Johannesburg - Low-cost airline Comair is pinning its growth hopes on a new fleet to maintain its competitive advantage over its rivals.
Comair chief executive Erik Venter said on Tuesday the industry was expecting the pressure on margins to continue, but the company’s investment in the new fleet and its cash reserves meant it would be well placed for future growth.
“The ongoing upgrades to our fleet provide mitigation to the expected increase in the fuel price, while also providing an improved customer experience. The new fleet, along with improved technology-driven operating processes, will ensure that we maintain a healthy competitive advantage for the benefit of our customers,” Venter said.
The company said it would spend $9.7 million (R129.4 million) in pre-delivery payments during the financial year towards the delivery of Boeing 737-8 Max aircraft in 2019.
Earlier, Comair shares rose more than 4 percent after the airline reported a 20 percent surge in profits for the six months to December, and had cash on hand of R949 million at the end of the period.
Comair said its profits for the period increased to R199 million from R84 million in the comparative period.
Read also: Comair's profits soar to R199m
The airline said its earnings a share and headline earning a share went up to 42.8cents during the period, compared to 18c and 13.1c respectively last year. Cash generated from operations was R448 million for the period.
Comair, which in 2016 was involved in a strike, a tussle over its licence and a challenge from a competitor over its foreign ownership, said its gains were mostly due to the strengthening of the rand against the dollar.
“The oil price remained relatively stable over the past 12 months, and the oil hedges that gave rise to a loss of R71 million in the comparative period all matured by December 31, 2015, with no subsequent hedges being entered into,” the company said.
Venter said the airline took delivery of one new Boeing 737-800 and one leased Boeing 737-800 to replace the Boeing 737-400 aircraft in the British Airways fleet retired as part of its fleet-replacement programme.
The South African aviation industry has experienced a turbulent past few years, with many airlines closing shop.
Last month, low-cost airliner Fly Blue said it was evaluating its routes as part of its restructuring after it had filed for business rescue last year. Nationwide Airlines, 1Time and Velvet Sky have folded.
Venter said he expected 2017 to be another challenging year for the industry, with consumer spending under pressure and subdued margins.
“Comair is well placed to operate in these conditions, though, with strong brands, committed staff, effective equipment, an efficient cost base and strong cash reserves,” he said.
Comair shares rose 5.21 percent on the JSE to close at R5.05.