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Comair hits the alarm button

Sep 18 2016 11:54
Justin Brown

Comair has predicted that another local airline could go under as prices were depressed, owing to an oversupply of capacity.

Comair CEO Erik Venter said this week that for everyone to stay in business, an airline had to go belly-up or airfares needed to increase.

Aviation analyst Joachim Vermooten said there was over capacity due to SAA and Mango increasing their aircraft and the entry of FlySafair.

Turning to Africa, Venter said that routes in Africa were “very thin” and most routes could only handle one airline. If another airline entered a route, both airlines would become lossmaking.

“Opportunities in Africa are few and far between.”

Comair has taken delivery of three new 737-800s from Boeing, with the last aircraft from the original order of eight aircraft scheduled for delivery in November. The delivery of eight Boeing 737-8 MAX aircraft will be made from 2019 to 2021.

Venter said that the new aircraft saved Comair about R20 million in costs a year because they were more cost-efficient and reliable. “These are bigger aircraft and more seats can be sold,” he said.

Comair was focused on its non-airline interests for growth and these included its airport lounges, pilot training centre and on-board food catering unit, Venter said.

The airline would like to see half of its profits coming from its non-airline interests, up from 18% at the moment, he added.

Venter said the new SAA board had “strong people”, but there was only so much they could do because the airline didn’t have the right people in its top executive.

Venter said that Finance Minister Pravin Gordhan was likely to have persuaded a number of new board members to sit on the board.

“If Pravin Gordhan goes, those people are also likely to go,” he said during an interview.

At least six of SAA’s top 13 executives are in an “acting” or “interim” capacity, including CEO Musa Zwane.

At the beginning of this month, Cabinet reappointed Dudu Myeni as SAA chair for a further year and appointed 11 new nonexecutive directors for three years, starting this month.

SAA’s new board has three nonexecutives that have aviation industry experience.

They are Myeni; deputy chairperson Tryphosa Ramano, who was SAA chief financial officer from 2004 to 2006; and Thandeka Mgoduso, who has served on the board of Air Traffic Navigation Services.

Comair, which owns the local British Airways (BA) and kulula.com businesses, has a 17-person board and Venter said that five nonexecutive directors, excluding executives on the board, had aviation industry experience.

These included Comair chairman Pieter van Hoven, who was Comair managing director from 1980 to 2006; Martin Moritz, Comair deputy chairman, who has been involved with Comair since 1969; Wrenelle Stander, a Comair nonexecutive and previously CEO of Air Traffic and Navigation Services; Khutso Mampeule, a Comair nonexecutive, who was CEO of SA Express from 1999 to 2001; and Gavin Halliday, a Comair nonexecutive, who served at BA for 18 years.

Comair has brought a damages claim of as much as R2 billion, once interest has been factored in, against SAA for abusing its market dominance.

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