South African airline group Comair Limited’s strategy of countering the weak local air passenger market by diversifying its business is proving successful, company CEO Erik Venter told Engineering News Online on Wednesday. “It’s working very well. About 20% of our profits are coming from our non-airline businesses and we’re hoping to get this to 50%, probably over the next five years.”

“Fundamentally, the airline business will remain our core business,” he stressed. “If, when, we see the economy recover, then I think we will see the airline profits taking off again!” The airline business is still, despite the state of the economy, making a profit, as is the entire group. “Both are still doing well,” he assured.

Apart from the airline business, operated under the Kulula low-cost and British Airways (in South Africa) brands, the company now also embraces airline catering business Food Directions, the Comair Training Centre, Kulula Travel (travel agency, which itself operates a number of brands) and the Slow Lounges (airport lounges at various South African airports, of which five are for domestic travellers and one, at OR Tambo International Airport, is for international passengers). These all operate as separate business units, although not all are subsidiary companies.

A constraint on the company is that it has invested a lot in new aircraft, but the airline business needs higher returns to sustain the originally planned pace of the fleet renewal strategy. “We’ve slowed up our new acquisition programme,” he reported. Comair has eight fourth generation Boeing 737MAX single-aisle airliners on order. Originally they were going to be delivered over the three-year period 2019 to 2021; now, they will be delivered over a four-year period (2019 to 2022).

In the past few years, the airline business has taken delivery of nine more efficient next-generation Boeing 737-800 aircraft (and it leases another seven), making this third generation version the mainstay of its fleet and leaving only ten older, second generation “Classic” 737-400s in service. “For us, it’s ‘thank goodness we got the new [737-800] aircraft’,” stated Venter. “Without their efficiencies, we’d be in quite a lot of financial stress right now.”

South Africa’s domestic air passenger market has seen no effective growth since 2008, a period of nine years. There were about 13-million passengers a year then and there are still 13-million a year now. This situation he describes as “astonishing”. 

“The four sectors we’re now in have a lot of scope for future growth,” he highlighted. “There is huge scope on the hospitality side, lots of place for growth in training, and also on the travel agency side.”