The success of any venture Integrated is in the planning, Annual Report so plan it well 2012

Contents

2 Report Profile 3 Core Values 4 Group Objectives 5 Chairman and CEO’s Report 8 Corporate Governance 19 Sustainability Report 41 Group Value Added Statement 42 Statement of Responsibility by the Board of Directors 43 Statement of the Company Secretary 44 Audit Committee Report 47 Remuneration Report 50 Social and Ethics Committee Report 51 Report of the Directors 58 Independent Auditor’s Report 60 Statements of Financial Position 61 Statements of Comprehensive Income 62 Statements of Changes in Equity 63 Statements of Cash Flow 64 Segmental Report 65 Accounting Policies 74 Notes to the Annual Financial Statements 102 Notice of the Annual General Meeting 114 Share Price Performance 115 Shareholder Analysis 118 Administration 119 Form of Proxy 120 Notes to the Form of Proxy

Comair Integrated Annual Report 2012 1 Report Profile

Scope, boundary and reporting cycle Significant events during the reporting period

This Integrated Annual Report of presents the economic, No significant changes regarding the Company’s size, structure or social and environmental performance of the Company in respect of its ownership occurred during the reporting period compared to previous operations in only, as well as presenting the financial results financial years. of the Comair Group for the financial year ended 30 June 2012. The Integrated Annual Report will be sent to shareholders, who are recorded External audit and assurance as such in Comair’s Securities Register on 21 September 2012. The Company’s financial statements and the Group’s financial statements Reporting principles were audited by the Group’s independent external auditors, PKF (Jhb) Inc. (“PKF”), in accordance with International Standards of Auditing. The The contents included in the Integrated Annual Report are deemed report of the external auditors is included on pages 58 and 59. to be useful and relevant to Comair’s stakeholders. The content of the Integrated Annual Report is driven by those issues that have the greatest Independent “limited level assurance” was also obtained from PKF in potential to impact the Company’s ability to operate. We consider a broad terms of ISAE 3000 on whether the Integrated Annual Report (inclusive range of external and internal factors including the outcome of various of the supplemental GRI Content Index Table on the Company’s website), stakeholder engagement processes when deciding which issues are of meets reasonable reporting expectations, as well as to assess the degree the utmost importance to address. to which this report is consistent with the Global Reporting Initiative (GRI) G3.1 Guidelines, with the objective of establishing whether or not this The Company follows a comprehensive risk management process where report has met the C level of reporting requirements. The Assurance the identification and management of risk forms part of the Executive Statement can be obtained from the Company Secretary or be accessed Management business plan. The Board, through the Company’s Risk via the Company’s website www.comair.co.za. Management Committee, actively monitors this process. For more information on the Company’s risk management process, refer to the Governance of the business Corporate Governance Report on pages 8 to 18. Comair’s governance structures are focused on maintaining and building The information included in this report aims to provide shareholders a sustainable business and being a responsible corporate citizen. The key with a good understanding of the significant economic, social and elements of these governance structures include: environmental risks and opportunities the Company faces in the short and medium term as well as the Company’s response in order to ensure • Providing a safe, secure, reliable and quality airline service (refer to its ability to create and sustain value for its shareholders in the long term. the Sustainability Report for more information); In addition, the Company attempts to explain its efforts to reduce its • Maintaining principles of good corporate governance, integrity and impact on the environment and the societies in which it operates. ethics (see the Corporate Governance Report for more information); • Maintaining effective risk management and internal controls (see The Integrated Annual Report was prepared in accordance with the risk management section of the Corporate Governance Report International Financial Accounting 500 Standards and interpretations as for more information); issued by the Accounting Practices Board, the Listings Requirements of • Engaging with stakeholders and responding to their reasonable the JSE, as well as the Companies Act (Act No. 71 of 2008) as amended. expectations (see the Sustainability Report for more information); The Company’s reporting on sustainable development is guided by the • Managing the business in a sustainable manner (see the Sustainability Reporting Guidelines of the Global Reporting Initiative. Sustainability Report for more information); and • Offering employees competitive remuneration packages, based on The Company has applied the majority of the principles contained in the the principles of fairness and affordability (see the Sustainability King Report on Governance for South Africa 2009 (“King III”). Those Report and the Remuneration Report for more information). requirements of King III which the Company has not applied are explained, where applicable, in this Integrated Annual Report. The Company’s reporting on sustainable development was done in accordance with the Global Reporting Initiative (GRI G3.1).

2 Hopefully, we can build bridges, but we also have to draw lines. Fred Thompson Core Values

Comair Limited (“the Group”) and its employees support the following Performance driven core values: We seek to always: Our customers • Set objectives and give regular performance feedback; In our dealings with our customers, we aim to: • Ensure that each employee knows what is expected of him/her and what our standards are; • Deliver a safe and quality service; • Give recognition to those to whom it is due; • Regard everyone who is dependent on our outputs as a customer; • Continuously strive to improve our operating efficiencies; • Meet the expectations of our customers; • Eliminate activities that do not add value; and • Measure customer satisfaction levels; • Base appointments and promotions on competence and • Respect our customers’ rights to confidentiality; and performance. • Accept responsibility for customer service. Team approach Mutual trust and respect We: We aim to: • Promote positive team behaviour; • Share information to the benefit of the Group; • Ensure the participation of all role players in problem solving; • Listen with empathy; • Set common goals; and • Communicate openly and honestly; • Exhibit responsible, fair, honest and effective leadership. • 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; and • Commit to sustainable transformation addressing the inequalities of the past.

Comair Integrated Annual Report 2012 3 Group Objectives

Creating shareholder value Leading as a responsible corporate citizen

• We will continue to optimise operating efficiencies and grow the We are committed to managing our business in a sustainable way and profitability of the business. upholding high standards of ethics and corporate governance practices. • We will always look to make investments that will provide incremental growth based on sound investment principles. Provide growth and development opportunities for employees Commitment to quality • We strive to maintain a corporate culture that provides a good • We will strive to be trusted by all our stakeholders. working environment, training and skills development opportunities • We will always ensure that we provide a safe, secure and reliable that assist us to attract and retain a talented workforce. service. • We strive to be an employer of choice, recognising that market • We will always strive to improve customer satisfaction levels. competition for competent resources is increasing. • We wish to position ourselves as the airline of choice. Operating effectiveness Managing risk • We will continue to develop core competencies across our • We will continue to ensure that our risks are meticulously managed. operating environment. • We will adopt a proactive approach to ensure compliance with • We will continue to look for cost saving initiatives and look to create regulatory and legislative change. synergies over our existing and future operations.

4 Hopefully, we can build bridges, but we also have to draw lines. Fred Thompson Chairman and CEO’s Report

Strategic priorities Costs were negatively impacted by the October increase in ACSA tariffs of 70%, and by the effect on maintenance and lease costs of the 11% During the period under review, we focused on the following strategic average weakening of the Rand. Numerous individual cost saving priorities: initiatives were therefore launched during the year, the most significant being the opening of the Company’s in-house flight catering units in • Improving revenue to cover the rapidly rising fuel price and and Cape Town, and the opening of a new crew base managing costs without ever compromising on providing a safe, in Cape Town. Employment costs were kept stable by applying a salary secure and reliable airline service; and headcount freeze for the 2012 calendar year, thereby avoiding any • Attempting to constantly meet the needs of our customers; retrenchments. • Implementing a new enterprise-wide IT platform and investing in new aircraft; and By mutual agreement, the Company and terminated • Continually monitoring and responding to changes to our economic the turboprop operation joint venture launched in the previous year, and operating environment. after suffering the impact of the rampant fuel price on the Nelspruit and Maputo routes. While this resulted in undesirable termination costs, it was We are pleased to report that the Company has made good progress apparent that we would not recover the higher fuel bill any time soon over against these priorities during the period under review. the relatively small number of seats on these aircraft.

Performance against objectives Of the four Boeing 737-200s retired in December of the prior year, the Company sold three and impaired the fourth to nil value, resulting in a Financial performance capital loss of R15 million.

The past year has been the toughest financial period in the Company’s The Company’s affiliated businesses in flight training, travel distribution history, and no different from that experienced by the and airport lounges continued to perform well, in line with the previous industry. The sustained high fuel price and weak global economy created year, and made a meaningful contribution to profits. During the year, a pressure from which few airlines could escape unscathed, as evidenced fourth flight simulator, for the training of ATR turboprop pilots, was placed by the failure of such notable carriers as Malev, Spanair and Air Australia, in a leased bay in the Company’s flight training building by ATR Industries, and the filing for Chapter 11 protection by American Airlines. In the local thereby further broadening the offering of this world class facility. market we saw the closure of one airline, being the ninth private airline Customer experience to fail out of 11 that have entered the market since deregulation in 1991, and the application for business rescue by another competitor. In the Service levels, as measured by on-board and call centre surveys, midst of the abovementioned challenges, we are very proud to announce remained strong, with the new, in-house catering units raising the that the Company has retained its unbroken profit history, now of 67 passenger satisfaction index for in-flight food to a new high. On-time years, with a small but noteworthy headline profit of R18 million (prior departures achieved our 85% target on both brands, and should be year R77 million). further improved with the new fleet in the year ahead. The Company also successfully completed its bi-annual IATA Operations Safety Audit Revenue grew by 16% as a result of sustained product excellence and (“IOSA”) in February, once again highlighting its leading commitment to value proposition, and despite continued pricing competition. This year airline safety in Africa. saw the highest ever average jet fuel price, being 29% higher than the average for the prior year, and 50% higher than that of 2010. Competitor Investment response to the cost increase, and consumer acceptance of higher ticket prices, was slow in the first half, but improved towards year end. During the year we made substantial investments towards the acquisition Seat occupancy remained strong, supported by the exit of one of our of a new fleet of Boeing 737-800 aircraft and a new IT platform, totalling competitors and reduced competition on routes from Lanseria airport. R216 million. The first new Boeing arrived just after year end, in July, and a further two will be delivered in October and November 2012 to join

Comair Integrated Annual Report 2012 5 Chairman and CEOs’ Report (continued)

the five 737-800s currently on lease. Thereafter four more are on order further into Africa. Our SLOW lounge brand has built great equity amongst for delivery in 2015 and 2016. By December 2012 the entire kulula fleet business travellers. will have been upgraded to 737-800s, where the high seating capacity, lower operating cost and extended potential daily utilisation will be most Competition Tribunal claim productive. A programme is also under way to refurbish the interiors of As previously advised, the Tribunal ruled in our favour in the case against the fleet. SAA for its anti-competitive travel agent incentives and its abuse of dominance. We also won the appeal which SAA lodged, and have issued The second half of the year was dominated by the implementation of a a multi-million Rand summons against SAA for damages related to this business-wide airline enterprise system from Sabre Airline Solutions at claim. a cost of R52 million. The cut-over to the new system on 23 June went largely unnoticed by our customers, but as with any system changes of A complaint issued by Airlines alleging that the Company’s this magnitude, there is still much work to do to iron out small faults arrangements for the use of Lanseria International Airport were anti- and implement the full functionality afforded by the new platform. The competitive was withdrawn by 1time Airlines. commercial modules of the system will improve revenue through more dynamic pricing, better capacity management and improved revenue ACSA charges integrity, while the operations modules will improve communications with ACSA tariffs increased by 70% in October 2011, and now comprise as customers, manpower planning and aircraft scheduling. much as 30% of the total price on discount airline tickets. Indications are that ACSA increases will be CPI-related for at least the next two years, Market environment and much effort will be put into gaining maximum throughput from the existing ACSA infrastructure. Partnerships We still see partnerships as the cornerstone of our business, and we Affiliate businesses continue to work closely with the travel agent community in distributing Our affiliates’ businesses performed well over the period and we continued our product. Our relationship with Discovery Vitality has also grown to look for aligned business opportunities. While these businesses form strongly and now includes local, regional and international flights, holiday a small percentage of our turnover, they are making an increasing packages as well as car rental services for Vitality members. We have contribution to our profits. Our on-line travel business and flight training extended our First National Bank/Rand Merchant Bank relationship with businesses in particular, performed well during the period under review. further investment in SLOW lounges, both in the international terminal at OR Tambo and in Sandton. Europcar is one of our strongest partners, and Corporate governance together we are the largest on-line seller of car rentals in South Africa.

We aim to be a good corporate citizen and maintain the highest standards Brands of integrity and ethics in our dealings with our stakeholders. To ensure that Our brands continue to perform well in the market. Kulula.com (“kulula”) we offer the best possible airline service and are regarded as the airline of is the market leader in affordable, easily accessible air travel and choice for all travellers within our operating environment, we manage and continues to grow in the cost conscious business and leisure market. control our business by implementing governance procedures and ensure It has become one of South Africa’s iconic consumer brands and is the that we indemnify and manage our risks effectively. More information can country’s largest on-line retailer by annual sales value. be found in our Corporate Governance Report on pages 8 to 18.

Our British Airways (“BA”) brand has continued to grow in the corporate Sustainability and government sectors, as well as in the inbound tourist markets. The BA loyalty programme, Executive Club, the SLOW lounges and our We are committed to managing our business in a sustainable way. This investment in our new catering product, have all helped grow the appeal means considering not only the Group’s financial performance, but of this brand. Our relationship with British Airways PLC remains strong, also its social, environmental and economic impacts. Included in the with BA and ourselves seeing great potential to grow our partnership

6 Comair Integrated Annual Report 2012 Integrated Annual Report is our Sustainability Report in which we intend to reduce the adverse impact that aviation has on the local and global to provide our shareholders with information regarding the significant environment. Further details are set out in our Sustainability Report. social and environmental risk and opportunities that impact our ability to create long-term value for our shareholders. In addition, we explain our Looking ahead effort to reduce our impact on the environment and the societies in which we operate. The past year has been one of inward focus and addressing the fundamentals in order to ensure sustainability in an environment of higher People operating costs. During the coming year we will continue to target these issues, with the delivery of the new aircraft and ongoing implementation We continue to attract the best talent in the business and constantly of the Sabre System’s functionality and related process changes. As invest in their wellbeing and development. Due to the tough economic much as these efforts address internal efficiencies, they will also provide a circumstances this year, we decided to freeze salaries to January 2013, better customer proposition, reduced environmental impact and a strong and our staff again demonstrated their commitment by giving their platform for future growth. best under these conditions. Our team was further challenged with the development, testing of and training for the cutover to our new enterprise- We are still somewhat cautious as to the state of the global and South wide Sabre IT platform, and performed exceptionally well in delivering a African economic circumstances, and expect consumers to remain seamless system change. under pressure for the foreseeable future. While there is much talk about the growth of aviation in Africa, this is off a very small base, and we will We are also very fortunate to have an experienced and dedicated therefore continue to take a pragmatic approach to our expansion on the management team that has a wealth of experience in the industry. continent. Training Whilst Government’s ownership of three airlines is anticipated to continue, Training and skills development is a major priority to ensure that we along with the ongoing funding of these airlines, it is imperative that there are able to provide a quality service to our customers, and we spent is greater transparency in the employment of such funds to ensure that approximately 3.6% of payroll during the period under review in support they are not used contrary to current policy, which requires Government of our commitment to training and skills development. Further details are to achieve a level playing field in the domestic aviation market. This is set out in our Sustainability Report. particularly relevant in that Government is a shareholder, competitor and regulator. Society We are, however, confident that our focus on safety, customer service We are a committed corporate citizen and, together with our staff, and efficiency has built a sustainable foundation that will allow us to take endeavour to improve the lives of fellow South Africans. We try to make advantage of growth opportunities as they arise. We do anticipate that our a meaningful impact on the communities we support by attempting to financial performance in the coming year will be an improvement on the alleviate some of their socio-economic challenges, as detailed in the results of the past difficult period. Sustainability Report. We wish to thank our staff for their commitment in a very tough year, where Environment many were impacted by the extra workload as a result of the enterprise system change, while at the same time being personally impacted by the We are committed to protecting the environment, conserving natural economic pressure affecting the Company. We also appreciate the loyalty resources and utilising resources in an effective and responsible way by of the travelling public and the travel industry in their ongoing support of adopting sound environmental practices in our business and industry. We our two airline brands. are committed to improving our environmental performance in attempting

We build too many walls and not enough bridges. Isaac Newton 7 Corporate Governance

Introduction Code of ethics

Comair (“the Company”) is a South African Group operating scheduled The Company has a strong culture of entrenched values, which forms and non-scheduled airline services as its main business under both its the cornerstone of the behaviour expected of the Company towards its kulula and British Airways brands (under licence from British Airways stakeholders. These values are embodied in a written document known as Plc) in South Africa, Sub-Saharan Africa and the Indian Ocean Islands. the Company Code of Ethics. Conducting business in an honest, fair and The Company’s head office and main base of operations are in South legal manner is a fundamental principle of the Company. Ethical behaviour Africa. It also maintains ticketing offices and outstations in Harare and has always been a fundamental guiding principal and management Victoria Falls, Zimbabwe. All other outstations outside South Africa are continually focuses on establishing a culture of responsibility, fairness, manned and managed by general sales agents or passenger handling honesty, accountability and transparency. The Company, during the agents appointed by the Company in the countries concerned. A diagram current reporting period, has adopted a guide to the Company Code of reflecting where the Company currently operates its services to is set out Ethics to further explain to employees what constitutes ethical conduct on page 20 of the Sustainability Report. The Company is subject to the and to provide guidance on how to make ethically correct decisions. listings requirements of JSE Limited (“JSE”) as well as the requirements of the Companies Act, No. 71 of 2008 as amended (“Companies Act”). The Confidential lines Company supports the governance principles and guidelines contained in the King Code on Governance for South Africa 2009 and the King Report The Company recognises the need for a confidential reporting process on governance for South Africa 2009 (King III) and is comfortable that (“Whistle Blowing”) covering fraud and other risks. In line with its effective controls have been put in place and complied with. commitment to transparency and accountability, the Company takes action against persons who are guilty of fraud, corruption and other Compliance with the JSE Listings Requirements and the Companies Act misconduct. Any employee or external stakeholder is able to report is monitored by the Company Secretary and the Company’s compliance wrongdoing on a confidential and anonymous basis to an independent officer and reported to the Board. service provider. The Company’s Whistle Blowing facilities are manned by an independent service provider, which ensures that all calls are treated The Company is committed to maintaining principles of good corporate confidentially. The number of calls or e-mails received during the year governance to ensure that its business is managed in a responsible was 11. All calls and e-mails were followed up by the Company and, manner with integrity, fairness, transparency and accountability. where necessary, appropriate action was instituted.

During the period under review the Company focused on ensuring Corruption it complied with the requirements of the Companies Act such as the establishment of a Social and Ethics Committee and the replacement The Company has a no-tolerance approach with regard to unethical of its Memorandum and Articles of Association with the required conduct, in particular to fraud and corruption. Strict policies relating to Memorandum of Incorporation as required in terms of the Companies gifts and donations received from third parties are in place compelling Act, to be completed by 30 April 2013. The Company’s Memorandum of employees or management to declare same. Incorporation will be presented to shareholders at the Company’s Annual General Meeting on 1 November 2012. The Group further prohibits the making of donations to political parties unless these have been pre-approved by the Board. No donations to Statement of compliance political parties were made by the Group during the period under review.

In terms of the JSE Listings Requirements the Company is required to The Risk Management Committee considers any incidents of fraud and report in respect of King III for its financial year end 30 June 2012. corruption. Any material incidents of fraud or corruption are reported to the Risk Management Committee. There were no material incidents of The JSE Listings Requirements require all JSE listed companies to comply fraud and corruption during the reporting period. 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 Competition vast majority of King III principles are applied by the Company for the duration of the period under review, those principles that have not been The Company supports and adheres to the relevant competition laws complied with are explained in this report. A King III checklist is included applicable to it. A complaint lodged during the Company’s previous at the end of this Corporate Governance Report. financial years by one of its competitors, namely 1time Airlines, which had alleged that the Company’s arrangements for the use of Lanseria

8 Comair Integrated Annual Report 2012 International Airport were anti-competitive, was withdrawn by 1time Dealing in securities Airlines. No other legal action for anti-competitive conduct was instituted against the Group during the financial year in question. The Company has a formal policy in place to ensure that the Directors and senior management do not trade in the Company’s shares during Compliance price-sensitive or closed periods. In terms of the Company’s policy, closed periods commence from the last day of the financial year or the Compliance with all relevant laws, regulations or codes is integral to the last day of the end of the first six-month period of the financial year up Company’s risk management approach. There has been no significant to the day after the publication of the annual or interim results of the non-compliance by, nor fines, nor non-monetary sanctions or prosecutions Company. Directors are required to obtain approval from the Chairman or against the Company during the period under review. a designated Director before dealing in any securities.

Customer privacy Conflict of interest

There have been no complaints regarding breach of customer privacy or All Board members and the Company Secretary are required to disclose loss of customer data against the Company during the year. their shareholding in the Company, other directorships and potential conflicts of interest. Where potential conflicts of interest exist, Directors are Financial reporting and going concern expected to recuse themselves from related discussions and decisions.

The Directors are responsible for the preparation of the annual financial Role and function of the Board statements in a manner that fairly and accurately represents the state of affairs and results of the Company. The Directors are responsible for The Board retains full and effective control of the Company and is adopting sound accounting practices, maintaining adequate accounting accountable and responsible for the performance and affairs of the records, ensuring an effective system of internal controls and for Company. The Board is accountable to all of the Company’s stakeholders safeguarding of assets. The financial statements of the Company have for exercising leadership, integrity and judgment in pursuit of the strategic been prepared on the “going concern” basis and the Board is of the view goals and objectives of the Company. Formal requirements specifying that the Company has adequate resources to continue operating for the the responsibilities of and type of conduct expected from the Directors, foreseeable future. the Company Secretary, the Chairman and the CEO are set out in the Company’s Board Charter. The Board’s primary functions include, Board of Directors amongst others:

Composition of the Board • Determining the Company’s mission; • Determining and providing strategic direction to the Company; The Company has a unitary Board structure. The composition of the • Adopting strategic plans and ensuring that same, through Board of the Company is set out on page 53. The roles of the Chairman the Executive Directors, are communicated to the applicable and the Chief Executive Officer (“CEO”) are separate. The Non-executive management levels and further ensuring that the objectives, as set Directors, with a strong independent element, are of sufficient number out in the strategic plan, are met; to ensure that no single individual has unfettered power of decision- • Approving and evaluating the annual business plan and budget making and authority. As at 30 June 2012, the Board comprised seven compiled by management and monitoring management on the Independent Non-executive Directors, four Non-executive Directors and implementation of the approved annual budget and business plan; four Executive Directors (including the alternate Directors) as defined in • Approving the Company’s financial statements and interim reports; the Listings Requirements of the JSE. • Appointing the CEO, who reports to the Board, and ensuring that succession is planned; The Board is considered to be appropriately skilled with regard to its • Determining Director selection and evaluation; responsibilities and the activities of the Company and is involved in • Evaluating the viability of the Company on a “going concern” basis; all material business decisions, enabling Directors to contribute to the • Ensuring that the Company has appropriate risk management, strategic and general guidance of management and the business. Newly internal control and regulatory compliance procedures in place. It appointed Directors are informed of their fiduciary duties, and in this further identifies and continually reviews key risks, as well as the regard are provided with a Director’s Manual which contains guidelines mitigation thereof by management; regarding their duties and responsibilities as Directors. The skills and • Approving of major capital expenditure and significant acquisitions experience profiles of the Board members are regularly reviewed to and disposals; ensure an appropriate and relevant Board composition. • Monitoring non-financial aspects pertaining to the business of the Company;

We build too many walls and not enough bridges. Isaac Newton 9 Corporate Governance (continued)

• Monitoring compliance with laws, regulations and the Company’s Retirement and re-election of Directors Code of Ethics; • Ensuring that the remuneration of Directors and Executive Under the Company’s Memorandum of Incorporation (currently still Managers occurs in accordance with the Company’s Remuneration named the Articles of Association), a third of the Directors retire by Policy; rotation each year and are eligible for re-election by shareholders at the • Identifying and managing potential conflicts of interest; Annual General Meeting. Details of the Directors retiring by rotation are • Settling principles for recommending the use of external auditors set out in the Notice of Annual General Meeting. The appointment of for non-audit services; Directors is a function of the entire Board based on recommendations • Establishing Board Committees with clear terms of reference and made by the Nominations Committee. responsibility; • Defining levels of authority and delegating required authority to the Chairman Committees and management; • Considering and, if appropriate, declaring payment of dividends to The Company’s new Chairman, Mr Pieter van Hoven, appointed on shareholders; 13 February 2012, is an Independent Non-executive Director, having • Evaluating the effectiveness of the Board and its Committees; and replaced Mr Donald Novick, the Company’s Non-executive Chairman, • Ensuring the creation of sustainable shareholder value. who retired on 31 January 2012. In addition to playing an active role within the Company, he provides guidance to the Board as a whole and To fulfil their responsibilities adequately, Directors have unrestricted ensures that the Board is efficient, focussed and operates as a unit. He access to timely financial and other information, records and documents acts as a facilitator at Board meetings to ensure a flow of opinions, and relating to the Company and the Group, as well as free access to senior attempts to lead discussions to optimal outcomes in the interests of good management and the Company Secretary. During the reporting period governance. under review, the Board received presentations from senior executive The CEO management enabling it to explore specific issues and developments in greater depth. Mr Gidon Novick resigned as Joint CEO of the Company on 31 December Induction of new Directors and independent advice 2011, with Mr Erik Venter being appointed as the sole CEO as of that date. The CEO, who reports to the Board, is responsible for the running Newly appointed Directors are informed of their fiduciary duties by the of the day-to-day business of the Company and for the implementation Company Secretary. Newly appointed Directors receive information on of policies and strategies adopted by the Board. The Executive Directors the JSE Listings Requirements and the obligations therein imposed and Executive Managers of the Company’s various business units and upon Directors and are informed of any amendments to legislation and subsidiaries assist him in this task. The Company Executive Management regulations. Committee meets on a bimonthly basis, or more regularly if required, to consider, inter alia, investment opportunities, operational and financial Individual Directors may, after consulting with the Chairman or the CEO, matters and other aspects of strategic importance to the Group. Executive seek independent professional advice, at the expense of the Company, managers have specific roles and responsibilities with specific reference on any matter connected with the discharge of his/her responsibilities as to their authority levels. a Director. The Company Secretary Board evaluations The Company Secretary is responsible for providing the Board collectively, The Board conducts informal evaluations of its performance. During and each Director individually, with guidance on the discharge of their the evaluation process, the Board identified improved sustainability responsibilities in terms of the legislation and regulatory requirements management and governance of information technology as areas of the Republic of South Africa. The Company Secretary is assisted in requiring attention. this regard by the Company’s Compliance Officer. The Directors of the Company keep the Company Secretary advised of all their dealings in Board meetings and attendance securities. The Company Secretary monitors that the Directors receive approval from the Chairman, or a designated Director, for any dealings in The Board meets at least four (4) times a year, with the proviso that securities, and ensures adherence to closed periods for share trading. In additional meetings could be called when certain important matters arise. addition, the Company Secretary monitors adherence to the Companies Details of attendance at Board meetings are provided on pages 53 to 54 Act, JSE Listings Requirements and corporate governance. The Directors of this report. have unlimited access to the services of the Company Secretary. The name and qualifications of the Company Secretary appear on page 54 of this report.

10 Comair Integrated Annual Report 2012 Board Committees Composition of Committee and attendance Membership Attendance The Board has created an Audit Committee, Risk Management Chairman Dr PJ Welgemoed 4/4 Committee, Nominations Committee, Remuneration Committee and a Members Mr KI Mampeule 3/4 Social and Ethics Committee, as set out below, to enable the Board to properly discharge its duties and responsibilities and to effectively fulfil Ms WD Stander 3/4 its decision-making process. The Board and its Committees are supplied Mr AK Buchanan 4/4 with relevant and timely information enabling them to discharge their responsibilities. The Committee, amongst other things, identifies and evaluates the adequacy of internal controls and provides effective communication While the Board remains accountable for the performance and affairs between Directors, management and the internal and external auditors. of the Company, it does delegate certain functions to the Committees The responsibilities of the Audit Committee are contained in a formal and management to assist it in carrying out its functions, duties and mandate from the Board (Terms of Reference) which is reviewed annually responsibilities. The Chairman of each Committee reports to the Board with the main responsibilities being, amongst others, to: at each Board meeting. • Perform the statutory functions of an Audit Committee in terms of The Chairman of each Committee, other than the Social and Ethics the Companies Act and other functions delegated by the Board; Committee which has a Non-executive Director as its Chairman, is an • Review and recommend to the Board for approval the Independent Non-executive Director and is requested to attend the Company’s Integrated Annual Report, interim reports and results Company’s Annual General Meeting to answer any questions posed by announcement; shareholders. • Nominate and approve the terms of engagement and remuneration of registered auditors who, in the opinion of the Committee, are The Board Committees have specific terms of reference, appropriately independent of the Company, and ensure that their appointment skilled members, membership by Non-executive Directors who act complies with the provisions of the Companies Act, King III and independently, Executive Directors and executive management other legislation relating to their appointment; participation and access to specialist advice when considered necessary. • Review and evaluate the effectiveness and performance of the Audit Committee external auditors, as well as the scope, adequacy and costs of audits to be performed and report there-on to the Board and The role of the Audit Committee is to review the Company’s financial shareholders; position and make recommendations to the Board on all financial matters • Evaluate and approve the external auditors’ plans, findings and and internal controls. The Committee also reviews the nature and extent reports; of non-audit services provided by the external auditors to ensure that • Receive and deal appropriately with any concerns or complaints, the fees for such services do not become so significant as to call into whether received internally or externally, dealing with the question their independence. The Chairman of the Committee reports on Company’s or the Group’s accounting practices and internal audits, the Committee’s activities at each Board meeting. the Company’s financial statements, internal financial controls or related matters; The members of this Committee are Independent Non-executive Directors, • Monitor and evaluate the performance of the Financial Director; bar one member who is a Non-executive Director who acts independently • Identify and evaluate exposure to financial risks; but meets all the requirements of Section 94 of the Companies Act. All • Evaluate the effectiveness of the internal auditing function, members are financially literate and all possess substantial business and including its activities, scope and adequacy and receive and financial expertise. The Committee meets at least three (3) times per approve the internal audit plan, internal audit reports and material year. Both internal and external auditors have unrestricted access to the changes to same; Committee. • Evaluate procedures and systems, including but not limited to, internal controls, disclosure controls and the internal audit function; The Chairman of the Board, CEO, Financial Director, Internal Auditor and • Consider legal matters which could financially affect the Company; external auditors attend the Audit Committee meetings by invitation. The and Committee held four (4) meetings during the reporting period. • 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 is included in this Integrated Annual Report on pages 44 to 46.

