Passenger tax is going to double over the next five years, and that’s not even to mention the landing fees, which will also double — a bill the consumer will have to foot, says kulula.com’s Erik Venter. Something’s fishy, he says...

Bruce Whitfield:
More now on the Airports Company and the tariffs it is passing on to its customers through what they call the passenger service charges. Erik Venter first now, he is the joint chief executive of Comair which operates kulula.com and Erik, less than 10 percent average increase you must be delighted.

Erik Venter:
I wish it was that good yes Bruce. The actual increase is about 11.4 percent average over five years which we have actually managed to fight down from the original proposal of around 18 percent.

Bruce Whitfield:
So in this case I mean certainly the airlines have had a say and have been able to reduce the burden to some degree and it looks like at least the regulator has done his job around this issue.

Erik Venter:
Yes he certainly assisted. The one thing we must keep in mind is that the regulator is quite severely underfinanced and therefore the kind of investigation that he can get involved in isn't very in-depth so while we do agree that there is a volume growth in the market in terms of passengers and therefore there is a need for more facilities we have a huge concern still that the types of facilities are just a little bit overboard.

It is sort of like getting your local supermarket to build a marble entrance hall and then expecting your customers to pay for it.

Bruce Whitfield:
My point to the financial director, to Brookes Mparutsa, was we are building a Rolls-Royce airport for Toyota Corolla going public.

Erik Venter:
Pretty much, air travel isn't a great luxury anymore these days and to have this huge luxury palace to which you enter your aircraft is probably a little bit much. The other thing to keep in mind is that Acsa’s profit is actually based on a formula which gives them a percentage of assets employed on their balance sheet so they have got a huge incentive obviously to spend as much as possible because that determines their profit and our concern is the likes of the King Shaka Airport which in fact none of the airlines actually see as a requirement at all.

It is about 60 km north of the existing airport. It started up with a budget of around R2.5-billion and within a year it has gone to R7-billion which is a little suspicious.

Bruce Whitfield:
What do you mean by it is a little suspicious?

Erik Venter:
You know Acsa tendered for the construction of the airport and originally we were looking at about R2.5-billion expenditure to produce this airport.

Bruce Whitfield:
And that is why Acsa got the contract.

Erik Venter:
Well I'm not sure exactly of all the details in between. I don't know what numbers they eventually went in with or where it started off at but when we were initially consulted on the project we were told we were looking at about R2.5-billion and a year later it is now sitting on R7-billion which is quite a large increase within a year.

I could have imagined maybe construction cost inflation and maybe a few add-ons here and there but to almost triple the cost of the airport is quite a lot. The other consideration is that we had a consultant out from IATA which is the International Air Traffic Association who said that the existing airport with about R1-billion expenditure would last comfortably for another 10 years.

So you know one has got to question some of these decisions and considering as I mentioned before that the profit of Acsa is actually determined by the value of the assets on their balance sheet they have obviously got a huge incentive to actually spend as much as possible.

Bruce Whitfield:
Now what does this mean for me as somebody who might travel on a kulula.com flight between Johannesburg and Cape Town? How much more am I going to have to pay on that?

Erik Venter:
At the moment the Acsa component of the passenger tax is about R30 and as Brookes mentioned this year it is going up by 9.8 but the average over the five years is 11.4 percent which means we are going to close to double that tax over a five-year period but keep in mind that the other half of the financing of the airport comes from the airlines so the landing fees are also going to go up by double.

So you are going to get a double whammy on both your landing fees which have to be passed through to you, the customer and the actual passenger tax that the customer pays directly.

Bruce Whitfield:
Erik Venter thanks very much indeed, joined chief executive of Comair.