-19 LANDSCAPE

The lingering impact on air travel

As we reported in our FY2020/21 and FY2021/22 Integrated Annual Reports, the aviation industry was one of the hardest hit by the pandemic, which triggered a precipitous and complete cessation of air travel in 2020. While there was a slow recovery during the 2020/21 financial year, it was only when lockdown restrictions at home and abroad were relaxed just prior to the festive season that this began to pick up pace. By 31 March 2022, passenger throughput had reached 50% of pre-COVID-19 levels.

Certain restrictions nevertheless remained in place until the State of Disaster was lifted on 22 June 2022, creating a more solid platform for the implementation of our Recover and Sustain Strategy.

Recovery was hampered by the liquidation of the Comair Group which operated Kulula and British Airways through a franchise agreement. This includes cessation of Mango airlines operations, a subsidiary of South African Airways. The Comair Group ceased operations on 1 June 2022, and together with Mango led to a contraction of domestic supply of airline seats by over 40%. This necessitated a structural reform of the domestic air travel market, which continues to evolve.

This setback was nevertheless offset by a steady increase in both domestic and international flights throughout the reporting period, with regional capacity being augmented by South African Airways' expansion and other airlines from the African continent. Cape Town International, in particular, benefited from the increase in international travel during the period, with airlines such as Air Belgium, Condor, United Airlines, Qatar, Emirates and South African Airways contributing greatly to the recovery of the international market segment. By 31 March 2023, the network as a whole had reached 76% of its pre-pandemic throughput.

ACSA's three flagship airports, O.R. Tambo International, Cape Town International and King Shaka International, collectively account for 85% of all air passenger traffic in South Africa. Of these, O.R. Tambo accounts for 49% of the network's departing passengers but Cape Town International saw the most significant recovery in departing passengers during the course of the year, with passenger throughput increasing by 80% over the prior period. Air traffic movement and passenger throughput is expected to reach pre-pandemic levels during the 2023/24 financial year, a year earlier than projected at the start of the 2022/23 financial year.

This is partly because the ACSA network of airports remains one of the world's largest network of airports under a single authority, with O.R. Tambo International in Johannesburg being the only mega hub on the African continent. As air travel slowly returns to normal, the local aviation industry has unique opportunities to develop new routes and expand into new markets, all of which will support the Group's growth strategy.

A full analysis of passenger traffic trends and statistics during the reporting period is given in the Our Operating Environment section of this report.

The health and safety of our stakeholders

As in the previous period, ACSA adhered to all of the regulations for the management of the COVID-19 pandemic as issued by the South African Civil Aviation Authority (SACAA) throughout the first half of the reporting period.

Our first priority, as always, is to protect the health and safety of our staff, passengers, suppliers, and the other stakeholders working in our airports. This compelled us to adapt within the context of an uncertain and constantly changing operating environment.

We continued to implement rigorous health and safety protocols at all of our airports in order to detect, manage and prevent the spread of the virus. This was done within the framework of the pandemic management processes and procedures we had put into place in 2020 in compliance with all South African and international regulations and protocols. In addition, as ACSA is a registered member of the Airport Council International (ACI) Airport Health Accreditation Programme, we work closely with all of our airport stakeholders to ensure that they comply with the full range of our health and safety requirements.

Recovering and sustaining our business

As soon as the State of Disaster was declared in 2020, we undertook a full review of our Group strategy and business model in order to manage the impact of the pandemic, define our path towards recovery and secure value creation in the short-, medium- and long-term. This, in turn, led to the development of our supplementary Recover and Sustain Strategy, which was supported by a revised Financial Plan. These allowed for measures such as increasing our short-term banking facilities, stringently managing working capital, and reducing both operational and capital expenditure.

Our strategic pillars, which define our core focus on running airports, developing airports, and growing our footprint, nevertheless continued to define and guide our business throughout the pandemic, as they still do. They have remained securely in place and continue to be aligned to global best practice.

During the FY2019/20 reporting period, we went on to develop a Revised Governance Framework and Operating Model, a Capability Model, a new People and Culture Strategy and a new organisational structure, engaging with relevant stakeholders throughout the process. The implementation of these strategies, models and structures enabled us to achieve a solid recovery position by the end of the FY2022/23 reporting period and we are now able to look forward not only to full recovery but to resuming the implementation of our Growth Strategy.

Our business has shown remarkable resilience over the past three periods in the face of a once-in-a-lifetime sustainability challenge. Now, as the air travel and cargo transportation markets recover from the compounded impact of the COVID-19 pandemic and other high-impact external events, we remain as committed as ever to our strategic objectives and our role as a driver of transformation and socio-economic development.

Stakeholder engagement

ACSA Group operates within a dynamic ecosystem, where all our stakeholders play an integral role in shaping our business and operations. The aviation industry faced its most significant disruption during the pandemic, leading to the partial or complete collapse of numerous aviation-related businesses and markets. Throughout the past three reporting periods, we have demonstrated unwavering support for our stakeholders by empathising with the challenges they encountered. Through constructive dialogue, we reached agreements that showcased our commitment to their well-being.

In return, our stakeholders actively stood by us as we evaluated and adjusted our strategy and operating model in response to the crises. This collaborative effort resulted in a highly positive evolution of our partnerships and a reinvigoration of these essential relationships. Together, we faced and navigated through various significant challenges, strengthening our bond as we continue to move forward.