Comair Achieves 21% Increase In Eps, Despite Tough Economic Climate

New Generation Boeing B737-800 fleet to enhance lowest cost structure in the industry

Johannesburg, 14 September 2010: Comair Limited, operator of British Airways in South Africa and, today announced an increase in earnings per share of 21% for the year ended 30 June 2010, despite a year of tough trading in the current economic climate. With these results, the airline has extended its world record of consecutive profitable years to 65.

Erik Venter, Joint CEO of Comair said that the results are a decent performance and a tribute to the Comair team’s great effort in difficult trading conditions. “While the increase in earnings per share is encouraging, we believe our operating margin remains too low, at under 5%. A margin of 10% is feasible and necessary if we are to achieve our growth objectives,” he said.

Turnover remained similar to last year with higher volumes on both brands offset by lower airfares. Major cost variables, such as fuel and the rand-dollar exchange rate were stable during the year. Cash generation remained strong at R247-million, with the cash balance increasing to R374-million at year end. While the World Cup contributed positively in line with the company’s own expectations, it did not deliver the significant boom anticipated by many external speculators, as the local market refrained from normal business and leisure travel during this time.

Both the British Airways and brands performed well during the year, and were recognised particularly by business travellers, achieving first and second place respectively in the airline category in the Sunday Times annual Top Brands survey. “The continued success of both brands is a tribute to the 1 941 great people at Comair who continue to deliver exceptional service to our customers. We will continue to build on the talents and skills of our people going forward,” said Venter.

kulula also expanded its capacity significantly during the year, mostly out of Lanseria airport, which has extended the airline’s lead in the low cost segment. kulula plans to continue growing its low cost Lanseria base to achieve critical mass and greater efficiencies once the planned new high-capacity runway is in place.
Comair’s African expansion also progressed well during the year, and new services to Dar es Salaam and Maputo will begin in the next few months.
Venter said that the New Generation Boeing B737-800 aircraft, of which Comair will have three operating on long-term lease by December 2010, will provide the platform for a high efficiency business model, giving Comair the lowest cost structure in the industry - similar to what has been achieved by Ryanair in the European market.

“The New Generation Boeings offer an advance in technology that provides greater reliability, 20% less fuel usage per seat, and a higher potential number of flying hours per day. We have placed an order with Boeing for a further eight new Boeing 737-800 aircraft and will be working hard to enhance our processes to take advantage of the opportunities offered by the fleet upgrade over the next few years.

Importantly, due mainly to our 65-year profit history, we have been able to secure the credit backing of the United States Export Credit Agency for the funding of our new fleet,” he said.

Venter however remains concerned about the threat of significant increases in airfares as a result of the proposed more than doubling of airport charges by ACSA (The Airports Company of South Africa). “The impact that this is going to have on the affordability of air travel in the domestic market is a concern, and we will continue to engage strongly with the relevant stakeholders to ensure that the interests of consumers are upheld.”

Looking ahead, Venter said he did not anticipate much growth in the market, as the industry was very sensitive to business activity levels which had not yet recovered from the 2009 recession. “We do however anticipate continuing to grow our market share, based on our strong brands and competitive pricing. And with our new fleet and focus on further efficiencies, we are well positioned for much stronger profit performance in future.”



For further information, please contact:

Comair Ltd

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

Atmosphere Communications

Annemie Krause (Account Manager)
Tel: 021 461 2117
Cell: 082 825 3262


Comair Limited

(Incorporated in the Republic of South Africa)
Reg. No.1967/006783/06
ISIN Code: ZAE000029823Share Code: COM
(“Comair” or the “Group” or “the Company”)


Earnings review

We are proud of our team having achieved its 65th straight year of operating profits which we believe to be a world record in the airline industry. Turnover remained similar to last year, with higher volumes on our British Airways and Kulula brands offset by lower average fares. While the 21% increase in earnings per share was encouraging, our operating profit margin remains too low at just under 5%. A margin of 10% is achievable and necessary if we are to realise our growth objectives.  Major cost variables, being fuel and the rand dollar exchange rate, were stable during the year. Cash generated from operations and investment income remained strong at R247 million with our cash balance increasing to R374 million at yearend.

The continued success of Comair is a tribute to our 1941 great staff who once again delivered exceptional service to our customers. We will continue to build on the talents and skills of our people going forward and invest significantly in the training, development and well being of our excellent team.

The Boeing 737-800 is now established around the world as the leading aircraft for short haul and low cost operators. During the year we placed an order for eight new 737-800’s for future delivery and took delivery of two on long term leases. The performance of these aircraft has been exceptional, with low fuel consumption, negligible technical delays, and an overall improved experience for our customers.

During the year we extended our kulula capacity substantially, mostly out of Lanseria airport. Our plan to continue growing our low cost Lanseria base so that we can achieve critical mass and even greater efficiencies once the planned new high capacity runway is in place. During the year we obtained the rights to fly to several new African destinations and will be commencing services to Maputo, Mozambique and Dar es Salaam, Tanzania in the next few months.

Our affiliate businesses performed well over the period. Our travel business, which includes kulula travel and MTBeds, is showing great potential. Our flight training business is growing strongly and after year end we commenced with the installation of our third flight simulator, for Boeing737-800 type training. Commuter Handling Services and Imperial Air Cargo, in which we have minority stakes, both reported small losses during the year.

Looking ahead

Our industry is very sensitive to business activity levels and economic growth rates in South Africa, and we have only seen a very moderate recovery from the 2009 recession. We therefore don’t anticipate much growth in the market but do anticipate continuing growth in market share, based on the strength of our brands and our competitive pricing.

