Dave Novick (Chairman), Martin Moritz (Deputy Chairman)and Piet Van Hoven (MD) have collectively just sold (last week) over 13% of the equity they hold in Comair in one go. With the exception of Van Hoven, who is set to retire in a few months, this move has not been well received by the markets as there was no warning or indication that a major block of shares were being sold to another entity. I’ve heard rumours that a BEE deal in the offing but surely the directors would have prepared the market?? Bearing in mind these 3 individuals own about 40% of the company is this cause for concern?
As an interested observer I’ve noticed Comair’s vacillation over their fleet- which brand gets what aircraft etc chopping and changing- Kulula has tried out every aircraft in the Comair fleet before settling on the MD80’s now they have even gone back to the B732- operating out of Lanseria in Kulula green. Seems Comair’s long held reputation for business savvy is starting to unravel a tad. All this is costing them hard earned cash no doubt.
I’m afraid Comair is playing a very dangerous game with the BA brand- they are starving it of what it needs to compete with SAA- frequency and capacity. I think we all agree that BA is targeting corporates and Kulula is going for the SME’s and the “bucket and spade brigade” Have a look the table below which is a comparison of frequency on the CPT route. You will notice that collectively Comair is dividing its resources over both brands- with a slight bias to the BA brand- unfortunately this move has placed them at a competitive disadvantage as corporates demand frequency and above all last minute availability of seats- their current strategy is like slow poison to the BA brand- this is evidenced by their pricing strategy to their current corporates where 40% upfront discounts are handed out like sweets in an attempt to keep the customer base on board. By comparison SAA’s upfront discounts to corporates hardly ever exceed 10% and are never over 15%.
JNB/CPT/JNB
Airline FREQ
SA Airways 146
SA Express 3
ComAir 71
Nationwide Air 48
Kulula 52
Interlink Airlines 4
One Time 43
To me the smart move would be to dump one brand and comprehensively “own” one market segment. Remember SAA, at the moment, is fighting both ends of the market with one brand- although its main focus is still its corporates, seats sold on flysaa.com are merely “fill” to close down spare capacity that the corporate market didn’t utilize- but it does everything it can to keep seats available right up to the last moment. If Comair focussed on the Kulula brand SAA would find it very difficult to continue to compete in the low cost segment due to the sheer volume of seats available at that end of the market.
The time to make this decision is fast approaching- SAA will launch its own loco this year and its rumoured that the airline will maintain its current SAA branded fleet commitments so Comair will not get a break in the corporate market and will face ever more focussed competition in the low cost space. The time for Comair to act is now.