Comair takes aircraft maintenance in-house and looks to expand ancillary businesses

The JSE’s only listed aviation company, Comair, which is under new management, is expanding into aircraft maintenance and airport lounges in order to maintain its record of 70 years of uninterrupted profit. 

Comair, which operates British Airways and Kulula, said on Tuesday its profit in the year to end-June almost tripled due to a R1.27bn settlement it received from SAA.

Comair joint CEO Glenn Orsmond said his team is working to expand Comair’s revenue streams in order to compete and remain profitable in a weak economic environment.

Orsmond and Wrenelle Stander took over from Erik Venter as joint CEOs in July.

"We are happy with our results but we won’t get billion payouts like that again anytime soon so we have to grow our different revenue streams to maintain profits,” said Orsmond. 

Comair will expand its aircraft lounge offerings, ancillary businesses and look to better manage its cash, he said.  Comair has also bought an aircraft maintenance company so that it could maintain its fleet in-house.

Full-year revenue rose 9% to R7.1bn amid improved load factors, higher average fares and increased revenue from ancillary and non-airline revenue. Comair upped its final gross dividend 5.8% to 18c.

The company suffered a 16% rise in operating expenses to R6.26bn, with fuel and currency movements adding R342m and R89m respectively. This came after problems with aircraft maintenance scheduling and parts inventories at SAA Technical in the first half of its financial year. The problems were worsened by the global grounding of the MAX 8 aircraft in the second half of the reporting period.

The group took delivery of one of two MAX 8 aircraft shortly before it was grounded after an accident in Ethiopia earlier in 2019. The computation of these costs continues, but a preliminary estimate put it at R195m.

Comair has received preliminary communication from Boeing on compensation for the grounded aircraft but did not included these prospects in its financial results. The company is confident the MAX 8 will be recertified, and the more efficient aircraft will bring savings on fuel.

Pretax profit, excluding the SAA settlement, slumped 82% to R86m, with the British Airways franchisee buffeted by volatility in the rand and oil price.

Profit for the year soared 175% to R896m after the group received R1.27bn in its settlement from SAA. The settlement compared favourably with Comair’s R1.67bn market capitalisation as of Tuesday.

The airline had lodged civil claims based on a 2006 competition appeal court ruling that SAA paid commissions to travel agents to incentivise them to divert customers to SAA flights. The civil litigation was the first based on a Competition Tribunal ruling.

The competition appeal court concluded that SAA could show no reason that the scheme, in which SAA captured high-value customers and grew its revenue threefold over rivals, might drive technological innovation in the sector.

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