Develop airports 
Overview
Developing world-class airport infrastructure that is designed to meet the needs of our customers and aligned with industry requirements supports our vision of being a world-leading airport business. The severe financial impact of the COVID-19 pandemic has, however, meant that we have had to re-look some of our development timelines.
Prior to the COVID-19 pandemic, when many of our airports were operating at or near design capacity during peak hours, we were planning large capital investment programmes to expand and/or eliminate bottlenecks at some airports in the network. The feasibility studies for many of these projects had been completed and we were in the process of making awards for design and development.
The projects that are currently in implementation align to our Recover and Sustain Strategy and the objectives set out in our Growth Strategy. Priority has been given to projects that:
- protect the airport’s license to operate;
- provide a safe, efficient, and attractive environment for passengers and other airport users;
- mitigate risk;
- ensure that facilities remain compliant with regulations;
- allow for equipment to be replaced when we have been unable to secure the operating baseline through overhauls and/or intensified maintenance; and
- were in implementation prior to the COVID-19 pandemic and where the value of the infrastructure on completion will far exceed the cancellation costs.
Larger infrastructure projects that have been on hold since 2020 and are now being reviewed include:
- the terminal expansion and modification projects at Cape Town International Airport, Chief Dawid Stuurman International Airport in Gqeberha (previously Port Elizabeth) and King Phalo Airport in East London;
- the refurbishment of the cargo precinct at O.R. Tambo International Airports;
- the refurbishment of the runways at Bram Fischer International Airport in Bloemfontein and Kimberley Airport; and
- the planning for a new mid-field cargo terminal at O.R. Tambo.
We remain committed to improving and expanding the infrastructure in our network in order to unlock both the commercial and development potential inherent in our airports and to grow our footprint, especially in Africa. We anticipate that this will deliver significant socio-economic benefits at both national and regional level.
Enterprise project management
Our capital investment programme is managed through our Enterprise Project Management Office (EPMO), which enables us to evaluate and respond to business and financial challenges in a structured and centralised way. Over the past three periods, ACSA has reprioritised its capital expenditure plan to take into account the changes that have taken place in the operating environment since 2020.
Our five-year capital budget, which allows for approximately 1 500 projects, is expected to be R21.7 billion as we reinstate deferred projects. The portfolio prioritises replacement, refurbishment, and safety-critical projects over capacity creation, with capital allocation targets being set at enterprise level.
The EPMO has developed and implemented a standardised EPM environment and a set of 32 project management frameworks, which include roles and functions that support the lifecycle management methodology. These align all project management office functions and gate controls across IT, maintenance and engineering, security, major infrastructure, and fleet. As a result, our project management maturity has improved significantly, resulting in greater efficiency and better cost containment. An online EPM training solution is being developed to provide for the continuous maintenance and improvement of project management skills and capacity.
Infrastructure planning
Master plans that are closely aligned to our overall business strategy are crafted for each airport and duly coordinated with municipal spatial development frameworks and plans. These address the integration of airport development into the local authority’s broader spatial development plans and more needs-specific plans such as integrated transport plans.
An airport master plan is an expression of a vision for the ultimate development of the airport and a road map for efficiently meeting aviation demand in the foreseeable future, while still preserving the flexibility necessary to respond to changing industry conditions. Airport master plans also consider infrastructure enablement such as bulk services, access routes and environmental conditions.
At ACSA, we have adopted an integrated approach to airport planning and development, which is expressed in our Aerotropolis and Airport Cities Strategy. An aerotropolis or airport city is an urban area or city centred around an airport, with the airport fulfilling multiple functions.
In terms of this strategy, our aim is to define specific critical success factors for each airport, to support these by creating enabling conditions and to identify appropriate developments, projects, and initiatives for that airport. The master plan for each airport identifies the kind of infrastructure needed at that location, defines the precincts within the airport in which that infrastructure is needed, allows for the development of detailed development plans for areas such as the terminal precinct and the cargo precinct, and provides for the development and implementation of individual projects, such as terminal buildings, parkades or aircraft stands.
The aim of the Aerotropolis Strategy is to promote economic growth and development for the benefit of the Group, the regions in which the airports operate and the country as a whole. On a macroeconomic level, it is aligned to the goals of the National Development Plan, and, from a business perspective, it is intended to improve our competitiveness, maximise revenues, improve the accessibility of our airports and promote connectivity between airports and regional hubs.
Based on extensive research of the aerotropolis concept and its application around the world, as well as a review of South African policies and development frameworks, our strategy can be described as follows:
The execution of this strategy depends on several critical success factors, namely strategic partnerships in both the public and private sectors, suitable investment opportunities, the availability of adequate capital budget, an integrated approach to project planning and implementation, and a responsive regulatory framework.
To date, aerotropolis master plans have been concluded for the City of Ekurhuleni, where O.R. Tambo International is located, and the City of Durban, where King Shaka International is located. In addition, an aerotropolis feasibility study has been conducted for the City of Cape Town and the outcomes of this are being used to inform our strategy for that airport and the Western Cape regional hub.
Innovation
Innovation at all levels is essential to the implementation and success of our Aerotropolis and Airport Cities Strategy as well as our regional integration efforts. We have therefore put a revised Innovation Strategy into place that intends to harness the power of evolutionary innovation, breakthrough innovation and revolutionary innovation, and which takes into account the need for different types of innovation throughout the business:
Our value proposition for innovation initiatives is based on leveraging our existing knowledge base by implementing best-practice knowledge management systems and finding strategic ways to incorporate new technologies to align with leading digital airport business trends. We evaluate and prioritise innovation initiatives in line with core business objectives such as reducing costs, improving productivity, and providing better customer satisfaction.