We build too many walls and not enough bridges. Isaac Newton 11 Corporate Governance (continued)

Risk Management Committee Nominations Committee

The role of the Risk Management Committee is to review the risks facing The members of this Committee are all Non-executive Directors who act the Company’s business and to ensure compliance with all required independently. legislation, regulations and codes affecting the business. The members of this Committee, who also serve as members of the Audit Committee, This Committee, as well as the Remuneration Committee, considers the are Independent Non-executive Directors, bar one (1) member who is a issue of succession planning at Board and executive management level. Non-executive Director who acts independently. The Committee meets at The CEO, in consultation with the Board Chairperson, the Remuneration least three (3) times per year. The Chairman of the Board, CEO, Financial and the Nominations Committees, is responsible for ensuring that an Director, Internal Auditor and external auditors (where appropriate) attend adequate succession plan is in place. Risk Management Committee meetings by invitation. The Committee held three (3) meetings during the reporting period. The Committee met once during the reporting period under review. The composition of the Committee and attendance at meetings are set out Composition of Committee and attendance below: Membership Attendance Composition of Committee and attendance Chairman Dr PJ Welgemoed 3/3 Membership Attendance Members Mr KI Mampeule 2/3 Chairman Mr D Novick (retired 31 January 0/0 Ms WD Stander 2/3 2012) Mr AK Buchanan 3/3 Mr P van Hoven (with effect from 1/1 13 February 2012) The main responsibilities of the Risk Management Committee are, Members Mr JM Kahn 1/1 amongst others, to: Mr KI Mampeule 1/1 • Oversee the development and annual review of a risk management Mr MD Moritz 1/1 policy and plan for recommendation to the Board for approval; • Monitor implementation of the risk management policy and plan; Amongst others, the main responsibilities of the Nomination Committee • Make recommendations to the Board concerning the levels of are to: tolerance and appetite and ensure that risks are managed within the levels of tolerance and appetite as approved by the Board; • Make recommendations on the appointment of new Executive and • Ensure that the risk management plan is widely disseminated Non-executive Directors; throughout the Company and integrated in the day-to-day activities • Make recommendations on the composition of the Board generally of the Company; and the balance between Executive and Non-executive Directors; • Ensure that risk management assessments are performed on a • Review plans for succession and ensure their adequacy, for the continuous basis; Chairperson, CEO and Executive Directors; • Ensure that frameworks and methodologies are implemented to • Review the Board structure, size and composition and make increase the possibility of anticipating unpredictable risks; recommendations with regard to any adjustments deemed • Ensure that management considers and implements appropriate necessary; and risk responses; • Ensure that Board appointment policies and procedures are formal • Liaise closely with the Audit Committee to exchange information and transparent and a matter for the Board as a whole, and that relevant to risks; such appointment policies and procedures are reviewed and • Review reporting concerning risk management that is to be updated when necessary. included in the Integrated Annual Report to ensure that such reporting is timely, comprehensive and relevant; Remuneration Committee • Evaluate procedures and systems introduced including, without limitation, the Company’s information technology systems. The members of this Committee are all Non-executive Directors, three (3) of whom are Independent Non-executive Directors and one of whom

12 Comair Integrated Annual Report 2012 is a Non-executive Director who acts independently. The CEO attends Executive Directors and senior executives of the Company who are suitably meetings by invitation only and is not entitled to vote. The CEO does not experienced. The Chairman of the Board, Financial Director, Internal participate in discussions regarding his own remuneration. The Committee Auditors, representatives from other assurance providers, professional met once during the financial year under review. The composition of the advisors and Board members are entitled to attend Committee meetings. Committee and attendance at meetings is set out below. As the Committee was only established by the Board in November 2011, it met only once during the period under review. Composition of Committee and attendance Membership Attendance Composition of Committee and attendance Chairman Mr JM Kahn 1/1 Membership Attendance Members Mr RC Sacks 0/1 Chairman Mr MD Moritz 1/1 Mr AK Buchanan 1/1 Members Mr ER Venter 1/1 Mr P van Hoven 1/1 Mr DH Borer 1/1 Mr KI Mampeule 1/1 The remuneration policy and the execution thereof is the responsibility of Mr KV Gorringe 1/1 the Remuneration Committee. Ms EA Liebetrau 1/1

The fees for Non-executive Directors and the remuneration packages The main responsibilities of the Social and Ethics Committee are, amongst of Executive Directors for the financial year under review are disclosed others, to: in the Remuneration Report on pages 47 and 48 of this report. As recommended by King III, the Group’s remuneration policy was approved • Assist the Board in ensuring that the Group is compliant with all by shareholders of the Company at its last Annual General Meeting, held legislation and other requirements relating to social and economic on 9 November 2011, by way of a non-binding advisory vote. development and remains a good corporate citizen by monitoring the sustainability performance of the Group; and Amongst other things, the main responsibilities of the Remuneration • Perform its statutory functions in terms of the Companies Act and Committee are to: other functions delegated to it by the Board.

• Determine the Company’s general policy on remuneration as well The Committee’s report describing how it discharged its statutory duties as specific policies in respect of Executive Directors’ and Executive is included on page 50 of this report. Managers’ remuneration; • Review and determine remuneration packages for Executive Discharge of responsibilities Directors and Executive Managers, including, but not limited to, basic salary, annual bonuses, benefits, performance-based The Board is of the view that the Committees have discharged their incentives and share incentive scheme awards; responsibilities for the financial year under review in compliance with • Annually appraise the performance of the CEO; their terms of reference. • Annually review the general level of remuneration for Directors of the Board as well as its Committees and recommend proposals in Risk management this respect for approval by shareholders at general meetings; and • Make recommendations in respect of awards from the Comair The Board is ultimately accountable for the Group’s risk management Share Incentive Scheme. process. In terms of a mandate by the Board, the Risk Committee Social and Ethics Committee monitors the risk management process. The Board oversees the activities of the Risk Committee.

The Board established the Company’s Social and Ethics Committee Effective risk management is critical to the Company’s operations. and appointed its first members on 28 November 2011. The role and The Company therefore follows a comprehensive risk management responsibilities of the Committee are codified in a mandate from the Board process, which involves identifying, understanding and managing the (Terms of Reference), which will be reviewed annually. The members risks associated with its various businesses. As the Company, through of this Committee consist of Independent Non-executive Directors,

We build too many walls and not enough bridges. Isaac Newton 13 Corporate Governance (continued)

its various business units, is exposed to a wide range of risks, some of Skills shortage which may have serious consequences, the identification of risk and its In 2007/2008 South Africa experienced a substantial drain of skilled management, forms part of executive management’s business plan. Risk pilots and aviation technicians to international airlines. This trend was registers are used to identify, assess and monitor the risks faced by the tempered by the subsequent global economic downturn. However, there Company. Executive management meets at least four (4) times per year to has also been very little subsequent training of pilots and technicians, assess and consider the risks associated with the Company’s operations. both in South Africa and internationally. The Risk Committee also reviews the risk management process. The Risk Committee met three (3) times during the period under review. Non-beneficial increases in the price of airline tickets There is an extremely high correlation between the volume of air travel In addition to the foregoing, the Company recognises the need for its and the average price of airline tickets in the domestic market. Various employees and stakeholders to have a confidential reporting process state-owned suppliers to the aviation industry have implemented tariff (“whistle blowing”) covering fraud and other risks. In line with its increases for users that are significantly greater than the rate of inflation commitment to transparency and accountability, the Company takes and threaten to constrict the size of the market for air travel. There is also action against employees and others who are guilty of fraud, corruption talk of Government imposing carbon taxes on airline tickets. Furthermore, and other misconduct. Procedures are in place for the independent the Consumer Protection Act has, to a limited degree, impacted on airline investigation of matters reported and for appropriate follow-up action. At commercial practices, which possibly could lead to an increase in ticket present the following significant risks are considered, amongst a wide prices. As such, increases in ticket prices do not benefit the airline, since range of potential exposures: the consequential constraint on demand negatively impacts industry revenue. Safety of passengers and employees A multitude of processes and structures are in place to monitor and Currency fluctuations report on aviation safety, quality and security within the Company and The Company reports in South African Rands, the exchange rate of which its operating environment. The Company maintains an IATA Operational varies relative to other currencies. A significant portion of the Company’s Safety Audit (“IOSA”) registration, thereby ensuring the implementation of costs are incurred in foreign currencies, mainly the United States Dollar. global best practice in managing its operational safety, and is also audited The movement of these currencies could have a positive or negative by British Airways Plc as well as the South African Civil Aviation Authority. impact on the Company’s income, expenses and profitability. Unrealised and realised currency gains or losses may distort the Company’s financial Competition and technical innovation accounts. The Company has a policy in place to govern the hedging of The Company operates in an extremely competitive environment which currency exposure. is augmented by the fact that the country’s biggest airline is owned by the State. Technology forms an integral part of the Company’s business. Oil price fluctuations While the Company’s British Airways brand is, to a large extent, dependent As with foreign currencies, the Company incurs substantial costs with on developments implemented by British Airways Plc, the Company’s regard to the purchase of fuel for its aircraft. The Company has a policy to kulula brand is not, and the Company devotes significant resources to hedge a portion of its fuel requirements, where this is achievable, based information technology in respect of this brand, including the development on various instruments available. of new products and services, as well as analysing emerging trends in information technology and consumer behaviour. During 2012 the Legislation and regulations Company embarked on one of the single biggest business transformations The airline business is subject to various legislation and regulations. In in its history whereby a suite of integrated solutions, procured from Sabre addition, most regional and international routes are governed by bilateral Airline Solutions and including a new reservations platform for kulula, was treaties amongst the countries party thereto. Bilateral treaties within the implemented. The transition to the new platform provides the Company African continent have had a major effect on the Company’s ability to with an integrated solution that will, in the medium to long term, result in expand its operations into Africa. greater efficiencies, improved and wider distribution capabilities and the benefit of access to a global community which is constantly reviewing Political and economic developments processes and developing new products. Nevertheless, the Company is The state of the local economy impacts on the profitability of the aviation always faced with managing the risk presented by new technology, new industry, and the political climate affects the number of visitors from developments by its competitors or the speed of development. overseas to the Southern African region. Strikes and labour disruptions

14 Comair Integrated Annual Report 2012 by suppliers to the Company have the potential to constrain the operation While all internal control systems do have inherent shortcomings, the of the airline. The Company monitors global and local trends in order to Company’s internal control system is designed to provide reasonable adapt its business strategy accordingly. Political instability in any country assurances as to the reliability of financial information, in particular the in which the Group operates its services could also affect the Company. financial statements, to safeguard, verify and maintain accountability of The Company therefore undertakes risk assessments before embarking its assets and to detect fraud and potential liability, while complying with on new routes in Africa and internationally, and continually reviews those applicable laws and regulations. risks. It is assisted in this regard through its Licence Agreement with British Airways Plc and through its membership of the International Air The Company’s external auditors consider the internal control systems Transport Association (“IATA”). of the Company as part of their audit, and advise on deficiencies when identified. Availability of capital and finance The costs, terms and availability of capital to finance strategic expansion Internal audit have been affected by prevailing capital market conditions. The Company therefore undertakes long-term planning of capital requirements and The internal audit function is an independent appraisal mechanism continually monitors its cash position. In addition, the Company continually which evaluates the effectiveness of the applicable operational activities, monitors compliance with the requirements of its debt covenants. the attendant business risks and the systems of internal controls, so as to bring material deficiencies, instances of non-compliance and Economic and business environment development needs to the attention of the Audit and Risk Management A downturn in the general economic and business environment could Committee, external auditors and operational management for resolution. affect the Company’s operations. The Company therefore continually The Internal Auditor co-ordinates with the external auditors so as to monitors the development of trends and early warning indicators in the ensure proper coverage and minimise duplication of effort. Internal audit economic and business environment. plans are tabled at the Audit Committee meetings and follow-up audits are concluded in areas where weakness is identified. The internal audit plan, Information systems security and availability risk approved by the Audit Committee, is based on risk assessments which During the reporting period under review, the Company launched several are of a continuous nature, so as to identify not only existing and residual initiatives to cover not only information system security and availability risk, but also emerging risks and issues highlighted by the Committee and risk, but also information technology (“IT”) governance in accordance senior executive management. with the requirements of King III. The Board also appointed a Chief Information Officer. The Company has, in addition, implemented software External audit dealing with IT systems security. No security breaches occurred during The independence of the external auditors is recognised. The Audit the period under review. As regards systems and network availability, the Committee meets with the external auditors to review the scope for Company’s IT Department worked closely with its service providers to the external audit and any other audit matters that may arise. The ensure that better than ninety-nine percent (99%) uptime was achieved external auditors attend Audit and Risk Committee meetings and have on the Company’s networks and customer facing systems. unrestricted access to the Chairman of the Committee. The Audit Committee is responsible for nominating the Company’s external auditors Internal control and determining the terms of engagement. Internal control systems

The Board is responsible for ensuring that the Company 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 Internal Auditor or Chief Audit Executive (“CAE”), who in turn makes recommendations to executive management and the Audit Committee.

We build too many walls and not enough bridges. Isaac Newton 15 Corporate Governance (continued)

King III checklist Under Partially Apply review/do apply not apply

Ethical leadership and corporate citizenship Effective leadership based on an ethical foundation √ Responsible corporate citizen √ Effective management of company’s ethics √ (Note 1) Assurance statement on ethics in Integrated Annual Report √

Board and Directors The Board is the focal point for and custodian of corporate governance √ Strategy, risk, performance and sustainability are inseparable √ Directors act in the best interest of the Company √ The Chairman of the Board is an Independent Non-executive Director √ Framework for the delegation of authority has been established √ The Board comprises a balance of power, with a majority of Non-executive Directors who are √ (Note 2) independent Directors are appointed through a formal process √ Formal induction and ongoing training of Directors is conducted √ (Note 3) The Board is assisted by a competent, suitably qualified and experienced Company Secretary √ (Note 4) Regular performance evaluations of the Board, its Committees and the individual Directors √ (Note 5) Appointment of well-structured Committees and oversight of key functions √ (Note 6) An agreed governance framework between the Group and its subsidiary boards are in place √ Directors and Executives are fairly and responsibly remunerated √ Remuneration of Directors and Senior Executives is disclosed √ (Note 7) The Company’s remuneration policy is approved by its shareholders √

Internal audit Effective, risk-based internal audit √ Written assessment of the effectiveness of the Company’s system of internal controls and risk √ management The Audit Committee should be responsible for overseeing internal audit √ Internal audit is strategically positioned to achieve its objectives √

Audit Committee Effective and independent √ Suitably skilled and experienced Independent Non-executive Directors √ √ (Note 8) Chaired by an Independent Non-executive Director √ Oversees integrated reporting √ A combined assurance model is applied to improve efficiency in assurance activities √ Satisfies itself of the expertise, resources and experience of the Company’s finance function √ Integral to the risk management process √ Oversees the external audit process √ Reports to the Board and shareholders on how it has discharge its duties √

16 Comair Integrated Annual Report 2012 Under Partially Apply review/do apply not apply

Compliance with laws, codes, rules and standards The Board ensures that the Company complies with relevant laws √ The Board and Directors have a working understanding of the relevance and implications of non- √ (Note 9) compliance Compliance risk forms an integral part of the Company’s risk management process √ (Note 10) The Board has delegated to management the implementation of an effective compliance framework √ (Note 11) and processes

Governing stakeholder relationships Appreciation that stakeholder’s perceptions affect a Company’s reputation √ (Note 12) Management proactively deals with stakeholder relationships √ (Note 13) There is an appropriate balance between its various stakeholder groupings √ Equitable treatment of stakeholders √ Transparent and effective communication with stakeholders √ Disputes are resolved effectively and timeously √

The governance of information technology The Board is responsible for information technology (“IT”) governance √ IT is aligned with the performance and sustainability objectives of the Company √ Management is responsible for the implementation of an IT governance framework √ The Board monitors and evaluates significant IT investments and expenditure √ (Note 14) IT is an integral part of the Company’s risk management √ IT assets are managed effectively √ The Risk Management Committee and Audit Committee assist the Board in carrying out its IT √ responsibility

The governance of risk The Board is responsible for the governance of risk and setting levels of risk tolerance √ The Risk Management Committee assists the Board in carrying out its risk responsibilities √ The Board delegates the process of risk management to management √ The Board ensures that risk assessments and monitoring is performed on a continual basis √ Frameworks and methodologies are implemented to increase the probability of anticipating √ unpredictable risks Management implements appropriate risk responses √ The Board receives assurance on the effectiveness of the risk management process √ Sufficient risk disclosure to stakeholders √

Integrated reporting and disclosure Ensures the integrity of the Company’s Integrated Annual Report √ Sustainability reporting and disclosure is integrated with the Company’s financial reporting √ Sustainability reporting and disclosure is independently assured √

We build too many walls and not enough bridges. Isaac Newton 17 Corporate Governance (continued)

Notes to the checklist

Note Explanation

1 There are no formal measures in place to measure adherence to ethical standards. This is currently under review. 2 The review of the independence of the Non-executive Directors is not undertaken after they have served nine (9) years. The Company’s Board Charter has been updated to incorporate such requirement. 3 (a) Although a formal induction programme does not exist for new Board members, new Board members are advised of their roles and responsibilities on appointment and are provided with a Director’s Manual containing materials that specify and explain said roles and responsibilities. (b) Although no formal mentorship programme exists for newly appointed Directors, they do receive informal advice on and assistance in the performance of their responsibilities from the senior and more experienced Directors. 4 The Company Secretary is an alternate Director. 5 The Company currently only carries out informal evaluations of the Board, its Committees and individual Directors, but the Company has established procedures to carry out such formal evaluations. 6 While Terms of Reference exist for the Audit, Nominations and Remuneration Committees, the revised Terms of Reference for the Risk Management Committee are in the process of being approved. 7 The Company, in the interests of maintaining the confidentiality of the salary packages of its Senior Executives, has decided against disclosing the remuneration packages of the three most highly paid Senior Executives. 8 While the Chairman of the Audit Committee is an independent, Non-executive Director, one of the members of the Committee is a Non- executive Director who acts independently and meets the independence requirements as set out in S94 of the Companies Act. It is felt that Mr AK Buchanan’s experiences due to his involvement with British Airways PLC’s Audit and Risk Committees, justifies retaining him as a member of the Committee. 9 The Company does not have induction and ongoing training programmes that incorporate an overview of any changes to applicable laws, rules, codes and standards. However, new and existing Directors are informed of such changes as and when they take place. The Company Director’s Manual will be continually updated to advise Directors of changes to applicable laws and regulations. 10 The Company has not established a Compliance Forum. The Company does, however, have a Compliance Officer who does keep the Board appraised of the compliance requirements. 11 (a) The Company is in the process of assessing its compliance universe and drafting a compliance policy for approval by the Board. (b) The Company compliance policy, once developed and approved by the Board, will set out the roles and reporting lines of the Compliance Officer. 12 While the Company’s reputation and its linkage with shareholder relationships is not a regular Board item, the Board Charter has been amended to include a requirement that the Board evaluates how stakeholder perceptions affect the Company. 13 (a) The Company has considered but decided against publishing its stakeholder policies. (b) The Board is currently considering whether it should implement mechanisms and processes that support shareholders on constructive engagement with the Company. 14 The Board does not obtain independent assurance on IT governance due to the costs involved and this function is overseen by the internal audit function.

18 Comair Integrated Annual Report 2012 Sustainability Report

Introduction this could not be achieved without delivering a safe, secure, reliable and quality air service product, valuing its employees by following fair Comair Limited (“the Company/Group”) is firmly committed to managing labour practices, offering competitive remuneration and training and its business in a sustainable way and upholding high standards of ethics development opportunities, contributing to the well-being of society and and corporate governance practices. The benefits of delivering on these carefully managing the Company’s impact on the environment. commitments are many. Through our sustainability efforts we maintain our business integrity, maintain and improve the confidence, trust and The Company manages risk effectively and, despite the many challenges respect of our stakeholders and increase our ability to attract and retain faced by the airline industry today, the Company is confident that it is staff. Aviation is an economically vital activity generating employment involved in a growing and sustainable business, delivering value to all its and wealth across the world and it is thus important that we develop a stakeholders in the short, medium and long term. truly sustainable industry. The Company received the following external recognitions and achievements during the review period. Scope and boundary of the report

British Airways: This is the Company’s second Sustainability Report, published as part of the Company’s Integrated Annual Report for the financial year 1 July • The Sunday Times Top Brands Awards – First in the Business to 2011 to 30 June 2012. In this report, we provide our stakeholders with Business category information on the non-financial aspects of the Company’s business that • The Sunday Times Top Brands Awards – Second in the Business create economic, social and environmental value. The Company’s first to Consumer category Sustainability Report dated 30 June 2011 covered the period 1 July 2010 kulula.com: to 30 June 2011. Local awards: • Bronze Loerie for radio for the “You gotta love flying” campaign The Company has limited the scope of this report to deal only with the • Creative Circle Ad of the Month Award for Radio for “Cheaper than Company (Comair) and its operations in South Africa as was the case staying at home” campaign in the Company’s first Sustainability Report and has not restated any • Creative Circle Ad of the Month Award for Digital/Experiential for information contained in the Company’s first Sustainable Development the “Royal Wedding” campaign Report. The report does not deal with the Company’s subsidiary or • Gold PRISM award for the “Lobola” campaign associated companies. The Report does not extend to cover the impact of • The Sunday Times Top Brands Award – second place in the risks and opportunities impacting the Company’s outsourced operations Business to Business category such as, but not limited to, fleet maintenance or the Company’s leased • The Sunday Times Top Brands Award – fourth place in the facilities, as was the case in the Company’s first Sustainability Report. Business to Consumer category The Company hopes to be in a position in the near future to provide a Sustainability Report dealing with the entire Group’s impact on social, International awards: economic and environmental issues. • Shortlisted for Cannes Awards for the “You know what” World Cup campaign work and for all three radio commercials for the “Gotta Reporting principles and assurance love flying” campaign • One Show finalist for the “You know what” campaign for Integrated Please refer to the Report Profile as set out on page 2 of the Integrated work Annual Report, with specific reference to the sections headed Reporting • Silver Clio for the “You know what” campaign for integrated work Principles and External Audit and Assurance.

The Company’s track record of delivering profits in every year of its Organisational structure existence is testament to its strategy of being a long-term player in the airline business and delivering a sustainable business. While profitability The Company is a South African Group operating scheduled and non- is certainly a major strategic driver, the Company fully appreciates that scheduled airline services as its main business under both its kulula

We build too many walls and not enough bridges. Isaac Newton 19 and British Airways (under licence from British Airways Plc) brands in The Company’s organisational structure reflecting the percentage (%) South Africa, sub-Saharan Africa and the Indian Ocean Islands, as well shareholding owned by the Company is as follows: as providing other travel-related services, airline pilot training facilities and operating airline lounges. While the Company’s British Airways brand 100% does operate flights into sub-Saharan Africa and the Indian Ocean Islands (2) Alooca Properties 90% 100% and does advertise its flights on both its kulula and British Airways brands (Proprietary) Ltd (1) Kulula Air (3) Aconcagua for sale through global distribution systems, the majority of the Company’s (Proprietary) Ltd 23 Properties (Proprietary) Ltd revenue is earned in South African Rands with a small portion being earned trading as SLOW in foreign currency which foreign currency is repatriated to South Africa. During the period under review, the Company operated 40,153 flights and 100% 100% (11) Churchill carried 4,795,733 customers, compared to the 40,366 flights operated (4) Amber Capital Finance Services (Proprietary) Ltd and 4,650,568 customers carried in the previous reporting period. In next 23 Ltd year’s report we will incorporate a breakdown of flights operated within COMAIR South Africa, sub-Saharan Africa and the Indian Ocean Islands together 49% LIMITED 100% (10) Mair – with a breakdown of passengers carried within those regions. A diagram (5) Holiday Tours Mozambican (Proprietary) Ltd reflecting all the destinations to which the Company’s two brands provided African Airlines Ltd scheduled air services during the period is set out below. 40% 49% (6) Online Dar es Salaam (9) Commuter Handling Services World Travel 24 (Proprietary) Ltd (Proprietary) Ltd

Livingstone Harare 25% 30% Victoria Falls (8) Protea Hotel ORT (7) Mauritius Windhoek Gaborone (Proprietary) Ltd (Proprietary) Ltd Nelspruit Maputo Johannesburg 1. Kulula Air (Pty) Limited: Holds the liquor licences in respect of Durban certain of the Company’s lounges and looks after various service agreements relating to the lounges. Cape Town Port Elizabeth 2. Alooca Properties (Pty) Ltd: Property owning company which owns British Airways route network a number of properties in Rhodesfield surrounding the Company’s Note: The British Airways brand ceased operating the following routes on the Operations Building. following dates: 3. Aconcagua 32 Investments (Pty) Ltd: Property owning company 1. OR Tambo International Airport to Dar-es-Salaam on 2 August 2011; which owns the property on which the Company’s Operations 2. Lanseria International Airport to Gaborone on 31 October 2011; Building is situated. 3. Lanseria International Airport to Maputo on 17 January 2012; and 4. OR Tambo International Airport to Kruger Mpumalanga International Airport, 4. Amber Capital (Pty) Ltd: In the process of being deregistered. Nelspruit on 11 February 2012. 5. Holiday Tours (Pty) Ltd: An outbound tour operating company offering holiday packages to destinations outside of South Africa. 6. Online World Travel 24 (Pty) Ltd: A full service online travel agency providing travel services. 7. Imperial Air Cargo (Pty) Ltd: A cargo and freight company Lusaka providing services in South Africa. Harare 8. Protea Hotel ORT (Pty) Ltd: Property owning company which Windhoek Vilanculous Mauritius Gaborone owns the building that constitutes Protea OR Tambo Hotel. Nelspruit 9. Commuter Handling Services (Pty) Ltd: Provides ramp handling Maputo services in South Africa to various airlines. Johannesburg Lanseria 10. Mair – Mozambican African Airlines Limitada: The company is Durban Operated by: (MN) kulula currently dormant. (BA) British Airways Cape Town Port Elizabeth (operated by Comair Limited) 11. Churchill Finance Services 23 Limited: This company is in the George (7V) Federal Air process of being deregistered. kulula route network Note: kulula ceased operating the coastal route between OR Tambo International Airport, Port Elizabeth International Airport and Cape Town International Airport on 31 March 2012.

20 Comair Integrated Annual Report 2012 Apart from Mair – Mozambican African Airlines Limitada, which is No requests for information were received in terms of the South African registered in Mozambique, and Churchill Finance Services 23 Limited, Promotion of Access to Information Act. which is registered in Mauritius, all the other Company’s subsidiaries and Group entities are registered in South Africa. Customers

Providing a safe, secure, reliable and quality experience on both of the The Company’s affiliated businesses performed well over the period Company’s airline brands as well as in its travel related business is core under review and made a meaningful contribution to profits although they to the Company’s business and the Company therefore strives to be the make up a small percentage of the Company’s turnover. In addition, they airline of choice for all travellers within its operating environment. The are exposed to immaterial risks and pose no threat to the completeness Company continually measures customer satisfaction through various principle. surveys to identify areas for improvement in order to ensure it provides a quality service. No issues of a material or significant nature were raised Management approach by customers.

The Group Sustainable Development Manager is Mr Derek Borer, The Company does monthly research on both its airline brands, namely the Company Secretary, who, as part of the Company’s Social and British Airways and kulula, to determine its performance and identity Ethics Committee, is responsible for sustainable development. The areas that need improvement. The result of the research undertaken subcommittee reports to the Board. is shared amongst relevant staff members, where concerns raised are addressed. Please refer to the section in the Sustainability Report under Management’s approach to the sustainability indicators reported on is Customer Experience for more information on the research tools used dealt with in this Report as well as the Corporate Governance Report in and the overall performance of each of the Company’s brands. the relevant sections pertaining to them.

To enhance the quality of its service the Company provides access to its Engagement with stakeholders Airline lounges, known as SLOW Lounges, at OR Tambo International Airport, Cape Town International Airport, King Shaka International Airport The Company’s commitment to its stakeholders to conduct its business and SLOW in the City situated opposite the Gautrain station in Sandton in a responsible and sustainable way and to respond to their needs is to qualifying customers (i.e. Gold and Silver Executive Club Members, entrenched in the Company’s values. The nature of the Company’s business class customers and frequent kulula travellers). In addition, the business requires close engagement with stakeholders including but Company participates in and runs two (2) loyalty programmes known as not limited to customers, employees and trade unions, suppliers, the British Airways Executive Club and jetsetters as follows. Government and authorities, industry associates, investors and the media. Communication with stakeholders is important in maintaining the British Airways Executive Club Company’s reputation as a trusted and reliable provider of airline and The Executive Club is British Airways Plc’s global frequent flyer related services. One of the Company’s main objectives is to become the programme designed to recognise and reward loyal members, with the premier domestic and regional airline in sub-Saharan Africa and the airline aim of making their travel more enjoyable and rewarding. Executive of choice for travellers within the Company’s operating environment. The Club members earn Avios points (previously referred to as BA Miles) Company, in addition, values the importance of its brands, namely British whenever they fly on British Airways, a partner airline or one of the Airways, kulula and SLOW, and has taken the necessary legal steps to oneworld® alliance partners. The amount of Avios points that members protect them. 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 The Company, having regard to the importance and power of social can also collect Avios points with British Airways’ worldwide hotel, car media, has adopted a social media strategy allowing the Company to rental, financial and shopping partners even when they are not flying. In communicate with its customers through this media. The social media addition to Avios points, members also earn Tier Points. Tier Points allow platforms used by the Company are mainly Twitter, Facebook and members to move from Blue to Bronze, to Silver and finally Gold status YouTube. enabling members to enjoy additional benefits associated with each tier level such as, but not limited to, airline lounge access, dedicated check-in There have been no incidents of material non-compliance with processes and priority waitlisting. any applicable regulations or legislation concerning marketing communication, voluntary codes concerning marketing communication, kulula jetsetters advertising promotions and sponsorships. The Company recently did some research to determine what customers value most about the kulula jetsetters loyalty programme so as to ensure that the loyalty programme was delivering benefit to both the Company

Failing to plan is planning to fail. Alan Lakein 21 Sustainability Report (continued)

and members of the jetsetters loyalty programme. The research indicated • Ad hoc marketing communications in respect of the Company’s that members of the jetsetters programme who had a kulula credit card brands; were deriving the most benefit from the programme by earning kulula • Ad hoc IT communications known as IT Talk; moolah based on their credit card spend. As a result of this research, • E-mail notification to employees of changes in policies and the jetsetters loyalty programme was amended such that one could only procedures; and earn kulula moolah based on credit card spend on the member’s kulula • Interactions with employees through various workplace forums, credit card. To be a member of the programme one must therefore have a including the Employment Equity Forum. kulula credit card. kulula moolah earned based on credit card spend can then be used to pay for flights on kulula by redeeming in kulula moolah The Company furthermore has the following programmes in place for all in part of full payment for their kulula tickets. Kulula moolah is a virtual employees: currency with 1 kulula moolah equalling R1. 1. Think Vision: This is the Company formula for success and was In addition, the Company prints two on-board magazines, namely High formulated in consultation with employees to identify traits that are Life South Africa for its British Airways brand, and khuluma for its beneficial to the Company and to eliminate those traits which are kulula brand. These magazines cover a number of subjects, including detrimental; pertinent information relating to the Company and its business. Twelve 2. Catalyst Awards: This is a programme that encourages employees issues are printed per year of each magazine title (one per month). The to implement the Company’s Think Vision philosophies and to circulation for High Life South Africa is 16,000 per month and 21,000 inspire other employees to do the same; per month for khuluma. The magazines are made available on board 3. The Precious Cargo Programme: This was created to assist the aircraft and High Life South Africa is also available in the SLOW employees with balancing the demands of work and family life. Lounges. Other mediums of communication with customers and potential Details of this programme are dealt with further on in the report; customers include direct e-mail communications to the Company’s 4. Anonymous whistle-blowing facility: This facility enables respective customer databases, onboard announcements and advertising employees to report any suspicious activities. To date the campaigns (including radio, TV, outdoor, print and on-line) as well as whistle blowing facility, which is monitored and managed by an social media channels such as Facebook, Twitter and YouTube. independent third party, Deloitte, has been effective in combating various criminal activities such as bribery and theft. Employees and trade unions

Currently approximately 54% (1,003 of 1,853 employees) of the Company’s The Company’s business is also about the people it employs, and employees in South Africa are members of trade unions compared with gaining the trust and respect of the Company’s employees is vital to the 46% (897 of 1,953 employees) during the previous reporting period. The Company’s success. Paying attention to and responding to employee Company strives to maintain good working relationships with the trade needs through effective communication and sound labour relations is unions, where the Company has recognition agreements in place and important in being considered as an employer of choice among existing enters into substantive negotiations annually. These negotiations mainly and prospective employees, and vital to maintain a contented and loyal focus on salary increases and improvements to employment conditions. work force. The Company’s employees are treated with respect, receive Current union membership is as follows: competitive remuneration and are involved in the day to day running of the business. All employees have access to the Company’s e-mail facility and intranet. The Company communicates with its employees in a variety 2012 2011 of ways including, but not limited, to: Solidarity 194 275 Aviation Industry Workers Union (“AIWU”) 28 85 • The MyComair intranet: The MyComair intranet provides a platform South African Aviation and Allied Workers to inform employees of current news and events, newsletters from 603 359 Union (“SAAAWU”) the Company CEO, corporate information, social responsibility Comair Pilots Association (affiliated to the feedback, a library of standard templates to assist employees 178 178 in the performance of their duties, the Company’s policies and Airline Pilots Association of South Africa) procedures, standard forms for leave and employee travel benefits, as well as travel and related specials which the Company has There was no strike action during the period under review. However, been able to secure from various suppliers and make available to unionised airport staff who belong to SAAAWU did refer a wage negotiation employees; dispute to the CCMA. The Company and the Union were fortunately able • Direct e-mails to employees; to resolve the dispute with the parties having entered into a three year • Newsletters to employees from the Company’s CEO known as salary agreement. The Company in addition reached a three year salary Plane Talk; agreement with both the pilot and the cabin crew unions.

