Operating expenses

The Group experienced significant cost pressures with respect to security costs, a R158 million increase compared to the prior year across all airports, as a result of regulatory amendments which increased the scope of security services for land-side security. Other security-related scope increases were also introduced due to heightened security measures, additional deployment at access gates and remote sites as well as K9 services.

Additional bad debt to the amount of R93 million has been provided for in terms the new accounting treatment and primarily airline customer non-payment of arrears. Airline customers are placed on the cash-basis when certain levels of arrears are reached.

The Group remains exposed to administrative and regulatory costs which form a significant part of our fixed cost base, e.g. rates and taxes and utilities.

Some major infrastructure development projects reached the investment decision point during the year following the conclusion of the planning and detailed design activities. These phases however resulted in modest capital expenditure during these phases. Capital expenditure still represents mainly a refurbishment and replacement phase.

The Group made no further equity injections into its concessions. A cautionary was issued in February 2019 following an offer for the 10% equity stake in MIAL. The GRU concession reduced its negative impact on profitability by 72% for the period to December 2018, while the exchange rate strengthened further to enhance the Group’s balance sheet.


We repaid R2.3 billion in debt during the year comprising of amortising debt and loans of which the AIR01 bond of R2.0 billion was the most significant. These repayments have now reduced the Group’s debt levels to R6.6 billion with a weighted average cost of debt of 9.13%. Funding sources as at March 2019 were as follows:

Fixed rate debt comprised 75% of total debt as at the end of the financial year compared with 83% as at the end of the prior year.

The Group’s gearing has decreased to 18% on the back of the debt redemptions since 2013. More than R10.5 billion has now been repaid over the past six years.

Gearing ratio

Credit rating

Moody’s affirmed our credit rating on 25 April 2019. The global scale rating remains at Baa3 while the outlook remained stable. The national scale rating was affirmed at with a stable outlook. The Group’s credit rating largely reflects the constraint imposed by the government rating given that Moody’s would not rate the Group higher than the government.

Agency Ratings
Airports Company
South Africa ratings
Rating action Long-term issuer
rating (foreign)
Long-term issuer
rating (domestic)
Moody’s Affirmed Baa3 Stable

Outlook and focus areas

We have emphasised in the past that we will continue to apply a conservative financial management approach to mitigate against the unpredictability of regulatory decisions, especially insofar as new infrastructure investments are concerned.

Current levels of returns achieved remain a reflection point when new investments are being considered. A reasonable level of certainty of future cash flows associated with those investments is required from the economic regulatory context, which in turn would lead to the improvement of returns over the long term. It therefore remains a focus of our strategy to influence the improvement in regulatory decision making through stakeholder engagement with airlines associations, the Economic Regulating Committee and government departments at various levels. This becomes increasingly important as we commence the envisaged new infrastructure investment programme. The current economic regulatory approach requirement to fund new infrastructure investments through debt funding only until operationalisation or commissioning, will continue to require the Group to diversify funding sources to ensure financing in a cost-effective manner.

We continue to enhance ease of compliance to our sourcing policies and procedures to ensure a continuous reduction of irregular expenditure reported, with the emphasis on zero tolerance to non-conformances. Our investigation capability in line with National Treasury requirements has also been improved to treat irregular expenditure appropriately.

We will continue to monitor the economic climate and the impact thereof on operational volumes and ultimately revenues to not miss an opportunity to introduce efficiencies.

We are also very excited about the offer for our 10% stake in MIAL. This certainly provides evidence of the potential success and contribution to returns that such investments could have based on the technical contribution by the Group to concessions over the long-term.