2015 integrated ANNUAL REPORT

Contents

Report profile ...... 2 Who we are and what we do...... 5 Group value-added statement...... 9 Chairman and CEO’s report...... 10 Core values...... 14 Group objectives...... 15 Strategic intent...... 16 Internal control and risk management...... 19 Sustainable development report...... 24 Corporate governance...... 53 Audit Committee report...... 62 Remuneration report...... 65 Social and Ethics Committee report...... 68 Report of the Directors...... 70 Statement of responsibility by the Board...... 75 Certificate of Company Secretary...... 76 Independent Auditors’ report...... 77 Statements of Financial Position...... 78 Statements of Profit or Loss...... 79 Statements of Profit or Loss and Other Comprehensive Income...... 79 Statements of Changes in Equity...... 80 Statements of Cash Flows...... 81 Accounting Policies...... 82 Notes to the Financial Statements...... 92 Notice of Annual General Meeting (AGM)...... 125 Share price performance...... 136 Shareholder analysis...... 137

Comair Limited 1 Integrated Annual Report 2015 Report profile

Scope, boundary and reporting cycle Management has re-assessed the estimated residual values and useful lives of the Boeing 300 and Boeing 400 fleets, in line with the This Integrated Annual Report of the Comair Group (the Group) Group’s strategy of continuous fleet upgrading. Factors such as presents the economic, social and environmental performance technological innovation, planned maintenance programmes and of the Group’s airline and non-airline businesses in respect of its forecast retirement dates have been taken into account, resulting in operations in South Africa only, as well as the financial results additional depreciation of R95 million in the current reporting period. of the Group for the financial year 1 July 2014 to 30 June 2015. Whilst the performance of the Group’s associates is discussed in this report, the report focuses more on the performance of its Change in segmental classification subsidiaries, since their contribution to the Group’s performance The Group is organised into two main business segments: Airline is more significant. This report does not cover the performance or and non-airline. Previously non-airline comprised the travel issues facing the Group’s suppliers in its supply chain, outsourced business, property investments, simulator business and SLOW operations such as, but not limited to, its fleet maintenance, or in the City Lounge. Airport lounges were initially established at its leased facilities. These limitations are not considered material the main Airports Company of South Africa (ACSA) airports to enough to impair the completeness of this report. improve customer experience and were therefore included in the airline segment. However, the lounge business has since Other than stated below and as detailed in this Integrated Annual evolved into a self-sustainable business, generating third party Report, there have been no other restatements of previously lounge revenue and can now be considered independent of the reported information nor have there been changes to the basis airline segment and will be reported as non-airline for segmental of calculations or to the assumptions and techniques applied in reporting purposes (see note 29). compiling the data presented in this Report.

The Integrated Annual Report is sent to shareholders, who are recorded Reclassification of comparatives as such in the Group’s Securities Register, on Friday, 23 October 2015, and is available on the Group’s website at www.comair.co.za. Printed The Group offers travel and holiday package services using copies are available on request from the Group Company Secretary. advanced technology, both locally and internationally, to consumers This is the Group’s fifth Integrated Annual Report. The prior period’s directly as well as via the retail travel trade. This business forms Integrated Annual Report, which covered the period 1 July 2013 to part of the non-airline segment of the Group and is disclosed as 30 June 2014, was published on 29 September 2014 and is also such in the Segmental Report. In terms of IAS 18 – Revenue, the available on the Group’s website. Group acts as an agent for the collection of revenue on certain travel packages and these amounts, net of inventory cost, should be accounted for as commission received. In the financial year Reporting principles ended 30 June 2014 gross amounts were included in revenue, The content of this report is driven by those issues that have the and the associated inventory costs were included in operating greatest potential to affect the Group’s ability to operate. We expenses. The representation had no impact on the profit of the consider a broad range of external and internal factors, including Group. The effect is a reduction in both revenue and operating the outcome of various stakeholder engagement processes driving expenses amounting to R379 million in the Statements of Profit the Group’s integrated reporting process, when deciding which and Loss for the year ended 30 June 2014 (see note 29). issues are of the utmost importance to address. Whilst this report attempts to highlight the report issues raised and the outcomes of Change in accounting estimates these various engagement processes, the content of this report predominantly focuses on the information deemed relevant to the Aircraft are depreciated over their useful lives on a component Group’s shareholders and potential investors. basis, taking into account residual values where appropriate.

