Comair’s half-year profits soar to R199m despite slowed economy

• Company remains cost-efficient and competitive to overcome a constrained economy and tilted playing-field;
• Cash from operations: R448m; cash on hand: R949m; HEPS: 42.8c;
• Volume levels remain constant, but the company recorded a 6% increase in revenue on improved yields;
• Fleet expansion programme continues, boosting operating efficiency and customer experience;
• Non-airline operations perform well, with growth opportunities.

Comair's latest interim results for the period ending 31 December 2016 show a return to the company's historic trend of growing profits, with R199m in profit after tax, compared to R84m in the previous period. Comair CEO Erik Venter points out that the comparative half-year was marked by extraordinary costs arising from losses on oil hedges and the revaluation of its dollar-based aircraft loan, which did not recur in the current year. Comair has two airline brands: British Airways (operated by Comair) and its low-cost brand, kulula.com.

The company (Share code: COM) posted HEPS (headline earnings per share) of 42.8 cents and an interim dividend of 7 cents, supported by a 6% increase in revenue on improved yields, all of which CEO Erik Venter says are a testament to Comair's sound commercial practices.

"We're in an inflationary environment, but cost inflation was offset by a stronger rand and improved operating efficiencies" says Venter. Comair generated R448m cash from operations during the period under review, with R949m in cash on hand. It took delivery of one new Boeing 737-800 and one leased 737-800 to replace retired 737-400s in the British Airways fleet during the period ending 31 December 2016. During the remainder of this financial year it will make pre-delivery payments of USD9.7m towards its Boeing 737-8 Max aircraft, the first of which will arrive in 2019.

This marks the next phase of the company's fleet replacement strategy, completing the replacement of all of its 27 aircraft with 737-800s and 737-8 MAX's. Venter adds: "Kudos must go to every member of our staff for ensuring a cost-conscious and customer focused business. It's this level of commitment that has, for example, enabled our successful 20-year franchise with British Airways - BA's longest relationship of this sort. It has also enabled us to achieve 70 years of uninterrupted, profitable operations.

Venter adds that the company's non-airline operations also performed well: these include its SLOW airport lounges, travel businesses, catering operation (Foodirections), and its flight training facility.

Looking ahead, he says: "The weak economy is expected to maintain pressure on consumer spending, so we can expect continued pressure on margins in the airline industry. Comair is well placed to operate in these conditions though, with strong brands, committed staff, effective equipment, an efficient cost base and strong cash reserves."