Comair Maintains Profitability Despite Tough Trading Environment

Johannesburg, 16 February 2010: Comair Limited, operator of British Airways in South Africa and, has weathered a tough six months of negative growth in the local air travel industry to report a marginal increase in attributable profit of 3% to R33-million for the six months ended 31 December 2009. This resulted in headline earnings per share increasing from 7.9 cents to 8.1 cents. Cash on hand remained strong at R253-million. No interim dividends have been declared as the company considers one dividend annually.

Erik Venter, Joint CEO of Comair said, “The recessionary environment has continued in the local air travel market, but despite tough trading conditions the Comair business has maintained passenger volumes, which means we have grown our share of the market.

“This is great news, and it can mainly be attributed to our strong brands and excellent people. Notwithstanding a decline in turnover by 11.8% from R1.6-billion to R1.41-billion as a result of lower ticket prices on the back of a lower fuel cost, our cost-saving initiatives have continued to bear fruit, which enabled us to reduce operating costs by 12.2% from R1,55-billion to R1,36-billion and thereby maintain profitability.

“In particular, we have seen good growth at Lanseria as more and more passengers make use of the convenience and affordability of our service from this airport. Going forward we will grow our capacity out of Lanseria by a further 35% from March with additional flights to Durban and Cape Town,” said Venter. “The new services will be operated by our new Boeing 737-800’s which are already flying in kulula colours. The efficiency of the new aircraft and the low cost of operating out of this airport will make flights from Lanseria the lowest priced in the market - in fact tickets from Lanseria during the World Cup are by far the lowest on offer in the market.”

Passenger surveys conducted on both the BA and kulula brands confirmed the group’s high service levels, and further improvement in on-time performance to over 85% was also achieved. Comair also invested further in its affiliated businesses with the online travel business showing good growth over the period.

The group is also in the process of adding to its fleet, and in the past six months Comair took delivery of two new generation Boeing B737-800 aircraft, acquired on operating lease. The purchase process is currently underway for Comair to acquire a further eight new B737-800’s for delivery over the period 2012 to 2015. Effective financing mechanisms are currently under consideration and shareholders will be informed thereof in due course. The new fleet is expected to deliver improvements in operating efficiency, passenger comfort and environmental impact.

Comair believes that there are no clear indications of economic recovery in the local market for air travel, although it is expected that the South African market will follow the first signs of recovery seen overseas.  While the group remains cautiously optimistic about higher volumes over the World cup, this may be tempered by the difficulty in predicting patterns of demand and supply and the significant challenge this presents to pricing airline tickets for this month-long event.

“Going forward, we see the difficult trading conditions continuing and our priorities remain safety, operating efficiency, conservative cash management and superior customer service, while seeking new growth opportunities for both the airline and related businesses,” said Venter.