The past year was very significant in that for the first time since start-up, we placed an order for brand new aircraft. The eight 737-800’s that were ordered from the Boeing Company will further enhance our high efficiency, low cost business model and will set the standard for the industry in Southern Africa, while maintaining Comair’s leadership position. The R2 billion order will increase our gearing, but together with our other efficiency initiatives, position us for a much stronger profit performance in the future.


The directors have resolved to declare a cash dividend (Dividend number 11) of 5 cents per share (prior year: 5 cents) to all shareholders. The last day to trade (cum the dividend) in order to participate in the dividend will be Friday the8thof October 2010. The shares will commence trading “ex” dividend from the commencement of business on Monday the 11thof October 2010 and the record date is Friday the15thOctober 2010. Share certificates may not be de-materialised orre-materialised between Monday the 11thOctober 2010 and Friday the15thOctober 2010 both days included. The dividend payment will be made on Monday the 18thOctober 2010.

Directors’ resignation and appointment

(a) Erik Rudolf Venter resigned as financial director of the Company on the 15thof September 2009. He retains his position as joint CEO.
(b) Ranil Yasas Sri-Chandana was appointed as financial director on the 15thof September 2009.
(c) Rajesh Ramanlal Mehta resigned as a non executive director on the 31stof July 2010.

Annual General Meeting

The Annual General Meeting of shareholders of Comair will be held at its operations building on 29 October 2010 at 12h00.  

Basis of preparation

In terms of the Listing Requirements of the JSE Limited, the Group has prepared its consolidated financial statements in accordance with International Financial Reporting Standards including IAS 34 Interim Financial Reporting, the AC 500 standards as issued by the Accounting Standards Board and the requirements of the Companies Act. The accounting policies used in the preparation of these results are consistent in all material aspects with those used for the prior comparative period.

Abridged Group Statement of Comprehensive Income
  Audited year 30 June 2010 R'000 Audited year 30 June 2009 R'000
Revenue 3,009,544 3,048,782
Operating expenses (2,723,009) (2,814,209)
Operating profit before depreciation 286,535 234,573
Depreciation (142,542) (105,874)
Profit from operations 143,993 128,699
Investment income 32,751 34,033
Interest expense (45,859) (49,138)
Share of profit (loss) of associates (6,814) 170
Profit before taxation 124,071 113,764
Taxation (34,364) (40,715)
Profit after tax attributable to the equity holders of the parent 89,707 73,049
Other comprehensive income    
Fair value adjustment on cash flow hedge net of taxation 17,640 (18,193)
Total comprehensive income for the year attributable to the equity holders of the parent 107,347 54,856
Earnings per share(cents) 22.0 18.2
Headline earnings per share(cents) 22.0 19.6
Diluted earnings per share(cents) 21.8 18.0
Diluted headline earnings per share (cents) 21.8 19.4
Dividends per share 5.0 -
Weighted ordinary shares in issue ('000) 408,295 400,814
Diluted weighted ordinary shares in issue ('000) 412,327 405,873
Depreciation (R'000) 142,542 105,874
Reconciliation between earnings and headline earnings    
Profit after tax attributable to the equity holders of the parent 89,707 73,049
Add: IAS 16 loss on disposal of property, plant and equipment - 5,608
Headline earnings after tax 89,707 78,657
Abridged Group Statement of Financial Position
Property, plant and equipment 991,853 912,043
Investment in associates 75,887 73,637
Available-for-sale-investments 153,000 131,580
Current assets 801,833 583,526
  2,022,573 1,700,786
Share capital and reserves 725,275 517,722
Interest-bearing liabilities 188,976 360,582
Deferred taxation 78,463 68,310
Current liabilities 1,029,859 754,172
  2,022,573 1,700,786
Net asset value per share(cents) 154.1 129.1
Abridged Group Statement of Cash Flows
  Audited year 30 June 2010 R '000 Audited year 30 June 2009 R '000
Cash and cash equivalents at the beginning of the period 309,220 125,004
Cash from operations and investment income 247,107 363,629
Dividends paid (20,040) -
Taxation paid 1,258 (13,288)
Cash utilised in investing activities (136,858) (195,549)
Increase in interest bearing liabilities (26,410) 29,424
Cash and cash equivalents at the end of the period 374,277 309,220
Abridged Group Segment Report
Segmental Revenue    
Airline 2,978,411 3,021,830
Nonairline 31,133 26,952
  3,009,544 3,048,782
Segmental Results    
Airline 272,834 217,392
Nonairline 13,701 17,181
Profit before taxation and depreciation 286,535 234,573
Depreciation Airline (142,139) (105,422)
Depreciation - Nonairline (403) (452)
Profit before interest, dividend and taxation 143,993 128,699
Abridged Group Statement of Changes in Equity
Opening Balance 517,722 459,942
Rights issue 115,978 -
Total comprehensive income for the period 107,347 54,856
Dividends paid (20,040) -
Equity settled sharebased payment adjustment 3,428 3,428
Net effect of share trust activities 840 (504)
Closing Balance 725,275 517,722


Audit opinion

These financial statements have been audited by PKF (Jhb) Inc. and their unqualified audit report is available for inspection at the registered office of the company.

By order of theBoard
Mr. D Novick (Chairman) Mr G Novick (Joint CEO) Mr. E Venter (JointCEO)
13 September2010

RAND MERCHANT BANK (A division of First Rand Bank Limited)