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Operational efficiency and strong brands bolster Comair in weak economy

Direct News Source

13-Sep-2016 Despite declining revenue in the domestic airline market, exacerbated by the weak economy, JSE-listed Comair has announced continued profitability for the year ending 30 June 2016.

CEO Erik Venter says the airline grew its revenue by 1% and passenger volumes by 6%, largely due to the strength of the kulula.com and British Airways brands, and the company's ongoing focus on customer service, including achieving its threshold target of 85% on-time performance for both brands. The company's non-airline brands, such as flight training, travel product distribution, catering and airport lounges performed well, with their 6% revenue growth contributing 18% to profit from operations.

Cash generated from operations grew by R212m - an increase of 31% - resulting in a healthy cash balance of R1.12bn at the end of the financial year, up from R849m in the previous year.

The airline has performed well in the context of a 27% weakening of the Rand against the US Dollar; the volatility of the Rand contributed to unrealised exchange losses for R73m on the revaluation of a USD24.8m loan on one aircraft. As a result, profits after taxation for the year declined by 12% to R193m, yielding earnings per share of 41.5 cents, compared to 47.5 cents in the previous year, and headline earnings per share of 36.5 cents, compared to 47.9 cents in the previous year.

Venter says: "This robust performance in strained trading conditions is thanks to the commitment and unstinting effort of every person in the Comair group during the year under review, including our directors, management and employees. Thanks are due especially to our customers and stakeholders, who continue to choose our services or provide services to us."

Venter noted that this year sees the 70th anniversary of Comair's operations, the 20th anniversary of its franchise agreement with British Airways and the 15th birthday of kulula.com. Comair is also believed to be the only airline to return a profit for every year of its operation, a feat achieved without the luxury of state bailouts.

"We aim to strengthen all our relationships in the coming year, especially as the weak economy is expected to continue putting pressure on consumer spending in the industry, despite the recent growth in passenger volumes.

"Comair is well-placed to operate in these conditions, with strong brands, committed staff, effective, modern equipment, an efficient cost-base and strong cash reserves."

The ongoing upgrade of the Comair fleet continues, adds Venter. This year Comair took delivery of three new Boeing 737-800s, with another scheduled for delivery in November, the last of the current order of eight.

The company has also ordered eight Boeing 737-8 Max aircraft for delivery from 2019 to 2021. These upgrades will continue to improve operation efficiency and customer comfort, while enhancing potential revenue per flight.

Comair's focus on technology solutions is ongoing and aims to improve performance, customers' experience and revenue opportunities through improved market segmentation and efficient operating procedures.

Editors' note: Comair's claim against SAA for damages arising from anticompetitive conduct by the state airline between 2001 and 2005 was heard in the Gauteng South High Court between 18 April and 24 August 2016. The outcome remains pending.