Comair: ‘Consistent Profitability’ in No-Growth Market
17-Feb-2015 In the absence of growth in the domestic passenger market, South Africa's private domestic airline operator - JSE-listed Comair Limited - has reported capacity consistent with the previous year for the interim period leading up to December 2014. Revenue grew by 5% to R3.13 billion (2013: R2.96 billion), and earnings per share and headline earnings per share grew to 37.6 cents (2013: 34.3 cents). The cash balance was R688 million after an investment of R149 million in the purchase of the five Boeing 737-400s and early settlement of aircraft and simulator funding amounting to R73 million.
Comair's growth in revenue was attributable to a 3% increase in average yield and a 2% increase in occupancy. The declining dollar oil price benefitted the company towards the end of the reporting period, but was offset by a further 9% average weakening of the exchange rate compared to the previous year, which affects 48% of costs. The net effect for the half year was an increase in operating expenses of 2%.
Comair CEO Erik Venter said the company continued to progress with its fleet upgrade programme, and retired a further two Boeing 737-300 aircraft, which were replaced with one Boeing 737-800 for operation in the British Airways fleet. "We also purchased three Boeing 737-400 aircraft that were on lease to Comair, and two pre-owned Boeing 737-400 aircraft. These aircraft will replace the last three retiring 737-300 aircraft and will remain in the fleet until delivery of the new 737-8 Max aircraft on order for delivery from 2018 to 2021."
Venter said the domestic passenger market remained below the 2008 peak volume and any near-term recovery in local consumer spending was unlikely.
"While the decline in the oil price has provided welcome relief, we are of the view that it will increase in the second half of the year. The current market swap price for the 12 months ahead is averaging $65 to $75 per barrel, indicating expectations of a recovery in the price of oil. The impact of the lower fuel price is anticipated to equal around 3% of total cost for the full financial year and we are seeing related downward pressure on ticket prices."
Comair has hedged 26% of its fuel consumption for the second half of the financial year at an average price of $82 per barrel. The mark-to-market valuation has been taken to the cash flow hedge reserve and will be released against the underlying cost as the hedges mature.
"The ongoing upgrades to our fleet remain the best solution to the expected recovery in the fuel price, while also providing an improved customer proposition, and along with improved, technology-driven operating processes, will ensure that we maintain a healthy lead over our competitors. Our travel business, flight training facility, catering business and airport lounges also show opportunities for further growth," Venter said.
A gross interim cash dividend of 5 cents per ordinary share was declared.
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