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Johannesburg - The world's airline industry is expected to report a $9bn loss in 2009, but local outfit Comair and its rival 1Time are well in the black.
According to analysts, recent diversification strategies by Comair and 1Time have proved a masterstroke of tactical planning.
That both listed domestic airlines are still reporting profits is due to the deal-making abilities of both companies, as the global airline market has been in recession for the past two years and longer.
In SA their state-subsidised and -owned competitor South African Airways has been a perennial loss-maker and is expected to report a deficit of billions when it finally releases results for the year to end-March.
1Time reported 24.22c headline earnings per share (Heps) for the interim period to end-June, while Comair Holdings said in a trading update it expects to increase its Heps by up to 30% from the full year to end-June 2008. Comair earned 15.4c per share last year, which would grow to 20.02c/share this year.
The historical earnings multiple of 2.96 times and earnings yield of 33.7% for 1Time also compare favourably to Comair's expected forward earnings multiple of 9.1 times (at the expected 20.02c/share profit) and earnings yield of about 10.8%.
While Comair has had an uninterrupted profit history of over 60 years, 1Time ran into a R9.8m loss in 2008 before reporting an interim profit of R54.5m.
Comair halved its interim profit to R31.7m in December 2008, but its full-year figure will be up about 30% from the R61.8m in 2008.
Maintenance acquisition
Comair managed to stay not only airborne but soar by diversifying into financial services, travel and tourism, which have softened the blow struck by a record-breaking fuel price of over $140/barrel last year.
"Currently our key diversification project is the development of our online travel business, which is already marketing a wide range of travel packages and hotel rooms as well as car rental," said Comair in June 2008. It formed Kulula Travel and Kulula Card and Kulula Connect to complement Kulula Air (the airline).
1Time also diversified heavily and expanded its aircraft maintenance offering. The acquisition of 72% in aircraft maintenance company Safair Technical early this year provided critical mass to Aeronexus Technical, which has always been the backbone of 1Time, while the airline business has been a loss-maker. It has also ventured into the tourism and travel business.
1Time saw an interim 35% revenue growth to R613m. While the combined maintenance company contributes R151m of the revenue, its operating profit of R7m (after acquisition costs) pointed to higher margins than on the airline business.
1Time's acquisition of Safair Technical makes it the second-largest aircraft maintenance company in Africa after SAA Technical. What gives it an advantage over its competitors is the high barriers to entry in the maintenance business.
- Fin24.com