22 Comair Integrated Annual Report 2012 Other than the above-mentioned, no other material or significant issues and the SACAA, for conducting bilateral air service negotiations with were raised by employees or trade unions during the period under review. foreign governments and for managing aviation industry involvement in major events. The Company interacts, co-operates with and provides Suppliers feedback to the DoT in all these areas. During the period under review, the Company actively lobbied the DoT to engage the Zimbabwean The Company is dependent on a number of suppliers who form an and Mozambican aviation authorities in order to increase the capacity integral part of the Company’s ability to provide a safe, secure, reliable allocated to South African carriers in terms of the applicable Bilateral Air and quality service. The Company attempts to build up long-term Services Agreements. With the demise of Air Zimbabwe, there is currently relations with suppliers who are of vital importance to the Company no service being provided from the Zimbabwe side and the ability of based on the principle of mutual trust and respect. Regular meetings are the South African carriers, including Comair to cater for the increased held with suppliers to ensure continuity of service. We further rely on our demand on this route is limited by the current 65 frequency capacity cap. suppliers to deliver products and services in line with the Company’s own There is also currently insufficient capacity to cater for the demand on the standards. Other criteria also play an import role in selecting suppliers, Johannesburg – Maputo route – a route on which the Company is also such as compliance with international and local quality standards, price, interested in operating in competition with . The stability of the organisation support network and technical capacity and Company also provided input and comments to the DoT on the content the B-BBEE status of South African suppliers. of draft Slot Co-ordination Regulations to ensure that the said regulations were in line with the relevant IATA guidelines. There has been a DoT led No material or significant issues were raised by suppliers during the process to formulate regulations to better inform and control the ATNS period under review. and ACSA Permission Process, which has, over the past two years, been Government and authorities the subject of disagreement between the airlines and ACSA in particular. Unfortunately, the progress in completing this task has been slow and will only be finalised during the next reporting period. The Company remains committed to working with Government and other relevant authorities to ensure: b) International Air Services Council • The maintenance of a safe, reliable, competitive and commercially International air services operated by South African carriers between South viable air transport sector where all operators are afforded equal Africa and other countries remain regulated with respect to destination, treatment by Government and the authorities; frequency and capacity. The International Air Services Council (“IASC”) • The provision of air transport infrastructure that is affordable to and is the authority responsible for issuing licences to South African operators consistent with the requirements of the air transport sector and the wishing to operate air services to regional and international destinations. travelling public; and During the period under review, the Company applied for the allocation • The provision of air travel at a cost that is affordable to South of three additional frequencies on the route Johannesburg – Harare as African consumers and in line with internationally accepted airline well as for rights to operate on the route Johannesburg – Maputo. Both service standards and practices. applications are still awaiting adjudication by the IASC.

c) Air Services Licensing Council The Company received no financial assistance from Government nor did Domestic air services within the Republic have been de-regulated the Company make any contribution towards any political party. since 1990. Therefore the Air Services Licensing Council’s (“ASLC”) Government, regulatory and industry bodies responsibilities are restricted to the issuing of air service licences to new applicants, ensuring the safety and reliability of air services operated The airline industry is subject to extensive Government and regulatory within South Africa and adjudicating complaints of non-compliance with oversight relating to amongst other things, safety, security, licensing and the Air Services Licensing Act. As the Company has held and maintained consumer protection. The Company communicates and interacts with the a Class I and Class II Air Service Licence for many years, it only appears following governmental, regulatory and industry bodies, with no material infrequently before the Council to either answer questions on its published or significant issues having been raised by such governmental, regulatory annual financial results or to amend certain details on its licence. During or industry bodies during the period under review: the period under review it was not necessary for the Company to appear before the ASLC. Government and regulatory bodies a) Department of Transport d) South African Civil Aviation Authority The Department of Transport (“DoT”) is responsible for providing The South African Civil Aviation Authority (“SACAA”) is the body secretarial support to the two licensing councils and the ACSA/ATNS responsible for controlling and regulating civil aviation safety and security Regulating Committee, for ensuring entity oversight of ATNS, ACSA in South Africa. As safety is the Company’s number one priority, it interacts and co-operates on a regular basis with the SACAA to ensure

Failing to plan is planning to fail. Alan Lakein 23 Sustainability Report (continued)

that the Company maintains and in some areas exceeds the safety and participates in both the activities of and management of the Association. security standards required by the SACAA. The promulgation of the new The Company believes that the association is vital to ensuring a healthy amendments to the Civil Aviation Regulations and Technical Standards, and commercially successful airline sector in Southern Africa. The which were to have been implemented this past year, have been delayed Company supports AASA by providing it with data and information on and will probably only come into operation in August 2012. The Company a variety of airline issues, by giving feedback and comment on AASA participates on various SACAA committees and working groups and position papers and submissions and by participating in the various continues to maintain a very good working relationship with the Authority. AASA delegations that attend important stakeholder meetings. During the past year, in addition to participating in the standard AASA activities, the e) Airports Company of South Africa Company has worked with AASA to develop a position paper to highlight Most large airports in South Africa are owned and operated by the to Government certain deficiencies in South Africa’s implementation of Airports Company of South Africa (“ACSA”). On an operational level, the Cape Town Convention and Aircraft Equipment Protocol as well as the Company interacts with ACSA on a continuous basis and maintains participated in the drafting of the Airline Industry Code mentioned above. a fulltime representative at the ACSA Airport Management Centre at Oliver Tambo International Airport. The Company, together with AASA b) The International Air Transport Association also engages ACSA on the important issues of airport user charges The International Air Transport Association (“IATA”) is responsible for and the standard of service provided by ACSA to airport users. During promoting the safe, reliable, secure and economical air services and the year under review, the Company voiced its concerns regarding the fostering inter airline co-operation. IATA also operates the airline clearing 70% increase in the ACSA Passenger Service Charge, which came into house in Geneva which processes and allocates financial credits and effect on 1 October 2011. This large increase has raised the Company’s debits between member airlines as well as administering the IOSA airline operating costs as well as diminished passenger demand during the past safety audit scheme. The Company maintains its membership of IATA, year. As mentioned above, the Company has also participated in the participates in the clearing house and undergoes a bi-annual IOSA safety ongoing process to develop regulations to better describe and structure audit. the Permission Process for the setting of ACSA tariffs. Investors f) Air Traffic and Navigation Services Company Air traffic and navigation services in South Africa are provided by the The Company’s main objective is to create value for its shareholders. Air Traffic and Navigation Services Company (“ATNS”). The Company Reports to the Company’s shareholders are aimed at providing a regularly interacts with ATNS on an operational level and maintains a very clear understanding of the Company’s financial, economic, social and good relationship with this service provider. environmental performance both positive and negative. Policies are in place to ensure that communications with shareholders are made g) National Consumer Commission available timeously and simultaneously. The Company has co-operated with the National Consumer Commission (“NCC”) by providing expeditious responses on all consumer complaints The Company endeavours to maintain dialogue with its shareholders referred to it by the NCC as well as by participating in NCC initiated and other interested parties and meets with its institutional shareholders conciliation proceedings with consumers whose complaints had not initially twice a year, after the release of its annual and interim results. The been resolved. Almost all consumer complaints are dealt with directly Company’s website, www.comair.co.za, contains the latest, as well as between the Company and the consumer. No significant complaints were historical, financial and other information about the Company, including received during the period under review and almost all complaints were the Company’s Annual Reports. The Board encourages shareholders to resolved to the satisfaction of the consumer with no complaints having attend its Annual General Meeting, notice of which is contained in this been referred to the Consumer Tribunal. The Company, via the Airline Integrated Annual Report, at which shareholders have the opportunity to Association of South Africa, has further co-operated with the NCC through put questions to the Board. the development of a draft Airline Industry Code intended to provide guidance on how the airline industry will deal with specific airline related No material issues or topics were raised by investors during the period consumer matters and compensation issues. The draft Code has been under review. submitted to the NCC and a response thereon is awaited. Community

Industry bodies The Company is a committed corporate citizen and, together with its a) Airlines Association of South Africa employees, endeavours, wherever possible, to improve the lives of fellow The Airlines Association of Southern Africa (“AASA”) is an organisation South Africans. The Company believes that social responsibility is a formed to promote and protect the interests of its member airlines duty, privilege and obligation to help those less fortunate and to make operating with the Southern African region. The Company actively some impact on society in general. For more information regarding the

24 Comair Integrated Annual Report 2012 Company’s engagement with the community, refer to the section dealing best and latest equipment and technology affordable to it in providing with our community involvement on page 35 of this report. such services.

Media Maintenance of the Company’s fleet of aircraft is regulated by the South African Civil Aviation Authority and, as the Company leases in a number The media plays an important role in the Company’s engagement with all of aircraft from foreign owned leasing companies, the Federal Aviation its stakeholders. The Company interacts on a regular basis with the media Authority of the United States and the European Aviation Safety Authority. by issuing press releases to both the corporate and trade media as well The Company also ensures compliance with directives issued by the as granting media interviews to share news on developments related to manufacturers of the equipment. The Company’s buildings, plant and the Company. No material or significant issues were raised by the media other equipment are also maintained to a high standard to ensure a during the period under review. safe and user friendly environment for the Company’s employees and customers. The Company’s objective is to position Comair in the media as a trusted player in the airline industry – a ‘champion’ of the people, and to position The Company has, in the past financial year, made the following its management as leaders on industry issues, to educate the media investments in respect of equipment, plant and buildings: about the Company’s business and how the industry operates, as well as broaden the Company’s profile amongst the travel industry media. • As part of a joint venture with Avions de Transport Regional (“ATR”) installed a fourth simulator in its simulator training facility, Commitment to quality namely, an ATR72 simulator; Commitment to safety and service quality • Spent approximately R15,000,000 (fifteen million Rand) in setting up its own catering department known as “Food Directions”, which The Company is committed to providing a safe, secure, reliable and will result in a major reduction in the cost of on-board catering, quality service to its customers, and aims at being regarded as the airline without in any way compromising quality. In fact, the quality of of choice for corporate and individual travel in all the areas and regions catering product on board the Company’s flights has improved; in which it operates. The safety and security of the Company’s customers • Continuously invests in maintaining the safety and reliability of its is of paramount importance to the Company and it therefore ensures that aircraft. The Company subcontracts the maintenance of its aircraft a strong culture of safety and security exists among all employees, which and engines to South African Airways Technical (Pty) Ltd, Israeli goal is supported by a well-defined reporting and management process Aircraft Industries and Singapore Aerospace; to ensure that all safety and security issues are dealt with thoroughly and • Implemented a businesswise airline enterprise reservation effectively. This is formally documented in a Safety Management Manual system from Sabre Airline Solutions at a cost of approximately that has been accepted by the South African Civil Aviation Authority. R52,000,000.00 (fifty two million Rand). This system will improve In addition, the Company maintains an International Air Transport Association Operational Safety Audit (“IOSA”) Registration, has been the Company’s revenue through more dynamic pricing, better audited and has passed the bi-annual IOSA audit in February 2012. The capacity management and improved revenue integrity; and Company has also received favourable audit ratings from British Airways • Made a substantial investment towards the acquisition of a new Plc, the Boeing Company and the South African Civil Aviation Authority. fleet of Boeing 737-800 new generation aircraft. The first new Security of customers is achieved by applying measures such as, but generation Boeing 737-800 aircraft arrived in mind-July 2012 with not limited to, ensuring that all customers, including the Company’s a further two (2) new generation Boeing 737-800 aircraft due for airline crew, prior to entering the secure area of the airport, are screened delivery in October and November 2012. together with their carry-on baggage. All baggage and cargo being placed Customer experience in the hold of the aircraft is screened and no aircraft departs unless the customer and his/her baggage is on board the aircraft. In providing a safe, secure, reliable and quality service the Company Quality of equipment continuously measures customer satisfaction levels in respect of both its British Airways and kulula brands to identify areas of improvement and As mentioned above, the Company’s goal is to provide a safe, secure, to ensure the delivery of a quality service to its customers. The overall reliable and quality service to its customers and strives to procure the performance of the Company’s two (2) brands as measured by customers for the period under review is reflected below.

Failing to plan is planning to fail. Alan Lakein 25 Sustainability Report (continued)

British Airways Broad-based black economic empowerment The Company conducts monthly on-board research amongst randomly selected customers with the assistance of a research company, Catalyst. The Board views the Company’s business as an integral part of the The research methodology is in line with the global brand’s research political, social and economic community in South Africa and is methodology known as Global Performance Measurements (“GPMs”). committed to sustainable transformation as part of its business strategy. The overall customer satisfaction performance of the British Airways The Company recognises the importance of implementing a broad-based brand during the period under review is reflected in the graph below. black economic empowerment (“B-BBEE”) programme that addresses the inequality of the past through a dedicated and ongoing process Cabin crew 88% and regularly reviews its B-BBEE strategy with the aim of effecting improvement across all seven pillars of the B-BBEE scorecard. Meal/refreshments 67%

Cabin environment 68% For the 2011/2012 financial year, the Company’s B-BBEE verification audit was conducted by BEESCORE. The Company’s B-BBEE verification audit Departure process 70% for the year 2010/2011 was conducted by Honeycomb. A comparison of

Lounges 85% the results of both these audits is contained in the table below:

Check-in process 79% Score Score Elements Indication Weighting Likelihood of recommendation 81% 2012* 2011* Ownership Black ownership 20 18.79 18.60 Likelihood to travel with 83% British Airways again Management Black top Value for money 69% control management 10 2.42 2.54 Overall satisfaction with 77% British Airways Employment Black managers equity 15 1.90 2.33

British Airways overall performance Skills Black training July 2011 – June 2012 development spend 15 7.20 10.53

kulula Preferential Procurement 20 12.16 10.78 The brand uses a system known as Attentive Customer Experience procurement spend (“ACE”). The ACE system was put in place with the assistance of a Enterprise Investment in research company, Ransys, and is in line with GPMs. The ACE system is development black-owned a proactive, live feedback solution, which allows for daily alerts and quick 15 0.00 0.21 enterprises response to the customer. Randomly selected customers are contacted via telephone and prompted with questions specific to their unique Socio-economic Socio-economic 5 5.00 5.00 customer experience. The kulula brand’s overall performance is reflected development contribution in the graph below: Total score 100 47.74 50.01 Cabin crew efficiency 97% * There was a change in rating methodology between 2011 and 2012 as per Notice 103 of 2012 Catering options 82%

Baggage collection experience 67% The assessment indicates that the Company achieved a total scorecard of 47.74 in 2011/2012 compared to 50.01 achieved in 2010/2011. The 48% Experience beyond expectation score for 2012 was negatively impacted by a reduced investment in

Disruption handling 94% bursary programmes, which impacted the Skills Development score, and a headcount freeze, which impacted the Employment Equity score, as a Check-in process – Agents 94% efficiency result of the poor trading environment. The Company remains a level 6 contributor. Fly kulula again 97%

Likelihood of recommendation 94% Equity ownership

Overall performance on kulula ACE Results The Company concluded a Black Economic Empowerment (“BEE”) July 2011 – June 2012 transaction during the 2007 financial year pursuant to which shares

26 Comair Integrated Annual Report 2012 equivalent to 15% of the Company’s post-transaction issued share Currently four of the Company’s 14 Directors (28,6%), excluding the capital were issued to a Black Empowerment Consortium known as Thelo alternate Director, are black, as opposed to 25% for the previous financial Aviation Consortium (Proprietary) Limited (“Thelo Aviation Consortium”) year. Effectively there has been no change, with the Board having reduced led by Thelo Aviation Investments (Proprietary) Limited (“Thelo Aviation in size from 16 to 14 Directors, as a result of the retirement of Mr Donald Investments”). In addition to the above-mentioned BEE transaction, Novick as Non-executive Chairman and the resignation of Mr Gidon Thelo Aviation Investments, the biggest shareholders in the Thelo Aviation Novick as Executive Director and Joint CEO. At Executive Management Consortium, purchased a futher 6,172,550 shares in the Company level two members (17%) of the 12 member Executive Committee are for cash from various shareholders. This resulted in Thelo Aviation black, which is the same as in the previous financial year. Investments and the Thelo Aviation Consortium, together, holding in aggregate 16.1% of the Company’s issued share capital post the BEE Employment equity transaction in 2007. Thelo Aviation Investment did, however, during the period under review, sell some of the shares it purchased, as reflected in The Company’s focus on employment equity is in line with its overall Directors’ Interest in Share Capital. transformation strategy.

The Equity Ownership score for the 2011/2012 year has improved due to The overall race distribution of the Company’s fulltime employees as at the inclusion in the calculation of the representation of black women in 30 June 2012, compared to 30 June 2011, is set out below: those companies that own Comair Limited stock. 30 June 2012 30 June 2011 The Company, on its listing in 1998, implemented a share incentive White (females and 741 employees 781 employees scheme for all permanent employees, including black employees, to males) (constituting 41% (constituting 40% enable them to purchase shares in the Company. This scheme, as a of the total number of the total number result of certain tax changes, has, to a large extent become dormant. of permanent of permanent The Company shareholder analysis is set out on pages 115 to 117 of this employees) employees) report. African, Coloured, 1,069 employees 1,172 employees Management control Indian (designated (constituting 59% (constituting 60% females and males) of the total number of the total number of permanent of permanent The Company’s Black Economic Empowerment Consortium has employees) employees) representation on the Comair Board with two of the Consortium members having been appointed to the Comair Board, namely, Mr Ronald Reflected on the following page is the summarised Employment Equity Sibongiseni Ntuli as the non-executive Joint Deputy Chairman of the Report (“EEA2”) submitted on 1 October 2011 as required in terms Board and Mr Khutso Ignatius Mampeule being an independent non- of section 22 of the Employment Equity Act, as well as the Company executive Director. workforce profile as at 30 April 2012.

Failing to plan is planning to fail. Alan Lakein 27 Sustainability Report (continued)

Summarised Employment Equity Report (EEA2) as at 1 October 2011 Total number of employees, including employees with disabilities, in each of the occupational levels

Male Female Foreign nationals Occupational levels Total A C I W A C I W Male Female

Top management 0 0 0 2 0 0 0 0 0 0 2 Senior management 0 0 2 8 0 0 0 2 0 0 12 Professionally qualified and experienced specialists and mid- 4 2 0 145 0 3 6 45 0 0 205 management Skilled technical and academically qualified workers, 128 74 42 197 311 152 95 289 0 3 1,291 junior management, supervisors, foremen and superintendents Semi-skilled and discretionary 67 20 13 22 118 68 28 84 1 0 421 decision making Unskilled and defined decision 1 0 0 0 23 0 0 0 1 0 25 making Total permanent 200 96 57 374 452 223 129 420 2 3 1,956 Temporary employees 0 0 0 0 0 0 0 0 0 0 0 Grand total 200 96 57 374 452 223 129 420 2 3 1,956

Note: A=African, C=Coloured, I=Indian, W=White

Total number of employees with disabilities in each of the occupational levels

Male Female Foreign nationals Occupational levels Total A C I W A C I W Male Female

Top management 0 0 0 0 0 0 0 0 0 0 0 Senior management 0 0 0 0 0 0 0 0 0 0 0 Professionally qualified and experienced specialists and mid- 0 0 0 1 0 0 0 0 0 0 1 management Skilled technical and academically qualified workers, junior 1 1 0 1 1 1 1 1 0 0 7 management, supervisors, foremen and superintendents Semi-skilled and discretionary 0 0 0 0 1 0 0 0 0 0 1 decision making Unskilled and defined decision 0 0 0 0 0 0 0 0 0 0 0 making Total permanent 1 1 0 2 2 1 1 1 0 0 9 Temporary employees 0 0 0 0 0 0 0 0 0 0 0 Grand total 1 1 0 2 2 1 1 1 0 0 9

Note: A=African, C=Coloured, I=Indian, W=White

28 Comair Integrated Annual Report 2012 Workforce profile as at 30 April 2012 Top management Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 0 0 0 1 0 0 0 0 0 0 1 0 1 0 1 % representivity 0% 0% 0% 100% 0% 0% 0% 0% 0% 0% 100% 0%

Senior management Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 0 0 2 6 0 0 0 2 0 0 8 2 10 0 10 % representivity 0% 0% 20% 60% 0% 0% 0% 20% 0% 0% 80% 20%

Mid-management Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 4 2 2 146 1 3 6 46 0 0 154 56 210 0 210 % representivity 1.9% 1% 1% 69.5% 0.5% 1.4% 2.9% 21.9% 0% 0% 73.4% 26.7%

Junior management Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 120 73 44 188 316 157 88 314 1 3 426 878 1,304 0 1,304 % representivity 9.2% 5.6% 3.4% 14.4% 24.2% 12% 6.7% 24.1% 0.1% 0.2% 32.7% 67.2%

Semi-skilled employees Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 44 10 10 16 89 51 36 40 1 0 81 216 297 0 297 % representivity 14.8% 3.4% 3.4% 5.4% 30% 17.2% 12.1% 13.5% 0.3% 0% 27.3% 72.8%

Unskilled employees Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 2 1 0 0 22 2 0 0 1 0 4 24 28 0 28 % representivity 7.1% 3.6% 0% 0% 78.6% 7.1% 0% 0% 3.6% 0% 14.3% 85.7%

Failing to plan is planning to fail. Alan Lakein 29 Sustainability Report (continued)

Total permanent employees Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 178 90 59 365 433 221 129 415 3 3 695 1,201 1,896 0 1,896 % representivity 9.4% 4.7% 3.1% 19.3% 22.8% 11.7% 6.8% 21.9% 0.2% 0.2% 36.7% 63.3%

Temporary employees Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 % representivity 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Total persons with disabilities Foreign Total Budgeted Male Female Total nationals filled Vacancies head A C I W A C I W M F M F posts count Current profile 1 1 0 3 1 1 1 0 1 0 6 3 9 0 9 % representivity 0.1% 0.1% 0% 0.2% 0.1% 0.1% 0.1% 0% 0.1% 0% 0.3% 0.2%

The Company is implementing the following action plans to improve a particular challenge to achieve a more equitable representation. representation by previously disadvantaged groups: The employment and retention of pilots from previously disadvantaged groups remains a major challenge, especially as the • Workforce and succession planning: The Company will identify pool of suitably qualified persons from previously disadvantaged areas and positions, which will mostly, but not exclusively, be at groups is less than 18%, with black persons being just over 10%. specialist, scarce skills, senior management and executive level. • Job evaluation and grading: The Company contracted an external The capabilities required for these key areas will be benchmarked. specialist consultant to audit its job grading system to ensure The Company will implement staffing plans that will include greater improved transparency and independence of the process; focus on recruitment and the identification of potential and talent • Entry level barriers and transformational opportunities: In as well as fast tracking programmes. line with industry requirements and affordability the Company • Recruitment and selection: Although the Company has placed an will identify and attempt to eradicate non-regulatory entry level embargo on recruitment and selection for all non-essential posts requirements for cabin crew. The Company is also currently until profitability improves, once things return to normal, the main investigating a programme to foster an interest among learners in driver for recruitment and selection will be the degree of under- mathematics and science as an entry level to flying and technical representation by candidates in previously disadvantaged groups. careers within the airline industry. Active steps will then be taken to appoint suitably qualified persons • Electronic EE monitoring system: The Company has established from such designated groups. The Company is fully committed an electronic EE monitoring System which tracks in real time to increasing the representation amongst, and the diversity of the EE profile and the Company’s progress towards achieving its its work force. The Company Employment Equity Forum works employment equity targets. with management to increase the number of black persons with • Establishment of the Board’s Social and Ethics Committee: This the Company. Due to the Company’s low number of resignations will result in improved management and oversight of EE within the amongst white staff, the recruitment embargo on all non-essential Company. staff and the resignation of a small number of black managers who have left the Company, the number of previously disadvantaged The Company’s new five-year Employment Equity Plan (2011 to 2016), employees has reduced slightly to 59% (compared to 60% during reflecting the numerical goals/targets as set by the Company and which it the previous reporting period). The percentage includes pilots and hopes to achieve, is set out as follows: technicians – professions where the aviation industry is faced with

30 Comair Integrated Annual Report 2012 % SA Budget Foreign EE Male Female Total Level black head- national Goal target count A C I W A C I W M F M F 2011 2 0 0 0 2 0 0 0 0 0 0 2 0 Top management 0% 2016 2 0 0 0 2 0 0 0 0 0 0 2 0 2011 10 0 0 2 6 0 0 0 2 0 0 8 2 Senior management 30% 2016 10 1 0 1 5 1 0 0 2 0 0 7 3 2011 207 3 2 0 147 1 3 6 44 0 0 152 54 Mid-management 30% 2016 195 14 3 1 121 12 2 1 41 0 0 139 56 2011 1,283 126 74 41 196 310 150 89 297 0 0 437 846 Junior management 80% 2016 1,276 241 34 18 131 555 80 42 175 0 0 424 852 2011 444 72 21 14 24 131 73 27 82 0 0 131 313 Semi-skilled 79.7% 2016 443 142 20 11 44 148 21 11 46 0 0 217 226 2011 28 3 0 0 0 25 0 0 0 0 0 3 25 Unskilled 87.9% 2016 28 9 1 1 3 9 1 1 3 0 0 14 14 2011 10 2 0 0 3 2 1 1 1 0 0 5 5 Disabled employees - 2016 32 5 0 0 2 12 2 1 10 0 0 7 25

Skills development companies based mainly in Europe and the United States of America. The proportion of spend with foreign suppliers varies significantly year The Company’s commitment to providing a quality air service means that on year due to the capital value of spend on aircraft and aircraft spares. skills development is a priority. The Company invested approximately For the period under review the Company spent approximately 87% of its R13,000,000 (compared to R7,300,000 in the previous financial total procurement spend with South African suppliers. year) or approximately 3.6% (2010/2011: 1.4%) of payroll during the period under review in support of its commitment to training and skills In the period under review, the Company scored full points for preferential development. See the section dealing with the Company’s training and spend. However, it is realised that more emphasis needs to be placed on development initiatives on pages 34 to 35 for more details. channelling procurement through to black owned QSEs and EMEs and the Company is in the process of formulating an action plan to achieve Preferential procurement this. The Company is also improving its systems to more accurately reflect its data collection with respect to preferential procurement. The Company is committed to the concept of preferential procurement. The Company relies on its suppliers to deliver products and services in Enterprise development line with the Company’s required standards and, where possible, the Company enters into service level agreements with such suppliers in an Enterprise development is the area where the Company has made the attempt to ensure that such standards are met and maintained. Other least progress, mainly due to the challenging economic climate. Once important factors play a role in selecting suppliers including, but not things improve, the Company will make financial resources available to limited to, compliance with local and international laws and regulations invest in black-owned enterprises. (particularly those related to aviation), good quality service and products, Socio-economic development reliability and stability, cost effectiveness, support networks, with particular reference to suppliers of aircraft parts, components and fuels The success of the Company’s corporate social investment strategy and and the availability of products and services. The B-BBEE status of South initiatives is reflected in the fact that the Company scored the highest African suppliers is also taken into account in selecting South African possible mark for this element in the B-BBEE scorecard. The Company suppliers. is continuing with its programme to support and assist the Ekhuruleni Community through a variety of initiatives centred around the Reiger Park While the Company attempts to source products and services from South Community Crisis Centre. African suppliers, this is not always possible, having regard to the nature of the Company’s business, where aviation equipment or specialised Further details on the Company’s corporate social investment strategies airline branded products need to be procured and sourced from foreign and initiatives are dealt with on pages 32 to 36 of this report.

Failing to plan is planning to fail. Alan Lakein 31 Sustainability Report (continued)

Impact that the Company has on the economy, thereby eliminating the use of traditional paper tickets and by society and environment and the impact of introducing self-service check-in for customers; sustainability trends on the Company • The Company’s Flight Operations Department, working with Air Traffic Control and Navigation Services, has developed the most Aviation is an economically vital activity generating employment and efficient routing of aircraft between airports; and wealth across the world. The Company goal is to become the airline of • The Company has set up its own catering department known as choice for all travellers within its operating environment, and its strategy “Food Directions”, thereby reducing the cost of on-board catering, is as follows: while at the same time ensuring a better quality of catering for customers. • Economic impact: To provide innovative and responsible ways for Despite its many cost saving initiatives, some of which are mentioned the Company’s customers to travel; above, the Company expects to see a significant increase in average airline • Social impact: To provide a great place for the Company’s ticket prices during the next financial year as a result of a substantial employees to work and to support the community through socially rise in the price of fuel, as well as in the Airport Company South Africa’s responsible initiatives; and tariffs which they implemented to fund recent airport upgrades and • Environmental impact: To reduce carbon emissions through the development projects, particularly the new King Shaka International adoption of new technology and operating efficiencies. Airport in Kwa-Zulu Natal and current economic uncertainties facing the Economic impact world at large.

