Comair: We have been profitable for 72 years

Aviation
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Despite a challenging environment, Comair [JSE:COM] has maintained an unbroken 72 years of profitability.

The group operates under its low-cost airline brand, kulula.com, as well as under the British Airways livery, as part of a license agreement.

Comair’s ongoing diversification into non-airline business continues to offset the narrow margins and volatility of commercial aviation, it said on Tuesday when it announced its results for the first half of the financial year.

Its non-airline businesses continued to perform well, with an overall contribution to net profit before taxation of 27% and sustained prospects for further growth, it announced.

These operations include an aviation training academy with a global customer base, its SLOW lounge business, its Food Directions catering unit, its travel business and its technology solutions for tourism, travel and aviation.

Comair had a record first-half increase of 12% in revenue despite negative gross domestic product (GDP) growth for two consecutive quarters.

This revenue growth was offset, however, by sharply increased fuel prices and the need for short-term aircraft leases.

Consequently, earnings per share (EPS) and headline earnings per share (HEPS) declined by 38% to 27.2 cents per share respectively compared to the prior period.

The elevated fuel price also contributed to the increase in airline operating costs of 17%.

Agreement with SAA

Airline passenger revenue increased by 11% and average seat occupancy increased on both brands but remains below global industry standards.

Comair will take delivery of two Boeing 737 MAX 8 aircraft in February and March, the first of eight MAX 8s as part of its ongoing fleet renewal strategy.

In its view, the efficiency of the new aircraft will help reduce exposure to fuel-price volatility and enhance potential revenue per flight, while improving the customer experience.

Last week Comair advised shareholders that it has entered into a full and final settlement agreement with South African Airways (SAA) regarding a case relating to SAA’s incentive schemes for travel agents from 14 years ago.

Comair had initiated the case against SAA because it was of the view that these incentive schemes for travel agencies were anti-competitive in nature.

In terms of the settlement agreement, SAA will pay Comair a total settlement amount of R1.1bn plus interest.

Comair CEO Erik Venter told Fin24 on Tuesday that SAA has undertaken to pay the amount over the next 3.5 years.

Venter further said the slow pace of economic growth in SA remained a big concern as far as the impact especially on domestic travel in the low-cost airline sector.

“There has been capacity growth in the low-cost airline sector in SA, but without economic growth. Low-cost airlines in SA still operate below 85% occupancy,” he said.

“In the meantime, we focus on our other non-airline businesses.”

As for labour issues Comair faced at the end of last year and beginning of this year, Venter said wage settlements have been reached and all parties are working with the Commission for Conciliation, Mediation and Arbitration (CCMA) to resolve a last remaining issue.

“In the short term, we need to make sure our maintenance facility is well established and that all processes associated with that works well,” said Venter.

“And our long-term focus will be on growing our non-airline businesses, so we can still achieve profit despite slow economic growth in SA.”

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