Comair to retire Kulula MD82's

[Q4NVS]

Heard that Comair will be retiring the Kulula MD82's within 3 years.

Anyone know what the long term plan is wrt what they will be eventually replaced with?

A380's..? :p

[samueldethierry]

Comair and Kulula are really in a pickle! Kulula are bankrupting BAComair on lots of routes and so now BAComair and Kulula are (trying to) organise plans to share flights. In terms of Aircraft, initially, the airlines; both Kulula and BA Comair would like Airbus aircraft, the A320 family. However, the airlines are in chaos so this looks like a dream!

[Tailspin2001]

Comair would still be the small niche airline they always were if they hadn’t taken on the BA franchise in 1996; it was this that finally put them on the map.
It is my personal view that Comair didn’t like sharing the income of the BA operation with BA and therefore set up Kulula in 2001. It's no wonder that Kulula is ‘bankrupting’ BA Comair, they compete with them self on the same route with the same aircraft and pilots. You just have to look at the flight timings JNB-CPT; Kulula has a 0750 flight, pretty much peak time, while BA Comair has nothing between 0700 and 0930!
There was a big fanfare when BA Comair got the 737-400’s from Big BA, the next thing you know these same aircraft are in use by Kulula in Kulula livery………. then another fanfare………. BA Comair gets 737-300’s from Qantas!!!
I don’t think dumping the BA franchise seems to be an option otherwise Comair would have done it a long time ago and anyway BA still owns 18% of Comair.

[George Tower]

Mr Thierry

You seem to have quite a thing about Comair/Kulula/BA don't you. I think that Comair has to be the most successful airline in South Africa. It has very highly regarded safety, two very strong brands, and unlike other airlines in SA, MAKES A PROFIT.

Getting back to the original question with respect to retiring the JT8D powered MD82, I would guess that it is in part due to the fact that this represents good business sense in so far as the current and future cost of fuel is concerned.

[Kep Ten Jim]

I'm really surprised Kulula is in a pickle. Every time I try and get a seat on a Kulula flight, it's fully booked. I thought they would have been making hobos of money

[newcrew]

GEORGE TOWER...

i have to agree with you 100% so very well put in so few words ////NICE

:) :) :) :)

[T Hairy Henry]

George Tower

Don't tar me with the other Henry's brush!!!!

My thoughts in the past were all about the cannibalisation of the BAComair brand. Unless you work for Comair, we don't know if both brands actually making money? They may well do, I don't know. I'm not close enough to the action to know too much.

Kep Ten Jim

High load factors are not always an indication of a route doing well. Because of the revenue management systems used by Low-Costs, the average fares being achieved may be below breakeven.

[Q4NVS]

I totally agree with the last - often people, epsecially those not directly involved, tend to measure success by the number of souls running up/down the airstairs...

This however is a false sense of achievement, i'd say.

As an example, if one looks at the rates 1Time are charging to Bloemfontein, they are most probably not turning more than R200 per seat after all the ACSA fees and taxes etc have been paid.

For those watching from the distance, seeing a DC9 at 80% load, would think hey these guys are coining it. At that revenue, i don't think so... Look carefully :8

As for the "only" airline making a profit....?

It has been said that of the R4 Billion borrowed by SAA, in the last 12 months alone, some R1.6 Billion has been repaid to Transnet. Goto be doing something (small) right atleast one day of the week to be able to do that, hey?

By the sounds of things, the new SAA plans might just catch a few off-guard.
:ok:

[Deskjocky]

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.

[George Tower]

May be Comair are acting - a bit of insider trading possibly by the top brass.....who knows.

I think the issue about the two brands is going to rear its head soon, if not already. In the past I think Comair did well having both as to start Kulula from scratch would have been a good deal harder and more risky. I guess having all the infrastructure in place can be a good thing, BUT if that cost base is too high it can then become a millstone. In terms of where the two brands are at in their business cycles, may be now is the time for them to go their seperate ways,

As far as load factors go it is really all us mere mortals have to go on. Not being close to the action we can't get info on yields but suffice to say they're falling world wide and fuel prices are heading upwards, and consequently I for one find it difficult to see the future of LCC business model using old and inefficient aircraft. 5-6 years ago it would have made perfect sense - fly these old aeries in to the ground (not literally) and fill 'em up, but at 20$ per barrell you could afford to.

