Arriving at a new airport funding model

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Client Department of Transport (SADoT), South Africa
Dates 2012
Service(s)Regulation & Competition, Strategy & Finance

CEPA advised the South African Department of Transport on the appropriate funding model for the Airports Company of South Africa (ACSA) and Air Traffic and Navigation Services (ATNS).

It was considered that the existing funding model and its application had led to a less than satisfactory outcome. In particular its inability to provide stable, predictable tariffs in the context of significant capital expenditure had contributed to a fraught relationship between major stakeholders which threatened to act as an obstacle to future investment in the sector.

As part of the mandate, we considered the following issues in relation to advising on the funding model:

  • ensuring that the companies are able to meet their financial obligations without unduly stressing the paying airlines and public with tariff hikes that are unpalatable;
  • review of the various funding options and those that may be best suited for the South African environment and ambitions;
  • treatment of how costs should be recovered in cases where ACSA and/or ATNS provide infrastructure in excess of requirements of the infrastructure users and when cost overruns occur;
  • the global trend in airport infrastructure development and funding;
  • arrange and coordinate interaction with Economic Regulators that have similar challenges and possibly have some options that may be considered for this process;
  • incentives for the regulated entities to provide future infrastructure.