Comair Limited 2 Integrated Annual Report 2015 The information included in this report aims to provide shareholders and investors with a good understanding of the significant economic, social and environmental risks and opportunities the Media Group faces in the short and medium term, as well as the Group’s response in order to ensure its ability to create and sustain value for its shareholders and investors in the long term. In addition, Communities Customers* the Group attempts to explain its efforts to reduce its impact on the environment and the societies in which it operates.

This Report was prepared in accordance with International Financial Reporting Standards, the Financial Reporting Guides issued by the Employees and Investors* trade unions* Accounting Practices Committee, the Listings Requirements of the JSE, as well as the requirements of the Companies Act (Act No. 71 of 2008), as amended. The Group’s reporting on sustainable development is guided by the Sustainability Reporting Guidelines of the Global Government Industry Reporting Initiative (GRI) and the International Integrated Reporting and regulatory associations* Council’s Integrated Reporting Framework’s Guiding Principles. bodies*

The Group has applied the majority of the principles contained in the Suppliers* King Code of Governance Principles and King Report on Governance (King III).The Group’s application of the principles of King III, as well as the few instances of non-compliance, are recorded and explained in the Group’s King III register, which is continuously updated and * Considered to be significant stakeholder groups published on the Group’s website, www.comair.co.za. A summary of the King III checklist is included in the Corporate Governance section of this report. The Group’s reporting on sustainable development • the media who play an important role in the Group’s was done in accordance with GRI G3.1. engagement with stakeholders; and • its investors as one of the main objectives of the Group is to Our stakeholders create wealth for its investors as reflected in the stakeholder diagram set out above. The Group’s commitment to its stakeholders to conduct its business in a sustainable way and to respond to their needs is entrenched Without regular communication with its various stakeholder groups, in its core values. The nature of the Group’s business implies a the Group would not be able to deliver its products and services in close relationship with its stakeholders such as, but not limited to: a safe, secure or reliable way. Of the stakeholder groups identified in the diagram above as part of the Group’s regular business activities, • those customers who purchase the Group’s products and select stakeholder groups are considered to be more significant services and to whom it must provide, amongst other things, in determining the Group’s ability to operate and generate value. a safe, secure and reliable service; • its employees, who are responsible for providing a safe, Risk management secure and reliable services to its various customers; • suppliers who form an integral part of the Group’s ability to The Group follows a comprehensive and integrated risk management provide a safe, secure and reliable service; process where the identification and management of risk forms part • government, regulatory and industry bodies since the of the Executive Management business plan. The Board, through industry in which the Group operates is subject to extensive the Group’s Risk Management Committee, actively monitors this government and regulatory oversight; process. For more information on the Group’s risk management • the community in an attempt to improve the lives of fellow process, refer to the Internal Control and Risk Management Report South Africans; on pages 19 to 23 of this report.

Comair Limited 3 Integrated Annual Report 2015 Significant events during the reporting period No significant changes regarding the Group’s size, structure or ownership, apart from the foregoing, occurred during the reporting No significant events occurred during the period or after the period compared to previous financial years. Therefore there are end of the reporting period, which may have an impact on the no significant changes from previous reporting periods in the Groups operation. scope, boundary, or measurement methods applied in this Report.