We have therefore undertaken a number of initiatives with these objectives in mind. They include a self-service programme that complements the IATA Fast Travel programme and designed to provide passengers with more extensive automated and touchless services. These are delivered online, via our app or on-site at our airports. New integrated technologies, including biometric identification technologies, are also being used to improve airport security and to provide passengers with robust, swift, and smooth processes. All of these innovations are intended to improve the overall user experience and to promote our postpandemic recovery.
In addition, multiple energy-efficiency initiatives are either in place or are being implemented throughout our network. These include active solar farms at four of our airports as well as geothermal, gas-generated, solar, wind and waste-to-power initiatives. A fifth solar farm is currently in development and all of these initiatives not only help to reduce our carbon footprint, but also our dependence on the national grid. In the long-term, we aim to move all of our operations off-grid. We are also aiming to be carbon neutral by 2030 and continue to hold ISO 4001 carbon accreditation from ACI.
Property development
Property development
The property development portfolio aims to monetise land in and around our airports through the development of infrastructure and opportunities that are adjacent and complementary to our core business of running airports. Typical investments include conference facilities, transportation nodes, cargo facilities, office parks and logistics platforms. The portfolio is vitally important to minimising air travel costs as the revenue generated from these developments reduces or, in some cases, even offsets the cost of operating the airport.
As already mentioned, infrastructure projects deferred in 2020
are now being revisited and prioritised, and we have been
incubating projects in the areas of general aviation, aircraft
services and premises and facilities for travellers. In contrast,
projects that were in progress at the time have largely been
completed. These include certain refurbishment projects and
ACSA's new office park at
O.R. Tambo International. The
33 000m2 Aviation Park campus comprises three buildings, the
first of which is used by ACSA while the other two form part of
our rental property portfolio.
A world-class facility, the campus has been granted a four-star rating for sustainable building design by the Green Building Council of South Africa. This relates in large part to the use of energy-efficient infrastructure, which features primary lighting by natural light, occupancy sensors to minimise electricity usage, the use of rain water harvesting and vegetated areas that promote natural thermal inertia. There is also a sophisticated building management system (BMS) in place, which ensures all the sub-systems of the building are working in harmony to achieve the most efficient and sustainable outcomes.
Enterprise Asset Management is tasked with managing ACSA’s infrastructure and assets throughout their lifecycle. This includes responsibility for optimising the return-on-asset levels through safe and relevant engineering practises and technology selection that is suitable for an airport environment. As we recover from the COVID-19 pandemic, Enterprise Asset Management continues to ensure that infrastructure and operations are scaled to passenger traffic at an acceptable cost.
To achieve this, we are guided by our maintenance regime standards for core, key and supporting assets. This ensures the safety of airport operations and compliance with regulatory standards. The following table indicates how our assets and technologies are categorised:
Categorisation of various assets and technologies
| Category | Examples of Assets/Technology classes | |
|---|---|---|
Core Assets(without these assets ACSA will experience business interruptions with the possibility of a downgrade or airport closure due to non-compliance) |
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Key Assets(airport can operate without for 8-48 hrs of asset unavailability) |
|
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Supporting Assets(we are able to sustain business without it, minimal influence on operations, however, rectification is needed to sustain the ACSA brand) |
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The ability to achieve and sustain reduced cost baselines throughout the past three reporting periods was also attributable to:
- Implementing a revised service catalogue for maintenance services. This catalogue bundles like services so that full-time equivalents needed to service a contract are reduced and the contract specifications are informed by the maintenance regimes to be implemented. In other words, we have adopted an output-based service contracting approach. This will remain in place for the foreseeable future.
- Critical review. This is a process of deciding which maintenance activities can be performed by in-house artisans and technical staff (e.g., weekly generator on-load testing and asset inspections). The tooling, training, and development of the staff necessary for this function is ongoing, with the benefit that first-line maintenance department staff now have enhanced technical skills and equipment know-how.
In addition, we have implemented an in-house asset assurance programme to ensure the timely completion of maintenance regimes at quality and regulatory standards. In cases in which quality assurance needs to be performed by a certified inspector (e.g., a lift inspector or a refrigeration technician), this is being done. In the current period, we expect to see an increase in cleaning and maintenance costs as passenger traffic recovers, resulting in longer operating hours at all of our airports. Airport infrastructure and equipment redundancy will also reduce in line with recovery.
Reduced allocations for capital expenditure during the COVID-19 pandemic have naturally also impacted on the asset management function. Capex projects have therefore been prioritised according to safety and risk, recurring and/or single points of failure, end of life, technology obsolesce, and modernisation. This approach is likely to continue over the next two years until the business has fully recovered from the effects of the COVID-19 pandemic.
In order to catch up on capital backlog, we are revisiting our plans to implement a rolling capital programme, which was discussed with the aviation industry in January 2020. This will entail a cyclical renewal of infrastructure and assets using replicable implementation standards and processes. The process will eliminate duplication in engineering design and will accelerate execution as a result of lessons learned from prior projects.
ACSA will also be soliciting specialised services that were deferred during the COVID-19 pandemic. These will be in the areas of bulk services planning, fuel master planning, corrosion engineering, energy performance certification, fuel infrastructure rehabilitation costs for NERSA applications, and infrastructure condition monitoring. They are required in order to comply with regulations and/or the Asset Management Strategy.
Outlook
Although we have observed a gradual, albeit uneven, recovery in our business during the past two reporting periods, however, we anticipate that financing limitations and the evolving operating landscape will persistently influence our capital expenditure programme.
With this in mind, we will continue to prioritise projects that minimise business risk, support sustainability and enable us to be responsive to changing market needs. The limited funding available for capital development will be allocated to business-critical projects.
