Easy for Comair to stay ahead of the rat pack

Comair might like to rub the noses of its competitors, such as they are, into the fact that it has produced an operating profit without fail for the past 72 years. This must be meaningful, but does it mean Comair gets it right every time?

No-one is perfect, as they say. Assuming the airline, which operates in SA, sub-Saharan Africa and the Indian Ocean islands, does sometimes get it wrong, what would account for its extraordinary run?

Bear in mind that Comair ranks among the top JSE-listed companies on an average annual growth of 41.5%, which it maintains in a highly regulated, capital-intensive and volatile industry in which profit margins are notoriously negligible.

The domestic airline business got no easier over the past year. CEO Erik Venter complains about SA’s economy being in the doldrums and fuel prices going through the roof, yet Comair reported record results for the year to June 30 2018 on revenue of R6.5bn from R6.064bn a year ago. Headline earnings per share were up 4% to 69.8c a share from 67c a share in 2017.

One scary answer is that it is not that Comair is consistently brilliant at what it does, but that its competitors are consistently bad. If that is the case, what will happen to Comair’s record when SAA pulls up its socks?

Venter is too polite to poohpooh the notion, but he does hope such an event will bring an end to the irrational pricing in the market. SAA’s woes are not necessarily Comair’s gains. Shareholders may agree, but will its passengers?

The conditions the Competition Commission wants imposed on SibanyeStillwater’s acquisition of Lonmin strikes a delicate balance between saving jobs and preserving the business in the long term.

Lonmin is already in the process of cutting 12,460 jobs as part of a restructuring and Sibanye determined another 855 jobs should be cut to sustain the business.

But the commission estimated 3,189 of the retrenchments arise directly from the merger and so has proposed there be a condition that the company implement three short-term projects that run up to 2020 and that will delay some shaft closures and save these jobs. The jobs, however, will not be saved at all costs – 87% will be subject to the platinum price rising and the costs of mining being contained.

The commission also proposes Sibanye embark on an agri-industrial community development programme in the Rustenburg area, to create an alternative source of economic activity to sustain retrenched employees and the communities in which they live.

The commission’s proposed conditions are fitting for the tough times platinum producers face. The metal price remains close to 10-year lows of $800 an ounce while a global oversupply persists and no new drivers of demand are apparent.

Neither Sibanye-Stillwater nor Lonmin’s share prices have reacted much to the news of the recommended approval and indeed they shouldn’t. There are still a few hurdles to clear, the next being the Competition Tribunal, which can, and often does, impose different or additional conditions on large mergers like this one.