Integrated Annual Report - Comair - Comair Airways Limited ... · Annual Report, which covered the...

Integrated Annual Report2014

Performance Highlights for the Past Five Years

7.06.05.04.03.02.01.0

-2010 2011 2012 2013 2014

Revenue (R’billion)

300

250

200

150

100

50

-2010 2011 2012 2013 2014

Profit after taxation (R’mllion)

50,000

40,000

30,000

20,000

10,000

-2010 2011 2012 2013 2014

Sectors flown

800700600500400300200 100

-2010 2011 2012 2013 2014

EBITDA (R’million)

60

50

40

30

20

10

-2010 2011 2012 2013 2014

Profit per passenger (Rand)

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

-2010 2011 2012 2013 2014

Passengers carried

45.0040.0035.0030.0025.0020.0015.0010.005.00

-2010 2011 2012 2013 2014

Fuel burn (litres) per 1,000 available

seat kilometers

Integrated Annual Report 2014

1

Report Profile ........................................................................................................ 2

Who We Are and What We Do .............................................................................. 4

Group Value Added Statement .............................................................................. 7

Chairman and CEO’s Report ................................................................................ 8

Core Values ......................................................................................................... 11

Group Objectives ................................................................................................. 11

Strategic Intent .................................................................................................... 12

Internal Control and Risk Management ................................................................ 14

Sustainable Development Report ......................................................................... 18

Corporate Governance ........................................................................................ 42

Audit Committee Report ..................................................................................... 52

Remuneration Report .......................................................................................... 55

Social and Ethics Committee Report ................................................................... 58

Report of the Directors ........................................................................................ 59

Statement of Responsibility by the Board of Directors.......................................... 65

Certificate of Company Secretary ........................................................................ 66

Independent Auditor’s Report .............................................................................. 67

Statements of Financial Position .......................................................................... 68

Statements of Comprehensive Income ................................................................ 69

Statements of Changes in Equity ......................................................................... 70

Statements of Cash Flow ..................................................................................... 71

Segmental Report ............................................................................................... 72

Accounting Policies ............................................................................................. 73

Notes to the Annual Financial Statements ............................................................ 82

Notice of Annual General Meeting ...................................................................... 109

Share Price Performance ................................................................................... 120

Shareholder Analysis ......................................................................................... 121

Contents

2

Report Profile

Scope, Boundary and Reporting Cycle

This Integrated Annual Report (“this Report”) of the Comair Group

(“the Group”) presents the economic, social and environmental performance

of the Group’s airline and non-airline businesses in respect of its operations

in South Africa only, as well as the financial results of the Group for the

financial year 1 July 2013 to 30 June 2014. Whilst the performance of

the Group’s associates is discussed in this Report, the Report focuses

more on the performance of the Group’s subsidiaries as their contribution

to the Group’s performance is more significant. In addition, this Report

does not extend to cover the performance or issues facing the Group’s

suppliers in its supply chain, outsourced operations such as, but not limited

to its fleet maintenance, or its leased facilities. These limitations are not

considered materially to impair the completeness of this Report. There

have been no restatements of previously reported information, nor have

there been changes to the basis of calculations or to the assumptions

and techniques applied in compiling the data presented other than as

detailed in the Report.

The Integrated Annual Report will be sent to shareholders, who are recorded

as such in the Group’s Securities Register on 19 September 2014, and

is available on the Group’s website at www. comair. co.za. Printed copies

are available on request from the Group Company Secretary. This is the

Group’s fourth Integrated Annual Report, and the prior periods’ Integrated

Annual Report, which covered the period 1 July 2012 to 30 June 2013

and was published on 28 September 2013, is also available on the

Group’s website.

Reporting Principles

The content of this Report is driven by those issues that have the greatest

potential to impact on the Group’s ability to operate. We consider a broad

range of external and internal factors, including the outcome of various

stakeholder engagement processes driving the Group’s integrated reporting

process, when deciding which issues are of the utmost importance to

address. Whilst this Report attempts to highlight the significant issues

raised and the outcomes of these various engagement processes, its

content predominantly focuses on the information deemed relevant to

the Group’s shareholders and potential investors.

The information included in this Report aims to provide shareholders and

investors with a good understanding of the significant economic, social

and environmental risks and opportunities the Group faces in the short

and medium term, as well as the Group’s response in order to ensure its

ability to create and sustain value for its shareholders and investors in the

long term. In addition, the Group explains its efforts to reduce its impact

on the environment and the societies in which it operates.

This Report was prepared in accordance with International Financial

Reporting Standards, the Financial Reporting Guides issues by the

Accounting Practices Committee, the Listings Requirements of the JSE

as well as the requirements of the Companies Act (Act No. 71 of 2008),

as amended. The Group’s reporting on sustainable development is guided

by the Sustainability Reporting Guidelines (G3.1) of the Global Reporting

Initiative (GRI) and the International Integrated Reporting Council’s Integrated

Reporting Framework’s Guiding Principles.

The Group has applied the majority of the principles contained in the King

Code of Governance Principles and King Report on Governance (King III).

The Group’s application of the principles of King III as well as the few

instances of non-compliance are recorded and explained in the Group’s

King III register that is continuously updated and maintained and located

on its website www.comair.co.za. A summary report is included in the

Corporate Governance Report.

Our Stakeholders

The Group’s commitment to its stakeholders to conduct its business in

a sustainable way and to respond to their needs is entrenched in its core

values. The nature of the Group’s business implies a close relationship

with its stakeholders such as, but not limited to:

• Its customers who purchase the Group’s products and services and

to whom it must provide, amongst other things, a safe, secure and

reliable service;

• Its employees, who are responsible for providing safe, secure and

reliable services;

• Its various suppliers who form an integral part of the Group’s ability

to provide a safe, secure and reliable service;

• Government Regulatory and Industry Bodies, since the industry in

which the Group operates is subject to extensive government and

regulatory oversight;

• The community, in an attempt to improve the lives of fellow South

Africans;

• The media, who play an important role in the Group’s engagement

with stakeholders; and

• Investors, since one of the main objectives of the Group is to create

wealth for its investors as reflected in the stakeholder diagram set

out below.

Without regular communication with the Group’s various stakeholder

groups, it would not be able to deliver its products and services in a safe,

secure or reliable way. Of the stakeholder groups identified below as part

of the Group’s regular business activities, select stakeholder groups are

considered to be more significant in determining the Group’s ability to

operate and generate value.


3

Customers*Communities

Media

Investors*Employees and trade unions*

Industry associations*

Government and regulatory

bodies*

Suppliers*

Risk Management

The Group follows a comprehensive and integrated risk management

process where the identification and management of risk forms part

of the Executive Management Business Plan. The Board, through the

Risk Management Committee, actively monitors this process. For more

information on the Group’s risk management process, refer to the Internal

Control and Risk Management Report on pages 14 to 17 of this Report.

Significant Events during the Reporting Period

During the reporting period in question, the Company implemented a share

buy-back in terms of which it repurchased 48,913,372 ordinary shares

amounting to 10% of its ordinary issued share capital in accordance

with a general authority to repurchase shares, granted by the Group’s

shareholders at its Annual General Meeting held on 30 October 2013, and

which share repurchases were announced on SENS on 6 November 2013

and 9 December 2013.

No significant changes regarding the Group’s size, structure or ownership,

apart from the foregoing, occurred during the reporting period compared

to previous financial years. Hence there are no significant changes from

previous reporting periods in the scope, boundary, or measurement

methods applied in this Report.

External Audit and Assurance

The Financial Statements on pages 68 to 108 were audited by the Group’s

independent external auditors, Grant Thornton (Jhb) Inc. (Grant Thornton),

in accordance with International Standards of Auditing. The report of the

external auditors is included on page 67.

Grant Thornton has provided limited assurance over selected key

performance indicators and specific disclosures as set out in this Report.

Based on the work Grant Thornton performed, nothing has come to our

attention that causes us to believe that the selected key performance

indicators and specific disclosures in the Integrated Annual Report for

the year ended 30 June 2014 have not been fairly stated.

For a better understanding of the scope of Grant Thornton’s assurance

process, reference should be made to Grant Thornton’s Assurance

Statement, which can be obtained from the Group Company Secretary,

or accessed via the Group’s website www.comair.co.za.

Contact Us

We welcome the opinions and suggestions of all our stakeholders. Please

address all opinions, suggestions and questions to our Group Company

Secretary, Derek Borer, using our contact details supplied on the inside

back cover of this Report.

4

Who We Are and What We Do

Comair Limited (the Group) is a South African Company listed on the

Johannesburg Stock Exchange since 1998 offering, scheduled and non-

scheduled airline services within South Africa, sub-Saharan Africa and

the Indian Ocean Islands as its core business.

The Group has operated successfully in South Africa since 1946 and is the

only known airline to have achieved operating profits for 69 consecutive

years, with a safety record which is internationally recognised.

The Group operates its scheduled airline services under two (2) brands,

namely, the kulula brand and the British Airways brand under licence from

British Airways Plc. During the period under review the Group operated

43,246 sectors (one-way flights) and carried 5,196,507 passengers,

as opposed to having operated 40,757 sectors and carried 5,050,873

passengers during the prior reporting period. A diagram reflecting all the

destinations to which the Group’s two (2) airline brands provided airline

services during the period under review is set out below. The Group’s

headquarters are based in Bonaero Park, Kempton Park and whilst it

operates flights destined for locations outside of South Africa, the Group’s

operations are based in South Africa.

In addition to providing scheduled and non-scheduled airline services,

the Group offers the following non-airline related services:

• A travel and holiday package service using advanced technology to

deliver travel and holiday packages to many destinations, both locally and

internationally, to consumers directly and the retail travel trade. Through

acquisitions, expansion and partnerships, the Group has established one

of the country’s largest and broadest digital travel distribution networks.

The brands under the Group’s travel and holiday package banner include

kulula holidays, Holiday Tours, GoTravel24, MTBeds and African Dream

Holidays, and the Group also has Harvey World Travel-Holiday Retail

Travel Agency. The Group continues to form partnerships with industry

leaders in travel reward and recognition programmes as part of its

objective to continuously expand and grow this business.

• In 2009 the Group launched its SLOW Lounges and currently operates

SLOW Lounges at OR Tambo International Airport in both the domestic

and international terminals, Cape Town International Airport domestic

terminal, King Shaka International Airport domestic terminal and SLOW

in the City in Sandton, Johannesburg. The SLOW Lounges have set

a global standard for airport lounges, providing a perfect sanctuary


5

from the fast pace of travel and modern life, and have won numerous

awards for their creative excellence. Demand for the lounges has

increased and the Group is embarking on an expansion programme

for the Cape Town International Airport domestic lounge and the

domestic and international lounges at OR Tambo International Airport.

• The Group launched its own catering unit in 2012 under the Food

Directions brand and provides on-board catering services to its kulula

and British Airways flights, giving the Group control and flexibility in

terms of cost and product offering.

• In addition to training Comair’s own pilots, the Comair Training

Centre (“CTC”) offers a full range of aviation-related ground school

subjects and flight simulator training for the full range of Boeing

737 type aircraft. The CTC also provides a variety of other ancillary

subjects as well as cabin crew and flight dispatcher training. In

collaboration with Avian de Transport Regional (ATR), the CTC is

also the host for the ATR Reference Training Centre which offers

simulator training for pilots of ATR turboprop aircraft. The CTC has

a client base of airlines from numerous African countries, as well

as the likes of the Middle East, South America, Indo-Asia and the

Far East.

A diagram reflecting the various Group brands is set out below.

kulula.com and British Airways, operated by Comair, are our airline related brands, while the balance of the brands are non-airline brands.

As at 30 June 2014, the Group employed 2,006 permanent, full-time employees over its various operating platforms in South Africa as opposed to

having employed 1,912 permanent, full-time employees over its various operating platforms in South Africa as at 30 June 2013.

6

Who We Are and What We Do (continued)

Organisation Structure

Apart from Comair Mozambique Limitada, which is registered in

Mozambique, and Churchill Finance Services 23 Limited, which is

registered in Mauritius, all the Group’s other subsidiaries and associates

are registered in South Africa.

The Group’s affiliated businesses performed well over the period under

review and made a meaningful contribution to profits, although they

make up a small percentage of the Group’s turnover. They are exposed

to immaterial risks and pose no threat to the completeness principle.

100%

100%

100%

100%

100%

25%

40%

49%

100%

100%

Kulula Air (Proprietary) Limited trading as SLOW in the City: Holds the liquor licences in respect of

certain of the Company’s lounges and looks after various service agreements relating to the lounges

Alooca Properties (Proprietary) Limited: Property owning company which owns a number of properties

in Rhodesfield surrounding the Company’s operations building

Aconcagua 23 Properties (Proprietary) Limited: Property owning company which owns the property

on which the Company’s operations building is situated

Amber Capital (Proprietary) Limited: This company was set up as part of a financing transaction for

certain aircraft. It is in the process of being deregistered and is currently dormant

Holiday Tours (Proprietary) Limited: An outbound tour operating company offering holiday packages

to destinations outside of South Africa

49%

30%

Online World Travel 24 (Proprietary) Limited: A full service online travel agency providing travel

services online

Imperial Air Cargo (Proprietary) Limited: A cargo and freight company providing cargo and freight

services in South Africa

Protea Hotel ORT (Proprietary) Limited: Property owning company which owns the building that

constitutes Protea OR Tambo Hotel

Commuter Handling Services (Proprietary) Limited: Provides ramp handling services in South Africa

to various airlines

Comair Mozambique Limitada: The company is currently dormant

Churchill Finance Services 23 Limited: Established in Mauritius for the purposes of financing the

acquisition of aircraft. This company is dormant and is in the process of being deregistered

Comair Catering (Proprietary) Limited: Holds the liquor licence in respect of the Group’s catering

business and looks after various service agreements relating to the catering operation


7

Group Value Added Statementfor the year ended 30 June 2014

2014 2013

R’000 % R’000 %

Wealth created

Group revenue 6,282,219 5,386,581

Cost of materials and services (4,794,443) (4,112,760)

Value added 1,487,776 1,273,821

Interest income 32,149 20,217

Total value added 1,519,925 1,294,038

Wealth distributed 964,327 824,930

Community investment 1,623 0 660 0

Employees

Salaries, wages and related benefits 738,003 49 671,936 52

Providers of capital

Interest on loans 77,340 5 61,641 5

Dividends paid to shareholders 70,295 5 24,215 2

Government

Taxation expense 77,066 5 66,478 5

Wealth retained 555,598 469,108

555,598 37 469,108 36

Accumulated profits 555,598 469,108

1,519,925 100 1,294,038 100

8

Chairman and CEO’s Report

Group Performance

As Chairman and Chief Executive Officer, it is our privilege to oversee and

lead an airline that has grown from its infancy in 1946 to the Group known

today, operating scheduled airline services in South Africa, sub-Saharan

Africa and the Indian Ocean Islands and using 26 aircraft made up of

B737-800s, B737-400s and B737-300s. During the year under review,

the airline operated 43,246 sectors, carrying 5.2 million passengers and

employing 2,026 staff members.

We remain firmly committed to our vision of offering an exceptional travel

experience in the most efficient way. Our focus in delivering on our strategic

intent will enable us to continue to create long-term shareholder value. The

Group’s reputation and focus on safety, customer service and efficiency

has built a sustainable foundation to accommodate growth opportunities

and ensure that we continue to play a major role in the Southern African

aviation and travel industry.

The Airline Industry

The aviation industry worldwide is recognised for its operating challenges.

It is an industry that is capital intensive, has small profit margins and is

highly regulated. A consistent theme across the global airline industry is

one of poor returns on investment, protected competition and low barriers

to entry. It is an industry that is a soft target for taxes, volatile costs and

increased regulation.

The high and volatile fuel price, and in South Africa, our volatile exchange

rate, requires airlines to constantly innovate and improve on operating

efficiency. Worldwide the industry has recognised the need for radical

change to ensure sustainability and profitability.

Our top priorities are to continuously improve our customer service,

control costs and increase our business efficiencies. In this regard, we

have adopted an approach not dissimilar to many successful airlines

worldwide, of acquiring and operating larger but more fuel-efficient aircraft

and implementing a new generation information technology platform

enabling us to deliver greater efficiencies and new commercial opportunities.

We are firmly committed to the local aviation industry and to working with

government and other relevant authorities to ensure:

• The maintenance of a safe, reliable, competitive and commercially

viable air transport sector, where all operators are afforded equal

treatment by government;

• The provision of an air transport infrastructure that is affordable and

consistent with the requirements of the air transport sector and the

travelling public; and

• The provision of air travel at costs that are affordable to South African

consumers and are in line with internationally accepted airline service

standards and practices.

Strategic Priorities

During the period under review, we concentrated on the following strategic

priorities:

• Improving revenue to cover the rapidly rising fuel price and US

dollar denominated costs and managing these costs without ever

compromising on providing a safe, secure and reliable airline service;

• Constantly delivering on our promise to customers;

• Enhancing our new, enterprise-wide IT platform;

• Upgrading our fleet, including the investment in new aircraft;

• Continually monitoring and responding to changes to our macro-

operating environment; and

• Providing employment security to all of our employees.

We have delivered against these priorities during the period under review.

Performance against Objectives

Financial Performance

Comair has again delivered strong performance against a backdrop

of a contracting domestic market and devaluation of the Rand. Total

comprehensive income increased by 16% to R265 million, while earnings

per share were further improved by the repurchase of 10% of issued

shares, transacted in November and December 2013, resulting in a 24%

increase in earnings per share to 58 cents.

Turnover grew by 17%, with one quarter attributable to an increase in

passengers and three quarters from improved yields. Due to the strength

of the kulula and British Airways brands and the ongoing attention to

customer service, a growth in passengers of 3% was achieved despite

the domestic market contracting by 4%. We continued to focus on our

customers through the application of service metrics, feedback surveys,

customer journey mapping, and extensive investment in training programmes

for front-line staff. Operating performance remained good, with on-time

performance meeting our threshold target of 85% across both the British

Airways and kulula.com brands. The capacity growth by Comair and its

competitors has, however, resulted in a decline of 6% in average seat

occupancy rates compared to the prior year.

Operating costs remain under control. A significant challenge for the 2014

financial year was to accommodate an 18% weakening of the average

exchange rate, contributing to an increase of 19% in the price of fuel and

similar increases in other foreign-based costs. Excluding the effect of the

fuel price increase, the cost per available seat decreased by 1.5%. This

was achieved mainly through the efficiencies derived from the ongoing

fleet upgrade strategy. The new Boeing 737-800s, acquired 18 months

ago, continued to perform exceptionally well, and Comair purchased a

further, pre-owned ’800 early in the year, followed by another ’800 on

lease. Both of these aircraft replaced Boeing 737-300s that were retired.


9

Cash at year end remained strong at R868 million, after accommodating

outflows of R120 million for the 50% cash component of the purchase

of the 737-800 mentioned above, R151 million for the share buy-back,

R152 million on pre-delivery payments for the four (4) new aircraft to be

delivered in late 2015 and 2016, and a R102 million deposit on eight (8)

new aircraft to be delivered from 2019 to 2021.

Comair achieved a clean safety audit by IATA, thereby renewing its IATA

Operations Safety Audit certification for a further two (2) years.

Our affiliated businesses of flight training, travel product distribution and

airport lounges continued to perform well.

The Group continued to invest in its transformation initiatives, including

its pilot cadet programme, airport learnerships, and social responsibility

initiatives, and anticipates an improvement in its B-BBEE score.

Customer Experience

We continued to focus on our customers through the application of feedback

surveys, customer journey mapping, service metrics and extensive training

programmes for front-line staff. Operating performance remained good,

with on-time departures meeting our threshold target of 85% on both the

British Airways and kulula.com brands.

Investment

During the year we made substantial investments towards the ongoing

upgrading of the fleet by placing an order for eight Boeing 737-8 MAX

aircraft for delivery from 2019 to 2021. This was the first order in Africa

for the new generation MAX aircraft.

We also acquired a B737-800 in October 2013, which became the first

of its type in our British Airways fleet. A second, leased B737-800 will

join our British Airways fleet in December 2014, followed by the next

four (4) new B737-800s on delivery from Boeing in late 2015 and 2016.

All of the aforementioned aircraft are currently designated to replace

existing aircraft. We are also in the process of upgrading our SLOW

Lounge in Cape Town.

Market Environment

Partnerships

Partnerships are still the cornerstone of our business. We continue to

work closely with the travel agent community in distributing our products.

Our relationship with Discovery Vitality has also grown and now includes

local, regional and international flights, holiday packages as well as car

rental and hotels for Vitality members. We have extended our First National

Bank/Rand Merchant Bank relationship with further investment in the

SLOW Lounge at Cape Town International Airport. Europcar is one of

our strongest partners, and together we believe we are the largest online

car rental business in South Africa.

Brands

Our brands continue to perform well in the market. kulula.com is the

market leader in affordable, easily accessible air travel and continues to

grow in the cost-conscious business and leisure market. kulula.com has

become one of South Africa’s iconic consumer brands and is estimated

to be the country’s largest online retailer by annual sales value.

Our British Airways (BA) brand has continued to grow in the corporate and

public sectors, as well as in the inbound tourist markets. The BA loyalty

programme, Executive Club, the SLOW Lounges and our investment in our

catering products, have all helped to grow the appeal of this brand. Our

relationship with British Airways Plc remains strong, with BA and ourselves

seeing great potential to grow our partnership further into Africa. Our

SLOW Lounge brand has built great equity amongst business travellers.

Competition Tribunal Claim

As previously reported, the Competition Tribunal ruled in our favour in our

case against SAA for its anti-competitive travel agent incentives and its

abuse of dominance. We also won the appeal which SAA lodged, and

have issued a multi-million Rand summons against SAA for damages

related to this claim. We are currently waiting for a date in the High Court

of South Africa to have our damages claim against SAA heard.

State Funding of SAA

Comair’s entry onto the main South African routes, and its ongoing

sustainability, relied on the commitments made by government in various

policies and legislation to create a pro-competitive aviation industry. Failure

by government and the state-owned airlines to adhere to these principles,

including the ongoing state funding of SAA, has led to an uneven playing

field for competitors. The resulting, often irrational, commercial behaviour

of the state-owned airlines remains the most disruptive challenge to

the sustainability of the domestic industry, and to us delivering on our

obligations to our customers, employees and shareholders.

As previously reported, the Group found it necessary to challenge, by way of

an action before the South African High Court, the R5 billion State guarantee

provided by government to SAA. This challenge is on the basis that such

funding is contrary to government’s domestic aviation policy, the Constitution,

the Public Finance Management Act, the Promotion of Administrative Justice

Act and the SAA Act. The Group is awaiting a court date for its challenge

but sincerely hopes that the matter will be amicably settled with government

and a solution will be found whereby SAA is held accountable to operate in

a commercially responsible manner in the domestic market.

Affiliate businesses

Our affiliates’ businesses performed well over the period and we continued to

look for aligned business opportunities. While these businesses contribute a

small percentage of our turnover, they are making an increasing contribution

to our profits. Specifically, our online travel business, lounges and flight

training business performed well during the year.

10

Chairman and CEO’s Report (continued)

Corporate Governance

We aim to be a good corporate citizen and maintain the highest standards

of integrity and ethics in our dealings with our stakeholders. To ensure that

we offer the best possible airline service and are regarded as the airline

of choice for all travellers within our operating environment, we manage

and control our business by implementing governance procedures and

ensuring that we identify and manage our risks effectively. During the

year the Group achieved a clean safety audit by IATA, thereby renewing

its IATA Operations Safety Audit certification for a further two (2) years.

Further information in this regard can be found in our Internal Control and

Risk Report on pages 14 to 17 of our Integrated Annual Report.

Sustainability

We are committed to managing our business in a sustainable way. This

means considering not only the Group’s financial performance and risk

profile, but also its social, environmental and economic impact. Included

in the Integrated Annual Report is our Sustainable Development Report,

which provides our shareholders with information regarding the significant

social and environmental risks and opportunities that have an impact on

our ability to create long-term value for our stakeholders. In addition,

we explain our effort to reduce the impact on the environment and the

societies in which we operate.

People

We continue to attract the best talent in the business and continually

invest in their wellbeing and development. We are also very fortunate to

have a highly experienced and dedicated management team that has a

wealth of experience in the industry.

Training

Training and skills development is a major priority to ensure that we

are able to provide a quality service to our customers, and we spent

approximately 3% of payroll during the period under review to support

our commitment to this priority. Further details in this regard are set out

in our Sustainable Development Report.

Society

We are a committed corporate citizen and, together with our staff,

endeavour to improve the lives of fellow South Africans. We try to make

a meaningful impact on our local communities by attempting to alleviate

some of their socio-economic challenges. Our Sustainable Development

Report provides further information in this regard.

Environment

We are committed to protecting the environment, conserving natural resources

and utilising resources in an effective and responsible way by adopting sound

environmental practices in our business and industry. We are also committed

to improving our environmental performance by attempting to reduce the

adverse impact that aviation has on the local and global environment. Further

details are set out in our Sustainable Development Report.

Transformation

The Group continued to progress with its transformation programme, as

seen in the most recently issued B-BBEE certificate where the score has

improved from a level 5 to a level 4 contributor. The industry is still faced

with significant challenges in attracting adequate numbers of matriculants

with higher grade mathematics and science from previously disadvantaged

groups for training in aviation specialised skills. Further details on this

matter are set out in the Sustainable Development Report.

Looking Ahead

We remain concerned with the sluggish economy, declining domestic

passenger market and the high operating costs faced by the aviation

industry. The total market size remains below the peak volume of 2008

and does not currently show signs of returning to historic levels.

Nevertheless, looking further ahead, we remain confident that there is

scope for further growth in the profits of the Group. The ongoing upgrades

to the fleet will continue to improve operating efficiency, while at the

same time enhancing the revenue potential per flight. We are scheduled

to take delivery of the next four new 737-800s from Boeing in late 2015

and 2016. During the year Comair placed the first African order for the

next generation of Boeing 737, the 737-8 MAX. Eight (8) of these aircraft

will be delivered to Comair from 2019 to 2021.

We are also focused on implementing technology solutions to enhance

our operating performance, customer service experience and revenue

generating opportunities. The pace of development in distribution

technology is relentless, and Comair is intent on extracting the maximum

benefit from its customer information data in order to improve its service

offering, and the marketing of relevant products to its various customer

segments. We are also developing new software applications for use

on board the aircraft and on the ground to facilitate more efficient

operating procedures.

Appreciation

Our sincere appreciation goes to every person within the Comair Group

who contributed to the ongoing success of the Group during the year

under review. This includes our Directors, management and employees.

We extend special thanks to our customers and other stakeholders who

have chosen to use our services or provide services to us.

We also thank all the public sector departments and agencies that we

have worked with this year for their shared commitment to our objectives.


11

Core Values Group Objectives

The Group and its employees support the following core values.

Our Customers

In our dealings with our customers, we aim to:

• Reflect the image of the Company;

• Deliver a safe and quality service;

• Regard everyone who is dependent on our outputs as a customer;

• Meet the expectations of our customers;

• Measure customer satisfaction levels;

• Respect our customers’ rights to confidentiality; and

• Accept responsibility for customer service.

Mutual Trust and Respect

We aim to:

• Share information to the benefit of the Group;

• Listen with empathy;

• Communicate openly and honestly;

• Display respect for the individual and his/her dignity;

• Solve problems on a win-win basis for all parties;

• Greet and acknowledge one another;

• Maintain ethical standards;

• Exhibit respect for the individual and his/her dignity; and

• Commit to sustainable transformation addressing the inequalities of

the past.

Performance Driven

We seek to always:

• Set objectives and give regular performance feedback;

• Ensure that each employee knows what is expected of him/her and

what our standards are;

• Give recognition to those to whom it is due;

• Continuously strive to improve our operating efficiencies;

• Eliminate activities that do not add value;

• Base appointments and promotions on competence and performance;

and

• Offer each employee the opportunity to develop to his/her full potential.

Team Approach

We:

• Promote positive team behaviour;

• Ensure the participation of all role players; and

• Exhibit responsible, fair, honest and effective leadership.

Creating Shareholder Value

• We will continue to optimise operating efficiencies and grow the

profitability of the business.

• We will continue to optimise our cost base, without compromising

safety, reliability or customer services.

• We will always look to make investments that will provide incremental

growth based on sound investment principles.

Commitment to Quality

• We will strive to be trusted by all our stakeholders.

• We will always ensure that we provide a safe, secure and reliable

service.

• We will always strive to improve customer satisfaction levels.

Managing Risk

• We will continue to ensure that our risks are meticulously managed.

• We will adopt a proactive approach to ensure compliance with

regulatory and legislative change.

Leading as a Responsible Corporate Citizen

• We are committed to managing our business in a sustainable way

and upholding high standards of ethics and corporate governance

practices.

Provide Growth and Development Opportunities for Employees

• We strive to maintain a corporate culture that provides a working

environment which is conducive to employee engagement and

productivity and which assists us to attract and retain a talented

workforce.

• We will provide continuous training and development opportunities

to our employees, ensuring that their skills and competencies are

relevant and appropriate to our business and the delivery of exceptional

service to our customers.

• We will strive to be an employer of choice, recognising that market

competition for competent resources is increasing.

Operating Effectiveness

• We will continue to develop core competencies across our operating

environment.

• We will continue to look for cost-saving initiatives and look to create

synergies over our existing and future operations.

• We wish to position ourselves as the airline of choice.

12

Strategic Intent

Cycle of Success

The Comair ‘Cycle of Success’ illustrates the Group’s strategic intent, its purpose, the business model it follows, its vision as well as the action pillars

that underpin its core values. A diagram reflecting the Group’s ‘Cycle of Success’ is set out below:

Purpose

The Group’s purpose, ‘We Lift You Up’, drives our aspiration to lift people

up in an inspiring, empowering, passionate and innovative way, to render

a positive impact on the world.

The Group believes that:

By lifting myself up,

I can lift my colleagues up,

To lift our customers up,

To lift investors up,

To lift society up,

To lift nations up,

To lift the world up,

To lift myself up.

Business Model

The business model is not unique to the Group or the airline industry. The

challenge lies in making sure the Group achieves the ‘cycle’ for sustainability

and growth. It means that with the right equipment and people, the

Group can deliver an awesome travel experience to its customers. If our

customers are happy, they will keep coming back and when they keep

coming back, our investors will continue to invest in the Group. This will

allow the Group to be more resilient to change and together we can move

forward in a sustainable way.

Vision

The Group’s vision is to ‘Deliver an awesome travel experience in the

most efficient way’. It is an aspirational description of what the Group

would like to achieve and is intended to serve as a clear guide when

choosing current and future courses of action.


13

Action Pillars and Values

The four action pillars and Think Vision Values guide the Group in following

the business model in the right direction.

Action Pillars

The four action pillars are as follows:

Innovation: The Group has a professional approach to everything

it does or presents and is committed to a consistent

high standard. It is committed to offering worldclass

products and services in the most efficient way. As a

market leader, the Group stays up to date with current

trends and can relate and communicate to the public,

customers, investors, suppliers and employees.

Leadership: The Group is a well led and managed South African

company. It leads by example and represents

courage and humility. The Group behaves in a

responsible way towards the public, customers,

investors, suppliers and employees.

Integrity: Safety and security underpin everything the Group

does. The Group represents poise and reassurance

and is trusted by the public, customers, investors,

suppliers and employees.

Passion for service: The Group is committed to operational efficiency and

value. It understands and anticipates the needs of

its customers, investors, suppliers and employees.

‘Think Vision’ Values and Principles

The ‘Think Vision’ formula for success identifies those values and

principles that are beneficial (Top Line) to the Group as well as those

values and principles that should be eliminated which could be detrimental

(Bottom Line) to the Group.

We encourage our employees to apply these values and principles.

Governance of the Business

The Group’s governance structures are focused on maintaining and

building a sustainable business and being a responsible corporate citizen.

The key elements of these governance structures include:

• Providing a safe, secure, reliable and quality airline service (refer to

the Sustainable Development Report for more information);

• Maintaining principles of good corporate governance, integrity and

ethics (see the Corporate Governance Report for more information);

• Maintaining effective risk management and internal controls (see the

Internal Control and Risk Management Report for further information);

• Engaging with stakeholders and responding to their reasonable

expectations (see the Report Profile and Sustainable Development

Report for more information);

• Managing the business in a sustainable manner (see the Sustainable

Development Report for more information); and

• Offering employees a good working environment and competitive

remuneration packages, based on the principles of fairness and

affordability (see the Sustainable Development Report and the

Remuneration Report for more information).

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14

Internal Control and Risk Management


The Group is committed to maintaining principles of good corporate

governance to ensure that its business is managed in a responsible manner

with integrity, fairness, transparency and accountability.

Internal Controls over Financial Reporting

Internal controls and risk management systems in relation to the Group’s

financial reporting process are in place. During the period under review,

no material changes in risk management and internal control systems

over financial reporting occurred.

Internal Control Framework

The Group continues to review its internal control processes to ensure

it maintains a strong and effective internal control environment. During

the period under review, the effectiveness of the process was regularly

reviewed by the Group’s Risk Management Forum and Audit Committee.

For further information on the Group’s internal controls, please refer to

pages 48 and 49 of this Report.

Risk Management

Effective risk management is critical to the Group’s operations and is crucial

to the continued growth and success of the Group. In order to achieve its

objectives and create shareholder value, the Group does take risks but fully

understands and effectively manages the risks it takes in order to minimise

loss and maximise opportunities. The objective of risk management in

the Group is to establish an integrated and effective risk management

framework where important risks are identified, quantified and managed.

In order to give effect to same, the Group follows a comprehensive risk

management process, which involves identifying, understanding and

managing the risks associated with its various businesses. As the Group,

through its various business units, is exposed to a wide range of risks,

some of which may have serious consequences, the identification of risk

and its management forms part of Executive Management’s Business

Plan. Risk Priority Registers are used to identify, assess and monitor the

risks faced by the Group and are prepared by each business department.

The Risk Priority Registers are combined into a Group Risk Register by

the Group’s Risk Management Forum and are prepared, discussed and

assessed by the Group’s Risk Management Committee, which in turn

reports to the Board. The Group prioritises risks based on the likelihood

of the risk occurring, the impact of the risk and mitigating factors, and

categorises each risk as high, medium or low. The Risk Management Forum,

comprising the CEO, the Chief Risk Officer, the Chief Audit Executive and

certain Executive Management, meets at least four (4) times per year to

assess and consider the risks associated with the Group’s operations.

The Risk Committee also reviews the risk management process.

In addition to the foregoing, the Group recognises the need for its employees

and stakeholders to have a confidential reporting process (whistle blowing)

covering fraud and other risks. In line with its commitment to transparency

and accountability, the Group takes action against employees and others

who are guilty of fraud, corruption and other misconduct. Procedures

are in place for the independent investigation of matters reported and

for appropriate follow-up action.

The Board believes that the risks described below are the ones that may

have the most significant impact on the Group’s ability to achieve its six (6)

objectives set out earlier on in this Report.

Debt Funding

The Group is exposed to a variety of financial risks, including market

risks, credit risks, capital risks and liquidity risks. The Board approves

prudent financial policies and delegates certain responsibilities to Executive

Management who directly control day-to-day financial operations and

who operate within clearly defined parameters.

The Group carries substantial debt that needs to be repaid. The ability

to finance ongoing operations, committed aircraft orders and future fleet

growth plans is vulnerable to various factors, including institutional appetite

for secured aircraft financing. The Group attempts to maintain substantial

cash reserves and committed financing facilities to mitigate the risk of

short-term interruptions to the aircraft financing markets. The Group, in

addition, continually monitors its cash position and further undertakes

long-term planning of its capital requirements.

For more information regarding the Group’s response to this risk, see the

Annual Financial Statements in this Report.

Currency Fluctuations

The Group reports in South African Rands, the exchange rate of which

varies relative to other currencies. A significant portion of the Group’s

costs are incurred in foreign currencies, mainly the United States Dollar.

The movement of these currencies could have a positive or negative

impact on the Group’s income, expenses and profitability. Unrealised

and realised currency gains or losses may distort the Group’s financial

accounts. The Group has a policy in place to govern the hedging of

currency exposure.



Oil Price Fluctuations

As with foreign currencies, the Group incurs substantial costs with regard

to the purchase of fuel for its aircraft. The Group has a policy to hedge

a portion of its fuel requirements based on various instruments available

and where this is achievable.




15

Safety of passengers and employees

A multitude of processes and structures are in place to monitor and report

on aviation safety, quality and security within the Group and its operating

environment. The Group maintains an IOSA (IATA Operational Safety Audit)

registration, thereby ensuring the implementation of global best practice

in managing its operational safety, and is also audited by British Airways

Plc as well as the South African Civil Aviation Authority.


Sustainable Development Report in this Report.

Aircraft Safety

Maintenance of the Group’s fleet of aircraft is regulated by the South African

Civil Aviation Authority and, in certain instances, the Federal Aviation Authority

of the United States, and the European Aviation Safety Authority. While the

Group outsources the maintenance of its fleet of aircraft and engines to

the likes of South African Airways Technical, Israeli Aircraft Industries, and

ST Aerospace Engines Pte Ltd, it maintains an oversight function over all

these entities and ensures that it maintains a good relationship with the

South African Civil Aviation Authority. The Group, in addition, runs a safety

management system to address all aspects of aviation and ground safety.



Brand Reputation

The Group’s brands have significant commercial value. Erosion of the brands

may adversely impact the Group’s position with its customers and could

ultimately affect future revenue and profitability. The Group’s Executive

Team regularly monitors customer satisfaction through monthly surveys and

integrated social media monitoring, as well as ongoing improvements in the

Group’s product offering in order to mitigate this risk. The Group allocates

substantial resources to safety, security, on-board product and new aircraft.



Non-beneficial Increases in Airline Tickets

There is an extremely high correlation between the volume of air travel

and the average price of airline tickets in the domestic market. In the past,

various state-owned suppliers to the aviation industry implemented tariff

increases for users that were significantly greater than the rate of inflation

and threatened to constrict the size of the market for air travel. While it

must be noted that tariff increases effective 1 April 2014 were more or less

in line with CPI, the cumulative effect of previous increases may restrict

the size of the market for air travel. There is further talk of government

imposing carbon taxes on airline tickets and the Consumer Protection Act

has, to a limited degree, impacted on airline commercial practices, which

could lead to an increase in ticket prices. Such increases in ticket prices

do not benefit the airline. On the contrary, the consequential constraint

on demand negatively impacts industry revenue.

For more information regarding the Group’s response to this risk, see

the Sustainable Development Report and Annual Financial Statements

in this Report.

Political and Economic Developments

The state of the local economy impacts on the profitability of the aviation

industry, and the political climate affects the number of visitors from

overseas to the Southern African region. Strikes and labour disruptions

by suppliers to the Group have the potential to constrain the operation of

the airline. The Group monitors global and local trends in order to adapt its

business strategy accordingly. Political instability in any country into which

the Group operates its services could also affect the Group. It therefore

undertakes risk assessments before embarking on new routes in Africa

and internationally. It continually reviews those risks and is assisted in

this regard through its Licence Agreement with British Airways Plc and

through its membership of the International Air Transport Association.



in this Report.

Economic and Business Environment

The Group’s revenues are sensitive to the economic and business

environment. A downturn in the general economic and business environment

could affect the Group’s revenues and operations. It therefore continually

monitors developments in the economic and business environment for

trends and early warning indicators. Executive Management and the Audit

Committee regularly review the Group’s revenue forecasts.



in this Report.

Competition

The market in which the Group operates is highly competitive and this

risk is augmented by the fact that the country’s biggest airline is owned

by the State. Direct competition is faced from other airlines on the routes

the Group operates and from other modes of transport. Competitor

capacity growth in excess of demand growth could materially impact the

Group’s margins. Some competitors have other competitive advantages

such as being funded and supported by government intervention. Fare

discounting by competitors has historically had a negative effect on the

Group’s results because a response is generally required to competitor

fares to maintain passenger volumes. The Group has a strong market

position, a good alliance with British Airways Plc and a diverse customer

base to address this risk.

16

Internal Control and Risk Management (continued)



Legislation and Regulation

Regulation of the airline industry is increasing and covers many of the Group’s

activities such as safety, security, traffic rights, slot control access and

environment controls. In order to mitigate these risks, the Group attempts,

amongst other things, to maintain a good working relationship with the

government departments with which it interacts, the Airports Company

South Africa and other regulatory and industry bodies. Notwithstanding,

bilateral treaties governing route rights within the African continent have

had a major impact on the Group’s ability to expand its operations into

the African region.



Technical Innovation

Technology forms an integral part of the Group’s business. While the

British Airways brand is, to a large extent, dependent on developments

implemented by British Airways Plc, the kulula brand is not, and the

Group devotes significant resources to information technology in respect

of this brand, including the development of new products and services,

as well as analysing emerging trends in information technology (IT) and

consumer behaviour. The Group, during 2012, embarked on one of the

single biggest business transformations in its history whereby a suite of

integrated solutions procured from Sabre Airline Solutions, including a new

reservations platform for kulula.com, was implemented. The transition to

the new platform provides the organisation with an integrated solution that

will in the medium to long term result in greater efficiencies, improved and

wider distribution capabilities and the benefit of access to a global Sabre

user community that is constantly reviewing processes and developing new

products. Nevertheless, the Group is constantly faced with managing the

risk presented by new technology, new developments by its competitors

or the speed of development.



