Tough year ahead for SA aviation, predicts BA Comair

BA Comair
2 min read

The current weak economy is expected to maintain pressure on consumer spending and result in a tough year for the aviation industry. That is the word of BA Comair CEO Erik Venter.

As a result of a weak economy, South Africa can expect to see continued pressure on margins, particularly in the airline industry, combined with a possible decline in passenger volumes, according to Venter.

This year, in the continued absence of meaningful GDP growth in South Africa, Comair’s domestic airline-passenger market has yet to expand into its surplus seat capacity, adds Venter. “The lack of GDP growth constrains industry occupancy levels at below the global average. Average global seat occupancy is 80.6% as per IATA, while Comair has an average of 75%.”

Despite these ‘tough trading conditions, Comair has reported a 54% increase in profits in this year’s annual financial results, and a 28% increase in cash generated by its operations.

Says Venter: “Comair is well positioned to operate in these conditions, with strong brands, dedicated staff, effective equipment, an efficient cost base and strong cash reserves.”

The company also reports that income generated by its non-airline brands now constitutes 20% of its earnings. Venter says the results, including the strong performance of the non-airline operations, supports Comair’s strategic focus.

Comair’s claim against SAA for damages, arising from anti-competitive conduct, and amounting to between R810 and R898 million, was recently heard in the Gauteng South High Court. Judgement in this matter was handed down on 15 February 2017. In terms of the judgement, Comair was awarded damages of R554 million, with a similar additional amount being awarded in respect of interest and costs, resulting in total damages of approximately R1.16 billion. SAA lodged an appeal against this judgement.

Comair lodged a cross appeal to recover the full amount of the damages sustained plus interest on the total amount, which if successful, will increase the damages awarded to approximately R1.9 billion. “It’s anticipated the appeal will be heard in early 2018,” concludes Venter.