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Comair share price up on improved results

Crucial licensing review before court next month.
Erik Venter, Comair CEO

The share price of airline group Comair hit the R5.00 mark on Tuesday afternoon, after an increase of 4.17% on the back of much improved interim results for the six months ended December 31.

The group reported R199 million net profits, up from R83 million in the first half of the previous financial year and off a 6% increase in revenue to R3.1 billion (H1 2016: R2.9 billion).

The share movement follows a 50% increase in share value over the past six months and 92% over the last year.

Comair declared an interim dividend of 7c, up from 5c in the corresponding period. Headline earnings per share (Heps) improved from 13.1c in the corresponding period to 42.8c in the reporting period.

Comair CEO Erik Venter said the results reflect “a return to Comair’s historic profit growth trend in the absence of the extraordinary costs of the comparative period that arose from losses on oil hedges and the revaluation of the dollar-based aircraft loan”.

He said economic growth needed to accelerate for revenue to increase and there was still surplus capacity in the market. This results in low occupancy levels, but yields started recovering during the reporting period, partly at the expense of passenger volumes.

Cost increases were offset by the benefits of the improved exchange rate on expenses incurred in foreign currencies and as a result costs remained flat.

The non-airline segment that consists of the travel business, flight-training facility, catering business and airport lounges contributed R136 million to revenue and offers further growth opportunities, Venter said.

During the period Comair took delivery of one Boeing 737-800 aircraft and leased one Boeing 737-800 aircraft to replace a Boeing 737-400 aircraft in the British Airways fleet, due for retirement as part of Comair’s fleet replacement programme. This, Venter said, contributed to further operating efficiency and enhancement of the customer experience.

Venter expects pressure on consumer spending to continue and accordingly put pressure on airline margins. He expects the exchange rate to remain volatile and the oil price to increase. The increased fuel cost will be mitigated by more efficiency as a result of the company’s on-going fleet renewal programme.

Comair’s court application to have the decision by the Air Services Licensing Council to have its domestic Air Services License suspended, will be heard in the High Court in Pretoria next month, financial director Kirsten King told Moneyweb.

The company obtained an interdict against the suspension in May last year, which prevented it from being grounded. The council is of the view that Comair does not comply with its license conditions regarding foreign shareholding, but the company disputes this.

King said Comair was still prepared to proceed with the scheduled weekly service to St Helena Island, if the country’s government could obtain permission from the British Aviation Authority for it to make use of the unused part at the end of the runways on the newly built St Helena Airport.

Comair suspended plans for such a service that was due to start in May last year, due to safety concerns related to wind turbulence experienced during a test flight.

King confirmed that Comair was ready to start with the service and incurred expenses to achieve that. She said it was a “massive project”, which Comair was prepared to continue if the safety requirements were met.

The St Helena government has applied to the British Aviation Authority for the necessary certificate for the use of the end of the runways, but has not received any response yet as the project seems to be caught up in British politics, King said.

At this stage no claims have been submitted with regard to the cost incurred, and Comair “will address it when the need arises”.

She said Comair was also concerned about possible reputation damage if flights had to be cancelled or diverted due to rapidly changing weather conditions on the island.

To listen to the podcast with CEO Erik Venter and SAfm host Siki Mgabadeli, click here.

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