Noteworthy developments during the reporting period include: • The Group finalised and wound up its BEE transaction External audit and assurance with the Thelo Aviation Consortium Proprietary Limited (the The Group’s Financial Statements, set out on pages 78 to 124, Consortium). In terms of the BEE transaction, the Company were audited by its independent external auditors, Grant Thornton issued 74 117 647 ‘A’ shares at a par value of 1 cent each Johannesburg Partnership in accordance with International to the Consortium, details of which were set out in a Circular Standards of Auditing. The report of the independent auditors is to Shareholders dated 23 August 2006 and was approved included on page 77. by shareholders by way of a special resolution passed in September 2006. The BEE transaction commenced in 2006 Grant Thornton Johannesburg Partnership provided limited and ended in 2014 (the Final Date). In terms of the BEE assurance over selected key performance indicators and specific transaction, on or after the Final Date the Company had disclosures as set out in this Integrated Annual Report. Based on a call option to re-acquire a certain number of ‘A’ shares the work Grant Thornton Johannesburg Partnership performed, based on certain hurdle balances that had to be met by the nothing has come to our attention that causes us to believe that Consortium in accordance with a formula which was detailed the selected key performance indicators or specific disclosures in the Circular to Shareholders. The Company exercised in the 2015 Integrated Annual Report for the year ended 30 June the call option, leaving the Consortium with 29 067 766 2015 have not been fairly stated. ‘A’ shares. Following the issue of the remaining ‘A’ shares to the Consortium, these ‘A’ shares in terms of the BEE For a better understanding of the scope of Grant Thornton’s transaction, were to be converted to ordinary shares on a assurance process, reference should be made to their Assurance one for one basis and listed on the JSE. With the approval Statement, which can be obtained from the Group Company of the JSE, 29 067 766 ordinary shares were listed on the Secretary, or accessed via the Group’s website, www.comair.co.za. JSE and issued to the Consortium, resulting in the issued share capital of the Company increasing from 440 263 099 Preparation of the Annual Financial Statements ordinary shares to 469 330 865 ordinary shares. Kirsten King CA(SA) was responsible for the preparation of the • The Group, at it operations building, developed and built a Annual Financial Statements. state of the art cabin crew training facility. • The Group has increased its equity stake in OR Tambo Contact us Hospitality Holdings Proprietary Limited, previously known as Protea Hospitality Proprietary Limited. We welcome the opinions and suggestions of all our stakeholders. All opinions, suggestions and questions should be directed to the Group Secretary, Derek Borer. Please find our contact details on page 140 of this report.

Comair Limited 4 Integrated Annual Report 2015 Who we are and what we do

Comair Limited (the Group) is a South African company listed on under license from British Airways Plc. During the period under the Johannesburg Stock Exchange since 1998, offering scheduled review the Group operated 42 736 sectors (one way flights) and and non-scheduled airline services within South Africa, sub-Saharan carried 5 140 599 passengers, as opposed to 43 246 sectors Africa and the Indian Ocean Islands as its core business. and 5 196 507 passengers during the prior reporting period. A diagram reflecting all the destinations to which the Group’s two The Group has operated successfully in South Africa since airline brands provided airline services during the period under 1946 and is the only known airline to have achieved operating review is set out below. The Group’s headquarters are based profits for 69 consecutive years, with a safety record which is at 1 Marignane Drive, Bonaero Park, Kempton Park and whilst internationally recognised. it operates flights destined for locations outside of South Africa, the Group’s operations are based in South Africa. The Group operates its scheduled airline services under two (2) brands, namely the kulula brand and the British Airways brand

Comair Limited 5 Integrated Annual Report 2015 In addition to providing scheduled and non-scheduled airline services, International Airport, and is in the process of expanding the the Group also offers the following non-airline related services: SLOW Lounge in the international terminal at O.R. Tambo International Airport. • A travel and holiday packaging service using advanced technology to deliver travel and holiday packages to many • The Group launched its own catering unit in 2012 under destinations both locally and internationally to consumers the Food Directions brand and provides on-board catering directly and to the retail travel trade. Through acquisitions, services to the kulula and British Airways flights, giving the expansion and partnerships, the Group has established one Group control and flexibility in terms of cost and product of the country’s largest and broadest digital travel distribution offering. networks. The brands under the Group’s Travel and Holiday Package banner include kulula holidays, MTBeds, African • In addition to training Comair’s own pilots, the Comair Images and African Dream Holidays and the Group also Training Centre (CTC) offers a full range of aviation-related has a Harvey World Travel Holiday Retail Travel Agency. The ground school subjects and flight simulator training for the Group continues to form partnerships with industry leaders full range of Boeing 737 type aircraft. The CTC also provides in travel reward and recognition programmes as part of its a variety of ancillary subjects as well as cabin crew and flight objective to continuously expand and grow this business. dispatcher training. In collaboration with Avion de Transport Regional (ATR), the CTC is the host for the ATR Reference • In 2009, the Group launched its SLOW Lounges and currently Training Centre which offers simulator training for pilots of operates SLOW Lounges at O.R. Tambo International Airport ATR turboprop aircraft. The CTC has a client base of airlines in both the domestic and international terminals, Cape from numerous African countries, as well as the likes of the Town International Airport domestic terminal, King Shaka Middle East, South America, Indo-Asia and the Far East. International Airport domestic terminal and SLOW in the City in Sandton, Johannesburg. The SLOW Lounges have • During the period under review, the Group commenced with set a global standard for airport lounges, providing a perfect the design and development of a purpose-built cabin crew sanctuary from the fast pace of travel and modern life, and training facility which will be used to train not only the Group have won numerous awards for their creative excellence. cabin crew, but also third party cabin crews. Demand for the lounges has increased and the Group has extended and refurbished its SLOW Lounge at Cape Town The diagram below sets out the various brands of the Group.

