Comair loses altitude on rising fuel prices


Comair loses altitude on rising fuel prices

Published Date: 2019-02-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

Comair loses altitude on rising fuel prices

The airline will take delivery of six new aircraft this year which will mitigate high fuel prices and enhance the potential revenue per flight.

Higher fuel prices and short-term aircraft leasing costs, which weren't expected, have put the brakes on Comair's earnings. Still, the airline has continued its 72-year run of unbroken profit. Its non-airline businesses are also making a growing contribution to earnings.

Reporting interim results yesterday, Comair said it did well to deliver a record 12% increase in revenue for the six months to end-December despite the weak economic conditions in SA. Cash generated from its operations fell by 30% to R436 million due to the elevated fuel prices. It said a 35% increase in the rand price of fuel cost it an extra R263 million compared to the prior period.

It made R89 million in pre-delivery payments on an order for a Boeing 737-8 MAX aircraft and spent R253 million on aircraft heavy maintenance. That left it with a closing cash balance of R331 million. Earnings and headline earnings per share declined by 38% to 27.2c. It's maintained its interim dividend at 5c per share.

Airline Passenger Revenue increased 11% as it flew 5% more passengers and raised the average fare per passenger by 6%. Despite the higher seat occupancy, it said it still remained below the global average of 85% due to overcapacity in the domestic airline market.

Apart from contributing to higher fuel costs, the weaker rand over the period resulted in an R11 million loss on a dollar-based aircraft loan, compared to a profit of R11 million on the revaluation of the loan at the end of 2017.

Its non-airline businesses, which include pilot and cabin crew training, business lounges and catering, contributed 27% of pre-tax profit, up from 19% a year earlier, with sustained prospects for further growth.

Comair said it would take delivery of two new Boeing 737-8 MAX aircraft over the next two months as well as four leased Boeing 737-800 aircraft due for delivery between April and September, all of which will replace older Boeing 737-400 equipment.

Last week, SAA agreed to pay Comair R1.11 billion after it was found guilty of anti-competitive behaviour. The settlement will be made between now and July 2022.

Its shares ended trade 0.2% down at R5.74.

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