Information Systems Security and Availability Risk

The Group is dependent on IT systems for most of its principal business

processes. The failure of a key system may cause significant disruption

and/ or result in lost revenue. System controls, disaster recovery and business

continuity arrangements exist to mitigate the risk of a crucial system failure.

The Group has launched several initiatives to cover not only information

system security and availability risk, but also IT governance in accordance

with the requirements of King III. The Board has also appointed a Chief

Information Officer. The Group has, in addition, implemented software

dealing with IT systems security. No security breaches occurred during

the period under review. As regards systems and network availability,

the Group’s Information Technology Department worked closely with its

service providers to ensure that a better than 99% up-time was achieved

on the Group’s networks and customer facing systems.


the Corporate Governance Report and Annual Financial Statements in

this Report.

Landing Fees and Security Charges

Airport taxes, landing fees and security charges represent a significant

operating cost to the Group and have an impact on operations. Whilst certain

of these charges are passed on to passengers by way of surcharges and

taxes, others are not. The Group regularly engages with various industry

bodies and government in an attempt to keep these costs under control.



in this Report.

Employee Relations

A large number of the Group’s employees in South Africa are members of

trade unions. The Group strives to maintain a good working relationship

with the trade unions where it has recognition agreements in place and

enters into substantive negotiations annually. The Group further has a

strike action plan in place.



Key Supplier Risk

The Group is dependent on suppliers for certain principal business

processes. The failure of a key supplier to deliver on contractual obligations

may cause significant disruption to operations. A close relationship is

maintained with key suppliers to ensure awareness of any potential supply

chain disruption. The Group further continually monitors its key suppliers.



Fraud (Credit Card, Cash, System)

The Group has implemented a number of risk mitigants to cover credit card,

cash and systems fraud such as, but not limited to, the implementation

of Cybersource software as well as the planned implementation of 3D

Secure in respect of credit card fraud; strict controls and authorisation

frameworks for use of Travel Bank’s accounts and strict control over

access and transfer rights; regular password changes in respect of bank

accounts; and daily bank reconciliations and procedures for immediate


17

investigation of discrepancies in cash reconciliations. The Risk Management

Committee and, where appropriate, the Audit Committee, considers any

incidents of fraud and corruption.


the Corporate Governance Report and Annual Financial Statements in

this Report.

State Funding of SAA

During the prior financial year, the Group launched a legal challenge in

the High Court of South Africa against government’s R5 billion guarantee

provided to SAA, on the basis that such action was contrary to government’s

domestic aviation policy, implemented just prior to the deregulation of the

South African skies to create an equal playing field amongst domestic

competitors, and in contravention with, amongst others, the Public Finance

Management Act. While it was hoped that the matter would go to trial in

August and/or a settlement would be reached with government, it appears

more likely, but not certain as yet, that the matter could be set down for

hearing in October/November 2014 about a settlement with government.



in this Report.

Broad-based Black Economic Empowerment

The Group recognises the importance of implementing a broad-based

black economic empowerment (B-BBEE) programme that addresses

the inequality of the past, and regularly reviews its B-BBEE strategy so

as to ensure that it remains an integral part of the political, social and

economic community of South Africa. In addition, the International Air

Services Licensing Council and Domestic Air Services Licensing Council

review the B-BBEE score of companies applying for licences.



Skills Shortages

Training, employment and retention of skilled staff remains a major challenge,

with particular regard to pilots from previously disadvantaged groups.

The Group has attempted to address this challenge through its cadet

pilot training programme and through its policy of having its pilots signing

training bonds in an attempt to ensure that they remain in the employ of

the Group for a certain period of time to cover the cost of their training.



Effectiveness of the Risk Management Process and System of Internal Controls

The Board, via the Audit and Risk Committees, regularly receives reports

on, and considers the activities of, the internal and external auditors of

the Group. The Board, via the Audit and Risk Committees, is satisfied

that there is an effective risk management process in place and that there

is an adequate and effective system of internal controls to mitigate the

significant risks faced by the Group to an appropriate level.

18

Sustainable Development Report

Introduction

Comair Limited (the Group) is firmly committed to managing its business in

a sustainable way and upholding high standards of ethics and corporate

governance practices. The benefits of delivering on these commitments

are many. Through its sustainability efforts the Group maintains business

integrity; maintains and improves the confidence, trust and respect of its

stakeholders; and increases its ability to attract and retain staff. Aviation

is an economically vital activity generating employment and wealth

across the world and it is thus important that the Group develops a truly

sustainable industry.

The Group’s track record on delivering growth and creating long-term

value is testament to its strategy of being a long-term player and delivering

a sustainable business. While growth, profitability and creating value are

certainly major strategic drivers, this cannot be achieved by the Group unless

it offers a safe, secure, reliable and quality product; values its employees

by following fair labour practices and offering fair remuneration as well

as training and development opportunities; respects the communities in

which it operates and contributes to the wellbeing of society; and cares

for and manages its impact on the environment.

It is evident from the Group profile that it operates in a highly regulated

environment. Risks are managed effectively as reported in the Corporate

Governance and Internal Control and Risk Management Reports and despite

the many challenges faced by the airline industry, the Group is confident

that it is involved in a growing and sustainable business, delivering value

to all its stakeholders in the short, medium and long term.

Through its sustainability efforts, the Group believes that it will:

• Maintain its business integrity;

• Continue to create shareholder value by growing the business;

• Effectively manage its risks;

• Attract and retain a talented workforce by creating a good working

environment; and

• Effectively manage and minimise its impact on the environment.

Awards

The Group received the following external recognitions and achievements

during the reporting period under review.

British Airways:

• The Sunday Times Top Brands Awards – Second place in the

Business category; and

• ACSA Feather Awards for Best Domestic Full Service Airline at

OR Tambo International Airport.

kulula.com:

• The Sunday Times Top Brands Award – First place in the Business

category;

• The Sunday Times Top Brands Award – Third place in the Business

category for “Company most spontaneously aware of” by business

sample; and

• ACSA Feather award for best low cost airline at OR Tambo International

Airport.

Route Network

Comair Limited is a South African Group operating scheduled and non-scheduled

airline services as its core business under both its kulula. com and British

Airways brands (the latter under licence from British Airways Plc) in South

Africa, sub-Saharan Africa and the Indian Ocean Islands, as well as providing

other travel-related services, airline pilot training facilities and operating airline

lounges. While the British Airways brand does operate flights into sub-Saharan

Africa and the Indian Ocean Islands, and does advertise its flights on both

its kulula.com and British Airways brands for sale through global distribution

systems, the majority of its revenue is earned in South African Rand, with

a small portion being earned in foreign currency, which foreign currency

is repatriated to South Africa. During the period under review, the Group

operated 43,246 flights and carried 5,196,507 customers, against 40,757

flights operated and 5,050,873 customers carried in the previous reporting

period. The British Airways brand operated 18,594 flights on the domestic

routes and 3,650 flights to regional destinations and carried 1,745,154

passengers on its domestic routes and 289,653 passengers on its regional

routes. The kulula.com brand operated 21,002 flights on domestic routes

and carried 3,161,700 passengers to domestic destinations operated by the

brand. The destinations to which the Group’s two brands provided scheduled

air services during the period under review are depicted on page 19.

Management Approach

The Group Sustainable Development Manager is Mr Derek Borer, the

Group’s Company Secretary, who, as part of its Social and Ethics

Committee, is responsible for the compilation of this Sustainable

Development Report. The Social and Ethics Committee is also responsible

for developing and reviewing the Group policies with regard to social

and economic development, good corporate citizenship and for making

recommendations to the Board and/or management on matters within its

mandate. See the Social and Ethics Report for more information in this

regard. The content of this Sustainable Development Report is driven by

the material risks and opportunities facing the Group’s ability to achieve

its objectives, as set out in the Internal Control and Risk Management

Report. In addition, this Sustainable Development Report aims to explain

the stakeholder engagement process undertaken by the Group, as well

as to disclose the key topics raised as a result of this process, and the

Group’s response in this regard.


19

KENYA

DURBAN

EAST LONDON

GEORGECAPE TOWN

JOHANNESBURG(OR Tambo and Lanseria)

kulula.comkulula.com codeshare

British Airways Route Network

Note: Effective 8 February 2014, the Group discontinued its services to Maputo from OR Tambo International Airport and hence the route is not reflected above.

kulula.com Route Network

Note: The service between OR Tambo International Airport and Nairobi in Kenya is operated on a codeshare basis using Kenya Airways Aircraft.

LONDON AND THE WORLD

HARARE

MAURITIUS

DURBAN

PORT ELIZABETHCAPE TOWN

JOHANNESBURG

British Airways (Plc)British Airways (operated by Comair)

WINDHOEK

VICTORIA FALLSLIVINGSTONE

20

Sustainable Development Report (continued)

Engagement with Stakeholders

The Group’s commitment to its stakeholders to conduct its business

in a responsible and sustainable way and to respond to their needs is

entrenched in the Group’s values. The nature of the Group’s business

requires close engagement with its stakeholders, including but not limited

to customers, employees and trade unions, suppliers, government and

authorities, industry associates, investors and the media. Communication

with stakeholders is important in maintaining the Group’s reputation as

a trusted and reliable provider of airline and related services. One of the

Group’s main objectives is to deliver “an awesome travel experience in the

most efficient way” and thus become the premier domestic and regional

airline in sub-Saharan Africa and the airline of choice for travellers within

its operating environment. The Group, in addition, values the importance

of its brands, namely British Airways, kulula.com, SLOW and its travel,

catering and training brands, and has taken the necessary legal steps

to protect them. A diagram reflecting the Group’s brands is set out on

page 5 of this Integrated Annual Report.

The Group, having regard to the importance and power of social media,

has adopted a social media strategy allowing it to communicate with

its customers through these media and in this regard has recently

introduced sophisticated software that monitors all social media channels,

consolidating all the direct and non-direct customer feedback in real-time

allowing the Group the ability to better manage brand performance and

consistency. The social media platforms used by the Group are mainly

Twitter, Facebook and YouTube.

There have been no incidents of material non-compliance with any applicable

regulations or legislation concerning marketing communication during the

period under review. The Group was, during its previous financial year,

taken to the Advertising Standards Tribunal by South African Airways in

respect of its “Most South African Way To Travel” advertising campaign

on the basis that the advertising campaign was a flagrant breach of the

Advertising Standards Authority Code. The Advertising Standards Tribunal

dismissed South African Airways’ application. South African Airways took

the decision on appeal to the Final Appeal Committee of the Advertising

Standards Authority, which was defended by the Group. The appeal was

heard on 26 September 2013 and the Final Appeal Committee of the

Advertising Standards Authority found in the Group’s favour by upholding

the decision given by the Advertising Standards Tribunal.

No requests for information were received in terms of the Promotion of

Access to Information Act (Act No. 2 of 2000) of South Africa.

As part of its ongoing operations, the Group frequently engages with

various stakeholder groups. It defines stakeholders as “anyone who

affects or is affected by the Group”, and in deciding which stakeholder

groups to concentrate its engagement efforts on, the Group considered

the significance of the various stakeholder groups in the achievement of

the Group’s objectives. Only those significant stakeholder groups that

could fundamentally have an impact on the ability of the Group to achieve

its objectives were engaged.

Customers

Providing a safe, secure, reliable and quality experience on both of the

Group’s airline brands as well as in its travel-related business is core to

the Group’s business and it therefore strives to deliver “an awesome

travel experience in the most efficient way” and hence be recognised as

the airline of choice for all travellers within its operating environment. The

Group continually measures customer satisfaction through various surveys

and integrated social media monitoring, to identify areas for improvement

in order to ensure it provides a quality service. No issues of a material or

significant nature were raised by customers.

The Group undertakes monthly research on its brands to determine its

performance and identity areas that need improvement. The result of the

research is shared amongst relevant staff members, where concerns raised

are addressed. Please refer to the section in the Sustainable Development

Report titled Customer Experience for more information on the research

tools used and the performance of each of the Group’s airline brands.

To enhance the quality of its service, the Group provides access for

qualifying customers (i.e. Gold and Silver Executive Club members,

business class customers, the Group’s VIP guests and RMB qualifying

clients) to its airline lounges, known as SLOW Lounges. These are situated

at OR Tambo International Airport, Cape Town International Airport, King

Shaka International Airport and SLOW in the City, situated opposite the

Gautrain Station in Sandton. The concept of the SLOW Lounges is based

on the theme that time always plays a significant part in people’s lives.

Modern day life places numerous demands on people’s time and there

is generally not enough of it. SLOW was created as a space for people

to get their time back on their own terms when, for a few moments,

they have a chance to catch their breath and relax. The Group wanted

to ensure that within the busy airport environment it developed a space

and offering that was conducive to relaxation, comfort and convenience.

This is evident in the technologies, furnishings and the freshly prepared

food and beverage choices delivered through its friendly, efficient staff in

the lounges. Since the introduction of the SLOW Lounges, the Group has

received many accolades, awards and compliments from industry and

customers alike. Demand for the lounges has increased and the Group

recently embarked on an expansion programme, with extensions to the

Cape Town domestic lounge expected to be complete by mid-September

2014. Plans are also under way to expand the OR Tambo domestic and

international lounges.

The Group actively participates in the British Airways Plc Executive Club

loyalty programme, as well as offering a co-branded kulula credit card

as follows.


21

British Airways Executive Club

The Executive Club is British Airways Plc’s global frequent flyer programme

designed to recognise and reward loyal members, with the aim of making

their travel more enjoyable and rewarding. Executive Club members

earn Avios points (previously referred to as BA Miles) whenever they fly

with British Airways, a partner airline or on one of the oneworld® alliance

partners. The number of Avios points that members earn, depends

on the distance they fly, the cabin they travel in, the type of ticket they

purchase and their Executive Club tier status. Members can also collect

Avios points with British Airways’ worldwide hotel, car rental, financial

and shopping partners, even when they are not flying. In addition to

Avios points, members also earn Tier Points. Tier Points allow members

to move through the various tier levels, starting with Blue, then Bronze,

then Silver and finally Gold Executive Club status. As members progress

from one tier level to the next they are able to enjoy additional benefits

associated with each tier level such as, but not limited to, airline lounge

access, dedicated check-in processes and priority waitlists.

The kulula credit card

The kulula credit card is a Visa credit card which is issued, owned, financed

and administered by FirstRand Bank Limited, which is an authorised

financial services and registered credit provider. Customers can earn

up to 3% back in kulula moolah when using their kulula credit card to

purchase various goods and services. kulula moolah can be used to pay

for, or towards, any kulula flights. kulula moolah is a virtual currency with

1 kulula moolah equating to R1.

On-board Magazines

The Group, in addition, prints two on-board magazines, namely High Life

South Africa for its British Airways brand, and khuluma for its kulula. com

brand. Both magazines cover a number of subjects, including pertinent

information relating to the Group and its business. The Group has recently

introduced a magazine in the SLOW Lounges, titled SLOW, which offers

readers information and articles of general interest. Twelve issues are

printed per year of each magazine title (one per month). The circulation

for High Life South Africa is 16,000 per month, for khuluma, 21,000 per

month and for the SLOW magazine 5,500 per month. The magazines,

other than the SLOW magazine, are made available on board the aircraft

and the High Life South Africa magazine is also available in the SLOW

Lounges. Other mediums of communication with customers and potential

customers include direct e-mail communications to the Group’s respective

customer databases, on-board announcements and advertising campaigns

(including radio, TV, outdoor, print and online) as well as social media

channels such as Facebook, Twitter and YouTube.

British Airways Plc

The Group entered into a Licence Agreement with British Airways Plc (BA)

during the 1996 calendar year in terms of which it was granted a licence

to operate flights using BA intellectual property and in accordance with

BA’s style of business, tweaked to meet local conditions. In terms of

the Licence Agreement, BA provides other services to the Group such

as, but not limited to, access to the BA frequent flyer programme. As

mentioned above, the Licence Agreement has been in operation for

almost 18 years and has, in the Group’s view, been highly beneficial to

both BA and the Group.

Employees and Trade Unions

An integral part of the Group’s business is about the people it employs.

The Group strives to be an employer of choice and invests significantly in

this relationship. Paying attention to and responding to employee needs

through effective communication and sound labour relations is critical

to the maintenance of a stable and engaged workforce. Employees are

treated with respect, receive competitive remuneration and are involved

in the day-to-day running of the business and have access to the Group’s

e-mail facility and intranet. The Group communicates with its employees

in a variety of ways including, but not limited, to:

• The My Comair intranet: This provides a platform to inform employees

of current news and events, newsletters from the CEO, classifieds,

corporate information, social responsibility feedback, a library of

standard templates to assist employees in the performance of

their duties, policies and procedures, standard forms for leave and

employee travel benefits, as well as travel and related specials made

available to employees, which the Group has been able to secure

from various suppliers;

• Direct e-mails to employees;

• Newsletters to employees from the CEO known as Plane Talk;

• Ad hoc marketing communications in respect of the Group’s two

brands;

• Ad hoc IT communications known as IT Talk;

• Ad hoc communications from the Learning and Development

Department;

• E-mail notification to employees regarding changes in policies and

procedures;

• Interactions with employees through various workplace forums;

• ‘Business Talk with Erik’ – a quarterly forum for middle and senior

managers to engage with the CEO and Executive team on topical

matters relating to the business.

The Group, in addition, has the following programmes in place for all

employees:

• We Lift You Up: This is designed to create a business understanding

amongst employees in order to obtain their commitment to the

Group’s Cycle of Success as set out in the Group’s Strategic Intent

document;

22


• Think Vision: This is the Group’s formula for success and was

formulated in consultation with employees to identify values and

principles that are beneficial to the Group and to eliminate those

values and principles which are detrimental. The Think Vision values

and principles are the DNA of the Group and their purpose is to guide

the thinking, decision-making and actions of all employees;

• Catalyst Awards: This is a reward and recognition programme that

encourages employees to implement the Think Vision philosophy

and to inspire other employees to do the same. Employees may be

nominated for Catalyst Awards by their peers, managers or customers,

by living one or more of the Think Vision values;

• The Precious Cargo Programme: This was created to assist

employees with balancing the demands of work and family life.

Details of this programme are dealt with further on in this Sustainable

Development Report;

• Tip Offs Anonymous: This is an anonymous whistle-blowing facility

to enable employees to report any suspicious activities;

• On Track: This is a performance management programme giving

employees clarity as to what is expected of them and measuring

their performance in respect of certain key performance indicators;

• Take Off: This is a leadership development programme with the aim

of identifying and developing employees who the Group believes can

fill key leadership positions; and

• Succession Development Programme: This is a programme developed

for middle management for succession planning at the airports.

As at 30 June 2014, approximately 43% (864 of 2,006) of the Group’s

full-time, permanent employees in South Africa were members of trade

unions compared with 50% (946 of 1,912 employees) as at 30 June 2013.

The Group strives to maintain good working relationships with the trade

unions, and has recognition agreements in place and enters into substantive

negotiations annually. These negotiations mainly focus on salary increases

and improvements to employment conditions. As at 30 June 2014 union

membership was as follows:

2014 2013

Solidarity 179 188

United Association of South Africa (UASA) 167 89

South African Aviation and Allied Workers Union (SAAAWU) 362 517

Comair Pilots Association (which is affiliated to the Airline Pilots Association of South Africa) 156 152

There was no strike action during the period under review. However,

SAAWU raised several disputes during this period, mainly relating to a

refusal by the Group to bargain with this union as they were no longer

representative within the Airport bargaining unit. SAAWU also raised a

dispute with regard to the Group’s refusal to provide them with recognition

within the Cabin Crew bargaining unit due to insufficient representation.

There is an ongoing dispute with SAAWU around their membership

levels which has yet to be resolved by the CCMA. A further dispute with

the Comair Pilots Association in regard to their entitlement to a special

bonus paid to other employees was settled in private arbitration, with

the dispute being resolved in the Group’s favour. As there are multi-year

salary agreements in place, there was no negotiation with unions around

wages during the period under review.

Other than the above-mentioned, no other material or significant issues

were raised by employees or trade unions during the period under review.

Human Rights

The United Nations Global Compact is an international initiative that

addresses human rights, labour, environmental and corruption issues

through a commitment to ten principles derived from the Universal

Declaration of Human Rights. The information set out below provides

a brief overview of the Group’s implementation of the ten principles as

further dealt with in this Sustainable Development Report.

• Business should support and respect the protection of International

Proclaimed Human Rights.

The Group’s human rights policy is part of the ‘Guidelines to the

Code of Ethics’. Human rights principles are incorporated in the

Group’s labour relations policies and practices and corporate social

responsibility initiatives.

• Business should make sure that it is not complicit in human

rights abuses.

The Group adheres to this principle through its compliance with all

applicable legislation.

• Business should uphold the freedom of association and effective

recognition of the right to collective bargaining.

The Group recognises the rights of employees to collective bargaining

and to freedom of association in accordance with all relevant South

African labour legislation. It maintains constructive relationships with

all representative unions who enjoy consultative and negotiating rights

on issues of employee rights and mutual interests.

• The elimination of all forms of forced and compulsory labour.

All the Group’s employees are sourced from the open labour market.

Employees are provided with employment contracts and are free to

resign at any time.

• The effective abolition of child labour.

The Group does not make use of child labour and does not support

the use of child labour in any form whatsoever. It does, in certain

instances, provide employment opportunities for school leavers,

provided that such persons meet the International Labour Organization’s

employment age requirements.


23

• The elimination of discrimination in respect of employment and

occupation.

The Group is committed to compliance with the intent and spirit of

employment equity legislation in the workplace. It is further committed

to meeting its targets to achieve an equitable representation of race

and gender in the workplace. An analysis of the Group’s employment

equity status is set out later in this Sustainable Development Report.

• Businesses should support a precautionary approach to

environmental challenges.

This will be the fourth time the Group reports on its emissions in

terms of the Corporate Accounting and Reporting Standards of the

Green House Gas Protocol. Its environmental performance is set

out later in this Sustainable Development Report.

• Undertake initiatives to promote greater environmental

responsibility.

The Group undertakings in this regard are set out later in this

Sustainable Development Report.

• Encourage the development and diffusion of environmentally

friendly technologies.

The Group is committed to developing and diffusing environmentally

friendly technologies where both a clear benefit and business case

can be made for the introduction of this technology, such as, but

not limited to, the new aircraft introduced into service, which are

more environmentally friendly, as set out later in this Sustainable

Development Report.

• Businesses should work against corruption in all its forms,

including exploitation and bribery.

The Group’s commitment to combating corruption is embodied in

its Code of Ethics as detailed in the Corporate Governance Report.

Allegations of fraud and corruption are rigorously investigated and

where sufficient evidence exists, appropriate disciplinary action is

enforced, including the dismissal of offending employees.

Suppliers

The Group is dependent on a number of suppliers who form an integral

part of its ability to provide a safe, secure, reliable and quality service.

The Group attempts to build long-term relations with suppliers who

are of vital importance to it based on the principle of mutual trust and

respect. Regular meetings are held with suppliers to ensure continuity

of service. The Group further relies on its suppliers to deliver products

and services in line with its own standards. Other criteria also play an

import role in selecting suppliers, such as compliance with international

and local quality and safety standards, price, stability of the organisation

support network and technical capacity and the B-BBEE status of South

African suppliers. Any form of purchase incentive is prohibited and the

Group’s whistle-blowing facility is available to suppliers. Employees

involved in the purchasing of equipment are bound by strict ethical

principles ensuring that high standards of integrity are maintained in

the supplier relationship.

No material or significant issues were raised by suppliers during the

period under review.

Government and Authorities

The Group remains committed to working with government and other

relevant authorities to ensure:

• The maintenance of a safe, reliable, competitive and commercially

viable air transport sector where all operators are afforded equality

of treatment by government and the authorities;

• The provision of air transport infrastructure that is affordable to and

consistent with the requirements of the air transport sector and the

travelling public; and

• The provision of air travel at a cost that is affordable to South African

consumers and is in line with internationally accepted airline service

standards and practices.

Government Financial Assistance

The Group received no financial assistance from government nor did it

make any contribution towards any political party.

Government, Regulatory and Industry Bodies

The airline industry is subject to extensive government and regulatory

oversight relating to, amongst other things, safety, security, licensing traffic

rights and consumer protection. The Group regularly communicates and

interacts with governmental, regulatory and industry bodies.

Government and Regulatory Bodies

Department of Transport

The Department of Transport (DoT) is responsible for providing secretarial

support to the two licensing councils, the Airports Company of South

Africa (ACSA) and the Air Traffic and Navigation Services Company (ATNS)

Regulating Committee; for ensuring entity oversight of ATNS, ACSA and the

South African Civil Aviation Authority (SACAA); for conducting bilateral air

service negotiations with foreign governments; and for managing aviation

industry involvement in major events. The Group interacts, co-operates with

and provides feedback to the DoT in all these areas. The Group strongly

supports the concept of a deregulated and competitive domestic airline

industry where all airlines are required to comply with applicable aviation

legislation and compete fairly and equally with one another for market

share. During the period under review, the Group continued with its efforts

to ensure that the applicable requirements contained in South African Air

24


Services Licensing Legislation are complied with via engagement with the

DoT and the two licensing councils mentioned below. The Group continued

its participation in the Airlines Association of South Africa (AASA) initiative

to assist the DoT and other government departments to promulgate

legislation to fully implement the Cape Convention and Aircraft Equipment

Protocol (The Convention) into South African Law. Unfortunately, during

the year under review, limited progress was made with this initiative. As

all South African airlines will benefit from discounted aircraft financing

rates once the Convention is fully implemented, the Group will continue

to help AASA to lobby government for the introduction of the necessary

legislative amendments.

International Air Services Council

International air services operated by South African carriers between South

Africa and other countries remain regulated with respect to traffic rights,

frequency and capacity. The International Air Services Council (IASC) is

the authority responsible for issuing licences to South African operators

wishing to operate air services to regional and international destinations.

During the period under review, the Group abandoned its licence to operate

on the Johannesburg-Maputo (Mozambique) route. The Group also made

representations to the IASC against an application by Flysafair to change

its shareholding. In the submission, the Group raised its concerns that

the Flysafair corporate structure might not comply with the requirements

of the International Air Services Act (Act No. 60 of 1993) (the Act) and

requested the IASC to subpoena certain documents that might clarify the

matter. After receiving argument as to whether the Act allowed the Council

to consider objections from interested parties regarding an applicant’s

shareholding, the IASC found that although the Council did indeed have

such powers, it decided to dismiss the Group’s objections and granted

the Flysafair amendment application. The Group maintains an excellent

working relationship with this Council.

Air Services Licensing Council

Domestic air services within the Republic have been deregulated since

1990. Therefore the Air Services Licensing Council’s (ASLC) responsibilities

are restricted to the issuing of air service licences to new applicants,

ensuring the safety and reliability of air services operated within South

Africa and adjudicating complaints of non-compliance with the Air

Services Licensing Act (Act No. 115 of 1990). As the Group has held

and maintained a Class I and Class II Air Service Licence, amongst

others, for many years, it only appears infrequently before the Council

to either answer questions on its published annual financial results or

to amend certain details on its licence. In November 2013, the Group

successfully interdicted Flysafair from launching its new scheduled low

cost operation, pending a review by the High Court of the scheduled

licence granted by the ASLC. The Group based its application on the

fact that 75% of the Flysafair shareholding was not held by South African

residents. In light of the outcome of the interdict application and prior to

the hearing of the review application, Flysafair surrendered the disputed

licence to the ASLC and thereafter submitted a new application for a

licence. The Group again objected to the content of the application,

which resulted in Flysafair abandoning this process and submitting a

fresh application. Although the Group made submissions to the ASLC

that the fresh application, did not comply with the foreign ownership

requirements of the licensing legislation, the ASLC saw fit to ignore

these representations and granted Flysafair a new licence in April 2014.

In addition to the foregoing and as mentioned above, Flysafair lodged a

complaint with the ASLC against the Group’s domestic air service licence.

The complaint consists of the allegation that the Group breached the Air

Services Licensing Act by failing to apply for a licence amendment after

undertaking a share repurchase programme and secondly that when

a ‘look through’ construction is applied to the Group’s current foreign

shareholding component, the amount of this shareholding slightly exceeds

the restrictions specified in the said Act. The Group is certain that there

is no substance in either fact or law to both aspects of this complaint.

The complaint has still to be adjudicated by the ASLC.

South African Civil Aviation Authority

The South African Civil Aviation Authority (SACAA) is the body responsible

for controlling and regulating civil aviation safety and security in South

Africa. As safety and security is the Group’s number one priority, it interacts

and co-operates on a regular basis with the SACAA to ensure that it

maintains and in some areas exceeds the safety and security standards

required by the SACAA. Besides the usual interaction between the Group

and the safety regulator during the period under review, the Group’s

involvement with the SACAA has concentrated on aircraft registration

and deregistration processes as aircraft have moved into and out of

the Group’s fleet. In addition, in light of the complaint received from the

Human Rights Commission regarding the Group’s denied boarding of a

passenger with special needs, the Group has engaged the SACAA with

respect to possible changes to the Civil Aviation Regulations (CAR) that

apply to the carriage of special needs passengers. The Group, through

AASA, is working with the SACAA to align the CAR applying to special

needs passengers with international best practice.

In January 2014, the SACAA issued the Group with a Notice of Intended

Enforcement Action (the Notice) alleging that the Group had committed

an offence by failing to comply with a portion of an Airworthiness Directive

applicable to certain B737 aircraft and was therefore liable to a fine or

imprisonment or both. As there was no safety risk associated with this

non-compliance and as this incident had been voluntarily reported to

the SACAA, the Group filed two sets of objections to the SACAA. These

objections were mainly centred on the ‘Just Culture’ principle, (which is a

widely recognised international aviation safety principle protecting those

who voluntarily report safety incidents from punitive sanction in order to

advance aviation safety), and objecting to the sanctions described in the


25

Notice. In June 2014, the Director of Civil Aviation, acting as the final appeal

authority, dismissed the Group’s objection and levied a fine against the

Group for its non-compliance. The Group has paid this fine under protest

and will continue, together with other stakeholders, to engage the SACAA

on an acceptable application of the Just Culture principle in South African

aviation. The Group’s management continues to maintain a positive and

good working relationship with the Authority.

Human Rights Commission of SA

In January 2014, the Group received a complaint from the Human Rights

Commission alleging that it had violated the human rights of one of its

special needs passengers by denying him boarding on one of its flights

during August 2013. The Group had denied the boarding of this special

needs passenger on the grounds that the Civil Aviation Regulations (CAR)

required this passenger to travel with an able-bodied assistant and that

no arrangements had been made with the Group to accommodate the

need for such an assistant. The Group’s written response to the Human

Rights Commission was accepted and the Commission decided to close

its file in this matter. The Group is, however, working with the SACAA

to establish whether the CAR complies with International Civil Aviation

Organisation (ICAO) standards and other international best practice for

the carriage of special needs passengers. The matter was in addition

satisfactorily resolved with the special needs passenger.

Airports Company of SA

Most large airports in South Africa are owned and operated by the Airports

Company of South Africa (ACSA). On an operational level, the Group

interacts with ACSA on a continuous basis and maintains a full-time

representative in the ACSA Airport Management Centre at OR Tambo

International Airport. The Group, together with AASA, also engages

ACSA on the important issues of airport user charges and the standard

of service provided by ACSA to airport users. As 2014 constitutes the fifth

financial year of the current ACSA/ATNS Permission, the Group has been

participating via AASA in consultations to agree on a business plan for the

Group for the next Permission period. During the period under review, as

part of the IATA Runway Excursions and Incursions Initiative, the Group

attended the ACSA Runway Safety Team meetings for the purpose of

identifying and mitigating runway hazards. The Group participates, on an

ongoing basis, with AASA to implement regulations to better structure

the permission process for the setting of ACSA tariffs.

Air Traffic and Navigation Services Company

Air traffic and navigation services in South Africa are provided by the

Air Traffic and Navigation Services Company (ATNS). During the period

under review, the Group held regular meetings with ATNS and co-

operated in developing the first Global Navigation Satellite System (GNSS)

VNAV Baro Approach into Lanseria International Airport, Runway 06L.

This has resulted in significant cost reductions and improvement in

efficiencies for the Group. The Group regularly interacts with ATNS on

an operational level and maintains a very good relationship with this

service provider.

National Consumer Commission

The Group has co-operated with the National Consumer Commission

(NCC) by providing expeditious responses to all consumer complaints

referred to it by the NCC as well as by participating in NCC initiated

conciliation proceedings with consumers whose complaints are not

initially resolved. Almost all consumer complaints are dealt with directly

between the Group and the consumer. No significant complaints were

received during the period under review and almost all complaints were

resolved to the satisfaction of the consumer, with no complaints having

been referred to the NCC. The Group, via the Airline Association of SA,

has further co-operated with the NCC through the development of a

draft Airline Industry Code intended to provide guidance on how the

airline industry will deal with specific airline-related consumer matters and

compensation issues. The draft Code has been submitted to the NCC

and a response thereon is awaited.

Industry Bodies

Airlines Association of South Africa

The Airlines Association of Southern Africa (AASA) is an organisation formed

to promote and protect the interests of its member airlines operating within

the Southern African region. The Group actively participates in both the

activities and management of the Association. It believes that the Association

is vital to ensuring a healthy and commercially successful airline sector in

Southern Africa. The Group supports AASA by providing it with data and

information on a variety of airline issues; by giving feedback and comment

on AASA position papers and submissions; and by participating in the

various AASA delegations that attend important stakeholder meetings.

During the period under review, in addition to participating in the standard

AASA activities, the Group continued to participate in the AASA initiative to

engage government on certain deficiencies in South Africa’s implementation

of the Cape Town Convention and Aircraft Equipment Protocol. The

Group has also participated with AASA in consultations over the content

of the ACSA and ATNS business plans for the next five-year permission

cycle. There has also been valuable interaction between the Group and

AASA with respect to the air travel requirements pertaining to special

needs passengers. At the request of the Group, AASA has undertaken

a benchmarking exercise to compare the content of the South African

requirements for the carriage of special needs passengers with the

aviation laws existing in other jurisdictions such as the United States and

the European Union. This research forms the basis of the engagement

with the SACAA on these matters.

26


The International Air Transport AssociationThe International Air Transport Association (IATA) is responsible for

promoting a safe, reliable, secure and economical air services and fostering

inter-airline co-operation. IATA also operates the airline clearing house

in Geneva, which processes and allocates financial credits and debits

between member airlines and administers the International Operational

Safety Audit (IOSA) scheme. The Group maintains its membership of

IATA, participates in the clearing house and undergoes a bi-annual IOSA

audit. During the period under review, the Group successfully undertook

its fifth bi-annual IOSA audit, which is valid until 16 May 2016. As part

of the IOSA audit, the Group was audited against 998 standards and in

this regard the auditors made no findings, which is a huge compliment

to the Group.

Investors

The Group’s main objective is to create value for its shareholders. Reports

to its shareholders are aimed at providing a clear understanding of the

Group’s financial, economic, social and environmental performance, both

positive and negative. Policies are in place to ensure that communications

with shareholders are made available timeously and simultaneously.

The Group endeavours to maintain dialogue with its shareholders and

other interested parties in the investor community and meets with its

institutional shareholders twice a year, after the release of its annual

and interim results. The Group’s website, www.comair.co.za, contains

the latest, as well as historical, financial and other information about the

Group, including its Integrated Annual Reports. The Board encourages

shareholders to attend its Annual General Meeting, notice of which is

contained in this Integrated Annual Report, at which shareholders have

the opportunity to put questions to the Board.

Apart from an incorrect SENS announcement, which was investigated

by both the JSE and the Financial Services Board as reported on in this

Integrated Annual Report, no material issues or topics were raised by

investors during the period under review.

Community

The Group is a committed corporate citizen and, together with its

employees, endeavours wherever possible to improve the lives of fellow

South Africans. It believes that social responsibility is a duty, privilege and

obligation to help those less fortunate and to make some impact on society

in general. For more information regarding the Group’s engagement with

the community, refer to the section dealing with community involvement

on page 36 of this Sustainable Development Report.

Media

The media plays an important role in the Group’s engagement with all its

stakeholders. The Group interacts on a regular basis with the media by

issuing press releases to both the corporate and trade media, as well as

granting media interviews to share news on developments related to the

Group. No material or significant issues were raised by the media during

the period under review.

The Group’s objective is to position it in the media as a trusted player

in the airline industry – a ‘champion’ of the people, and to position its

management as leaders on industry issues, to educate the media about its

business and how the industry operates as well as broaden the Group’s

profile amongst the travel industry media.

The Group’s Response to Material Risks and Opportunities Identified

Issues Impacting the Group, its Strategic Direction and its Ability to Operate and Create Value

Commitment to Quality

Commitment to Safety and Quality of Service

The Group is committed to providing a safe, secure, reliable and quality

service to its customers, and aims to deliver ‘an awesome travel experience

in the most efficient way’ and hence be regarded as the airline of choice

for corporate and individual travellers in all the areas and regions in which

it operates. The safety and security of its customers is of paramount

importance and the Group therefore ensures that a strong culture of

safety and security exists among all employees, which goal is supported

by a well-defined reporting and management process to ensure that all

safety and security issues are dealt with thoroughly and effectively. This

is formally documented in a Safety Management Manual that has been

accepted by the South African Civil Aviation Authority. In addition, the Group

maintains an International Operational Safety Audit (IOSA) Registration and

has been audited and has passed all audits, with the next bi-annual IOSA

audit due in February 2016. The Company has also received unqualified

audit ratings from British Airways Plc, the Boeing Company and the South

African Civil Aviation Authority. The Group’s simulators have been audited

by external airlines interested in making use of the simulator training facility

and accordingly, numerous airlines are currently making use of the facility.

Avions de Transport Regional (ATR) conducted an audit of the Group’s

ATR72 simulator training facilities in the 2011 calendar year and the Group

passed the audit with flying colours.

Security of customers is achieved by applying measures such as, but not

limited to, ensuring that all customers, including the Group’s airline crew,

prior to entering the secure area of the airport, are screened together with

their carry-on baggage; all baggage and cargo being placed in the hold of

the aircraft is screened; and no aircraft departs, with certain exceptions,

unless the customer and his/her baggage is on board the aircraft.


27

The key safety and quality of service priorities applied by the Group are

detailed below.

• Implementation of the IATA IOSA

IOSA is an internationally recognised and accepted evaluation system

designed to assess the operational management and control systems

of an airline. The Group’s approach to aviation safety is one of oversight

and audit as defined within the context of the eight (8) disciplines of

the IOSA audit structure, namely organisational management, flight,

dispatch, maintenance, cabin, ground (airport), cargo and security.

The Group has participated in the IOSA programme since 2006 and

has successfully undergone a total of five unqualified audits.

• Implementation of runway safety measures

Safety statistics show that runway excursions and incursions are

the most common type of accident or incident reported annually.

In response to this, ACSA has established consultative forums, in

the form of local Runway Safety teams, at each ACSA airport. The

Group actively participates in such forums. It also provides operational

guidance to the Lanseria Airport management team on their airport

runway upgrade programme and associated infrastructure.

• Training on preventing loss of control

The Group incorporates loss of control in-flight training as part of its

continuous pilot training curriculum. Various exercises are practiced

during such training.

• Implementation of safety management system

The Group has a safety management system (SMS) to address all

aspects of aviation and ground safety. The purpose of the SMS is to

ensure that safety management systems are in place and to ensure

that risks affecting safety are controlled and appropriately mitigated.

The Director of Operations monitors the Group’s performance against

defined objectives and the Board reviews the Aviation Safety Goal

matrix at its quarterly Board Meetings.

Quality of Equipment

As mentioned above, the Group’s goal is to provide a safe, secure, reliable

and quality service to its customers and it strives to procure the best and

latest equipment and technology affordable to it in providing such services.

Maintenance of the fleet of aircraft is regulated by the South African

Civil Aviation Authority and, as the Group leases in a number of aircraft

from foreign-owned leasing companies, the Federal Aviation Authority

of the United States and the European Aviation Safety Authority. The

Group ensures compliance with airworthiness directives issued by the

manufacturers of the equipment. Buildings, plant and other equipment

are maintained to a high standard to ensure a safe and user-friendly

environment for employees and customers.

The Group has, in the past financial year, made the following investments

in respect of its equipment, plant and buildings:

(a) Continuous investment in maintaining the safety and reliability of

aircraft. The Group subcontracts the maintenance of its aircraft and

engines to South African Airways Technical (Pty) Ltd, Israeli Aircraft

Industries and ST Aerospace Engines Pte.

