A spike in the oil price in October last year impacted Comair’s results for the six months ended December 31, but the fundamental business performed in line with the previous year and Comair has maintained its record of 72 years of profitability, CEO Erik Venter said on Tuesday.
Comair operates the low-cost brand Kulula as well as the British Airways brand in the local market.
Comair’s share price dropped marginally on the day and closed at R5.74. It is still more than 20% up over the last seven days, thanks to the announcement last week of a court settlement in terms of which South African Airways has to pay it more than R1 billion for historic uncompetitive conduct.
Comair’s revenue for the reporting period grew by 12% to R3.7 billion in a very depressed market. Airline operating cost however rose by 17% due to the additional R263 million spent on fuel, compared to the prior period, as the dollar price of oil spiked.
Due to disruption in the maintenance schedule of SAA Technical, which had been doing Comair’s aircraft maintenance, the airline was forced to lease additional aircraft in the short term, which added R34 million to its operating cost.
Earnings per share and headline earnings per share dropped by 38% to 27.2c, compared to 43.6c in the prior period.
Net profit for the period was R127 million, compared to R203 million in the first half of the previous financial year.
The group has declared a gross interim dividend of 5c per share.
Non-airline businesses contributed 27% to net profit before tax, up from 19% in the prior period.
Venter says that while the market is very sensitive, with volumes dropping as soon as fares increase, Comair should be able to maintain its revenue growth in the second half and deliver stronger results.
He said the travel business delivered about R10 million in profit, which is well below its potential but understandable in the current market. By July the group hopes to launch the first phase of its new inbound travel tourism platform and start selling. This will deliver a truly world class experience to the international tourist, with integrated social media functionalities, he says.
Comair completed the refurbishment of its domestic and international airport lounges at OR Tambo, with this business unit delivering a third of its non-airline profit.
The pilot training business provided mostly internal training in the reporting period to prepare the crew for the fleet renewal, but is performing well as a training business, Venter says. It achieved NQF level 4 accreditation and is on course to offer a specialised matric in the fields of technical and IT aeronautical training.
Comair plans to launch a full training academy that will provide for students from grade 10 to post-graduate level later this year. It is working with academic institutions in this regard and will also train 1 400 cabin crew members this year.
The group plans to position the academy as a globally recognised training provider, Venter says.
Nacelle, the IT company formed by a joint venture between Comair and Infinea SA Holdings last year, has been focusing on the development and testing of products for Comair as its anchor client. The next step in the second half of the financial year is to further package these as generic products fit for other aviation clients and to develop a consultancy service to assist clients with the implementation of these products.
The Food Directions subsidiary provides Comair with airline food and has realised huge savings for the airline, Venter says. The business is trying to break into the retail food market as well, especially with non-perishable products, but that is a hard nut to crack, he says.
The domestic airline market still has significant overcapacity and South Africans continue to see air travel as a luxury, Venter says. The reconfiguration of the SAA service, with capacity moving from the premium airline to low-cost Mango, has not made a significant difference to the trading environment, which he believes will remain tough and continue to lag the international market for air travel.