Airline operator Comair, which has reported operating profits for 72 years running, on Thursday said it expects earnings for the year to June to increase by at least 20%, due mainly to its R1bn settlement from SAA.
However, without the settlement amount, Comair’s earnings were set to drop, the company said.
This was an indication that declining passenger numbers due to the slump in the economy have caught up with the airline operator of low-cost carrier kulula.com and British Airways in SA.
This will be the first fall in the company’s earnings since the year to June 2016.
In terms of the settlement, the state-owned SAA must pay Comair R1.1bn from the end of February 2019 until July 2022.
Comair lodged a civil claim against SAA based on a 2006 Competition Commission Appeals Court ruling that the national carrier had engaged in anticompetitive behaviour by paying commissions to travel agents in order to incentivise them to divert customers to SAA.
In the year to end-June 2018, Comair’s earnings per share and headline earnings per share were 69.8c and 69.5c, respectively, compared to 63.7c and 67c in the prior year.
Ian Cruickshanks, a chief economist at the SA Institute of Race Relations, said on Thursday the expected fall in earnings was indicative of the poor state of the economy.
Weak economy
"Because the economy has not been growing, it does not come as a surprise that the number of passengers would shrink.
"This is what has been happening in the aviation industry all over the world. This has a lot to do with the environment in which they are in," Cruickshanks said.
Comair has previously bemoaned the weak economy’s pressure on consumer spending as well as an oversupply of seats in the domestic market, which it said placed downward pressure on pricing.
The International Air Transport Association (Iata) on Thursday said global passenger growth had slowed down in the past two years.
"This is in line with slumping global trade, rising trade tension and weakening business confidence. In this challenging environment, airlines are managing capacity carefully in order to optimise efficiency," Iata director-general Alexandre de Juniac said.
Iata said traffic for African airlines rose 2.1% in May and traffic between Africa and Europe continued to expand strongly, "but economic growth in SA — a key regional economy and air transport market — contracted sharply in the first quarter and this is adversely impacting air passenger demand".
Controversy
Comair courted controversy earlier in 2019 when it said it would continue to fly the Boeing 737 Max 8 aircraft despite safety concerns after the March 10 crash of an Ethiopian Airlines aircraft in Ethiopia.
The company later made an about-turn on the decision.
The group this week announced the appointment of Bidvest Group CEO Lindsay Ralphs to its board.
This followed the resignation of Phuti Mahanyele-Dabengwa, who was this week appointed CEO of Naspers’s SA business.
Bidvest has a 27.2% interest in Comair. Comair’s share price rose 3.49% to R3.85 on Thursday.
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