kulula.com and British Airways, operated by Comair, are our As at 30 June 2015, the Group employed 2 072 permanent fulltime airline-related brands, while the balance of the brands are non- employees over its various operating platforms in South Africa as airline brands. opposed to 2 006 permanent fulltime employees as at 30 June 2014.

Comair Limited 6 Integrated Annual Report 2015 Organisation structure

100% (1) Kulula Air Proprietary Limited trading as SLOW in the City

100% (2) Alooca Properties Proprietary Limited

100% (3) Aconcagua 23 Properties Proprietary Limited

100% (4) Holiday Tours Proprietary Limited

100% (5) Imperial Air Cargo Proprietary Limited

49% (6) OR Tambo Hospitality Proprietary Limited

40% (7) Commuter Handling Services Proprietary Limited

49% (8) Comair Mozambique Limitada

100% (9) Churchill Finance Services 23 Limited

100% (10) Comair Catering Proprietary Limited

56% (11) Highly Nutritious Food Company Proprietary Limited

Comair Limited 7 Integrated Annual Report 2015 (1) Kulula Air Proprietary Limited Holds the liquor licences in respect of all of the Company’s Lounges and looks after various service agreements relating to the Airport Lounges and SLOW in the City

(2) Alooca Properties Proprietary Limited Property owning company which owns a number of properties in Rhodesfield surrounding the Company’s operations building

(3) Aconcagua 32 Investments Proprietary Limited Property owning company which owns the property on which the Company’s operations building is situated

(4) Holiday Tours Proprietary Limited An outbound tour operating company offering holiday packages to destinations outside of South Africa

(5) Imperial Air Cargo Proprietary Limited A cargo and freight company providing cargo and freight services in South Africa. The company is currently dormant and will be remained Comair Air Cargo Proprietary Limited

(6) OR Tambo Hospitality Proprietary Limited Property owning company (previously known as Protea Hotel OR Tambo Proprietary Limited), which owns the building that constitutes Protea Hotel O.R. Tambo Airport. The Group increased its shareholding in this Company to 49% with the increase in shareholding being effective 1 July 2014

(7) Commuter Handling Services Proprietary Limited Provides ramp handling services in South Africa to various airlines

(8) Comair Mozambique Limitada The company is currently dormant

(9) Churchill Finance Services 23 Limited A company established in Mauritius for the purposes of financing the acquisition of aircraft. This company is dormant and is in the process of being deregistered

(10) Comair Catering Proprietary Limited Holds the liquor licence in respect of the Company’s catering business and looks after various service agreements relating to the catering operation, but will, from the next reporting period, house the Company’s catering business

(11) Highly Nutritious Food Company Proprietary Limited The company provides food items to Comair’s catering Division and 3rd party retailers.

Apart from Comair Mozambique Limitada, which is registered in Mozambique, and Churchill Finance Services 23 Limited, which is registered in Mauritius, all of the Group’s subsidiaries and associates are registered in South Africa.

The Group’s affiliated businesses performed well over the period under review and made a meaningful contribution to profits, although they make up a small percentage of its turnover. In addition, they are exposed to immaterial risks and pose no threat to the completeness principle.

Comair Limited 8 Integrated Annual Report 2015 Group value-added statement for the year ended 30 June 2015

2015 2014

R’000 % R’000 %

Wealth created

Group revenue 5 890 746 6 282 219 Cost of materials and services (4 262 848) (4 794 443) Value added 1 627 898 1 487 776 Interest income 40 428 32 149

Total value added 1 668 326 1 519 925

Wealth distributed 1 043 738 964 327

Community investment 2 199 0 1 623 0

Employees Salaries, wages and related benefits 832 050 50 738 003 49

Providers of capital Interest on loans 72 930 4 77 340 5 Dividends paid to shareholders 79 938 5 70 295 5