(b) Following the successful implementation of a businesswide airline

enterprise reservation system from Sabre Airline solutions in June

2012 at a cost of approximately R52 million, the Group has continued

to improve the system with new modules and updated technology

as and when required. This system has and will continue to deliver

substantial improvements in revenue integrity, inventory management

and optimised ticket pricing as well as improved crew and airport

staff productivity.

(c) A substantial investment towards the acquisition of a new fleet of

Boeing 737-800 new generation aircraft was made which, in addition

to having delivered substantial fuel savings compared to the B737-400

fleet, also has a greater revenue-generating potential with its greater

seating capacity and requires less maintenance downtime. The

Group took delivery of four (4) new Boeing 737-800 aircraft during

the previous reporting period and will be taking delivery of a further

four (4) new Boeing 737-800 aircraft during 2015/16. In addition, the

Group has entered into a purchase agreement with Boeing for the

purchase of eight (8) Boeing 737-8 MAX aircraft for delivery during

2019 to 2021. During the period under review, the Group purchased

one (1) second-hand Boeing 737-800 aircraft and leased a second-

hand Boeing 737-800 aircraft.

(d) An upgrade of the SLOW Lounge at Cape Town International Airport

is currently being implemented, and should be completed by mid-

September 2014 and the Group plans to upgrade its lounge at OR

Tambo International Airport in the next financial year.

Customer Experience

The Group recognises that in order to be a truly customer-centric airline, it

needs to consistently listen to its customers’ needs. The Group therefore

continuously seeks the best and most reliable tools to measure customer

satisfaction levels in respect of both its British Airways and kulula.com

brands. In this regard, the Global Performance Measurement (GPM) tool

is used for the British Airways brand and the Voice of the Customer (VoC)

feedback tool is used for kulula.com.

British Airways

The Group conducts monthly on-board research amongst randomly

selected customers. The research methodology is in line with the GPM.

The overall customer satisfaction performance of the British Airways brand

during the period under review is reflected in the table below.

28


British Airways overall performance

July 2013–June 2014

Value for money 62%

SLOW Lounge team 74%

SLOW Lounge refreshment 77%

SLOW Lounge environment 81%

Overall satisfaction with British Airways 76%

Meal/refreshment service 57%

Likelihood to travel British Airways again 76%

Likelihood of recommendation 72%

Departure process 65%

Check-in process 76%

Cabin environment 60%

Cabin crew 78%

The Group acknowledges that there are areas for improvement and plans

are in place to address these.

kulula.com

As mentioned above, kulula.com uses the VoC tool. The VoC tool receives

real-time feedback from customers which is used to ensure that the

brand remains responsive to customer needs. The feedback reflects the

customer’s perception of the service experienced at different customer

touch points, which in turn informs decisions on how the brand can better

serve customers. While there are areas for improvement, it is encouraging

to note that 87% of customers are likely to fly with kulula.com again.

Customers likely to fly with kulula.com again

Jul

100%90% 89% 86% 89% 88% 84% 88% 89% 87% 88% 89% 85% 87%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Broad-based Black Economic Empowerment

The Board views the Group’s business as an integral part of the political,

social and economic community in South Africa and is committed to

sustainable transformation as part of its business strategy. The Group

recognises the importance of implementing a broad-based black economic

empowerment (B-BBEE) programme that addresses the inequality of the

past through a dedicated and ongoing process and regularly reviews its

B-BBEE strategy with the aim of effecting improvement across all seven

pillars of the B-BBEE scorecard, as detailed later in this Report. The Group

is also required to provide both the International Air Services Council and Air

Services Licensing Council with its verification certificate and Employment

Equity Plan when applying for licences or amendments to same.

In order to facilitate better preparation for the purposes of its B-BBEE

Verification, the Group decided to skip the financial year 2012–2013 and

conduct a verification assessment for the financial year 2013–2014. The

B-BBEE audit for the 2013–2014 financial year was conducted by the

verification services of Grant Thornton. A comparative of the results for the

2011–2012 and 2013–2014 financial year is contained in the table below.

Element Indication Weighting

Financial year

2013/14

Financial year

2011/12Ownership Black

ownership 20 17.73 14.88Management control

Black top management 10 3.75 2.63

Employment equity

Black managers15 2.66 2.39

Skills development

Black training spend 15 10.60 3.66

Preferential procurement

Procurement spend 20 13.28 12.42

Enterprise development

Investment in black-owned enterprises 15 15 15

Socio-economic development

Socio-economic contribution 5 3.38 4.44

Total point 100 66.40 55.42

The assessment indicates that the Group achieved a total of 66.40 in the

2013–2014 financial year compared to a total of 55.42 in the 2011–2012

financial year. The B-BBEE recognition level for the Group increased from

Level 5 to Level 4, indicating an improvement due to its focus on several

elements of the B-BBEE scorecard.

Equity Ownership

The Group concluded a Black Economic Empowerment (BEE) transaction

during the 2007 financial year pursuant to which shares equivalent to 15% of

its post-transaction issued share capital were issued to a BEE Consortium

known as Thelo Aviation Consortium (Proprietary) Limited (Thelo Aviation

Consortium) led by Thelo Aviation Investments (Proprietary) Limited (Thelo


29

Aviation Investments). In addition to the above-mentioned BEE transaction,

Thelo Aviation Investments, the biggest shareholders in the Thelo Aviation

Consortium, purchased an additional 6,172,550 shares in the Company

for cash from various shareholders. Thelo Aviation Investments disposed

of its 6,172,550 shares during the reporting period in question.

The increase in ownership score between the 2011–2012 and 2013–2014

financial years is as a result of the public purchasing of the Group’s shares

in the market.

The Group, on its listing in 1998, implemented a share incentive scheme for

all permanent employees, including previously disadvantaged employees,

to enable them to purchase shares in the Group. This scheme, as a result

of certain tax changes, has to a large extent become dormant. The Group

Shareholder Analysis is set out on pages 121 to 123 of this Integrated

Annual Report.

Management Control

The Group’s BEE Consortium has representation on its Board, with two

of the Consortium members having been appointed to the Board, namely

Mr Ronald Sibongiseni Ntuli as the Non-executive Joint Deputy Chairman

of the Board and Mr Khutso Ignatius Mampeule being an independent

Non-executive Director.

Currently three (3) of the Group’s 14 Directors (21.4%), excluding the

alternate Director, are previously disadvantaged persons, as opposed

to 30.8% (four (4) of 13) during the previous financial year. At Executive

Management level (which includes both top management and senior

management), two (2) members (18%) of the 11 member Executive

Committee are previously disadvantaged persons, which is the same as

during the previous financial year.

Employment Equity

The Group’s focus on employment equity (EE) is in line with its overall

transformation strategy.

The overall race distribution of the Group’s permanent employees in South

Africa as at 30 June 2014, compared to 30 June 2013, is set out below:

At 30 June 2014 At 30 June 2013

White (Females and Males)

737 employees(constituting 37% of the total number of employees)

742 employees(constituting 38% of the total number of employees)

African, Coloured, Indian (designated Females and Males)

1,269 employees(constituting 63% of the total number of employees)

1,170 employees(constituting 62% of the total number of employees)

Reflected below is the summarised employment equity reports (EEA2)

submitted online on 6 December 2013 as required in terms of section 22

of the Employment Equity Act, as well as the Group’s workforce profile

as at 30 June 2014.

Summarised Employment Equity EEA2 Report as at 31 July 2013

Total number of employees (including employees with disabilities) in each of the occupational levels

Occupational level

Male FemaleForeign

nationalsTotal Total

head countA C I W A C I W Male Female Male Female

Top management 0 0 0 2 0 0 0 0 1 0 3 0 3

Senior management 0 0 1 6 0 0 0 1 0 0 7 1 8

Professionally qualified and experienced specialists and mid-management

4 2 2 145 4 3 6 45 0 0 153 58 211

Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents

127 73 46 187 327 151 93 284 2 3 435 858 1,293

Semi-skilled and discretionary decision-making

57 13 14 22 123 53 52 48 1 0 107 276 383

Unskilled and defined decision-making

2 1 0 0 21 2 0 0 1 0 4 23 27

Total permanent 190 89 63 362 475 209 151 378 5 3 709 1,216 1,925

Temporary employees 0 0 0 0 1 0 0 1 0 0 0 2 2

Grand total 190 89 63 362 476 209 151 379 5 3 709 1,218 1,927

(A = African, C = Coloured, I = Indian, W = White)

30


Summarised Employment Equity Report as at 31 July 2013

Total number of employees with disabilities only in each of the occupational levels

Occupational level

Male FemaleForeign



Top management 0 0 0 0 0 0 0 0 0 0 0 0 0


Professionally qualified and experienced specialists and mid-management

0 0 0 2 0 0 0 0 0 0 2 0 2

Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents

0 1 0 1 0 0 1 0 1 0 3 1 4

Semi-skilled and discretionary decision-making

2 0 0 1 1 0 0 0 0 0 3 1 4

Unskilled and defined decision-making

0 0 0 0 0 0 0 0 0 0 0 0 0

Total permanent 2 1 0 4 1 0 1 0 1 0 8 2 10


Grand total 2 1 0 4 1 0 1 0 1 0 8 2 10


Workforce profile as at 30 June 2014

Occupational level

Male FemaleForeign



Top management 0 0 0 2 0 0 0 1 0 0 2 1 3


Middle management 6 2 3 142 5 3 6 46 0 0 153 60 213

Junior management 127 73 52 192 315 161 108 277 2 3 446 864 1,310

Semi-skilled 63 16 13 18 201 49 36 45 1 0 111 331 442

Unskilled 2 1 0 0 24 2 0 0 1 0 4 26 30

Total permanent 198 92 69 360 545 215 150 370 4 3 723 1,283 2,006


Grand total 202 92 69 360 546 215 150 370 4 3 727 1,284 2,011



31

The Group is implementing the following action plans in order to improve

representation by previously disadvantaged groups:

• Workforce and succession planning: The Group has identified

areas and positions in the organisation at specialist, scarce skills,

and senior management levels and has implemented targeted plans

and initiatives to identify and fast track high potential candidates.

• Recruitment and selection: Active steps have been taken to target

and appoint suitably qualified persons from designated groups. The

Group is fully committed to increasing the representation amongst,

and diversity of, its workforce. It has an established Employment

Equity Forum with whom it consults at regular intervals on progress

towards achieving the EE Plan. Due to the targeted efforts made by

the Group during the year, the number of previously disadvantaged

employees increased to 63% compared to 62% during the previous

reporting period. The percentage includes pilots and technicians,

professions where the aviation industry is faced with a particular

challenge to achieve a more equitable representation. The employment

and retention of pilots from previously disadvantaged groups remains

a major challenge. Notwithstanding the foregoing, the Group has

increased its pilot pool of previously disadvantaged groups by 3%

since the implementation of its EE Plan in 2011.

• Job profiling, job evaluation and grading: All jobs in the Group

have been profiled, evaluated and assigned job grades. This enables

valid benchmarking of positions and remuneration both internally and

externally. This has significantly improved transparency in terms of

recruitment and the filling of vacancies, as well the remuneration

policy within the Group. Further, through the job profiling process, the

critical competencies for each job have been identified and mapped

which has facilitated the development of personal development plans

per employee.

• The Group has established an electronic EE Monitoring System which

tracks in real time the EE profile and the Group’s progress towards

achieving its employment equity targets.

The Group’s five-year EE Plan (2011–2016) reflecting the numerical

goals/ targets that it has set and hopes to achieve, is set out below.

LevelEE

goal

% SA black target

Budgetheadcount

Male FemaleForeign

nationals Total

A C I W A C I W M F M F

Top management2011

0%2 0 0 0 2 0 0 0 0 0 0 2 0

2016 2 0 0 0 2 0 0 0 0 0 0 2 0

Senior management2011

30%12 0 0 2 8 0 0 0 2 0 0 10 2

2016 10 1 0 1 5 1 0 0 2 0 0 7 3

Mid-management2011

17%205 4 2 0 145 0 3 6 45 0 0 151 54

2016 195 14 3 1 121 12 2 1 41 0 0 139 56

Junior management 2011

76.9%1,282 128 74 42 197 311 152 95 289 0 3 441 850

2016 1,276 241 34 18 131 555 80 42 175 0 0 424 852

Semi-skilled2011

86%421 67 20 13 22 118 68 28 84 1 0 123 298

2016 444 87 12 7 27 203 29 16 63 0 0 133 311

Unskilled2011

89%25 1 0 0 0 23 0 0 0 0 1 1 24

2016 27 4 1 0 1 16 2 1 3 0 0 6 22

Disabled employees2011

-10 2 0 0 3 2 1 1 1 0 0 5 5

2016 32 5 0 0 2 12 2 1 10 0 0 7 25


Skills Development

The Group’s commitment to providing a quality air service means that skills development is a priority. The Group invested approximately R16.3 million

during the period under review (compared to R14 million in the prior financial year) or approximately 3% of payroll (which is the same for the prior financial

year) in support of its commitment to training and skills development. See the section dealing with the Group’s training and development initiatives on

pages 35 to 36 for more details.

32


Preferential Procurement

The Group is committed to the concept of preferential procurement. It relies

on its suppliers to deliver products and services in line with its required

standards such as, but not limited to, quality and safety of the product,

timeous delivery and availability of supply. Where possible, the Group enters

into service level agreements with such suppliers in an attempt to ensure

that such standards are met and maintained. Other important factors play

a role in selecting suppliers including, but not limited to, compliance with

local and international laws and regulations (particularly those related to

aviation), good quality service and products, reliability and stability, cost

effectiveness and support networks, with particular reference to suppliers

of aircraft parts, components and fuels and the availability of products

and services. The B-BBEE status of South African suppliers is also taken

into account during selection. The Group is currently implementing a

centralised procurement system which will be able to accurately track

B-BBEE spend in the future.

While the Group attempts to source products and services from South

African suppliers, this is not always possible, having regard to the nature

of the Group’s business, where the acquisition of aviation equipment and

specialised airline-branded products need to be procured and sourced

from foreign companies, based mainly in Europe and the United States of

America. The proportion of spend with foreign suppliers varies significantly

year-on-year due to the capital value of spend on aircraft and aircraft

spares. For the period under review, excluding spend on the leasing and

purchase of aircraft and aircraft spares, the Group spent approximately

87% of its total procurement spend with South African suppliers.

In the period under review, the Group marginally increased its score for

preferential spend from 12.4 to 13.28 points. It will continue to focus

on channelling procurement through to black-owned qualifying small

enterprises and exempted micro-enterprises. It is also improving its

systems to more accurately reflect its data collection with respect to

preferential procurement.

Enterprise Development

The Group scored full points for enterprise development, mainly as a result of

a loan that was provided to BidAir Cargo (Pty) Limited, a black empowered

company, as well as the funding and setting up by the Group of an academy

which grooms unemployed school leavers for entry into the workforce.

Socio-economic Development

The success of the Group’s Corporate Social Investment Strategy and

initiatives is reflected in the fact that it scored 3.38 out of 5 in this category.

The Group has several social development initiatives in place including:

• A programme to support and assist the Ekurhuleni Community through

a variety of initiatives centred around the Reiger Park Community

Crisis Centre;

• Contributions to the Smile Foundation, and Casual Day;

• A partnership with the Red Cross Children’s Hospital in the Western

Cape in which the Group has donated air tickets for the transport of

sick children and immediate family members to and from the hospital

as well as the transportation of specialised medical personnel to

hospitals in South Africa where their expertise may be required; and

• The donation of air tickets to Wings and Wishes for the purpose of

transporting children in need of specialised medical treatment.

Further details on the Group’s Corporate Social Investment Strategy and

initiatives are dealt with on page 36 of this Report.

Economic Impact

The Group, like many other companies, has an impact on its stakeholders

through, amongst others, the creation of wealth; the creation of employment

opportunities; the fair and competitive remuneration of its employees

based on industry standards; and its corporate social investment. Kindly

refer to the Group’s Value Added Statement as set out on page 7 of the

Integrated Annual Report. The Group’s economic impacts are driven and

influenced by the following factors.

Access to Affordable Flights

The airline industry is fraught with many challenges involving, but not

limited to, the cost of equipment, oil price and currency fluctuations,

airport charges and taxes and, consequently, access to affordable flights.

It was for this reason that the Group was the first in South Africa to launch

a low fares airline, making air travel affordable for a larger portion of the

population that would previously not have flown. To enable the Group to

continue to offer access to affordable flights, it continuously looks at ways

in which to improve its efficiency and cost effectiveness. These include:

• Implementing a progressive fleet replacement programme. By

operating more modern and fuel-efficient aircraft, the Group has

achieved a consistent reduction in the cost of aircraft maintenance

as well as the amount of fuel used per seat;

• The introduction of a comprehensive fuel savings programme with

the co-operation of pilots;

• The weight of an aircraft impacts on fuel burn and the Group has,

through the installation of lightweight seats and catering equipment,

substantially reduced aircraft weight;

• Maximised use of available technology to reduce airline distribution

costs through the use of the internet, thereby eliminating the use of

traditional paper tickets and by introducing self-service check-in for

customers;

• The Group’s Flight Operations Department, working with Air Traffic

Control and Navigation Services, has developed the most efficient

routing of aircraft between airports and developed more efficient

landing approach profiles resulting in substantial fuel savings; and


33

• The setup of the Group’s own catering department known as Food

Directions, thereby reducing the cost of on-board catering, while at

the same time ensuring a better quality of catering for customers.

Despite its many cost-saving initiatives, some of which are mentioned above,

the Group has experienced a significant increase in average airline ticket

prices during the financial year under review as a result of a substantial

rise in the price of fuel and the weak exchange rate, as reflected in the

Group’s Annual Financial Statements.

Public-Private Initiatives

The Group believes that Public-Private Partnerships (PPPs) and other joint

initiatives with government could play a meaningful role in ensuring access

to affordable airfares. The Group continuously looks at opportunities for

PPPs. No PPPs were entered into during the period under review.

Social Impact

The Group’s objective to create and sustain value for all its stakeholders

is impacted by its ability to achieve its goal of being an employer of choice

and creating a positive impact on society as a whole. The manner in which

it ensures that it achieves these goals is set out below.

The Company’s Employees

Employee Composition and Turnover Rate

The success of the Group is dependent on the commitment of its 2,011

employees to deliver a safe, secure, reliable and quality service. The

composition of its employees is made up as follows:

Workforce composition by employment type

2014 Financial year

end

2013 Financial year

end

Permanent employees 2,006 1,912

Temporary employees 5 2

Note 1: Of the Group’s total number of permanent employees, it has seven (7) foreign nationals in its employ, an increase from six (6) in the 2012/13 financial year. All these foreign nationals are employed in South Africa.

Note 2: The total number of employees, as set out above, excludes 15 of the Group’s permanent employees who are employed in Zimbabwe.

Workforce composition per gender

2014 Financial year

end

2013 Financial year

end

Male 727 707

Female 1,284 1,205

Workforce composition per age distribution

2014 Financial year

end

2013 Financial year

end

Number of employees younger than 30 666 581

Number of employees between

30 and 50 1,177 1,178

Number of employees older

than 50 168 153

While the Group does not maintain data on turnover rate by age group

and gender, its staff attrition rate during the 2013/14 financial year was

12.4% as opposed to 9.6% in the prior reporting period.

Employee Remuneration

The Group offers competitive salaries and benefits to its employees

based on the principles of equity and fairness. Further details of the

Group’s remuneration policies are set out in the Remuneration Report

on pages 55 to 57.

Remuneration and reward guidelines serve to create a platform for fair

and transparent human resource practices so as to ensure consistency

and non-discrimination among employees and thereby eliminate any

form of subjectivity or favouritism. The Group’s position on salaries is in

the middle quartile; however, salary progression for new employees will

range from the lower quartile to the upper quartile as determined by the

employees’ skills, experience, qualifications and performance.

The Group offers employee benefits to its permanent employees employed

in South Africa and makes a contribution towards employee benefits

and medical aid schemes to those permanent employees employed in

Zimbabwe. The Zimbabwe employees are free to join the medical aid and

pension scheme if they so wish. The Group has a defined contribution

pension scheme in place for its permanent employees in South Africa,

which is an umbrella scheme known as Evergreen, administered by Old

Mutual. In addition it offers its permanent employees in South Africa risk

benefits in the form of death and disability benefits, which scheme is

administered by Discovery Life. The Group’s permanent employees in

South Africa contribute 7% towards retirement funding with the Group

contributing 10% to cover both retirement funding and risk benefits. A

medical aid scheme is also in place for permanent employees in South

Africa, which scheme is administered by Discovery. The Group contributes

50% of the cost in respect of the Discovery Essential Comprehensive Plan

for such permanent employees.

Labour Relations

The Group’s aim is to create and maintain sound labour relations, which

support its goal of being the employer of choice in the South African

34


airline industry. The Group regularly reviews its employment conditions.

It tries to ensure that all employees are made aware of their benefits and

this information is furnished to employees during induction sessions and

via the Group’s intranet, newsletters sent directly to staff by the Group,

Old Mutual and Discovery and other communication methods referred

to earlier in the report.

The Group was not subject to any strikes during the period under review.

Its disciplinary and grievance procedures are communicated to new

employees as part of their induction into the Group and are also available

to all employees to ensure that they are aware of the process in place to

lodge grievances, should they have the need to do so.

The percentage of the Group’s employees represented by trade unions or

collective bargaining agreements is reflected on page 22 of this Sustainable

Development Report.

The minimum notice periods for its employees, as set out in the employees’

letters of appointment, are as follows:

Pilots: 3 months

All other employees: 4 weeks

Top and senior management enter into employment contracts with the

Group, which are subject to termination on four (4) weeks’ notice and

are not subject to any fixed term or form of restraint. This is under review.

Performance Management

A performance management process known as On Track, is carried out

for all employees in terms of which they receive performance and career

development reviews. The On Track process strives to give employees

as much clarity as possible on what is expected of them and how their

performance will be measured. It is designed to give managers and staff

tools and skills to maintain open, empowered and constructive relationships.

The performance management process exists to assist managers to be

fair and consistent and manage accountability throughout the Group. The

emphasis is on quality and face-to-face discussions on performance, with

the aim of contributing to a culture of giving and receiving constructive

and developmental feedback.

In addition to the above philosophy, the functional purpose is to align

individually agreed objectives to ensure that the collective effort will achieve

the Group’s overall Strategic Plan. Through the performance management

process the Group hopes to create an environment in which individuals

receive direction, guidance and feedback in order to perform optimally

by identifying ongoing accountabilities and agreeing to specific task

assignments. Ultimately it enables the Group to recognise and reward

high performance by way of performance incentive pay-outs.

Recruitment and Retention of Skilled Staff

The recruitment and retention of the right calibre of employee is vital to

enable the Group to deliver on its goal of becoming the airline of choice

in the places and regions in which it operates. The Group acknowledges

that its ability to recruit and retain skilled employees is a critical factor in

driving performance in the intensely competitive and dynamic business

environment in which it operates.

The employment and retention of pilots remains a major challenge to

the Group, particularly pilots from previously disadvantaged groups.

As part of its commitment to transformation and skills development in

the aviation industry, the cadet pilot programme sponsors individuals

from previously disadvantaged groups to obtain their commercial pilots

licences. The cost to sponsor each cadet is approximately R400,000.

Once the cadets graduate from the programme, they are placed with

selected commercial operators to obtain sufficient flying experience to

be able to be considered for employment with the Group. The Group,

having regard to the fact that each pilot that joins the Group has to be

trained to fly on its aircraft, requires that the pilots sign training bonds, to

ensure that they remain in the employ of the Group for a certain period

to cover the cost of such training.

The Group’s recruitment and selection practices are carried out in

accordance with all applicable labour legislation and are based on the

principles of fairness, transparency and consistency. This is achieved

through the use of objective and validated tools including, but not limited

to, competency-based interviews and psychometric assessments. The

recruitment and selection process entails achieving a balance between

employing the best person for the position and the achievement of the

numerical goals as set out in the Group’s EE Plan in order to achieve an

equitable representation of designated groups in all occupational levels

within the Group.

Diversity and Equal Opportunities

The Group is committed to non-discriminatory treatment in all its employment

practices and to providing equal opportunities for all employees, and

does not accept any form of unfair discrimination based on gender, race,

nationality or religion. Employment policies, including hiring, training,

working conditions, compensation and benefits, promotion, termination

and retirement are based on individual qualifications. Employees are treated

equally, irrespective of gender, age, race, sexual orientation, disability or

other status unrelated to performing the job. The Group’s focus on diversity

and employment equity is in line with its overall transformation objectives

and this is dealt with in the section of this Report relating to B-BBEE.

During the financial year under review no incidents of discrimination were

observed or reported.


35

Health and Safety at Work

Special attention is paid to health and safety in the workplace so as to

ensure that there is a safe environment for employees, customers and

invitees. The health of employees is important to ensure the sustainability

of the Group. During the period under review, 20 minor incidents were

reported (as opposed to 52 in the previous reporting period) which injuries

ranged from slipping on wet floors, to falling incidents and other minor

incidents. There were no fatalities during the period under review.

The CEO ensures that all health and safety duties are discharged as a shared

responsibility throughout the organisation, from appointing occupational

health and safety representatives who know their functions, to positively

enforcing monthly inspections and attending Health and Safety Committee

meetings on a monthly basis. Occupational Health and Safety Representatives

conduct monthly inspections within their departments and annual audits

are conducted by the Quality Assurance Department to ensure compliance

with the Act and to identify any further risks and/or trends.

Health and Safety Committees

Due regard is paid to the health and safety of employees. The Group

strives to provide employees, customers and invitees with a clean and safe

working environment, and maintains reporting and notification systems.

The Group has an open reporting culture and encourages the reporting

of all incidents. Safety incidents and damage are reported though a safety

management system and a formal structure exists to allow safety issues

to be addressed within each department. Safety representatives are

appointed in each department and trained in various areas of health and

safety. The Health and Safety Committee meets at regular intervals to

discuss pertinent issues. The Group is fully compliant with the Occupational

Health and Safety Act.

Staff Welfare

Balancing the demands of work and family life is not always easy, and it was

with this in mind that the Group entered into a contract with Independent

Counselling Advisory Services (ICAS) and the Group’s Precious Cargo

Wellness Programme was born. ICAS provides a confidential 24 hour a day,

365 day a year personal support and information service for employees

and their families where they can call for help in dealing with everyday

situations and more serious concerns. On-site clinics have been set up

and are manned by a registered psychologist once a month at the Group’s

Head Office, Operations Department, OR Tambo International Airport

and Cape Town International Airport. The service includes telephone

consulting, face-to-face counselling, life management services and HIV

counselling. In addition, employees have access to e-Care services,

which is an online comprehensive health portal providing valuable and

interactive resources on a wide range of topics approved by qualified health

professionals. Forty-nine percent of staff made contact telephonically with

the ICAS advisors and 20% made use of the counselling services during

the period under review.

Health and wellness days are held annually and enable employees to

have health checks done at their place of work. These include blood

pressure, height, age, weight and HIV/AIDS tests. The Group’s HIV/AIDS

programme forms part of the Precious Cargo Wellness Programme for all

employees and allows them to undergo voluntary HIV testing and, if need

be, counselling. Employees who test positive are referred for additional

counselling through the programme and are provided with medical support

through the Group medical aid scheme. In addition, HIV Awareness

Workshops are conducted to promote the understanding of HIV and AIDS.

Training and Skills Development

Training programmes are focused on improving human capital, improving

business processes and procedures, maintaining and promoting quality

service delivery in all aspects of the business and alleviating, within

affordable boundaries, skills shortages amongst pilots.

Employee Training

The Group makes a significant investment in training, investing approximately

3.0% (the same as in the previous reporting period) of payroll annually.

The Group has the following training programmes in place:

• Take Off: As part of its succession planning, this leadership

development programme has been running for four consecutive years.

The programme is delivered in conjunction with the Gordon Institute

of Business Science (GIBS) and is underwritten by the University

of Pretoria. As part of this programme the Group’s potential future

leaders are identified and undertake courses covering key areas of

business management in a mini-MBA styled programme. To date,

124 employees have completed the programme, with a further 20

employees currently involved in the programme.

• Cadet Pilot Training Programme: The Group remains committed

to its Cadet Pilot Training Programme and two cadet pilots were

recruited during the period under review. Since the initiation of the

programme, 11 cadets have obtained their commercial pilot licences,

six (6) of whom are currently employed by the Group, while some

of the others have been employed at other smaller airlines to obtain

sufficient flying experience to qualify for employment as a pilot with

the Group. The Department of Transport has commended the Group

on the programme, having regard to the challenges faced by the

aviation industry in recruiting and training cadets from previously

disadvantaged groups.

• Workplace Experiential Learning: During the period under review,

the Group was involved with various tertiary education providers to

provide six-month workplace experiential training stints to students

in the travel-related disciplines offered by these tertiary education

facilities. Since the inception of the programme, five (5) students from

the Durban University of Technology have completed the practical

component of their workplace experiential learning (WEL) at King Shaka

36


International Airport in Durban; 13 students from the University of

Johannesburg have completed their WEL at OR Tambo International

Airport, with all subsequently being offered permanent employment

as Customer Service Agents by the Group; and six (6) students from

the Cape Town University of Technology have completed their WEL

at Cape Town International Airport.

• Skills Development: The Group contributed R6.2 million to the skills

development of the country in the form of the Skills Levy, which is paid

to the Department of Labour, as compared to R5.7 million contributed

during the prior reporting period. As part of the Group’s contribution

to the community, students from Reiger Park have been provided

with the opportunity of gaining six (6) months’ work experience.

Since the Group commenced this initiative in 2006, it has awarded

135 students from the Ekurhuleni district with passenger handling

certificates; employed nine (9) students from the Ekurhuleni district as

cabin attendants; and offered 14 students permanent employment.

• A Succession Development Programme (SDP): This programme is

modelled on the GIBS Take Off Programme, and was developed for

middle management (supervisors) at the airports to enable ground staff

to develop to the next level of management. Nine (9) supervisors at

OR Tambo International Airport, nine (9) supervisors from Cape Town

International Airport and 13 supervisors from King Shaka International

Airport have completed the programme.

• Training and Development: In addition, training and development

courses were provided to employees in areas such as, but not limited

to, passenger handling, Group orientation, passenger check-in,

dangerous goods, customer service, station emergency awareness,

aviation safety and security, fares and ticketing, customer experience,

safety and emergency procedures, type-rating for pilots in respect

of the aircraft types operated by the Group, and crew resource

management training, so as to ensure that the highest standards of

safety, security and service are maintained throughout the Group. In

total 1,436 employees underwent training and development courses

during the period under review.

Investing in the Community

The Group is a committed corporate citizen and, together with its staff,

endeavours wherever possible to improve the lives of fellow South Africans.

The Group believes that social responsibility is a duty, privilege and an

obligation to help those less fortunate and to make a positive impact on

society in general. In this regard, the Group assisted the community as follows:

The Red Cross Children’s Hospital Trust

During the period under review the Group formed a partnership with and

made a donation to the Red Cross War Memorial Children’s Hospital Trust,

to assist children needing medical assistance at the hospital. The Group’s

contribution comprised R500,000 worth of flight tickets to be used to

transport children, as well as their parents/immediate family members to

and from the hospital for medical treatment. The flight ticket contribution

can also be used by certain staff members from the hospital who need

to travel for work purposes. In addition to the flight ticket contribution,

the Group committed to provide a cash donation of R500,000 to the Red

Cross War Memorial Children’s Hospital, which will be used towards the

building of a new facility to accommodate the parents and caregivers of

the children receiving treatment at the hospital.

Project Green

This project was launched in 2007 to raise money to care for the environment,

while also offsetting the Group’s carbon emissions through the sustainable

greening of townships in South Africa. During this review period, the Group

was unable to collect donations from customers directly, since the Sabre

Reservation System does not offer this facility, but it continued with its

investment in Project Green through the donation of R200,000 worth of

air tickets to this worthy cause.

Smile Foundation

The Group continued to put smiles on children’s faces by donating R250,000

in the form of air tickets to the Smile Foundation, which is dedicated to

transforming the lives of children with facial conditions.

Casual Day

The Group sold stickers on board its flights in support of the Casual Day

charity initiative, and raised approximately R6,850.

Diabetes SA

The Group worked with Diabetes SA to promote awareness of diabetes,

by providing free exposure in khuluma (kulula’s on-board magazine), and

during the month of November the kulula.com cabin crew wore the official

Diabetes Badge, to promote World Diabetes Day.

For Good Social Network

For Good Social Network is an initiative of Heartlines, a non-profit company

that uses various forms of media to inspire people to live their lives to

the fullest. The Group contributed an amount of R90,000 to this worthy

cause in the form of air tickets.

ORT SA

The Group made a donation of R35,000 in the form of air tickets to ORT

SA to assist them with their Robben Island Swim Initiative.

Cycle for Life

Prizes in the form of air tickets were donated to Cycle for Life in the amount

of R57,000 to assist with the DSTV Mitchell’s Plain Festival.

Wings and Wishes

This organisation flies critically ill children from all over the country to various

hospitals for life saving surgery and medical care. The Group provided

air tickets to the value of R57,247 to assist in transporting such children

during the period under review.


37

Environmental Impact

The Group’s ability to operate and create and sustain value is largely

driven by its environmental impact. It is therefore committed to protecting

the environment, conserving natural resources and utilising resources

in an effective and responsible way, by adopting sound environmental

practices in its business.

Responsible aviation starts with safety and security and this is the

fundamental duty of the Group to its customers and colleagues.

The Group’s responsibilities also extend to the impact that it has on

the environment.

This section of the Report deals with the environmental performance of the

Group and reflects its carbon footprint based on the Corporate Accounting

and Reporting Standard of the Greenhouse Gas Protocol (GHG Protocol).

The organisational boundary of the report is reflected in the table below.

Organisational entity Comair Limited

Operational control 100%

Operational boundary Operational control

Reporting period 1 July 2013 to 30 June 2014

Base year 2011

Methodology GHG Protocol Corporate Accounting and Reporting Standard

Number of employees 2,006

Number of sites 16

Square meterage of facilities 19,409 m2

KPI: Passengers carried 5,196,507

As mentioned at the outset, this Report deals only with the Group and its

operations in South Africa and does not deal with its associated companies.

The Report includes the compulsory reporting requirements of the GHG

Protocol by quantifying the Group’s emissions that are categorised as

Scope 1 and Scope 2 and includes selected Scope 3 emissions and

fugitive emissions as optional information.

The activities listed in the table below have been reported on.

Scope 1 Scope 2 Scope 3

(a) Mobile fuel combustion in Group-owned/leased aircraft and Group-owned/leased vehicles

Purchased electricity (Electricity (usage))

Water supplyPaper usagePaper recyclingWell-to-tank emission (fuel- and energy-related activity)

(b) Stationary fuel combustion in Group-owned assets (Generators and catering equipment)

Environmental Objectives

The Group’s environmental objectives focus on assessing and minimising

its impact on the environment and are currently aimed at:

• Identifying and complying with environmental legislation and regulations;

• Identifying and managing all risks relating to the Group’s impact on the

environment with regard to water use, energy use and conservation

and emissions and climate change;

• Creating environmental awareness amongst all employees;

• Limiting aircraft noise without compromising safety; and

• Linking fuel saving initiatives with an environmental saving objective.

These objectives enable the Group to identify aspects of its business

that could have an effect on the environment with a view to reducing

such impact and, working closely with aviation policymakers in South

Africa, to influence the development and implementation of effective

environmental regulations.

The Group’s Chief Executive Officer is responsible for ensuring compliance

with these goals and delegates this responsibility to senior managers

within the Group.

Environmental Management Risk Assessment

The Group is committed to ensuring that it complies with the environmental

legislation and regulations applicable to it. The main environmental impact

being managed is the utilisation of fuel and oil which have a direct effect

on carbon emissions.

The Group assesses the risks faced by it that are associated with climate

change, which include:

• Regulatory risks: Compliance with environmental legislation; and

• Physical risks: Interruption to fuel supply, fuel shortages, and the

risks associated with load shedding in South Africa.

No fines or sanctions were imposed upon the Group during the period

under review for non-compliance with any environmental laws or

regulations.

Emissions

Climate change is the most urgent and significant sustainability issue. The

greatest component of the Group’s climate impact (approximately 99%)

results from GHG emissions released through the burning of fossil-based

jet fuel in aircraft engines. The international community aims to limit GHG

concentrations in the atmosphere so that global temperatures do not

increase by more than 2°C by 2050. The Group wishes to ensure that it

makes a fair contribution towards achieving this aim.

38


Globally, aviation produces around 700 million tonnes of carbon dioxide

(CO2) per year, which represents approximately 2% of total man-made

emissions. This share is projected to grow. The aviation industry is

extremely vulnerable to climate change response policies, especially

where these involve the pricing of carbon emissions. On the other hand,

the industry has to contribute its fair share to efforts to limit climate

change. Slowing down aviation growth to reduce carbon emissions is not

in anyone’s interest. It will create unemployment and undermine efforts

to reduce poverty. As it currently stands, it is estimated that tourism

sustains one in every 12 jobs globally and contributes approximately 9%

of worldwide gross domestic product. Aviation is not only a key enabler

of tourism, but also of trade, investment and global integration. However,

while slowing down aviation growth is not an option, being complacent

and doing nothing is also not an option, as the continued growth of

emissions will not be environmentally and economically sustainable. The

Group therefore welcomes the progress made at the International Civil

Aviation Organisation (ICAO) General Assembly in October 2010 where

190 member states agreed to the aspiration of achieving carbon neutral

growth from 2020. This is in line with the global airline industry vision for

a sector-wide approach to enable carbon neutral growth by 2020 and a

huge reduction in net emissions by 2050. The Group supports a framework

for reducing aviation emissions based on carbon trading that is applied

equally to all airlines and all industries as a whole, i.e. the burden on

aviation should not be disproportionate to that of other economic sectors.

Aviation cannot be the ‘cash cow’ of the climate regime. There is also a

firm belief that sustainable bio-jet fuels will play a pivotal role in helping

to meet the carbon emission targets. In this regard there are still hurdles

to overcome, which are mainly commercial in nature, and the need to

establish a level playing field for suppliers to produce aviation bio-jet fuel

against road transportation and other energy products.

British Airways Plc, the Group franchisor in respect of its BA brand and a

major shareholder, is playing a leading role within the aviation industry in

developing and promoting proactive schemes for a post-Kyoto aviation

policy. They believe that CO2 emissions from international aviation must

be integrated within a global agreement and that this must be done in a

way that ensures equal treatment of all airlines. The Group supports this

approach and is committed to improving its environmental performance

and reducing the adverse impact that its activities have on the local and

global environment.

Insofar as the Group’s emissions are concerned, its GHG inventory, by

scope and expressed in metric tonnes of carbon dioxide equivalent (CO2e)

is detailed in the tables and graphs below with comparatives between

the financial year in question and the base year. The Group also reflects

GHG Inventory for 2013 financial year.

Inventory 2013/14

Total GHG emissions by source

Emission source by Scope % of

footprint t CO2e% change from 2011

Scope 1 Direct emissions 82.0% 539,293.08 ↑ 1%

Stationary fuel combustion <1% 77.00 ↑ 19%

Mobile fuel consumption 81.9% 539,216.08 ↓ 1%

Scope 2 Indirect emissions 1.1% 7,146.53 ↓ 1%

Purchased electricity 1.1% 7,146.53 ↓ 1%

Total Scope 1 and 2 emissions 546,439.61 ↑ 1%

Scope 3 Indirect emissions 16.9% 111,132.57 NM

Fuel- and energy-related activities 16.9% 111,083.37 NM

Material use <1% 29.72 NM

Water use <1% 19.33 ↑ 11%

Waste disposal <1% 0.15 NM

Total Scope 1, 2 and 3 emissions 657,572.18 ↑ 21%

Out of Scope emissions t CO2e

Fugitive emissions 6.68

Emission intensities t CO2e% change from 2011

All Scopes’ footprint per passenger 0.13 ↑ 8%

Aviation fuel footprint per passenger 0.10 ↓ 10%

All Scopes’ footprint per employee 328.05 ↑ 18%

Scope 1 and 2 footprint per employee 272.62 ↓ 2%

Site specific emissions per m2 1 0.39 ↑ 46%

1 Site-specific emissions includes stationary fuel combustion and electricity consumption only

Emissions by Emission Source

2013/14 GHG Inventory by Emission Source

Tonnes of CO2e

Scope 1

Stationary fuel combustion

Purchased electricity

Material use

Mobile fuel combustion

Fuel- and energy-related activities

Water use

Waste disposal

0 100,000 200,000 300,000 400,000 500,000 600,000

Scope 2

Scope 3


39

Mobile fuel combustion (primarily aviation fuel) has the largest emission

impact, making up 82% of the total footprint and 99% of Scope 1 and

Scope 2 emissions. It is encouraging to note that emission growth in this

source remains slower than growth in passengers carried, demonstrated

by the 10% decrease in aviation fuel emissions per passenger carried

since the base year.

While immaterial, stationary fuel combustion emissions have increased

from base year (19%), due the Group’s Catering Division which was in

operation for the full financial year.

