Johannesburg, 14 September 2015: In the absence of revenue growth in the domestic passenger market and despite a challenging financial year, JSE-listed Comair Limited has announced continued profitability for the 12-month period ending 30 June 2015. Revenue remained consistent at R5.89 billion (2014: R5.90 billion), with a 1% saving in operating costs. Profit for the year amounted to R219 million (a net reduction of 17%, mainly as a result of two non-cash flow items). Cash from operations remained healthy at R646 million.
Comair reported a very strong profit in the first half of the financial year, supported by an unprecedented collapse in the oil price. The second half saw two new competitors enter the market with very aggressive, but more than likely unsustainable pricing. As a result, any savings achieved on the price of fuel were returned to customers by way of significantly reduced ticket prices, which led to a reversal of the revenue growth experienced in the first six months.
Comair CEO Erik Venter said despite the new capacity in the market, Comair maintained its passenger volumes, largely due to the strength of the kulula and British Airways brands and the company’s ongoing attention to service. “We continued to focus on our customers through the application of service metrics, feedback surveys, customer journey mapping, and extensive investment in training programmes for front-line staff. Operating performance therefore remained good, with on-time performance exceeding our threshold target of 85% across both the British Airways and kulula.com brands.”
The two non-cash flow items which resulted in decreased profits were the additional depreciation of R79 million provided on the retiring Boeing 737-300 fleet, and the year-end revaluation of R51 million to the dollar-based funding applicable to one Boeing 737-800.
Cash of R147 million was invested in three previously leased Boeing 737-400 aircraft and two pre-owned Boeing 737-400’s, all for operation in the British Airways fleet. These aircraft have replaced the 737-300 fleet which will be fully retired by December. The newer aircraft afford improved fuel efficiency and reduced maintenance demands, while at the same time improving passenger comfort. Cash on hand at year-end was R849 million, much in line with the prior year balance of R868 million.
Venter said the black economic empowerment transaction concluded by Comair and the Thelo Consortium in 2007 matured in September 2014, and created realised value of R152 million for the participants. The “A” shares arising from the transaction were converted to ordinary shares, and the weighted effect of the additional shares amounted to a reduction in the 2015 earnings per share of 3 cents. Comair continued to invest in transformation initiatives, and thereby maintained its level 4 B-BBEE score.
Commenting on the year ahead, Venter said Comair remained concerned about weak economic growth and the consequent impact of overcapacity in the domestic aviation market. “Fundamentals dictate that a correction in market capacity is very likely. The new visa regulations applicable to South Africans traveling with children, as well as to foreign tourists, have impacted negatively on our cross-border tourist destinations, and we are actively participating in achieving a more favourable dispensation in this regard.”
“We are nevertheless confident that there is scope for further growth in our profits. Comair is focused on implementing technology solutions to enhance customer satisfaction, operating performance and drive revenue generating opportunities. We are also developing new applications to enhance both the ground and air experience that will facilitate more efficient operating procedures. Furthermore, the ongoing upgrades to the fleet will continue to improve efficiency while at the same time-enhancing the revenue potential per flight.”
In August 2015 we took delivery of the first of the next four new 737-800’s from Boeing, the remaining three of which will be delivered in late 2015 and 2016. The delivery of the eight Boeing 737-8 Max aircraft remains scheduled for 2019 to 2021.
About Comair Limited: Comair Limited is a South African aviation and travel company, offering scheduled and non-scheduled airline services within South Africa, Sub- Saharan Africa and the Indian Ocean Islands, as its main business. The company operates under its low-fare airline brand, kulula.com, as well as under the British Airways livery, as part of its British Airways Plc. license agreement. Managed and owned by South Africans through its listing on the JSE, Comair has been operating successfully in this country since 1946. Comair is the only known airline to have achieved operating profits for 69 consecutive years and has a safety record which is internationally recognised.
For more information on Comair, visit www.comair.co.za