The Company, like many other companies, has many impacts on its Public-private initiatives stakeholders through, amongst others, the creation of wealth; creation The Company believes that Public Private Partnerships (“PPPs”) and of employment opportunities; remunerating its employees fairly and other joint initiatives with Government could play a meaningful role in competitively, based on industry standards; and the Company’s corporate ensuring access to affordable airfares. The Company continuously looks social investment. Kindly refer to the Company’s value added statement as at opportunities for PPPs. set out on page 41 of the Integrated Annual Report. Social impact

Access to affordable flights The Company’s employees The airline industry is fraught with many challenges involving but not Employee composition and turnover rate limited to the cost of equipment, oil price fluctuations, airport charges The success of the Company is dependent on the commitment of its and taxes and, consequently, access to affordable flights. It was for this 1,853 employees to deliver a safe, secure, reliable and quality service. Its reason that the Company was the first in South Africa to launch a low fares workforce composition is made up as follows: airline, making air travel affordable for a larger portion of the population that would previously not have flown. To enable the Company to continue Workforce composition by employment type to offer access to affordable flights, the Company continuously looks at 2012 2011 ways in which to improve its cost effectiveness. Permanent employees 1,853 1,901

Efficiency and cost effectiveness Temporary employees 0 52 To improve its cost effectiveness, the Company continuously investigates ways to reduce its costs, some examples of which are: Note 1: Of the Company’s total number of permanent employees, the Company had employed 5 foreign nationals at the end of the 2011 financial year and 6 • The Company has implemented a progressive fleet replacement foreign nationals at the end of the 2012 financial year. All these foreign nationals are employed in South Africa. programme. By operating more modern and fuel efficient aircraft, the Company has achieved a consistent reduction in the cost of Note 2: 20 of the Company’s permanent employees (both during the 2011 financial year and 2012 financial year) are employed in Zimbabwe. aircraft maintenance as well as the amount of fuel used per seat; • The Company has also introduced a comprehensive fuel savings Workforce composition per gender programme with the co-operation of its pilots which has contributed a further 1,4% fuel savings; 2012 2011 • The weight of an aircraft impacts on fuel burn and the Company Males 677 730 has, through the installation of light weight seats and catering Females 1,176 1,223 equipment, substantially reduced aircraft weight; • The Company has maximised the use of available technology to reduce airline distribution costs through the use of the internet,

32 Comair Integrated Annual Report 2012 Workforce composition per age description discrimination was reported and the employee responsible for same was 2012 2011 dismissed. Number of employees younger than 30 728 883 Labour relations Number of employees between 30 and 50 985 939 The Company’s aim is to create and maintain sound labour relations, Number of employees older than 50 140 131 which support its goal of being the employer of choice in the South African airline industry. The Company regularly reviews its employment While the Company does not maintain data on the turnover rate of conditions and tries to ensure that all employees are made aware of their employees by age group and gender, the annual turnover rate for all benefits. This information is furnished to employees via the Company’s employees during the 2011/2012 financial year was 16.0% or 313 intranet, newsletters by the Company, Old Mutual and Discovery; as well employees terminating against a head count of 1,853, compared to a as other communication methods referred to earlier in the Report. turnover rate of 7.42% or 145 employees terminating against a head count of 1,953 during the 2010/2011 financial year. The Company was not subject to any strike actions during the period under review. The Company’s disciplinary and grievance procedures Employee remuneration are communicated to new employees as part of their induction into the The Company offers competitive salaries and benefits to its employees Company, and are also available to all employees to ensure that they are based on the principles of equity and fairness. Further details of the aware of the process in place to lodge grievances, should they have the Company’s remuneration policies are set out in the Remuneration Report need to do so. on pages 47 to 49. The percentage of the Company’s employees represented by trade unions Remuneration and reward guidelines serve to create a platform for fair or collective bargaining agreements is reflected on page 22 of this Report. and transparent human resource practices so as to ensure consistency and non-discrimination among employees, thereby eliminating any form The minimum notice periods for the Company’s employees as set out in of subjectivity or favouritism. The Company’s position on salaries is the the employees’ letters of appointment are as follows: middle quartile; however, salary progression for new employees will range from the lower quartile to the upper quartile as determined by the Pilots: Three months employees’ skills, experience, qualifications and performance. All other employees: Four weeks

The Company offers employee benefits to its permanent employees Performance management The performance management process, known as “On Track”, is carried employed in South Africa and makes a contribution towards employee out for all employees in terms of which employees receive performance benefits and medical aid schemes to those permanent employees and career development reviews. The On Track process strives to give employed in Zimbabwe. The Zimbabwe employees are free to join any employees as much clarity as possible on what is expected of them medical aid and pension scheme they may so wish. The Company and how their performance will be measured. It is designed to give has a defined contribution pension scheme in place for its permanent managers and staff the tools and skills to maintain open, empowered and employees in South Africa, which is an umbrella scheme known as constructive relationships. The performance management process exists Evergreen, administered by Old Mutual. In addition, the Company offers to assist managers to be fair and consistent, and manage accountability its employees risk benefits in the form of death and disability benefits throughout the organisation. The emphasis is on quality and face-to-face to permanent employees in South Africa, which scheme is administered discussions on performance, and aims to contribute to a culture of giving by Discovery Life. The Company’s permanent employees in South Africa and receiving positive and developmental feedback. contribute 7% towards retirement funding, with the Company contributing 10% to cover both retirement funding and risk benefits. A medical aid In addition to the above philosophy, the functional purpose is to align scheme is also in place for permanent employees in South Africa, which individually agreed objectives to ensure that the collective effort will scheme is administered by Discovery. The Company contributes 50% achieve the Company’s overall strategic plan. Through the performance of the cost in respect of the Discovery Essential Comprehensive Plan for management process the Company hopes to create an environment in permanent employees. which individuals receive direction, guidance and feedback in order to perform optimally by identifying ongoing accountabilities and agreeing to Equal opportunities specific task assignments. It ultimately enables the Company to recognise The Company believes in providing equal opportunities to all employees and reward high performance by way of performance incentive pay-outs. and does not accept any form of unfair discrimination based on gender, race, nationality or religion. In line with the aforementioned, there is no Recruitment and retention of skilled staff difference in the salary structure for male or female employees performing The recruitment and retention of the right calibre of employee is vital the same function. During the period under review, one incident of to enable the Company to deliver on its goal of becoming the airline of

Failing to plan is planning to fail. Alan Lakein 33 Sustainability Report (continued)

choice in the places and regions to which it operates. The Company Health and Safety Committee acknowledges that its ability to recruit and retain skilled employees is a The Company pays due regard to the health and safety of employees and critical factor in driving Company performance in the intensely competitive strives to provide employees, customers and invitees with a clean and safe and dynamic business environment in which it operates. working environment, and maintains reporting and notification systems. Safety incidents and damage are reported though a safety management The employment and retention of pilots remains a major challenge to the system. A formal structure exists to allow safety issues to be addressed Company, particularly pilots from previously disadvantaged groups. The within each department. The Company has an open reporting culture Company has attempted to address this challenge through its Cadet Pilot and encourages the reporting of all incidents. Safety representatives are Training Programme, although this programme, having regard to the very appointed in each department and trained in various areas of health and tough economic environment in which we operate, was suspended during safety. The company has a Health and Safety Committee that meets the year under review for the reasons as set out under the Training and at regular intervals to discuss pertinent issues. The Company is fully Skills Development section of this report. In addition, given that each pilot compliant with the Occupational Health and Safety Act. that joins the Company has to be trained to fly on the Company’s aircraft, the Company requires that the pilots sign training bonds, to ensure that Staff welfare they remain in the employ of the Company for a certain period to cover Balancing the demands of work and family life is not always easy, the cost of the training. and it was with this in mind that the Company entered into a contract with Independent Counselling Advisory Services (“ICAS”) and the The Company’s recruitment and selection practices are carried out in Company’s Precious Cargo Wellness Programme was born. ICAS accordance with all applicable labour legislation and are based on the provides a confidential 24 hour a day, 365 day a year personal support principles of fairness, transparency and consistency. This is achieved and information service for employees and their families to call for help through the use of objective and validated tools including, but not limited in dealing with everyday situations and more serious concerns. In this to, competency-based interviews and psychometric assessments. The regard, the Company has set up an onsite clinic, manned by a registered recruitment and selection process entails achieving a balance between psychologist once a month, at each of the Company’s Head Office, employing the best person for the position and the achievement of the Operations Department, OR Tambo International Airport and Cape Town numerical goals as set out in the Company’s employment equity plan in International Airport. The service includes telephone consulting, face order to achieve an equitable representation of designated groups in all to face counselling, life management services and HIV counselling. In occupational levels within the Company. addition, employees have access to e-Care services, which is an online comprehensive health portal providing valuable and interactive resources Diversity and equal opportunities on a wide range of topics approved by qualified health professionals. The Company is committed to non-discriminatory treatment in all of its employment practices. The Company’s employment policies, including The Company’s HIV/AIDS programme forms part of the Precious Cargo hiring, training, working conditions, compensation and benefits, promotion, Wellness Programme for all employees and allows all employees to termination and retirement are based on individual qualifications. The undergo voluntary HIV testing and, if need be, counseling. Employees Company treats its employees equally irrespective of gender, age, race, who test positive are referred for additional counseling through the sexual orientation, disability or any other status unrelated to performing programme as well as being provided with medical support through the the job. No differentiation is made in the basic salary offered to men Company’s medical aid scheme. The Company runs HIV awareness compared to women. The Company’s focus on diversity and employment workshops which allow employees the opportunity to learn more about equity is in line with its overall transformation objectives and this is dealt HIV and AIDS. with in the section of this report relating to B-BBEE. During the financial year under review, one incident of discrimination was reported and the Training and skills development employee concerned was dismissed. The Company’s training programmes are focused at improving its human capital, improving business processes and procedures, maintaining Health and safety at work and promoting quality service delivery in all aspects of the Company’s The Company pays special attention to health and safety in the work business and alleviating, within affordable boundaries, skills shortages place so as to ensure that there is a safe environment for the Company’s amongst pilots. employees, customers and invitees. The health of the Company’s employees is important to ensure the sustainability of the Company. Employee training During the period under review, 41 minor incidents were reported (as The Company makes a significant investment in training, investing opposed to 19 in the previous reporting period), ranging from equipment approximately 3.6% (compared to 1.4% in the previous financial year) injuries to motor vehicle accidents. There were no fatalities during the of payroll in training. period under review.

34 Comair Integrated Annual Report 2012 The Company has implemented the following training programmes: and emergency procedures training, type-rating training for pilots on the Company aircraft, and crew resource management training, so as • Take Off: As part of the Company’s succession planning, a to ensure that the highest standards of safety, security and service are leadership development programme called “Take Off” was maintained. 1,777 employees underwent training and development launched in conjunction with the Gordon Institute of Business courses during the period under review, in addition to the 1,209 Science (“GIBS”) and underwritten by the University of Pretoria. employees who completed training courses in respect of the Company’s As part of this programme the Company’s potential future leaders new kulula reservations system. This is the major reason for the increase are identified and undertake courses covering several key issues of in payroll spend by the Company on training business management in a mini-MBA styled programme. • Cadet Pilot Training Programme: The Company remains Investing in the community committed to its Cadet Pilot Training Programme. However, during the period under review, the Company took a decision to suspend The Company is a committed corporate citizen and, together with this programme for the following reasons: its staff, endeavours, wherever possible, to improve the lives of fellow - Four of our cadet pilots who attained their commercial pilot South Africans. The Company believes that social responsibility is a duty, licences were unable to find employment with other airlines privilege and an obligation to help those less fortunate and to make a in order to gain experience on smaller aircraft. The Company positive impact on society in general. In this regard, the Company has offered these employees positions in the Company’s Flight assisted the community as follows: Operations Department; and - The prohibitive cost of the programme, based on the current The South African Police Service, Metro Police Department, economic climate and with the Company’s focus being on Traffic Police and Gene Louw Traffic College cost containment. The Company will re-assess whether it can The Company unfortunately had to discontinue its programme to provide continue with the programme. discounted kulula tickets to members of the South African Police Service Since the initiation of the programme, 11 cadets have obtained (“SAPS”), Metropolitan Police Department (“MPD”), Gauteng Traffic their commercial pilot licences, three of whom are currently Police (“GTP”) and the Gene Louw Traffic College (“GLTC”) and their employed by the Company, while some of the others were immediate families due to difficulties in verifying that only disadvantaged employed by other smaller airlines to obtain sufficient flying persons receive this benefit. This programme will be replaced with a experience to qualify for employment as a pilot with the Company; scheme whereby discounted kulula tickets will be provided to start-up black businesses via the National Empowerment Fund. • Workplace Experiential Learning: During the period under review, the Company was involved with various tertiary education institutions to provide students in these institutions’ travel-related Project Green disciplines with six months’ of workplace experiential training. In This project was launched in 2007 to raise money to care for the this regard, four students from the Cape Peninsula University of environment, while also offsetting the Company’s carbon emissions Technology completed their six month practical work experience at through the sustainable greening of townships in South Africa. The Cape Town International Airport; and Company, through a collection process run through the kulula website, raised over R1,000,000 from its customers, which money is handed over • Skills Development Programme: As part of the Company’s contribution to the community, nine students from Reiger Park to Food and Trees for Africa to complete the greening process. (compared to 31 in the previous financial year) were provided with the opportunity of gaining six months’ work experience at Reiger Park the Company. Since the Company commenced this initiative in In addition to the Company’s skills development programme with Reiger 2006, it has awarded 135 students from the Ekurhuleni district Park, it also adopted approximately 600 vulnerable children and orphans with passenger handling certificates. The Company has, in who are cared for by the Community Crisis Centre in Reiger Park. This addition, employed nine students from the Ekurhuleni district as Centre provides support to the Greater Ekurhuleni area, including the cabin attendants. It has further offered 111 students permanent surrounding informal settlements. The Company’s employees have employment. supported the Crisis Centre for the last five years by donating their time on feeding days and supplying food. In addition to the aforementioned, the Company provides training and development courses to its employees in areas such as, but not limited Christmas 2011 to, passenger handling, orientation courses on the Company, passenger The Company and its employees hosted a Christmas party for over 600 check-in, dangerous goods training, customer service training, station vulnerable children and orphans from the Greater Ekurhuleni area. The emergency awareness training, aviation safety and security training, Company employees treated the children to a day of fun, providing the training on fares and ticketing, customer experience training, safety children with gifts, hot dogs, cold drinks, sweets and a visit from Santa Claus.

Failing to plan is planning to fail. Alan Lakein 35 Sustainability Report (continued)

Casual Day The Company, through its employees and customer donations on the Environmental objectives website, raised more than R136,000 in support of the Casual Day charity. The Company’s environmental objectives focus on assessing and minimising its impact on the environment and are currently aimed at: Movember Movember (the month formerly known as November) is a moustache • Identifying and complying with environmental legislation and growing charity event held annually during November to help raise regulations; funds and awareness for prostrate and testicular cancer. The Company • Identifying and managing all risks relating to its impact on the collected almost R50,000 for this charity. environment with regard to water use, energy use and conservation and emissions and climate change; Environmental impact • Creating environmental awareness amongst all employees; • Limiting aircraft noise without compromising safety; and The Company is committed to protecting the environment, conserving • Linking fuel saving initiatives to an environmental saving objective. natural resources and utilising resources in an effective and responsible way by adopting sound environmental practices in its business. These objectives enable the Company to identify aspects of its business that could have an effect on the environment, with a view to reducing This section of the report deals with the environmental performance of such impact. The Company works closely with aviation policy makers the Company and reflects its carbon footprint based on the Corporate in South Africa to influence the development and implementation of Accounting and Reporting Standard of the Greenhouse Gas Protocol effective environmental regulations. (“GHG Protocol”). The organisational boundary of the report is reflected in the table below. The Company’s Chief Executive Officer is responsible for ensuring compliance with these goals and delegates this responsibility to Senior Organisational entity Comair Limited Managers within the Company. Operational control 100% Boundary approved Operational control No fines or sanctions were imposed upon the Company during the period under review for non-compliance with any environmental laws or Reporting period 1 July 2011 to 30 June 2012 regulations. Methodology GHQ Protocol Corporate Accounting and Reporting Standard Environmental management risk assessment Number of Employees 1,853 The Company is committed to ensuring that it complies with environmental Number of sites 14 legislation and regulations applicable to it. The main environmental Square metreage of 14,525m2 impact being managed is the utilisation of fuel and oil, which have a facilities direct effect on the Company’s carbon emissions.

Other Industry-based KPI kg CO2e per passenger carried The Company assesses the risks faced by it associated with climate As mentioned at the outset of this report, this report deals only with the change, which risks include: Company and its operations in South Africa and does not deal with the Company’s subsidiary and associated companies. The report includes the • Regulatory risks: Compliance with environmental legislation; compulsory reporting requirements of the GHG Protocol by quantifying • Physical risks: Interruption to fuel supply and fuel shortages, as the Company’s emissions that are categorised as Scope 1 and Scope 2 well as the risks associated with load shedding in South Africa. and includes selected Scope 3 emissions. The activities listed in the table below have been reported on. Emissions Globally, aviation produces around 700 million tonnes of carbon dioxide (“CO ”) per year, which represents approximately 2% of total manmade Scope 1 Scope 2 Scope 3 2 emissions. This share is projected to grow. The aviation industry is extremely Mobile fuel combustion in Consumption Water supply vulnerable to climate change response policies, especially where these company-owned/leased aircraft of purchased involve the pricing of carbon emissions. On the other hand, the industry and company-owned vehicles electricity has to contribute its fair share to efforts to limit climate change. Slowing Stationary fuel combustion down aviation growth to reduce carbon emissions is in no one’s interest. in company-owned assets It will create unemployment and undermine efforts to reduce poverty. (generator and gas) As it currently stands, tourism sustains one in every 12 jobs globally and

36 Comair Integrated Annual Report 2012 contributes approximately 9% of worldwide gross domestic product. GHG inventory by scope: Comair Limited 2011

In addition, aviation is not only a key enabler of tourism, but also of trade, Tonnes CO2e investment and global integration. 7,199.80 17.37 1% 0% However, while slowing down aviation growth is not an option, not doing anything about the emission issue is not the solution either, as the current growth in emissions will not be environmentally and economically sustainable. The Company 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 Scope 1 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 Scope 2 growth by 2020 and a huge reduction in net emissions by 2050. Scope 3

The Company supports a framework for reducing aviation emissions based on carbon trading that is applied equally to all airlines and all industries, i.e. the burden on aviation should not be disproportionate to that of other economic sectors. Aviation cannot be the “cash cow” of the 534,632.47 climate regime. There is also a firm belief that sustainable bio-jet fuels will 99% 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 541,850 277 in nature and the need to establish a level playing field for suppliers to metric tonnes of metric tonnes of CO e CO e produce aviation bio-jet fuel against road transportation and other energy 2 2 products. Total Emissions emissions per employee British Airways Plc, the Company 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 CO emissions from international 2 0.115 0.116 aviation must be integrated within a global agreement and that this must metric tonnes of metric tonnes of be done in a way that ensures equal treatment of all airlines. CO2e CO2e Emissions Emissions The Company supports the approach adopted by British Airways Plc and per m2 per passenger is committed to improving its environmental performance and reducing the adverse impact that its activities have on the local and global environment. The total GHG inventory of the Company for the 2011 financial year was

Insofar as the Company’s emissions are concerned, the Company’s GHG 541,849.64 metric tonnes of CO2e made up as follows: inventory, by scope and expressed in metric tonnes of carbon dioxide equivalent (“CO2e”) is detailed in the tables and graphs below. Direct emissions (Scope 1) Emission Unit of Emission Tonnes of GHG Inventory 2011 Consumption source measure factor CO2 Scope 1 Scope 2 Scope 3 Total Mobile fuel ℓ Various 209,816,860 534,567.63 consumption Metric tonnes Stationary 534,632.47 7,199.80 17.37 541,849.64 of CO e combustion 2 ℓ 2.67 24,304 64.83 (generators and gas) Total Scope 1 534,632.47

Failing to plan is planning to fail. Alan Lakein 37 Sustainability Report (continued)

The direct emissions reflected above are broken down as follows: GHG inventory by scope: Comair Limited 2012

Tonnes CO2e Detailed breakdown of mobile fuel combustion in Company-owned/ 1.2% 0% leased aircraft and owned vehicles:

Emission Unit of Emission Tonnes of Consumption source measure factor CO2 Aviation fuel ℓ 2,5478 kg 209,800,926 534,530.80

Petrol ℓ 2,3117 kg 15,934 36.83 Scope 1 Detailed breakdown of stationary combustion (generators): Scope 2 Emission Unit of Emission Tonnes of Consumption Scope 3 source measure factor CO2 Diesel ℓ 2,667 kg 24,304 64.83

Indirect emissions (Scope 2) 98.8%

Emission Unit of Emission Tonnes of Consumption source measure factor CO 2 513,336.89 277.03 Purchased kWh 0.99 kg 7,272,525 7,199.80 metric tonnes of metric tonnes of electricity CO2e CO2e Total Emissions Total Scope 2 7,199.80 emissions per employee Scope 3 emissions

Emission Unit of Emission Tonnes of Consumption source measure factor CO2 0.49 0.106 Water supply metric tonnes of metric tonnes of

(purchased Million ℓ 340 51.09 17.37 CO2e CO2e water) Emissions Emissions per m2 per Total Scope 2 17.37 passenger

GHG Inventory 2012 The total GHG inventory of the Company for the period under review was

Scope 1 Scope 2 Scope 3 Total 513,336.89.64 metric tonnes of CO2e made up as follows:

Metric tonnes of Direct emissions (Scope 1) 507,223.01 6,060.82 53.06 513,336.89 CO e 2 Unit of Tonnes of Emission source Consumption measure CO2 Mobile fuel consumption ℓ 198,759,727 507,206.25 Stationary fuel combustion ℓ 8,970 16.76 (generators and gas) Total Scope 1 507,223.01

38 Comair Integrated Annual Report 2012 The direct emissions reflected above are broken down as follows: In comparing our GHG Inventory for 2012 with 2011, it must be noted that: Detailed breakdown of mobile fuel combustion in Company’s owned/ leased aircraft and owned vehicles 1. The major reason for the improvement in Scope 1 emissions is due to the following factors: Emission Unit of Emission Tonnes of Consumption source measure factor CO 2 (a) Our aviation fuel emission has improved as the company Aviation fuel ℓ 2.55 kg 198,681,977 507,016.54 operated fewer flights than in the previous year as well as Diesel ℓ 2.68kg 26,938.1 72.11 having introduced new generation aircraft into its fleet which aircraft are more fuel efficient. Going forward it is, however, Petrol ℓ 2.31 kg 50,811.3 117.60 anticipated that the company will increase the number of flights it operates substantially which will ultimately increase Detailed breakdown of stationary combustion (generator, gas): its scope 1 emissions in the future. Emission Unit of Emission Tonnes of (b) The decrease in the stationary fuel combustion was due to Consumption a stable power supply during the period under review which source measure factor CO2 allowed the company to make less use of its generators. Diesel ℓ 2.68 kg 2,635 7.05 2. The major reason for the decrease in the Scope 2 emissions during LPG ℓ 1.53 kg 6,335 9.71 the period under review may be attributed to various power saving initiatives that have been implemented by the Company. Indirect emissions (Scope 2) 3. The major reason for the improvement in the Scope 3 emissions is as a result of the Company having made substantial use of Emission Unit of Emission Tonnes of Consumption borehole water during the period under review. source measure factor CO2 Purchased In order to reduce the effect that the Company has in respect of Scope 1, kWh 0.99 kg 6,122,039.8 6,060.82 electricity Scope 2 and Scope 3 emissions, the Company:

Scope 3 emissions • Has, over the past number of years, implemented a fleet Breakdown of paper usage replacement programme and during the period under review operated five Boeing 737-800 new generation aircraft, ten Tonnes of Emission source Unit of measure Consumption Boeing 737-400 aircraft and nine Boeing 737-300 aircraft. The CO2 Company placed an order with the Boeing Company to acquire eight B737-800 new generation aircraft, with the first deliveries Copy kg 14,969 41.92 occurring in the 2012 calendar year. In this regard, the Company took delivery of its first new B737-800 aircraft on 12 July 2012. Breakdown of water supply These new generation B737-800 aircraft are not only quieter than the older generation B737 aircraft, but also offer better Emission Unit of Emission Tonnes of Consumption performance and fuel efficiency, reduced noise on take-off and source measure factor CO 2 landing and lower engine emissions; Water supply • Approximately three years ago, implemented a programme to (purchased Million ℓ 344 32.37 11.14 reduce weight on board the aircraft by implementing a paperless water) cockpit, reducing the amount of potable water carried on board the aircraft and reducing the weight of the aircraft galleys, thus GHG Inventory 2012 reducing the fuel used on board the aircraft; • In conjunction with Air Traffic Control, has, where possible, Scope 1 Scope 2 Scope 3 Total implemented a Continuous Descent Approach to achieve fuel efficiency and reduce the impact of noise; Metric tonnes of 507,223.01 6,060.82 53.06 513,336.89 • Has, where such stands are assigned to them by the Airports CO2e Company South Africa, used fixed ground power units as opposed to auxiliary power units to reduce fuel consumption and noise;

Failing to plan is planning to fail. Alan Lakein 39 Sustainability Report (continued)

• Has attempted to reduce the impact of noise, as annoyance and Glossary of terms used in the environment impact section sleep disturbance are the most commonly reported adverse effects of aircraft noise. The Company’s objective is to try to reduce or limit Boundaries – The inventory boundaries to determine which emissions the total number of people exposed to high levels of aircraft noise. are accounted for and reported. Boundaries include organisational, Current regulations and voluntary actions by the Company, such as operational, geographic and business unit structures. phasing out its older aircraft, ensuring that all its engines are stage Carbon footprint – The total greenhouse gas emissions caused directly 3 noise compliant, as well as restrictions on the use of airspace, and indirectly by an organisation, typically over a period of 12 night-time flying and ground operations restrictions, have, to a large months. extent, resulted in reduced aircraft noise; • Is currently investigating implementing various energy saving CO2e – Carbon dioxide equivalent – standardisation of all greenhouse initiatives with regard to electricity consumption such as, but not gases to reflect the warming equivalent to carbon dioxide (CO2). limited to, changing all light fittings and globes to more energy This is used to evaluate different greenhouse gases against a efficient ones; common basis. • Has implemented a number of initiatives to reduce water Direct emissions – GHG emissions from facilities or sources owned or consumption, including the use of borehole water at the Company’s controlled by the reporting company, e.g. generator, company- Head Office and Operations Building. Other initiatives to reduce owned vehicles, etc. water consumption include employee awareness, monitoring of uncontrolled leakages and monitoring garden irrigation cycles; Emissions – The release of greenhouse gases into the atmosphere. • Has, in conjunction with our pilots, designed and implemented a Emission factor – Conversion factor to translate activity data, e.g. tonnes comprehensive fuel savings programme according to global best of fuel consumed, into emission data. practice, while also taking local operating conditions into account. This has already resulted in a further 1.4% reduction in fuel GHG – Greenhouse gases. Under the GHG Protocol standard six gases consumption across our fleet. The Boeing 737-800 aircraft have are accounted for, namely carbon dioxide, methane, nitrous oxide, also reduced the Company’s fuel burn per passenger as they have hydrofluorocarbons, per fluorocarbons and sulphur hexafluoride. the capacity to carry 21 more passengers and burn 200 ℓ per hour GHG inventory – A listing of the GHG emissions and sources that are less fuel than the Boeing 737-400 aircraft. attributable to the reporting company.

Waste management and recycling GHG Protocol – GHG Protocol Corporate Accounting and Reporting While the Company does have a programme in place to recycle paper, Standard. no measures have yet been put in place to measure the tonnage of paper Indirect emissions – Emissions that are a consequence of the recycled. operations of the reporting company, but occur at sources owned or controlled by another company. The Company outsources the maintenance of its aircraft and aircraft engines to third party suppliers as detailed earlier in this report. These Operational boundary – The boundary to establish the operations and third party suppliers dispose of waste arising from the maintenance of the sources of emissions included in the GHG inventory. aircraft and aircraft engines, including radioactive material, in accordance Organisational boundary – The boundary to establish business units or with their own policies and procedures relating to water management and entities of an organisation included in the GHG inventory. An equity recycling. or control approach can be taken.

Refuse removal in the Company complies with South African laws and Reporting period – The period of time, typically a calendar or financial regulations. During the period under review there were no incidents or year, which the report covers. fines imposed for breach of any law or regulation. Scope 1 emission – Direct emission from company-owned or controlled equipment, vehicles or aircraft. Compliance To the best of the Company’s knowledge and belief, there have been Scope 2 emission – Indirect emission from the consumption of no incidents of material non-compliance with any environmental laws or purchased electricity. regulations, and no fines were imposed upon the Company during the Scope 3 emission – Indirect emission from other activities associated period under review. with the activities of the Company, e.g. commuting travel, business air travel and paper or water consumption.

40 Comair Integrated Annual Report 2012 Group Value Added Statement for the year ended 30 June 2012

2012 2011 % % R‘000 R‘000

Wealth created

Group revenue 4,162,938 3,587,754 Cost of materials and services (3,392,452) (2,762,713) Value added 770,486 825,041 Interest income 8,200 17,545

Total value added 778,686 842,586

Wealth distributed Employees Salaries, wages and related benefits 596,456 77 537,740 64

Providers of capital Interest on loans 19,433 2 35,255 4 Dividends paid to shareholders - 0 23,598 3

Government Taxation expense 1,451 0 10,672 1

Re-invest in the Group 161,346 21 235,321 28 Depreciation 153,270 158,835 Retained income 8,076 76,486

778,686 100 842,586 100

Innovation distinguishes between a leader and a follower. Steve Jobs 41 Statement of Responsibility by the Board of Directors

The Directors are responsible for the preparation, integrity and fair presentation of the financial statements and other financial information included in this report.

The financial statements, presented on pages 60 to 101 have been prepared in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act (Act No. 71 of 2008), as amended, and include amounts based on judgements and estimates made by management.

The going-concern basis has been adopted in preparing the 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 financial statements support the viability of the Company and the Group.

The financial statements have been audited by the independent accounting firm, PKF (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 financial statements which appear on pages 60 to 101 were approved by the Board of Directors on 10 September 2011 and signed on its behalf.

Mr ER Venter Mr P van Hoven CEO Chairman 11 September 2012 11 September 2012

42 Comair Integrated Annual Report 2012 Statement of the Company Secretary

In terms of section 88(2)(e) of the Companies Act (Act No. 71 of 2008), as amended (“Companies Act”), I certify that the Company has lodged all returns and notices as required by the Companies Act and that all such returns are true, correct and up to date.

Mr DH Borer Company Secretary 11 September 2012

Innovation distinguishes between a leader and a follower. Steve Jobs 43 Audit Committee Report

This report is presented by the Company’s Audit Committee (the “Committee”) approved by the Board and the shareholders in respect of the financial year ended 30 June 2012. 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 as assigned to it by the Board in respect of the financial year ended 30 June 2012.

Audit Committee mandate

The Committee has adopted a formal mandate setting out its responsibilities and functions that has been approved by the Board of Directors 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 the duties assigned to it by the Board during the financial year under review, as further detailed below.

Composition and meetings

The Committee consists of three (3) Independent Non-executive Directors and one Non-executive Director who acts independently but meets the independent requirements of the Companies Act, and meets at least three (3) times per annum.

The Chairman of the Board, CEOs, Financial Director, Internal Auditor and external auditors attend Committee meetings by invitation.

During the year, the Committee held four (4) meetings.

Committee members

No. of meetings Name Date of appointment Qualifications Attendance held during the year Dr PJ Welgemoed 28/03/1996 BCom (Hons), MCom, DCom 4 4/4 Mr KI Mampeule 05/09/2005 BA, MSc, MBA 4 3/4 Ms WD Stander 15/09/2008 BA (Hons), MBA 4 3/4 Mr AK Buchanan 30/11/2009 MA, LLB 4 4/4

Abridged curricula vitae of the Committee members appear on pages 112 to 113 of this Integrated Annual Report.

The Board re-appointed the Committee members, which appointments are subject to shareholders re-electing these members at its Annual General Meeting to be held on Thursday, 1 November 2012.

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 on pages 8 to 18 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, PKF (Jhb) Inc. (“PKF”), approved its fee and determined its terms of engagement. The appointment will be presented to Company shareholders at the Annual General Meeting for approval. The Committee has further satisfied itself that PKF is accredited and appears on the JSE List of Accredited Auditors and that the designated auditor is not disqualified from acting

44 Comair Integrated Annual Report 2012 as such. The Committee has further satisfied itself that the external auditors, PKF, are independent of the Company as contemplated in sections 90(2) (b) and (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 external auditors may provide. During the period under review, the external auditors provided non-audit services to the Company in the form of tax advice. 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 Company and Group 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 Company and Group system of internal financial controls.

Expertise and experience of the Financial Director and finance function

The Committee performed a review of the Financial Director and finance function and 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 Company’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 Company; • Provides assurance and awareness on risks and controls specific to the Company 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 Company’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 Internal Auditor’s annual audit plan was approved by the Committee.

The Committee is satisfied with the independence, quality and scope of the internal audit process.

Risk management

The Board assigned oversight of the Company and Group’s risk management function to the Risk Management Committee. The members of the Committee are also members of the Risk Management Committee. The Committee fulfills 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 Company’s risk management function can be found in the corporate governance section of this 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 Company and the Group and is satisfied that they comply with International Financial Reporting Standards.

Innovation distinguishes between a leader and a follower. Steve Jobs 45 Audit Committee Report (continued)

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.

Going concern

The Committee, based on an assessment received from executive management, is of the view that the Company and the Group will be going concerns for the foreseeable future.

Duties assigned by the Board

The Committee fulfils an oversight role regarding the Company’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 PKF, an external independent assurance provider, to perform an assurance engagement with the purpose of expressing a limited assurance opinion in terms of ISAE3000 on whether whether the Integrated Annual Report – inclusive of the supplemental GRI Content Index Table, on the Company’s website – meets reasonable reporting expectations, as well as to assess the degree to which this report is consistent with the Global Reporting Initiative (GRI) G3.1 Guidelines, with the objective of establishing whether or not this report has met the C level of reporting requirements. The assurance statement can be accessed via the Company’s website www.comair.co.za.

The Committee has considered the Company’s sustainability information as disclosed in the Integrated Annual Report and the supplemental GRI Content Index Table on the Company’s website 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 the Integrated Annual Report for approval by the Board

The Committee recommended the Integrated Annual Report for approval by the Board on 10 September 2012.

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 11 September 2012

46 Comair Integrated Annual Report 2012 Remuneration Report

The Company 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.

Details on the mandate, composition and attendance of meetings held by the Remuneration Committee are set out in the Corporate Governance Report.

Remuneration approach

The Company’s Remuneration Policy provides full details of the remuneration approach for Directors, Senior Managers and Non-executive Directors.

The remuneration offered by the Company 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 that furthermore 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; and • Promoting cost-effectiveness and efficiency.

In order to balance external equity with affordability and to ensure that market-related salaries are offered to staff, the Company participates in several salary surveys and uses that information for benchmarking purposes.

Remuneration structures

The management remuneration structures of the Company comprise of fixed and variable components:

• Fixed pay: base salary and benefits; and • Variable pay: short-term merit bonus, based on economic performance.

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, are the key consideration for the annual salary reviews.

Retirement benefits

The Company 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 and is administered by Old Mutual.

Other benefits

This includes benefits such as medical aid, risk benefits insurance (i.e. death and disability) to permanent employees in South Africa and leave.

Innovation distinguishes between a leader and a follower. Steve Jobs 47 Remuneration Report (continued)

Variable pay Short-term incentives

Executive Directors and Senior Managers participate in management incentive schemes.

The key business performance criterion for the financial year in respect of the management incentive schemes was profit after tax.

Payments in terms of short-term incentives to any employee are dependent upon achievement against personal targets and business performance targets and remain subject to the final discretionary approval of the Board.

Employees who do not participate in the short-term incentive scheme would be entitled as follows:

• Pilot group – guaranteed 13th cheque • Rest of staff – discretionary amount based on personal performance and Company affordability.

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 a one-month notice period.

Details of the remuneration of individual Executive and Non-executive Directors are set out in the annual financial statements on pages 55 to 57.

Non-executive Directors’ remuneration

Non-executive Directors do not receive any benefits or share options from the Company, apart from Directors’ fees, which fees were approved by shareholders at the Company’s Annual General Meeting on 9 November 2011. The Nominations Committee has recommended that an annual fee of R10,000 be payable to the Chairman of the Social and Ethics Committee for the 2012 and 2013 financial year. The Non-executive Directors’ fees for the year ended 30 June 2012 are included in the joint remuneration payable to the Company’s Non-executive Directors, as included in Special Resolution Number 1 in the Notice of Annual General Meeting to be held on Thursday, 1 November 2012.