Scope 3 emissions have increased substantially from previous years,

due to the inclusion, for the first time, of indirect fuel-related emissions,

otherwise known as well-to-tank emissions. This source makes up 17%

of the total footprint.

The total GHG Inventory of the Group for the 2013/14 financial year was

657,572.18 tonnes of CO2e made up as follows:

Direct Emissions (Scope 1)Scope 1 Emissions

Emission sourceUnit of

measure Emission

factor Consumption

Tonnes of CO2e

Mobile fuel consumption: aircraft kg Various 169,354,931 538,924.33Mobile fuel consumption:Vehicles ℓ Various 114,987 291.75Stationary combustion: generator fuel use and LPG fuel use ℓ Various 50,373 77.00Total Scope 1 539,293,08

The direct emissions reflected above are broken down as follows:

Detailed breakdown of mobile fuel combustion in Company-owned/leased

aircraft and owned/leased vehicles


measure Emission

factor Consumption

Tonnes of CO2e

Aviation fuel kg Various 169,354,931 538,924.33Petrol ℓ Various 41.071 94,46Diesel ℓ Various 73,916 197.29Total score 539,216.08

Detailed breakdown of stationary combustion


measure Emission

factor Consumption

Tonnes of CO2e

Diesel ℓ Various 1,134 3.03LPG ℓ Various 49,239 73.97Total score 77.00

Indirect Emissions (Scope 2)


measure

Emission factor

kg C02e per unit Consumption

Tonnes of CO2e

Purchased electricity kWh 1.03 6,938,381 7,146.53 Total Scope 2 7,146.53

Scope 3 Emissions


measure

Emission factor

kg C02e per unit Consumption

Tonnes of CO2e

Fuel-related well- to-tank activities Mobile fuel combustionAviation fuel kg 0,6550 169,354,931 111,012.16Petrol ℓ 0,45040 41,071 18,5Diesel ℓ 0,57850 73,916 42.76Stationary fuel combustion

Diesel ℓ 0,57850 1,134 0.66LPG ℓ 0,18890 49,239 9.29Material use

Paper Tonnes 956 31.09 29.72 Water useWater supply K ℓ 0,34410 56,184 19,33Paper, closed-loop disposal method Tonnes 21 6.93 0.15Total Scope 3 111,132.57

40


Optional Information

Breakdown of non-Kyoto fugitive emissions from air-conditioning equipment


measure Consumption

Tonnes of CO2e

Refrigerant emissions: R22 kg 3.69 6.68

GHG Inventory 2012/13

GHG Inventory 2013/14 Scope 1 Scope 2 Scope 3 Total

Metric tonnes of CO2e 515,870.54 7,281.89 43.33 523,195.76

The total GHG Inventory of the Group for the 2012/13 financial year was

523,195.76 metric tonnes of CO2e made up as follows:

Direct Emissions (Scope 1)Scope 1 Emissions


measure Consumption

Tonnes of CO2e

Mobile fuel consumption ℓ 202,927,886 515,797.46Stationary fuel combustion ℓ 47,356 73.08 Total 515,870.54

The direct emissions reflected above are broken down as follows:

Detailed breakdown of mobile fuel combustion in Group-owned/leased

aircraft and owned vehicles


measure Emission factor2 Consumption

Tonnes of CO2e

Aviation fuel ℓ Various 202,846,266 515,589.19Diesel ℓ Various 26,928 62.22 Petrol ℓ Various 54,692 146.05 Total 515,797.46

Detailed breakdown of stationary fuel combustion (generator, gas)


measure Emission

factor Consumption

Tonnes of CO2e

Diesel ℓ Various 2,025 5,41 LPG ℓ Various 45,331 67.67 Total 73.08

Indirect Emissions (Scope 2)


measure Emission

factor Consumption

Tonnes of CO2e

Purchased electricity kWh 1.00 kg 7,281,891 7,281.89

Scope 3 Emissions

Breakdown of paper usage


measure Emission

factor Consumption

Tonnes of CO2e

Paper Tonnes 954.51 26.20 25.00 Waste Tonnes 5.19 0.11Water supply (Purchased municipal water) Million ℓ 344 kg 52.97 18.22 Total 43.33

In comparing our GHG Inventory for 2013/14 with 2012/13, and the base

year, it must be noted that:

• The major reason for the increase in Scope 1 emissions is due to

the following factors:

- The Group increased the number of flights operated to 43,246

flights in the 2013/14 financial year compared to 40,757 in the

2012/13 financial year.

- The increase in the stationary fuel combustion was due to the

Group having operated its own Catering Department for a full

financial year.

• The major reason for the increase in the Scope 2 emissions is attributed

to the Group having operated its own Catering Department for a full

financial year (as mentioned previously).

• The major reason for the increase in the Scope 3 emissions is as set

out in 2 above.

In order to reduce the effect that the Group has in respect of Scope 1,

Scope 2 and Scope 3 emissions, it has:

• Over the past number of years, implemented a fleet replacement

programme and during the period under review operated 11 Boeing

737-800 new generation aircraft, ten (10) Boeing 737-400 aircraft and

five (5) Boeing 737-300 aircraft. It has also entered into an agreement

with the Boeing Company to purchase eight (8) B737-8 MAX aircraft

for delivery through 2019 to 2021, which aircraft are an upgrade

to the B737-800 aircraft and will offer even better performance,

fuel efficiency and lower engine emissions. These new generation

B737-800 aircraft are not only quieter than the older generation B737

aircraft, but also offer better performance and fuel efficiency, reduced

noise on take-off and landing, and lower engine emissions. Since

the introduction of the new Boeing 737-800 aircraft, the average fuel

burn per passenger is now at around 30 kg per passenger. The new

aircraft and increased passenger numbers have helped to reduce

the average fuel burn per passenger. In fact the new 737-800 uses

approximately 6% less fuel per seat than the older 737-800 aircraft

and 24% less fuel per seat relative to the 737-400 aircraft;


41

• Approximately four years ago, implemented a programme to reduce

weight on board the aircraft by implementing a paperless cockpit,

reducing the amount of potable water carried on board the aircraft

and reducing the weight of the aircraft galleys and thus reducing the

fuel used on board the aircraft;

• In conjunction with Air Traffic Control, where possible, implemented a

Continuous Descent Approach to achieve fuel efficiency and reduce

the impact of noise;

• Where such stands are assigned to them by the ACSA, used fixed

ground power units as opposed to auxiliary power units to reduce

fuel consumption and noise;

• Attempted to reduce the impact of noise, as annoyance and sleep

disturbance are the most commonly reported adverse effects of

aircraft noise. The Group’s objective is to try to reduce or limit the

total number of people exposed to high levels of aircraft noise. Current

regulations and voluntary actions by the Group, such as phasing

out its older aircraft, ensuring that all its engines are stage 3 noise

compliant, as well as restrictions on the use of airspace, night time

flying and ground operations restrictions, have, to a large extent,

resulted in reduced aircraft noise;

• Investigated and is currently implementing various energy-saving

initiatives with regard to electricity consumption such as, but not limited

to, changing all light fittings and globes to more energy efficient ones;

• Implemented a number of initiatives to reduce water consumption,

including the use of borehole water at its Head Office and operational

buildings. Other initiatives to reduce water consumption include

employee awareness, monitoring of uncontrolled leakages and

monitoring garden irrigation cycles; and

• In conjunction with its pilots, designed and implemented a comprehensive

fuel savings programme according to world best practice while also

taking local operating conditions into account. This has resulted in a

further 1.4% reduction in fuel consumption across its fleet. The B737-

800 aircraft have also reduced the Group’s fuel burn per passenger,

as the aircraft has the capacity to carry 21 more passengers and

burns 200 kg per hour less fuel than the B737-400.

Waste Management and Recycling

While the Group had previously implemented a programme to recycle

paper, this is the second year in which it has been able to measure the

tonnage of the paper recycled which measurement was included in its

carbon footprint measurement.

The Group outsources the maintenance of its aircraft and aircraft engines

to third party suppliers as detailed earlier in this Report. These third party

suppliers dispose of waste arising from the maintenance of the aircraft and

aircraft engines, including radioactive material, in accordance with their

own policies and procedures relating to water management and recycling.

Refuse removal in the Group complies with South African laws and

regulations.

Compliance

To the best of the Group’s knowledge and belief there have been no incidents

of material non-compliance with any environmental laws or regulations and

no fines were imposed upon it during the period under review.

Glossary of Terms Used in this Environment Impact Section

Boundaries The inventory boundaries to determine which emissions are accounted for and reported. Boundaries include organisational, operational, geographic and business unit structures.

Carbon footprint The total greenhouse gas emissions caused directly and indirectly by an organisation, typically over a period of 12 months.CO2e Carbon dioxide equivalent – standardisation of all greenhouse gases to reflect its warming equivalent to carbon dioxide (CO2).

This is used to evaluate different greenhouse gases against a common basis.Direct emissions GHG emissions from facilities or sources owned or controlled by the Group, e.g. generators, Company-owned vehicles, etc.Emissions The release of greenhouse gases into the atmosphere.Emission factor Conversion factor to translate activity data, e.g. tonnes of fuel consumed, into emission data.GHG Greenhouse gases. Under the GHG Protocol standard six gases are accounted for, namely carbon dioxide, methane, nitrous

oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.GHG Inventory A listing of the GHG emissions and sources that are attributable to the Group.GHG Protocol GHG Protocol Corporate Accounting and Reporting Standard.Indirect emissions Emissions that are a consequence of the operations of the Group, but occur at sources owned or controlled by another company.Operational boundary The boundary to establish the operations and sources of emissions included in the GHG Inventory.Organisational boundary

The boundary to establish business units or entities of an organisation included in the GHG Inventory. An equity or control approach can be taken.

Reporting period The period of time, typically a calendar or financial year, which the report covers.Scope 1 emission Direct emission from Group-owned or controlled equipment, vehicles or aircraft.Scope 2 emission Indirect emission from the consumption of purchased electricity.Scope 3 emission Indirect emission from other activities associated with the activities of the Group, e.g. commuting travel, business air travel and

paper or water consumption.

42


Introduction

The Group is subject to the Listings Requirements of JSE Limited (JSE)

as well as the requirements of the Companies Act (Act No. 71 of 2008),

as amended (Companies Act). The Group supports the governance

principles and guidelines contained in the King Code of Governance

Principles and King Report on Governance (King III) and is comfortable

that it has complied with effective controls that have been put in place.

Compliance with the JSE Listings Requirements and the Companies Act is

monitored by the Group Company Secretary and the Group’s Compliance

Officer and reported to the Board.

The Group is committed to maintaining principles of good corporate

governance to ensure that its business is managed in a responsible

manner with integrity, fairness, transparency and accountability. The

Board supports the governance principles and guidelines contained in

the Companies Act, the JSE Listing Requirements and King III.

Statement of Compliance

In terms of the JSE Listings Requirements the Group is required to report

in respect of King III for its financial year ending 30 June 2014.

The JSE Listings Requirements require all JSE-listed companies to comply

with King III and to report on the application of the King III principles in

accordance with the ‘comply or explain’ approach of King III. While the vast

majority of King III principles were applied by the Group for the duration

of the period under review, those principles that were not complied with

are explained in this Report. A summary King III Checklist is included at

the end of this Corporate Governance Report. The full King III Application

Register appears on the Group’s website at www.comair.co.za.

Code of Ethics

The Group has a strong culture of entrenched values, which forms the

cornerstone of the behaviour expected of it towards its stakeholders.

These values are embodied in a written document known as the Group

Code of Ethics. Conducting business in an honest, fair and legal manner

is a fundamental principle of the Group. Ethical behaviour has always been

a fundamental guiding principal and management continually focuses on

establishing a culture of responsibility, fairness, honesty, accountability

and transparency. The Group has adopted a Guide to the Code of Ethics

to further explain to employees what constitutes ethical conduct and to

provide guidance on how to make ethically correct decisions.

Confidential Reporting Process

The Group recognises the need for a confidential reporting process (whistle

blowing) covering fraud and other risks. In line with its commitment to

transparency and accountability, it takes action against persons who

are guilty of fraud, corruption and other misconduct. Any employee or

external stakeholder is able to report wrongdoing on a confidential and

anonymous basis to an independent service provider, which ensures

that all calls are treated confidentially. The number of calls or e-mails

received during the reporting period was five (5). All calls and e-mails

were followed up by the Group and, where necessary, appropriate

action was instituted.

Corruption

The Group has a no-tolerance approach with regard to unethical conduct,

in particular to fraud and corruption. Strict policies relating to gifts and

donations received from third parties are in place, compelling employees

or management to declare same.

The Group further prohibits the making of donations to political parties

unless same have been pre-approved by the Board. No donations to

political parties were made by the Group during the period under review.

Any material incidents of fraud or corruption are reported to the Risk

Management Committee and in addition, where appropriate, to the Audit

Committee. The following incidents of fraud and corruption were brought

to the attention of both the Risk and Audit Committees and reported to

the Board:

Credit Card Fraud

The Group first experienced increased levels of credit card fraud in 2010

and as a result implemented a software program (Cybersource Fraud

Detection), which resulted in a significant reduction in credit card fraud.

The Group has been able to maintain these reduced credit card fraud

levels, and credit card chargebacks incurred for fraudulent bookings are

down by approximately 83% from the peak levels experienced in previous

years. This reduction has been achieved by a combination of systems

and controls including:

• The Cybersource Fraud Detection System which makes the necessary

verification call prior to confirmation of the flight booking;

• System development, enabling the transmission of credit card CVV

numbers to the banks, which went live in the second quarter of

the period under review and allows the relevant bank to conduct

additional verification on the credit card presented; and

• Constant monitoring and regular amendment of the parameters

and rules within Cybersource, based on fraudulent behaviours and

trends.

The Payments Association of South Africa (PASA) has continued to drive

its enforcement of 3D Secure on all ‘card not present’ transactions. Online

retailers (excluding airlines), went live with 3D Secure in February 2014.


43

The results and feedback from this activation have not been very positive

and the Group remains concerned about the readiness of the inter-banking

systems and communication networks to cope with the additional volumes

of electronic messaging, come the activation of 3D Secure within the airline

industry. The airline industry accounts for approximately 80% of all online

sales in South Africa. Activation of 3D Secure in the airline environment

will therefore result in significant strain on the inter-banking systems and

communication networks. Regardless of the aforementioned concerns,

the Group has completed the development work for implementation of

3D Secure and remains committed to this initiative in its bid to reduce

its exposure to fraud.

Travel Bank Fraud

Travel Bank is a tool used by the Group to provide, amongst other things,

a credit to customers inconvenienced due to flight delays, cancellations,

overbookings, etc. In March 2013 there were substantial credits allocated

to Travel Bank accounts that appeared unusual relative to the size of the

expected account. Following a detailed investigation, the Group established

that substantial credits had been fraudulently allocated to various Travel

Bank accounts by a supervisor in the Group’s outsourced call centre in

Cape Town. It was further established that the supervisor in question was

working within a syndicate advertising cheap flights on both kulula and

British Airways through Facebook. Four people were arrested in connection

with this fraud, all of whom have since appeared in court. The first accused

entered into a plea agreement with the State. The Group expects that

accused two and three will receive minimum sentences of ten years but

the outcome of court proceedings, which commenced in June 2014, is

awaited. Accused four entered into a plea agreement with the State and

it is expected that the accused will to be fined a maximum of R200,000.

The Group has, in addition, implemented a number of corrective measures

to prevent the recurrence of this kind of fraud.

Electronic Fund Transfer (EFT) fraud

The Group experienced a loss of approximately R1 million resulting from

EFT fraud. Investigations to date indicate that a yet unknown external party

managed to intercept certain electronic communications between the Group

and one of its suppliers. The fraudster ‘disguised’ himself, by electronic means,

as an employee of the supplier and, together with fraudulently completed

documentation, succeeded in having the Group amend the EFT beneficiary

details of the supplier to his/her own bank account details. This subsequently

led to the Group making a supplier payment into a fraudulent bank account.

The fraud was duly reported to the South African Police Service. Additional

controls were implemented with immediate effect, including the online

confirmation of beneficiary banking details before making amendments to

any EFT beneficiary details. The Group is further exploring the possibility

of pursuing a claim against the bank at which the fraudulent bank account

was opened, as the bank account holder is listed as a known fraudster per

the South African Banking Risk Information Centre.

Competition

The Group supports and adheres to the relevant competition laws

applicable to it. No legal action for anti-competitive conduct, anti-trust

or monopoly practices was instituted against the Group during the

period under review.

Compliance

Compliance with all relevant laws, regulations or codes is integral to the

Group’s risk management approach. Other than a R70,000 fine imposed

by the Financial Services Board and a private censure that was received

from the JSE in respect of an incorrect SENS announcement released in

November 2013 reflecting that certain Directors had purchased shares as

opposed to having sold shares, and which was immediately corrected once

the Company became aware of the mistake, there has been no significant

non-compliance by, nor significant fines, nor non-monetary sanctions or

prosecutions against the Group during the period under review.

Customer Privacy and Information Security

Information security policies are in place throughout the Group regulating,

inter alia, the processing and protection of own and third party information.

Legitimate requests for information can be made in terms of the Promotion

of Access to Information Act. No requests for information we made in

terms of the Act in the review period.

The Protection of Personal Information Act (Act No. 4 of 2013) has been

passed in South Africa, but the date of implementation, apart from a few

enabling sections, has yet to be determined. The Act will require further

actions on the part of the Group to ensure privacy of personal information.

The Group will put measures in place to ensure that it will be able to

comply with the requirements of the Act.

There were no complaints against the Group regarding breach of customer

privacy or loss of customer data during the period under review.

Financial Reporting and Going Concern

The Directors are responsible for the preparation of the Annual Financial

Statements in a manner that fairly and accurately represents the state

of affairs and results of the Group. The Directors are responsible for

adopting sound accounting practices, maintaining adequate accounting

records, ensuring an effective system of internal controls and for

safeguarding of assets. The Financial Statements of the Group have

been prepared on the going-concern basis and the Board is of the

view that the Group has adequate resources to continue operating for

the foreseeable future.

44

Corporate Governance (continued)

Board of Directors

Composition of the Board

The Group has a unitary Board structure. The composition of the Board

is set out on pages 61 and 62. The roles of the Chairman and the Chief

Executive Officer (CEO) are separate. The Non-executive Directors, with

a strong independent element, are of sufficient number to ensure that no

single individual has unfettered power of decision-making and authority. As

at 30 June 2014, the Board comprised eight independent Non-executive

Directors, two Non-executive Directors and four Executive Directors (including

the alternate Directors) as required by the Listings Requirements of the JSE.

The Board is considered to be appropriately skilled with regard to its

responsibilities and the activities of the Group and are involved in all material

business decisions enabling them to contribute to the strategic and general

guidance of management and the business. Newly appointed Directors

are informed of their fiduciary duties and in this regard are provided with

a Director’s Manual which contains guidelines regarding their duties and

responsibilities as Directors. The skills and experience profiles of the Board

members are regularly reviewed to ensure an appropriate and relevant

Board composition.

Dealing in Securities

The Group has a formal policy in place to ensure that the Directors and

senior management do not trade in the Group’s shares during price-sensitive

or closed periods. In terms of the policy, closed periods commence from

the last day of the financial year or the last day of the end of the first six

month period of the financial year up to the day after the publication of the

annual or interim results. Directors are required to obtain approval from

the Chairman or a designated Director before dealing in any securities.

Conflict of Interest

All Board members and the Group Company Secretary are required

to disclose their shareholding in the Group, other directorships and

potential conflicts of interest. Where potential conflicts of interest exist,

Directors are expected to recuse themselves from relevant discussions

and decisions. In addition, employees within the Group are obliged to

disclose any conflict of interest.

Role and Function of the Board

The Board retains full and effective control of the Group and is accountable

and responsible for the performance and affairs of the Group. All material

resolutions have to be approved by the Board. The Board is accountable

to all of the Group’s stakeholders for exercising leadership, integrity and

judgment in pursuit of the strategic goals and objectives of the Group.

Formal requirements specifying the responsibilities of and type of conduct

expected from the Directors, the Group Company Secretary, the Chairman

and the CEO are set out in the Group’s Board Charter, which is reviewed

annually. The Board’s primary functions include, amongst others:

• Determining the Group’s vision;

• Determining and providing strategic direction to the Group;

• Adoption of strategic plans and ensuring that same, through the

Executive Directors, are communicated to the applicable management

levels and further ensuring that the objectives as set out in the strategic

plan are met;

• Approving and evaluating the annual business plan and budget

compiled by management and monitoring management on the

implementation of the approved Annual Budget and Business Plan;

• Approving the Group’s Financial Statements and Interim Reports;

• Appointing the CEO who reports to the Board and ensuring that

succession is planned;

• Determining Director selection and evaluation;

• Evaluating the viability of the Group on a going-concern basis;

• Ensuring that the Group has appropriate risk management, internal

control and regulatory compliance procedures in place. It further

identifies and continually reviews key risks as well as the mitigation

thereof by management;

• Approving major capital expenditure and significant acquisitions and

disposals;

• Monitoring non-financial aspects pertaining to the business of the

Group;

• Monitoring compliance with laws, regulations and the Group’s Code

of Ethics;

• Ensuring that the remuneration of Directors and Executive Managers

occurs in accordance with the Group’s remuneration policy;

• Identifying and managing potential conflicts of interest;

• Settling principles for recommending the use of external auditors for

non-audit services;

• Establishing Board committees with clear terms of reference and

responsibility;

• Defining levels of authority and delegating required authority to the

Committees and management;

• Considering and, if appropriate, declaring payment of dividends to

shareholders;

• Evaluating the effectiveness of the Board and its committees;

• Conducting an evaluation of the Group Company Secretary; and

• Ensuring the creation of sustainable shareholder value.

To fulfil their responsibilities adequately, Board members and members

of the sub-committees receive Board and sub-committee agendas

ahead of any meeting. In addition, Directors have unrestricted access

to timely financial and other information relating to the Group as well as

free access to senior management and the Group Company Secretary.

During the financial year under review, the Board received presentations

from various senior Executive Managers enabling it to explore specific

issues and developments in greater depth.


45

Induction of New Directors and Independent Advice

Newly appointed Directors are informed of their fiduciary duties by the

Group Company Secretary. Newly appointed Directors receive information

on the JSE Listings Requirements and the obligations therein imposed

upon Directors, and are informed of any amendments to legislation and

regulations.

Individual Directors may, after consulting with the Chairman or the CEO,

seek independent professional advice, at the expense of the Group, on

any matter connected with the discharge of his/her responsibilities as a

Director.

Board Evaluations

The Board conducts informal evaluations of its performance. During the

evaluation process, the Board identified improved sustainability management

and governance of information technology as areas requiring attention.

Board Meetings and Attendance

The Board meets at least four (4) times a year with the proviso that

additional meetings could be called when certain important matters arise

and measures exist to accommodate resolutions that have to be approved

between meetings. Details of attendance at Board meetings are provided

on page 61 and 62 of this Report.

Retirement and Re-election of Directors

Under the Group’s Memorandum of Incorporation, a third of the Directors

retire by rotation each year and are eligible for re-election by shareholders

at the Annual General Meeting. Details of the Directors retiring by rotation

are set out in the Notice of Annual General Meeting. The appointment of

Directors is a function of the entire Board based on recommendations

made by the Nominations Committee.

Chairman

The Group’s Chairman, Mr P van Hoven, is an independent Non-executive

Director. In addition to playing a key role within the Group, he provides

guidance to the Board as a whole and ensures that the Board is efficient,

focused and operates as a unit. He acts as a facilitator at Board meetings

to ensure a flow of opinions, and attempts to lead discussions to optimal

outcomes in the interests of good governance.

The CEO

The CEO, who reports to the Board, is responsible for the running of

the day-to-day business of the Group and for the implementation of

policies and strategies adopted by the Board. The Executive Directors

and Executive Managers of the various business units and subsidiaries

assist him in this task.

The Group Company Secretary

The Group Company Secretary plays a pivotal role in the continuing

effectiveness of the Board, ensuring that all Directors have full and timely

access to the information that helps them to perform their duties and

obligations properly, and enables the Board to function effectively.

The Group Company Secretary is responsible for providing guidance to

the Board collectively and to the Directors individually with regard to their

duties, responsibilities and powers.

The Group Company Secretary’s key duties with regard to the Directors

include, but are not limited to, the following:

• Collating and distributing relevant information such as corporate

announcements, investor communications and any other developments

affecting the Group or its operations;

• Inducting new Directors. This includes a briefing on their fiduciary

and statutory duties and responsibilities (including those arising from

the JSE Listings Requirements);

• Providing regular updates on effective and proposed changes to

laws and regulations affecting the Group and/or its businesses; and

• Monitoring of Directors’ dealings in securities and ensuring that

prior approval to deal in securities is obtained from the Chairman or

another designated Director.

The Group Company Secretary reports to the CEO and has a direct channel

of communication to the Chairman. He meets with the Chairman before each

Board and general meeting to prepare for and discuss important issues.

He is responsible for the functions specified in section 88 of the Companies

Act 2008 (as amended). All meetings of shareholders, Directors and

Board committees are properly recorded as per the requirements of the

Act. The removal of the Group Company Secretary would be a matter

for the Board as a whole.

The Group Company Secretary is a Director of the Company, albeit an

alternate Director, and a Director of some of the Group’s subsidiaries. The

Board is of the opinion that, in view of the fact that the Group Company

Secretary is an alternate Director of the Group, an arm’s length relationship

is not feasible. However, the Board annually evaluates the competency

and effectiveness of the Group Company Secretary as required in terms

of the JSE Listings Requirements. The Board has considered and is

satisfied that no conflict of interest exists and that the Group Company

Secretary is competent and has the requisite qualifications and experience

to effectively execute his duties.

The name and qualifications of the Group Company Secretary appear

on page 62 of this Report.

46


Executive Management

The Group’s Executive Management Committee meets on a regular basis

to consider, inter alia, investment opportunities, operational, financial and

other aspects of strategic importance to the Group. Executive Managers

have roles and responsibilities that are specific to their levels of authority.

Board Committees

The Board has created an Audit Committee, Risk Management Committee,

Nominations Committee, Remuneration Committee and a Social and

Ethics Committee, as set out below, to enable it to properly discharge

its duties and responsibilities and to effectively fulfil its decision-making

process. The Board and its committees are supplied with relevant and

timely information enabling them to discharge their responsibilities.

While the Board remains accountable for the performance and affairs

of the Group, it does delegate certain functions to its committees

and management to assist it in carrying out its functions, duties and

responsibilities. The Chairman of each committee reports to the Board

at each Board meeting.

The Chairmen of the committees, other than the Social and Ethics

Committee, which has a Non-executive Director as its Chairman, are

all independent Non-executive Directors and are requested to attend

the Group’s Annual General Meeting to answer any questions posed

by shareholders.

The Board committees have specific terms of reference, appropriately skilled

members, membership by Non-executive Directors who act independently,

Executive Directors and Executive Management participation and access

to specialist advice when considered necessary.

Audit Committee

The role of the Audit Committee is to review the Group’s financial position

and make recommendations to the Board on all financial matters and

internal controls. The Committee also reviews the nature and extent

of non-audit services provided by the external auditors to ensure that

the fees for such services do not become so significant as to call into

question their independence. The Chairman of the Committee reports on

the Committee’s activities at each Board meeting.

The members of this Committee are independent Non-executive Directors.

All members are financially literate and all possess substantial business

and financial expertise and comply with section 94 and Regulation 42 of

the Companies Act. The Committee meets at least three (3) times per

year. Both internal and external auditors have unrestricted access to the

Committee.

The Chairman of the Board, CEO, Financial Director, Chief Audit

Executive (CAE) and external auditors attend the Audit Committee

meetings by invitation. The Committee held three (3) meetings during

the reporting period.

Composition of Committee and Attendance

Membership Attendance

Chairman Dr PJ Welgemoed 2/3

Members Mr KI Mampeule 3/3

Ms WD Stander 2/3

Mr GJ Halliday 3/3

Mr HR Brody (Appointed to the Audit Committee on 9 June 2014)

0/0

The Committee, amongst other things, identifies and evaluates the

adequacy of internal controls and provides effective communication

between Directors, management and the internal and external auditors.

The responsibilities of the Audit Committee are contained in a formal

mandate from the Board (terms of reference) which is reviewed annually

with the main responsibilities being, amongst others, to:

• Perform the statutory functions of an Audit Committee in terms of

the Companies Act and other functions delegated by the Board;

• Review and recommend to the Board for approval the Group’s

Integrated Annual Report, interim reports and results announcement;

• Nominate and approve the terms of engagement and remuneration

of registered auditors, who in the opinion of the Committee, are

independent of the Group, and ensure that their appointment complies

with the provisions of the Companies Act, King III and other legislation

relating to their appointment;

• Review and evaluate the effectiveness and performance of the external

auditors as well as the scope, adequacy and costs of audits to be

performed and report there-on to the Board and to the shareholders;

• Evaluate and approve the external auditors’ plans, findings and

reports;

• Receive and deal appropriately with any concerns or complaints,

whether received internally or externally, dealing with the Group’s

accounting practices and internal audits, the Financial Statements,

internal financial controls or related matters;

• Monitor and evaluate the performance of the Financial Director;

• Identify and evaluate exposure to financial risks;

• Evaluate the effectiveness of the internal auditing function, including its

activities, scope and adequacy and receive and approve the Internal

Audit Plan, internal audit reports and material changes to same;

• Evaluate procedures and systems including, but not limited to, internal

controls, disclosure controls and the internal audit function;


47

• Consider legal matters which could financially affect the Group; and

• Recommend principles for the use of external auditors for non-audit

services and ensure that the fees for such services do not become

so significant as to call into question their independence.

The Committee’s report describing how it discharges its statutory duties

and the additional duties assigned to it by the Board is included in this

Integrated Annual Report on pages 52 to 54.

Risk Management Committee

The role of the Risk Management Committee is to review the risks facing

the Group’s business and to ensure compliance with all required legislation,

regulations and codes affecting the business. The members of this Committee,

who also serve as members of the Audit Committee, are independent

Non-executive Directors. The Committee meets at least three (3) times

per year. The Chairman of the Board, CEO, Financial Director, CAE and

external auditors (where appropriate) attend Risk Management meetings by

invitation. The Committee held four (4) meetings during the reporting period.



Chairman Dr PJ Welgemoed 3/4

Members Mr KI Mampeule 4/4

Ms WD Stander 2/4

Mr GJ Halliday 3/4

Mr HR Brody (Appointed to the Committee on 9 June 2014)

0/0

The main responsibilities of the Risk Management Committee are,

amongst others, to:

• Oversee the development and annual review of a Risk Management

Policy and Plan for recommendation to the Board for approval;

• Monitor implementation of the Risk Management Policy and the Plan;

• Make recommendations to the Board concerning the levels of

tolerance and appetite and ensure that risks are managed within

the levels of tolerance and appetite as approved by the Board;

• Ensure that the Risk Management Plan is widely disseminated

throughout the Group and integrated in the day-to-day activities of

the Group;

• Ensure that risk management assessments are performed on a

continuous basis;

• Ensure that frameworks and methodologies are implemented to

increase the possibility of anticipating unpredictable risks;

• Ensure that management considers and implements appropriate

risk responses;

• Liaise closely with the Audit Committee to exchange information

relevant to risks;

• Review reports concerning risk management that are to be included

in the Integrated Annual Report to ensure that such reporting is timely,

comprehensive and relevant; and

• Evaluate procedures and systems introduced including, without

limitation, the Company’s information technology systems.

For more information regarding the Group’s risk management and the

material issues facing the Group that have been identified as a result of

the Group’s risk management procedures, refer to the Internal Control

and Risk Management Report.

Nominations Committee

The members of this Committee are all Non-executive Directors who act

independently.

This Committee, together with the Remuneration Committee, considers

the issue of succession planning at Board and Executive Management

level. The CEO, in consultation with the Board Chairperson, Remuneration

and Nominations Committees, is responsible for ensuring that adequate

succession plans are in place.

The Committee met once during the financial year under review. The

composition of the Committee and attendance at meetings are set out below:



Chairman Mr P van Hoven 1/1

Members Mr JM Kahn 1/1

Mr KI Mampeule 1/1

Mr MD Moritz 1/1

Amongst others, the main responsibilities of the Nomination Committee

are to:

• Make recommendations on the appointment of new Executive and

Non-executive Directors;

• Make recommendations on the composition of the Board generally

and the balance between Executive and Non-executive Directors;

• Review plans for succession and ensure their adequacy, for the

Chairperson, the CEO and Executive Directors;

• Review the Board structure, size and composition and make

recommendations with regard to any adjustments deemed necessary;

and

• Ensure that Board appointment policies and procedures are formal

and transparent and a matter for the Board as a whole, and that

such appointment policies and procedures are reviewed and updated

when necessary.

48


Remuneration Committee

The members of this Committee are all independent Non-executive

Directors. The CEO attends meetings by invitation only and is not entitled

to vote. The CEO does not participate in discussions regarding his own

remuneration. The Committee met twice during the financial year under

review. The composition of the Committee and attendance at meetings

is set out below.



Chairman Mr JM Kahn 1/2

Members Mr RC Sacks 1/2

Mr P van Hoven 2/2

Ms WD Stander 1/2

The remuneration policy and the execution thereof is the responsibility of

the Remuneration Committee.

The fees for Non-executive Directors and the remuneration packages of

Executive Directors for the financial year under review are disclosed in the

Remuneration Report on page 63 of this Report. As recommended by

King III, the Group’s remuneration policy was approved by shareholders

of the Group at its last Annual General Meeting, held on 30 October 2013,

by way of a non-binding advisory vote.

Amongst other things, the main responsibilities of the Remuneration

Committee are to:

• Determine the Group’s general policy on remuneration as well as

specific policies in respect of Executive Directors’ and Executive

Managers’ remuneration;

• Review and determine remuneration packages for Executive Directors

and Executive Management including, but not limited to, basic salary,

annual bonuses, benefits, performance-based incentives and Share

Incentive Scheme awards;

• Annually appraise the performance of the CEO;

• Annually review the general level of remuneration for Directors of the

Board as well as its committees and recommend proposals in this

respect for approval by shareholders at general meetings; and

• Make recommendations in respect of awards from the Comair Share

Incentive Scheme.

Social and Ethics Committee

The role and responsibilities of the Committee are codified in a mandate

from the Board (terms of reference), which is reviewed annually. The

members of this Committee consist of independent Non-executive

Directors, Executive Directors and Senior Executives of the Group who

are suitably experienced. The Chairman of the Board, Financial Director,

CAE, representatives from other assurance providers, professional advisors

and Board members are entitled to attend Committee meetings. The

Committee met four times during the year under review. The composition

of the Committee and attendance at meetings are set out below:



Chairman: MD Moritz 4/4

Members: ER Venter 4/4

DH Borer 4/4

KI Mampeule 3/4

KV Gorringe 4/4

EA Liebetrau 4/4

WD Stander (Appointed to the Committee on 9 June 2014)

0/0

The responsibilities of the Social and Ethics Committee are, amongst

others, to:

• Assist the Board in ensuring that the Group is compliant with all

legislation and other requirements relating to social and economic

development and remains a good corporate citizen by monitoring

the sustainable development performance of the Group; and

• Perform the statutory functions of a Social and Ethics Committee in

terms of the Companies Act and other functions delegated to it by

the Board.

The Committee’s report describing how it discharged its statutory duties

is included in the Integrated Report on page 58.

Discharge of Responsibilities

The Board is of the view that the committees have discharged their

responsibilities for the financial year under review in compliance with their

terms of reference.

Internal Control

Internal Control Systems

The Board has responsibility for ensuring that the Group implements

and monitors the effectiveness of its systems of internal control. The

identification of risk and the implementation and monitoring of adequate

systems of internal control to manage both financial and operational

risk are delegated to the CAE, who in turn makes recommendations to

Executive Management as well as to the Audit Committee.


49

While all internal control systems do have inherent shortcomings, the

Group’s internal control system is designed to provide reasonable assurance

as to the reliability of financial information and in particular the Financial

Statements, as well as to safeguard, verify and maintain accountability of

its assets and to detect fraud and potential liability, while complying with

applicable laws and regulations.

The Group’s external auditors consider the internal control systems of the

Group as part of their audit, and advise on deficiencies when identified.

Internal Audit

The internal audit function is an independent appraisal mechanism which

evaluates the effectiveness of the applicable operational activities, the

attendant business risks and the systems of internal controls, so as to

bring material deficiencies, instances of non-compliance and development

needs to the attention of the Audit Committee, external auditors and

operational management for resolution. The CAE co-ordinates with the

external auditors so as to ensure proper coverage and minimise duplication

of effort. Internal audit plans are tabled at the Audit Committee meetings

and follow-up audits are concluded in areas where weakness is identified.

The Internal Audit Plan, approved by the Audit Committee, is based on risk

assessments which are of a continuous nature, so as to identify not only

existing and residual risk, but also emerging risks and issues highlighted

by the Committee and senior Executive Management.

External Audit

The independence of the external auditors is recognised. The Audit

Committee meets with external auditors to review the scope for the external

audit, and any other audit matters that may arise. The external auditors

attend Audit and Risk Committee Meetings and have unrestricted access

to the Chairmen of the Committees. The Audit Committee is responsible

for nominating the Company’s external auditors and determining the

terms of engagement.

Investor Relations

The Board is committed to keeping shareholders and the investor community

informed of developments in the Group’s business. For further information

in this regard, please refer to the Sustainable Development Report.

Summary King III Checklist

Principle Principle description

Applied/ partially applied/

not appliedIoDSA GAI

score

Explanation/compensating

practices Not applied commentary

Principle 2.1 The Board acts as the focal point for and custodian of corporate governance

Applied AAA

Principle 2.2 The Board appreciates that the strategy, risk, performance and sustainability are inseparable

Applied AAA

Principle 2.3 The Board provides effective leadership based on ethical foundation

Applied AAA

Principle 2.4 The Board ensures that the company is, and is seen to be, a responsible corporate citizen

Applied AAA

Principle 2.5 The Board ensures that the company ethics are managed effectively

Applied AAA

Principle 2.6 CHAPTER 3: Audit Committees Applied AAA

Principle 2.7 CHAPTER 4: The governance of risk Applied AA

Principle 2.8 CHAPTER 5: The governance of information technology

Applied AAA

Principle 2.9 CHAPTER 6: Compliance with laws, rules, codes and standards

Applied AAA

Principle 2.10 CHAPTER 7: Internal audit Applied AAA

Principle 2.11 CHAPTER 8: Governing stakeholder relationships

Applied AA

Principle 2.12 CHAPTER 9: Integrated reporting and disclosure

Applied AAA

50





score



Principle 2.13 CHAPTER 7 and 9: The Board reports on the effectiveness of the company’s internal controls

Applied AAA

Principle 2.14 The Board and its Directors act in the best interests of the company

Applied AAA

Principle 2.15 The Board will/has consider/ed business rescue proceedings or other turnaround mechanisms as soon as the company has been/may be financially distressed as defined in the Companies Act (Act No. 71 of 2008)

Applied AAA

Principle 2.16 The Board has elected a Chairman of the Board who is an independent Non-executive Director. The CEO of the company does not also fulfil the role of Chairman of the Board

Applied AAA

Principle 2.17 The Board has appointed the Chief Executive Officer and has established a framework for the delegation of authority

Applied AAA

Principle 2.18 The Board comprises a balance of power, with a majority of Non-executive Directors. The majority of Non-executive Directors are independent

Applied AA

Principle 2.19 Directors are appointed through a formal process

Applied AA

Principle 2.20 The induction of and ongoing training, as well as the development of Directors are conducted through a formal process

Partially not applied

BB Although no induction and ongoing training programmes exist, Comair takes note of training received by Directors outside of the company and Directors receive informal advice and professional mentoring from the senior and more experienced Directors as well as relevant information included in the Directors’ Manual from time to time.

Principle 2.21 The Board is assisted by a competent, suitably qualified and experienced Company Secretary

Applied AAA

Principle 2.22 The evaluation of the Board, its committees and individual Directors is performed every year

Applied AA

Principle 2.23 The Board delegates certain functions to well-structured committees without abdicating from its own responsibilities

Applied AAA

Principle 2.24 A governance framework has been agreed upon between the Group and its subsidiary Boards

Applied AAA


51




score



Principle 2.25 The company remunerates its Directors and Executives fairly

Applied AAA

Principle 2.26 The company has disclosed the remuneration of each individual Director and prescribed officer

Applied AAA

Principle 2.27 The shareholders have approved the company’s remuneration policy

Applied AAA

52

Audit Committee Report

This report is presented by the Group’s Audit Committee (“the Committee”) approved by the Board and the shareholders in respect of the financial

year ended 30 June 2014. It is prepared in accordance with the recommendations of King III and the requirements of the Companies Act (Act No. 71

of 2008) as amended, and describes how the Committee has discharged its statutory duties in terms of the Companies Act and the additional duties

assigned to it by the Board in respect of the financial year ended 30 June 2014.