[Deskjocky]

GT, spot on, the days of running an old banger around are gone. A fact not lost on investors..... like the directors of Comair!!:} That said they still have have the lowest cost per avialable seat in the market although they have almost lost that position to CE in recent time -so just imagine what old Vern could do if he didnt fly those old 727's around!!! does he know something the rest of the industry doesnt know???:hmm:

[Q4NVS]

Therefore the world wide Turbo Prop revival..

As said earlier on another post, the bean counters at SAX might just have seen, predicted and acted accordingly wrt the Q400 acquisitions.

FAJS to FAGG
Literally only minutes longer than the CRJ, but with 48% more passengers while doing this at 75% the cost of the CRJ.

Makes one think about the old adage "only airline that makes a profit..."

:hmm:

[George Tower]

ERJ,

I am unapologetic about being a champion of the free market and to this end SAA and SAX should have been dead or privatised a long time ago. I guess my whining is getting to resemble a stuck record......however yes it's all well and nice for SAX to make a prudent acquisition but but had a private company made some of transnet's blunders over the years chances are they wouldn't be around to tell the tale. At 20m USD each Q400's ain't cheap.

Be interesting to see if they use them on the Windhoek routes & what the pax think of em once they're flying the line.

ERJ, one more thing - do you drive the jungle jet or have you? If so how much do you burn approx between FAJS & FAGG?

DJ,

Interesting point about NW. I never would have thought that given that apart from the 2xB737-500s he has an old fleet of JT8D powered aircraft. Just wondering if the 767 rotations to LGW are thrown into the equation and thus skew the figures. I guess the low costs per ASK may well be achieved :E through slave labour as well

I think VB is from the Michael O'Leary school of industrial relations.....shaft everyone:ouch:

Rgds

GT

[Deskjocky]

GT, I was surprised at the figures too when I saw them, think its also cyclical. VB knows how to extract his pound of flesh:} he runs a very tight ship in terms of expenditure- if you have a chance go and look how many people fit into the typical CE office then go and look at MN- real eye opener!!! Also he does self handling with ancient equipment he keeps importing from the UK- he invented the art of cost cutting.

What you cannot deny is the passenger numbers climbing on his aircraft- thats why he is making a better showing when one looks at the historical data. He is ideally positioned in this market- he has the low cost airline infrastructural costs but the full service product.

[George Tower]

Another thing about CE is they haven't really expanded that much in the last few years apart from say the LGW route.

I know they did once try the East London route but then shelved it and interesting to see 1-Time promoting that a lot.

A search of these forums will show that VB has still some way to go with respect to the cutting of costs as per Ryanair. I'm not sure whether some these stories are true but they are quite interesting.......staff not being allowed to charge their mobile phones at work, no window blinds, no reclining seats in new aircraft etc.

I'm also amazed that customer service is so good considering how (allegedly) he treats his staff.

[Q4NVS]

GT,

ERJ from FAJS to FAGG = approx 2000kg's @ 37 pax
Q400 from FAJS to FAGG = similar or less @ 74 pax

How much do you think R Foster paid for the ERJ's and if so, what would you have bought instead of Q400's..?

Considering a forecasted Oil Price of 150 USD per barrel, within 18 months.

Btw, it is understood that the 1st 2 Q400's will be used on the FAJS-FAGG as well as FAJS-FABL routes.

FAGG frequencies @ 50 per week
FABL frequencies increased to 53 per week

:E

[George Tower]

ERJ,

Presume you are now driving the big dash for SAX after having had fun in the jungle jet?

I presume your question is rhetorical - but wasn't the original Embraer deal valued at about R8bn for all the options. In part I guess that was RJ mania like the dot.com bubble that burst. Not implementing Yamassoukro has also put a damper on things no doubt.

[Goldfish Jack]

One of the nice things about reading things on PPrune is the amount of rubbish spoken!

A business that has been profitable for 50 years and needs to expand can do it several ways - by raising capital on the equity market or by selling part of its shares as well. It is well known that Comair is a sought-after business and they are ideal for a takeover, to enable them to expand. Sure they have sold a lot of equities, but the whole deal has been financed by a well known investment bank is SA. Sure it is going to be a BEE-related company and the deal will officially be announced shortly, but have any of you thought of this:
BA plc, as an overseas investor, owns 18% of Comair and in terms of present legislation, this is the maximum allowed to be owned by a foreign company, if no there is no BEE element. Should there be a BEE element, that ration can be increased to 40%. mmmm

Furthermore, it is a well known fact that BA plc is very happy with Comair's performance - proof of this is the fact that they are the only franchise that BA plc has invested in and also Comair has, for the last 6 years or so, been the top franchise performer in the BA group of companies, consistently earning the award as the best run franchise in terms of opperational delivery and performance.

