SINCE Comair published its annual results for the year ended June 30 just more than a week ago, I've been thinking maybe it is the right time to air some comments on its performance.

I've not been triggered by sudden interest in a possible investment in its sector, although potential travel and leisure may well thrive during and after the 2010 Soccer World Cup. I do think, though, that the way the company has managed its assets during a demanding fundamental environment is a model investment exercise.

Comair, as you must know, operates two airline brands in SA, British Airways and its budget brand, Kulula.

It's bedevilled by high fuel prices, what can fairly be described as state-subsidised anticompetitive pricing and the economic slowdown. These three factors affect both asset turn (the ratio of revenue to assets) and operating margin (the percentage return of operating profit on revenue), which are the drivers of return on assets.

The fuel price trend is volatile and fundamentally upwards over time. Comair manages this by hedging against volatile upward spike prices. This hedging cost -- in both management time and price -- affects operating margin. The hedging cost stabilises expenses but can't change the fundamental fuel price trend. Thus, in the first half of the financial year, when the oil price peaked at 147 a barrel, Comair's ticket prices - and those of their competitors increased. When the oil price retreated to 40, the pressure on ticket prices eased.

In battling competitive ticket price pressures, Comair's strategy was two-pronged. The first was pushing for a high level of customer satisfaction. In both brands, it achieved high scores. The second was the continuation of the upgrading of its fleet to more fuel-efficient and more comfortable aircraft.

Comair's performance is best gauged in the context of the comparative sector performance: the directors reported that the company's strong brands enabled it to maintain volumes in a year when the overall market declined 10%.

Its other business strategy has been to diversify into allied operations, flight training and on- line travel businesses.

The implementation of Comair's strategies were distilled into an improvement in the operating margin in the financial year to 4,23% from 4,17% last year, and a rise in turnover of 13% to R3,05bn from R2,69bn the previous year.

It could hardly be expected that asset turn could have been boosted at a time when asset upgrading was in the process of implementation. The total assets base grew year on year 18% to R17,01bn from R1,44bn, while turnover, as already mentioned, rose 13%. Consequently, asset turn fell to 1,79 from 1,86 the previous year. This small decline confirms the company's strong management investment fundamental.

This fundamental enabled Comair to return 7,58% on its return on assets managed, only a marginal dent on 7,77% the previous year. Helped by a stronger balance sheet -- interest- bearing liabilities were barely unchanged year on year at R361m -- bottom-line headline earnings per share rose 23% to 19c from 14,9c last year.

At Comair's share price of R195, the price-earnings ratio of 9,7, earnings yield of 10,3, the dividend yield is 2,6%. Counting into next year's tourist potential, the price could have value.