Sep 11, 2012
Comair posts small profit in ‘toughest’ financial yearBack
Cape Town|Johannesburg|Maputo|Nelspruit|American Airlines|ATR Industries|Boeing|British Airways|Comair|Solenta Aviation|Africa|South Africa|Lanseria Airport|Airline|Airline Operator|Boeing 737-200s|Boeing 737-800|Southern Africa|Information Technology
© Reuse this
Revenue grew by 16% to R4.16-billion in the financial year ended June 30.
But Comair, which operates British Airways flights in Southern Africa and low-cost domestic airline kulula.com, said 2012 was the “toughest” financial period in the group’s history, with the average jet fuel price surging 29% to an all-time high.
“The sustained high fuel price and weak global economy created pressure from which few airlines could escape unharmed, as evidenced by the failure of such notable carriers as Malev, Spanair and Air Australia, and the filing for Chapter 11 protection by American Airlines,” the company stated.
In South Africa, new Velvet Sky closed down, while JSE-listed 1time filed for a business rescue application.
Comair said competitor response to the cost increase, and consumer acceptance of higher ticket prices, was slow in the first half, but improved.
Seat occupancy remained strong, supported by the exit of Velvet Sky and reduced competition on routes from Lanseria Airport, while costs were negatively impacted by the October increase in the Airports Company of South Africa (ACSA) tariffs of 70%, and by the effect on maintenance and lease costs of the 11% average weakening of the rand.
A number of individual cost-saving initiatives were launched during the year, the most significant being the opening of its in-house flight catering units in Johannesburg and Cape Town, and the opening of a new crew base in Cape Town.
Employment costs were kept stable by applying a salary and headcount freeze for the 2012 calendar year, thereby avoiding any retrenchments.
After suffering the impact of the rampant fuel price on the Nelspruit and Maputo routes, Comair and Solenta Aviation, by mutual agreement, terminated the turboprop operation joint venture launched in the previous year. Comair said that it had resulted in termination costs, but that the company would not have been able recover the higher fuel bill any time soon considering the relatively small number of seats on these aircraft.
Of the four Boeing 737-200s retired in December of the prior year, Comair sold three and impaired the fourth to nil value, resulting in a combined capital loss of R14.7-million. Comair's affiliated businesses in flight training, travel distribution and airport lounges continued to perform well, in line with the previous year, and made a meaningful contribution to profits.
During the year, a fourth flight simulator, for the training of ATR-turboprop pilots, was placed in a leased bay in the Comair flight training building by ATR Industries, thereby further broadening the offering of this facility.
Meanwhile, the company noted that by December the entire kulula.com fleet would have been upgraded to 737-800s, where the high seating capacity, lower operating cost and extended potential daily use would be most productive.
“During the year we made substantial investments towards the acquisition of a new fleet of Boeing 737-800 aircraft and a new information technology platform, totalling R216-million. The first new Boeing arrived just after year end, in July, and a further two will be delivered in October and November to join the five 737-800s currently on lease,” the company noted.
Four more were on order for delivery in 2015 and 2016. A programme was also under way to refurbish the interiors of the British Airways fleet.
The company added that it was still somewhat cautious as to the state of the global and South African economic circumstances, and expected consumers to remain under pressure for the foreseeable future. “While there is much talk about the growth of aviation in Africa, this is off a very small base, and we will, therefore, continue to take a pragmatic approach to our expansion on the continent,” it said.
Edited by: Mariaan Webb© Reuse this Comment Guidelines
Recent Research Reports
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
Road and Rail 2013: A review of South Africa's road and rail infrastructure (PDF Report)
Creamer Media’s Road and Rail 2013 Report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Liquid Fuels 2013 (PDF Report)
Creamer Media’s 2013 Liquid Fuels report examines South Africa’s liquid fuels market, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing,...
This Week's Magazine
A structured approach, wherein managers personally engage at each level of the project, is necessary to mitigate delays to the workflow on mega construction projects, says State-owned Eskom Kusile power station projects GM Abram Masango. The 4 800 MW Kusile power...
Construction of transmission lines to evacuate power from a regional hydroelectric project in East Africa, which was hanging on the balance following the withdrawal of financing by key partners, is now back on track. After six months of uncertainty, the African...
Three Memorandums of Understanding (MoUs) were signed between South African and Malaysian companies at the Malaysian High Commission in Pretoria on Friday. These MoUs are part of the indirect offsets programme South Africa is providing in return for Malaysia’s...
The South African new vehicle market may well dip to 640 000 units in 2014, says Toyota South Africa Motors (TSAM) sales and marketing senior VP Calvyn Hamman. This is the first prediction that anticipates a drop in the market. To date economists and industry bodies...
Nissan will re-enter the South African minibus taxi industry in March, when the new NV350 Impendulo goes on sale. The 16-seater has been specifically tailored to meet the terms of government’s Taxi Recapitalisation Programme, which aims to replace South Africa’s...