As to them getting rid of the MD's - FACT. Just like the B737-200s they will also be phased - as I type this, I am aware that they are looking at bigger a/c in the desert - both for Kulula and the BA brand - with a shortage of slots available out of FAJS how else can you expand, short of getting bigger a/c? Talk of the AIrbus is a joke Comair is a Boeing company - just look at their simulator section to see that and how important that is to the Company. Do you really think they will train their pilots to fly Airbus and then allow them to train other pilots on Boeings as well??

Sure they combing Kulula flts and BA flts, by cancelling kulula flts - but that is a straight economic decision. In terms of the BA franchise and IATA rules you cannot cancel flights because of poor loads, should they do that they will be liable for fines from BA plc and possible termination of the franchise because they have not met the rules, never mind possible censure from IATA. So with kulula not being an IATA airline, rather cancel kulula flts and combine them with BA ones. Great economic decision, if you ask me.

Have you also thought about the insurance savings for Comair being part of the BA group? I know the savings are far more than the annual franchise fees they pay, so it makes sense to stay within the BA group.

As a small time investor who enjoys playing the South African and overseas equity markets I just wish I had more money to buy Comair shares.

On a a totally unrelated point, did you know that SA Express told Equity that if they continue to hanlde 1Time, they would cease all their handling contracts with Equity. WHo is smoking what at SA Express - who do they think will do their handling around SA - Swissport ? opposition to Equity and SAA??

[Goldfish Jack]

One of the nice things about reading things on PPrune is the amount of rubbish spoken!

A business that has been profitable for 50 years and needs to expand can do it several ways - by raising capital on the equity market or by selling part of its shares as well. It is well known that Comair is a sought-after business and they are ideal for a takeover, to enable them to expand. Sure they have sold a lot of equities, but the whole deal has been financed by a well known investment bank is SA. Sure it is going to be a BEE-related company and the deal will officially be announced shortly, but have any of you thought of this:
BA plc, as an overseas investor, owns 18% of Comair and in terms of present legislation, this is the maximum allowed to be owned by a foreign company, if no there is no BEE element. Should there be a BEE element, that ration can be increased to 40%. mmmm

Furthermore, it is a well known fact that BA plc is very happy with Comair's performance - proof of this is the fact that they are the only franchise that BA plc has invested in and also Comair has, for the last 6 years or so, been the top franchise performer in the BA group of companies, consistently earning the award as the best run franchise in terms of opperational delivery and performance.

As to them getting rid of the MD's - FACT. Just like the B737-200s they will also be phased - as I type this, I am aware that they are looking at bigger a/c in the desert - both for Kulula and the BA brand - with a shortage of slots available out of FAJS how else can you expand, short of getting bigger a/c? Talk of the AIrbus is a joke Comair is a Boeing company - just look at their simulator section to see that and how important that is to the Company. Do you really think they will train their pilots to fly Airbus and then allow them to train other pilots on Boeings as well??

Sure they combing Kulula flts and BA flts, by cancelling kulula flts - but that is a straight economic decision. In terms of the BA franchise and IATA rules you cannot cancel flights because of poor loads, should they do that they will be liable for fines from BA plc and possible termination of the franchise because they have not met the rules, never mind possible censure from IATA. So with kulula not being an IATA airline, rather cancel kulula flts and combine them with BA ones. Great economic decision, if you ask me.

Have you also thought about the insurance savings for Comair being part of the BA group? I know the savings are far more than the annual franchise fees they pay, so it makes sense to stay within the BA group.

As a small time investor who enjoys playing the South African and overseas equity markets I just wish I had more money to buy Comair shares.

On a a totally unrelated point, did you know that SA Express told Equity that if they continue to hanlde 1Time, they would cease all their handling contracts with Equity. WHo is smoking what at SA Express - who do they think will do their handling around SA - Swissport ? opposition to Equity and SAA??