Audit Committee Mandate

The Committee has adopted a formal mandate setting out its responsibilities and functioning that has been approved by the Board of Directors (Board)

and will be reviewed annually. The Committee has conducted its affairs in compliance with this mandate and is satisfied that it has fulfilled all its statutory

duties and duties assigned to it by the Board during the financial year under review, as further detailed below.

Composition and Meetings

The Committee consists of five (5) independent Non-executive Directors and meets at least three (3) times per annum.

The Chairman of the Board, CEO, Financial Director, Chief Audit Executive (CAE) and external auditors attend Committee meetings by invitation.

During the period under review the Committee held three (3) meetings.

Committee Members’ Name Date of

Appointment QualificationsNo. of Meetings held during year Attendance

Dr PJ Welgemoed 28/03/1996 BCom (Hons), MCom, DCom 3 2/3

Mr KI Mampeule 05/09/2005 BA, MSc, MBA 3 3/3

Ms WD Stander 15/09/2008 BA (Hons), MBA 3 2/3

Mr GJ Halliday 06/06/2013 BA (Hons), MBA 3 3/3

Mr HR Brody 09/06/2014 BAcc (Hons) 3 0/0

Abridged curricula vitae of the Committee members appear on pages 117 to 119 of this Integrated Annual Report.

The Board re-appointed the Committee members and appointed a new member, which appointments are subject to shareholders re-electing the

Committee members at its Annual General Meeting to be held on 5 November 2014.

Role and Function of the Committee

The roles and functions of the Committee, including its statutory duties, are set out in the Corporate Governance Report to be found on pages 46

and 47 of this Integrated Annual Report.

The Committee is satisfied that it has fulfilled all its statutory duties, including those prescribed by the Companies Act, and duties assigned to it by the

Board during the financial year under review. In addition, the Committee did not receive or deal with any concerns related to matters listed in section 94(7)

(g)(i)–(iv) of the Companies Act.

External Audit

The Committee has, during the period under review, nominated external auditors, Grant Thornton (Jhb) Inc. (Grant Thornton), approved its fee and

determined its terms of engagement. The appointment will be presented to shareholders of the Group at the Annual General Meeting for approval.

The Committee has further satisfied itself that Grant Thornton is accredited and appears on the JSE list of Accredited Auditors and that the designated

auditor is not disqualified from acting as such. The Committee has further satisfied itself that the external auditors, Grant Thornton, are independent of

the Group as contemplated in sections 90(2)(b), (c) and 94(8) of the Companies Act.

There is a formal policy that governs the process whereby the external auditors are considered for non-audit related services. The Committee approved

the terms of the policy for the provision of non-audit services by the external auditors and approved the nature and extent of non-audit services that the


53

external auditors may provide. During the period under review, the external auditors did provide non-audit services to the Group, namely in the form of

tax advice and assurance on selected information in this Integrated Annual Report. The use of the external auditors for such services was pre-approved

by the Committee.

Internal Financial Controls

The Committee is responsible for assessing the Group’s systems of internal financial controls and has considered reports from the internal and external

auditors and has satisfied itself about the adequacy and effectiveness of the Group’s system of internal financial controls.

Expertise and Experience of the Financial Director and Finance Function

The Committee recommended that Ms Kirsten King, a registered Chartered Accountant, be appointed as the Group’s Financial Director, which

recommendation was approved by the Board. The Committee is of the view that Ms King has substantial knowledge of the airline industry, having served

as the Group Revenue Accountant since 2011. The Committee performed a review of the Financial Director and the finance function and the Committee

is satisfied with the expertise and experience of the Financial Director and the appropriateness of the finance function.

Internal Audit

Internal audit forms an integral part of the Group’s Risk Management Process and system of internal controls. The Committee is satisfied with the

independence, quality and scope of the internal audit function. Mr Sean Percival Miller was appointed as Chief Audit Executive (CAE). The CAE has

developed a sound working relationship with the Committee in that he:

• Provides an objective set of eyes and ears across the Group;

• Provides assurance and awareness on risks and controls specific to the Group and the industry in which he is involved;

• Has positioned himself as a trusted strategic adviser to the Committee;

• Confirms to the Committee at least once a year the independence of the internal audit function; and

• Communicates regularly with the Committee Chairman.

Further details of the Group’s internal audit function are contained in the Corporate Governance Report. The Committee has considered and recommended

the Internal Audit Charter for approval by the Board. The CAE’s annual audit plan was approved by the Committee.

Risk Management

The Board has assigned oversight of the Group’s risk management function to the Risk Management Committee. The members of the Audit Committee

are also members of the Risk Management Committee. The Committee fulfils an oversight role regarding financial reporting risks, internal financial controls

and fraud risk as it relates to financial reporting and safety and security issues. Further details of the Group’s risk management function can be found

in the Corporate Governance Report and the Internal Control and Risk Management Report.

The Committee is satisfied that the system as well as the process of risk management is effective.

Financial Statements

The Committee has reviewed the Financial Statements of the Group and is satisfied that they comply with International Financial Reporting Standards.

Compliance

The Committee is responsible for reviewing any major breach of relevant legal, regulatory and other responsibilities. The Committee is satisfied that there

has been no material non-compliance with laws and regulations, apart from the following:

During November 2013, the Group issued an incorrect SENS announcement indicating that certain Directors had purchased shares as opposed to having

sold same. The announcement was corrected as soon as the mistake came to the Group’s attention. As a result of the incorrect SENS announcement,

the Group received a fine of R70,000 from the Financial Services Board (FSB) and a private censure from the JSE. The Group, on the recommendation

of the Audit Committee, has enhanced its internal policies and procedures for approving and releasing SENS announcements.

54

Audit Committee Report (continued)

Going Concern

The Committee, based on an assessment received from Executive Management, is of the view that the Group will be a going concern for the foreseeable

future.

Duties Assigned by the Board

The Committee fulfils an oversight role regarding the Group’s Integrated Annual Report and the reporting process including the systems of internal

financial controls. It is responsible for ensuring that the internal audit function is independent and has the necessary resources, standing and authority

to enable it to effectively discharge its duties. The Committee also oversees co-operation between the internal and external auditors, and serves as a

link between the Board and their functions.

Whistle Blowing

The Committee is satisfied that all instances of whistle blowing have been appropriately dealt with during the period under review.

Sustainability Reporting

The Committee recommended to the Board the appointment of Grant Thornton, an external independent assurance provider, to perform an assurance

engagement with the purpose of expressing a limited assurance opinion in terms of ISAE 3000 on whether selected key performance indicators and

specific disclosures as contained in the Integrated Annual Report have been fairly stated and meet reasonable reporting expectations. The assurance

statement can be accessed via the Company’s website www.comair.co.za.

The Committee has considered the Group’s sustainability information as disclosed in the Integrated Annual Report and has assessed its consistency

with operational and other information known to Committee members, and for consistency with the Annual Financial Statements. The Committee is

satisfied that the sustainability information is reliable and consistent with the financial results.

Recommendation of this Integrated Annual Report for Approval by the Board

The Committee recommended this Integrated Annual Report for approval by the Board on 8 September 2014.

The Committee is satisfied that it has complied with all its legal, regulatory and other responsibilities during the period under review.

Dr PJ Welgemoed

Chairman: Comair Limited Audit Committee

8 September 2014


55

Remuneration Report

The Group has a dedicated Board Committee that, inter alia, determines the governance of remuneration matters, Group remuneration philosophy,

remuneration of Executive Directors and other Senior Managers, as well as the compensation of Non-executive Directors, which is ultimately approved

by the shareholders.

Detail on the mandate, composition and attendance of meetings held by the Remuneration and Nominations Committees are set out in the Corporate

Governance Report.

Remuneration Approach

The Group’s remuneration approach aims to ensure that it remunerates its Directors and Senior Managers in a manner that supports the achievement

of the strategic objectives of the Group, while attracting and retaining scarce skills and rewarding high levels of performance. The remuneration offered

by the Group needs to be competitive in order to attract, retain and incentivise high calibre staff.

The remuneration philosophy is based on the following principles:

• Affordability;

• Internal fairness; and

• External fairness.

The remuneration approach, which guides the level of salaries of all Directors and Senior Management, is aimed at:

• Ensuring that no discrimination occurs;

• Recognising exceptional and value adding performance;

• Encouraging team performance and participation;

• Promoting cost-effectiveness and efficiency; and

• Achieving the strategic objectives of the Group.

In order to balance external equity with affordability and to ensure that market-related salaries are offered to staff, the Group participates in several salary

surveys and uses that information for benchmarking purposes.

Remuneration Structures

Management remuneration structures comprise fixed and variable components as follows:

• Fixed Pay: base salary and benefits; and

• Variable Pay: short-term merit bonus and a long-term Executive Incentive Scheme based on Group profits before tax and the Group’s share price

performance (payable every three years).

These structures are detailed below:

Fixed Pay

Base salary

Market data is used to benchmark individual salary levels for Directors and Senior Managers. This information, combined with the individual’s performance

assessment, is the key consideration for the annual salary reviews.

Retirement benefits

The Group offers membership to a defined contribution pension fund to all permanent employees in South Africa. This fund is part of an umbrella

arrangement known as Evergreen Superfund and is administered by Old Mutual.

56

Remuneration Report (continued)

Other benefits

This includes benefits such as medical aid, risk benefit insurance (i.e. death and disability) to permanent employees in South Africa, and leave.

Pilots

Pilots are currently guaranteed a 13th cheque.

Variable Pay

Short-term incentives

Executive Directors and Senior Managers participate in a short-term, cash based management incentive scheme. Payment in terms of the short-term

incentive scheme is dependent upon achievement against key performance criterion, namely profit after tax and subject to three (3) components:

• Achievement by the qualifying employee of key performance indicators (40%);

• Group profit performance (40%); and

• 20% of the bonus is payable at the discretion of the Board.

The payment of any short-term incentive to Executive Directors and Senior Managers is subject to Board approval.

Employees who do not participate in the short-term incentive scheme would be entitled to a 13th cheque, or a portion thereof, based on personal

performance and company affordability and a discretionary amount based on the Group’s performance. This does not apply to Pilots, who are guaranteed

a 13th cheque.

Long-term Executive Incentive Scheme

Executive Directors and designated Senior Managers who were in the employ of the Group on or prior to 31 December 2012 and are still in the employ

of the Group as at 30 September 2015 participate in the long-term Executive Incentive Scheme (“the Scheme”).

The purpose of the Scheme is to retain talent as well as to reward participants of the Scheme based on the Group’s performance. The Scheme comprises

two components as follows:

Profit linked component (35%) In terms of this component, 7% of the aggregated headline profits before tax (excluding profits from damages awards and profits from new business

ventures that are not managed by the participants), made by the Group during the 2013, 2014 and 2015 financial years in excess of R250 million, but

capped to a maximum of R17.5 million, would be allocated to participants in the Scheme in proportion to their basic salary versus the combined basic

salary of the participants in the Scheme.

Share price linked component (65%) This component is based on the trade weighted average share price of the Group for the six months to 30 June 2015, with the bonus payable to

participants being the difference between the Group share price as determined on 30 June 2015 and a share price of R1.50c, but capped to a maximum

of R32.5 million.

Executive Directors’ Remuneration

Remuneration of Executive Directors is compared to the market for comparable roles in companies of similar size.

The annual bonus payable to Executive Directors in terms of the short-term management incentive scheme is limited to 100% of their annual base salary.

Executive Directors have standard service contracts with no fixed duration, no restraint and with a one-month notice period. This is currently under review.

Details of the remuneration of individual Executive and Non-executive Directors are set out in the Report of the Directors on pages 63 and 64.


57

Non-executive Directors’ Remuneration

Non-executive Directors do not receive any benefits or share options from the Group apart from Directors’ fees, which fees were approved by shareholders

at the Group’s Annual General Meeting on 30 October 2013. The Non-executive Directors’ fees for the year ended 30 June 2014 are included in the

joint remuneration payable to the Group’s Non-executive Directors, as indicated in Special Resolution Number 1 in the Notice of Annual General Meeting

to be held on 5 November 2014.

The Directors’ fees per meeting, for the financial years ended 30 June 2013 and 30 June 2014, as well as the proposed fee per meeting for the financial

year ending 30 June 2015, are set out in the table below. Members of the Committees are also remunerated for their participation as members of the

various Committees.

Directors’ Fees

Meeting

Annual fee for the year ended

30 June 2013R


30 June 2014R


30 June 2015R

Chairperson: Board 1,000,000 1,200,000 1,280,000

Vice-Chairperson: Board 250,000 350,000 374,500

Member: Board 120,000 150,000 160,500

Fee per meeting for the year ended

30 June 2013R

Fee per meeting for the year ended

30 June 2014R

Proposed fee per meeting for the year ended

30 June 2015R

Chairperson: Audit Committee 10,000 13,000 13,910

Member: Audit Committee 5,000 6,500 6,955

Chairperson: Risk Committee 10,000 13,000 13,910

Member: Risk Committee 5,000 6,500 6,955

Chairperson: Nominations Committee 10,000 13,000 13,910

Member: Nominations Committee 5,000 6,500 6,955

Chairperson: Social and Ethics Committee 10,000 13,000 13,910

Member: Social and Ethics Committee 5,000, 6,500 6,955

Chairperson: Remuneration Committee 10,000 13,000 13,910

Member: Remuneration Committee 5,000 6,500 6,955

Chairperson: Pension fund 10,000 13,000 13,910

58

Social and Ethics Committee Report

The Social and Ethics Committee (the Committee) assists the Board in

ensuring that the Group is and remains a good and responsible corporate

citizen by monitoring the Group’s sustainable development performance,

and performing the statutory functions required of a social and ethics

committee in terms of the Companies Act as well as the additional

functions assigned to it by the Board. The responsibilities and functioning

of the Committee are governed by a formal mandate approved by, and

subject to annual review by, the Board. The Committee is satisfied that

it has fulfilled all its statutory duties and the duties assigned to it by the

Board during the period under review.

The composition and number of meetings held or to be held by the

Committee is set out in the Group’s Corporate Governance Report in

this Integrated Annual Report on page 48.

The Committee is responsible for developing and reviewing the Group’s

policies with regard to social and economic development and good

corporate citizenship; and reporting on the Group’s sustainable development

performance and for making recommendations to the Board and/or

Management on matters within its mandate.

The Committee performs a monitoring role with respect to the sustainable

development performance of the Group relating, amongst others, to:

• Environmental, Health and Public Safety, which includes Occupational

Health and Safety;

• Broad-based Black Economic Empowerment and Employment

Equity;

• Labour relations and working conditions;

• Consumer relationships (advertising, public relations and compliance

with consumer protection laws);

• Training and skills development for the Group’s employees;

• Management of the Group’s environmental impacts;

• Ethics and compliance; and

• Corporate social investment.

The Committee is satisfied with the Group’s performance in each of

the areas listed above and as further reported on in the Sustainable

Development section of this Report.

The Committee’s monitoring role also includes the monitoring of relevant

legislation, other legal requirements or prevailing codes of good practice,

specifically with regard to matters relating to social and economic

development, good corporate citizenship, the environment, health and

public safety as well as labour and employment.

The Committee is further responsible for annually reviewing, in conjunction

with Executive Management, the Group’s material sustainability issues

and for reviewing and approving the sustainability content included in the

Integrated Annual Report.

During the period under review, the following reports relating to the

Committee’s functions were produced by Management and reviewed

by the Committee:

• The Group’s standing with respect to consumer relations and

compliance with consumer protection laws;

• The Group’s compliance with applicable advertising and marketing

laws;

• The Group’s record of sponsorship, donations and charitable giving;

and

• The new B-BBEE codes.

Each of the above-mentioned reports was analysed in-depth and in one

case, namely in the area of donations and charitable giving, Management

was requested to identify one particular charitable cause, with whom an

ongoing relationship could be created. This resulted in the Group concluding

an arrangement with the Red Cross Children’s Hospital in Cape Town in

terms of which the Group is providing free travel for patients to the hospital

as well as a donation of R500,000 to assist with the construction of new

accommodation for family members visiting or staying over with patients.

The relationship with the Red Cross Children’s Hospital is expected to

continue into the future. All the reports were subsequently approved by

the Board, upon recommendation by the Committee. The Committee is

satisfied with the Group’s standing in the areas reviewed and that the

current level of combined assurance provides the necessary independent

assurance over the quality and reliability of the information presented.

The Committee, through one of its members, is required to report on

matters within its mandate to the Group’s shareholders at the Group’s

Annual General Meeting. Shareholders will be referred to this Report,

read together with the Sustainable Development Report, at the Group’s

Annual General Meeting on 5 November 2014.

Mr MD Moritz

Chairman: Social and Ethics Committee

8 September 2014


59

Report of the Directors

The Directors take pleasure in presenting their report, which forms part of the Annual Financial Statements of the Group for the year ended 30 June 2014.

Nature of Business

The main business of the Group is the provision of domestic and regional air services in the Southern African and Indian Ocean Islands market, trading

under the names of kulula. com and British Airways. In addition to the foregoing, the Group provides other travel-related services, undertakes third party

simulator training and operates airline lounges and currently provides airline catering for its own services.

General Review of Main Activities

The Group currently operates a fleet of twenty-six (26) aircraft flying to the destinations set out on pages 4 and 19 of this Report. The Directors have

performed the solvency and liquidity test required by the new Companies Act, the outcome of which is that the Group is a ‘going concern’ with adequate

resources to continue operating for the foreseeable future.

Financial Results

Full details of the financial results are set out on pages 68 to 108 of this Integrated Annual Report.

Dividends

Notice is hereby given that a gross cash dividend of 13.0000 cents per ordinary share has been declared payable to shareholders. The dividend has

been declared out of income reserves.

The dividend will be subject to a local dividend tax rate of 15% or 1.9500 cents per ordinary share, resulting in a net dividend of 11.0500 cents per ordinary

share, unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of the applicable double tax agreement. No

STC credits were available to be utilised as part of this declaration. The Company’s tax reference number is 9281/874/1/0 and the number of ordinary

shares in issue at the date of this declaration is 440,263,099.

In accordance with the provisions of Strate, the electronic settlement and custody system used by the JSE Limited, the relevant dates for the dividend

are as follows:

Event Date

Last day to trade (cum dividend) Friday, 10 October 2014

Shares commence trading (ex dividend) Monday, 13 October 2014

Record date (date shareholders recorded in books) Friday, 17 October 2014

Payment date Monday, 20 October 2014

Share certificates may not be dematerialised or rematerialised between Monday, 13 October 2014 and Friday, 17 October 2014, both days inclusive.

Share Capital

The authorised share capital of the Group remained unchanged during the reporting period under review.

Share Buy-back

During the period under review, the Group repurchased 48,913,372 ordinary shares, being approximately 10% of its ordinary share capital, in accordance

with a general authority to repurchase shares approved by shareholders at the Group’s Annual General Meeting held on 30 October 2013. The shares

were repurchased during November and December 2013, as announced on SENS, as follows:

(a) At the beginning of November 2013, the Group repurchased 29,858,467 ordinary shares at an average price of R2.99 per ordinary share;

(b) In and during November and December 2013 the Group repurchased 19,054,905 ordinary shares at an average price of R3.24 per ordinary share; and

(c) All shares repurchased were delisted and reverted to authorised but unissued ordinary shares.

60

Report of the Directors (continued)

Issued Share Capital

Following a share buy-back, implemented in November and December 2013, as mentioned above, the Group’s issued share capital has reduced from

489,176,471 ordinary shares of 1 cent each to 440,263,099 ordinary shares of 1 cent each.

Subsidiaries and Associates

Details of the Group’s subsidiaries and associates are recorded in Notes 4 and 5 of this Integrated Annual Report on pages 84 to 89.

Subsequent Events

The Directors are not aware of any matter or circumstance arising since the end of the period under review that would significantly affect or have a

material impact on the financial position of the Group.

Directors’ Interest in Share Capital

The following Directors of the Group held direct and indirect interests in the issued share capital of the Group at 30 June 2014 as set out below.

2014 2013

DirectorDirect

BeneficialIndirect

BeneficialHeld by

AssociatesTotal

Shares %Direct

BeneficialIndirect

BeneficialHeld by

AssociatesTotal

Shares %

MD Moritz - 50,000,000 9,462 50,009,462 11.35 - 50,000,000 9,462 50,009,462 10.23

P van Hoven 204,647 - - 204,647 0.05 204,647 - - 204,647 0.04

ER Venter 1,531,883 - - 1,531,883 0.35 1,531,883 - - 1,531,883 0.31

MN Louw 111,732 - - 111,732 0.03 36,732 - - 36,732 0.01

PJ Welgemoed 118,788 - - 118,788 0.03 118,788 - - 118,788 0.02

KI Mampeule** - - - - 0.0 - - - - 0.0

RS Ntuli** - - - - 0.0 - 5,772,615 - 5,772,615 1.18

DH Borer* 188,000 - - 188,000 0.04 188,000 - - 188,000 0.04

AK Gupta*** - - - - 0.0 - 22,794,439 - 22,794,439 4.66

TOTAL 2,155,050 50,000,000 9,462 52,164,512 11.85 2,080,050 78,567,054 9,462 80,656,566 16.49

* Alternate Director

** Excludes 74,117,647 “A” shares issued to the Thelo Consortium, of which both Mr RS Ntuli and Mr KI Mampeule are members, but not forming part of the Group’s listed share capital, in terms of the Company’s Black Economic Empowerment transaction. Refer to Circular to Ordinary Shareholders issued on 23 August 2006 for further information relating to the Black Economic Empowerment transaction.

*** Refers to shares owned by Oakbay Investments (Pty) Ltd, of which Mr Gupta has a 30% direct shareholding and a 10% indirect shareholding.

There have been no changes in the Directors’ interests in share capital between 30 June 2014 and the date of posting of this Report.

Special Resolutions

Since its last Integrated Annual Report, the Group passed four (4) special resolutions at its Annual General Meeting held on 30 October 2013, namely:

• A special resolution for approval of Non-executive Directors’ remuneration for 2012/13;

• A special resolution for the approval of Non-executive Directors’ remuneration for 2013/14;

• A special resolution giving the Group a general authority to re-purchase its shares; and

• A special resolution as contemplated in section 45(3)(a)(ii) of the Companies Act, i.e. a general authority to provide financial assistance to related

and interrelated companies or corporations.

Other than the aforegoing, no other special resolutions were passed.

As required in terms of section 8.63(i) of the JSE Listings Requirements, no special resolutions were passed by the Group’s subsidiaries relating to


61

borrowing powers, the object clause contained in the Memorandum of Incorporation or other material matters that affect the Group and the subsidiaries

for the period under review.

Board of Directors, Company Secretary and Board Meeting Attendance

The names, ages, qualifications, nationality, business addresses, attendance at Board Meetings and occupations of the Directors and the Group Company

Secretary who served during the period under review, are set out below.

Name, Age, QualificationGender and RaceM = MaleF = FemaleW = WhiteB = Black, Coloured or Indian Nationality Business Address

Attendance – four (4) Board Meetings Held during Period under Review Occupation

Pieter van Hoven Age : 70 (M) (W)

South African 1 Marignane Drive, Bonaero Park,Kempton Park 1619

4 of 4 Independent Non-executiveChairman

Martin Darryl Moritz Age: 69 (M) (W)(BCom, LLB)

South African 1 Marignane Drive, Bonaero Park,Kempton Park, 1619

4 of 4 Non-executive Joint Deputy Chairman

Rodney Cyril SacksAge: 64 (M) (W)HDip Law, HDip Tax

South African 550 Monica Circle, Suite 201,Corona, CA 92880, U.S.A

1 of 4 Independent Non-executive Director

Dr Peter Johannes WelgemoedAge: 71 (M) (W)BCom (Hons), MCom, DCom



Jacob Meyer KahnAge: 75 (M) (W)BA (Law); MBA (UP); DCom (hc); SOE

South African Retired Chairman of SABMiller Plc, 4 East Road, Morningside, 2057


Martin Nicolaas LouwAge: 59 (M) (W) BMil

South African 1 Marignane Drive, Bonaero Park, Kempton Park, 1619

4 of 4 Director Operations

Erik Rudolf Venter Age: 44 (M) (W)BCom, CA(SA)


4 of 4 Chief Executive Officer

Khutso Ignatius MampeuleAge: 49 (M) (B)BA, MSc, MBA

South African C/o Lefa Group Holdings (Pty) Ltd, Mulberry Hill Office Park, Broadacres Ave, Dainfern, 2191


Ronald Sibongiseni NtuliAge: 44 (M) (B)LLB (Edinburgh University)

South African Thelo Group,(Pty) Ltd, Ground Floor, Block 9, St.Andrews Inanda Greens Business Park, 54 Wierda Road West, Wierda Valley, 2196

4 of 4 Non-executive Joint Deputy Chairman

Wrenelle Doreen Stander Age: 48 (F) (B)BA (Hons), MBA

South African 272 Kent Avenue, Randburg, 2194 3 of 4 Independent Non-executive Director

Atul Kumar Gupta1

Age: 46 (M) (B)BSc

South African 89 Gazelle Avenue, Corporate Park South, Old Pretoria Main Road, Midrand, 1682


Ranil Yasas Sri-Chandana2

Age: 41 (M) (B)BCompt (Hons), MCom, CA(SA), CFA, HDip Company Law


2 of 2 Finance Director

62


Name, Age, QualificationGender and RaceM = MaleF = FemaleW = WhiteB = Black, Coloured or Indian Nationality Business Address

Attendance – four (4) Board Meetings Held during Period under Review Occupation

Gavin James HallidayAge: 50 (M) (W)BA (Hons) Economics, MBA (Lancaster University)

British British Airways Plc, Waterside (HAA2), Harmondsworth,Middlesex UB7 OGB, UK


Hubert Rene Brody3

Age: 50 (M) (W)BAcc (Hons)

South African 79 Boeing Road East, Bedfordview, Gauteng, 2007


Kirsten Emily King4

Age: 36 (F) (W)BCom (Hons) Accounting (CTA Equivalent), CA(SA)

South African 1 Marignane Drive, Bonaero Park, Kempton Park, 1619

0 of 0 Financial Director

Derek Henry BorerAge: 52 (M) (W)BCom, LLB


4 of 4 Alternate Director to Martin Nicolaas Louw and Rodney Cyril Sacks, and Group Company Secretary

Notes1 Atul Kumar Gupta resigned as an independent Non-executive Director of the Board on 12 November 2013. 2 Ranil Yasas Sri-Chandana, who emigrated to Australia, resigned as the Group’s Financial Director on 15 January 2014. 3 Hubert Rene Brody was appointed as an independent Non-executive Director on 1 January 2014.4 Kirsten Emily King was appointed as Financial Director on 9 June 2014.

Share Incentive Scheme

Executive Directors participate in a Share Incentive Scheme with no allocations made or options exercised during the financial year.

No share options were issued to employees through the Share Incentive Scheme during the year and 4,992,531 options remained available for issue

at year-end. There were share options exercised by employees prior to year-end, with the transfers effected post year-end.


63

Directors’ Remuneration 2014

Name

For Services

as Directors

R’000

Related Committee

WorkR’000

Package1 R’000

Performance-related2

R’000PensionR’000

Group Life and Disability

R’000MedicalR’000

Share-based

Payments as per IFRSR’000

Total 2014R’000

Executives

Mr ER Venter - - 2,525 3,500 342 67 38 ,- 6,472

Mr MN Louw - - 1,858 1,872 235 46 35 - 4,046

Mr RY Sri Chandana - - 988 - 90 17 20 - 1,115

Mr DH Borer - - 1,430 1,423 174 34 38 - 3,099

Ms KE King - - 50 158 7 3 3 - 221

Sub-total - - 6,851 6,953 848 167 134 - 14,953

Non-executives

Mr MD Moritz 350 59 - - - - - - 409

Mr RS Ntuli 350 - - - - - - - 350

Dr PJ Welgemoed 150 65 - - - - - - 215

Mr JM Kahn 150 20 - - - - - - 170

Mr KI Mampeule 150 72 - - - - - - 222

Mr P van Hoven 1,200 39 - - - - - - 1,239

Ms WD Stander - - - - - - - - -

Mr HR Brody 75 - - - - - - - 75

Sub-total 2,425 255 - - - - - - 2,680

Share-based payment - - - - - - - 17,416 17,416

Total 2,425 255 6,851 6,953 848 167 134 17,416 35,049

Notes:1 ‘Package’ includes the following regular payments made in respect of the financial year while actively employed: cash salary, S&T allowances and vehicle allowances.2 ‘Performance related’ refers to the incentive rewards in respect of the financial year ended 30 June 2014.3 Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares.

Further details regarding the Company’s remuneration policies are set out in the Remuneration Report on pages 55 to 57 of this Integrated Annual Report.

64


Directors’ Remuneration 2013

Name

For Services

as Directors

R’000

Related Committee

WorkR’000

Package1 R’000

Performance-related2

R’000PensionR’000

Group Life and Disability

R’000MedicalR’000

Share-based

Payments as per IFRSR’000

Total 2013R’000

Executives

Mr ER Venter - - 2,381 3,000 307 60 35 - 5,783

Mr MN Louw - - 1,717 1,693 215 42 32 - 3,699

Mr RY Sri Chandana - - 1,330 1,341 142 28 31 - 2,872

Mr DH Borer - - 1,314 1,332 159 31 37 - 2,873

Sub-total - - 6,742 7,366 823 161 135 - 15,227

Non-executives

Mr MD Moritz 250 45 - - - - - - 295

Mr RS Ntuli 250 - - - - - - - 250

Dr PJ Welgemoed 120 70 - - - - - - 190

Mr JM Kahn 120 10 - - - - - - 130

Mr KI Mampeule 120 45 - - - - - - 165

Mr P van Hoven 1,000 60 - - - - - - 1,060

Ms WD Stander 120 30 - - - - - - 150

Sub-total 1,980 260 - - - - - - 2,240

Share-based payment - - - - - - - 4,250 4,250

Total 1,980 260 6,742 7,366 823 161 135 4,250 21,717

Notes:1 ‘Package’ includes the following regular payments made in respect of the financial year while actively employed: Cash salary, S&T allowances and vehicle allowances.2 ‘Performance related’ refers to the incentive rewards in respect of the financial year ended 30 June 2012.3 Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares.


65

Statement of Responsibility by the Board of Directors

The Directors are responsible for the preparation, integrity and fair presentation of the Annual Financial Statements and other financial information

included in this report.

The Annual Financial Statements, presented on pages 68 to 108 have been prepared in accordance with International Financial Reports Standards (IFRS)

and the requirements of the Companies Act (Act No. 71 of 2008), and include amounts based on judgements and estimates made by Management.

The going-concern basis has been adopted in preparing the Annual Financial Statements. The Directors have no reason to believe that the Company

or the Group will not be going concerns in the foreseeable future, based on forecasts and available cash resources. The Annual Financial Statements

support the viability of the Company and the Group.

The Annual Financial Statements have been audited by the independent accounting firm, Grant Thornton (Jhb) Inc., which was given unrestricted access

to all financial records and related data, including minutes of all meetings of shareholders, the Board of Directors and Committees of the Board. The

Directors believe that all representations made to the independent auditors during the audit were valid and appropriate.

The Annual Financial Statements, which appear on pages 68 to 108, were approved by the Board of Directors on 8 September 2014 and signed on

its behalf.

Mr ER Venter Mr P van Hoven

CEO Chairman

8 September 2014 8 September 2014

66

Certificate of Company Secretary

In terms of section 88(2)(e) of the Companies Act (Act No. 71 of 2008), as amended (“the Act”), I certify that the Company has lodged all returns and

notices as required by the Act and that all such returns are true, correct and up to date.

Mr DH Borer

Company Secretary

8 September 2014


67

We have audited the consolidated and separate financial statements of

Comair Limited set out on pages 68 to 108, which comprise the statements

of financial position as at 30 June 2014, and the statements of comprehensive

income, statements of changes in equity and statements of cash flows for

the year then ended, and the notes, comprising a summary of significant

accounting policies and other explanatory information.

Directors’ Responsibility for the Financial Statements

The company’s directors are responsible for the preparation and fair

presentation of these consolidated and separate financial statements

in accordance with International Financial Reporting Standards and the

requirements of the Companies Act of South Africa and for such internal

control as the directors determine is necessary to enable the preparation of

consolidated and separate financial statements that are free from material

misstatements, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated and

separate financial statements based on our audit. We conducted our audit

in accordance with International Standards on Auditing. Those standards

require that we comply with ethical requirements and plan and perform

the audit to obtain reasonable assurance about whether the consolidated

and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about

the amounts and disclosures in the financial statements. The procedures

selected depend on the auditor’s judgement, including the assessment of

the risks of material misstatement of the financial statements, whether due

to fraud or error. In making those risk assessments, the auditor considers

internal control relevant to the entity’s preparation and fair presentation

of the financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the entity’s internal control. An audit

also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by management,

as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated and separate financial statements present

fairly, in all material respects, the consolidated and separate financial

position of Comair Limited as at 30 June 2014, and its consolidated and

separate financial performance and consolidated and separate cash flows

for the year then ended in accordance with International Financial Reporting

Standards, and the requirements of the Companies Act of South Africa.

Other Reports Required by the Companies Act

As part of our audit of the consolidated and separate financial statements

for the year ended 30 June 2014, we have read the Directors’ Report, Audit

Committee’s Report and Company Secretary’s Certificate for the purpose

of identifying whether there are material inconsistencies between these

reports and the audited consolidated and separate financial statements.

These reports are the responsibility of the respective preparers. Based

on reading these reports we have not identified material inconsistencies

between these reports and the audited consolidated and separate financial

statements. However, we have not audited these reports and accordingly

do not express an opinion on these reports.

Grant Thornton (Jhb) Inc.

Registration No.: 1994/001166/21

Chartered Accountants (SA)

Registered Auditors

B Frey

Director

Chartered Accountant (SA)

Registered Auditor

8 September 2014

42 Wierda Road West

Wierda Valley

2196

Independent Auditor’s Report

68

Group Company

Notes

2014 2013 2014 2013

R’000 R’000 R’000 R’000

AssetsNon-current assets 2,586,419 2,361,275 2,550,595 2,334,480

Property, plant and equipment 1 2,545,033 2,314,082 2,493,813 2,262,467

Intangible assets 2 31,106 41,475 31,106 41,475

Loan to share incentive trust 3 - - 3,814 5,337

Investments in and loans to subsidiaries 4 - - 21,862 25,201

Investments in and loans to associates 5 6,612 2,050 - -

Goodwill 6 3,668 3,668 - -

Current assets 1,436,929 1,244,581 1,441,986 1,242,770

Inventory 7 7,608 7,086 7,608 7,086

Trade and other receivables 8 523,226 420,656 508,056 399,133

Investments in and loans to subsidiaries 4 - - 31,353 31,513

Investments in and loans to associates 5 7,852 7,852 7,852 7,852

Taxation 30,540 30,942 28,999 30,558

Cash and cash equivalents 9 867,703 778,045 858,118 766,628

4,023,348 3,605,856 3,992,581 3,577,250

Equity and LiabilitiesCapital and reserves 1,067,970 1,021,200 1,057,595 1,014,103

Share capital 10 5,094 5,578 5,144 5,633

Share premium - 123,631 - 123,742

Non-distributable reserves 27,424 23,996 27,424 23,996

Accumulated profits 1,035,452 867,995 1,025,027 860,732

Non-current liabilities 1,372,427 1,273,713 1,373,964 1,274,695

Interest-bearing liabilities 11 1,183,072 1,133,767 1,183,072 1,133,767

Deferred taxation 12 167,689 135,696 169,226 136,678

Share-based payments 13 21,666 4,250 21,666 4,250

Current liabilities 1,582,951 1,310,943 1,561,022 1,288,452

Trade and other payables 13 1,346,562 1,058,510 1,324,633 1,036,019

Provisions 14 99,719 116,212 99,719 116,212

Interest-bearing liabilities 11 136,670 136,221 136,670 136,221

4,023,348 3,605,856 3,992,581 3,577,250

Net asset value per share (cents) 245.3 211.1

Statements of Financial Positionas at 30 June 2014


69

Group Company

Notes

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Revenue 16 6,282,219 5,386,581 6,224,285 5,366,240

Operating expenses (5,577,457) (4,765,356) (5,517,795) (4,742,297)

Operating profit before depreciation, impairment and profit on sale of assets 704,762 621,225 706,490 623,943

Depreciation (290,747) (241,582) (290,140) (239,709)

Reversal of impairment (impairment) 5.2 & 17 2,235 (6,817) - (17,559)

Profit on sale of assets 524 984 524 984

Profit from operations 17 416,774 373,810 416,874 367,659

Interest income 32,149 20,217 31,515 19,856

Interest expense 18 (77,340) (61,641) (77,317) (61,445)

Share of profit (loss) of associates 5 2,327 (1,725) - -

Profit before taxation 373,910 330,661 371,072 326,070

Taxation 19 (109,059) (103,135) (108,864) (101,066)

Total comprehensive income for the year attributable to equity holders of the parent 264,851 227,526 262,208 225,004

Earnings per share (cents) 20 58.4 47.0

Diluted earnings per share (cents) 20 56.1 47.0

Statements of Comprehensive Incomefor the year ended 30 June 2014

70

Share Capital

Share Premium

Share-based Payment Reserve

Accumulated Profit Total

R’000 R’000 R’000 R’000 R’000

Group

Balance at 1 July 2012 5,578 123,631 20,568 664,684 814,461

BEE share-based payments - - 3,428 - 3,428

Total comprehensive income for the year - - - 227,526 227,526

Dividend paid - - - (24,215) (24,215)

Movement for the year - - 3,428 203,311 206,739

Balance at 30 June 2013 5,578 123,631 23,996 867,995 1,021,200



Dividend paid - - - (70,295) (70,295)

Repurchase of shares (489) (123,631) - (27,093) (151,213)

Shares sold by Share Trust 5 - - (6) (1)

Movement for the year (484) (123,631) 3,428 167,457 46,770

Balance at 30 June 2014 5,094 - 27,424 1,035,452 1,067,970

Company

Balance at 1 July 2012 5,633 123,742 20,568 660,187 810,130



Dividend paid - - - (24,459) (24,459)

Movement for the year - - 3,428 200,545 203,973

Balance at 30 June 2013 5,633 123,742 23,996 860,732 1,014,103



Dividend paid - - - (70,931) (70,931)

Repurchase of shares (489) (123,742) - (26,982) (151,213)

Movement for the year (489) (123,742) 3,428 164,295 43,492

Balance at 30 June 2014 5,144 - 27,424 1,025,027 1,057,595

Statements of Changes in Equityfor the year ended 30 June 2014


71

Group Company

Notes

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Cash generated from operating activities 966,483 830,694 963,715 826,189

Cash receipts from customers 6,281,836 5,395,124 6,217,549 5,377,551

Cash paid to suppliers (5,193,498) (4,440,476) (5,133,275) (4,430,503)

Cash generated by operations 21 1,088,338 954,648 1,084,274 947,048

Interest paid 18 (77,340) (61,641) (77,317) (61,445)

Interest received 32,149 20,217 31,515 19,856

Taxation paid 22 (76,664) (82,530) (74,757) (79,270)

Cash utilised in investing activities (610,842) (104,441) (605,606) (105,242)

Additions to property, plant and equipment (611,366) (105,096) (611,152) (105,151)

Additions to intangible assets - (329) - (329)

Proceeds on disposal of property, plant and equipment 524 984 524 984

Decrease in loan to share incentive trust - - 1,523 242

Decrease (increase) in subsidiaries loans 4 - - 3,499 (988)

Cash utilised in financing activities (265,983) (194,303) (266,619) (194,547)

Repurchase of share capital (151,214) - (151,214) -

Dividend paid (70,295) (24,215) (70,931) (24,459)

Raising of interest bearing liabilities 174,675 - 174,675 -

Repayment of interest-bearing liabilities (219,149) (170,088) (219,149) (170,088)

Net increase in cash and cash equivalents 89,658 531,950 91,490 526,400

Cash and cash equivalents at the beginning of the year 778,045 246,095 766,628 240,228

Cash and cash equivalents at the end of the year 867,703 778,045 858,118 766,628

Statements of Cash Flowfor the year ended 30 June 2014

72

Segmental Reportfor the year ended 30 June 2014

Airline Non-airline Total

R’000 R’000 R’000

30 June 2014Revenue 6,109,143 173,076 6,282,219

Operating profit before depreciation, impairment and profit on sale of assets 681,552 23,210 704,762

Profit on sale of assets 524 - 524

Reversal of impairment 2,235 - 2,235

Depreciation (285,734) (5,013) (290,747)

Profit from operations 398,577 18,197 416,774

Segmental assets and liabilities

Segmental assets 3,875,108 148,240 4,023,348

Segmental interest-bearing liabilities (1,284,833) (34,909) (1,319,742)

Other segmental liabilities (1,540,481) (95,155) (1,635,636)

Segmental net asset value 1,049,794 18,176 1,067,970

Segmental capital additions (excluding borrowing costs capitalised) during the year 510,381 668 511,049

30 June 2013Revenue 5,232,260 154,321 5,386,581

Operating profit before depreciation, impairment and profit on sale of assets 596,907 24,318 621,225

Profit on sale of assets 984 - 984

Impairment (6,817) - (6,817)

Depreciation (236,342) (5,240) (241,582)

Profit from operations 354,732 19,078 373,810

Segmental assets and liabilities

Segmental assets 3,421,093 184,763 3,605,856

Segmental interest-bearing liabilities (1,226,379) (43,609) (1,269,988)

Other segmental liabilities (1,251,316) (63,352) (1,314,668)

Segmental net asset value 943,398 77,802 1,021,200

Segmental capital additions (excluding borrowing costs capitalised) during the year 1,093,702 432 1,094,134

Comair predominately operates within South Africa and as a result no Geographic Segmental Report is presented. Revenue earned from flights, other

than in South Africa, is not considered to be significant and is generated from assets in control of the South African operation.