The Directors’ fees per meeting for the financial years ended 30 June 2011 and 30 June 2012, as well as the proposed fee per meeting for the financial year ending 30 June 2013, are set out in Table 1 below. Commencing from the 2013 financial year, members of the Committees are also remunerated for their participation as members of the various Committees.

48 Comair Integrated Annual Report 2012 Table 1: Directors’ fees Annual fee for the year Annual fee for the year Annual fee for the year Meeting ended ended ended 30 June 2011 30 June 2012 30 June 2013 Chairperson: Board (outgoing) 500,000 292,000 - Chairperson: Board (new)* - 370,000 1,000,000 Vice-chairperson: Board 250,000 250,000 250,000 Member: Board 120,000 120,000 120,000 Lead Independent Director - - -

Fee per meeting for the Proposed fee per meeting Proposed fee per year ended for the year ended meeting for the year 30 June 2011 30 June 2012 ended 30 June 2013 Chairperson: Audit Committee 10,000 10,000 10,000 Member: Audit Committee - - 5,000 Chairperson: Risk Committee 10,000 10,000 10,000 Member: Risk Committee - - 5,000 Chairperson: Nominations Committee 10,000 10,000 10,000 Member: Nominations Committee - - 5,000 Chairperson: Social and Ethics Committee - 10,000 10,000 Member: Social and Ethics Committee - - 5,000 Chairperson: Remuneration Committee 10,000 10,000 10,000 Member: Remuneration Committee - - 5,000 Chairperson: Pension Fund 10,000 10,000 10,000 Note: * New Chairman’s annual fee for the year ended 2012 was made up as follows:

In his capacity as a member of the Board prior to appointment as Chairman R120,000 In his capacity as Chairman R250,000 Total R370,000

Innovation distinguishes between a leader and a follower. Steve Jobs 49 Social and Ethics Committee Report

The Board established the Company’s Social and Ethics Committee (“the Committee”) in November 2011. This report is presented by the Committee to describe how it has discharged its statutory duties in terms of the Companies Act, 71 of 2008 (“the Companies Act”).

The composition and number of meetings held or to be held by the Committee is set out in the Company’s Corporate Governance Report in the Company’s Integrated Report on pages 8 to 18 in this Integrated Annual Report.

The responsibilities and functioning of the Committee are governed by a formal mandate approved and subject to annual review by the Board. The main purpose of the Committee is to assist the Board in ensuring that the Group and Company remain a good corporate citizen by monitoring the sustainable development performance of the Company and to perform the statutory functions required of a Social and Ethics Committee in terms of the Companies Act.

The Committee is responsible for developing and reviewing the Group and Company policies with regard to social and economic development, good corporate citizenship and reporting on the Company’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 in respect of the sustainability performance of the Company 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 of the Company’s employees; • Management of the Company’s environmental impacts; • Ethics compliance; and • Corporate social investment.

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 Company’s material sustainability issues. The Committee must also review and approve the sustainability content included in the Integrated Annual Report.

The Committee reviewed the Company’s Sustainability Report included in the Company’s Integrated Annual Report. The Sustainability Report was also approved by the Board, upon the recommendation of the Committee. The Committee is satisfied that the current level of combined assurance provides the necessary independent assurance over the quality and reliability of the information presented.

The Committee is also required to report through one of its members to the Company’s shareholders on the matters within its mandate at the Company’s Annual General Meeting. Shareholders will be referred to this report read with the Sustainability Report, at the Company’s Annual General Meeting on Thursday, 1 November 2012.

The Board will assess the effectiveness of the Committee annually.

Mr MD Moritz Chairman: Social and Ethics Committee Date: 11 September 2012

50 Comair Integrated Annual Report 2012 Report of the Directors

The Directors take pleasure in presenting their report, which forms part of the annual financial statements of the Group and the Company for the year ended 30 June 2012.

Nature of business

The main business of the Company is the provision of domestic and regional air services in the Southern African market, trading under the names of British Airways and kulula.com. In addition to the foregoing, the Company provides other travel-related services, undertakes third party simulator training and operates airline lounges.

General review of main activities

The Company currently operates a fleet of twenty-four jet aircraft flying to the destinations as set out on page 20 of this Integrated Annual Report. The Directors have performed the solvency and liquidity test required by the new Companies Act, the outcome of which is that the Company 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 60 to 101 of this Integrated Annual Report for the year ended 30 June 2012.

Dividends

Due to the uncertain economic outlook, the Directors have resolved not to declare a dividend.

Share capital

The authorised share capital of the Company remained unchanged during the period under review.

Subsidiaries and associates

Details of the Company’s subsidiaries and associates are recorded in Notes 4 and 5 of this Integrated Annual Report on pages 77 to 80.

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 the Company.

Innovation distinguishes between a leader and a follower. Steve Jobs 51 Report of the Directors (continued)

Directors’ interest in share capital

The following Directors held direct and indirect interests in the issued share capital of the Company at 30 June 2012 as set out below.

2012 2011 Held by Held by Direct Indirect Total Direct Indirect Director assoc- % assoc- Total shares % beneficial beneficial shares beneficial beneficial iates iates D Novick1 - - - - 0.00 - 28,223,607 - 28,223,607 5.77 MD Moritz - 49,623,607 9,462 49,633,069 10.15 - 49,623,607 9,462 49,633,069 10.15 P van Hoven 204,647 - - 204,647 0.04 204,647 - - 204.647 0.04 GS Novick2 - - - - 0.00 350,892 - - 350.892 0.07 ER Venter 1,106,983 - - 1,106,983 0.23 1,106,983 - - 1.106.983 0.23 MN Louw 1,000 - - 1,000 0.00 1,000 - - 1.000 0.0 PJ Welgemoed 118,788 - - 118,788 0.02 118,788 - - 118,788 0.02 KI Mampeule ** - - - - 0.00 - - - - 0.00 RS Ntuli ** - 5,772,615 - 5,772,615 1.18 - 6,172,550 - 6,172,550 1.26 DH Borer * 188,000 - - 188,000 0.04 188,000 - - 188,000 0.04 AK Gupta *** - 22,800,000 - 22,800,000 4.66 - 22,800,000 - 22,800,000 4.66 Total 1,619,418 78,196,222 9,462 79,825,102 16.32 1,970,310 106,819,764 9,462 108,799,536 22.24 Notes: 1 Mr D Novick retired as a Director on 31 January 2012. 2 Mr GS Novick resigned as a Director on 1 December 2011. * 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 Company’s listed share capital in terms of the Company’s black economic empowerment transaction. Refer to the 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 AK Gupta has a 30% direct and a 10% indirect shareholding.

There have been no changes in the Directors’ interests in share capital from 30 June 2012 to the date of posting of this Integrated Annual Report.

Special resolutions

Since its last Integrated Annual Report, the Company passed four (4) special resolutions at its Annual General Meeting held on 9 November 2011, namely:

a. A special resolution for the approval of Non-executive Directors’ remuneration for 2010/2011; b. A special resolution for the approval of Non-executive Directors’ remuneration for 2011/2012; c. A special resolution giving the Company a general authority to repurchase its shares; and d. 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.

In addition to the aforementioned, 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 Company’s subsidiaries relating to borrowing powers, the object clause contained in the Memorandum of Incorporation or other material matters that affect the Company and the subsidiaries for the period under review.

52 Comair Integrated Annual Report 2012 Board of Directors, Company Secretary and Board meeting attendance

The names, ages, qualifications, gender, race, nationality, business addresses, attendance at Board meetings and occupations of the Directors and the Company Secretary of Comair Limited who served during the period under review, are set out below.

Name, age, qualification, gender and race Board meetings M = Male and attendance Nationality Business address Occupation F = Female (four meetings W = White held) B = Black, Coloured or Indian

Pieter van Hoven1 South African 1 Marignane Drive, 4/4 Independent Non-executive Age: 68 (M) (W) Bonaero Park, Chairman Kempton Park, 1619

Martin Darryl Moritz2 South African 1 Marignane Drive, 4/4 Non-executive Joint Deputy Age: 67 (M) (W) Bonaero Park, Chairman BCom; LLB Kempton Park, 1619

Donald Novick3 South African 1 Marignane Drive 2/2 Non-executive Chairman Age: 74 (M) (W) Bonaero Park (former) CA (SA) Kempton Park, 1619

Rodney Cyril Sacks South African Suite 201, 2/4 Independent Non-executive Age: 62 (M) (W) 550 Monica Circle, Director HDip Law; HDip Tax Corona, CA 92880, USA

Dr Peter Johannes Welgemoed South African 1 Marignane Drive, 4/4 Independent Non-executive Age: 69 (M) (W) Bonaero Park, Director BCom (Hons); MCom; DCom Kempton Park, 1619

Jacob Meyer Kahn South African SABMiller Plc, 1st floor, 3/4 Independent Non-executive Age: 73 (M) (W) No. 2 Jan Smuts Avenue, Director BA Law; MBA (UP); DCom (hc); SOE Braamfontein, Johannesburg, 2001

Gidon Saul Novick4 South African 1 Marignane Drive, 2/2 Joint CEO Age: 42 (M) (W) Bonaero Park, BCom; CA (SA); MBA Kempton Park, 1619

Martin Nicolaas Louw South African 1 Marignane Drive, 4/4 Director Operations Age: 57 (M) (W) Bonaero Park, BMil Kempton Park, 1619

Erik Rudolf Venter5 South African 1 Marignane Drive, 4/4 CEO Age: 42 (M) (W) Bonaero Park, BCom; CA (SA) Kempton Park, 1619

Khutso Ignatius Mampeule South African C/o Lefa Group Holdings (Pty) 4/4 Independent Non-executive Age: 47 (M) (B) Ltd, Director BA; MSc; MBA Mulberry Hill Office Park, Broadacres Ave, Dainfern, 2191

Innovation distinguishes between a leader and a follower. Steve Jobs 53 Report of the Directors (continued)

Board of Directors, Company Secretary and Board meeting attendance (continued) Name, age, qualification, gender and race Board meetings M = Male and attendance Nationality Business address Occupation F = Female (four meetings W = White held) B = Black, Coloured or Indian

Alan Kerr Buchanan British British Airways Plc, 4/4 Non-executive Director Age:54 (M) (W) Waterside (HBA3), MA; LLB Harmondsworth, Middlesex UB7 OGB, UK

Ronald Sibongiseni Ntuli South African Thelo Group (Pty) Ltd, 4/4 Non-executive Joint Deputy Age: 42 (M) (B) Ground floor, Block 9, Chairman LLB St. Andrews Inanda Greens Business Park, 54 Wierda Road West, Wierda Valley, 2196

Wrenelle Doreen Stander South African 272 Kent Avenue, 4/4 Independent Non-executive Age: 46 (F) (B) Randburg, 2194 Director BA (Hons); MBA

Atul Kumar Gupta South African 89 Gazelle Avenue, Corporate 3/4 Independent Non-executive Age: 44 (M) (B) Park South, Director BSc Old Pretoria Main Road, Midrand, 1682

Ranil Yasas Sri-Chandana South African 1 Marignane Drive, 4/4 Finance Director Age: 39 (M) (B) Bonaero Park, Hons BCompt; MCom; CA (SA); CFA; Kempton Park, 1619 HDip Co. Law

Gavin James Halliday British British Airways Plc, 4/4 Non-executive Director Age: 48 (M) (W) Waterside (HBAG), BA Hons Economics, MBA Harmondsworth, Middlesex UB7 OGB, UK

Derek Henry Borer South African 1 Marignane Drive, 4/4 Alternate Director to Martin Age: 50 (M) (W) Bonaero Park, Nicolaas Louw and the BCom; LLB Kempton Park, 1619 Company Secretary

Notes 1. Pieter van Hoven, an existing Independent Non-executive Director, was appointed as Independent Non-executive Chairman of the Board on 13 February 2012. 2. Martin Darryl Moritz acted as Chairman of the Board between the retirement of Donald Novick as Non-executive Chairman and the appointment of Pieter van Hoven as Independent Non-executive Chairman. 3. Donald Novick retired as Non-executive Chairman of the Board and as a Board member on 31 January 2012. 4. Gidon Saul Novick resigned as Executive Director and Joint CEO on 31 December 2011. 5. Erik Rudolf Venter was appointed as the sole Chief Executive Officer on 31 December 2011.

54 Comair Integrated Annual Report 2012 Share Incentive Scheme

Executive Directors participate in a Share Incentive Scheme with the following allocations on 1 July 2011 and 30 June 2012.

Allocated at 1 July Awarded during the Totals as at 30 June Exercised during the year Gains made 2011 year 2012 on exercise of Name options during Average Allocated Exercise Average Number Number Price Number Number the year price price price price R

Mr ER Venter 1,566,000 1.60 - 0.00 1,566,000 1.60 2.00 - 0.00 616,155

No share options were issued to employees through the Share Incentive Scheme during the year and 5,525,864 options remain available for issue at year end.

Directors’ remuneration 2012

Name For services Related Package1 Performance Pension Group Medical Share- Total as Directors committee related2 life and based 2012 work disability payments as per IFRS5

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Executives Mr ER Venter - - 2,064 1,020 292 57 31 - 3,464 Mr GS Novick4 - - 6,6224 - 146 28 18 - 6,814 Mr MN Louw - - 1,606 780 208 40 29 - 2,663 Mr RY Sri Chandana - - 1,269 618 133 26 26 - 2,072 Mr DH Borer - - 1,232 600 153 30 34 - 2,049 - - 12,793 3,018 932 181 138 - 17,062 Non-executives Mr D Novick 292 ------292 Mr MD Moritz 250 10 ------260 Mr RS Ntuli 250 ------250 Dr PJ Welgemoed 120 70 ------190 Mr JM Kahn 120 10 ------130 Mr KI Mampeule 120 ------120 Mr P van Hoven 370 30 ------400 Ms WD Stander 120 ------120 1,642 120 ------1,762 1,642 120 12,793 3,018 932 181 138 - 18,824

Innovation distinguishes between a leader and a follower. Steve Jobs 55 Report of the Directors (continued)

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. 4. As mentioned above, GS Novick resigned as an Executive Director and Joint CEO on 31 December 2011. His package was made up as follows: Normal benefits up to termination: R1,082,000.00 Accumulated leave pay: R160,000.00 Severance pay: R4,180,000.00 Restraint of trade payment (12 months from 31 December 2012): R1,200,000.00 Total package R6,622,000.00 5. Share-based payments are calculated based on the IFRS2 cash settled share-based payment calculation. Refer to the Share Incentive Scheme section of this report for actual payment.

Further details regarding the Company’s remuneration policies are set out in the Remuneration Report, which can be found on pages 47 to 49 of this Integrated Annual Report.

Directors’ remuneration 2011

Name For services Related Package1 Performance Pension Group Medical Share- Total as Directors committee related2 life and based 2011 work disability payments as per IFRS5

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Executives Mr ER Venter - - 1,931 806 260 51 29 752 3,829 Mr GS Novick4 - - 1,953 806 257 50 31 201 3,298 Mr MN Louw - - 1,332 746 183 36 26 163 2,486 Mr RY Sri Chandana - - 1,187 625 119 23 24 - 1,978 Mr DH Borer - - 1,097 648 138 27 31 91 2,032 - - 7,500 3,631 957 187 141 1,207 13,623

56 Comair Integrated Annual Report 2012 Name For services Related Package1 Performance Pension Group Medical Share- Total as Directors committee related2 life and based 2011 work disability payments as per IFRS5

R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Non-executives Mr D Novick 500 10 ------510 Mr MD Moritz 250 ------250 Mr RS Ntuli 250 ------250 Dr PJ Welgemoed 120 70 ------190 Mr JM Kahn 120 30 ------150 Mr KI Mampeule 120 ------120 Mr P van Hoven 120 30 ------150 Ms WD Stander 120 ------120 1,600 140 ------1,740 1,600 140 7,500 3,631 957 187 141 1,207 15,363 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 2011. 3. Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares.

Innovation distinguishes between a leader and a follower. Steve Jobs 57 Independent Auditor’s Report

Independent auditors’ report to the shareholders of Comair Limited

We have audited the consolidated and separate financial statements of Comair Limited, which comprise the statements of financial position as at 30 June 2012, 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 as set out on pages 60 to 101.

Directors’ responsibility for the consolidated 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.

Auditors’ 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 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 auditors’ judgment, 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 auditors consider 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 Directors, 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 2012, 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.

58 Comair Integrated Annual Report 2012 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 2012, we have read the Directors’ Report, the Audit Committee’s Report and the 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 preparer. 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.

PKF (Jhb) Inc Director: B Frey Registered Auditors Chartered Accountants (SA) Johannesburg 11 September 2012

Tel +27 11 384 8000 · Fax +27 11 384 8008 · Email [email protected] · www.pkf.co.za 42 Wierda Road West · Wierda Valley 2196 · Private Bag X10046 · Sandton 2146 · Docex 135 Jhb

PKF (Jhb) Inc. · Registered Auditors · Chartered Accountants (SA) · Reg No. 1994/001166/21 Directors AJ Hannington (Managing) IG Abbott PR Badrick JM Borowitz GM Chaitowitz DA Church MA da Costa EE du Plessis B Frey RM Huiskamp S Kock T Schoeman RB Stoler AJ van den Berg LT van Manen ID Vorster Practising consultant DR Howell

PKF (Jhb) Inc is a member firm of the PKF South Africa Inc network of legally independent firms which practice as separate incorporated entities in Bloemfontein, Cape Town, Durban, George, Johannesburg, Port Elizabeth, Pretoria and Welkom. PKF South Africa Inc is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

The empires of the future are the empires of the mind. Winston Churchill 59 Statements of Financial Position as at 30 June 2012

Group Company

2012 2011 2012 2011 Note R‘000 R‘000 R‘000 R‘000

Assets

Non-current assets 1,496,409 1,327,352 1,475,384 1,307,495 Property, plant and equipment 1 1,432,509 1,315,357 1,379,021 1,263,489 Intangible assets 2 51,515 - 51,515 - Loan to Share Incentive Trust 3 - - 5,579 7,754 Investment in and loans to subsidiaries 4 - - 23,710 20,693 Investment in and loans to associates 5 8,717 8,327 15,559 15,559 Goodwill 6 3,668 3,668 - -

Current assets 709,358 776,269 716,848 798,359 Inventory 7 11,389 6,914 11,389 6,914 Trade and other receivables 8 429,199 470,674 410,444 468,625 Investment in and loans to subsidiaries 4 - - 32,016 30,044 Investment in and loans to associates 5 7,727 53,223 7,852 54,287 Taxation 14,948 11,427 14,919 12,281 Bank and cash 9 246,095 234,031 240,228 226,208

2,205,767 2,103,621 2,192,232 2,105,854

Equity and liabilities

Capital and reserves 814,461 800,521 810,130 800,842 Share capital 10 5,578 5,562 5,633 5,633 Share premium 123,631 123,599 123,742 123,742 Non-distributable reserves 20,568 16,745 20,568 16,745 Accumulated profits 664,684 654,615 660,187 654,722

Non-current liabilities 184,946 371,503 185,148 371,960 Interest-bearing liabilities 11 85,907 274,245 85,907 274,245 Deferred taxation 12 99,039 97,258 99,241 97,715

Current liabilities 1,206,360 931,597 1,196,954 933,052 Trade and other payables 13 788,729 725,194 779,323 726,649 Provisions 14 73,094 76,403 73,094 76,403 Interest-bearing liabilities 11 344,537 129,606 344,537 129,606 Forward exchange contracts 15 - 394 - 394

2,205,767 2,103,621 2,192,232 2,105,854

Net asset value per share (cents) 168.4 166.3

60 Comair Integrated Annual Report 2012 Statements of Comprehensive Income as at 30 June 2012

Group Company

2012 2011 2012 2011 Note R‘000 R‘000 R‘000 R‘000

Revenue 16 4,162,938 3,587,754 4,136,449 3,577,678 Operating expenses (3,974,163) (3,311,147) (3,950,231) (3,409,330)

Operating profit before depreciation, 17 188,775 276,607 186,218 168,348 impairment and loss on sale of assets Depreciation (153,270) (158,835) (152,989) (158,835) Impairment (4,049) - (4,049) - Loss on sale of assets (10,669) - (10,669) -

Profit from operations 20,787 117,772 18,511 9,513 Interest income 8,200 17,545 7,914 17,123 Interest expense 18 (19,433) (35,255) (19,433) (35,255) Dividend income - 5,639 - 114,175 Share of profit of associates 5 1,329 762 - -

Profit before taxation 10,883 106,463 6,992 105,556 Taxation 19 (3,202) (29,466) (1,527) (28,554)

Profit for the year 7,681 76,997 5,465 77,002

Other comprehensive profit/(loss) Realised profit/(unrealised loss) due to change in fair value of cash flow hedge net of 395 (511) 395 (511) taxation

Total comprehensive income for the year attributable to equity holders of the parent 8,076 76,486 5,860 76,491

Earnings per share (cents) 20 1.6 15.9 Diluted earnings per share (cents) 20 1.6 15.9

The empires of the future are the empires of the mind. Winston Churchill 61 Statements of Changes in Equity for the year ended 30 June 2012

Share-based Share Share Hedging Accumulated payment Total capital premium reserve profit reserve

R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Group

Balance at 1 July 2010 5,441 123,356 13,712 116 582,650 725,275 BEE share-based payments - - 3,428 - - 3,428 Total comprehensive (loss)/income for the year - - - (511) 76,997 76,486 Dividend paid - - - - (23,598) (23,598) Shares sold by Share Trust 121 243 - - 18,566 18,930 Balance at 30 June 2011 5,562 123,599 17,140 (395) 654,615 800,521 BEE share-based payments - - 3,428 - - 3,428 Total comprehensive income for the year - - - 395 7,681 8,076 Shares sold by Share Trust 16 32 - - 2,388 2,436 Balance at 30 June 2012 5,578 123,631 20,568 - 664,684 814,461

Company Balance at 1 July 2010 5,633 123,742 13,712 116 602,244 745,447 BEE share-based payments - - 3,428 - - 3,428 Total comprehensive (loss)/income for the year - - - (511) 77,002 76,491 Dividend paid - - - - (24,524) (24,524) Balance at 30 June 2011 5,633 123,742 17,140 (395) 654,722 800,842 BEE share-based payments - - 3,428 - - 3,428 Total comprehensive income for the year - - - 395 5,465 5,860 Balance at 30 June 2012 5,633 123,742 20,568 - 660,187 810,130

62 Comair Integrated Annual Report 2012 Statements of Cash Flow for the year ended 30 June 2012

Group Company

2012 2011 2012 2011 Note R‘000 R‘000 R‘000 R‘000

Cash from operating activities 273,226 112,078 278,560 115,685 Cash receipts from customers 4,204,413 3,464,214 4,194,630 3,456,109 Cash paid to suppliers and employees (3,914,983) (3,271,053) (3,901,913) (3,366,399) Cash generated by operations 21 289,430 193,161 292,717 89,710 Interest paid (19,433) (35,255) (19,433) (35,255) Interest received 8,200 17,545 7,914 17,123 Dividend received - 5,639 - 114,175 Taxation paid 22 (4,971) (45,414) (2,638) (45,544) Cash available from operating activities 273,226 135,676 278,560 140,209 Dividend paid - (23,598) - (24,524)

Cash utilised in investing activities (134,388) (135,564) (135,331) (128,065) Additions to property, plant and equipment (145,099) (301,095) (142,626) (300,251) Additions to intangible assets (42,744) - (42,744) - Proceeds on disposal of property, plant and equipment 7,020 - 6,418 - Payment on acquisition of businesses 23 - (2,568) - (2,568) Decrease in loan to share incentive trust - - 2,175 5,996 Sale of preference shares - 153,000 - 153,000 (Increase)/decrease in subsidiaries’ loans 4 - - (4,989) 659 Decrease in associates’ loans 5 46,435 15,099 46,435 15,099

Cash utilised in financing activities (126,774) (116,760) (129,210) (135,690) Shares sold by Share Trust 2,436 18,930 - - Repayment of interest-bearing liabilities (129,210) (135,690) (129,210) (135,690)

Net increase/(decrease) in cash and cash equivalents 12,064 (140,246) 14,020 (148,070) Cash and cash equivalents at the beginning of the year 234,031 374,277 226,208 374,278 Cash and cash equivalents at the end of the year 246,095 234,031 240,228 226,208

The empires of the future are the empires of the mind. Winston Churchill 63 Segmental Report for the year ended 30 June 2012

Airline Non-airline Total R’000 R’000 R’000

30 June 2012

Revenue 4,076,004 86,934 4,162,938

Operating profit before depreciation, impairment and loss on sale of assets 169,705 19,070 188,775 Loss on sale of asset (10,669) - (10,669) Impairment (4,049) - (4,049) Depreciation (148,030) (5,240) (153,270) Profit before interest, dividend and taxation 6,957 13,830 20,787

Segmental assets and liabilities Segmental assets 2,039,582 166,185 2,205,767 Segmental interest-bearing liabilities (378,072) (52,372) (430,444) Other segmental liabilities (917,178) (43,684) (960,862) Segmental net asset value 744,332 70,129 814,461 Segmental capital additions (excluding borrowing costs capitalised) during the year 305,131 3,046 308,177

30 June 2011

Revenue 3,538,766 49,988 3,587,754

Operating profit before depreciation 261,492 15,115 276,607 Depreciation (155,859) (2,976) (158,835) Profit before interest, dividend and taxation 105,633 12,139 117,772

Segmental assets and liabilities Segmental assets 1,991,594 112,027 2,103,621 Segmental interest-bearing liabilities (342,752) (61,099) (403,851) Other segmental liabilities (859,169) (40,080) (899,249) Segmental net asset value 789,673 10,848 800,521 Segmental capital additions (excluding borrowing costs capitalised) during the year 377,722 31,776 409,498

Comair predominately operates within South Africa and as a result no geographic segmental report is presented. Revenue earned from flights other than South Africa is generated from assets in control of the South African operation. Inter-segmental revenue is not material and has therefore not been presented. 64 Comair Integrated Annual Report 2012 Accounting Policies

Principal accounting policies Business combinations

The annual financial statements are presented in South African Rands The Group accounts for business combinations using the acquisition as it is the currency of the economic environment in which the Group method of accounting. The cost of the business combination is measured operates. as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the The annual financial statements are prepared in accordance with business combination are expensed as incurred, except the costs to issue International Financial Reporting Standards (“IFRS”), as well as the debt which are amortised as part of the effective interest and costs to AC 500 standards as issued by the Accounting Practices Board in terms issue equity which are included in equity. of the Listings Requirements of the JSE Limited and the Companies Act of South Africa (Act No. 71 of 2008). The annual financial statements have Contingent consideration is included in the cost of the combination at fair been prepared on the historical cost basis, except for the measurement value as at the date of acquisition. Subsequent changes to the assets, of certain financial instruments at fair value, and incorporate the principle liabilities or equity which arise as a result of the contingent consideration accounting policies listed below. are not affected against goodwill, unless they are valid measurement period adjustments. Except for the adoption of the new and revised accounting standards, the principle accounting policies of the Group are consistent with those The acquiree’s identifiable assets, liabilities and contingent liabilities, applied in the audited consolidated financial statements for the year which meet the recognition conditions of IFRS 3 Business Combinations, ended 30 June 2011. are recognised at their fair values at acquisition date, except for non- current assets (or disposal group) that are classified as held-for-sale Adoption of standards and interpretations in accordance with IFRS 5 Non-current Assets Held-For-Sale and effective in 2012 discontinued operations, which are recognised at fair value less costs to sell.

No new standards were adopted during the current financial year. A full Contingent liabilities are only included in the identifiable assets and list of standards that will become effective in the next financial year are liabilities of the acquiree where there is a present obligation at acquisition disclosed in Note 29. date.

Principles of consolidation On acquisition, the Group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is The consolidated annual financial statements incorporate the annual inappropriate for Group purposes. This excludes lease agreements and financial statements of the Company and all entities, including special insurance contracts, whose classification remains as per their inception purpose entities, which are controlled by the Company. date.

Control exists when the Company has the power to govern the financial Non-controlling interest arising from a business combination is measured and operating policies of an entity so as to obtain benefits from its either at their share of the fair value of the assets and liabilities of the activities. acquiree or at fair value. The treatment is not an accounting policy choice, but is selected for each individual business combination, and disclosed in The results of subsidiaries are included in the consolidated annual the note for business combinations. financial statements from the effective date of acquisition to the effective date of disposal. In cases where the Group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value All intra-group transactions, balances, income and expenses are as at acquisition date. The measurement to fair value is included in profit eliminated in full on consolidation. or loss for the year. Where the existing shareholding was classified as an

The empires of the future are the empires of the mind. Winston Churchill 65 Accounting Policies (continued)

available-for-sale financial asset, the cumulative fair value adjustments eliminated on consolidation, whilst the Group’s share of inter-company recognised previously to other comprehensive income and accumulated losses is only eliminated if the transaction does not provide evidence in equity are recognised in profit or loss as a reclassification adjustment. of impairment of the asset transferred. Investments in associates are disclosed as the initial investment plus the aggregate of loans made to the Goodwill is determined as the consideration paid, plus the fair value of associate plus the Group’s aggregate share of post-acquisition equity. The any shareholding held prior to obtaining control, plus non-controlling investment in associates is accounted for at cost in the Company’s books. interest and less the fair value of the identifiable assets and liabilities of the acquiree. Joint ventures

Subsidiaries A joint venture is an entity over which the Group has joint control. Joint control is the contractually agreed sharing of control over an entity, and Subsidiaries are companies and entities over which the Company has exists only when the strategic financial and operating decisions relating to the ability to control the financial and operating activities so as to obtain the activity require the unanimous consent of the parties sharing control. benefit from their activities. Investments in subsidiaries of the Company The Group has elected to recognise its interest in jointly controlled entities are carried at cost less any accumulated impairment. using the equity method. Under the equity method, interests in jointly controlled entities are carried in the consolidated statement of financial The cost of an investment in a subsidiary is the aggregate of the fair value, position at cost adjusted for post-acquisition changes in the Group’s share at the date of exchange, of assets given, liabilities incurred or assumed, of net assets of the jointly controlled entity, less any impairment losses. and equity instruments issued by the Company. The Group’s share of movements in the joint venture’s other An adjustment to the cost of a business combination contingent on future comprehensive income is recognised in other comprehensive income. events is included in the profit or loss of the combination if the adjustment The Group’s share of the aggregate loss in any joint venture is limited is probable and can be measured reliably. 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 Identifiable assets, liabilities and contingent liabilities acquired are initially of inter-company gains is eliminated on consolidation, whilst the Group’s measured at their fair values at the date of acquisition. share of inter-company losses is only eliminated if the transaction does not provide evidence of impairment of the asset transferred. Investments The Group Share Incentive Trust is included in the consolidated financial in joint ventures are disclosed as the initial investment plus aggregate of statements as a subsidiary. loans made to the associate plus the holding company’s aggregate share of post-acquisition equity. Associate companies Property, plant and equipment Associate companies are those entities which are not subsidiaries or joint ventures, in which the Group has the ability to exercise a significant Freehold property, aircraft and related equipment, vehicles, furniture, influence and holds a long-term equity interest. computers and flight simulator equipment are depreciated on a systematic basis on the straight-line method, which is estimated to depreciate the Associate companies are accounted for on the equity method. Equity assets to their anticipated residual values on a component approach over accounted income, which is included in the carrying value of the their planned useful lives. Land is not depreciated. investment, represents the Group’s proportionate share of the associate companies’ post-acquisition reserves after accounting for dividends Property, plant and equipment are stated at cost less accumulated payable by those associates. Any difference between the cost of depreciation and impairment. acquisition and the Group’s share of identifiable net assets is classified as goodwill and included in the cost of the investment. The acquisition cost Cost includes expenditure that is directly attributable to the acquisition of is net of impairment. On acquisition date is classified as goodwill and is the assets. Subsequent costs are included in the asset’s carrying value or included in the investment. recognised as a separate asset as appropriate, only when it is probable that future economic benefits associated with the specific asset will flow The Group’s share of movements in the associates other comprehensive to the Group and costs can be measured reliably. The carrying values income is recognised in other comprehensive income. The Group’s share are assessed at each reporting date and only written down if there are of the aggregate loss in any associate is limited to its net investment in the impairments in value. The useful life depreciation method and residual associate unless the Group has incurred an obligation or made payments values are assessed at the end of each reporting period and revised if on the associate’s behalf. The Group’s share of inter-company gains is necessary.

66 Comair Integrated Annual Report 2012 Depreciation rates for property plant and equipment any subsequent accumulated impairment losses. Revaluations are made Freehold property 2% with sufficient regularity such that the carrying amount does not differ Motor vehicles 20% materially from that which would be determined using fair value at the Furniture and equipment 10% end of the reporting period. Computer equipment 20 to 50% Second-hand flight simulator equipment 20% Any increase in the carrying amount of an intangible asset, as a result of a New simulator equipment 7% revaluation, is credited to other comprehensive income and accumulated Leasehold improvements Life of the lease agreement in the revaluation surplus in equity. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset Aircraft previously recognised in profit or loss.

Aircraft are initially recognised at spot rate at date of purchase. The Any decrease in the carrying amount of an intangible asset, as a result carrying values of aircraft are assessed annually for impairment. Aircraft of a revaluation, is recognised in profit or loss in the current period. The modifications are capitalised only to the extent that they materially improve decrease is debited to other comprehensive income to the extent of any the value of the aircraft from which further future economic benefits are credit balance existing in the revaluation surplus in respect of that asset. expected to flow. Maintenance and repairs which neither materially or appreciably prolong their useful lives are charged against income. C and An intangible asset is regarded as having an indefinite useful life when, D Checks are capitalised and expensed over their useful lives. The gain based on all relevant factors, there is no forseeable limit to the period over or loss on disposal of an asset is determined as the difference between which the asset is expected to generate net cash inflows. Amortisation the sales proceeds and the carrying amount of the asset and recognised is not provided for these intangible assets, but they are tested for in the statements of comprehensive income. The aircraft residual values impairment annually and whenever there is an indication that the asset are between 0 and 10%. may be impaired. For all other intangible assets amortisation is provided on a straight-line basis over their useful life. Depreciation rates for aircraft Aircraft and related equipment 4 to 20% The amortisation period and the amortisation method for intangible assets C Checks 18 months are reviewed at the end of every period. Reassessing the useful life of an D Checks 72 months intangible asset with a finite useful life after it was classified as indefinite Intangible assets 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. An intangible asset is recognised when: Internally generated brands, mastheads, publishing titles, customer lists • It is probable that the expected future economic benefits that are and items similar in substance are not recognised as intangible assets. attributable to the asset will flow to the entity; and • The cost of the asset can be measured reliably. Amortisation is provided to write down the intangible assets, on a straight- line basis, to their residual values as follows: Intangible assets are initially recognised at cost. Internally-generated intangible assets: research and An intangible asset arising from development (or from the development development expenditure phase of an internal project) is recognised when: Costs associated with developing and maintaining computer software programmes are recognised as expenses when incurred. Costs that • It is technically feasible to complete the asset so that it will be are directly associated with the development of identifiable and unique available for use or sale; software products controlled by the Group and that will probably generate • There is an intention to complete and use or sell it.; economic benefits exceeding costs beyond one year, are recognised as • There is an ability to use or sell it; intangible assets. Costs include the software development employee costs • It will generate probable future economic benefits; and an appropriate portion of relevant overheads. Amortisation is charged • There are available technical, financial and other resources to on a straight-line basis over their estimated useful lives of five years. complete the development and to use or sell the asset; and • The expenditure attributable to the asset during its development can be measured reliably. Pre-delivery payments

Aircraft pre-delivery payments and security deposits are capitalised to Intangible assets are carried at revalued amount, being fair value at the property, plant and equipment once all conditions precedent to the legal date of revaluation less any subsequent accumulated amortisation and

The empires of the future are the empires of the mind. Winston Churchill 67 Accounting Policies (continued)

agreements are met and construction of the aircraft has begun. Prior equity instrument in accordance with the substance of the contractual to being capitalised to property, plant and equipment, aircraft security arrangement. deposits are accounted for as deposits in other receivables. Aircraft pre-delivery payments and security deposits are not depreciated. Upon Financial assets and financial liabilities are recognised on the Group’s delivery of the relevant aircraft the pre-delivery payments are transferred statement of financial position when the Group becomes party to the to the cost of the aircraft. contractual provisions of the instrument.

Fair value determination Goodwill The fair values of quoted investments are based on current bid prices. If Goodwill represents the excess of the cost of an acquisition over the fair the market for a financial asset is not active (and for unlisted securities), value of the Group’s share of the net identifiable assets of the acquired the Group establishes fair value by using valuation techniques. These subsidiary at the date of acquisition. Goodwill is tested at reporting date include the use of recent arm’s length transactions, reference to other for impairment and carried at cost less accumulated impairment losses. instruments that are substantially the same, discounted cash flow Impairment losses on goodwill are not reversed. Gains and losses on the analysis, and option pricing models making maximum use of market disposal of an entity include the carrying amount of goodwill relating to inputs and relying as little as possible on entity-specific inputs. the entity sold. Derecognition Finance leases and instalment sale agreements – lessee 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 Leases, whereby the lessor provides finance to the Group and where the contractual rights that comprise the financial asset. In derecognition, Group assumes substantially all the benefits and risks of ownership, are the difference between the carrying amount of the financial asset and classified as finance leases. The amount capitalised at inception of the proceeds receivable and any prior adjustment to reflect fair value that had lease is the lower of the fair value of the leased property and the present been reported in other comprehensive income are included in profit or value of the minimum lease payment, the current interest rate is used loss. Financial liabilities (or a portion thereof) are derecognised when the to discount the minimum payments to present value. Assets acquired obligation specified in the contract is discharged, cancelled or expires. in terms of finance leases are capitalised and depreciated to residual On derecognition, the difference between the carrying amount and the realisable value over the shorter of the lease period or the useful life of financial liability, including related unamortised costs, and amount paid the asset. for it are included in profit or loss.

The capital element of future obligations under leases is included as Loans to/(from) Group companies a liability in the statement of financial position. Each lease payment is allocated between the liability and finance charges so as to achieve These include loans to subsidiaries, associates and joint ventures and are a constant rate on the finance balance outstanding. The interest recognised initially at fair value plus direct transaction costs. Subsequently element of the instalments is charged against income over the these loans are measured at amortised cost using the effective interest lease period. rate method, less any impairment loss recognised to reflect irrecoverable amounts. Operating leases – lessee On loans receivable, an impairment loss is recognised in profit or loss Leases of assets to the Group under which all risks and rewards of when there is objective evidence that it is impaired. The impairment is ownership are effectively retained by the lessor, are classified as operating measured as the difference between the instrument’s carrying amount leases. Payments made under operating leases are charged against and the present value of estimated future cash flows discounted at the income on a straight-line basis over the period of the lease. A straight-line effective interest rate computed at initial recognition. Impairment losses asset/liability is raised for the difference between the leased payment and are reversed in subsequent periods when an increase in the instrument’s the lease expense. recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying Financial instruments amount of the instrument at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment Initial recognition not been recognised. Loans to/(from) Group companies are classified as loans and receivables. The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an

68 Comair Integrated Annual Report 2012 Trade and other receivables Other financial liabilities are measured initially at fair value less transaction costs and subsequently at amortised cost, using the effective interest rate Trade receivables are measured at initial recognition at fair value plus method. transaction costs, and are subsequently measured at amortised cost Derivatives using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when Derivative financial instruments, which are not designated as hedging there is objective evidence that the asset is impaired. The allowance instruments, consist of foreign exchange contracts and are initially recognised is measured as the difference between the asset’s carrying measured at fair value on the contract date, and are re-measured to amount and the present value of estimated future cash flows discounted fair value at subsequent reporting dates. Derivatives embedded in other at the effective interest rate computed at initial recognition. financial instruments or other non-financial host contracts are treated as separate derivatives when their risks and characteristics are not closely The carrying amount of the asset is reduced through the use of an related to those of the host contract and the host contract is not carried at allowance account, and the amount of the loss is recognised in the fair value with unrealised gains or losses reported in profit or loss. Changes statement of comprehensive income within operating expenses. When in the fair value of derivative financial instruments are recognised in profit a trade receivable is uncollectable, it is written off against the allowance or loss as they arise. Derivatives are classified as financial assets at fair account for trade receivables. Subsequent recoveries of amounts value through profit or loss. previously written off are credited against operating expenses in the statement of comprehensive income. Hedge accounting Trade and other receivables are classified as loans and receivables. The Group designates certain derivatives as either: Trade and other payables • Hedges of the fair value of recognised assets or liabilities or a firm Trade payables are initially measured at fair value less transaction costs, commitment (fair value hedge); and are subsequently measured at amortised cost, using the effective • Hedges of a particular risk associated with a recognised asset or interest rate method. liability or a highly probable forecast transaction (cash flow hedge); or Cash and cash equivalents • Hedges of a net investment in a foreign operation (net investment hedge). Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term, highly liquid investments that are readily convertible The Group documents, at the inception of the transaction, the relationship to a known amount of cash and are subject to an insignificant risk of between hedging instruments and hedged items, as well as its risk changes in value. These are initially recorded at fair value, including management objectives and strategy for undertaking various hedging transaction costs and subsequently measured at amortised cost, using transactions. The Group also documents its assessment, both at hedge the effective interest rate method. These instruments are classified as inception and on an ongoing basis, of whether the derivatives that are loans and receivables. used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Bank overdraft and borrowings The fair values of various derivative instruments used for hedging Bank overdrafts and borrowings are initially measured at fair value less purposes are disclosed in Note 15. transaction costs, and are subsequently measured at amortised cost, which include all interest bearing liabilities, using the effective interest The full fair value of a hedging derivative is classified as a non-current rate method. Any difference between the proceeds (net of transaction asset or liability when the remaining hedged item is more than 12 months costs) and the settlement or redemption of borrowings is recognised over and as a current asset or liability when the remaining maturity of the the term of the borrowings in accordance with the Group’s accounting hedged item is less than 12 months. policy for borrowing costs. Cash flow hedge Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other The dividends on these preference shares are recognised in the statement comprehensive income. The gain or loss relating to the ineffective portion of other comprehensive income as interest expense. is recognised immediately in the statement of comprehensive income within profit or loss.

The empires of the future are the empires of the mind. Winston Churchill 69 Accounting Policies (continued)

The amount of gains/losses in other comprehenisive income is reclassified with a corresponding increase in liabilities. The fair value is initially to profit or loss in the period when the hedged item affects profit or measured at grant date and expensed over the period during which the loss. employee becomes unconditionally entitled to payment. Management also reassesses the fair value of the amount payable at each reporting However, when the forecast transaction that is hedged results in date, until vesting, by considering the number of options expected to the recognition of a non-financial asset (for example, inventory ultimately vest. Share appreciation right options that expire or are forfeited or fixed assets) the gains and losses previously deferred in the are reversed against the liability raised with an adjustment to profit or loss. statements of comprehensive income are transferred from other The fair value of the instruments granted is measured against market comprehensive income and included in the initial measurement of performance of the share price. 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 The liability is measured at each reporting date and at settlement date, fixed assets. with all movements in fair value being recognised in profit or loss.

If a legally enforceable right exists to set off recognised amounts of Where options are issued that provide the holder the choice of settlement financial assets and liabilities and there is an intention to settle net, the (equity or cash) these are accounted for as a compound financial relevant financial assets and liabilities are offset. instrument. First the fair value of the debt component is determined and then the difference between the value of the compound instrument Where the impact of discounting is not considered to be material, and the fair value of the debt component is recognised as the equity financial instruments carried at amortised costs are not discounted due component. to the fact that the fair value is adjusted for transaction costs on the initial recognition. Equity settled

Inventory Convertible “A” class shares and options were issued in terms of a black economic empowerment deal. The fair value of the equity instrument is Inventory is stated at the lower of cost and net realisable values. Cost measured at grant date using the Black Scholes model and recognised is determined on the first-in-first-out basis. Net realisable value is the as an expense with corresponding increase in equity over the vesting estimated selling price in the ordinary course of business less the period of the share-based payment. Management reassesses the estimated costs of completion and the estimated costs necessary to make number of options expected to ultimately vest based on non-market the sale. The cost of inventories comprises all costs of purchase, costs of vesting conditions. The impact of the revision to the original estimates, conversion and other costs incurred in bringing the inventories to their if any, is recognised on the statements of comprehensive income, with present location and condition. a corresponding adjustment to equity. Proceeds received net of any directly attributable transaction costs are credited to share capital and Share capital share premium when the options are exercised. Subsequent to vesting, management no longer makes any adjustments to the cost of the share- An equity instrument is any contract that evidences a residual interest based payments recognised. Options that expire or are forfeited are in the assets of an entity after deducting all of its liabilities. Ordinary removed from equity with a corresponding adjustment to the statements shares are classified as equity. If the Group re-acquires its own equity of comprehensive income. instruments, the consideration paid, including any directly attributable incremental costs (net of income taxes) on those instruments, is deducted Provisions from equity until the shares are cancelled or reissued. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of “The amount of a provision is the present value of the expenditure the Group’s own equity instruments. Consideration paid or received shall expected to be required to settle the obligation. Where some or all be recognised directly in equity. of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised Incremental costs directly attributable to the issue of new shares or when, and only when, it is virtually certain that reimbursement options are shown in equity as a deduction, net of tax, from the proceeds. will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised Share-based payment transactions for the reimbursement shall not exceed the amount of the provision. Provisions are not recognised for future operating losses. If an Cash settled entity has a contract that is onerous, the present obligation Options are granted to certain employees in the Group. The fair value under the contract shall be recognised and measured as a of the amount payable to the employee is recognised as an expense provision.

70 Comair Integrated Annual Report 2012 Provisions were raised and management determined an estimate based differences and deferred tax assets are recognised to the extent that it on the information available. Additional disclosure of these estimates of is probable that taxable profits will be available against which deductible provisions are included in Note 14 – Provisions. temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill (or Revenue recognition 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 nor the accounting profit. Revenue comprises all airline-related and non-airline revenue earned. Revenue arising from the provision of transportation services to Deferred tax liabilities are recognised for taxable temporary differences passengers is recognised on an accrual basis in the period in which arising from investments in subsidiaries and associates, and interests in the services are rendered and the passenger has flown. Unflown ticket joint venture, except where the Group is able to control the reversal of the revenue is recognised as a liability until such time as the passenger has temporary differences and it is probable that the temporary difference will flown. Revenue is measured at the fair value of consideration received not reverse in the foreseeable future. The carrying amount of deferred tax and is exclusive of VAT, discounts received and returns. 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 Non-airline revenue relates to services relating the hiring of simulator all or part of the asset to be recovered. equipment and the sale of holiday packages.

Deferred tax assets and liabilities are measured at the tax rates that are International Loyalty Programme revenue is income received from British expected to apply to the period when the asset is realised or the liability Airways Executive Club members using the Group’s services and is is settled, based on tax rates (and tax laws) that have been enacted or recognised on the accrual basis in profit or loss. substantively enacted by the reporting date.

Interest is recognised on the accrual basis in profit or loss using the effective interest rate method. Borrowing costs

Dividends are recognised in profit or loss when the Group’s right to receive Borrowing costs that are directly attributable to the acquisition, payment has been established. construction or production of a qualifying asset (aircraft, currently the pre-delivery payments on the aircraft) are capitalised as part of the cost Taxation of that asset until such time as the asset is ready for its intended use. The amount of borrowing costs eligible for capitalisation is determined as follows: Current tax and deferred taxes are recognised as income or an expense Actual borrowing costs on funds specifically borrowed for the purpose and are included in profit or loss for the period, except to the extent that of obtaining a qualifying asset less any temporary investment of those the tax arises from: borrowings.

• A transaction or event which is recognised, in the same or a Weighted average of the borrowing costs applicable to the Group on different period, directly in other comprehensive income; or funds generally borrowed for the purpose of obtaining a qualifying asset. • A business combination. The borrowing costs capitalised do not exceed the total borrowing costs incurred. The borrowing costs include interest calculated using the Current tax and deferred taxes are charged or credited directly to other effective interest rate method and exchange differences arising from comprehensive income if the tax relates to items that are credited or foreign currency borrowing to the extent that they are regarded as an charged in the same, or a different period, directly to other comprehensive adjustment to interest costs. income.

Current tax is calculated at a rate of 28% in accordance with the South The capitalisation of borrowing costs commences when: African Income Tax Act 1962 (Act No. 58 of 1962). • Expenditures for the asset have occurred; Deferred taxation • Borrowing costs have been incurred; and • Activities that are necessary to prepare the asset for its intended use or sale are in progress. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial Capitalisation is suspended during extended periods in which active statements and the corresponding tax basis used in the computation development is interrupted. of taxable profit, and is accounted for using the comprehensive liability method. Deferred tax liabilities are recognised for all taxable temporary

The empires of the future are the empires of the mind. Winston Churchill 71 Accounting Policies (continued)

Capitalisation ceases when substantially all the activities necessary to If there is any indication that an asset may be impaired, the recoverable prepare the qualifying asset for its intended use or sale are complete. 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 All other borrowing costs are recognised as an expense in the period in the cash-generating unit to which the asset belongs is determined. which they are incurred. The recoverable amount of an asset or a cash-generating unit is the higher Foreign currency 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 Foreign currency transactions are recorded at the exchange rate ruling on impairment loss. the transaction dates. Monetary assets and liabilities designated in foreign currencies are translated at rates of exchange ruling at the reporting date. An impairment loss of assets carried at cost less any accumulated Profits or losses arising on translation of foreign currency transactions are depreciation or amortisation is recognised immediately in profit or loss. included in profit or loss.

Goodwill acquired in a business combination is, from the acquisition Non-monetary assets and liabilities are translated at the rate at the date date, allocated to each of the cash-generating units, or groups of cash- of acquisition. Exchange differences on translating monetary assets generating units, that are expected to benefit from the synergies of the and liabilities at year end spot rates are recognised in the statements of combination. comprehensive income. Exchange differences on non-monetary assets classified as available for sale financial instruments are recognised as part An impairment loss is recognised for cash-generating units if the of the fair value movement in other comprehensive income. 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 Short-term employee benefits the assets of the unit in the following order:

The cost of short-term employee benefits, (those payable within • First, to reduce the carrying amount of any goodwill allocated to the 12 months after the service is rendered, such as paid vacation leave and cash-generating unit; and bonuses), are recognised in the period in which the service is rendered • Then, to the other assets of the unit, pro rata on the basis of the and are not discounted. The expected cost of compensated absences is carrying amount of each asset in the unit. recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the An entity assesses at each reporting date whether there is any indication absence occurs. The expected cost of profit sharing and bonus payments that an impairment loss recognised in prior periods for assets other than is recognised as an expense when there is a legal or constructive obligation goodwill may no longer exist or may have decreased. If any such indication to make such payments as a result of past performance. exists, the recoverable amounts of those assets are estimated.

Retirement and medical funds The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount Current contributions to the Group’s defined contribution retirement fund that would have been determined had no impairment loss been are based on current salary and are recognised when they fall due. The recognised for the asset in prior periods. Group has no further payment obligations once the payments have been made. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately Impairment in profit or loss.

The Group assesses, at the end of each reporting period, whether there Accounting estimates and judgements is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. Sources of estimation uncertainty

Irrespective of whether there is any indication of impairment, the Group In preparing the annual financial statements, management is required to also tests goodwill acquired in a business combination for impairment on make estimates and assumptions that affect the amounts represented in an annual basis. the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation

72 Comair Integrated Annual Report 2012 of estimates. Actual results in the future could differ from these estimates Borrowing costs which may be material to the annual financial statements. Significant Pre-delivery payment assets are regarded as qualifying assets for the judgements include: purpose of the capitalisation of borrowing costs. Exchange differences arising from foreign currency borrowings, to the extent that they are Asset lives and residual values regarded as an adjustment to interest costs, are capitalised as part of Property, plant and equipment are depreciated over their useful lives borrowing costs as these expenses are considered part of the cost of taking into account residual values, where appropriate. The actual borrowing in foreign currency. 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 Taxation asset lives, factors such as technological innovation, product lifecycles Judgement is required in determining the provision for income taxes and maintenance programmes are taken into account. Residual value due to the complexity of legislation. There are many transactions and assessments consider issues such as future market conditions, the calculations for which the ultimate taxation determination is uncertain remaining life of the asset and projected disposal values. during the ordinary course of business. The Group recognises liabilities for anticipated taxation audit issues based on estimates of whether additional Future cash flows expected to be generated by the asset are projected, taxes will be due. Where the final taxation outcome of these matters is taking into account market conditions and the expected useful lives of different from the amounts that were initially recorded, such differences the assets. The present value of these cash flows, determined using an will impact the income taxation and deferred taxation provisions in the appropriate discount rate, is compared to the current asset value and, if period in which such determination is made. lower, the assets are impaired to present value. The Group recognises the net future taxation benefit related to deferred Trade and other receivables income taxation assets to the extent that it is probable that the deductible The Group assesses its trade and other receivables for impairment at the temporary differences will reverse in the foreseeable future. Assessing end of each reporting period. In determining whether an impairment loss the recoverability of deferred income taxation assets requires the Group should be recorded in profit or loss, the Group makes judgements as to to make significant estimates related to expectations of future taxable whether there is observable data indicating a measurable decrease in the income. Estimates of future taxable income are based on forecast cash estimated future cash flows from a financial asset. flows from operations and the application of existing taxation laws in each jurisdiction. To the extent that future cash flows and taxable income differ Fair value estimation significantly from estimates, the ability of the Group to realise the net The fair value of financial instruments that are not traded in an active deferred taxation assets recorded at the end of the reporting period could market is determined by using valuation techniques. The Group uses a be impacted. variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Quoted market Recovery of deferred tax assets prices or dealer quotes for similar instruments are used for long-term Management has applied a probability analysis to determine future debt. Other techniques, such as estimated discounted cash flows, are taxable income against which calculated tax losses will be utilised. used to determine fair value for the remaining financial instruments. The fair value of forward foreign exchange contracts is determined using Segmental information quoted forward exchange rates at the end of the reporting period. Operating segments are reported in a manner consistent with the internal reporting privided to the chief operating decision-maker. The chief The carrying value less impairment provision of trade and other operating decision-maker, who is responsible for allocating resources and receivables are assumed to approximate their fair values. The fair value assessing performance of the segments has been identified as the Chief of financial liabilities for disclosure purposes is estimated by discounting Executive Officer. the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. At year end the Group was organised in two main operating segments: 1. Airline Critical judgements in applying the entity’s accounting 2. Non-airline 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.

The empires of the future are the empires of the mind. Winston Churchill 73 Notes to the Annual Financial Statements for the year ended 30 June 2012

Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

1. Property, plant and equipment

Property and buildings Cost 107,942 117,214 55,374 66,190 Accumulated depreciation (6,414) (9,902) (6,414) (9,902) Carrying value 101,528 107,312 48,960 56,288

Leasehold improvements Cost 38,814 - 38,814 - Accumulated depreciation (11,778) - (11,778) - Carrying value 27,036 - 27,036 -

Aircraft and flight simulator equipment Cost 1,506,738 1,535,377 1,506,738 1,535,377 Accumulated impairment (30,559) (26,510) (30,559) (26,510) Accumulated depreciation (619,584) (592,263) (619,584) (592,263) Carrying value 856,595 916,604 856,595 916,604

Vehicles, furniture, equipment and computer equipment Cost 79,628 76,226 78,337 75,382 Accumulated depreciation (52,155) (41,106) (51,784) (41,106) Carrying value 27,473 35,120 26,553 34,276

Pre-delivery payments 419,877 256,321 419,877 256,321

Total property, plant and equipment and pre-delivery payments 1,432,509 1,315,357 1,379,021 1,263,489

- Reconciliation of carrying value

Property and buildings Carrying value at the beginning of the year 107,312 81,912 56,288 30,888 Additions 15,763 29,352 14,219 29,352 Transfer to leasehold improvements (20,128) - (20,128) - Depreciation (1,419) (3,952) (1,419) (3,952) Carrying value at the end of the year 101,528 107,312 48,960 56,288

74 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Leasehold improvements Additions 13,780 - 13,780 - Transfer from property and buildings 20,128 - 20,128 - Depreciation (6,872) - (6,872) - Carrying value at the end of the year 27,036 - 27,036 -

Aircraft and flight simulator equipment Carrying value at the beginning of the year 916,604 887,893 916,604 887,893 Additions 95,173 177,081 95,173 177,081 Disposals (17,086) - (17,086) - Impairment (4,049) - (4,049) - Depreciation (134,047) (148,370) (134,047) (148,370) Carrying value at the end of the year 856,595 916,604 856,595 916,604 - - Vehicles, furniture, equipment and computer equipment Carrying value at the beginning of the year 35,120 22,048 34,276 22,048 Additions 12,629 19,585 11,699 18,741 Transfer to intangible assets (8,771) - (8,771) - Disposals (573) - - - Depreciation (10,932) (6,513) (10,651) (6,513) Carrying value at the end of the year 27,473 35,120 26,553 34,276 - - Pre-delivery payments Carrying value at beginning of year 256,321 - 256,321 - Payments made 128,088 183,480 128,088 183,480 Borrowing costs capitalised 35,468 - 35,468 - Interest capitalised 7,754 - 7,754 - Foreign exchange losses capitalised 27,714 - 27,714 -

Transfer from trade and other receivables (Note 8) - 72,841 - 72,841 Carrying value at the end of year 419,877 256,321 419,877 256,321

Total property, plant and equipment 1,432,509 1,315,357 1,379,021 1,263,489

The empires of the future are the empires of the mind. Winston Churchill 75 Notes to the Annual Financial Statements (continued)

1. Property, plant and equipment (continued)

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 (2011: R107 million).

Instalment sale agreement book values are disclosed under Note 11.

Pre-delivery payments are payments made to the Boeing Company for the eight new Boeing 737-800 aircraft which are scheduled to arrive in South Africa from July 2012. The finance for the aircraft was partly through a rights issue (See Note 10) 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 28. Borrowing costs capitalised to the pre-delivery payments were incurred at a rate of 3.7% on a US$-based facility.

In the current year the Group has sold certain aircraft at a loss. This was an indicator that the remaining aircraft of the same type in the fleet may require impairment. Management provided for an impairment provision on these aircraft based on the fair value less cost to sell.

Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

2. Intangible assets

Computer software Cost capitalised 42,744 - 42,744 - Transfer from property, plant and equipment 8,771 8,771 Carrying value 51,515 - 51,515 -

- Reconciliation of carrying value

Computer software Carrying value at the beginning of the year - - - - Additions 42,744 - 42,744 - Transfer from property, plant and equipment 8,771 - 8,771 - Carrying value at the end of the year 51,515 - 51,515 -

The intangible asset relates to the implementation of Sabre Airline Solutions and was fully operational at the beginning of July 2012 and as a result will be amortised in the next financial year.

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 5,525,864 shares representing 1.1% of shares in issue (prior year: 7,091,864 shares representing 1.5%) at a closing price of 133c (prior year: 239c).

- - 5,579 7,754

76 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000 4. Investments in and loans to subsidiaries

Non-current portion

4.1 Aconcagua 32 Investments (Pty) Ltd 1 ordinary share of R1 at cost (100% shareholding) Investment at cost - - 16,372 16,372 Loan receivable 4,375 1,393

The company is the owner of erf 700, Rhodesfield Township. This is the only asset in the company’s books, valued at R22 million. There are no material liabilities in this company. The share in the company was acquired during May 2008.

4.2 Holiday Travel (Pty) Ltd 1 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 an outbound tour operating company offering holiday packages to destinations outside of South Africa.

Investment at cost - - 2,593 2,558

4.3 Churchill Finance 23 Ltd 2 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.

In 2004 Comair Limited entered into a finance lease with Churchill Finance Services 23 Limited. In terms of the agreement once the lease came to an end, Comair would have an option to purchase the shares in Churchill Finance 23 Limited. In October 2010 the lease came to an end and Comair then owned the three aircraft previously leased. During February 2011 Comair Limited exercised its option to purchase 100% of the shares in Churchill Services 23 Limited for an amount of R10,000. The company is currently being deregistered.

Investment at cost - - 10 10 Total non-current portion - - 23,710 20,693

The empires of the future are the empires of the mind. Winston Churchill 77 Notes to the Annual Financial Statements (continued)

4. Investments in subsidiaries (continued)

Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Current portion 4.4 Alooca Technologies (Pty) Ltd 100 ordinary shares of R1 at cost (100% shareholding)

Loan receivable - - 28,734 29,314

The Company acquired erven 674, 684, 685, 687, 688, 689, 690, 695 and 1040, Rhodesfield Township with funding from Comair Limited. The properties at cost are valued at R30.8 million.

The loan is unsecured, has no fixed repayment terms and is interest free.

4.5 Amber (Pty) Ltd 1 ordinary share of R1 at cost (100% shareholding) 5,549 preference shares at R10,000 per share at cost - - - - Dividend accrued - - - - Subscription to Comair preference shares - - - -

Comair borrowed an amount of R135.49 million from AMB Financial Services (Pty) Ltd in the 1999/2000 financial year.

The capital on this loan was repaid through means of Comair issuing preference shares on 31 May 2004.

The preference shares were issued to Amber (Pty) Ltd, which acquired these shares from AMB.

These shares were redeemed on the 24 February 2011 and the Company is currently being liquidated.

4.6 Kulula Air (Pty) Ltd 90 ordinary shares of R1 at cost (90% shareholding) - - - -

This previously dormant company operates a business lounge situated opposite the Gautrain Station in Sandton. The lounge commenced operations in August 2011. As a result the net asset deficit minorities do not share in accumulated losses therefore minorities are disclosed in the annual financial statements.

Assets were transferred to the building during the year as leasehold improvements. A portion of the leasehold improvements as reflected in Note 1 are for the use of Kulula Air (Pty) Ltd.

78 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Loan receivable - - 3,282 730 The loan is unsecured, has no fixed repayment terms and is interest free. Total current portion - - 32,016 30,044

Total investment in subsidiaries and maximum credit risk - - 55,726 50,737

5. Investment in and loans to associates

5.1 Commuter Handling Services (Pty) Ltd

Comair Limited has a 40% shareholding in Commuter Handling Services (Pty) Ltd, a company in the passenger and ground handling industry.

Carrying value of the investment

Shareholder’s loan 7,852 54,287 7,852 54,287

The loan is unsecured. Interest was charged at prime rates for the year and there are no fixed terms of repayment (2011: prime).

Cumulative post-acquisition equity

Prior year (1,064) (1,813) - -

Current year 939 749 - -

This associate provides passenger handling services to airlines at ACSA- based airports and made an after tax profit of R2.3 million (2011:profit of R1.8 million). The Company is incorporated in South Africa and has a June year end.

5.2 Imperial Air Cargo (Pty) Ltd

Comair Limited has a 30% shareholding in Imperial Air Cargo (Pty) Ltd, a company in the air freight industry.

Carrying value of the investment Shareholder’s loan 15,559 15,559 15,559 15,559 Cumulative post-acquisition equity Prior year (7,232) (7,245) - - Current year 390 13 - - This associate is an air freight company and made an after tax profit of R1.3 million (2011: R42 thousand profit). The company is incorporated in South Africa and has a June year end.

The shareholders loan has been subordinated until such time as the assets fairly valued exceed the liabilities. The loan is unsecured, interest free and there are no fixed repayment terms.

The empires of the future are the empires of the mind. Winston Churchill 79 Notes to the Annual Financial Statements (continued)

5. Investments in and loans to associates (continued)

Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

5.3 Protea Hotel ORT (Pty) Ltd

The Group has a 25% shareholding in Protea Hotel ORT (Pty) Ltd, a company in the hotel industry. The company is incorporated in South Africa and has a June year end. A branded Protea Hotel was built on erf 700 Rhodesfield Township. Comair has no capital commitments in relation to this project. A 99 year lease is in place. Comair does not share in the profits or losses of the Protea Hotel.

Carrying value of the investment - - - -

16,444 61,550 23,411 69,846

Non-current portion 8,717 8,327 15,559 15,559

Current portion 7,727 53,223 7,853 54,287

Total investment and maximum credit risk exposure 16,444 61,550 23,411 69,846

Summarised financial information of associates (aggregated)

Statement of comprehensive income

Revenue 392,318 363,836

Operating profit 14,703 10,629

Net finance charges (5,067) (8,116)

Profit before taxation 9,636 2,513

Taxation (2,713) (2,003)

Profit for the year 6,923 510

Statement of financial position

Assets

Property plant and equipment 127,031 129,150

Deferred tax 8,430 11,675

Net current assets 42,995 33,501

178,456 174,326

Equity and liabilities

Capital and reserves (31,747) (38,139)

Borrowings 210,203 212,465

178,456 174,326

80 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000 6. Goodwill

Gross amount 3,668 - Addition through business combinations - 3,668 Carrying value 3,668 3,668

Refer to Note 23 on business combinations.

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 pretax discount rate of 25% was used. As a result of the acquisition of Holiday Tours (Pty) Ltd, the Group’s footprint into Africa has been enhanced and the synergies that the Group will add has resulted in the recognition of goodwill. The envisaged enhancement should occur in the next three years as the project is still in its infancy. No impairment has occurred in the current financial year.

7. Inventory

Aircraft spares 10,064 5,859 10,064 5,859 Catering equipment and consumables 6,046 5,776 6,046 5,776 Write down of aircraft spares to net realisable value (4,721) (4,721) (4,721) (4,721) 11,389 6,914 11,389 6,914

8. Trade and other receivables

Trade receivables 331,887 282,377 313,132 277,225 Impairment allowance (3,030) - (3,030) - 328,857 282,377 310,102 277,225 Deposits 42,300 46,866 42,300 46,866 Other receivables 58,042 141,431 58,042 144,534 429,199 470,674 410,444 468,625 Maximum exposure to credit risk 368,123 329,243 349,368 329,243

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.

The empires of the future are the empires of the mind. Winston Churchill 81 Notes to the Annual Financial Statements (continued)

8. Trade and other receivables (continued) Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Included in the Group’s trade receivables balance are debtors with a carrying value of R7.1 million (prior year: R4.7 million), which are past due at the reporting date for which the Group has not provided as the amounts are still considered recoverable.

Ageing of past due but not impaired trade receivables

120 days - 4,251 3,056 4,251 3,056

120 days + 2,930 1,630 2,930 1,630

7,181 4,686 7,181 4,686

Ageing of impairment trade receivables

120 days - - - - -

120 days + 3,030 - 3,030 -

3,030 - 3,030 -

Reconciliation of impairment allowance

Opening balance - - - -

Provision impairment raised 3,030 - 3,030 -

3,030 - 3,030 -

9. Cash encumbered

The Group has pledged cash totalling R20 million (prior year: R10 million) in respect of aircraft lease obligations.

10. Share capital

Authorised: 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

82 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Issued: 489,176,471 ordinary shares of 1 cent each 4,892 4,892 4,892 4,892 74,117,647 “A” class shares of 1 cent each 741 741 741 741 Adjustment in respect of consolidation of share trust – 2012: 5,525,864 shares (2011: 7,091,864 shares) (55) (71) - - 5,578 5,562 5,633 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 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.

11. Interest-bearing liabilities

Rand Merchant Bank 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 9.4%. The current instalment is R3.4 million. A Boeing 737-800 simulator serves as collateral covering security (net book value R58.3 million, prior year R62.7 million). 52,372 61,099 52,372 61,099

Investec Limited Aircraft instalment sale agreement payable in 20 quarterly instalments with the last payment due on 20 December 2012. The current instalment is R5.2 million. Interest is charged at a variable rate – currently 7.6%.

One aircraft mortgage serves as collateral covering security net book value R67.6 million, (prior year R69 million). 10,188 29,441 10,188 29,441

The empires of the future are the empires of the mind. Winston Churchill 83 Notes to the Annual Financial Statements (continued)

11. Interest-bearing liabilities (continued) Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Aircraft instalment sale agreement payable in 20 quarterly instalments with the last payment due on 5 June 2013. Interest is charged at a variable rate – currently 7.6%. The current instalment is R5.7 million.

Two aircraft mortgages serve as collateral covering security (net book value R167 million, prior year R164 million). 21,782 41,974 21,782 41,974

Working capital loan: This loan is unsecured and is payable in 20 quarterly instalments with the last payment due on 30 September 2013. Interest is charged at a variable rate – currently 7.6%. The current instalment is R1.7 million. 7,990 13,859 7,990 13,859

Working capital loan: This is a short-term loan and was repaid in full on 24 August 2011. Proceeds from Comair's VAT submission stood as security for this loan. Interest was charged at a rate of 7.9% p.a. - 45,360 - 45,360

Mortgage finance agreement: This loan is payable in 20 quarterly instalments with the last instalment due on 25 June 2014. Comair properties, save for erf 700, Rhodesfield Township, have been pledged as collateral for a mortgage finance loan. A notarial bond of R80 million has been registered against these properties. Interest is charged at a variable rate – currently 10.39%. The current instalment is R4.8 million. 34,409 49,373 34,409 49,373

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$ and earns a variable interest rate payable quarterly – currently 3.8%. The first aircraft is currently scheduled for delivery in July 2012 with the fourth aircraft scheduled for delivery in December 2012. 263,757 108,402 263,757 108,402

Nedbank Aircraft refinance agreement payable in 20 quarterly instalments with the last payment due on 31 December 2014. Interest is charged at a variable rate – currently 9.4%. The current instalment is R4.8 million.

One aircraft mortgage serves as collateral covering security net book value R96 million (prior year R100 million). 38,500 54,343 38,500 54,343

Wesbank An instalment sale facility of R5 million was entered into with Wesbank for the purchase of new vehicles for the Catering Division. Currently seven light delivery vehicles have been purchased. Interest is charged at prime -1%. The current instalment is R38 thousand a month. The last instalment is due in February 2016 (net book value R1.2 million). 1,446 - 1,446 -

84 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Sub-total 430,444 403,851 430,444 403,851 Less short-term portion (344,537) (129,606) (344,537) (129,606) 85,907 274,245 85,907 274,245

Total value of interest-bearing liabilities 430,444 403,851 430,444 403,851 Finance charges 25,584 45,869 25,584 45,869 Total interest-bearing liability commitments 456,028 449,720 456,028 449,720 Total commitments for year one 354,961 155,356 354,961 155,356 Total commitments for year two to five 91,877 285,174 91,877 285,174 Total commitments after year five 9,190 9,190 9,190 9,190

Allocation of present valued amounts 430,444 403,851 430,444 403,851 Capital commitments for year one 344,537 129,606 344,537 129,606 Capital commitments for year two to five 77,228 265,566 77,228 265,566 Capital commitments after year five 8,679 8,679 8,679 8,679

12. Deferred taxation

On temporary differences arising from: Property, plant and equipment 154,501 149,213 154,501 149,213 Staff obligations and accruals (63,094) (69,750) (63,094) (69,750) Prepayments 15,549 19,694 14,966 20,151 Other - (1,899) - (1,899) Assessed losses (7,917) - (7,132) - 99,039 97,258 99,241 97,715

Deferred tax reconciliation Opening balance 97,258 78,463 97,715 78,463 Deferred tax – current 1,781 18,795 1,526 19,252 Closing balance 99,039 97,258 99,241 97,715

Future budgets were reviewed to determine whether adequate future profits are available to utilise the deferred tax asset raised to tax losses.

The empires of the future are the empires of the mind. Winston Churchill 85 Notes to the Annual Financial Statements (continued)

Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

13. Trade and other payables

Trade payables 648,435 526,491 639,029 527,946 Cash-settled share-based payment 35 2,404 35 2,404 Unflown ticket liability 122,629 146,504 122,629 146,504 Other 17,630 49,795 17,630 49,795 788,729 725,194 779,323 726,649

Trade creditor terms vary depending on the agreements. An average of 30 days from statement is fair. Average days outstanding is 40 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.

Unflown ticket liability is all monies received from passengers prior to 30 June 2012 for travel after that date.

14. Provisions

Leave pay provision 41,952 48,806 41,952 48,806 Opening balance 48,806 41,056 48,806 41,056 - Raised 6,000 66,887 6,000 66,887 - Utilised (12,854) (59,137) (12,854) (59,137)

Bonus provision 31,142 27,597 31,142 27,597 Opening balance 27,597 21,551 27,597 21,551 - Raised 35,567 66,887 35,567 66,887 - Utilised (32,022) (60,841) (32,022) (60,841) 73,094 76,403 73,094 76,403

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.

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 September. 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 (“FECs”) 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 risk 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.

86 Comair Integrated Annual Report 2012 Identification of financial instruments Financial At fair value liabilities at through Loans and amortised Non-financial Fair value profit/loss receivables cost instruments Total

2012 (R’000) Assets Non-current assets Property, plant and equipment - - - - 1,432,509 1,432,509 Intangible assets - - - - 51,515 51,515 Investments in and loans to subsidiaries 8,717 - 8,717 - - 8,717 Goodwill - - - - 3,668 3,668

Current assets Inventories - - - - 11,389 11,389 Trade and other receivables 368,123 - 368,123 - 61,076 429,199 Investments in and loans to subsidiaries 7,727 - 7,727 - - 7,727 Taxation - - - - 14,948 14,948 Bank and cash 246,095 - 246,095 - - 246,095 Total assets 630,662 - 630,662 - 1,575,105 2,205,767

Equity and liabilities Capital and reserves Share capital - - - - 5,578 5,578 Share premium - - - - 123,631 123,631 Non-distributable reserves - - - - 20,568 20,568 Accumulated profit - - - - 664,684 664,684

Non-current liabilities Interest-bearing liabilities 85,907 - - 85,907 - 85,907 Deferred taxation - - - - 99,039 99,039

Current liabilities Trade and other payables 666,100 - - 666,100 122,629 788,729 Provisions - - - - 73,094 73,094 Interest-bearing liabilities 344,537 - - 344,537 - 344,537 Total liabilities 1,096,544 - - 1,096,544 1,109,223 2,205,767

The empires of the future are the empires of the mind. Winston Churchill 87 Notes to the Annual Financial Statements (continued)

15. Financial risk management and financial instruments (continued)

Financial At fair value liabilities at through Loans and amortised Non-financial Fair value profit/loss receivables cost instruments Total

2011 (R'000) Assets Non-current assets Property, plant and equipment - - - - 1,315,357 1,315,357 Investments in and loans to subsidiaries 8,327 - 8,327 - - 8,327 Goodwill - - - - 3,668 3,668

Current assets Inventories - - - - 6,914 6,914 Trade and other receivables 329,243 - 329,243 - 141,431 470,674 Investments in associates and joint ventures 53,223 - 53,223 - - 53,223 Taxation - - - - 11,427 11,427 Bank and cash 234,031 - 234,031 - - 234,031 Total assets 624,824 - 624,824 - 1,478,797 2,103,621

Equity and liabilities Capital and reserves Share capital - - - - 5,562 5,562 Share premium - - - - 123,599 123,599 Non-distributable reserves - - - - 16,745 16,745 Accumulated profit - - - - 654,615 654,615

Non-current liabilities Interest-bearing liabilities 274,245 - - 274,245 - 274,245 Deferred taxation - - - - 97,258 97,258

Current liabilities Trade and other payables 578,690 - - 578,690 146,504 725,194 Provisions - - - - 76,403 76,403 Interest-bearing liabilities 129,606 - - 129,606 - 129,606 FEC (level 2) 394 394 - - - 394 Total liabilities 982,935 394 - 982,541 1,120,686 2,103,621

Financial assets are substantially the same for the Group and the Company, however loans to subsidiaries amount to R55.7 million (2011: R48.1 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 having a mixture of fixed and floating rates on long-term loans and placing surplus funds in investments that yield a market-linked return.

88 Comair Integrated Annual Report 2012 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 entered into a foreign denominated loan during the 2011 financial year. 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.

Credit risk Credit risk relates to potential exposure on 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. Current short-term borrowings of R263,757 will be settled after year end and replaced by longer term borrowings.

Maturity profile of financial liabilities at 30 June 2012 Carrying Contractual More than No fixed Group amount cash flows Within 1 year 2 to 5 years 5 years terms 2012 (R'000) Secured and non-current borrowings 85,907 101,067 - 91,877 9,190 0 Secured short-term borrowings 344,537 354,961 354,961 - - 0 Trade and other payables 666,100 666,100 666,100 - - 0 Total financial liabilities – Group and Company 1,096,544 1,122,128 1,021,061 91,877 9,190 - Total financial assets – Group 630,662 630,662 614,218 - - 16,444

Carrying Contractual More than No fixed amount cash flows Within 1 year 2 to 5 years 5 years terms 2011 (R'000) Secured and non-current borrowings 274,245 294,364 - 285,174 9,190 - Secured short-term borrowings 129,606 155,356 155,356 - - - Trade and other payables 578,690 578,690 578,690 - - - Total financial liabilities – Group and Company 982,541 1,028,410 734,046 285,174 9,190 - Total financial assets – Group 624,824 624,824 563,274 - - 61,550

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 50% of operating costs are incurred and approximately 12% of revenue is earned in foreign currency. The following uncovered foreign currency amounts are included in the financial statements at year end: net short-term liabilities of US$32,930,864 (2011: US$2,379,102) and GBP950,188 (2011: GBP9,974,977) and net short-term receivables of GBP3,543,383 (2011: GBP13,511,133).

The Group entered into a foreign denominated loan during the 2011 financial year and 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.

The empires of the future are the empires of the mind. Winston Churchill 89 Notes to the Annual Financial Statements (continued)

15. Financial risk management and financial instruments (continued) 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 profits. The analysis is based on closing balances at year end.

Foreign exchange risk Interest rate risk Profit/(loss) should the interest rate Profit/(loss) should the exchange rate change by 5% change by 2% Group Amount Amount Carrying exposed to Rand Rand exposed to Rate Rate value risk appreciation depreciation risk increase decrease 2012 Financial asset R'000 Bank 246,097 135,167 (6,758) 6,758 246,097 4,922 (4,922) Trade and other receivables 368,123 245,636 (12,282) 12,282 - - - Impact of financial assets on: - profit before tax - - (19,040) 19,040 - 4,922 (4,922) - profit after tax - - (13,709) 13,709 - 3,544 (3,544)

Financial liabilities R'000 Interest-bearing liabilities 430,444 263,757 - - 430,444 (3,334) 3,334 Trade and other payables 666,100 292,163 14,608 (14,608) - - - Forward exchange contract ------Impact of financial liabilities on: - profit before tax - - 14,608 (14,608) - (3,334) 3,334 - profit after tax - - 10,518 (10,518) - (2,400) 2,400

Overall impact on profit after taxation - - (3,191) 3,191 - 1,144 (1,144)

Interest and related foreign currency amounts, made on account of aircraft and other qualifying assets under construction, are capitalised and added to the asset concerned and therefore do not affect the income statement. The effect of a 5% movement in foreign exchange would be R13,188,000 (2011: R5,420,000) and the effect of a 2% interest rate adjustment would be R2,649,000 (2011: R43,000).

The effect of the movement in the interest rate was only calculated for the estimated period that the loan will be outstanding.

2011 Financial asset R'000 Bank 234,031 42,426 (2,121) 2,121 234,031 4,681 (4,681) Trade and other receivables 329,243 174,475 (8,724) 8,724 Impact of financial assets on: - profit before tax - - (10,845) 10,845 - 4,681 (4,681) - profit after tax - - (7,808) 7,808 - 3,370 (3,370)

90 Comair Integrated Annual Report 2012 Foreign exchange risk Interest rate risk Profit/(loss) should the interest rate Profit/(loss) should the exchange rate change by 5% change by 2% Group Amount Amount Carrying exposed to Rand Rand exposed to Rate Rate value risk appreciation depreciation risk increase decrease Financial liabilities R'000 Interest-bearing liabilities 403,851 - - - 403,851 (8,077) 8,077 Trade and other payables 578,690 122,498 6,125 (6,125) - - - Forward exchange contract 394 394 20 (20) Impact of financial liabilities on: - profit before tax - - 6,145 (6,145) - (8,077) 8,077 - profit after tax - - 4,424 (4,424) - (5,815) 5,815

Overall impact on profit after taxation - - (3,384) 3,384 - (2,445) 2,445

Capital risk management

The Group’s objective 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 2012 and 2011 were as follows:

Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Total liabilities excluding deferred tax 1,292,267 1,205,842 1,282,861 1,207,297 Less: Cash and bank (246,095) (234,031) (240,227) (226,208)

Adjusted liabilities 1,046,172 971,811 1,042,634 981,089 Equity 814,461 800,521 810,130 800,842

Adjusted capital ratio 1.28:1 1.21:1 1.28:1 1.22:1

The empires of the future are the empires of the mind. Winston Churchill 91 Notes to the Annual Financial Statements (continued)

Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

16. Revenue 4,162,938 3,587,754 4,136,449 3,577,678

Flight revenue 4,013,200 3,497,428 4,013,200 3,497,428 Service-based 96,322 54,654 89,217 54,654 Commission-based 48,650 35,672 29,417 25,596 Other 4,766 - 4,615 -

17. Profit from operations

Operating expenses are stated after incorporating the following items:

Audit fees 700 518 700 518 Managerial, technical, administrative and secretarial services 18,081 14,433 18,081 14,433

Directors' emoluments (included in total staff costs) 18,824 15,363 18,824 15,363 - for services as Directors and related Committee work 1,762 1,740 1,762 1,740 - for managerial and other services 15,811 11,131 15,811 11,131 - retirement and medical benefits 1,251 1,285 1,251 1,285 - share-based payments - 1,207 - 1,207 Only Directors are considered key management A comprehensive breakdown per Director is included in the Directors’ Report on pages 55 to 57

Rentals under operating leases 331,135 225,603 331,135 225,603 - property rentals 16,371 11,444 16,371 11,444 - aircraft rentals 312,824 213,225 312,824 213,225 - equipment and vehicle rentals 1,940 934 1,940 934

Contingent rent expenses under capitalised finance leases - - - 107,486

During the prior year, the Company made additional payments to a subsidiary in terms of a finance lease arrangement for three aircraft. These payments are eliminated on consolidation.

Total staff costs 596,456 537,740 596,456 537,740 Employment costs 559,983 501,177 559,983 501,177 Contributions to defined contribution funds 36,473 36,563 36,473 36,563 Number of employees 1,873 1,953

92 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Profit/(loss) on exchange differences 15,881 (17,095) 15,881 (17,095) Equity settled 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 IFRS2) using the Black Scholes option valuation model. The principle 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% e. Strike price of R3.03

18. Interest expense

Total interest paid 27,187 35,255 27,187 35,255 Bank interest 19,433 35,255 19,433 35,255 Interest capitalised to pre-delivery payments 7,754 - 7,754 -

Less: amount capitalised as borrowing costs (See Note 1) (7,754) - (7,754) - Net interest 19,433 35,255 19,433 35,255

19. Taxation

Normal tax – current 1,451 10,672 - 9,303 Deferred tax – current 1,751 19,600 1,527 20,057 STC asset utilised - (806) - (806) 3,202 29,466 1,527 28,554

Reconciliation of taxation rate % % % % South African normal tax rate (28.0) (28.0) (28.0) (28.0) Taxation effect of: Exempt income 0.1 1.4 0.1 30.4 Disallowable expenditure (1.5) (1.9) 5.9 (30.3) STC asset utilised - 0.8 - 0.8 Effective taxation rate (29.4) (27.7) (22.0) (27.1)

The Company has an estimated tax loss of R29,411,000 available for set off against future taxable income. The Group has an estimated tax loss of R32,215,000 available for set off against future taxable income.

The Group considers it probable that sufficient taxable income will be available in the future to realise this deferred tax asset based on the future income. The sufficiency of future taxable income was supported by budgets for the 2013 financial year, as well as the historical trading results of the Group.

The empires of the future are the empires of the mind. Winston Churchill 93 Notes to the Annual Financial Statements (continued)

Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

20. Headline earnings

Earnings attributable to ordinary shareholders 7,681 76,997 5,465 77,002 Add: IAS 16 loss on disposal of property, plant and equipment 10,669 - 10,669 - Add: IAS 16 Impairment to assets 4,049 - 4,049 - Less: tax effect of remeasurement adjustments (4,121) - (4,121) -

Headline earnings attributable to ordinary shareholders 18,278 76,997 16,062 77,002

Weighted ordinary shares in issue ('000) 483,028 481,484 Weighted ordinary shares in issue 489,176 489,176 Adjustment in respect of consolidation of Share Trust (6,148) (7,692)

Adjustment for dilutive effect of share options in issue 27 980

Diluted weighted ordinary shares in issue ('000) 483,055 482,464 Earnings per share (cents) 1.6 15.9 Headline earnings per share (cents) 3.8 15.9 Diluted earnings per share (cents) 1.6 15.9 Diluted headline earnings per share (cents) 3.8 15.9

94 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

21. Cash generated by operations

Profit before taxation 10,883 106,463 6,992 105,556 Impairment 4,049 - 4,049 - Depreciation 153,270 158,835 152,989 158,835 Equity settled BEE transaction 3,428 3,428 3,428 3,428 Share of (profit) from associates (1,329) (762) - - Interest expense 19,433 35,255 19,433 35,255 Interest received (8,200) (17,545) (7,914) (17,123) Dividends received - (5,639) - (114,175) Loss on disposal of assets 10,669 - 10,669 - Cash from operations before working capital changes 192,203 280,035 189,646 171,776 Movement in working capital 97,227 (86,874) 103,071 (82,066) - Inventory movement (4,475) 875 (4,475) 550 - Accounts receivable movement 41,475 (122,182) 58,181 (121,568) - Accounts payable movement 60,227 34,433 49,365 38,952

289,430 193,161 292,717 89,710

22. Taxation paid

Taxation owing at beginning of year 11,427 (23,315) 12,281 (23,960) Taxation charge for the year (1,451) (10,672) - (9,303) Taxation (receivable) at end of the year (14,947) (11,427) (14,919) (12,281) Taxation (paid) (4,971) (45,414) (2,638) (45,544)

The empires of the future are the empires of the mind. Winston Churchill 95 Notes to the Annual Financial Statements (continued)

23. Business combinations

The Churchill Finance Services 23 Limited figures are provisional and the purchase price allocation was completed in the current year and was correctly allocated to goodwill. No additional adjustments were done in the current year. Goodwill relates to synergies achieved.

2011 Comair Limited acquired 65% of the shares in Holiday Tours (Pty) Ltd during January 2011 and a further 35% in February 2012.

Comair Limited acquired 100% of the shares in Churchill Finance Services 23 Limited during February 2011.

Purchase of non-equity accounted business: Carrying value of assets.

Churchill Finance Holiday Tours Services 23 Total

Accounts receivable 1,357 - 1,357 Inventory 325 - 325 Trade and other payables (2,782) - (2,782) Total net asset deficit (1,100) - (1,100) Goodwill 3,658 10 3,668 Total purchase consideration paid 2,558 10 2,568 Revenue for full year to 30 June 2011 10,076 130,240 140,316 Revenue consolidated 2,982 - 2,982

24. Retirement benefits

Post-retirement benefits The Group contributes to the Evergreen Pension Fund, which is governed by the Pension Funds Act, 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.

96 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

25. Operating lease commitments

Commitments for year one Aircraft 188,823 231,650 231,650 231,650 188,823 231,650 231,650 231,650

Commitments for year two to five Aircraft 362,093 530,214 362,093 530,214 362,093 530,214 362,093 530,214 Commitments after year five Aircraft 186,374 277,920 186,374 277,920 186,374 277,920 186,374 277,920 Total operating lease commitments 737,290 1,039,784 737,290 1,039,784

Leasing arrangements – aircraft Generally medium-term (five-year) leasing agreements on aircraft.

Currently the Group has three aircraft on South African Rand (“ZAR”) payment terms which are repayable at R1 million each per month and have been straight lined. The Group has entered into two additional aircraft leases on ZAR payment terms of R610,500 per month. There are two aircraft leases at market related US Dollar (“US$”) amounts which have no escalation clauses in the agreements and are repayable at US$135,000 each per month. There are a further three aircraft lease agreements at market-related US$ amounts which have no escalation clauses in the agreement and are 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. A further lease has been entered into at a rate of US$228,000 per month. Another lease at a rate of US$220,000 per month and one at a rate of US$255,000 per month have also been entered into. These leases are included in the operating lease commitments outlined above.

26. Borrowing powers

There are no restrictions on the Group’s borrowing powers.

27. 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 (previously this was one to three 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 can be converted into shares, cash or a combination of both, depending on the participant’s choice.

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.

The empires of the future are the empires of the mind. Winston Churchill 97 Notes to the Annual Financial Statements (continued)

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: 1.5%) of issued share capital. The maximum number of options to be held by any participant in the scheme shall not exceed 1% (4.9 million shares) of the ordinary shares then in issue. The share option liability as per IFRS 2 at year end was R35,000 (prior year: R2.4 million) based on the closing share price of R1.33 (prior year R2.39).

The following table illustrates the number and weighted average exercise prices of share options held by eligible participants, including Directors:

2012 2012 2011 2011 Number of share Weighted average Number of share Weighted average options exercise price (R) options exercise price

Balance at beginning of period 2,840,667 1.67 14,316,714 1.56 Options exercised (1,566,000) 1.61 (11,476,047) 1.60

Balance at end of period 1,274,667 1.55 2,840,667 1.67

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 2012 become unconditional between the following dates:

2012 2011 Subscription price (R) Number of share options Number of share options

1 September 2004 and 1 September 2007 0.80 66,667 66,667 5 December 2005 and 5 December 2010 1.70 233,000 899,000 5 June 2006 and 5 June 2011 1.57 975,000 1,875,000 Total 1,274,667 2,840,667

Should the participant resign from the Group before options fully vest, the unvested portion will be forfeited.

Share options granted to Directors are as follows:

Balance at beginning of period 1,566,000 9,664,668 Options exercised (1,566,000) (8,098,668) - 1,566,000

The options outstanding for Directors at 30 June 2012 become unconditional between the following dates:

1 September 2004 and 1 September 2007 0.80 - - 5 December 2005 and 5 December 2010 1.70 - 666,000 5 June 2006 and 5 June 2011 1.57 - 900,000 - 1,566,000

98 Comair Integrated Annual Report 2012 28. Group and Company capital commitments and contingent liabilities

During 2010 the Company placed an order for eight Boeing 737-800s from the Boeing Company. The capital commitments will be setlled as outlined below: 2012 2011 R’000 R’000 Financial year 2012 - 109,337 Financial year 2013 947,954 949,129 Financial year 2014 218,750 129,719 Financial year 2015 159,456 826,853 Financial year 2016 1,016,398 - 2,342,558 2,015,038

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 R6.8 million (2011: R7.2 million).

29. New accounting pronouncements

At the date of authorisation of these financial statements, various standards are in issue which are not yet effective. This includes the following standards which are applicable to the business of the Group and may have impact on future financial statements.

Annual periods Standard Details of amendment beginning on or after

IFRS 1: First-time Adoption of • Standard amended to provide guidance for entities emerging from severe 01-Jul-11 International Financial Reporting hyperinflation and resuming presentation of IFRS-compliant financial Standards statements, or presenting IFRS-compliant financial statements for the first time • Standard amended to remove the fixed date of 1 January 2004 relating to the 01-Jul-11 retrospective application of the derecognition requirements of IAS 39, and relief for first-time adopters from calculating day 1 gains on transactions that occurred before the date of adoption

IFRS 7: Financial Instruments: • Amendments require additional disclosure on transfer transactions of financial 01-Jul-11 Disclosures assets, including the possible effects of any residual risks that the transferring entity retains. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period • Amendments require entities to disclose gross amounts subject to rights of set- 01-Jan-13 off, amounts set off in accordance with the accounting standards followed and the related net credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations

IFRS 9: Financial Instruments • New standard that forms the first part of a three-part project to replace IAS 39 01-Jan-15 Financial Instruments: Recognition and Measurement

IFRS 10: Consolidated Financial • New standard that replaces the consolidation requirements in SIC-12 01-Jan-13 Statements Consolidation – Special Purpose Entities and IAS 27 Consolidated and Separate Financial Statements. This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company and provides additional guidance to assist in the determination of control where this is difficult to assess

The empires of the future are the empires of the mind. Winston Churchill 99 Notes to the Annual Financial Statements (continued)

Annual periods Standard Details of amendment beginning on or after

IFRS 11: Joint Arrangements • New standard that deals with the accounting for joint arrangements and 01-Jan-13 focuses on the rights and obligations of the arrangement, rather than its legal form. Standard requires a single method for accounting for interests in jointly controlled entities

IFRS 12: Disclosure of Interests in • New and comprehensive standard on disclosure requirements for all forms 01-Jan-13 Other Entities of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles

IFRS 13: Fair Value Measurement • New guidance on fair value measurement and disclosure requirements 01-Jan-13

IAS 1: Presentation of Financial • New requirements to group together items within OCI that may be reclassified 01-Jul-12 Statements to the profit or loss section of the income statement in order to facilitate the assessment of their impact on the overall performance of an entity

IAS 12: Income Taxes • Rebuttable presumption introduced that an investment property will be 01-Jul-12 recovered in its entirety through sale

IAS 19: Employee Benefits • Amendments to the accounting for current and future obligations resulting from 01-Jan-13 the provision of defined benefit plans

IAS 27: Consolidated and Separate • Consequential amendments resulting from the issue of IFRS 10, 11 and 12 01-Jan-13 Financial Statements

IAS 28: Investments in Associates • Consequential amendments resulting from the issue of IFRS 10, 11 and 12 01-Jan-13

IAS 32: Financial Instruments: • Amendments require entities to disclose gross amounts subject to rights of set- 01-Jan-13 Presentation off, amounts set off in accordance with the accounting standards followed and the net related credit exposure. This information will help investors understand the extent to which an entity has set off in its balance sheet and the effects of rights of set-off on the entity’s rights and obligations

The Directors have not yet determined what the impact of these new standards and interpretation on the Company will be.

30. Related parties

Subsidiaries Inspect Note 4 for investments in subsidiaries.

Associates Inspect Note 5 for investments in associates.

Share Incentive Trust Inspect Note 2 for the details.

Directors Inspect Directors emoluments on pages 55 to 57 and Note 17

100 Comair Integrated Annual Report 2012 Group Company 2012 2011 2012 2011 R’000 R’000 R’000 R’000

Related party balances

Loan accounts – Owing (to)/by related parties Alooca Technologies (Pty) Ltd - - 28,734 29,314 Aconcagua 32 Investments (Pty) Ltd - - 21,107 18,125 Kulula Air (Pty) Ltd - - 3,282 730 Commuter Handling Services (Pty) Ltd 7,853 54,287 7,853 54,287 Imperial Air Cargo (Pty) Ltd 15,559 15,559 15,559 15,559 Comair Share Incentive Trust - - 5,579 7,754

Amounts included in trade receivable/(trade payable) regarding related parties Commuter Handling Services (Pty) Ltd - 51 - 51 Imperial Air Cargo (Pty) Ltd 1,208 12,950 1,208 12,950 Kulula Air (Pty) Ltd 522 - 522 -

Amounts included in finance lease payments to related parties Churchill Finance 23 Ltd - - - 108,535 Related party transactions

Interest received from related parties Commuter Handling Services (Pty) Ltd (549) (6,149) (549) (6,149)

Rent paid to related parties Aconcagua 32 Investments (Pty) Ltd - - 1249 1,135 Alooca (Pty) Ltd - - 799 726

Service recovery Kulula Air (Pty) Ltd - - 2,400,000 -

Dividends received from related parties Churchill Finance 23 Ltd - - - (108,535)

31. 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.

The empires of the future are the empires of the mind. Winston Churchill 101 Notice of Annual General Meeting

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 which 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 of Annual General Meeting

Notice is hereby given in terms of section 62(1) of the Companies Act, 71 of 2008, as amended (“the Companies Act”) that the AGM of shareholders of the Company will be held at the SLOW in the City Lounge (Radisson Blu Gautrain Hotel), corner of Rivonia and West streets (opposite Gautrain station), Sandton, 2196, on Thursday 1 November 2012 at 12h00 to consider, and if approved, 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 Friday, 21 September 2012, 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 AGM.

Shareholders or their proxies may participate in the AGM by way of a teleconference call and, if they wish to do so:

• Must contact the Company Secretary (by e-mail at the address [email protected]) no later than 12h00 on Tuesday, 30 October 2012, in order to obtain a pin number and dial-in details for that conference call; • Will be required to provide reasonably satisfactory identification; and • Will be billed separately by their own telephone service providers for their telephone call to participate in the AGM.

The notice of meeting includes the attached proxy form.

Ordinary resolutions

1. Consideration of annual financial statements

Ordinary Resolution No. 1 RESOLVED THAT the audited annual financial statements, together with the report of the Board of Directors of the Company (the “Board”), the Auditors’ Report and the report by the Audit Committee of the Company and the Group for the year ended 30 June 2012, be and are hereby received and adopted.

Reason and effect of Ordinary Resolution Number 1 The reason for and the effect of Ordinary Resolution Number 1 is to adopt complete audited annual financial statements, including the Directors’ Report, Auditors’ Report and the Audit Committee Report of the Company and the Group for the year ended 30 June 2012 are included in the Integrated Annual Report of which this notice forms part.

2. Reappointment of external auditors

Ordinary Resolution No. 2 RESOLVED THAT the re-appointment of PKF (Jhb) Inc., 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. It is noted that Mr Ben Frey is the individual registered auditor who will undertake the audit for the financial year ending 30 June 2013.

102 Comair Integrated Annual Report 2012 Reason and effect of Ordinary Resolution Number 2 The reason for and the effect of Ordinary Resolution Number 2 is to re-appoint PKF (Jhb) Inc. 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

Ordinary Resolution No. 3.1 RESOLVED THAT Mr Pieter van Hoven, 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.

