Comair buckles up for SAA Technical descent

● One longtime customer is moving further and further away from embattled SAA. And this time it is not a passenger.

After losing millions of rands due to capacity problems at SAA Technical, Comair is now taking maintenance of its aircraft into its own hands, the private aviation group’s joint CEO Glenn Orsmond told Business Times this week.

Comair, which owns kulula and operates the South African domestic flights of British Airways, started by shifting heavy maintenance of its aircraft overseas to alleviate the backlog it experienced at SAA Technical. But this is a short-term measure for the company and in the long run it hopes to do its heavy maintenance in-house through Star Air Cargo and Star Air Maintenance, which it bought outright earlier this year.

“We want to take more control of our own maintenance,” said Orsmond.

Comair’s move is yet another blow to SAA as it awaits another lifeline from the National Treasury. The national carrier had over the years done some decent business with Comair.

“Definitely it is an opportunity missed for SAA. Comair was a very stable client for [SAA] Technical,” said independent aviation economist Joachim Vermooten.

“SAA Technical has a good historical reputation,” he added. But it has been a troublesome time for the division in recent years as decisions about its resources were influenced by SAA’s financial woes.

SAA CFO Deon Fredericks, according to reports, told parliament this week that the airline’s journey will be challenging and that another R3.5bn lifeline from the state’s contingency fund is expected by the end of this month.

SAA has been undercapitalised for years and its boardroom and management teams have been in flux for the better part of the past decade. CEO Vuyani Jarana resigned earlier this year, citing slow decisionmaking and red tape at the airline.

Acting CEO Zuks Ramasia briefed parliament this week that the airline was making progress in reducing staff costs.

The maintenance issues squeezed Comair’s profits in the year to end-June. And it could not have come at a worse time as the grounding of its new Boeing 737 MAX 8, following worldwide safety concerns in the wake of the crash an Ethiopian Airlines flight, meant it had to lease other planes.

Together, these issues came at an estimated cost of nearly R200m, according to Comair. The company made a tidy full-year profit, but this was, ironically, inflated by a settlement from SAA for uncompetitive behaviour to the tune of R1.1bn plus interest. Without the settlement, Comair’s full-year profit was down by 82% at R86m.

In a business with margins as low as the airline industry’s, Comair is even willing to pay a bit more initially to make sure it does not encounter the same problems it did at SAA. Despite probably being more expensive for at least the next three years, Comair is backing Lufthansa to do the job for line maintenance purposes, as the German company sets up operations in SA.

“The transition to Lufthansa Technik will come at a cost to the airline as Lufthansa recovers initial set-up costs and scales up its facilities,” Comair said.

The company said it is on track with the transition of its entire fleet from SAA Technical to Lufthansa Technik.

SAA should learn something from losing Comair’s business as it fleshes out its turnaround plans, said Vermooten.

“SAA Technical has a lot of potential as a standalone business.”

Definitely it is an opportunity missed for SAA

Joachim Vermooten

Independent aviation economist