Comair profits decline in saturated aviation market

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Drop in the price of jet fuel had little effect

Even the substantial decline in the oil price, resulting in a drop in the price of jet fuel, was unable to lift the company's bottom line.

In the year ended June 2015, Comair said headline earnings per share fell to 47.9c from 55.6c in the year-earlier period. Profit for the year fell to R218.8m compared with the R264.9m achieved at the end of June 2014. Revenue saw a marginal decline to R5.89bn from R5.90bn in the year-earlier period.

Despite the weaker numbers, Comair declared a final gross cash dividend of 10c per share.

Comair said in the first half of the year, the unprecedented collapse in the oil price had granted it some relief when compared to dramatic cost escalations of previous years. However, in the second half of the year, "due to hedging 26% of demand during the early decline in the fuel price, the company was not able to achieve the full benefit of the lower cost of fuel," it said.

New competitors

Comair said the second half of the year saw two new competitors entering the market with "very aggressive", but more than likely "unsustainable" pricing. "Comair was, out of necessity, drawn into the fray in order to retain its slice of a market that had still not recovered to 2008 volumes.

"As a result of this, any savings achieved on the price of fuel were returned to our customers by way of significantly reduced ticket prices, with a consequent reversal of the revenue growth experienced in the first six months," the company said.

Looking ahead

Looking ahead, Comair said it remained concerned about the "overcapacity" in the domestic aviation market and the effect the new visa regulations would have on passenger volumes. "The new visa regulations applicable to South Africans travelling with children, as well as to foreign tourists, have impacted negatively on our cross-border tourist destinations, and we are actively participating in achieving a more favourable dispensation in this regard," it said.

It said it would continue upgrading its fleet, focussing on implementing technology solutions to enhance customer satisfaction, operating performance, and drive revenue generating opportunities.

At 12.43pm, the share was down 10.15% to R3.01 valuing the company at about R1.572bn. In the past year, Comair has seen its market cap fall by about 30.34%.

Source: BDpro