Government Taxation expense 56 621 3 77 066 5

Wealth retained 624 588 555 598

624 588 38 555 598 37 Accumulated profits 624 588 555 598

1 668 326 100 1 519 925 100

Comair Limited 9 Integrated Annual Report 2015 Chairman and CEO’s report

Group performance We are firmly committed to the local aviation industry and to working with government and other relevant authorities to ensure: As Chairman and Chief Executive Officer, it is our privilege to oversee and lead an airline that has grown from its infancy in • The maintenance of a safe, reliable, competitive and commercially 1946, to the Group known today, operating scheduled airline viable air transport sector, where all operators are afforded services in South Africa, sub-Saharan Africa and the Indian Ocean equal treatment by government; Islands using twenty five aircraft made up of eleven B737-800s, • The provision of an air transport infrastructure that is affordable twelve B737-400s and two B737-300s. During the year under and consistent with the requirements of the air transport review, the airline operated 42 736 sectors, carrying approximately sector and the travelling public; and 5.1 million passengers and employing 2 088 staff members. • The provision of air travel at costs that are affordable to South African consumers and are in line with internationally We remain firmly committed to our vision of offering an exceptional accepted airline service standards and practices. travel experience in the most efficient way. Our focus on delivering on our strategic intent will enable us to continue to create long-term shareholder value. The Group’s reputation and focus on safety, Strategic priorities customer service and efficiency has built a sustainable foundation to During the period under review, we concentrated on the following accommodate growth opportunities and ensure that we continue to strategic priorities: play a major role in the Southern African aviation and travel industry.

• Maintaining revenue in a depressed economic environment, The airline industry combined with increased competition in the form of new entrants to the market, sparking an irrational pricing response The aviation industry worldwide is recognised for its operating by our existing, protected competitors during the second challenges. It is an industry that is capital intensive, has small half of the financial year. Revenue was maintained to cover profit margins and is highly regulated. A consistent theme across and manage costs without ever compromising on providing the global airline industry is one of poor returns on investment, a safe, secure and reliable airline service; protected competition and low barriers to entry. The industry is • Constantly delivering on our promise to customers; a soft target for taxes, volatile costs and increased regulation. • Enhancing our new, enterprise-wide IT platform; • Upgrading our fleet, including the investment in new aircraft, The volatile fuel price, and in South Africa, our volatile exchange the next deliveries of which will take place in August and rate, requires airlines to constantly innovate and improve on October 2015 and February and November 2016; operating efficiency. Worldwide, the industry has recognised the • Continually monitoring and responding to changes to our need for radical change to ensure sustainability and profitability. macro operating environment; and • Providing employment security to all of our employees. Considering the above, Comair has a unique record of delivering operating profits for 69 years in succession. We have delivered against these priorities during the period under review. Our top priorities are to continuously improve our customer service, control costs and increase business efficiencies. In this regard, we have adopted an approach not dissimilar to many successful Performance against objectives airlines worldwide, of acquiring and operating larger but more fuel Financial performance efficient aircraft and implementing a new generation information technology platform, enabling us to deliver greater efficiencies The 2015 financial year provided a basket of challenging variables, and new commercial opportunities. with a very strong profit in the first half followed by a more mundane second half. The first half started with an unprecedented collapse in

Comair Limited 10 Integrated Annual Report 2015 the oil price, resulting in a drop in the price of jet fuel from a high of and created realised value of R152 million for the participants. R9.50 per litre to R7.30 by December, and R6.50 by year end. This The ‘A’ shares arising from the transaction were converted to decline granted relief to the dramatic cost escalation of previous years. 29 067 766 ordinary shares on 21 April 2015. The weighted effect We benefitted from revenue growth of 5% in the first half of the year. of the additional shares is a reduction in the 2015 earnings per share of 3 cents. The Group continued to invest in its transformation The second half of the year saw two new competitors enter the initiatives, including its pilot cadet programme, airport learnerships, market with very aggressive, but more than likely unsustainable enterprise development and social responsibility, and thereby pricing. Comair was, out of necessity, drawn into the fray in order maintained its level 4 B-BBEE score. to retain its slice of a market that had still not recovered to 2008 volumes. As a result of this, any savings achieved on the price of Customer experience fuel were returned to our customers by way of significantly reduced We continued to focus on our customers through the application ticket prices, with a consequent reversal of the revenue growth of feedback surveys, customer journey mapping, service metrics experienced in the first six months. Despite the new capacity in and extensive training programmes for front-line staff. Operating the market, Comair maintained its passenger volumes, largely performance remained good, with on-time departures meeting due to the strength of the kulula.com and British Airways brands our threshold target of 85% across both the British Airways and and our ongoing attention to service. kulula.com brands.