Ordinary Resolution No. 3.2 RESOLVED THAT Mr Martin Darryl Moritz, 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 Resolution No. 3.3 RESOLVED THAT Mr Atul Kumar Gupta, who retires in terms of the Company’s MOI and who, being eligible for re-election, offers himself for re-election, be hereby re-elected as a Director of the Company.

Ordinary Resolution No. 3.4 RESOLVED THAT Dr Peter Johannes Welgemoed, 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 Resolution No. 3.5 RESOLVED THAT Mr Erik Rudolf Venter, 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.

Reasons and effect of Ordinary Resolutions Numbers 3.1 to 3.5 The reasons for and the effect of Ordinary Resolutions Numbers 3.1 to 3.5 is to re-elect Mr Pieter van Hoven, Mr Martin Darryl Moritz, Mr Atul Kumar Gupta, Dr Peter Johannes Welgemoed and Mr Erik Rudolf Venter as Directors of the Company.

In terms of article 24.1 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. 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 112 to 113 of the Integrated Annual Report of which this notice forms part.

4. Election of Members of Audit Committee

Ordinary Resolution No. 4.1 RESOLVED THAT, subject to the re-election of Dr PJ Welgemoed as a Director of the Company, pursuant to Ordinary Resolution Number 3.4, Dr PJ 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 2013.

Ordinary Resolution No. 4.2 RESOLVED THAT Mr KI 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 2013.

Ordinary Resolution No. 4.3 RESOLVED THAT Ms WD 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 2013.

Ordinary Resolution No. 4.4 RESOLVED THAT Mr AK Buchanan, a Non-executive Director of the Company who meets the independence requirements of the Companies Act, be hereby elected as a member of the Company’s Audit Committee for the financial year ending 30 June 2013.

Study the past, if you would divine the future. Confucius 103 Notice of Annual General Meeeting (continued)

Reasons and effects of Ordinary Resolutions Numbers 4.1 to 4.4 The reasons for and the effect of Ordinary Resolutions Numbers 4.1 to 4.4 is to elect Dr PJ Welgemoed, Mr KI Mampeule, Ms WD Stander and Mr AK Buchanan as members of the Audit Committee of the Company.

A brief CV of each of the Directors mentioned above is included on pages 112 to 113 of the Integrated Annual Report of which this notice forms part. As is evident from the CVs of those Directors, each of the proposed members of the Audit Committee has the required qualifications and/or experience to fulfil his/her duties.

5. General authority to place authorised but unissued ordinary share capital under the control of the Board

Ordinary Resolution No. 5 RESOLVED THAT the authorised but unissued ordinary shares in the capital of the Company be and are hereby placed under the control of the Board as a general authority in terms of the Company’s MOI, which authority shall be restricted to five percent (5%) of the issued ordinary shares as at 30 June 2012, and that the Board be and is hereby authorised and empowered to allot, issue and otherwise dispose of such shares to such person or persons on such terms and conditions and at such times as the Board may from time to time and in their discretion deem fit, subject to the provisions of the Companies Act, the MOI of the Company and the JSE Limited (“JSE”) Listings Requirements, to the extent applicable.

Reason and effect of Ordinary Resolution Number 5 The reason for and the effect of Ordinary Resolution Number 5 is to place the authorised but unissued ordinary shares of the Company under the control of the Board.

The authority will be subject to the Companies Act and the JSE Listings Requirements. The aggregate number of ordinary shares able to be allotted and issued in terms of this resolution shall be limited to five percent (5%) of the issued ordinary shares as at 30 June 2012.

6. General authority to issue shares for cash

Ordinary Resolution No. 6 RESOLVED THAT the Board be and is hereby authorised, by way of a general authority, to issue all or any of the authorised but unissued shares in the capital of the Company for cash, as and when it in its discretion deems fit, subject to the Companies Act, the MOI of the Company, the JSE Listings Requirements, when applicable, and the following limitations:

6.1 The equity securities, which are the subject of the issue for cash, must be of a class already in issue, or where this is not the case, must be limited to such securities or rights that are convertible into a class already in issue; 6.2 Any such issue will only be made to “public shareholders” as defined in the JSE Listings Requirements and not related parties; 6.3 The number of shares issued for cash shall not in the aggregate in any one financial year exceed five percent (5%) of the Company’s issued share capital of ordinary shares as calculated in terms of the JSE Listings Requirements. The number of ordinary shares which may be issued shall be based on the number of ordinary shares in issue at the date of such application less any ordinary shares issued during the current financial year, provided that any ordinary shares to be issued pursuant to a rights issue (which has been announced, is irrevocable and fully underwritten) or acquisition (which has had final terms announced) may be included as though they were shares in issue at the date of application; 6.4 This authority is valid until the Company’s next AGM, provided that it shall not extend beyond fifteen (15) months from the date that this authority is given; 6.5 A paid press announcement giving full details, including the impact on the net asset value and earnings per share, will be published at the time of any issue representing, on a cumulative basis within one (1) financial year, five percent (5%) or more of the number of shares in issue prior to the issue; and 6.6 In determining the price at which an issue of shares may be made in terms of this authority, post the listing of the Company, the maximum discount permitted will be ten percent (10%) of the weighted average traded price on the JSE of those shares over the thirty (30) business days prior to the date that the price of the issue is determined or agreed by the Board. The JSE should be consulted for a ruling if the Company’s securities have not traded in such thirty (30) day business period.

Reason and effect of Ordinary Resolution Number 6 The reason for and the effect of Ordinary Resolution Number 6 is to give, by way of a general authority, authority to the Board to issue all or any of the authorised but unissued shares in the capital of the Company for cash, as and when it, in its discretion, deems fit.

104 Comair Integrated Annual Report 2012 7. Non-binding endorsement of the Company’s Remuneration Policy

The Company’s Remuneration Policy, as described in the Remuneration Report on pages 47 to 49 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 for South Africa 2009, 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.

Special resolutions

8. Approval of Non-executive Directors’ remuneration 2011/2012

Special Resolution No. 1 RESOLVED THAT the joint remuneration of the Non-executive Directors for their services as Directors of the Company in the amount of R1,762,000 (one million seven hundred and sixty-two thousand Rand) for the financial year ended 30 June 2012, be and is hereby approved.

Reasons and effect of Special Resolution No. 1 The 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 2012. The fees payable to Non-executive Directors are based on a fixed annual retainer. The Chairperson of each sub-committee, however, is paid an additional fee for each sub-committee meeting attended up until the end of the 2012 financial year. No fees are payable to Mr Gupta, Mr Sacks, Mr Buchanan and Mr Halliday. Mr Van Hoven, in addition to being the Chairman of the Board and Nominations Committee, is also the Chairman of Comair Pension Fund and as such is paid a fee for each Pension Fund trustee meeting attended, which fees were approved by the Company’s shareholders at the Annual General Meeting on 9 November 2011 (other than the fee payable to the Chairman of the Social and Ethics Committee, which was only established in November 2011). The fees payable to each Director and further details on the basis of calculation of the remuneration are included in this report in the annual finance statements on pages 60 to 101, and in the Remuneration Report on pages 47 to 49 respectively.

9. Approval of Non-executive Directors’ remuneration 2012/2013

Special Resolution No. 2 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 ended 30 June 2013:

30 June 2012 30 June 2013

Chairman of the Board * (a) Outgoing Chairman (1) R292,000.00 R0.00 # (b) New Chairman (1) R370,000.00 R1,000,000.00 Vice-chairman (2) R250,000.00 R250,000.00 Non-executive Directors (5) R120,000.00 R120,000.00 Chairperson of each sub-committee per sub-committee meeting held R10,000.00 R10,000.00 Members of each sub-committee per sub-committee held R0.00 R5,000.00 Chairperson of the Pension Fund Board R10,000.00 R10,000.00 Notes: * Outgoing Chairman, D Novick, retired on 31 January 2012. # New Chairman, P van Hoven, appointed effective 13 February 2012.

Study the past, if you would divine the future. Confucius 105 Notice of Annual General Meeeting (continued)

Reasons and effect of Special Resolution No. 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 2013. 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, irrespective of attendance at the sub-committee meeting or not. No fees are payable to Mr Gupta, Mr Sacks, Mr Buchanan and Mr Halliday. Mr Van Hoven, who in addition to being Chairman of the Board and the Nominations Committee, is also the Chairman of the Comair Pension Fund and as such is paid a fee for each Pension Fund trustee meeting held. Further details on the basis of calculation of the remuneration are included on pages 47 to 49 of the Remuneration Report contained in this Integrated Annual Report of which this notice forms part.

10. General authority to repurchase shares

Special Resolution No. 3 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:

10.1.1 The Company or the relevant subsidiary is authorised thereto by its MOI; 10.1.2 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 ten percent (10%) of the Company’s 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 ten percent (10%) 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; 10.1.3 At any point in time, the Company may only appoint one agent to effect any repurchases on the Company’s behalf; 10.1.4 The repurchase of securities is 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); 10.1.5 The Company, or the relevant subsidiary, is authorised thereto by its shareholders in terms of a special resolution of the Company or the relevant subsidiary at the AGM, which 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; 10.1.6 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 ten percent (10%) 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; 10.1.7 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 10.1.8 When the Company or any subsidiary has cumulatively repurchased three percent (3%) of the initial number of the relevant class of securities, and for each three percent (3%) in aggregate of the initial number of that class acquired thereafter, an announcement will be made.

10.2. In terms of the general authority given under this special resolution, any acquisition of ordinary shares shall be subject to: 10.2.1 Any applicable exchange control regulations and approval at that point in time; 10.2.2 The Companies Act; 10.2.3 The JSE Listings Requirements and any other applicable stock exchange rules, as may be amended from time to time; 10.2.4 The sanction of any other relevant authority whose approval is required in law; and 10.2.5 A resolution by the Board and/or the relevant subsidiary of the Company confirming that the Board of the Company and/or 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

106 Comair Integrated Annual Report 2012 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.

Reason and effect of Special Resolution Number 3 The 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 acquire its own issued shares and/or its subsidiary company on such terms, conditions and such amounts determined from time to time by the Board, subject to the limitations as 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.

11. General Authority to provide financial assistance to related and inter-related companies or corporations

Special Resolution No. 4 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:

11.1 It will not adopt a resolution to authorise such financial assistance unless the Directors are satisfied that: 11.1.1 Immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test as contemplated in the Companies Act; and 11.1.2 The terms under which the financial assistance is proposed to be given are fair and reasonable to the Company; and

11.2 Written notice of such resolution by the Board shall be given to all shareholders of the Company and any trade union representing the employees: 11.2.1 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 11.2.2 Within thirty (30) days of the end of the financial year, in any other case.

Reason and effect of Special Resolution Number 4 The 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

Study the past, if you would divine the future. Confucius 107 Notice of Annual General Meeeting (continued)

Board provided such inter-group financial assistance to subsidiaries as disclosed in the annual financial statements in Note 4 on page 77 of the Integrated Annual Report of which this notice forms part.

Other disclosure in terms of the JSE Listings Requirements Section 11.26 Further to Special Resolutions Number 3 and 4, the JSE Listings Requirements require the following disclosure, some of which provided is elsewhere in the Integrated Annual Report of which this notice forms part:

Directors and management – page 53; Major shareholders of the Company – page 116; Directors’ interests in securities – page 52; and Share capital of the Company – pages 82 and 83.

Litigation statement In terms of section 11.26 of the JSE Listings Requirements, the Directors, whose names are given on page 53 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 are given on page 53 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.

12 Cancellation of “N” Shares

Special resolution Number 5 RESOLVED THAT the authorised share capital of the Company consisting of (i) one billion (1,000,000,000) ordinary par value shares of one cent (R0.01) each; (ii) seventy five million (75,000,000) “A” Shares with a par value of one cent (R0.01) each; (iii) one million (1,000,000) cumulative redeemable preference shares with a par value of one cent (R0.01) each; and (iv) one billion (1,000,000,000) “N” ordinary par value shares of one tenth of one cent (R0.001) each (the ““N” Shares”), be and is hereby amended by the cancellation of the “N” Shares.

Reasons and effect of Special Resolution No. 5 The reason for and the effect of Special Resolution Number 5 is to cancel the “N” Shares, none of which are in issue. In terms of the Companies Act, the “N” Shares may not be issued in their present form. Furthermore, the Board is of the view that creating replacement no par value “N” ordinary share capital at this point in time is redundant, as it would be more appropriate to create new shares with appropriate concomitant rights as and when the Company wishes to issue other classes of shares in future.

13. Replacement of the Memorandum of Incorporation

Special Resolution Number 6 RESOLVED THAT the Company’s existing MOI (which currently comprises the Memorandum and Articles of Association) be abrogated in its entirety and replaced, in terms of the Companies Act, with the new MOI, a copy of which has been initialed by the Company Secretary for purposes of identification and has been tabled at the AGM.

108 Comair Integrated Annual Report 2012 The Company’s existing MOI consists of the Memorandum and Articles of Association. Since the adoption of the existing MOI, the Companies Act came into effect on 1 May 2011, which replaced the Companies Act, 61 of 1973 (the “1973 Act”), as amended, in its entirety.

The Companies Act abolishes the distinction between the Memorandum of Association and the Articles of Association, and provides that there will only be one constitutional document for a company, namely the MOI. The Company proposes to adopt a new MOI in substitution for its Memorandum of Association and the Articles of Association, which in the course of law became its MOI, upon the advent of the Companies Act. The MOI is however required to be brought in harmony with the Companies Act and changes to the JSE Listings Requirements.

Schedule 10 of the JSE Listings Requirements, which contains the content requirements of a JSE listed company, was also amended in 2011 to, inter alia, align the JSE Listings Requirements with the Companies Act. Both the Companies Act and the JSE Listings Requirements require the Company to amend its MOI by no later than 30 April 2013 to harmonise the MOI with the Companies Act and the JSE Listing Requirements. The Board approved the new MOI and recommends the approval thereof by the Company’s shareholders.

Salient features of the new MOI 13.1 Any change in the authorised capital (increase or decrease) or any variation of rights attached to any share requires the approval of shareholders by way of special resolution before such change may be made (Similar to the 1973 Act); 13.2 The introduction of a solvency and liquidity test, which must be considered by the Board in respect of the following: • Capitalisation of shares; • Cash payment in lieu of a capitalisation award; • Declaration of dividends; • Repurchase of shares; • Provision of financial assistance; and • Any other distribution as defined by the Companies Act. (This is new); 13.3 A record date must now be set for dividends, participation in general meetings and exercise of rights (This is new); 13.4 Fifteen (15) business days’ notice is required for the convening of shareholder meetings (The 1973 Act required 21/14 days’ notice); 13.5 Shareholders may participate in meetings via electronic means (This is new); 13.6 A resolution that could be voted on at a shareholders’ meeting may instead be voted on in writing within a period of twenty (20) days from the date the resolution was presented to shareholders (This is new); 13.7 In general, a repurchase of shares only requires authorisation by way of a Board resolution. However, a repurchase of shares from a Director or Prescribed Officer or any company or person related to such Director or Prescribed Officer must be approved by way of a special resolution. A repurchase of shares which involves the acquisition of more than five percent (5%) of the issued shares of any particular class will be subject to sections 114 and 115 of the Companies Act (This is new); 13.8 Subject to the Company’s shareholders passing an ordinary resolution to this effect, the Company may at any time make an odd-lot offer on such terms as the Directors shall determine. If, upon the implementation of any odd-lot offer in accordance with the JSE Listings Requirements or any similar procedure, there are holders who hold less than one hundred (100) securities (including, but not limited to, ordinary shares) in the Company or holders who hold less than one hundred (100) securities on behalf of a person who owns the beneficial interest in such securities (odd-lots), then unless such holders either elected to retain their odd-lots or to sell their odd-lots in accordance with the terms of the odd-lot offer, such holders shall be deemed to have agreed to sell their odd-lots and the Directors shall, with the approval of any ordinary resolution of shareholders passed at any general meeting of the Company, be entitled to cause the odd-lots of such holders to be sold on behalf of such holders on such basis as the Directors may determine, and the Company shall be entitled (on implementation of the odd-lot offer, to expropriate all of the odd-lots held by such holders).

Copies of the existing and proposed new MOI are available for inspection at the registered office of the Company and will also be published on the Company’s website www.comair.co.za.

Reasons and effect of Special Resolution Number 6 The reason for and the effect of Special Resolution Number 6 is to replace the Company’s existing MOI in its entirety with the new MOI to ensure compliance with the Companies Act and JSE Listings Requirements. The existing and proposed new MOI are available for inspection at the registered office of the Company and will also be published on the Company’s website www.comair.co.za.

Study the past, if you would divine the future. Confucius 109 Notice of Annual General Meeeting (continued)

Ordinary resolution 14. Authorisation for Company Secretary or any Director to sign necessary documents to give effect to resolutions

Ordinary Resolution Number 7 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 15. To transact any other business that may be transacted at Annual General Meetings.

Approvals required for resolutions

Ordinary Resolutions Numbers 1 to 5 and 7 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.

Ordinary Resolution Number 6 (General authority to issue shares for cash) and Special Resolutions Numbers 1 to 6 contained in this notice of AGM require the 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, 26 October, 2012. Accordingly, the last day to trade in order to be eligible to attend and vote at the meeting is Friday, 19 October 2012.

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 included in this report.

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 Thursday, 1 November 2012, at 12h00. Nevertheless, forms of proxies 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 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.

110 Comair Integrated Annual Report 2012 On a show of hands, every shareholder of the Company present in person or represented by proxy shall have one (1) vote only. On a poll, every shareholder of the Company shall have one (1) 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 • Are 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 annual general meetings taken into account for the purposes of 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 barcoded identification document, issued by the South African Department of Home Affairs, a drivers’ licence or a valid passport will be accepted as sufficient identification.

By order of the Board

Mr DH Borer Company Secretary

Date: 11 September 2012 Place: Bonaero Park

Study the past, if you would divine the future. Confucius 111 Notice of Annual General Meeeting (continued)

Directors standing for election or re-election

1. P van Hoven (Board) (Age: 68) Pieter van Hoven joined Comair in 1965 and after serving the Company in a variety of designations, was appointed Managing Director in 1980. He was responsible for initiating and introducing the British Airways franchise agreement, transforming Comair into the local British Airways brand in the latter part of 1996.

It was under Pieter’s management that Comair’s low cost airline, kulula, took to the skies in August 2001. After 41 years with the Company, he retired in 2006 but has continued to serve on the Comair Board as an Independent Non-executive Director.

Pieter van Hoven has also been a Director of Comair General Aviation Holdings since 1970 and continues to serve the company in the capacity of a Non- executive Director.

During this period, Pieter was a member of the South African Tourism Board, serving on several Committees during the period 1983 to 1997, during which time he was appointed Chairman of the Board in 1989 and continued to serve in this position until 1996. He was also Chairman of the Airlines Association of South Africa (“AASA”) for four years, and was active in many industry committees and the Department of Transport Inquiries. He continues to serve on the Aviation Accident Investigation Panel for the Civil Aviation Authority.

As of 13 February 2012, Pieter was appointed as Independent Non-executive Chairman to the Comair Limited Board of Directors.

2. MD Moritz (Board) (Age: 67) (BCom, LLB) Martin Moritz matriculated at King Edward VII School, Johannesburg, in 1961 and graduated from the University of the Witwatersrand in 1968 with BCom and LLB degrees. After graduating, he was appointed as Legal Adviser to Rand Mines Limited. In October 1969, he commenced employment at Comair Holdings Limited as Assistant to the Managing Director. He was appointed as Assistant General Manager of the Comair Group shortly thereafter and subsequently Group General Manager in 1973. In 1976 he acquired a shareholding in the Company as part of the management buy-out and was, in 1978, appointed Deputy Chairman of the Group, a position, which he still holds today. He is a Fellow of the Royal Aeronautical Society and a Director of the Commercial Aviation Association of Southern Africa, which honoured him with a Lifetime Service Award in 2011. Martin currently holds the position of Non-executive Joint Deputy Chairman of Comair.

3. AK Gupta (Board) (Age: 44) (BSc) Atul Gupta was born and raised in the city of Saharanpur, UP, India. He launched his career with a BSc degree at the Meerut University in India during 1989. Thereafter time was spent in China to oversee and understand manufacturing processes. In 1993, Atul was asked by his late father to explore business opportunities in South Africa on behalf of the family. After spending some time here, he was impressed with the climate and people and, once comfortable to base himself in the country, saw many opportunities for business and social growth in South Africa.

He started up Correct Marketing in 1993, which became the successful forerunner to the development of Sahara Computers in 1997 and Sahara’s ICT holdings. Other group interests have extended into mining and media, where he is Chairman of Shiva Uranium and TNA Media. Atul also sits on the Board of Afripalm Resources and Comair as a Non-executive Independent Director.

4. PJ Welgemoed (Board and Audit Committee) (Age: 69) (BCom (Hons), MCom, DCom) In 1971 Peter Welgemoed obtained a Doctorate in Transport Economics at the 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

112 Comair Integrated Annual Report 2012 he was appointed Deputy Minister of Mineral and Energy Affairs and Public Enterprises. In 1990 he was appointed as a Member of the Cabinet, with the portfolio of Minister of Transport, and in 1992 as Minister of Transport and of Post and Telecommunication. In 1998 he was appointed as the 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.

5. ER Venter (Board) (Age: 43) (BCom, CA (SA)) Erik Venter completed articles with KPMG, during which time he obtained his CA(SA) qualification. Thereafter he joined Brindley Manufacturing for a year as General Manager. Erik joined Comair in 1996 as Financial Manager and took on the role of Commercial Manager in 1998. He was appointed to the Board in July 2003 as Commercial Director, Joint CEO in July 2006 and as Financial Director in 2009. He was appointed as sole CEO in December 2011.

6. WD Stander (Audit Committee) (Age: 46) (BA (Hons), MBA) Wrenelle Stander joined Sasol Limited in 2008 and was appointed as the Managing Director of Sasol Gas in October 2010. She serves on a number of Sasol subsidiary boards, including Sasol Gas, Sasol Synfuels International and Sasol Group Services. In addition, she serves as an employer representative on the Sasolmed Board of Trustees. Before joining Sasol, Wrenelle served in various capacities within the South African civil aviation industry where she also served as the Chief Executive Officer of the Air Traffic and Navigation Services Company (“ATNS”). Prior to joining the aviation industry, Wrenelle served in senior positions in the South African energy non-government organisation (“NGO”) sector. She holds a BA (Hons) degree from UCT, as well as an MBA from Oxford Brookes University in the United Kingdom.

7. AK Buchanan (Audit Committee) (Age: 54) (MA, LLB) After qualifying as a Scottish solicitor, Alan Buchanan worked in Hong Kong for two and a half years specialising in ship financing. He moved to London in 1988 where he specialised in aircraft finance. Alan was seconded to British Airways in 1989 before joining the airline as its principal legal advisor financial in 1990. He was appointed Company Secretary in 2000. Following the merger with Iberia, Alan was appointed Chief of Staff responsible for the Secretariat, Communications, Insurance, Risk Management and Compliance within British Airways.

8. KI Mampeule (Audit Committee) (Age: 46) (BA, MSc, MBA) Khutso Mampeule is the Executive Chairman of Lefa Group Holdings, an investment holding and consulting company 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 and Chairman of JSE-listed Capevin Investments Limited, Capevin Holdings Limited, Phetogo Investments (Pty) Ltd and Withmore Investments (Pty) Ltd, an empowerment consortium he represents on the KWV Holdings Limited Board, where he is also the Chairman of the Empowerment Committee. He is also a Director of Remgro Capevin Limited and a few other privately held companies. Until May 21 2007, Khutso was the 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 the CEO of Old Mutual Employee Benefits, where he had the overall responsibility of the business with approximately R70 billion of assets under management. Before joining Old Mutual, 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, Airways. Khutso is a trustee of the World Wide Fund for Nature (“WWF”) South Africa, a member of the Advisory Council of the University of Stellenbosch Business School and the Chairman of the Johannesburg Chapter of the Young President’s Organisation (“YPO”). He holds BA, MSc and MBA degrees.

Study the past, if you would divine the future. Confucius 113 Share Price Performance

The options outstanding at 30 June 2012 become unconditional between the following dates:

2012 2011

Market price (cents per share) c c Closing (30 June 2012) 133c 239c High 257c 255c Low 130c 190c

Closing price/earnings ratio 83.1 15.0

Number of shares in issue At year end (millions) 489 489 Weighted average (millions) 489 489

Volume of shares traded (millions) 48 37

Volume of shares traded to number in issue 10.0% 7.5%

114 Comair Integrated Annual Report 2012 Shareholder Analysis

Shareholder spread

Bands No. of shareholdings % No. of shares %

1 – 1,000 shares 1,787 61.40 538,047 0.11 1,001 – 10,000 shares 724 24.88 2,570,587 0.53 10,001 – 100,000 shares 227 7.80 7,161,664 1.46 100,001 – 1,000,000 shares 125 4.30 37,832,274 7.73 1,000,001 shares and over 47 1.62 441,073,899 90,17 2,910 100.00 489,176,471 100.00

Distribution of shareholders

Type of shareholder No. of shareholdings % No. of shares %

Banks and brokers 12 0.41 11,831,045 2.41 Medical schemes 8 0.27 1,996,951 0.40 Close corporations 24 0.83 128,362 0.03 Empowerment funds 1 0.03 5,772,615 1.18 Endowment funds 5 0.17 963,973 0.20 Individuals 2,534 87.09 10,767,889 2.20 Insurance companies 17 0.58 5,038,722 1.03 Investment companies 5 0.17 591,463 0.12 Mutual funds 57 1.96 143,334,248 29.30 Nominees and trusts 94 3.23 5,407,936 1.11 Other corporations 16 0.55 49,904 0.01 Retirement funds 100 3.44 41,772,394 8.54 Private (Pty) companies 34 1.17 75,708,331 15.48 Strategic holdings 2 0.07 180,286,774 36.86 Share trust 1 0.03 5,525,864 1.13 2,910 100.00 489,176,471 100.00

If you want to succeed you should strike out on new paths, rather than 115 travel the worn paths of accepted success. John D. Rockefeller Shareholder Analysis (continued)

Beneficial shareholders holding of 3% or more

The following shareholders hold more than 3% of the issued share capital of the Company:

No. of shares % shareholding

* BB Investment Company (Pty) Ltd 126,320,151 25.82 ** Allan Gray 75,104,123 15.35 Britair Holdings Limited 53,966,623 11.03 Innercreek Investments (Pty) Limited 49,623,607 10.14 Oakbay Investments (Pty) Ltd 22,800,000 4.66 *** Investment Solutions 21,894,797 4.49 **** Oasis 17,817,243 3.64 Total 367,526,544 75.13

* BB Investment Company (Pty) Ltd Bidcorp Group Provident Fund and Pension Fund collectively hold 1,268,492 shares (0.26%), which are independently managed and which are not disclosed in the number above ** Allan Gray Allan Gray Balanced Fund 24,454,211 (5.00%) Allan Gray Equity Fund 24,442,611 (5.00%) Allan Gray Domestic Equity Portfolio 19,161,100 (3.92%) Allen Gray Global Absolute Portfolio 2,722,003 (0.56%) Allan Gray Life Hedged Domestic Equity Portfolio 2,459,462 (0.50%) Allan Gray Domestic Absolute Portfolio 1,684,736 (0.34%) Allan Gray Relative Domestic Equity Portfolio 180,000 (0.03%) 75,104,123 15.35% *** Investment Solutions Investment Solutions Funds 12,120,331 (2.49%) Investment Solutions Real Return Focus Fund 2,427,819 (0.50%) Investment Solutions Classic Balanced 2,075,000 (0.42%) Investment Solutions Specialist 1,729,953 (0.35%) Investment Solutions Balanced 1,663,000 (0.34%) Investment Solutions Pure Equity 1,011,927 (0.21%) Investment Solutions Aggressive Value Equity 358,668 (0.07%) Investment Solutions Relative Product 175,501 (0.04%) Investment Solutions Institutional Equity 155,968 (0.03%) Investment Solutions Preservation Provident Fund 68,400 (0.01%) Investment Solutions Real Return Focus 65,430 (0.01%) Investment Solutions Institutional Equity 42,800 (0.01%) 21,894,797 (4.49%) ****Oasis Oasis Crescent Equity Fund 16,001,819 (3.27%) Oasis General Equity Fund 1,815,424 (0.37%) 17,817,243 (3.64%)

116 Comair Integrated Annual Report 2012 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) Limited, led by Thelo Aviation Investments (Pty) Ltd. Thelo Aviation Investments (Pty) Ltd have purchased an additional 1.5% of the Company’s issued share capital at the time from certain shareholders for cash. 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:

No. of shares % shareholding

Allan Gray Asset Management 109,551,702 22.40 Oasis Asset Management 23,337,846 4.77 Coronation Fund Managers 21,101,973 4.31 Investec Asset Management 13,660,219 2.79 Total 167,651,740 34.27

Public/non-public shareholder spread (including resident and non-resident shareholding)

Number of shareholders in Number of shareholders other Total shareholders Shareholder type and number South Africa than in South Africa of shares No. of shares % No. of shares % No. of shares %

Non-public shareholders Directors and associates (9) 79,825,102 16.32 - - 79,825,102 16.32 Strategic holdings (more than 10%) BB Investment Co. (Pty) Ltd (1) 126,320,151 25.82 - - 126,320,151 25.82 Britair Holdings Limited (1) - - 53,966,623 11.03 53,966,623 11.03 Share trusts Comair Share Incentive Trust (1) 5,525,864 1.13 - - 5,525,864 1.13 Public shareholders Resident (2,869) 211,649,325 43.27 - - 211,649,325 43.27 Non-resident (29) - - 11,889,406 2.43 11,889,406 2.43 423,320,442 86.54 65,856,029 13.476 489,176,471 100.00

If you want to succeed you should strike out on new paths, rather than 117 travel the worn paths of accepted success. John D. Rockefeller Administration

Registered office 1 Marignane Drive Bonaero Park Kempton Park 1619

Principal place of business 1 Marignane Drive Bonaero Park Kempton Park 1619

Transfer secretaries Computershare Investor Services (Proprietary) Limited Ground floor 70 Marshall Street Johannesburg 2001 (PO Box 61051, Marshalltown, 2107)

118 Comair Integrated Annual Report 2012 Form of Proxy for Annual General Meeting

Comair Limited Registration number 1967/006783/06 Incorporated in the Republic of South Africa ISIN Code: ZAE000029823 Share Code: COM (“Comair” or “the Company”)

The form of proxy is only to be completed by those shareholders who are: • Holding Comair ordinary shares in certificated form; or • Are 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 Thursday, 1 November 2012 at 12h00. Nevertheless, forms of proxies 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 votes For Against Abstain

Ordinary Resolutions No. 1 to 6 1 Consideration of the annual financial statements 2 Re-appointment of external auditors 3 To re-elect the following Directors: 3.1 P van Hoven 3.2 MD Moritz 3.3 AK Gupta 3.4 Dr PJ Welgemoed 3.5 ER Venter 4 To elect the following Directors to the Audit Committee 4.1 PJ Welgemoed 4.2 KI Mampeule 4.3 WD Stander 4.4 AK Buchanan 5 General authority to place shares under the control of the Directors 6 Authority to issue shares for cash Non-binding Endorsement 7 Non-binding endorsement of Company’s Remuneration Policy Special Resolutions No. 1 to 6 8 Approval of Non-executive Directors’ remuneration 2011/2012 9 Approval of Non-executive Directors’ remuneration 2012/2013 10. General authority to repurchase shares 11 General authority to provide financial assistance to related and inter-related companies and corporations 12 Cancellation of “N” shares 13 Replacement of Memorandum of Incorporation Ordinary Resolution No. 7 14 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 2012

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 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 Thursday, 1 November 2012, at 12h00. Nevertheless, forms of proxies 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 Chairman 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:

• Under a power of attorney • On behalf of a Company,

unless that person’s power of attorney or authority is deposited with the Transfer Secretaries of the Company as set out in note 3 not less than 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:

• The previous death, insanity or any other legal disability of the person appointing the proxy; • The revocation of the proxy; or • The transfer of a share in respect of which the proxy was given,

unless notice as to any of the above-mentioned matters 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 her/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.

Comair Integrated Annual Report 2012 K-10037 [www.kashan.co.za] Comair Limited Integrated Annual Report 2012

Incorporated in the Republic of South Africa. Registration number: 1967/006783/06. Share code: COM. ISIN code: ZAE000029823. (“Comair” or “the Company” or “the Group”)

The bridges theme originates from Operation Crossover, the change management programme for the launch of Sabre Airlines Solutions.