ACSA rejects suggestions of sanctions busting with new fuel arrangement
24 February 2023
Airports Company South Africa (ACSA) would like to respond to several media reports that recently suggested that the company is sanction busting by changing its Fuel arrangements.
ACSA vehemently denies that its plans to institute operational changes in terms of aircraft refuelling as an attempt to bypass sanctions imposed by Western governments on Russian aircraft since the outbreak of hostilities between Russia and Ukraine over a year ago. The company also rejects any suggestion that the move is a direct response to two incidents last year where oil companies refused to refuel Russian aircraft at O.R Tambo International Airport and Cape Town International Airport.
The facts: ACSA’s plan to separate jet fuel supplying companies from the refuellers and through-putters at its airports, by appointing its own independent refuelling and through-putting operator, dates back to 2020, long before the outbreak of hostilities between Russia and Ukraine, when the Board of the company started deliberating on the issue and formulating the Recover and Sustain Strategy, an integral part of which was the first Jet Fuel Strategy approved by the ACSA Board in June 2021 before the Russian aircraft in question needed refilling at our airports. Subsequently, the Jet Fuel Strategy was integrated into ACSA’s Growth Strategy approved by its Board in September 2021. Hence, any link between the ACSA’s Jet Fuel Strategy and the suggestions of “sanctions busting” is factually incorrect.
Current arrangement for Supply of Jet Fuel
Jet fuel suppliers currently lease airport fuel storage and hydrant facilities from ACSA, while using their own equipment and vehicles to transport and pump fuel into planes. Under the current agreement with ACSA, oil companies can manage the fuel facilities and operations directly.
Under the current Jet Fuel arrangement, the supply of aviation fuel is not handled by ACSA. The company issues licences to all major oil companies so they can supply jet fuel to refuel aircraft on their platforms. Aside from major fuel suppliers, ACSA has issued licences to several local Black economically empowered fuel suppliers as part of its efforts to drive transformation in the local industry.
It was the Oil Majors that refused to refuel Russian Aircrafts at OR Tambo International Airport and Cape Town International Airport citing sanctions of their headquarters in Europe. As a result the aircraft were not refuelled at ACSA Airports. It has been stated they were refuelled at Non – ACSA Airport. Therefore ACSA did not Sanction Bust but instead the Oil majors imposed sanctions on Russian aircraft in South Africa.
Protecting the growth of the Aviation industry by securing the supply of jet fuel at competitive processing costs
As a state-owned company whose main stakeholder is the South African government, it has other shareholders, including the Public Investment Corporation (PIC), and several private empowerment investors. ACSA is a Schedule 2 Major Public Entity in terms of the Public Finance Management Act (PFMA) that operates within the ambit of the Companies Act.
As such, ACSA is obligated to operate as a viable and profitable concern, maximising profits for its various shareholders. The plan to institute operational changes in terms of aircraft
refuelling is part of the broader ACSA Growth Strategy, which focuses on providing greater control of its value chain and diversifying revenue streams in order to generate more value for its shareholders. ACSA, as a response to the COVID-19 pandemic, designed and executed a Recover and Sustain Strategy. Some of the elements of the strategy entailed: cost reduction; suspending capital projects; monetising assets; a revision of its operating model; and a revised jet fuel infrastructure operating model.
ACSA had identified these opportunities as far back as 2020, approved in 2021, to be implemented in 2024, (as ACSA must acquire the equipment through procurement and appoint an operator in the case of jet fuel) This strategy is aimed at creating an additional revenue stream by controlling the refuelling process. The role of oil companies in applying this model would only be to supply fuel to ACSA airports. It is envisaged that an independent operator will manage the facilities on ACSA's behalf.
The jet fuel infrastructure operating model was identified for revision because of: Increased dependence on imported jet fuel due to dwindling in-country refining capacity. Our in-country refineries supply +/- 18 000 barrels of jet fuel per day while the annual average consumption is about 40 000 barrels per day
ACSA’s return on investment for fuel infrastructure lags behind the petroleum industry targets. At a company level, ACSA’s return on capital employed (ROCE) matches that of private airport companies, its jet fuel infrastructure does not align to ROCE expectations for the oil and gas industry.
On 2 December 2022, the ACSA Board approved the revised Jet Fuel Strategy that included:
Confirmation of the appointment of an Operator
Optimisation of operations and supply processes, and
ACSA to take ownership of certain parts of the fuel value-chain to fully execute its mandate, including the acquisition of into-plane equipment.
The Board was appraised of the implications of the extension of fuel licences (this was not in the 2021 revision of the operating model) from 2022 to when the new model will be implemented with effect 1 October 2024. This effectively will separate the fuel supply from the operations of the fuel storage facilities and into plane services.
The Regulatory Environment
ACSA has a legal mandate to supply fuel to all aircraft that uses its airports through the Airports Company of South Africa Act, which mandate it fulfils through licence agreements with Jet Fuel Suppliers. The approval for Aircraft to enter South Africa is granted by the National Department of Transport through Bilateral Air Services Agreements (BASA) between two countries and specific Foreign Operators Permit (FOP) granted and founded on South Africa’s Foreign Policy.
ACSA Airports are designated as level 3 coordinated airports. Before leaving its origin-destination an aircraft operator applies for a FOP from the Department of Transport. After approval, the operator submits a slot approval request to Central Airspace Management Unit - Air Traffic & Navigation Services (CAMU – ATNS). ATNS requests ACSA to confirm the availability of bays, airfield and terminal infrastructure.
The slot request is approved when both CAMU, ATNS and ACSA accept the specific date and time for the purpose of landing or take-off. This is the process all aircrafts must follow prior to landing at ACSA airports. All government policies, bilateral air services agreements as well as ICAO rules are followed throughout the process, with ACSA as the 4th step in this value chain.
By the time the aircraft lands at an ACSA or any other South African Airport for that matter, Government approval has already been granted. The Airport authority is obliged by the ICAO international rules to refuel all aircraft that enter the country and its airports. The South African Government does not have sanctions against Russia. If it had, BASA would be suspended and the FOP would not have been granted.
ACSA, as a state-owned entity, whose majority shareholder is the government would like to stress that it complies with the nation's international relations policies, ICAO rules, bilateral air services agreements, aspirations of transformation, sustainable growth and value creation. While providing a world-class secure infrastructure for airlines to transport people and goods, ACSA recognises that it plays a key role in the national development plan; in facilitating economic growth, job creation and accelerating transformation towards inclusive economic participation.
Issued by ACSA, 24 February 2023
