Comair Plans Re-Engineer Against Backdrop Of Weak Local And Global Economy

The airline grew its revenue by 17% for the half year period leading up to December 2011 as a result of higher fleet utilisation and the larger Boeing 737-800 aircraft which it introduced last year. However, its operating costs increased by 24% to R2,008-billion (2010: R1,607-billion) as a result of the more than 40% increase in the average fuel price compared to the same period last year. The combined impact of the high fuel price - which has been at its highest level since 2008 - the weak economic climate and airports tariff increases of more than 70%, placed pressure on the airline which could not be passed on to consumers.

As a result, headline EPS declined from 10,3 cents (Dec 31, 2010) to a loss per share of 4.9 cents. In addition, a R10,7-million loss was incurred with the disposal in December 2011 of three Boeing 737-200s.

Cash generated from its operations remained strong, and R106 million was reinvested in heavy maintenance on aircraft and in the new Sabre Airline enterprise system.

CEO of Comair, Erik Venter, commented, "We are focused on dramatically re-engineering the airline business. Airlines that do not substantially reinvent themselves are unlikely to survive in this challenging environment as demonstrated by the failure of a number of global airlines such as Spanair and Malev Airlines during the first weeks of 2012. External factors such as the high oil price and a weak global economy will prevail for the foreseeable future and we've therefore taken dramatic action through a cost reduction programme."

He added that the company has embarked on several cost saving projects such as setting up its own catering unit which aims to reduce catering costs by 25% and establishing a crew base in Cape Town to reduce crew accommodation costs by 80%.

"We are also focusing on optimising our flight schedules and we are positive that these short- and medium-term measures will significantly improve Comair's financial performance in a consistently tough trading environment."

As part of its aggressive strategy to increase revenue, Comair is also busy implementing a new state-of-the-art inventory, reservations and logistics system from Sabre Airline Solutions. He added that the company was confident that it would see tangible business benefits of the new Sabre system in the 2013 financial year.

Venter highlighted that since the deregulation of the South African domestic airline industry in '91, British Airways and low-fare carrier kulula.com - both operated by Comair Limited - have remained two of only four private sector airlines to survive in a marketplace with a 73% failure rate.

Although the growth of its other sources of revenue - SLOW lounges, the online travel business and pilot training - performed well, they were also affected by the weak economy. The pilot training was further enhanced with the establishment of a fourth flight simulator, thereby further broadening the offering of this world class facility.

During the period under review, Erik Venter was appointed as the sole Chief Executive Officer and Piet van Hoven was appointed as Chairman of the Board on the 13th February 2012.