The year closed with no growth in revenue compared to the previous Investment year, and a 1% saving in operating costs. Despite an increase In addition to the Boeing 737-400 aircraft mentioned above, in operating profit, profit for the year reflects a 17% reduction, during the year we made substantial investments in expanding and resulting in earnings per share of 47.8 cents (prior year 58.4 cents). upgrading our SLOW Lounges at Cape Town International Airport and expanding our SLOW Lounge in the international terminal at Cash of R147 million was invested in the acquisition of three O.R. Tambo International Airport. We have, in addition, invested previously leased Boeing 737-400 aircraft and two pre-owned in and built a Cabin Crew Training Facility at our operations base Boeing 737-400s, all for operation in the British Airways fleet. in Rhodesfield. These aircraft have replaced the 737-300 fleet which will be fully retired by December. The newer aircraft afford improved We will be taking delivery of four new Boeing 737-800 aircraft fuel efficiency and reduced maintenance demands, while at the in the 2015/2016 calendar years, due for delivery in August and same time improving passenger comfort. Early settlement was October 2015 and February and November of 2016. All of the also concluded on aircraft and simulator funding amounting to aforementioned aircraft are currently designated to replace existing R115 million. Cash on hand at year end was R849 million, much aircraft as part of our ongoing fleet upgrade programme. in line with the prior year balance of R868 million. Market environment Shortly after the initial collapse of the oil price, Comair took out hedges on approximately 26% of its fuel demand, amounting to Partnerships 500 000 barrels, at an average price of $82. While this appeared Partnerships are still the cornerstone of our business. We continue to be a prudent move at the time, the onward decline of the oil to work closely with the travel agent community in distributing price during the year proved that history does not necessarily our products. Our relationship with Discovery Vitality has grown provide a good precedent, and we had to write back a hedging and now includes local, regional and international flights, holiday loss of R61 million against the fuel expense. At year end there packages as well as car rental and hotels for Vitality members. remain 160 000 barrels hedged at an average of $82, representing We have extended our First National Bank/Rand Merchant Bank 10% of our fuel demand for the 2016 financial year. The last of relationship with further investment in the SLOW Lounge at Cape these hedges expire in December 2015. Recent developments Town International Airport. We are currently in the process of in the global demand for oil, and the remaining global production upgrading and increasing the size of our SLOW Lounge in the capacity, have deterred us from any further hedging activity. International Terminal at O.R.Tambo International Airport. Europcar is one of our strongest partners, and together we are the largest The Black Economic Empowerment transaction concluded by Comair online seller of car rental in South Africa. and the Thelo Consortium in 2007, matured in September 2014,

