Neels Blom Writer at large
Erik Venter. Picture: MARTIN RHODES
Erik Venter. Picture: MARTIN RHODES

JSE-listed airline company Comair has reported a record performance for its first half to December 31 2017, despite the constrained economic conditions, says CEO Erik Venter.

Comair operates scheduled and nonscheduled flights in SA and in the sub-Saharan and Indian Ocean island region under the low-cost brand kulula.com and under licence as British Airways. The results continue an unbroken record of profit for the company since inception 71 years ago.

Venter said Comair’s main constraint over the period was a surplus capacity in its fleet that was not at international standards. “Considering SA’s flying population, this suggests that there is considerable latent capacity in the market. “[But] despite a lack of growth in the economy and the GDP, we saw a 6% growth in both revenue and passenger volumes over the review period.”

Comair reported an after-tax profit of R203m on Tuesday, up R4m from R199m in the first half a year ago, and earnings and headline earnings per share of 43.6c, from the 42.8c in the comparable period. This resulted from a 13% rise in nonairline operations. A dividend of 6c a share was declared.

The company benefited from its fleet renewal programme, which permitted its two brands to operate more competitively than airlines operating older, less fuel-efficient aircraft, said the CEO.

Aviation economist Joachim Vermooten said Comair’s fleet renewal suggested a clear business focus primarily on domestic routes with narrow-bodied equipment.

“In contrast, its main competitor, SAA [South African Airways], has a difficult mix of airline businesses, which result in a contamination of brands and service offerings, loss of management focus and a blurred business proposition from an investment perspective.”

Vermooten said Comair’s diversification into nonaviation had already provided positive contributions in the short term, while its fleet renewals due for 2019 would contribute in the medium to long term.

Venter said that despite the political changes under way he expected political uncertainty to continue causing volatile economic conditions, but the company intended capitalising on its expanded capacity and was “well-placed to prosper”.

The big hurdle facing Comair now, said Venter, was to stimulate an appropriate level of interest among local investors. “There is a lot of value in the share [considering that] comparable airline companies traded at [a price-earnings ratio] of 15-20, while Comair was at six.

“This seems inappropriate in light of Comair being among the top five JSE-listed companies in growth in cumulative shareholder value in the past five years, equating to annual growth of 41.5% and a total growth of 467%,” said Venter.

About the litigation between Comair and SAA, Venter said he expected the matter to be settled by June. “If successful, the damages will amount to about R1.9bn,” he said.

SAA appealed against the finding of the High Court in Johannesburg, which ruled that SAA had to pay Comair R554m, plus years of interest, for engaging in anticompetitive behaviour between 1999 and 2005.

blomn@bussinesslive.co.za