Comair Cautious In Tough Trading Conditions

Unaudited Annual Results for the year ended 30 June 2011
Johannesburg, 13 September 2011: In its annual results for the year ended 30 June 2011, Comair Ltd, operators of British Airways in Southern Africa and, has said it is cautious about the outlook for the future, and would make some necessary tough changes to strengthen its competitive position going forward.

Joint CEO, Erik Venter said the company was still focused on growth in specific strategic areas, and would use the opportunity provided by tough trading conditions to invest in new aircraft, expand its African route network, and grow its ancillary businesses. “Our joint venture with Solenta Aviation, which operates smaller gauge (50-70 seater) aircraft is one growth initiative. Together we already operate daily flights from Johannesburg to Nelspruit, and subsequent to year end, started further routes from Lanseria to Gaborone and Maputo. Early indications are that this new partnership will allow us to successfully access smaller, lucrative routes both in South Africa and Southern Africa.”

“Despite external market pressures, a slowdown in the local market and pressure on margins due to crippling Airports Company of South Africa (ACSA) charges and a high oil price, Comair is committed to building a sustainable airline,” said Venter.

“We are focused on building one of the strongest airline teams in the world by attracting the best local talent and investing significantly in leadership development,” he said. “We have also made excellent improvements in service levels with our on-time performance climbing to 90% in the last few months. This was underscored when British Airways and kulula were voted first and second in the business airline category in the annual Sunday Times Top Brands Survey.

“During the year we introduced three new generation Boeing 737-800’s into the kulula fleet and additional new aircraft, due for delivery mid-2012, will result in kulula operating the newest and most efficient fleet in the domestic industry. We are also implementing an enterprise system solution from Sabre that will improve our revenue potential as well as improve staff productivity and efficiency through better rostering and the automation of administrative functions.”

Venter said that affiliated businesses, particularly online travel and flight training performed well over the period, and while they comprise a small percentage of turnover, are making an increasing contribution to profits. The introduction of Comair’s new concept SLOW airport lounges at all major airports has been very well received by business travelers and post year end, a new SLOW in the City lounge and business facility was opened opposite the Gautrain station in Sandton.

Despite strong growth in turnover, up 19% to R3,58 billion, a particularly weak fourth quarter with significant cost increases ended a tough year for the business with profit down 14%. A 20% increase in the average price of jet fuel has negatively impacted the global aviation industry as a whole, while a stagnant economy, over-capacity in the market and declining demand created an unfavorable trading environment locally. This resulted in a decline in earnings per share of 28% to 15.9 cents (22.0 cents in the previous year). Cash generation remained strong, however investment in flight simulator equipment and deposits on new aircraft resulted in a reduction in the year-end cash on hand from R374 million to R234 million.

Venter said that the company’s performance over the period was below budget. “Last year we set ourselves a medium term objective of a 10% profit margin and we are some way from achieving this. We are concerned that further ACSA tariff increases and a weak economy will negatively impact the local air travel market. As a result, we have reduced capacity in anticipation of this and are looking at further cost cutting measures to remain sustainable and competitive.”

Looking ahead, Venter said that the company’s outlook for the coming year was very cautious. “We are anticipating a flat travel market due to a weak economy and ongoing pressure on consumers. A stubbornly high oil price and unaffordable airport fees will be passed on in the form of higher ticket prices, putting further pressure on the market. We will therefore use the time to further strengthen our competitive position by reducing costs and improving productivity, whilst maintaining our unwavering focus on customer service.” He added that going forward, flexibility in capacity would remain essential in the uncertain economic environment.


For further information, please contact:

Comair Ltd:
Heidi Brauer (Executive Manager: Group Marketing)
Tel:       011 281 5877
Cell:      082 557 8376

Atmosphere Communications
Alice Jordan (Account Director)
Tel: 021 469 1567
Cell: 083 448 2650