Fly­ing high

Finweek English Edition - - Marketplace Simon Says -

I have spent pretty much my en­tire in­vest­ing life­time say­ing that air­lines are a hor­rid busi­ness and we should never in­vest in them. Dur­ing this time Comair has been qui­etly prov­ing me wrong, as the lat­est re­sults at­test, with HEPS com­ing in at 67c ver­sus 36.5c pre­vi­ously. The big deal for Comair is the non-air­line busi­ness (cater­ing, train­ing and lounges, among oth­ers), which now makes up 20% of its rev­enue and will pro­vide a great base that will also be less volatile than air­line prof­its, which are sub­ject to cur­rency moves and the oil price. The one down­side is that while the com­pany states the lo­cal air­line mar­ket grew 2.3% lo­cally, it only grew seat num­bers by 2%, sug­gest­ing some lost mar­ket share. This is likely the re­sult of new low-cost car­ri­ers hav­ing en­tered the mar­ket. But with SAA po­ten­tially cut­ting back on some lo­cal routes, this should add some ex­tra growth po­ten­tial as a lack of GDP growth hin­ders real seat growth in the in­dus­try. That all said, I re­main very wary of air­lines as a busi­ness and still avoid the sec­tor.

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