Comair Limited (JSE: COM) today (SUBS: Tuesday 18 September 2018) announced record earnings despite dismal trading conditions that include poor GDP growth, rising fuel prices and a domestic airline market characterised by surplus capacity.
With its non-airline business contributing 25% to net profit before tax, earnings per share (EPS ) increased by 10% to 69.8 cents per share, while headline earnings per share (HEPS) increased by 4% to 69.5 cents per share. This surpasses the previous year's EPS of 63.7 cents per share and HEPS of 67.0 cents per share. Consequently, profit after tax was R326 million, which is up R29 million compared to the prior year.
The group generated cash of R946 million from operating activities, resulting in a closing cash balance of R685 million, and has thus approved a final gross cash dividend of 17 cents per ordinary share.
This marks 72 years of uninterrupted profitable operation, thought to be a world record in the airline industry.
But, says Comair's CEO, Erik Venter, there's still room for improvement: "While profits for the year were good, we're still not achieving the margins that will allow for the optimum pace of upgrading our fleet. The weak economy will maintain pressure on consumer spending while the oversupply of seats in the domestic market suppresses pricing across most routes.
"We're well placed to operate in these difficult conditions, with strong brands, committed staff, effective equipment, an efficient cost base, strong cash reserves and a diversification strategy into the non-airline segment of the business which yields comparatively higher margins and is less capital intensive than the airline segment.
"Our continued investment in efficiency, innovation and diversification have helped the business thrive despite a moribund economy and an increase in the fuel-price of nearly 15%. Our significant investment into new aircraft over the past 5 years is now clearly demonstrating the value of this strategy."
Venter adds, "This year we acquired a pre-owned Boeing 737-800 and made predelivery payments on our order for eight new Boeing 737 MAX 8s, the first two of which will be delivered in February. It's a combined net cash investment of R305 million."
In line with its diversification, Comair also invested in its thriving training and lounge businesses, and in IT.
Those investments include R46 million on Comair's aviation training facility, R41 million on its lounge business and R54 million on its technology solutions.
In progressing towards an extensive aviation training academy with a global customer base, Comair has doubled its capacity for pilot training at its Rhodesfield facility.
"Our simulators run around the clock to accommodate and train personnel from 36 airlines, so we're adding four simulator bays to create the necessary capacity for expansion," says Venter.
Comair also acquired two businesses to bolster its training capacity: EPT Aviation Training, and Global Training College South Africa, both of which provide cabin crew training and passenger handling training. The group also acquired Metaco Holdings, which focuses on leadership development and change management.
Comair's catering subsidiary, Food Directions, has an ongoing expansion programme at its Anchor Industrial Park facility. It has won two concessions for extending its business: a licence to provide catering to third-party airlines, and a tender to provide lounge food and beverages for British Airways at both OR Tambo and Cape Town international airports.
Additionally, Food Directions has been awarded the catering for the group's SLOW lounge network, improving economies of scale within the group.
Comair has also committed to investing R54 million on improved technology to enhance the group's operating performance, customer service and revenue generation. Investment in IT included the R34 million acquisition of a data integration platform from Tibco, which enables cross-channel data extraction to improve service and product offering.
Post financial year, Comair's IT unit entered a joint venture with Infinea SA Holdings to establish Nacelle, a service provider focused on aviation and related sectors.
Underpinning these successes, says Venter, is the group's focus on managing, attracting and retaining talent. We invest in our skills base and value our people and their loyalty. It's why we're proud of our Top 500 award for South Africa's best managed companies, in which we were named first in the airline sector," he concludes.
About Comair Limited
Comair Limited is a South African aviation group, offering scheduled and non-scheduled airline services within South Africa, Sub-Saharan Africa and the Indian Ocean Islands, as its main business. The group operates under its low-fare airline brand, kulula.com, as well as under the British Airways livery, as part of a license agreement.
In addition to scheduled and nonřscheduled airline services, Comair also offers the following non-airline related services;
A catering service, Food Directions, originally launched to cater to the airline brands, now also provides a range of health and other food products to retailers.
Its award-winning domestic and international SLOW lounges have set the standards for airline hospitality in South Africa. It is expanding this offering, while its reputation as a lounge operator has resulted in management contracts from other companies.
Investment in technology to improve operational efficiency and offer innovative products to travel agencies and consumers has seen it become the country's largest digital travel distribution network, covered under the Comair Travel brand.
The Comair Training Centre, originally founded in early 2000 to train the airline's own flight and cabin crew has grown considerably and now provides operational training for pilots and crew from other domestic and international airlines and even overseas air forces. Comair acquired
Comair's most recent acquisition is that of the leadership development consultancy company, Metaco Holdings. The acquisition fits well with Comair's training business that already encompasses courses for pilots, cabin crew, ground operations staff and travel and tourism. Through Comair existing client base, it has identified the demand for leadership and team coaching, and Metaco fits this requirement.
Managed and owned by South Africans through its listing on the JSE, Comair has operated successfully in this country since 1946. Comair is the only known airline to have achieved operating profits for 72 consecutive years, has a safety record which is internationally recognised and a level 3 B-BBEE recognition. Comair has independently been certified by the Top Employers Institute, as one of the Top Employers South Africa 2018.
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