Inter-segmental revenue is not material and has therefore not been presented.


73

Principal Accounting Policies

The Annual Financial Statements are presented in South African Rand

as it is the currency of the economic environment in which the Group

operates.

The Annual Financial Statements are prepared in accordance with

International Financial Reporting Standards (IFRS) as well as the SAICA

Financial Reporting Guides as issued by the Accounting Practices

Committee in terms of the Listings Requirements of the JSE Limited

and the Companies Act of South Africa 2008. The Annual Financial

Statements have been prepared on the historical cost basis, except

for the measurement of certain financial instruments at fair value, and

incorporate the principal accounting policies and measurement bases

listed below.

Except for the adoption of the new and revised accounting standards

the principal accounting policies of the Group are consistent with those

applied in the audited consolidated Financial Statements for the year

ended 30 June 2013.

Adoption of Standards and Interpretations Effective in 2014

The following new standards were adopted during the finacial year under

review, however none had significant financial impacts for the Group:

IFRS 10 ‘Consolidated Financial Statements’ (IFRS 10)

IFRS 10 supersedes IAS 27 ‘Consolidated and Separate Financial

Statements’ (IAS 27) and SIC 12 ‘Consolidation-Special Purpose Entities’.

IFRS 10 revises the definition of control and provides extensive new

guidance on its application. These new requirements have the potential

to affect which of the Group’s investees are considered to be subsidiaries

and therefore to change the scope of consolidation. The requirements

on consolidation procedures, accounting for changes in non-controlling

interests and accounting for loss of control of a subsidiary are unchanged.

Management has reviewed its control assessments in accordance with

IFRS 10 and has concluded that there is no effect on the classification (as

subsidiaries or otherwise) of any of the Group’s investees held during the

period or comparative periods covered by these financial statements.

IFRS 12 ‘Disclosure of Interests in Other Entities’ (IFRS 12)

IFRS 12 integrates and makes consistent the disclosure requirements

for various types of investments, including unconsolidated structured

entities. It introduces new disclosure requirements about the risks to

which an entity is exposed from its involvement with structured entities.

Management has reviewed the impact of the following new and revised

standards effective for annual periods beginning on or after 1 January 2013

and is of the view that the adoption of these standards and interpretations

has no material impact on the financial statements of the Group:

• IFRS 11 ‘Joint Arrangements’ (IFRS 11)

• IFRS 13 ‘Fair Value Measurement’ (IFRS 13)

• Consequential amendments to IAS 27 ‘Separate Financial Statements’

(IAS 27) and IAS 28 ‘Investments in Associates and Joint Ventures’

(IAS 28)

• Amendments to IAS 19 ‘Employee Benefits’ (IAS 19)

A full list of standards that will become effective in the next financial year

are disclosed in Note 28.

Basis of consolidation

The Group financial statements consolidate those of the parent company and

all of its subsidiaries as of 30 June 2014. The parent controls a subsidiary

if it is exposed, or has rights, to variable returns from its involvement with

the subsidiary and has the ability to affect those returns through its power

over the subsidiary. All subsidiaries have a reporting date of 30 June.

All transactions and balances between Group companies are eliminated

on consolidation, including unrealised gains and losses on transactions

between Group companies. Where unrealised losses on intra-group

asset sales are reversed on consolidation, the underlying asset is also

tested for impairment from a Group perspective. Amounts reported in the

financial statements of subsidiaries have been adjusted where necessary

to ensure consistency with the accounting policies adopted by the Group.

Profit or loss and other comprehensive income of subsidiaries acquired

or disposed of during the year are recognised from the effective date of

acquisition, or up to the effective date of disposal, as applicable.

Non-controlling interests, presented as part of equity, represent the

portion of a IFRS 10.B94 subsidiary’s profit or loss and net assets that

is not held by the Group. The Group attributes total comprehensive

income or loss of subsidiaries between the owners of the parent and the

non-controlling interests based on their respective ownership interests.

Business Combinations

The Group applies the acquisition method in accounting for business

combinations. The consideration transferred by the Group to obtain

control of a subsidiary is calculated as the sum of the acquisition-date

fair values of assets transferred, liabilities incurred and the equity interests

issued by the Group, which includes the fair value of any asset or liability

arising from a contingent consideration arrangement. Acquisition costs

are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed

in a business combination regardless of whether they have been previously

recognised in the acquiree’s financial statements prior to the acquisition.

Accounting Policies

74

Accounting Policies (continued)

Assets acquired and liabilities assumed are generally measured at their

acquisition-date fair values.

Goodwill is stated after separate recognition of identifiable intangible

assets. It is calculated as the excess of the sum of:

a) fair value of consideration transferred;

b) the recognised amount of any non-controlling interest in the acquiree;

and

c) acquisition-date fair value of any existing equity interest in the acquiree,

over the acquisition-date fair values of identifiable net assets.

If the fair values of identifiable net assets exceed the sum calculated

above, the excess amount (i.e. gain on a bargain purchase) is recognised

in profit or loss immediately.

Subsidiaries

Subsidiaries are companies and entities of which the Company has the

ability to control the financial and operating activities so as to obtain

benefit from their activities. Investment in subsidiaries are carried at

cost less any impairment losses in the Company’s stand-alone Financial

Statements.

The cost of an investment in a subsidiary is the aggregate of:

• The fair value, at the date of exchange, of assets given, liabilities

incurred or assumed, and equity instruments issued by the Company.

An adjustment to the cost of a business combination contingent on future

events is included in the profit or loss of the combination if the adjustment

is probable and can be measured reliably.

The cost includes an estimate of contingent consideration payable at fair

value at acquisition date.

The Group Share Incentive Trust is included in the consolidated Financial

Statements as a subsidiary.

Investments in Associates

Associates are those entities over which the Group is able to exert significant

influence but which are not subsidiaries.

Investments in associates are accounted for using the equity method.

Any goodwill or fair value adjustment attributable to the Group’s share in

the associate is not recognised separately and is included in the amount

recognised as investment.

The carrying amount of the investment in associates is increased or

decreased to recognise the Group’s share of the profit or loss and other

comprehensive income of the associate, adjusted where necessary to

ensure consistency with the accounting policies of the Group.

Unrealised gains and losses on transactions between the Group and its

associates are eliminated to the extent of the Group’s interest in those

entities. Where unrealised losses are eliminated, the underlying asset is

also tested for impairment.

The Group’s share of movements in the associate’s other comprehensive

income is recognised in other comprehensive income. The Group’s share

of the aggregate loss in any associate is limited to its net investment in the

associate, unless the Group has incurred an obligation or made payments

on the associate’s behalf. The Group’s share of inter-company gains is

eliminated on consolidation, whilst the Group’s share of inter-company

losses is only eliminated if the transaction does not provide evidence of

impairment of the asset transferred. Investments in associates are disclosed

as the initial investment plus the aggregate of loans made to the associate

plus the Group’s aggregate share of post-acquisition equity. Investments

in associates are accounted for at cost less any impairment losses in the

Company’s stand-alone Financial Statements.

Property, Plant and Equipment

Freehold property, aircraft and related equipment, vehicles, furniture,

computers and flight simulator equipment are depreciated systematically

on the straight-line basis, which is estimated to depreciate the assets to

their anticipated residual values through a component approach over their

planned useful lives. Land is not depreciated.

Property, plant and equipment are stated at cost less accumulated

depreciation and impairment.

Cost includes expenditure that is directly attributable to the acquisition of

the asset. Subsequent costs are included in the asset’s carrying value or

recognised as a separate asset as appropriate, only when it is probable that

future economic benefits associated with the specific asset will flow to the

Group and costs can be measured reliably. The carrying values are assessed

at each reporting date and only written down if there are impairments in

value. The useful life, depreciation method and residual values are assessed

at the end of each reporting period and revised if necessary.

Depreciation Rates for Property Plant and Equipment

Property and buildings 2%

Motor vehicles 20%

Furniture and equipment 7%

Computer equipment 20% to 50%

Second-hand flight simulator equipment 20%

New simulator equipment 7%

Leasehold improvements Life of the lease agreement


75

Aircraft

Aircraft are initially recognised at spot rate at date of purchase. The

carrying values of aircraft are assessed annually for impairment. Aircraft

modifications are capitalised only to the extent that they materially improve

the value of the aircraft from which further future economic benefits are

expected to flow. Maintenance and repairs which neither materially or

appreciably prolong their useful lives are charged against income. C and

D Checks are capitalised and expensed over their useful lives. The gain

or loss on disposal of an asset is determined as the difference between

the sales proceeds and the carrying amount of the asset and recognised

in the Statements of Comprehensive Income. The aircraft residual values

are between 0 and 10%.

Depreciation Rates for Aircraft

Aircraft and related equipment 4 to 20%

C Checks 18 months

D Checks 72 months

Intangible Assets

An intangible asset is recognised when:

• It is probable that the expected future economic benefits that are

attributable to the asset will flow to the entity; and

• The cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

An intangible asset arising from development (or from the development

phase of an internal project) is recognised when:

• It is technically feasible to complete the asset so that it will be available

for use or sale;

• There is an intention to complete and use or sell it;

• There is an ability to use or sell it;

• It will generate probable future economic benefits;

• There are available technical, financial and other resources to complete

the development and to use or sell the asset; and

• The expenditure attributable to the asset during its development can

be measured reliably.

Intangible assets are carried at cost, being fair value at the date of revaluation

less any subsequent accumulated amortisation and any subsequent

accumulated impairment losses.

An intangible asset is regarded as having an indefinite useful life when,

based on all relevant factors, there is no foreseeable limit to the period over

which the asset is expected to generate net cash inflows. Amortisation is

not provided for these intangible assets, but they are tested for impairment

annually and whenever there is an indication that the asset may be impaired.

For all other intangible assets amortisation is provided on a straight-line

basis over their useful life.

The amortisation period and the amortisation method for intangible assets

are reviewed at every period end.

Reassessing the useful life of an intangible asset with a finite useful life

after it was classified as indefinite is an indicator that the asset may be

impaired. As a result, the asset is tested for impairment and the remaining

carrying amount is amortised over its useful life.

Internally generated brands, mastheads, publishing titles, customer lists

and items similar in substance are not recognised as intangible assets.

Amortisation is provided to write down the intangible assets, on a straight-

line basis, to their residual values as follows:

• Internally generated intangible assets: research and development

expenditure.

Costs associated with developing and maintaining computer software

programs are recognised as expenses when incurred. Costs that are

directly associated with the development of identifiable and unique

software products controlled by the Group and that will probably generate

economic benefits exceeding costs beyond one year, are recognised

as intangible assets. Costs include the software development employee

costs and an appropriate portion of relevant overheads. Amortisation

is charged on a straight-line basis over their estimated useful lives of

five years. Software is carried at cost less accumulated amortisation

and impairment.

Pre-delivery Payments

Aircraft pre-delivery payments and security deposits are capitalised to

property, plant and equipment once all conditions precedent cruical to

the legal agreements are met and construction of the aircraft has begun.

Prior to being capitalised to property, plant and equipment, aircraft pre-

delivery payments and security deposits are accounted for as deposits

in other receivables. Aircraft pre-delivery payments and security deposits

are not depreciated. Upon delivery of the relevant aircraft, the pre-delivery

payments are transferred to the cost of the aircraft.

Goodwill

Goodwill represents the excess of the cost of an acquisition of a business

over the fair value of the Group’s share of the net identifiable assets of

the acquired subsidiary at the date of acquisition. Goodwill is tested

at reporting date for impairment and carried at cost less accumulated

impairment losses. Impairment losses on goodwill are not reversed. Gains

and losses on the disposal of an entity include the carrying amount of

goodwill relating to the entity sold.

76


Finance Leases and Instalment Sale Agreements – Lessee

Leases, whereby the lessor provides finance to the Group and where the

Group assumes substantially all the benefits and risks of ownership, are

classified as finance leases.

The amount capitalised at inception of the lease is the lower of the fair

value of the leased asset and the present value of the minimum lease

payments. The discount rate used in calculating the present value of

the minimum lease payments is the interest rate implicit in the lease or

the Group’s incremental borrowing rate if rate implicit in the lease is not

practicable to determine. The capital element of future obligations under

leases is included as a liability in the Statement of Financial Position. Each

lease payment is allocated between the liability and finance charges so

as to achieve a constant rate on the finance balance outstanding. The

interest element of the instalments is charged against income over the

lease period.

Operating Leases – Lessee

Leases of assets to the Group under which all risks and rewards of ownership

are effectively retained by the lessor, are classified as operating leases.

Payments made under operating leases are charged against income on

a straight-line basis over the period of the lease. A straight-line asset/

liability is raised for the difference between the leased payment and the

lease expense.

Financial Instruments

Initial Recognition

The Group classifies financial instruments, or their component parts, on initial

recognition as a financial asset, a financial liability or an equity instrument

in accordance with the substance of the contractual arrangement.

Financial assets and financial liabilities are recognised on the Group’s

Statement of Financial Position when the Group becomes party to the

contractual provisions of the instrument.

Fair Value Determination

The fair values of quoted investments are based on current bid prices. If

the market for a financial asset is not active (and for unlisted securities),

the Group establishes fair value by using valuation techniques. These

include the use of recent arm’s length transactions, reference to other

instruments that are substantially the same, discounted cash flow analyses,

and option pricing models making maximum use of market inputs and

relying as little as possible on entity-specific inputs.

Derecognition

Financial assets (or a portion thereof) are derecognised when the Group

realises the rights to the benefits specified in the contract, the rights expire,

or the Group surrenders or otherwise loses control of the contractual rights

that comprise the financial asset. In derecognition, the difference between

the carrying amount of the financial asset and proceeds receivable and

any prior adjustment to reflect fair value that had been reported in other

comprehensive income are included in profit or loss. Financial liabilities (or

a portion thereof) are derecognised when the obligation specified in the

contract is discharged, cancelled or expires. On derecognition, the difference

between the carrying amount of the financial liability, including related

unamortised costs and the amount paid for it, are included in profit or loss.

Loans to (from) Group Companies

These include loans to subsidiaries, associates, share incentive trust

(accounted for as a subsidiary) and joint ventures and are recognised

initially at fair value plus direct transaction costs. Subsequently, these loans

are measured at amortised cost using the effective interest rate method,

less any impairment loss recognised to reflect irrecoverable amounts.

On loans receivable an impairment loss is recognised in profit or loss

when there is objective evidence that it is impaired. The impairment is

measured as the difference between the instrument’s carrying amount

and the present value of estimated future cash flows discounted at the

effective interest rate computed at initial recognition. Impairment losses

are reversed in subsequent periods when an increase in the instrument’s

recoverable amount can be related objectively to an event occurring after

the impairment was recognised, subject to the restriction that the carrying

amount of the instrument at the date the impairment is reversed shall not

exceed what the amortised cost would have been had the impairment

not been recognised. Loans to (from) Group companies are classified as

loans and receivables (financial liabilities at amortised cost).

Trade and Other Receivables

Trade receivables are measured at initial recognition at fair value plus

transaction costs, and are subsequently measured at amortised cost

using the effective interest rate method. Appropriate allowances for

estimated irrecoverable amounts are recognised in profit or loss when

there is objective evidence that the asset is impaired. The allowance

recognised is measured as the difference between the asset’s carrying

amount and the present value of estimated future cash flows discounted

at the effective interest rate computed at initial recognition.

The carrying amount of the asset is reduced through the use of an

allowance account, and the amount of the loss is recognised in the

Statement of Comprehensive Income within operating expenses. When

a trade receivable is uncollectable, it is written off against the allowance


77

account for trade receivables. Subsequent recoveries of amounts previously

written off are credited against operating expenses in the Statement of

Comprehensive Income.

Trade and other receivables are classified as loans and receivables.

Trade and Other Payables

Trade payables are initially measured at fair value less transaction costs,

and are subsequently measured at amortised cost, using the effective

interest rate method.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash on hand and demand deposits,

and other short-term, highly liquid investments that are readily convertible

to a known amount of cash, and are subject to an insignificant risk of

changes in value. These are initially recognised at fair value including

transaction costs and subsequently measured at amortised cost using

the effective interest rate method. These instruments are classified as

loans and receivables.

Interest-bearing Liabilities

Interest-bearing liabilities are initially measured at fair value less transaction

cost, and are subsequently measured at amortised cost, which include

all interest-bearing liabilities, using the effective interest rate method.

Any difference between the proceeds (net of transaction costs) and the

settlement or redemption of borrowings is recognised over the term of

the borrowings in accordance with the Group’s accounting policy for

borrowing costs.

The dividends on these preference shares are recognised in the Statement

of Comprehensive Income as an interest expense.

Other financial liabilities are measured initially at fair value less transaction

cost and subsequently at amortised cost using the effective interest rate

method.

Derivatives

Derivative financial instruments, which are not designated as hedging

instruments, consist of foreign exchange contracts and are initially

measured at fair value on the contract date, and are re-measured to

fair value at subsequent reporting dates. Derivatives embedded in other

financial instruments or other non-financial host contracts are treated as

separate derivatives when their risks and characteristics are not closely

related to those of the host contract and the host contract is not carried

at fair value with unrealised gains or losses reported in profit or loss.

Changes in the fair value of derivative financial instruments are recognised

in profit or loss as they arise. Derivatives are classified as financial assets

or financial liabilities at fair value through profit or loss.

Hedge Accounting

The Group designates certain derivatives as either:

• Hedges of the fair value of recognised assets or liabilities or a firm

commitment (fair value hedge);

• Hedges of a particular risk associated with a recognised asset or

liability or a highly probable forecast transaction (cash flow hedge); or

• Hedges of a net investment in a foreign operation (net investment

hedge).

The Group documents, at the inception of the transaction, the relationship

between hedging instruments and hedged items, as well as its risk

management objectives and strategy for undertaking various hedging

transactions. The Group also documents its assessment, both at hedge

inception and on an ongoing basis, of whether the derivatives that are

used in hedging transactions are highly effective in offsetting changes in

fair values or cash flows of hedged items.

The full fair value of a hedging derivative is classified as a non-current

asset or liability when the remaining maturity of the hedged item is more

than 12 months and as a current asset or liability when the remaining

maturity of the hedged item is less than 12 months.

Cash Flow Hedge

The effective portion of changes in the fair value of derivatives that

are designated and qualify as cash flow hedges is recognised in other

comprehensive income. The gain or loss relating to the ineffective portion

is recognised immediately in the Statement of Comprehensive Income

within profit or loss.

The amount of gains/losses in other comprehensive income is reclassified

to profit or loss in the period when the hedged item affects profit or loss.

However, when the forecast transaction that is hedged results in the

recognition of a non-financial asset (for example, inventory or fixed assets)

the gains and losses previously deferred in the Statement of Comprehensive

Income are transferred from other comprehensive income and included

in the initial measurement of the cost of the asset. The deferred amounts

are ultimately recognised in cost of goods sold in case of inventory or in

depreciation in case of fixed assets.

If a legally enforceable right exists to set off recognised amounts of financial

assets and liabilities and there is an intention to settle net, the relevant

financial assets and liabilities are offset.

Where the impact of discounting is not considered to be material, financial

instruments carried at amortised costs are not discounted due to the fact

that their carrying values approximate amortised cost.

78


Inventory

Inventory is stated at the lower of cost and net realisable values. Cost is

determined on the first-in-first-out basis. Net realisable value is the estimated

selling price in the ordinary course of business less the estimated cost

of completion and the estimated cost necessary to make the sale. The

cost of inventories comprises all cost of purchase, cost of conversion and

other costs incurred in bringing the inventories to their present location

and condition.

Share Capital

An equity instrument is any contract that evidences a residual interest in

the assets of an entity after deducting all of its liabilities. Ordinary shares

are classified as equity. If the Group re-acquires its own equity instruments,

the consideration paid, including any directly attributable incremental costs

(net of income taxes) on those instruments is deducted from equity. No

gain or loss is recognised in profit or loss on the purchase, sale, issue or

cancellation of the Group’s own equity instruments. Consideration paid

or received shall be recognised directly in equity.

Incremental costs directly attributable to the issue of new shares or options

are shown in equity as a deduction, net of tax, from the proceeds.

Share-based Payment Transactions

Cash Settled

Options are granted to certain employees in the Group. The fair value of

the amount payable to the employee is recognised as an expense with a

corresponding increase in liabilities. The fair value is initially measured at

grant date using the Black-Scholes Model and expensed over the period

during which the employee becomes unconditionally entitled to payment.

Management assesses the number of options that will ultimately vest

based on non-market vesting conditions at each reporting period until

vesting, but the assessment of the fair value of the option against the

market performance of the share price, is done at each reporting period

end up to and including settlement date.

Share options that expire or are forfeited are reversed against the liability

raised with an adjustment to profit or loss. The fair value of the instruments

granted is measured against market performance of the share price. The

liability is measured at each reporting date and at settlement date, with all

movements in fair value being recognised in profit or loss.

Where options are issued that provide the holder the choice of settlement

(equity or cash) these are accounted for as a compound financial instrument.

First the fair value of the debt component is determined and then the

difference between the value of the compound instrument and the fair

value of the debt component is recognised as the equity component.

Equity Settled

Convertible 'A' class shares and options were issued in terms of a Black

Economic Empowerment Deal. The fair value of the equity instrument is

measured at grant date using the Black-Scholes Model and recognised as

an expense with corresponding increase in equity over the vesting period of

the share-based payment. Management reassesses the number of options

expected to ultimately vest based on non-market vesting conditions. The

impact of the revision to the original estimates, if any, is recognised in the

Statement of Comprehensive Income, with a corresponding adjustment

to equity. Proceeds received net of any directly attributable transaction

costs are credited to share capital and share premium when the options

are exercised. Subsequent to vesting, management no longer makes any

adjustments to the cost of the share-based payments recognised. Options

that expire or are forfeited, are removed from equity with a corresponding

adjustment to the Statement of Comprehensive Income.

Provisions

The amount of a provision is the present value of the expenditure

expected to be required to settle the obligation. Where some or all of the

expenditure required to settle a provision is expected to be reimbursed

by another party, the reimbursement shall be recognised when, and

only when, it is virtually certain that reimbursement will be received if

the entity settles the obligation. The reimbursement shall be treated as

a separate asset. The amount recognised for the reimbursement shall

not exceed the amount of the provision. Provisions are not recognised

for future operating losses.

If an entity has a contract that is onerous, the present obligation under

the contract shall be recognised and measured as a provision. The rate

applied to present value the expenditure is the pre-tax market related rate

adjusted for the risks associated with the obligation.

Provisions were raised and management determined an estimate based

on the information available. Additional disclosure of these estimates of

provisions are included in the provisions note.

Revenue Recognition

Revenue comprises all airline-related and non-airline revenue earned.

Revenue arising from the provision of transportation services to passengers

is recognised on an accrual basis in the period in which the services

are rendered and the passenger has flown. Unflown ticket revenue is

recognised as a liability until such time as the passenger has flown.

Revenue is measured at the fair value of consideration received and is

exclusive of VAT, discounts received and returns.

Revenue from sale of goods is recognised when risks and rewards transfer

and excludes value added tax.


79

Non-airline revenue relates to services relating to the hiring of simulator

equipment, commission from airport lounges and the sale of holiday

packages.

International Loyalty Programme revenue is income received from BA

Executive Club members using the Group’s services, and is recognised

on the accrual basis in profit or loss.

Interest is recognised on the accrual basis, in profit or loss, using the

effective interest rate method. Dividends are recognised in profit or loss

when the Group’s right to receive payment has been established.

Taxation

Current tax and deferred taxes are recognised as income or an expense

and included in profit or loss for the period, except to the extent that the

tax arises from:

• A transaction or event which is recognised, in the same or a different

period, directly in other comprehensive income; or

• A business combination.

Current tax and deferred taxes are charged or credited directly to other

comprehensive income if the tax relates to items that are credited or

charged in the same or a different period, to other comprehensive income.

Current tax is calculated at rates (tax laws) enacted or substantively

enacted at reporting period end in accordance with the South African

Income Tax Act (Act No. 58 of 1962).

Deferred Taxation

Deferred tax is the tax expected to be payable or recoverable on differences

between the carrying amount of assets and liabilities in the Financial

Statements and the corresponding tax basis used in the computation

of taxable profit, and is accounted for using the comprehensive liability

method. Deferred tax liabilities are recognised for all taxable temporary

differences and deferred tax assets are recognised to the extent that it

is probable that taxable profits will be available against which deductible

temporary differences can be utilised. Such assets and liabilities are not

recognised if the temporary differences arise from goodwill (or negative

goodwill) or from the initial recognition (other than in a business combination)

of other assets and liabilities in a transaction affecting neither the tax profit

or losses, nor the accounting profit or losses.

Deferred tax liabilities are recognised for taxable temporary differences

arising on investments in subsidiaries and associates, and interests in

joint ventures, except where the Group is able to control the reversal of

the temporary differences and it is probable that the temporary difference

will not reverse in the foreseeable future. The carrying amount of deferred

tax assets is reviewed at each reporting date and reduced to the extent

that it is no longer probable that sufficient taxable profit will be available

to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates expected

to apply to the period when the asset is realised or the liability is settled,

based on the tax rates (and tax laws) enacted or substantively enacted

by the reporting date.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or

production of a qualifying asset are capitalised during the period of time

that is necessary to complete and prepare the asset for its intended use

or sale. Other borrowing costs are expensed in the period in which they

are incurred and reported in finance costs (see Note 18).

Foreign Currency

Foreign currency transactions are recorded at the exchange rate ruling

on the transaction dates. Monetary assets and liabilities denominated

in foreign currencies are translated at rates of exchange ruling at the

reporting date. Profits or losses arising on translation of foreign currency

transactions are included in profit or loss.

Non-monetary assets and liabilities are translated at the prevailing rate

at the date of acquisition. Exchange differences on non-monetary assets

classified as available for sale financial instruments are recognised as part

of the fair value movement in other comprehensive income. All foreign

exchange movements are recognised in profit or loss, unless they relate to

non-monetary assets classified as available for sale financial instruments

where that movement is then recognised in equity, or they form part of

the borrowing costs capitalised to qualifying assets.

Short-term Employee Benefits

The cost of short-term employee benefits (those payable within 12 months

after the service is rendered, such as paid vacation leave and bonuses),

are recognised in the period in which the service is rendered and are not

discounted. The expected cost of compensated absences is recognised as

an expense as the employees render services that increase their entitlement

or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of profit sharing and bonus payments is recognised

as an expense when there is a legal or constructive obligation to make

such payments as a result of past performance.

Retirement and Medical Funds

Current contributions to the Group’s defined contribution retirement fund are

based on current salary and are recognised when they fall due. The Group

has no further payment obligations once the payments have been made.

80


Impairment

The Group assesses, at the end of each reporting period, whether there is

any indication that an asset may be impaired. If any such indication exists,

the Group estimates the recoverable amount of the asset.

Irrespective of whether there is any indication of impairment, the Group also:

• Tests goodwill acquired in a business combination for impairment

annually; and

• Tests intangible assets for impairment annually.

If there is any indication that an asset may be impaired, the recoverable

amount is estimated for the individual asset. If it is not possible to estimate

the recoverable amount of the individual asset, the recoverable amount

of the cash-generating unit to which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher

of its fair value less costs to sell and its value in use. If the recoverable

amount of an asset is less than its carrying amount, the carrying amount

of the asset is reduced to its recoverable amount. That reduction is an

impairment loss.

An impairment loss of assets carried at cost less any accumulated

depreciation or amortisation is recognised immediately in profit or loss.

Goodwill acquired in a business combination is, from the acquisition date,

allocated to each of the cash-generating units, or groups of cash-generating

units, that are expected to benefit from the synergies of the combination.

An impairment loss is recognised for cash-generating units if the recoverable

amount of the unit is less than the carrying amount of the unit. The

impairment loss is allocated to reduce the carrying amount of the assets

of the unit in the following order:

• First, to reduce the carrying amount of any goodwill allocated to the

cash-generating unit; and

• Then, to the other assets of the unit, pro rata on the basis of the

carrying amount of each asset in the unit.

The Group assesses, at each reporting date, whether there is any indication

that an impairment loss recognised in prior periods for assets other than

goodwill may no longer exist or may have decreased. If any such indication

exists, the recoverable amounts of those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable

to a reversal of an impairment loss does not exceed the carrying amount

that would have been determined had no impairment loss been recognised

for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated

depreciation or amortisation other than goodwill is recognised immediately

in profit or loss.

Accounting Estimates and Judgements

Sources of Estimation Uncertainty

In preparing the Annual Financial Statements, management is required to

make estimates and assumptions that affect the amounts represented in

the Annual Financial Statements and related disclosures. Use of available

information and the application of judgement is inherent in the formation

of estimates. Actual results in the future could differ from these estimates

which may be material to the Annual Financial Statements. Significant

judgements include:

Asset Lives and Residual Values

Property, plant and equipment are depreciated over their useful lives taking

into account residual values, where appropriate. The actual lives of the

assets and residual values are assessed at each reporting date and may

vary depending on a number of factors. In re-assessing asset lives, factors

such as technological innovation, product lifecycles and maintenance

programmes are taken into account. Residual value assessments consider

issues such as future market conditions, the remaining life of the asset

and projected disposal values.

Impairment

Future cash flows expected to be generated by the asset are projected,

taking into account market conditions and the expected useful lives of

the assets. The present value of these cash flows, determined using an

appropriate discount rate, is compared to the current asset value and, if

lower, the assets are impaired to the present value.

Loans and other receivables

The Group assesses its trade and other receivables for impairment at the

end of each reporting period. In determining whether an impairment loss

should be recorded in profit or loss, the Group makes judgements as to

whether there is observable data indicating a measurable decrease in the

estimated future cash flows from a financial asset.

Fair value estimation

The fair value of financial instruments that are not traded in an active

market is determined by using valuation techniques. The Group uses a

variety of methods and makes assumptions that are based on market

conditions existing at the end of each reporting period. Quoted market

prices or dealer quotes for similar instruments are used for long-term debt.

Other techniques, such as estimated discounted cash flows, are used to

determine fair value for the remaining financial instruments. The fair value


81

of forward foreign exchange contracts is determined using quoted forward

exchange rates at the end of the reporting period.

The carrying value less impairment provision of trade and other receivables

is assumed to approximate their fair values as the instrument is short-term

in nature. The fair value of financial liabilities for disclosure purposes is

estimated by discounting the future contractual cash flows at the current

market interest rate that is available to the Group for similar financial

instruments.

Critical Judgements in Applying the Entity’s Accounting Policies

Judgements made by management are continually evaluated and are

based on historical experience and the expectation of future events that

are believed to be reasonable under the circumstances.

Borrowing Costs

Pre-delivery payment assets are regarded as qualifying assets for the

purpose of the capitalisation of borrowing costs. Exchange differences

arising from foreign currency borrowings, to the extent that they are

regarded as an adjustment to interest costs, are capitalised as part of

borrowing costs as these expenses are considered part of the cost of

borrowing in foreign currency.

Taxation

Judgement is required in determining the provision for income taxes

due to the complexity of legislation. There are many transactions and

calculations for which the ultimate taxation determination is uncertain

during the ordinary course of business. The Group recognises liabilities for

anticipated taxation audit issues based on estimates of whether additional

taxes will be due. Where the final taxation outcome of these matters is

different from the amounts that were initially recorded, such differences

will impact the income taxation and deferred taxation provisions in the

period in which such determination is made.

Recovery of Deferred Tax Assets

The Group recognises the net future taxation benefit related to deferred

income taxation assets to the extent that it is probable that the deductible

temporary differences will reverse in the foreseeable future. Assessing

the recoverability of deferred income taxation assets requires the Group

to make significant estimates related to expectations of future taxable

income. Estimates of future taxable income are based on forecast cash

flows from operations and the application of existing taxation laws in

each jurisdiction. To the extent that future cash flows and taxable income

differ significantly from estimates, the ability of the Group to realise the

net deferred taxation assets recorded at the end of the reporting period

could be impacted.

Management has applied a probability analysis to determine future taxable

income against which calculated tax losses will be utilised.

Segmental Information

Operating segments are reported in a manner consistent with the internal

reporting provided to the chief operating decision-maker (Financial Director).

The chief operating decision-maker, who is responsible for allocating

resources and assessing performance of the segments, has been identified

as the Chief Executive Officer. Segments are presented in terms of IFRS.

At year end, the Group was organised into two main operating segments:

1. Airline; and

2. Non-airline, which comprises the travel business, property investments,

simulator business and Slow in the City.

82

Notes to the Annual Financial Statementsfor the year ended 30 June 2014

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

1. Property, Plant and Equipment

Property and buildings

Cost 92,811 92,716 41,786 41,691

Accumulated depreciation (7,473) (6,724) (7,473) (6,724)

Carrying value 85,338 85,992 34,313 34,967

Leasehold improvements

Cost 63,266 52,930 63,266 52,930


Carrying value 29,305 29,854 29,305 29,854

Aircraft and flight simulator equipment

Cost 3,319,371 3,040,961 3,319,371 3,040,961

Accumulated impairment (30,559) (30,559) (30,559) (30,559)

Accumulated depreciation (1,105,393) (855,473) (1,105,393) (855,473)

Carrying value 2,183,419 2,154,929 2,183,419 2,154,929

Vehicles, furniture and equipment and computer equipment

Cost 84,308 80,567 84,096 79,606


Carrying value 16,640 18,739 16,445 18,149

Pre-delivery payments 230,331 24,568 230,331 24,568

Total property, plant and equipment and pre-delivery payments 2,545,033 2,314,082 2,493,813 2,262,467

Reconciliation of Carrying Value

Property and buildings

Carrying value at the beginning of the year 85,992 101,528 34,967 48,960

Additions 95 73 95 73

Transfer to leasehold improvements - (13,756) - (13,756)

Depreciation (749) (1,853) (749) (310)

Carrying value at the end of the year 85,338 85,992 34,313 34,967

Leasehold improvements


Additions 10,336 359 10,336 359

Transfer from property and buildings - 13,756 - 13,756

Depreciation (10,885) (11,297) (10,885) (11,297)



83

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Aircraft and flight simulator equipment

Carrying value at the beginning of the year 2,154,929 856,595 2,154,929 856,595

Additions 290,359 1,091,944 290,359 1,091,944

Transfer from pre-delivery payments - 414,289 - 414,289

Depreciation (261,869) (207,899) (261,869) (207,899)

Carrying value at the end of the year 2,183,419 2,154,929 2,183,419 2,154,929

Vehicles, furniture, equipment and computer equipment


Additions 4,776 1,429 4,564 1,429

Depreciation (6,875) (10,163) (6,268) (9,833)


Pre-delivery payments

Carrying value at beginning of the year 24,568 419,877 24,568 419,877

Payments made 205,483 - 205,483 -

Capitalised as part of aircraft - (414,289) - (414,289)

Borrowing costs capitalised 280 18,980 280 18,980

Interest capitalised 1,490 3,438 1,490 3,438

Foreign exchange (gains) losses capitalised (1,210) 15,542 (1,210) 15,542

Carrying value at the end of year 230,331 24,568 230,331 24,568

Total property, plant and equipment 2,545,033 2,314,082 2,493,813 2,262,467

Property and buildings owned consist of Erf 1092 and 1096 Bonaero Park extension 2, Erf 931, Bonaero Park extension 1, Erf 700, Rhodesfield Township,

and Erven 674, 684, 685, 687, 688, 689, 690, 695 and Erf 1040, Rhodesfield Township. Valuations of the properties are performed every three years,

and based on this the estimated Directors’ value of these properties is approximately R129 million (2013: R129 million).

The net book value of property, plant and equipment held under instalment sale and finance lease agreements are disclosed in Note 11.

Pre-delivery payments are payments made to the Boeing Company for the remaining four (4) of eight (8) new Boeing 737-800 aircraft which arrived

in South Africa from July 2012. The finance for the aircraft was partly through a rights issue during the 2010 financial year and a further loan through

Investec Limited which is disclosed in Note 11. Future capital commitments relating to the Boeing 737-800s are disclosed in Note 27. Borrowing costs

capitalised to the pre-delivery payments were incurred at a rate of 3.7% on a US Dollar-based facility concluded in 2012.

84

Notes to the Annual Financial Statements (continued)

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

2. Intangible Assets

Computer software

Cost 51,844 51,844 51,844 51,844

Accumulated amortisation (20,738) (10,369) (20,738) (10,369)

Carrying value 31,106 41,475 31,106 41,475

Reconciliation of Carrying Value

Computer software


Additions - 329 - 329

Amortisation (10,369) (10,369) (10,369) (10,369)


The intangible asset relates to the implementation of SABRE Airline Solutions, which was fully operational in the 2012 financial year. The remaining period of amortisation is three years.

3. Loan to Share Incentive Trust

This loan relates to the Comair Share Incentive Trust's acquisition of 21 million ordinary shares at 72 cents per share in June 1998. The term of the loan is unspecified and it bears no interest.

At year end the Trust held 4,992,531 shares representing 1.1% of shares in issue (prior year: 5,525,864 shares representing 1.1%) at a closing price of 448c (prior year: 265c).

- - 3,814 5,337

4. Investments in and Loans to Subsidiaries

Non-current portion

4.1 Aconcagua 32 Investments (Proprietary) Limited1 ordinary share of R1 at cost (100% shareholding)

Investment at cost - - 16,732 16,732

Loan receivable - - 2,527 5,866

The company is the owner of Erf 700, Rhodesfield Township. This is the only asset in its books, valued at R22 million. There are no material liabilities in this company. The share in the company was acquired during May 2008. The loan is interest free and not repayable in the next 12 months.


85

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

4.2 Holiday Tours (Proprietary) Limited1 million shares of 1 cent each at cost (100% shareholding)

The Group acquired 65% of the issued share capital in the 2011 financial year. In December 2011, the remaining 35% shareholding was acquired at a cost of R35,000. The company is a tour operating company offering holiday packages.

Investment at cost - - 2,593 2,593

4.3 Churchill Finance Services 23 Limited2 shares of US$1 at cost (100% shareholding)

Comair Limited acquired 100% of the shares in Churchill Finance Services 23 Limited during February 2011 for R10,000.

The company is currently being liquidated.

Investment at cost - - 10 10

Total non-current portion - - 21,862 25,201

Current portion

4.4 Alooca Technologies (Proprietary) Limited100 ordinary shares of R1 at cost (100% shareholding)


The company acquired Erven 674, 684, 685, 687, 688, 689, 690, 695 and 1040 in Rhodesfield Township with funding from Comair Limited. The properties at cost are valued at R30.8 million (2013: R30.8 million).

The loan is unsecured, has no fixed repayment terms and is interest free.

4.5 Amber (Proprietary) Limited1 ordinary share of R1 at cost (100% shareholding)

The company is currently being liquidated.

86


Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

4.6 Kulula Air (Proprietary) Limited100 ordinary shares of R1 at cost (100% shareholding)

This company operates a business lounge situated opposite the Gautrain Station in Sandton. The lounge commenced operations in August 2011.

Assets were transferred to the building during the prior year as leasehold improvements as reflected in Note 1.



4.7 Comair Catering (Proprietary) Limited100 ordinary shares of R1 at cost (100% shareholding)

This dormant company has a bank account which has been funded by Comair Limited.

Loan receivable - - 13 11


Total current portion - - 31,353 31,513

Total investment in subsidiaries - - 53,215 56,714

Maximum amount exposed to credit risk 33,880 37,368

5. Investment in and Loans to Associates

Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interests in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.

The following table lists the associates in the Group.

Ownership %Commuter Handling Services (Proprietary) Limited held by Comair Limited 40% 40% 40% 40% Imperial Air Cargo (Proprietary) Limited held by Comair Limited 30% 30% 30% 30% Protea Hotel ORT (Proprietary) Limited held by Aconcagua 32 (Proprietary) Limited 25% 25% 25% 25% Comair Mozambique Limitada held by Comair Limited 49% 49% 49% 49% Online World Travel 24 (Proprietary) Limited held by Comair Limited 49% 49% 49% 49%

4. Investments in and Loans to Subsidiaries (continued)


87

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Carrying Value

Commuter Handling Services (Proprietary) Limited 10,104 8,623 7,852 7,852

Imperial Air Cargo (Proprietary) Limited - - - -

Protea Hotel ORT (Proprietary) Limited 4,360 1,279 - -

Comair Mozambique Limitada - - - -

Online World Travel 24 (Proprietary) Limited - - - -

The summarised financial information in respect of the Group's associates are set out below.

5.1 Commuter Handling Services (Proprietary) Limited

Statement of Comprehensive Income

Revenue 203,236 192,820

Total comprehensive income 3,703 2,240

Statement of Financial Position

Assets

Property plant and equipment 4,687 6,903

Deferred tax 4,554 6,907

Net current assets 8,642 213

17,883 14,023

Equity and liabilities

Capital and reserves (1,908) (5,611)

Borrowings 19,791 19,634

17,883 14,023

Reconciliation to carrying amounts:

Loan to associate 7,852 7,852 7,852 7,852

Group share of retained income (763) (2,244)

Goodwill 3,015 3,015

Total carrying value 10,104 8,623

Opening net assets (5,611) (7,851)

Comprehensive income 3,703 2,240

Closing net assets (1,908) (5,611)

Commuter Handling Servies (Proprietary) Limited provides passenger handling services to airlines at ACSA-based airports and is incorporated in South Africa and has a June year-end.

88


Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

5.2 Imperial Air Cargo (Proprietary) Limited


Revenue 167,826 181,993



Assets

Property, plant and equipment 813 1,257

Deferred tax 2,909 126

Net current assets 26,278 17,663

30,000 19,046


Capital and reserves (43,257) (50,707)

Equity loan 35,537 36,305


30,000 19,046


Loan to associate 15,559 15,559 15,559 15,559

Loan impairment (2,582) (4,817) (15,559) (15,559)

Group share of accumulated loss (12,977) (10,742)

Total carrying value - -

Opening net assets (50,707) (63,707)


Closing net assets (43,257) (50,707)

Imperial Air Cargo (Proprietary) Limited has a June year-end.This associate is a company in the air freight industry.

5. Investment in and Loans to Associates (continued)


89

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

5.3 Protea Hotel ORT (Proprietary) Limited


Revenue 22,251 22,151



Assets

Property, plant and equipment 112,437 117,953

Net current assets 8,205 13,082

120,642 131,035


Capital and reserves 17,439 5,115

Deferred tax 7,703 4,513


120,642 131,035


Group share of retained income 4,360 1,279

Total carrying value 4,360 1,279

Opening net assets 5,115 (5,493)


Closing net assets 17,439 5,115

Protea Hotel ORT (Proprietary) Limited has a June year-end.This associate is a branded Protea Hotel.

Non-current portion 6,612 2,050 - -

Current portion 7,852 7,852 7,852 7,852

Total investment and maximum credit risk exposure 14,464 9,902 7,852 7,852

The maximum credit exposure for the Company and Group amount to R23,411,000 (2013: R23,411,000). In the current year an amount of R2,582,000 (2013: R4,817,000) in the Group and R15,559,000 (2013: R15,559,000) in the Company was provided against the loan. The balance of the loans receivable is considered to be recoverable and not past due.

90


Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

6. GoodwillGross amount 3,668 3,668

Carrying value 3,668 3,668

The recoverable amount of goodwill has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. A growth rate of 7% and a pre-tax discount rate of 25% was used. As a result of the acquisition of Holiday Tours (Proprietary) Limited, the Group’s footprint in Africa has been enhanced and the synergies that the Group will add has resulted in the recognition of goodwill. No impairment has occurred in the current financial year. The goodwill relates to the travel business that is part of the non-airline business.

7. InventoryCatering equipment and consumables 7,608 7,086 7,608 7,086

7,608 7,086 7,608 7,086

8. Trade and Other ReceivablesTrade receivables 351,750 347,933 336,580 326,410

Impairment allowance (1,096) (3,030) (1,096) (3,030)

350,654 344,903 335,484 323,380

Deposits 140,716 35,827 140,716 35,827

Other receivables 31,856 39,926 31,856 39,926

523,226 420,656 508,056 399,133

Maximum exposure to credit risk 350,654 372,077 335,061 350,554

The standard credit period is 30 days from statement. The average age of the receivables is 31 days. Only customers with whom the Group has a long-standing relationship have access to credit. New customers are rare as the Group prefers selling air tickets for cash rather than on credit.

Included in the Group’s trade receivables balance are debtors with a carrying value of R4.0 million (prior year: R6.4 million) which are past due at the reporting date for which the Group has not provided an impairment as the amounts are still considered recoverable.

Ageing of past due but not impaired trade receivables

120 days - 2,403 2,994 2,403 2,994

120 days + 1,640 3,425 1,640 3,425

4,043 6,419 4,043 6,419


91

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Ageing of impairment trade receivables

120 days - - - - -

120 days + 1,096 3,030 1,096 3,030

1,096 3,030 1,096 3,030

Reconciliation of impairment allowance

Opening balance 3,030 - 3,030 -

Provision impairment raised - 3,030 - 3,030

Reversal during the period (1,934) - (1,934) -

1,096 3,030 1,096 3,030

9. Cash Encumbered

The Group has pledged cash totalling R20 million (prior year: R20 million)

in respect of aircraft lease obligations.

10. Share CapitalAuthorised:

1,000,000,000 ordinary shares of 1 cent each 10,000 10,000 10,000 10,000

75,000,000 A Class shares of 1 cent each 750 750 750 750

10,000,000 'N' ordinary shares of 1 cent each 100 100 100 100

1,000,000 preference shares of 1 cent each 10 10 10 10

10,860 10,860 10,860 10,860

Issued:

489,176,471 ordinary shares of 1 cent each 4,892 4,892 4,892 4,892

Repurchase of 10% of share capital (48,913,372 ordinary shares of 1 cent each) (489) - (489) -

74,117,647 'A' Class shares of 1 cent each 741 741 741 741

Adjustment in respect of consolidation of Share Trust 4,992,531 (2013: 5,525,864) (50) (55) - -

5,094 5,578 5,144 5,633

At a general meeting of the Group held on 14 September 2006, shareholders approved by way of various special resolutions the creation, specific issue

and re-purchase of the 'A' shares, as well as the dividend and voting policy relating to those shares. The 'A' shares will be converted to equity if the

hurdle rate is achieved. The hurdle rate is set out as per the circular issued on the 23 August 2006. Refer to Note 17 below. The 'A' shares shall vote as

a single class at all meetings of shareholders of the Group, save for resolutions of the Group relating to the rights and privileges of the 'A' shares such

that the holders of the 'A' shares shall not be entitled to vote or approve any resolution that would otherwise have been passed or not by the required

majority of votes, collectively, of the holders of the ordinary shares and the 'A' shares (other than resolutions relating to the rights and privileges of the 'A'

shares). The 'A' shares will not be listed on the JSE and will not be taken into account for the purposes of categorisation transactions under the JSE

Listings Requirements. The 'A' shares will not be listed on any security exchange, but are convertible into ordinary shares on a ‘one-for-one’ basis and

are not entitled to dividends and voting rights.

92


Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

11. Interest-bearing Liabilities

Rand Merchant BankAircraft instalment sale agreements

Instalment sale agreement payable in 40 quarterly instalments with the final payment due on 12 October 2022. Interest is charged at a variable rate – currently 7.1% (prior year: 6.4%). The current instalment is R13 million. 276,232 308,445 276,232 308,445

Less: Finance raising fees (12,224) (13,675) (12,224) (13,675)

One aircraft mortgage serves as collateral covering security with a net book value of R333 million (prior year: R348 million).

Instalment sale agreement payable in 40 quarterly instalments with the final payment due on 12 October 2022. Interest is charged at a variable rate – currently 7.1% (prior year: 6.4%). The current instalment is R13 million. 276,193 308,391 276,193 308,391



Instalment sale agreement payable in 41 quarterly instalments with the final payment due on 12 July 2022. RMB has entered into a selldown agreement with Nedbank for this loan. Interest is charged at a variable rate – currently 7.1% (prior year: 6.4%). The current instalment is R12 million. 254,909 285,588 254,909 285,588



Simulator loan

Instalment sale agreement payable in 30 quarterly instalments with the final payment due on 8 June 2018. Interest is charged at a variable rate – currently 9.6% (prior year 9.0%). The current instalment is R3.1 million. A Boeing 737-800 simulator serves as collateral covering security with a net book value: R50 million (prior year: R54 million). 34,909 43,609 34,909 43,609

Private Export Funding CorporationAn US Dollar-based aircraft instalment sale agreement payable in 40 quarterly instalments with the final payment due on 15 November 2022. Interest is charged at a fixed rate of 2.275%. The current instalment is US$1 million. 331,452 352,976 331,452 352,976




93

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Investec Limited

Mortgage finance agreement

This loan is payable in 28 quarterly instalments with the final payment due on 30 September 2019. Erf 700, Rhodesfield Township, has been pledged as collateral for this mortgage finance agreement. A mortgage bond of R25.9 million has been registered against this property. Interest is charged at a variable rate – currently 9.5% (prior year: 8.9%). The current instalment is R1.3 million. 19,425 23,142 19,425 23,142

Working capital loan

This loan is unsecured and is payable in 20 quarterly instalments with the final payment due on 30 September 2013. Interest was charged at a variable rate of 7.6%. The current instalment is R1.7 million. This agreement was settled in full on 30 September 2013. - 1,655 - 1,655

Working capital loan

This loan forms part of a facility granted by the bank. Cross-colatarisation of properties serves as security for this loan. There are no repayment terms and interest is charged quarterly at a variable rate – currently 9.3%. 120,463 - 120,463 -

Boeing 737-800

A facility for pre-delivery payments required for four new 737-800 aircraft on order. Cross-colatarisation of other Investec loans stand as security for this loan. The facility is repayable on delivery of the relevant aircraft. The facility is in US Dollar and earns a variable interest rate payable quarterly – currently 4.0%. The aircraft will be delivered between August 2015 and November 2016. 54,213 - 54,213 -

Sub-total 1,319,742 1,269,988 1,319,742 1,269,988

Less: current portion (136,670) (136,221) (136,670) (136,221)

Non-current portion 1,183,072 1,133,767 1,183,072 1,133,767

Total value of interest bearing liabilities 1,319,742 1,269,988 1,319,742 1,269,988

Finance charges 279,114 326,546 279,114 326,546

Total interest-bearing liability commitments 1,598,856 1,596,534 1,598,856 1,596,534

Total commitments for year one 201,527 205,043 201,527 205,043

Total commitments for year two to five 867,027 740,447 867,027 740,447

Total commitments after year five 530,302 651,044 530,302 651,044

Allocation of present valued amounts 1,319,742 1,269,988 1,319,742 1,269,988

Capital commitments for year one 136,670 136,221 136,670 136,221

Capital commitments for year two to five 689,623 513,505 689,623 513,505

Capital commitments after year five 493,449 620,262 493,449 620,262

94


Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

12. Deferred Taxation

On temporary differences arising from:Property, plant and equipment 269,507 217,629 269,507 217,629 Staff obligations and accruals (63,390) (60,029) (63,390) (60,029)Unflown ticket liability (48,060) (33,315) (48,060) (33,315)Prepayments 9,632 11,411 11,169 12,393

167,689 135,696 169,226 136,678

Deferred taxation reconciliationOpening balance 135,696 99,039 136,678 99,241 Deferred taxation – current 31,993 36,657 32,548 37,437 Closing balance 167,689 135,696 169,226 136,678

There are no unrecognised deferred taxation assets or losses.

13. Trade and Other PayablesTrade payables 1,039,856 802,754 1,017,927 780,263 Cash-settled, share-based payment - - - -Share options granted to employees 21,666 4,250 21,666 4,250 Recognised as long-term portion (21,666) (4,250) (21,666) (4,250)Unflown ticket liability 270,391 217,729 270,391 217,729 Other 36,315 38,027 36,315 38,027

1,346,562 1,058,510 1,324,633 1,036,019

Trade creditor terms vary, depending on the agreements. An average of 30 days from statement is fair. Average days outstanding is 37 days.

Cash-settled, share-based payment – share options are granted to certain employees in the Group. The fair value of the amount payable to the employee is recognised as an expense with a corresponding increase in liabilities. This is a long-term liability and will be paid in the future.

Unflown ticket liability is all monies received from passengers prior to reporting period and relating to flights not yet flown.

14. ProvisionsLeave pay provision 48,128 43,994 48,128 43,994 Opening balance 43,994 41,952 43,994 41,952 - Raised 15,305 13,025 15,305 13,025 - Utilised (11,171) (10,983) (11,171) (10,983)

Bonus provision 51,591 72,218 51,591 72,218 Opening balance 72,218 31,142 72,218 31,142 - Raised 68,258 85,943 68,258 85,943 - Utilised (88,885) (44,867) (88,885) (44,867)

99,719 116,212 99,719 116,212

In terms of Comair’s policy, employees are entitled to accumulate vested leave benefits not taken within a leave cycle. Leave days have been capped,

depending on the level of employment of the employees.


95

The bonus scheme consists of performance bonuses which are dependent on the achievement of financial and non-financial targets. Bonuses are

payable annually in December for all staff other than Executives. Executive bonuses are paid in July.

15. Financial Risk Management and Financial Instruments

The Group finances its operations through a mixture of accumulated profits, current borrowings and non-current borrowings. The Group also enters into

Forward Exchange Contracts to manage the currency risks of its operations. The main risks arising in the normal course of business from the Group’s

financial instruments are currency, interest rate, credit and liquidity risk. This note presents information on the Group’s exposure to these risks. The Board

of Directors is responsible for risk management activities in the Group. The carrying values equate to the fair values of each financial instrument.

The carrying value of short-term financial instruments approximate fair value due to their short-term nature, and all interest-bearing financial liabilities

carried at amortised cost bear interest at market-related rates. Hence the carrying values of these financial instruments equate to their fair values.

Identification of Financial Instruments

Fair value

At fair value through

profit (loss) Loans and

Receivables

Financial liabilities

at amortised cost

Non-financial instruments Total

R’000 R’000 R’000 R’000 R’000 R’000

2014AssetsNon-current assetsProperty, plant and equipment - - - - 2,545,033 2,545,033 Intangible assets - - - - 31,106 31,106 Investments in associates - - - - 6,612 6,612 Goodwill - - - - 3,668 3,668

Current assetsInventories - - - - 7,608 7,608 Trade and other receivables 350,654 - 350,654 - 172,572 523,226 Investments in and loans to associates 7,852 - 7,852 - - 7,852 Taxation - - - - 30,540 30,540 Cash and cash equivalents 867,703 - 867,703 - - 867,703 Total assets 1,226,209 - 1,226,209 - 2,797,139 4,023,348

Equity and LiabilitiesCapital and reservesShare capital - - - - 5,094 5,094 Non-distributable reserves - - - - 27,424 27,424 Accumulated profit - - - - 1,035,452 1,035,452

Non-current liabilitiesInterest-bearing liabilities 1,183,072 - - 1,183,072 - 1,183,072 Deferred taxation - - - - 167,689 167,689 Share-based payments - - - - 21,666 21,666

Current liabilitiesTrade and other payables 1,076,171 - - 1,076,171 270,391 1,346,562 Provisions - - - - 99,719 99,719 Interest-bearing liabilities 136,670 - - 136,670 - 136,670 Total liabilities 2,395,913 - - 2,395,913 1,627,435 4,023,348

96


Fair value

At fair value through

profit (loss) Loans and

Receivables

Financial liabilities

at amortised cost

Non-financial instruments Total

R’000 R’000 R’000 R’000 R’000 R’000

2013

Assets

Non-current assets

Property, plant and equipment - - - - 2,314,082 2,314,082

Intangible assets - - - - 41,475 41,475

Investments in and loans to associates - - - - 2,050 2,050

Goodwill - - - - 3,668 3,668

Current assets

Inventories - - - - 7,086 7,086

Trade and other receivables 372,077 - 372,077 - 48,579 420,656

Investments in associates 7,852 - 7,852 - - 7,852

Taxation - - - - 30,942 30,942

Cash and cash equivalents 778,045 - 778,045 - - 778,045

Total assets 1,157,974 - 1,157,974 - 2,447,882 3,605,856

Equity and Liabilities

Capital and reserves

Share capital - - - - 5,578 5,578

Share premium - - - - 123,631 123,631

Non-distributable reserves - - - - 23,996 23,996

Accumulated profit - - - - 867,995 867,995

Non-current liabilities

Interest-bearing liabilities 1,133,767 - - 1,133,767 - 1,133,767

Deferred taxation - - - - 135,696 135,696

Share-based payments - - - - 4,250 4,250

Current liabilities

Trade and other payables 840,781 - - 840,781 217,729 1,058,510

Provisions - - - - 116,212 116,212

Interest-bearing liabilities 136,221 - - 136,221 - 136,221

Total liabilities 2,110,769 - - 2,110,769 1,495,087 3,605,856

Financial assets are substantially the same for the Group and the Company, however loans to subsidiaries amount to R37.3 million (2013: R37.3 million)

and are classified as loans and receivables.

Financial liabilities are substantially the same for the Group and the Company.

Interest Rate Risk

The Group is exposed to interest rate risk as it borrows and places funds. This risk is managed by managing the Group’s exposures on long-term loans

and placing surplus funds in investments that yield a market-linked return.

15. Financial Risk Management and Financial Instruments (continued)


97

Management reviews the interest rate risk on an ongoing basis. Where new loans are entered into, management compares interest rates offered by

various institutions and where considered more favourable, may enter into loans in foreign currency. The interest rate risk is viewed in conjunction with

the foreign exchange risk.

The Group, as part of its financing activities, enters into foreign denominated interest-bearing loans. The foreign exchange rate exposure is monitored

by management in conjunction with the interest rate exposure which would have been incurred had a Rand-denominated loan been taken out. Refer

to sensitivity analysis below.

Credit Risk

Credit risk relates to the potential of non-recovery of bank and call deposits and loans and trade receivables. At the reporting date, the Group did not

consider there to be any significant concentration of credit risk which has not been adequately provided for.

Liquidity Risk

The liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by monitoring

forecast cash flows and ensuring that adequate cash resources and unutilised borrowing facilities are maintained.

Maturity profile of financial liabilities at 30 June 2014

Carrying amount

Contractual cash flows

Within one year

Two to five years

More than five years

No fixed terms

Group R’000 R’000 R’000 R’000 R’000 R’000

2014

Secured non-current borrowings 1,183,072 1,397,329 - 867,027 530,302 -

Secured short-term borrowings 136,670 201,527 201,527 - - -

Trade and other payables 1,076,171 1,076,171 1,076,171 - - -

Total financial liabilities – Group and Company 2,395,913 2,675,027 1,277,698 867,027 530,302 -

Total financial assets – Group 1,232,821 1,232,821 1,218,357 - - 14,464

2013

Secured non-current borrowings 1,133,767 1,391,491 - 740,447 651,044 -

Secured short-term borrowings 136,221 205,043 205,043 - - -

Trade and other payables 840,781 840,781 840,781 - - -

Total financial liabilities – Group and Company 2,110,769 2,437,315 1,045,824 740,447 651,044 -

Total financial assets – Group 1,147,527 1,147,527 1,137,625 - - 9,902

Foreign Currency Risk

The Group undertakes certain transactions denominated in foreign currency, which therefore have exposure to exchange rate variations. The Group

may enter into forward exchange contracts to manage exchange rate exposure. Where appropriate, open positions are maintained. The Group does

not speculate in derivative instruments and all foreign exchange contracts are supported by underlying transactions.

Approximately 48% of operating costs are incurred and approximately 30% of revenue is based in foreign currency. The following uncovered foreign

currency amounts are included in the Financial Statements at year end: net short-term liabilities of US$6,774,987 (2013: US$4,294,324) and GBP1,480,062

(2013: GBP1,027,964) and net short term receivables of GBP3,993,836 (2013: GBP5,820,456).

The Group, as part of its financing activities, enters into foreign denominated interest-bearing loans. The foreign exchange rate exposure is monitored

by management in conjunction with the interest rate exposure which would have been incurred had a Rand-denominated loan been taken out.

98


Sensitivity Analysis

The sensitivity analysis below calculates the impact of movements in the foreign exchange rates in which the Group transacts as well as in interest rates

on the Group’s profits. The analysis is based on closing balances at year end.

Foreign exchange risk profit (loss) should the Rand exchange rate

change by 5%

Interest rate riskprofit (loss) should the interest rate

change by 2%

Group Carrying

value

Amount exposed to

risk Rand

appreciation Rand

depreciation

Amount exposed to

risk Rate

increase Rate

decrease

2014

Financial asset R'000

Cash and cash equivalents 867,703 285,754 (14,288) 14,288 867,703 17,354 (17,354)

Trade and other receivables 350,654 70,148 (3,507) 3,507

Impact of financial assets on:

- profit before tax - - (17,795) 17,795 - 17,354 (17,354)

- profit after tax - - (12,812) 12,812 - 12,495 (12,495)

Financial liabilities R'000

Interest-bearing liabilities 1,319,742 331,452 - - 1,319,742 (26,395) 26,395

Trade and other payables 1,076,171 323,062 16,153 (16,153) - - -

Impact of financial liabilities on:

- profit before tax - - 16,153 (16,153) - (26,395) 26,395

- profit after tax - - 11,630 (11,630) - (19,004) 19,004

Overall impact on profit after taxation - - (1,182) 1,182 - (6,509) 6,509

Interest and related foreign currency amounts incurred on account of aircraft and other qualifying assets under construction are capitalised and added

to the asset concerned and therefore do not affect profit or loss.

The movements are recognised in other comprehensive income until such time as the other qualifying asset is complete and the aircraft has been

delivered and recognised, in which case these amounts are no longer recognised and are expensed in profit or loss when incurred. The effect of a 5%

movement in foreign exchange would be Rnil (2013: Rnil) and of a 2% interest rate adjustment would be Rnil (2013: Rnil).

The effect of the movement in the interest rate was only calculated for the estimated period that the loan will be outstanding.

15. Financial Risk Management and Financial Instruments (continued)


99

Foreign exchange risk profit (loss) should the Rand exchange rate

change by 5%

Interest rate riskprofit (loss) should the interest rate

change by 2%

Group Carrying

value

Amount exposed to

risk Rand

appreciation Rand

depreciation

Amount exposed to

risk Rate

increase Rate

decrease

2013

Financial asset R'000

Cash and cash equivalents 778,045 222,605 (11,130) 11,130 778,045 15,561 (15,561)

Trade and other receivables 372,077 9,075 (454) 454

Impact of financial assets on:

- profit before tax - - (11,584) 11,584 - 15,561 (15,561)

- profit after tax - - (8,340) 8,340 - 11,204 (11,204)

Financial liabilities R'000

Interest-bearing liabilities 1,269,988 352,976 - - 1,269,988 (25,400) 25,400

Trade and other payables 840,781 234,994 11,750 (11,750) - - -

Impact of financial liabilities on:

- profit before tax - - 11,750 (11,750) - (25,400) 25,400

- profit after tax - - 8,460 (8,460) - (18,288) 18,288

Overall impact on profit after taxation - - 119 (119) - (7,084) 7,084

Capital Risk Management

The Group’s objectives when managing capital is to safeguard the entity’s ability to continue as a going concern.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes

in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust

the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

The Group monitors capital on the basis of the debt-to-adjusted-capital ratio. This ratio is calculated as net debt divided by adjusted capital. Net debt

is calculated as total interest-bearing debt (as shown in the Statement of Financial Position) less cash and cash equivalents. Adjusted capital comprises

all components of equity (i.e. ordinary shares, share premium, accumulated profits and other reserves).

The debt-to-adjusted capital ratios at 30 June 2014 and 2013 were as follows:

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Total liabilities, excluding deferred taxation 2,787,689 2,448,960 2,765,760 2,426,469

Less: Cash and cash equivalents (867,703) (778,045) (858,118) (766,628)

Net debt 1,919,986 1,670,915 1,907,642 1,659,841

Adjusted equity 1,067,970 1,021,200 1,057,595 1,014,103

Adjusted-capital ratio 1.80:1 1.64:1 1.80:1 1.64:1

100


Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

16. Revenue 6,282,219 5,386,581 6,224,285 5,366,240

Flight revenue 5,722,816 5,115,761 5,722,816 5,115,761

Service-based 136,769 122,571 126,715 112,394

Commission-based 413,190 141,640 365,310 131,476

Other 9,444 6,609 9,444 6,609

17. Profit from OperationsOperating expenses are stated after incorporating the following items:

Audit fees 670 656 670 656

Managerial, technical, administrative and secretarial services 55,583 21,435 55,583 21,435

Directors' emoluments (included in total staff costs) 35,049 21,717 35,049 21,717

- for services as Directors and related committee work 2,680 2,240 2,680 2,240

- for managerial and other services 13,804 14,108 13,804 14,108

- retirement and medical benefits 1,149 1,119 1,149 1,119

- share-based payments 17,416 4,250 17,416 4,250

Only Directors are considered key management

A comprehensive breakdown per Director is included in the Directors' Report on pages 63 and 64.

Rentals under operating leases 218,615 309,324 221,091 309,324

- property rentals 20,171 18,855 22,647 18,855

- aircraft rentals 193,644 286,142 193,644 286,142

- equipment and vehicle rentals 4,800 4,327 4,800 4,327

Total staff costs 738,003 671,936 734,904 671,936

Employment costs 693,728 633,715 690,629 633,715

Contributions to defined contribution funds 44,275 38,221 44,275 38,221

Number of employees 2,026 1,950

Profit (loss) on exchange differences 34,350 (12,199) 34,350 (12,199)

Impairments (2,235) 6,817 - 17,559

Loan to associate (2,235) 4,817 - 15,559

Trading loan in subsidiary - 2,000 - 2,000


101

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Equity-settled Share-based Payment (BEE Transaction) 3,428 3,428 3,428 3,428

This amount relates to the BEE transaction concluded in 2007 and is

being equity accounted for (in terms of IFRS 2) using the Black-Scholes

Option Valuation Model. The principal assumptions in applying the

value of the options were as follows:

a. Volatility of 50%;

b. Eight years to date of exercise;

c. Dividend yield of 5%;

d. Risk-free rate of 9.15%; and

e. Strike price of R3.03.

Cash-settled, Share-based Payments 17,416 4,250 17,416 4,250

This amount relates to the long-term incentive scheme concluded in

2013 and is being cash accounted for (in terms of IFRS 2) using the

Black-Scholes Option Valuation Model. The principal assumptions in

applying the value of the options were as follows:

a. Total vesting period is 36 months;

b. Only holders in the employment of the Group after the vesting

period will be entitled to receive a cash payout. For the purposes

of the calculation it was estimated that all employees will remain

in the employment of the Group;

c. Strike price is R1.50;

d. Risk-free rate is 5.22%; and

e. Dividend yield was 2%.

18. Interest ExpenseTotal interest paid 78,830 65,079 78,807 64,883

Bank interest 77,340 61,641 77,317 61,445

Interest capitalised to pre-delivery payments 1,490 3,438 1,490 3,438

Less: amount capitalised as borrowing costs (see Note 1) (1,490) (3,438) (1,490) (3,438)

Net interest 77,340 61,641 77,317 61,445

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Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

19. TaxationNormal taxation – current 77,066 66,478 76,316 63,629

Deferred taxation – current 31,993 36,657 32,548 37,437

109,059 103,135 108,864 101,066

Reconciliation of taxation rate % % % %

South African normal taxation rate (28.0) (28.0) (28.0) (28.0)

Taxation effect of:

Exempt income 0.1 0.1 0.1 0.1

Assessed losses utilised 0.1 0.1 0.1 0.1

Disallowable expenditure (1.4) (3.3) (1.4) (3.1)

Effective taxation rate (29.2) (31.1) (29.2) (30.9)

20. Earnings per ShareEarnings attributable to ordinary shareholders 264,851 227,526

Less: IAS 16 (profit) on disposal of property, plant and equipment (524) (984)

Less: IAS 36 (reversal of impairment) impairment to loans to associates (2,235) 4,817

Add: taxation effect of profit on disposal 147 276

Headline earnings attributable to ordinary shareholders 262,239 231,635

Weighted ordinary shares in issue ('000) 453,856 483,650

Ordinary shares in issue 440,263 489,176

Adjustment in respect of share buy-back 18,586 -

Adjustment in respect of consolidation of Share Trust (4,993) (5,526)

Adjustment for dilutive effect of share options in issue 483 527

Adjustment for dilutive effect of BEE transaction 17,512 -

Diluted weighted ordinary shares in issue ('000) 471,851 484,177

Earnings per share (cents) 58.4 47.0

Headline earnings per share (cents) 57.8 47.9

Diluted earnings per share (cents) 56.1 47.0

Diluted headline earnings per share (cents) 55.6 47.8

Dividends per share paid (cents) 15.0 5.0


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Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

21. Cash Generated by OperationsProfit before taxation 373,910 330,661 371,072 326,070

(Reversal of impairment) impairment (2,235) 6,817 - 17,559

Depreciation 290,747 241,582 290,140 239,708

Equity-settled BEE transaction 3,428 3,428 3,428 3,428

Cash-settled share-based payments 17,416 4,250 17,416 4,250

Share of (profit) loss from associates (2,327) 1,725 - -

Interest expense 77,340 61,641 77,317 61,445

Interest received (32,149) (20,217) (31,515) (19,856)

Profit on disposal of assets (524) (984) (524) (984)

Cash from operations before working capital changes 725,606 628,903 727,334 631,620

Movement in working capital 362,732 325,745 356,940 315,428

- Inventory movement (522) 4,303 (522) 4,303

- Accounts receivable movement 4,995 8,543 (5,161) 11,311

- Accounts payable movement 358,259 312,899 362,623 299,814

1,088,338 954,648 1,084,274 947,048

22. Taxation Paid Taxation owing at beginning of year 30,942 14,948 30,558 14,919

Taxation charge for the year (77,066) (66,536) (76,316) (63,631)

Taxation receivable at end of the year (30,540) (30,942) (28,999) (30,558)

Taxation paid (76,664) (82,530) (74,757) (79,270)

23. Retirement Benefits

Post-retirement Benefits

The Group contributes to the Evergreen Pension Fund, which is governed by the Pension Funds Act (Act No. 24 of 1956). The fund covers the majority

of its employees and is a defined contribution scheme. Contributions paid by Group companies are charged against income as incurred.

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Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

24. Operating Lease Commitments

Commitments for year one

Aircraft 188,567 169,759 188,567 169,759

188,567 169,759 188,567 169,759

Commitments for year two to five

Aircraft 555,464 540,914 555,464 540,914

555,464 540,914 555,464 540,914

Commitments after year five

Aircraft 116,847 174,472 116,847 174,472

116,847 174,472 116,847 174,472

Total operating lease commitments 860,878 885,145 860,878 885,145

Leasing Arrangements – Aircraft

Generally medium-term (five-year) leasing agreements on aircraft.

Currently the Group has two aircraft on South African Rand payment terms, which are repayable at R850,000 each per month, and one aircraft at

R1 million, all of which have been straight lined. The Group has entered into a further two aircraft leases on South African Rand payment terms of

R610,500 per month. There are two aircraft leases at market-related US Dollar amounts which have no escalation clauses in the agreements and which

are repayable at US$135,000 each per month. There are a further three aircraft lease agreements at market-related US Dollar amounts which have no

escalation clauses in the agreement which are repayable at US$160,000 each per month. Comair has entered into two aircraft lease agreements at rates

of US$210,000 each per month, which have no escalation clauses in them. Further leases have been entered into at rates of US$228,000 per month,

US$220,000 per month and US$255,000 per month. These leases are included in the operating lease commitments outlined above.

25. Borrowing powers

There are no restrictions on the Group’s borrowing powers.

26. Share Incentive Trust

Staff Share Incentive Scheme (Excluding BEE Equity-settled, Share-based Payment)

In terms of the Staff Share Incentive Scheme, shares are offered on an option or outright sale basis. Options vest over a period of one to five years.

All options must be taken up by way of purchase by no later than ten years after the date of grant. The exercise price of the option is not less than the

market value of the ordinary shares on the date preceding the day of grant and the option is exercisable provided the participant has remained in the

Group’s employ until the option vests. In the case of retirement/death/retrenchment, all options immediately vest. Options must be converted into shares.

In the event of retirement/death/retrenchment of a participant, options may be taken up and converted into cash within 12 months of such an event.

The Directors of the Group have the discretion to extend this by a further 12 months. In the case of the resignation of a participant, options which have

vested may be exercised within 30 days after date of resignation. Options which have not vested will be forfeited.


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The Staff Share Incentive Scheme is allowed to hold a total of 7.5% (36.7 million shares) of issued share capital in Comair Limited. Currently the scheme

holds 1.1% (prior year: 1.1%) of issued share capital. The maximum number of options to be held by any participant in the scheme shall not exceed

1% (4.2 million shares) of the ordinary shares then in issue. The share option liability as per IFRS 2 at year end was Rnil (prior year: Rnil) based on the

closing share price of R4.48 (prior year: R2.65).

The following table illustrates the number and weighted average exercise prices of share options held by eligible participants, including Directors:

2014 2014 2013 2013

Number of share options

Weighted average

exercise price

R Number of

share options

Weighted average

exercise price

R

Balance at beginning of period 1,274,667 1.55 1,274,667 1.55

Options exercised (533,333) 1.65 - -

Balance at end of period 741,334 1.55 1,274,667 1.55

Share options extended and accepted during the year were done at the ruling market price on the date preceding the extension date.

The options outstanding at 30 June 2014 become unconditional between the following dates:

Subscription price

R

2014 2013



1 September 2004 and 1 September 2007 0.80 33,334 66,667

5 December 2005 and 5 December 2010 1.70 133,000 233,000

5 June 2006 and 5 June 2011 1.57 575,000 975,000

Total 741,334 1,274,667

Should the participant resign from the Group before options fully vest, the unvested portion will be forfeited.

27. Group and Company Capital Commitments and Contingencies

Comair has made pre-delivery payments of R152 million prior to year end towards the delivery of four Boeing 737-800 aircraft in late 2015 and early

2016. The Group has a remaining commitment to Boeing for R1.5 billion at year end (prior year: R1.7 billion), the funding of which will be finalised closer

to the time of delivery. Pre-delivery payment finance has been arranged through Investec Bank.

Comair has also made deposits of R102 million towards the purchase of eight Boeing 737-8 MAX aircraft for delivery from 2019 to 2021. Pre-delivery

payments on these aircraft will commence in 2017. At year end the Group has a remaining commitment to Boeing for R4.6 billion (prior year: Nil), payable

from 2017 to 2021, the funding of which will be finalised closer to the time of delivery.

Comair has entered into two sales agreements with Qantas to purchase two Boeing 737-400 aircraft which will be delivered during the 2015 financial

year. The total purchase price for the two aircraft, payment for which will be made in cash, is R44 million.

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Group

2014 2013

R’000 R’000

Financial year 2014 - 197,413

Financial year 2015 315,652 261,756

Financial year 2016 982,063 945,579

Financial year 2017 336,797 324,285

1,634,512 1,729,033

The Group has signed a subordination agreement with Imperial Air Cargo (Pty) Ltd (per Note 5), which would represent a contingent liability in the

amount of R13 million. (2013: R10.7 million)

28. New Accounting Pronouncements

Standards in issue at the date of authorisation of the financial statements that have not been early adopted.

Standard Details of amendmentAnnual periods beginning on or after

IFRS 2: Share-based Payments Annual Improvements 2010–2012 Cycle: amendments added the definitions of performance conditions and service conditions and amended the definitions of vesting conditions and market conditions.

1 July 2014

IFRS 3: Business Combinations

Annual Improvements 2010–2012 Cycle: amendments to the measurement requirements for all contingent consideration assets and liabilities including those accounted for under IFRS 9.

1 July 2014

Annual Improvements 2011–2013 Cycle: amendments to the scope paragraph for the formation of a joint arrangement.

1 July 2014

IFRS 8: Operating Segments Annual Improvements 2010–2012 Cycle: amendments to some disclosure requirements regarding the judgements made by management in applying the aggregation criteria, as well as those to certain reconciliations.

1 July 2014

IFRS 9: Financial Instruments New standard that forms the first part of a three part project to replace IAS 39 Financial Instruments: Recognition and Measurement.

1 January 2015

The IASB aims to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ (IAS 39) in its entirety with IFRS 9. To date, the chapters dealing with recognition, classification, measurement, de-recognition of financial assets and liabilities and hedge accounting have been issued. Chapters dealing with impairment methodology are still being developed. Further, in November 2011, the IASB tentatively decided to consider making limited modifications to IFRS 9's financial asset classification model to address application issues.

1 January 2018

IFRS 10 Consolidated Financial Statements

IFRS 10 exception to the principle that all subsidiaries must be consolidated. Entities meeting the definition of ‘Investment Entities’ must be accounted for at fair value under IFRS 9, Financial Instruments, or IAS 39, Financial Instruments: Recognition and Measurement.

1 January 2014

IFRS 11: Joint Arrangements Amendments to provide guidance on the accounting for the acquisition of an interest in a joint operation in which the activity of the joint operation constitutes a business.

1 January 2016

IFRS 12: Disclosure of Interests in Other Entities

New disclosures required for Investment Entities (as defined in IFRS 10). 1 January 2014

27. Group and Company Capital Commitments and Contingencies (continued)


107

Standard Details of amendmentAnnual periods beginning on or after

IFRS 13: Fair Value Measurement

Annual Improvements 2010–2012 Cycle: amendments to clarify the measurement requirements for those short-term receivables and payables.

1 January 2013

Annual Improvements 2011–2013 Cycle: amendments to clarify that the portfolio exception applies to all contracts within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9.

1 July 2014

IFRS 15: Revenue from Contracts with Customers

New guidance on recognition of revenue that requires recognition of revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.

1 January 2017

IAS 16: Property, Plant and Equipment

Annual Improvements 2010–2012 Cycle: amendments to the revaluation method – proportionate restatement of accumulated depreciation.

1 July 2014

Amendments to prohibit the use of a revenue-based depreciation method for property, plant and equipment, as well as guidance in the application of the diminishing balance method for property, plant and equipment.

1 January 2016

IAS 24: Related Party Disclosures

Clarification of the definition of a related party. 1 July 2014

IAS 27: Consolidated and separate financial statements

Requirement to account for interests in Investment Entities' at fair value under IFRS 9, Financial Instruments, or IAS 39, Financial Instruments: Recognition and Measurement, in the separate financial statements of a parent.

1 January 2014

IAS 36: Impairment of Assets The amendment of IAS 36 clarifies the required disclosures of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

1 January 2014

IAS 38: Intangible Assets Annual Improvements 2010–2012 Cycle: Amendments to the revaluation method - proportionate restatement of accumulated depreciation.

1 July 2014

Amendments present a rebuttable presumption that a revenue-based amortisation method for intangible assets is inappropriate except in two limited circumstances, as well as provide guidance in the application of the diminishing balance method for intangible assets.

1 January 2016

IAS 40: Investment Properties Annual Improvements 2011–2013 Cycle: amendments to clarify the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.

1 July 2014

InterpretationsAnnual periods beginning on or after

IFRIC Interpretation 21: Levies 1 January 2014

Management anticipates that all of the above standards and interpretations will be adopted in the Group’s financial statements in the effective period

and that the adoption of these standards and interpretations will have no material impact on the financial statements of the Group in the period of initial

application.

108


29. Related Parties

Subsidiaries View Note 4 for investments in subsidiaries.

Associates View Note 5 for investments in associates.

Share Incentive Trust Inspect Note 3 for the details.

Directors Inspect Directors’ emoluments on pages 63 and 64 and in Note 16.

Group Company

2014 2013 2014 2013

R’000 R’000 R’000 R’000

Related Party Balances

Loan accounts – owing (to) by related parties

Alooca Technologies (Proprietary) Limited - - 27,517 28,212

Aconcagua 32 Investments (Proprietary) Limited - - 2,527 5,866

Kulula Air (Proprietary) Limited - - 3,823 3,290

Commuter Handling Services (Proprietary) Limited 7,852 7,852 7,852 7,852

Imperial Air Cargo (Proprietary) Limited 15,559 15,559 15,559 15,559

Comair Share Incentive Trust - - 3,814 5,337

Amounts included in trade receivables (trade payables) regarding related parties

Imperial Air Cargo (Proprietary) Limited - 71 - 71

Kulula Air (Proprietary) Limited 3,802 1,769 3,802 1,769

Related Party Transactions

Rent paid to related parties

Aconcagua 32 Investments (Proprietary) Limited - - 1,510 1,374

Alooca (Proprietary) Limited - - 966 878

Service recovery

Kulula Air (Proprietary) Limited - - 2,400 2,400

30. Subsequent Events

The Directors are not aware of any matter or circumstances arising since the end of the period under review that would significantly affect or have a

material impact on the financial position of the Group or Company.


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A member of the Company entitled to attend and vote at the below-mentioned Annual General Meeting (AGM) is entitled to appoint a proxy or proxies

to attend, speak and vote in his/her stead. A proxy need not be a member of the Company. Meeting attendees will be required to provide reasonably

satisfactory identification before being allowed to participate in or vote at the AGM. Forms of identification that will be accepted include original and valid

South African identity documents, driver’s licences and passports.

