Comair posts first loss in 74 years

• Airline to claim compensation from Boeing over Max

Comair ended 74 years of unbroken profitability after reporting dire financial results for the six months to December. The operator of kulula.com and British Airways in SA was hit by SAA’s failure to make a payment related to an anticompetitive behaviour case settlement.

Comair, which has reported a R555m half-year net loss, says it will claim compensation from Boeing for grounding an aircraft of a type involved in deadly crashes. This is in addition to the pursuing SAA for not paying a settlement amount owed to it.

The losses of the operator of low-cost carrier kulula.com and British Airways (BA) in SA was largely attributed to state-owned carrier SAA’s failure to make a payment related to a settlement in an anticompetitive behaviour case.

Higher operation and maintenance costs and the grounding of its new Boeing 737 Max 8 aircraft also contributed to the losses.

SAA, which is in business rescue, failed to make a payment due in December. The airline was supposed to pay Comair R1.1bn as part of the settlement agreement, which was reached after complaints by Comair that the national carrier had paid travel agents to divert customers to its flights from 2001 to 2006.

Comair reported a headline loss of R564m from headline earnings of R126.3m.

As much as R450m of the losses was attributable to the increase in the loss allowance on its legal damages claim against SAA. An initial payment of R389m was made on February 28 2019, with the balance payable in regular instalments until July 28 2022.

Comair’s new Boeing 737 Max 8 aircraft was grounded across the world in March 2019 after two new aircraft crashed within five months, one in Indonesia and one in Ethiopia, killing a total of 346 people.

Comair said it will claim compensation from Boeing for the grounding of the aircraft, pursue the full outstanding settlement owed by SAA and divest from nonperforming investments.

Comair CEO Wrenelle Stander said the company will have to devote the next six months to a year to sorting out its challenges. “We are dealing with a few uncontrollable issues. It’s very difficult to time how long it will take to get through all of these challenges,” she said.

Many of the headwinds Comair is facing “can turn quickly”, Stander said.

“We don’t know how long it will take to get money out of SAA but if we do so in the next few months, our profitability can swing in the right direction.

“We have made a half-year loss and still made a full-year profit before.

“We are looking at various ways of increasing revenue that include widening our services. If SAA itself cuts certain services, that also creates opportunities for other airlines such as ourselves,” she said.

Earnings per share fell 543% to a loss of 120.5c. Comair’s overall group revenue grew 3% to R3.8bn.

The company said decisive steps have been taken to implement far-reaching cost-cutting and to increase revenue through improved fleet availability and aircraft utilisation.

Comair said its board has decided that no dividend will be declared for the full 2020 financial year. The company will not pay a dividend again until its fleet has transitioned from SAA Technical to Lufthansa Technik, and targeted aircraft utilisation has been achieved.

Comair’s share price gained 1% on Wednesday, closing at R3.