If its maiden audited results for the financial year to December 31 2007 are anything to go by, 1time holdings can only soar from here on.
The diversified aviation group recently reported a strong set of results that point to its airline business, 1time Airline, as its main cash cow.
WHAT IT MEANS
 Weak rand grows maintenance business
Fuel accounts for up to 40% of operating cost
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Also aiding its performance was its aircraft maintenance subsidiary, Aeronexus Technical.
The maintenance arm performed exceptionally well in the year under review. Revenue generated from third-party aircraft maintenance services increased to R39,5m for the year.
The company has successfully tendered for the lease of 12 000m2 of land adjacent to its hangar facility at O R Tambo International Airport. This land will be used to expand its maintenance capacity during the second half of this year.
The group increased revenue 36% from R496m in 2006 to R674m for the year under review. Revenue growth was achieved in 1time Airline and Aeronexus Technical.
1time holdings successfully listed on the JSE AltX on August 14 last year with the private placement of 60m shares greatly oversubscribed.
The listing achieved the desired results: raising capital to fund growth, increasing corporate awareness of the 1time brand and attracting strong institutional and public support.
Attributable earnings increased from R24,5m in 2006 to R28,6m last year and headline earnings a share from 8,51c (before being restated as per the prospectus) in 2006 to 15,7c for the year under review (an increase of 84%).
Cash flow generated from operations remained strong at R63,6m for the year compared with R35,7m for 2006. The cash generated has largely been invested in the acquisition of four additional MD 80 aircraft.
Fuel prices increased 40c/litre on average this year, translating to a R35m fuel-price increase for the year.
The company says these cost increases have been recouped through revenue growth achieved as a result of higher passenger volumes and yield growth.
Group CEO Glenn Orsmond says these results, the first since its listing in August last year, are marked by exceptional growth and award winning customer services.
1time holdings consists of five entrepreneurs with extensive aviation experience who saw a gap in the market for a "real" low-cost airline.
Rodney James is CEO of 1time Airline, Sven Petersen runs Aeronexus Technical & Corporate, Michael Kaminski is the IT director and Gavin Harrison is CEO of 1time Charters.
A launch pad already existed in 2003 in the form of their aviation holding company, Afrisource Holdings, which owned Aeronexus.
It is on the back of this already existing business that the low-cost airline carrier was built.
A carefully crafted business plan for 1time Airline is now starting to pay off, says Orsmond.
The airline is now the second-biggest privately owned, low-cost carrier.
In addition to the two subsidiaries, 1time holdings also owns charter company, 1time Charters.
"The business plan works well. The aviation focus is clear and well understood. It is a mix of high-volume and high-margin businesses. A weaker rand grows the aircraft maintenance and charter businesses, which have rand costs and dollar incomes," says Orsmond.
"All three businesses are profitable. On average, about 10% of the profit is from the charter business, about 45% from the airline business and 45% from the aircraft maintenance business. While the airline generates the bulk of the revenue, high profit margins are achieved in the maintenance and charter businesses," says Orsmond.
Plans are in place to grow all three businesses further.
The company's results also reflect an impressive 34% growth in passenger numbers.
This growth far outstrips growth of 15%/year achieved by the entire domestic airline market for the past six months.
1time now claims 12% of the market.
Growth, says 1time Airline's James, is due largely to hard work on the product.
"We try to delight our passengers with better seats (leather), leg room and we try to achieve the lowest cost," he says.
The airline also offers discounted accommodation and car-hire rates on its website in partnership with City Lodge Hotels and Avis.
Unlike one of its competitors, 1time Airline does not offer this as a package, simply making it easier for travellers to access the information by publishing it on its website.
Its growing market share comes in spite of challenges such those brought by state-subsidised airlines such as Mango and SA Airways distorting the market by selling below cost "in an attempt to retain market share", says Orsmond.
The airline is also locking horns with two other low-cost carriers over an anti-competitive exclusivity agreement with Lanseria Airport.
"There are two issues regarding Lanseria. First, whether the exclusivity agreement is legal and second, whether it is fair. The first issue needs to be decided by the competition commission.
"When it comes to fairness, we believe the consumer needs choice, it is the only way prices can come down and services can improve. Service standards at Airports Company of SA (Acsa) airports are shocking as they have no competition. Lanseria should offer an alternative with better service, less congestion and lower costs," he says.
The IATA (International Air Transport Association) which represents about 240 airlines, comprising 94% of scheduled international air traffic, recently released a report saying that fuel costs represent a third of operating costs globally.
Orsmond has pointed out that the costs are slightly higher for low-cost carriers and that fuel accounts for up to 40% of 1time's operating costs.
Fuel prices have risen 83% on the continent over the past year and 79% the world over.
But an independent aviation analyst says that in spite of fuel and other inflationary pressures, the local market is growing at 5%/year.
"We constantly review fuel hedging opportunities, but have not hedged fuel to date. The current fuel prices are higher than the consensus forecasts on fuel prices for this year, making hedging unattractive," he says.
In terms of keeping other costs low, the company depends on selling 95% of its tickets through the Internet, eliminating traditional sales and distribution costs.
Orsmond says aircraft acquisition post September 11 2001 at depressed values and a stronger rand also assisted.
And with the recent closure of low-cost competitor, Nationwide, the pie has grown even bigger.
1time Airline owns a stage-three standardised aircraft fleet of 12 planes, four of which were purchased this year.
The challenges for the company will continue to be fuel-price volatility and government regulation, which prevents it from growing into the lucrative African market.
1time offers a weekly flight to Zanzibar and hopes to increase this to twice weekly by the end of June.
"We want to grow into servicing other parts of Africa, but golden regional routes are protected by bilateral agreements. What Africa needs is an open-skies policy that will help grow its economies," Orsmond says.
The airline is the first in the country to win five Feather Awards in one year.
These Acsa awards are based on the results of independent passenger surveys regarding all aspects of customer service.
Orsmond forecasts positive revenue growth next year for 1time's three main operations, in spite of a slowdown in gross domestic product growth.