This document is important and requires your immediate attention.

Comair Limited

Registration number 1967/006783/06

Incorporated in the Republic of South Africa

ISIN Code: ZAE000029823 Share Code: COM

(“Comair” or “the Company” or “the Group”)

Notice is hereby given in terms of section 62(1) of the Companies Act (Act No. 71 of 2008), as amended (the Companies Act) that the AGM of shareholders

of the Company will be held at the Comair Operation Building, corner Whirlwind and Fortress streets, Rhodesfield, 1619, on 5 November 2014 at 13h00

to consider, and if deemed fit, to pass the ordinary and special resolutions set out below.

This Notice has been sent to shareholders of the Company who were recorded as such in the Company’s security register on 19 September 2014,

being the notice record date set by the Board of the Company in terms of the Companies Act, determining which shareholders are entitled to receive

Notice of the Annual General Meeting.

Electronic Participation

Shareholders or their proxies are able to attend, but not participate and vote at the Annual General Meeting by way of a teleconference call. Should you

wish to make use of this facility, please contact Derek Borer at e-mail: [email protected], by no later than 12h00 on Monday, 3 November 2014.

Shareholders will:

• Be required to provide reasonably satisfactory identification; and

• Be billed separately by their own telephone service providers for their telephone call to participate in the meeting.

The Notice of meeting includes the attached Proxy Form.

Ordinary Resolutions

1. Consideration of Annual Financial Statements

Ordinary Resolution Number 1

RESOLVED THAT the Audited Annual Financial Statements, together with the report of the Board of Directors of the Company (Board), the Auditors’

Report and the Report by the Audit Committee of the Company and the Group for the year ended 30 June 2014, be and are hereby received and adopted.

Reason and effect of Ordinary Resolution Number 1The reason for and the effect of Ordinary Resolution Number 1 is to adopt the complete audited Annual Financial Statements of the Company and

Group, including the Report of the Directors, the Auditors’ Report and the Report by the Audit Committee of the Company and the Group for the year

ended 30 June 2014.

Notice of Annual General Meeting

110

Notice of Annual General Meeting (continued)

2. Re-appointment of External Auditors


RESOLVED THAT the re-appointment of Grant Thornton (Jhb) Inc. (Grant Thornton), as nominated by the Company’s Audit Committee as independent

external auditors of the Company, be and is hereby approved until the conclusion of the next AGM.

Reason and effect of Ordinary Resolution Number 2The reason for and the effect of Ordinary Resolution Number 2 is to re-appoint Grant Thornton as the auditors of the Company to hold office until the

conclusion of the next AGM. The Company’s Audit Committee has recommended, and the Board has endorsed, the above re-appointment.

3. Re-election of Directors

Directors Retiring by Rotation

Ordinary Resolution Number 3.1

RESOLVED THAT Mr Rodney Cyril Sacks, who retires in terms of the Company’s Memorandum of Incorporation (MOI) and who, being eligible, offers

himself for re-election, be hereby re-elected as a Director of the Company.


RESOLVED THAT Mr Gavin James Halliday, who retires in terms of the Company’s MOI and who, being eligible, offers himself for re-election, be hereby

re-elected as a Director of the Company.

Ordinary Resolutions Number 3.3

RESOLVED THAT Ms Wrenelle Doreen Stander, who retires in terms of the Company’s MOI and who, being eligible, offers herself for re-election, be

hereby re-elected as a Director of the Company.

Directors Appointed During the Year

Ordinary Resolutions Number 3.4

RESOLVED THAT Mr Hubert Rene Brody, who was appointed by the Board as an independent Non-executive Director with effect from 1 January 2014,

and who retires in terms of the Company’s MOI and who, being eligible, offers himself for re-election, be hereby re-elected as a Director of the Company.


RESOLVED THAT Ms Kirsten Emily King, who was appointed by the Board as the Financial Director with effect from 9 June 2014, and who retires in

terms of the Company’s MOI and who, being eligible, offers herself for re-election, be hereby re-elected as a Director of the Company.

Reasons and effect of Ordinary Resolutions Numbers 3.1 to 3.5The reason for and the effect of Ordinary Resolutions Number 3.1 to 3.5 is to re-elect, by way of separate resolutions, Mr Rodney Cyril Sacks, Mr Gavin

James Halliday, Ms Wrenelle Doreen Stander, Mr Hubert Rene Brody and Ms Kirsten Emily King as Directors of the Company.

In terms of Article 41 of the Company’s MOI, one third of the Company’s Directors are required to retire at every AGM. These Directors may offer

themselves for re-election. In terms of Article 40 of the Company’s MOI, a person appointed to fill a vacancy or appointed as an additional Director shall

retire at the AGM but may offer himself/herself for re-election. The Board recommends to the shareholders the re-election of the Directors mentioned

above. A brief CV of each of these Directors appears on pages 117 and 118 of the Integrated Annual Report of which this Notice forms part.


111

4. Election of Members of Audit Committee


RESOLVED THAT Dr Peter Johannes Welgemoed, who is an independent Non-executive Director of the Company, be hereby elected as a member

of the Company’s Audit Committee for the financial year ending 30 June 2015.


RESOLVED THAT Mr Khutso Ignatius Mampeule, who is an independent Non-executive Director of the Company, be hereby elected as a member of

the Company’s Audit Committee for the financial year ending 30 June 2015.


RESOLVED THAT, subject to the re-election of Ms Wrenelle Doreen Stander as a Director of the Company pursuant to ordinary resolution number 3.3,

Ms Wrenelle Doreen Stander, who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s Audit

Committee for the financial year ending 30 June 2015.


RESOLVED THAT, subject to the re-election of Mr Gavin James Halliday as a Director of the Company pursuant to ordinary resolution number 3.2,

Mr Gavin James Halliday, who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s Audit


Ordinary Resolution No. 4.5

RESOLVED THAT, subject to the re-election of Mr Hubert Rene Brody as a Director of the Company pursuant to Ordinary Resolution Number 3.4,

Mr Hubert Rene Brody, who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s Audit


Reason and effect of Ordinary Resolutions Numbers 4.1 to 4.5The reason for and the effect of Ordinary Resolutions Number 4.1 to 4.5 is to elect, by way of separate resolutions, Dr Peter Johannes Welgemoed,

Mr Khutso Ignatius Mampeule, Ms Wrenelle Doreen Stander, Mr Gavin James Halliday and Mr Hubert Rene Brody as members of the Audit Committee

of the Company.

A brief CV of each of the Directors mentioned above is included on pages 117 to 119 of the Integrated Annual Report of which this Notice forms part. As

is evident from these CVs, each of the proposed members of the Audit Committee has the required qualifications and/or experience to fulfil his/her duties.

5. Non-binding Endorsement of Company Remuneration Policy

The Company’s Remuneration Policy, as described in the Remuneration Report on pages 55 to 57 of the Integrated Annual Report, of which this Notice

forms part, is hereby endorsed by way of a non-binding advisory vote, as recommended in the King Code of Governance Principles and King Report

on Governance, commonly referred to as King III.

Reason and effect of non-binding endorsement The reason for and the effect of the above non-binding endorsement is to endorse the Company’s Remuneration Policy on the basis of a non-binding

advisory vote.

112


Special Resolutions

6. Approval of Non-executive Directors Remuneration – 2013/14

Special Resolution Number 1

RESOLVED THAT the joint remuneration of the Non-executive Directors for their services as Directors of the Company in the amount of R2,680,000

(two million, six hundred and eighty thousand Rand) for the financial year ended 30 June 2014 be and is hereby approved.

Reason and effect of Special Resolution Number 1The reason for and the effect of Special Resolution Number 1 is to approve the remuneration payable by the Company to its Non-executive Directors

for their services as Directors of the Company for the period ended 30 June 2014. The fees payable to Non-executive Directors are based on a fixed

annual retainer. The Chairperson and members of every Sub-committee, however, are paid an additional fee for each Sub-committee meeting chaired

and/or attended up until the end of the 2014 financial year. No fees are payable to Mr Sacks, Mr Halliday and Ms Stander. Mr van Hoven, in addition

to being the Chairperson of the Board and Nominations Sub-committee, is also Chairman of the Comair Pension Fund and as such gets paid a fee for

each Pension Fund Trustee meeting attended, which fees were approved by the Company’s shareholders at the Annual General Meeting of 30 October

2013. The fees payable to each Director and further details on the basis of calculation of the remuneration are respectively included in the Annual Financial

Statements on pages 68 to 108, and in the Remunerations Report on pages 55 to 57 of the Integrated Annual Report of which this Notice forms part.

7. Approval of Non-executive Directors Remuneration – 2014/15


RESOLVED THAT the following fees be approved as the basis for calculating the remuneration of the Non-executive Directors for their services as

Directors of the Company for the financial year ending 30 June 2015:

30 June 2014 30 June 2015

Chairman of the Board R1,200,000 R1,284,000

Vice-chairman (2) R350,000 R374,500

Non-executive Directors (5) R150,000 R160,500

Chairperson of each Sub-committee per Sub-committee meeting held R13,000 R13,910

Members of each Sub-committee, per Sub-committee meeting held R6,500 R6,955

Chairperson of Pension Fund Board R13,000 R13,910

Reason and effect of Special Resolution Number 2 The reason for and the effect of Special Resolution Number 2 is to approve the basis for calculating the remuneration payable by the Company to

its Non-executive Directors for their services as Directors of the Company for the period ending 30 June 2015. The fees payable to Non-executive

Directors are based on a fixed annual retainer. The Chairperson and members of each Sub-committee, however, will be paid an additional fee for each

Sub-committee meeting held, subject to attendance at the Sub-committee meeting. No fees are payable to Mr Sacks, Mr Halliday and Ms Stander.

Mr van Hoven, in addition to being Chairperson of the Board and the Nominations Sub-committee, is also Chairman of the Comair Pension Fund and

as such gets paid a fee for each Pension Fund Trustee meeting held. Further details on the basis of calculation of the remuneration are included in the

Remuneration Report on pages 55 to 57 of the Integrated Annual Report of which this Notice forms part.

8. General Authority to Repurchase Shares


RESOLVED THAT the Board of Directors of the Company is hereby authorised, by way of a renewable general authority, to approve the purchase of its

own ordinary shares by the Company, or to approve the purchase of ordinary shares in the Company by any subsidiary of the Company, provided that:


113

8.1.1 the Company or the relevant subsidiary is authorised thereto by its MOI;

8.1.2 the general repurchase by the Company and/or any subsidiary of the Company of ordinary shares in the aggregate in any one financial

year shall not exceed 10% (ten percent) of the Company issued ordinary share capital as at the beginning of the financial year, provided

that the acquisition of shares as treasury shares by a subsidiary of the Company shall not be effected to the extent that in aggregate more

than 10% (ten percent) of the number of issued shares in the Company are held by or for the benefit of all the subsidiaries of the Company

taken together;

8.1.3 at any point in time, the Company may only appoint one agent to effect any repurchases on the Company’s behalf;

8.1.4 the repurchase of securities being effected through the order book operated by the JSE trading system and done without any prior

understanding or arrangement between the Company and the counter party (reported trades are prohibited);

8.1.5 this general authority shall only be valid until the date of the next AGM or for fifteen (15) months from the date of passing of this Special

Resolution Number 3, whichever is the shorter;

8.1.6 in determining the price at which the Company’s ordinary shares are acquired by the Company or any subsidiary in terms of this general

authority, the maximum premium at which such ordinary shares may be acquired will be 10% (ten percent) of the weighted average of

the market price at which such ordinary shares are traded on the JSE, as determined over the five (5) trading days immediately preceding

the date of the repurchase of such ordinary shares by the Company. The JSE should be consulted for a ruling if the Company’s securities

have not traded in such five (5) business day period;

8.1.7 the Company or its subsidiary may not repurchase securities during a prohibited period as defined in the JSE Listings Requirements

unless they have in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period

are fixed (not subject to any variation) and full details of the programme have been disclosed in an announcement over SENS prior to the

commencement of the prohibited period; and

8.1.8 when the Company or any subsidiary has cumulatively repurchased 3% (three percent) of the initial number of the relevant class of securities,

and for each 3% (three percent) in aggregate of the initial number of that class acquired thereafter, an announcement will be made.

8.2 In terms of the general authority given under this special resolution, any repurchase of ordinary shares shall be subject to:

8.2.1 any applicable exchange control regulations and approval at that point in time;

8.2.2 the Companies Act;

8.2.3 the JSE Listings Requirements and any other applicable stock exchange rules, as may be amended from time to time;

8.2.4 the sanction of any other relevant authority whose approval is required in law; and

8.2.5 a resolution by the Board and/or the relevant subsidiary of the Company confirming that the Board of the Company and/or of such relevant

subsidiary has authorised the repurchase, that the Company and/or the relevant subsidiary has satisfied the solvency and liquidity tests

contemplated in the Companies Act, and that since the test was done there have been no material changes to the financial position of

the Group.

The Board is of the opinion that this authority should be in place should it become appropriate to undertake a share repurchase in the future. After having

considered the effect of any repurchases of ordinary shares pursuant to this general authority, the Board, in terms of the Companies Act and the JSE

Listings Requirements, confirms and undertakes that it will not implement the proposed authority to repurchase the shares unless it is of the opinion that:

• the Company and the Group will be in a position to repay its debt in the ordinary course of business for the next twelve (12) months after the date

of the general repurchase;

• the assets of the Company and the Group, fairly valued in accordance with International Financial Reporting Standards, will be in excess of the

liabilities of the Company and the Group for the next twelve (12) months after the date of the general repurchase;

• the share capital and reserves of the Company and the Group will be adequate for the next twelve (12) months after the date of the general

repurchase;

• available working capital will be adequate to continue the operations of the Company and the Group for the next twelve (12) months after the date

of the general repurchase; and

• the Company may not enter the market to proceed with the repurchase until the Company’s sponsor, Rand Merchant Bank (A division of FirstRand

Bank Limited), has confirmed the adequacy of the Company and the Group’s working capital in writing to the JSE.

114


Reason and effect of Special Resolution Number 3The reason for and the effect of Special Resolution Number 3 is to authorise the Company or any of its subsidiaries, by way of a general authority, to

repurchase its issued shares on such terms, conditions and such amounts determined from time to time by the Board subject to the limitations set

out above. Please refer to the additional disclosure of information contained in this Notice, which disclosure is required in terms of the JSE Listings

Requirements.

Other disclosure in terms of the JSE Listings Requirements Section 11.26Further to Special Resolution Number 3, the JSE Listings Requirements require the following disclosure, some of which is elsewhere in the Integrated

Annual Report of which this Notice forms part:

Directors and management – pages 61 and 62;

Major shareholders of the Company – page 122;

Directors’ interests in securities – page 60; and

Share capital of the Company – note 10 on page 91.

Litigation statement In terms of section 11.26 of the JSE Listings Requirements, the Directors, whose names appear on pages 61 and 62 of the Integrated Annual Report

of which this Notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may

have or have had in the recent past, being at least the previous twelve (12) months, a material effect on the Group’s financial position.

Directors’ responsibility statement The Directors, whose names appear on pages 61 and 62 of the Integrated Annual Report, collectively and individually accept full responsibility for the

accuracy of the information pertaining to this resolution and certify that to the best of their knowledge and belief there are no facts that have been omitted

which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this resolution

contains all information required by law and the JSE Listings Requirements.

No material change Other than the facts and developments reported on in the Integrated Annual Report, there have been no material changes in the financial or trading

position of the Company and its subsidiaries since the date of signature of the Audit Report and the date of this Notice.

Statement of Board’s intention The Board has no specific intention to effect the provisions of Special Resolution Number 3 but will, however, continually review this position having

regard to prevailing circumstances and market conditions, in considering whether to effect the provisions of Special Resolution Number 3.

9. General Authority to Provide Financial Assistance to Related and Inter-related Companies or Corporations


RESOLVED THAT the Board is hereby authorised in terms of section 45(3)(a)(ii) of the Companies Act, as a general approval (which approval will be

in place for a period of two (2) years from the date of adoption of this Special Resolution Number 4), to authorise the Company to provide any direct

or indirect financial assistance (‘financial assistance’ will herein have the meaning attributed to such term in section 45(1) of the Companies Act), that

the Board may deem fit to any related or inter-related company or corporation of the Company (‘related and inter-related’ will herein have the meaning

attributed to these terms in section 2 of the Companies Act), on the terms and conditions and for the amounts that the Board may determine.

The main purpose for this authority is to grant the Board the authority to provide inter-group loans and other financial assistance for the purpose of

funding the activities of the Group. The Board undertakes that:


115

9.1 it will not adopt a resolution to authorise such financial assistance unless the Directors are satisfied that:

9.1.1 immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test as contemplated in the

Companies Act; and

9.1.2 the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company; and

9.2 written notice of such resolution by the Board shall be given to all shareholders of the Company and any trade union representing the employees:

9.2.1 within ten (10) days after the Board has adopted the resolution, if the total financial assistance contemplated in that resolution, together

with any previous such resolutions during the financial year, exceeds zero comma one percent (0.1%) of the Company’s net worth at the

time of the resolution; and

9.2.2 within thirty (30) days of the end of the financial year, in any other case.

Reason and effect of Special Resolution Number 4The reason for and the effect of Special Resolution Number 4 is to provide a general authority to the Board to grant direct or indirect financial assistance

to any company or corporation forming part of the Company’s Group of Companies, including in the form of loans or the guaranteeing of their debts.

The Board provided such inter-group financial assistance to subsidiaries as disclosed in the Annual Financial Statements in note 4 on pages 84 to 86

of the Integrated Annual Report of which this Notice forms part.

Ordinary Resolution

10. Authorisation for Company Secretary or any Director to Sign Necessary Documents to Give Effect to Resolutions


RESOLVED THAT the Company Secretary or any Director be and is hereby authorised on behalf of the Company to sign all documents as may be

necessary in order to give effect to the Special and Ordinary Resolutions set out above.

Other Business

11. To Transact any Other Business that may be Transacted at Annual General Meetings

Approvals Required for Resolutions

Ordinary Resolutions Numbers 1 to 5 contained in this Notice of AGM require the approval by more than fifty percent (50%) of the votes exercised on

the resolutions by shareholders present or represented by proxy at the AGM, and further subject to the provisions of the Companies Act, the MOI of

the Company and the JSE Listings Requirements.

Special Resolutions Numbers 1 to 4 contained in this Notice of AGM require approval by at least seventy five percent (75%) of the votes exercised on

the resolutions by shareholders present or represented by proxy at the AGM and further subject to the provisions of the Companies Act, the MOI of the

Company and the JSE Listings Requirements.

Record Date

The record date on which shareholders of the Company must be registered as such in the Company’s Securities Register, which date was set by the

Board of the Company in determining which shareholders are entitled to attend and vote at the AGM, is Friday, 31 October 2014. Accordingly the last

day to trade in order to be eligible to attend and vote at the meeting is Friday, 24 October 2014.

116


Proxy and Voting Procedures

A shareholder entitled to attend and vote at the AGM is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy need

not be a shareholder of the Company. For the convenience of registered shareholders of the Company, a Form of Proxy is enclosed herewith.

Shareholders are requested to lodge their Forms of Proxy with, or to post same to the Company’s Transfer Secretaries, Computershare Investor Services

(Pty) Limited, PO Box 61051, Marshalltown, 2107, to be received not later than 48 hours (excluding Saturdays, Sundays and public holidays) before the

time appointed for the holding of the AGM, being Wednesday, 5 November 2014. Nevertheless, Forms of Proxy may be lodged at any time prior to the

commencement of voting on the resolutions at the AGM.

Any shareholder who completes and lodges a Form of Proxy will nevertheless be entitled to attend and vote in person at the AGM. Any Form of Proxy

not received by this time must be handed to the chairperson of the meeting immediately prior to the meeting.

On a show of hands, every shareholder of the Company present in person or represented by proxy shall have one vote only. On a poll, every shareholder

of the Company shall have one vote for every share held in the Company by such shareholder.

The attached Form of Proxy is only to be completed by those shareholders who are:

• Holding ordinary shares of the Company in certificated form; or

• Recorded on the electronic sub-register in ‘own name’ dematerialised form.

Shareholders who have dematerialised their shares through a Central Securities Depository Participant (CSDP) or broker, and wish to attend the AGM,

must instruct their CSDP or broker to provide them with a Letter of Representation, or they must provide the CSDP or broker with their voting instructions

in terms of the relevant custody agreement/mandate entered into between them and the CSDP or broker.

Equity securities held by a Share Trust or Scheme will not have their votes at the AGM taken into account for the purposes resolutions proposed in

terms of the JSE Listings Requirements.

Note that holders of unlisted securities and treasury shares are not entitled to vote at the AGM.

Proof of Identification Required

The Companies Act requires that any person who wishes to attend or participate in a shareholders meeting, must present reasonably satisfactory

identification at the meeting. Any shareholder or proxy who intends to attend or participate at the Annual General Meeting must be able to present

reasonably satisfactory identification at the meeting for such shareholder or proxy to attend and participate at the meeting. A green bar-coded identification

document issued by the South African Department of Home Affairs, a driver’s licence or a valid passport will be accepted as sufficient identification.

By order of the Board

Mr Derek H Borer

Company Secretary

8 September 2014

Bonaero Park


117

Directors Standing for Election or Re-election

1. RC Sacks (Board)

(Age: 64)

HDip Law, HDip Tax

Rodney was born and grew up in South Africa. He graduated from the University of the Witwatersrand in Johannesburg with post-graduate higher

diplomas in law and tax law. Rodney was one of the youngest attorneys to be made a partner at Werksmans, one of the largest corporate law firm in

South Africa. He was a senior partner when he emigrated to California with his family in August 1989 after spending nearly 20 years with Werksmans.

In 1990 a consortium headed up by Rodney and his partner, Hilton Schlosberg, acquired control of a publicly traded company which was ultimately

merged into and became known as Hansen Beverage Company. Hansen Beverage Company (now known as Monster Beverage Corporation) acquired

the Hansen’s Natural Soda and Apple Juice business in 1992 for a purchase consideration of some $14.5 million. At that time sales were $17.5 million

and the business had 12 employees.

Rodney has been Chairman and Chief Executive Officer of the company since 1990. In 2002 Hansen Beverage Company launched the well-known

Monster Energy drink line which has risen to become the best-selling energy drink in the United States and is now sold internationally in more than 114

countries. Under Rodney’s stewardship Monster Beverage Corporation’s sales have grown to in excess of $2.5 billion and the company today employs

more than 2,000 people.

2. GJ Halliday (Board and Audit Committee)

(Age: 50)

BA (Hons) Economics, Geography MBA (Lancaster University)

Gavin joined British Airways Plc (BA) in 1986, working in customer service, operational research and marketing, before joining sales as part of the

airline’s Global Sales team, where he was involved in the airline’s launch of e-ticket in 1995. He has managed sales teams in Miami; UK; Latin America;

and Asia & the Pacific region in 2006, where he was responsible for all sales activity, before joining Europe. At present he is Area General Manager for

Europe and Africa.

3. WD Stander (Board and Audit Committee)

(Age: 48)

BA (Hons) MBA

Prior to her appointment as Senior Vice President Public and Regulatory Affairs at Sasol on 1 July 2014, Wrenelle served as Managing Director of Sasol

Gas for almost four years. There she successfully managed the transition of natural gas prices to a new regulatory dispensation. This change process

spanned three years and involved 314 customers, NERSA and Sasol Gas.

Wrenelle has also served as a Director on a number of subsidiary Boards, including Sasol Gas, Sasol Synfuels International and Sasol Group Services.

She currently serves as Chairperson of the Sasol Social and Community Trust, as well as the Sasol Siyakha Trust. She also served as an Executive

Committee member of Sasol Synfuels International (SSI).

Before joining Sasol, Wrenelle held various positions within the South African civil aviation industry, including the positions of Deputy CEO of the SACAA

and Managing Director of the Air Traffic and Navigation Services Company (ATNS). At ATNS, she continued to promote the commercialisation of aviation

service provision and successfully oversaw the implementation of an African-wide air navigation communication service on a user pays basis.

In 2005, Wrenelle was elected to the Executive Committee of the Commercial Air Navigation Service Organisation (CANSO), an international body

responsible for promoting and protecting the interests of commercial air navigation service providers, where she worked on a variety of projects intended

to improve global air navigation infrastructure and customer service.

118


Wrenelle started her career in the minerals and energy NGO sector where, amongst others, she was involved in positioning the Minerals and Energy

Policy Centre (MEPC) to be less dependent on donor funding, established the Minerals and Energy Training Institute (MEETI), and was a contributor to

the Energy Policy White Paper.

Wrenelle holds a BA (Hons) degree from the University of Cape Town, as well as an MBA from Oxford Brookes University in the United Kingdom. She

has a 21-year-old daughter, Emma, who is a student at the University of Cape Town.

4. HR Brody (Board and Audit Committee)

Age: 50

CA(SA)

Hubert was, until recently, the Chief Executive of Imperial Holdings, the South Africa-based diversified mobility group with annual turnover of R100 billion

and assets of over R40 billion. At Imperial he chaired various group companies, notably the Regent Group, Imperial Bank, Imperial Logistics International

and Associated Motor Holdings.

Hubert is a Chartered Accountant. He studied at the University of Stellenbosch and qualified as a CA in 1989. He previously worked in the Property,

IT and banking industries, and before being transferred to Imperial Holdings in 2003, he was the Chief Financial Officer of Imperial Bank. At Imperial he

also held the position of Group Treasurer for a number of years. He led the Group in devising its current strategy of global expansion across the logistics

industry and supervised significant M&A activity during his tenure as CEO.

Hubert serves as Non-executive Director on the boards of Imperial Holdings, Woolworths and Mix Telematix.

5. KE King (Board)

(Age: 36)

BCom (Hons) Accounting (CTA Equivalent)

CA(SA)

After qualifying as a Chartered Accountant in 2008, Kirsten worked as an audit manager for PKF (Jhb) Inc (now Grant Thornton), before joining Comair

Limited in 2011. She was involved in the launch of the Sabre platform and implemented the Sabre Revenue Accounting system, establishing an end to

end revenue accounting function at Comair. She held the position of acting Finance Executive in 2014 and was appointed Financial Director in June 2014.

6. PJ Welgemoed (Audit Committee)

(Age: 71)

BCom (Hons), MCom, DCom

In 1971 Peter was awarded his Doctorate in Transport Economics at Rand Afrikaans University. In 1974, he was appointed Professor and Chairman

of the Department of Transportation Economics and Director of the Research Centre for Physical Distribution and Transportation Studies at Rand

Afrikaans University. Thereafter he served on various Boards of Directors of companies involved in transportation and banking. In September 1989 he

was appointed Deputy Minister of Mineral and Energy Affairs and Public Enterprises. In 1990 he served as a Member of Cabinet, with the portfolio of

Minister of Transport and in 1992 as Minister of Transport and of Post and Telecommunication. In 1998 Peter was appointed to the position of Executive

Chairman of the Board of Market Power (SA) in South America. He controlled the daily operations of the Group in Chile, Argentina and Uruguay from

the Head Office in Santiago. At present is he is involved in private business through directorships and consultancy.


119

7. KI Mampeule (Audit Committee)

(Age: 49)

(BA, MSc, MBA)

Khutso Mampeule is the Executive Chairman of Lefa Group Holdings, an investment holding and consulting company which he established in 2003. He

has overall responsibility for the development and implementation of the group’s strategy and business model. In addition, Khutso is a Director of JSE-

Listed Niveus Investments Limited (where he is Chairman of the Audit and Risk Committee), Truworths International Limited and Withmore Investments

(Pty) Ltd., an empowerment consortium he represents on the KWV Holdings Limited Board. He is also a Director of the Institute of Directors (IoD, SA)

and a number of other privately held companies. Until May 2007, Khutso was Group CEO of the South African Post Office, where he made extensive

headlines for taking firm positions against poor governance and corrupt practices at the institution. Prior to starting Lefa Group Holdings, Khutso was

CEO of Old Mutual Employee Benefits. Before that, he spent seven years in various senior executive positions at Transnet where he was responsible for

rail operations, including rail/port integration, and the turnaround of the iron-ore export business within Spoornet (OREX). His last position at Transnet

was as the CEO of its subsidiary, South African Express Airways. Khutso is a trustee of the World Wide Fund for Nature (WWF, SA), and Regional

Chairman of the Young Presidents Organisation (YPO, Africa). He holds BA, MSc and MBA degrees.

120

Share Price Performance

2014 2013

c c

Market price (cents per share)

Closing (30 June) 448 265

High 500 305

Low 250 110

Closing price/earnings ratio 7.7 5.6

Number of shares in issue

At year end (millions) 440 489

Weighted average (millions) 453 489

Volume of shares traded (millions) 116 38

Volume of shares traded to number in issue at year end 26.4% 7.80%


121

Shareholder Spread

BandsNo. of

shareholdings % No. of shares %

1–1,000 shares 1,879 59.03 572,606 0.13

1,001–10,000 shares 852 26.77 3,253,000 0.74

10,001–100,000 shares 277 8.70 9,324,765 2.12

100,001–1,000,000 shares 132 4.15 40,063,654 9.10

1,000,001 Shares and over 43 1.35 387,049,074 87.91

Total 3,183 100.00 440,263,099 100.00

Distribution of Shareholders

Type of shareholderNo. of

shareholdings % No. of shares %

Banks and brokers 13 0.41 17,204,220 3.91

Medical schemes 2 0.06 973,397 0.22

Close corporations 28 0.88 506,544 0.12

Endowment funds 11 0.35 1,753,974 0.40

Individuals 2,802 88.03 17,420,218 3.96

Insurance companies 11 0.35 1,908,221 0.43

Investment companies 8 0.25 4,056,106 0.92

Mutual funds 58 1.82 115,581,409 26.25

Nominees and trusts 99 3.11 8,996,407 2.04

Other corporations 18 0.57 162,269 0.04

Retirement funds 90 2.83 32,590,208 7.40

Private (Pty) companies 42 1.31 234,117,595 53.18

Share trust 1 0.03 4,992,531 1.13

Total 3,183 100.00 440,263,099 100.00

Shareholder Analysis

122

Shareholder Analysis (continued)

Beneficial Shareholders Holding of 3% or More

Type of shareholderNo. of shares

% shareholding

BB Investment Company (Pty) Ltd 126,320,151 28.69

Allan Gray* 64,842,669 14.73

Britair Holdings Limited 53,966,623 12.26

Innercreek Investments (Pty) Limited 50,000,000 11.35

Investment Solutions** 11,638,721 2.64

Barclays Private Bank and Trust Limited*** 9,000,000 2.04

Total 315,768,164 71.72

* Allan Gray

Allan Gray Balanced Fund 22,009,211 (5.00%)

Allan Gray Equity Fund 22,007,721 (5.00%)

Allan Gray Domestic Equity Portfolio 14,318,600 (3.25%)

Allen Gray Global Absolute Portfolio 2,722,003 (0.62%)

Allan Gray Life Hedged Domestic Equity Portfolio 2,459,462 (0.56%)

Allan Gray Domestic Absolute Portfolio 1,145,672 (0.26%)

Allan Gray Relative Domestic Equity Portfolio 180,000 (0.04%)

64,842,669 14.73%

** Investment Solutions

Investment Solutions Funds 5,548,241 (1.26%)

Investment Solutions Classic Balanced 2,766,740 (0.63%)

Investment Solutions Balanced 1,938,000 (0.44%)

Investment Solutions Incubator Pure Equity 1,032,284 (0.23%)

Investment Solutions Aggressive Value Equity 222,238 (0.05%)

Investment Solutions Preservation Provident Fund 68,400 (0.02%)

Investment Solutions Institutional Equity 62,818 (0.01%)

11,638,721 (2.64%)

*** Barclays Private Bank & Trust Limited

Barclays Private Bank and Trust Limited 9,000,000 (2.04%)

The Company concluded a Black Economic Empowerment (BEE) transaction during the 2007 financial year, pursuant to which shares equivalent to 15%

of the Company’s post transaction share capital were issued to a BEE consortium known as Thelo Aviation Consortium (Pty) Ltd, led by Thelo Aviation

Investments (Pty) Ltd. Thelo Aviation Investments (Pty) Ltd had, in addition, purchased 1.5% of the Company’s issued share capital at the time from

certain shareholders for cash which they sold in the financial year under review. Refer to the Circular to Ordinary Shareholders issued on 23 August 2006

for further information relating to the BEE transaction.

Fund Managers Holding 3% or More

The following Fund managers hold 3% or more of the issued share capital of the Company:

Type of shareholderNo. of shares

% shareholding

Allan Gray Asset Management 105,637,662 23.99

Investec Asset Management 10,106,578 2.30

Barclays Private Bank Trust Ltd 9,000,000 2.04

Centaur Asset Management 8,492,244 1.93

Total 133,236,484 30.26


123

Public/Non-public Shareholder Spread (Including Resident and Non-resident Shareholding)

Type of shareholder

Number of shareholders in South Africa

Number of shareholders other than in South Africa Total shareholders

No. of shares % No. of shares % No. of shares %

Non-public shareholders

Directors and Associates (9) 52,164,512 11.85 52,164,512 11.85

Strategic holdings (more than 10%)

BB Investment Co. (Pty) Ltd (1) 126,320,151 28.69 126,320,151 28.69

Britair Holdings Limited (1) 53,966,623 12.26 53,966,623 12.26

Share trusts

Comair Share Incentive Trust (1) 4,992,531 1.13 4,992,531 1.13

Public shareholders

Resident (3,137) 177,800,149 40.39 177,800,149 40.39

Non-resident (34) 25,019,133 5.68 25,019,133 5.68

361,277,343 82.06 78,985,756 17.94 440,263,099 100.00

124

Administration

Registered Office

1 Marignane Drive

Bonaero Park

Kempton Park

1619

Principal Place of Business

1 Marignane Drive

Bonaero Park

Kempton Park

1619

Group Company Secretary

DH Borer

1 Marignane Drive

Bonaero Park

Kempton Park

1619

E-mail: [email protected]

Transfer Secretaries

Computershare Investor Services (Proprietary) Limited

Ground floor

70 Marshall Street

Johannesburg

2001

(PO Box 61051, Marshalltown, 2107)

Form of Proxy for Annual General MeetingComair LimitedRegistration number 1967/006783/06Incorporated in the Republic of South AfricaISIN Code: ZAE000029823 Share Code: COM(Comair or the Company)

The form of proxy is only to be completed by those shareholders who are:

• holding ordinary shares of the Company in certificated form; or• recorded on the electronic sub-register in ‘own name’ dematerialised form.

Shareholders who have dematerialised their shares through a Central Securities Depository Participant (CSDP) or broker and wish to attend the Annual General Meeting, must instruct their CSDP or broker to provide them with a Letter of Representation, or they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement/mandate entered into between them and the CSDP or broker.

Shareholders are requested to lodge their Forms of Proxy or to post same to the Company’s Transfer Secretaries to be received not later than 48 hours (excluding Saturdays, Sundays and public holidays) before the time appointed for the holding of the Annual General Meeting, being Wednesday, 5 November 2014 at 13h00. Nevertheless, Forms of Proxy may be lodged at any time prior to the commencement of voting on the resolutions at the Annual General Meeting. Any shareholder who completes and lodges a Form of Proxy will nevertheless be entitled to attend and vote in person at the Annual General Meeting.

I/We (BLOCK LETTERS)

of (address)

Telephone: (Work) (area code) Telephone: (Home) (area code)

being a holder of certificated shares and ‘own-name’ dematerialised shares of the Company and entitled to votes hereby appoint (see Note 1):

(Please print)

1. or failing him/her

2. or failing him/her

3. the Chairman of the Annual General Meeting

as my/our proxy to vote for me/us at the Annual General Meeting which will be held for the purpose of considering, and, if deemed fit, passing, with or without modifications, the resolutions to be proposed thereat and at each adjournment or postponement thereof, and to vote for/or against the resolutions and/or abstain from voting in respect of the shares in the issued share capital of the Company registered in my/our name/s (see note 2) as follows:

Number of votesFor Against Abstain

Ordinary Resolutions 1 to 41 Consideration of the Annual Financial Statements2 Re-appointment of external auditors.3 To re-elect the following Directors:

Directors retiring by rotation:3.1 RC Sacks3.2 GJ Halliday 3.3 WD Stander

Directors appointed during the year3.4 HR Brody3.5 KE King4 To elect the following Directors to the Audit Committee4.1 PJ Welgemoed4.2 KI Mampeule4.3 WD Stander4.4 GJ Halliday4.5 HR Brody5. Non-binding Endorsement

Non-binding Endorsement of Company’s Remuneration PolicySpecial Resolutions 1 to 46. Approval of Non-executive Directors’ Remuneration 2013/14 7. Approval of Non-executive Directors’ Remuneration 2014/15 8 General Authority to repurchase shares9. General Authority to provide financial assistance to related and inter-related companies and corporationsOrdinary Resolution No. 510. Authorisation for Company Secretary or any other Director to sign necessary documents to give effect to

resolutions

and generally to act as my/our proxy at the said Annual General Meeting.(Please indicate with an ‘X’ whichever is applicable. If no direction is given, the proxy holder will be entitled to vote or abstain from voting as the proxy holder deems fit.)

Signed at on this day of 2014

Signature/s assisted by me (where applicable)Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder/s of the Company) to attend, speak and vote in place of that shareholder at the Annual General Meeting.

Please read the notes on the reverse side hereof

Notes to the Form of Proxy

1. A certificated shareholder or ‘own-name’ dematerialised shareholder may insert the names of two alternative proxies of the shareholder’s choice in the space provided, with or without deleting ‘the Chairman of the Annual General Meeting’. The person whose name appears first on the Form of Proxy and whose name has not been deleted will be entitled and authorised to act as proxy to the exclusion of those whose names follow.

2. A shareholder’s instructions to the proxy must be indicated by the insertion of an ‘X’ in the appropriate box provided. Failure to comply herewith will be deemed to authorise the proxy to vote or to abstain from voting at the Annual General Meeting as he/she deems fit in respect of all the shareholder’s votes exercisable thereat. Where the proxy is the Chairman, such failure shall be deemed to authorise the Chairman to vote in favour of the resolutions to be considered at the Annual General Meeting in respect of all the shareholder’s votes exercisable thereat.

3. The completion and lodging of this form will not preclude the relevant shareholders from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. Forms of proxy should be lodged with or posted to the Company’s Transfer Secretaries to be received not later than 48 hours before the Annual General Meeting, being Wednesday, 5 November 2014 at 13h00. Nevertheless, Forms of Proxy may be lodged at any time prior to the commencement of voting on the resolutions at the Annual General Meeting. Any Forms of Proxy not received by this time must be handed to the chairperson of the meeting immediately prior to the meeting.

4. The Chairman of the Annual General Meeting may accept or reject any Form of Proxy which is completed and/or received other than in accordance with these notes and instructions, provided that the Chairman is satisfied as to the manner in which the shareholder wishes to vote.

5. Documentary evidence establishing the authority of a person signing this Form of Proxy in a representative or other legal capacity such as a power of attorney or other written authority must be attached to this form unless previously recorded by the Transfer Secretaries of the Company or waived by the Chairman of the Annual General Meeting.

6. The Chairman shall be entitled to decline to accept the authority of a person signing the proxy form:

(a) under a power of attorney; and/or(b) on behalf of a Company

if that person’s power of attorney or authority is not deposited with the Transfer Secretaries of the Company as set out in Note 3 at least 48 hours before the holding of the Annual General Meeting.

7. An instrument of proxy shall be valid for any adjournment or postponement of the Annual General Meeting, unless the contrary is stated therein, but shall not be used at the resumption of an adjourned Annual General Meeting if it could not have been used at the Annual General Meeting from which it was adjourned for any reason other than that it was not lodged timeously for the meeting from which the adjournment took place.

8. A vote cast or act done in accordance with the terms of a Form of Proxy shall be deemed to be valid notwithstanding:

(a) the previous death, insanity or any other legal disability of the person appointing the proxy; or(b) the revocation of the proxy; or(c) the transfer of a share in respect of which the proxy was given,

unless notice as to any of the above-mentioned matters shall have been received by the Company care of its Transfer Secretaries as set out in Note 3 or by the Chairman of the Annual General Meeting if not held at the principal place of business of the Company, before the commencement or resumption (if adjourned) of the Annual General Meeting at which the vote was cast or the act was done or before the poll on which the vote was cast.

9. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the Company’s Transfer Secretaries.

10. Where shares are held jointly, all joint holders are required to sign the Form of Proxy.

11. Any alteration or correction made to this Form of Proxy must be initialled by the signatory/ies.


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Incorporated in the Republic of South AfricaRegistration number: 1967/006783/06.

Share code: COM. ISIN code: ZAE000029823.(“Comair” or “the Company” or “the Group”)

Integrated Annual Report - Comair - Comair Airways Limited ... · Annual Report, which covered the...

Documents

Transcript of Integrated Annual Report - Comair - Comair Airways Limited ... · Annual Report, which covered the...