ALEC HOGG: Some interesting news today – Comair, which is the airline that operates the British Airways franchise in South Africa, as well as kulula.com, is interested in buying Durban International Airport. Joint CEO Gidon Novick joins us now. Gidon, good to have you on the programme. This is an interesting move. Could it be something like we see in Johannesburg, where you’ve got this massive investment that Acsa is making into OR Tambo Airport – and it seems like the guys in the Lanseria airport are now trying to provide some kind of alternative? Is that what we might be seeing in Durban with the new King Shaka – perhaps you guys taking over Durban International?
GIDON NOVICK: Ja, we are hoping so, Alec. Lanseria models very well as an alternative airport in Johannesburg, and if you look internationally in many cases of airlines they are using alternative airports. Ryanair, probably the most successful airline around today, has really built its model around secondary airports. And that’s really grown the number of people travelling and expanded the market, and also grown a lot of economies around these secondary airports.
ALEC HOGG: It’s innovative, but it looks, just considering your balance sheet, market cap of R900m, the balance sheet you’ve got – it looks a little out of reach, given that the value of the property, according to Acsa, is somewhere around R3bn.
GIDON NOVICK: Ja, look, the value is ultimately what somebody is prepared to pay, and it is a stretch. It probably would be a stretch for us but, if you consider that we are going to be investing in eight new aircraft at more than R300m apiece, in those terms it’s not too scary an investment.
ALEC HOGG: It’s aggressive, though, if you are going to have eight aircraft and a new airport. You’ll certainly be making your bankers happy.
ALEC HOGG: We’ll do it with partners, particularly an airport operator that we will bring on board in terms of not only an investment partner but also in terms of somebody that can operate the airport. And then we’d obviously be looking for finance as well, but there’s a long way to go. The first step is just for government to give us some indication of the process. We think that Acsa will not be too happy about it and will probably resist the process.
ALEC HOGG: Why?
GIDON NOVICK: Well, basically there’s been a massive investment that they have made in the new airport, La Mercy, King Shaka, up in the north, and they’ll want to recover as much as they can on this investment. So that’s really the challenge – to try and get around that and really convince the stakeholders of the benefits of having an airport to the south of the city, the benefits to that area. There’s a lot of business activity to the south of the city, and obviously a lot of people that live in that area.
ALEC HOGG: Gidon, what happens in a case like this? Is Acsa forced to put it up for auction, or can it decide who it wants to sell to?
GIDON NOVICK: Alec, to be completely honest, we don’t know. It’s quite a mystery and it’s almost going to be quite an interesting experience to figure out what actually happens.
ALEC HOGG: Do you need licences to operate and airport?
GIDON NOVICK: Obviously it’s got to be a licensed airport, which it is, and that’s what makes it so attractive – it’s an existing airport. It works, it’s licensed, it operates, it’s got the infrastructure. There’s very little money that needs to be put into the airport once it has been acquired.
ALEC HOGG: So the only people who aren’t going to be happy are Acsa because, if you start flying to Durban International, and if you perhaps offer better rates by going through Durban International, that will affect their whole big investment at King Shaka.
GIDON NOVICK: No, it will. That’s the bottom line. But I think the flipside of it is that on our sums, if we are forced to move to La Mercy, the travelling market between Johannesburg and Durban or out of Durban will drop substantially, based firstly on the higher costs that are planned at that airport, and secondly on the geographic location. The airport’s far out if you live anywhere in the city or south of the city, and that really eliminates a very big chunk of the market out of the potential customers who could use the airport.
ALEC HOGG: What’s the role here of Bidvest? I ask it because it’s a big shareholder of yours, but it’s also a close partner of Acsa.
GIDON NOVICK: Ja, it’s a tricky one. Bidvest are a big shareholder. They give us a lot of leeway in terms of running the business, they don’t get directly involved. But at the same time they are a big partner of ours. So it’s also important to note that Bidvest are a service provider at the airport, and there’s a lot of potential for them to provide services or continue providing services at that airport.
ALEC HOGG: What’s your strategy to get this through? As we said earlier, Acsa aren’t going to be too keen. Who is going to make a decision like this or push it through to your benefit?
GIDON NOVICK: Alec, I don’t know.
ALEC HOGG: So you’re just buying a bit of a kite at the moment?
GIDON NOVICK: We’ve got to unpack it, we’ve sent in a one-page letter, we’ve got to do a lot more work ourselves in terms of building the case. The response that we got from government is: “We received your letter and we are having a look at it.” I don’t anticipate there’s going to be a very fast response. We are going to see how it goes.
ALEC HOGG: Best of luck in being a disrupter yet again. We like following these disruptive companies – Discovery is an example, Comair certainly has been over the years with kulula.com, and maybe they are going to disrupt just a little bit more to make air travel even more affordable in South Africa.
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