[Mark J B]

You hit the nail on the head GJ! The shares were sold to a single entity which will probably be BEE but we don't know who it is yet. As for the load factors, in March we moved more passengers than ever before in the 60 year history of the company. The notion that Kulula is sinking the company is a strange one, seeing as this is where Comair is focussing its growth plans. The reason the MD's are possibly going to be phased out is the fuel burn factor. It is not a forgone conclusion that this will happen but it makes sense to go with newer, more economical aircraft with the fuel prices as they are. As for Airbus, unless you know something we don't, it is not likely. Comair is striving for fleet commonality not mixing it up even more.

[Solid Rust Twotter]

Gi'z a job....:ok:

[George Tower]

One of the nice things about reading things on PPrune is the amount of rubbish spoken!

With respect GJ this isn't the Huey thread:E

I think by and large we've debated it in a measured way.....people of French extraction often have some strange ideas

Are you intimating that because of the BEE deal that BA plc might want to have a greater investment in Comair? If they do and I was a Comair investor I would be a bit worried as BA's record in regional ops in the UK is woeful. I'm not slagging BA - just pointing out that their history in this area is less than illustrious, see BRAL, BA Citi-express etc. The fact that Comair is locally owned and run is in my view part of why they've been so successful.

[Deskjocky]

One of the nice things about reading things on PPrune is the amount of rubbish spoken!
A business that has been profitable for 50 years and needs to expand can do it several ways - by raising capital on the equity market or by selling part of its shares as well. It is well known that Comair is a sought-after business and they are ideal for a takeover, to enable them to expand. Sure they have sold a lot of equities, but the whole deal has been financed by a well known investment bank is SA. Sure it is going to be a BEE-related company and the deal will officially be announced shortly, but have any of you thought of this:
BA plc, as an overseas investor, owns 18% of Comair and in terms of present legislation, this is the maximum allowed to be owned by a foreign company, if no there is no BEE element. Should there be a BEE element, that ration can be increased to 40%. mmmm

Agree with GT on this, think this one has been fairly even discussion.
What needs to be understood here is that just because Comair has been around for years doesn’t mean it doesn’t make mistakes. Is that a bad thing-no!! the issue was why not be open about who the shares goes to- in fact when Gideon Novick was on 702 recently he was asked about the trade- he ducked the question completely, as if he didn’t know about it- that type of thing is always going to raise a few eyebrows- the media got hold of this too. I think Comair are afraid of the way the market are going to take this BEE deal and have decided to play this one close to their chests.
In terms of other observations made, perhaps some don’t agree but I believe Comair are painting themselves into a corner with running the 2 brands and are going to have to make some decisions rather sooner than later in terms of what market segment they will choose to dominate or it will harm the airline as a whole, all the while uncle vern is sneaking up behind you:suspect:
On a a totally unrelated point, did you know that SA Express told Equity that if they continue to handle 1Time, they would cease all their handling contracts with Equity. WHo is smoking what at SA Express - who do they think will do their handling around SA - Swissport ? opposition to Equity and SAA??
Ten out of ten for Siza!! she must be reading pprune!!! Actually SAX has a lot of options regarding ground handling, they are the easiest airline around to handle. Their only requirements from a handling agent are for bussing and baggage handling (Im going to exclude the 737’s out of this discussion as they are a temporary arrangement and will be replaced by the Q400’s) The airports they require bussing at are JNB,CPT,DUR at the rest of the airports the pax walk- fortunately these airports have 3 handling agents operating there- ditto for baggage handling- no problems so far. At the other airports, baggage handling is a matter of buying a bakkie and hiring a few guys to load the aircraft- in some of their smaller stations like RCB/HDS etc this is already being done.
SAX have even more choice than you think- it is well known that SAA are going to take 50% of their contract away from Equity once the current contract expires- its going to be very convenient for SAA to see how another handling agent handles SAX and will definitely help it in its decision when the time comes (SAA staff handle SAX check-in at the main airports so SAA staff will get a feeling very quickly for how things are running) This is not going to be lost on the other 2 bidders for the SAX business. Im sure you are well aware that CHS has got aspirations for greater things, again this has been communicated to SAA...
If SAX kick equity out then they will have no option but to charge 1Time more for handling because at some stations they will be their only customer – eg BFN the economy of scale that prevailed due to SAX kindly paying the bills as the anchor client will evaporate- smart business if you ask me:ok:

[tamboekie]

Kulula and BA/Comair are one and the same company!

[George Tower]

Kulula and BA/Comair are one and the same company!

The above statement has to be one of the strongest contenders of all time for a statement of the bleedin' obvious:rolleyes: