Wednesday, September 12, 2012

► SOUTH AFRICA: Comair Ltd declares no dividend despite rise in revenues.

Comair LtdSouth Africa's Comair Ltd, the parent company of British Airways (Comair) (BA) and LCC Kulula (MN) today reported that it would not issue a dividend despite seeing a 16% growth in its revenue from USD440million in June 2011, to USD510million for the year ending June 30, 2012.
Product excellence, an increase in air fares, numerous individual cost saving initiatives among them the recent opening of in-house flight catering units in Johannesburg and Cape Town along with stable employment overheads, all contributed to the increased growth.

However, despite the rise in revenue, the group lamented the high price of jet fuel which took its toll on the company's bottom line, forcing operating expenses to balloon by 20% from USD410million in 2011 to USD490million in 2012. As a result, Comair and its joint venture partner, Solenta Aviation, had to axe the unprofitable Johannesburg (Lanseria) to Nelspruit and Maputo, Mozambique routes.

Additionally, South African airport operator ACSA's 70% tariff hike along with a weaker South African Rand impacted on the group's maintenance and leasing costs. 
Putting all these factors together left the group with a meagre USD2.2million profit for the year, down USD7.2million from 2011. Consequently, no dividend was declared. Whilst small, the profit does mean the group has been able to get back into the black following a USD4.1million loss last year.
Whilst presenting the figures for the Financial Year, Comair Ltd CEO Erik Venter said:
Comair boss Erik Venter
Comair Ltd boss Erik Venter (EM)
"The sustained high fuel price and weak global economy created pressure from which few airlines could escape unscathed, as evidenced by the failure of such notable international carriers as Malev, Spanair and Air Australia, and the filing for Chapter 11 protection by American Airlines. And here in SA, we saw the closure of Velvet Sky, the 9th private airline to fail out of the 11 launched since the market deregulated in 1991, and recently we also saw the application for business rescue by 1Time.  In the midst of these challenges, we are proud of being able to retain our unbroken profit history over more than six decades of operation.”
Source [Comair Ltd]
As part of efforts to keep operating costs and in particular, jet fuel costs, as low as possible, Venter stated that Comair Ltd would upgrade the entire kulula fleet to Boeing 737-800’s by end December 2012. 
On a closing note, he also took the time to point out the lopsided nature of South Africa's aviation industry, by attacking state-owned airlines like South African Airways (SA), SA Express and SA Airlink and their continuous requests for government funding which posed a serious threat to the viability of private airlines whose equities and therefore, viability, are built through retained profits.
In a recent speech to the inaugural South African Travel & Tourism Conference in Johannesburg recently, the President of the International Council of Tourism Partners, Professor Geoffrey Lipman said that four jobs are lost for every one created or saved by protecting the national carrier SAA.