Comair Limited 11 Integrated Annual Report 2015 Brands the North Gauteng High Court during the period under review Our brands continue to perform well in the market. kulula.com and, unfortunately for the Group, the matter was dismissed by is the market leader in affordable, easily accessible air travel and the Court without a cost order having been made. Despite having continues to grow in the cost conscious business and leisure reservations about the decision, the Group has decided not to market. kulula.com has become one of South Africa’s iconic take the decision on appeal. consumer brands and is estimated to be South Africa’s largest online retailer by annual sales value. Affiliate businesses Our affiliate businesses performed well over the period and we Our British Airways (BA) brand has continued to grow in the continued to look for aligned business opportunities. While these corporate and public sectors as well as in the inbound tourist businesses make up a small percentage of our turnover, they markets. The BA loyalty programme, Executive Club, the SLOW are making an increasing contribution to our profits. Specifically, Lounges and our investment in our new catering products, our online travel business, lounges and flight training business have all helped grow the appeal of this brand. Our relationship performed well during the year. with British Airways Plc remains strong, with BA and ourselves seeing great potential to grow our partnership further into Corporate governance Africa. Our SLOW Lounge brand has built great equity amongst business travellers. We aim to be a good corporate citizen and maintain the highest standards of integrity and ethics in our dealings with our stakeholders. Competition Tribunal claim To ensure that we offer the best possible airline service and As previously reported, the Competition Tribunal ruled in our are regarded as the airline of choice for all travellers within our favour in our case against SAA for its anti-competitive travel agent operating environment, we manage and control our business incentives and its abuse of dominance. We were also successful by implementing governance procedures and ensuring that we on the appeal which SAA lodged, and have issued a multi-million identify and manage our risks effectively. Rand summons against SAA for damages related to this claim. This matter is scheduled to be heard in the High Court of South Sustainability Africa during April 2016. We are committed to managing our business in a sustainable State funding of SAA way. This means considering not only the Group’s financial performance and risk profile, but also its social, environmental Comair’s entry onto the main South African routes, and its ongoing and economic impact. Included in the Integrated Annual Report sustainability, relies on the commitments made by government in is our Sustainable Development Report, which provides our various policies and legislation to create a pro-competitive aviation shareholders with information regarding the significant social and industry. Failure by government and the state-owned airlines to environmental risks and opportunities that have an impact on our adhere to these principles, including the ongoing state funding ability to create long-term value for our stakeholders. In addition, of SAA, has led to an uneven playing field for competitors. The we explain our effort to reduce our impact on the environment resulting, often irrational, commercial behaviour by the state-owned and the societies in which we operate. airlines remains the most disruptive challenge to the sustainability of the domestic industry, and to our delivery on our obligations People to our customers, employees and shareholders. We continue to attract the best talent in the business and continually As previously reported, the Group found it necessary to challenge, by invest in their wellbeing and development. way of an action before the South African High Court, the R5 billion state guarantee provided by government to South African Airways. We are also very fortunate to have a highly experienced and dedicated This challenge was on the basis that such funding was contrary to management team that has a wealth of experience in the industry. government’s domestic aviation policy, the Constitution, the Public Finance Management Act (Act No. 1 of 1999) as amended, the Training Promotion of Administrative Justice Act (Act No. 3 of 2000) and Training and skills development is a major priority to ensure the SAA Act (Act No. 5 of 2007). The matter was brought before that we are able to provide a quality service to our customers.

Comair Limited 12 Integrated Annual Report 2015 We spent approximately 3.09% of payroll during the period We are focused on implementing technology solutions to enhance under review to support our commitment to training and skills our operating performance, customer service experience and development. Further details are set out in our Sustainable revenue generating opportunities. The pace of development in Development Report. distribution technology is relentless, and the Group is intent on extracting the maximum benefit from its customer information Society data in order to improve its service offering and the marketing of We are a committed corporate citizen and, together with our relevant products to its various customer segments. We are also staff, endeavour to improve the lives of fellow South Africans. developing new software applications for use on-board the aircraft We try to make a meaningful impact on our local communities and on the ground to facilitate more efficient operating procedures. by attempting to alleviate some of their socio-economic challenges. Further details in this regard are set out in our In August and October 2015 we took delivery of two of the next Sustainable Development Report. four new Boeing 737-800s from Boeing. The remaining two of which will be delivered in 2016. The delivery of eight Boeing 737-8 Environment MAX aircraft remain on schedule for 2019 to 2021. The ongoing upgrades to the fleet will continue to improve operating efficiency We are committed to protecting the environment, conserving natural which at the same time enhances the revenue potential per flight. resources and utilising resources in an effective and responsible way by adopting sound environmental practices in our business and Despite the challenges of the industry and the additional capacity industry. We are also committed to improving our environmental arising from potential new competitors, the Group’s much improved performance by attempting to reduce the adverse impact that infrastructure and continued focus on customer service bode well aviation has on the local and global environment. Further details for reasonable results in the year ahead. are set out in our Sustainable Development Report.

Transformation Appreciation

The Group continued to progress with its transformation programme, Our sincere appreciation goes to every person within the Comair as reflected in the most recently issued broad-based black Group who contributed to the ongoing success of the Group during economic empowerment (B-BBEE) certificate. The industry is still the year under review. This includes our Directors, management faced with significant challenges in attracting an adequate number and employees. Special thanks are extended to our customers of matriculants, with higher grade mathematics and science and other stakeholders who have chosen to use our services or from previously disadvantaged groups, for training in aviation provide services to us. specialised skills. Further details are set out in the Sustainable Development Report. We also thank all the public sector departments and agencies that we have worked with this year for their shared commitment Looking ahead to our objectives.

We remain concerned with the weak economic growth and the consequent impact of overcapacity on the domestic aviation market. Fundamentals dictate that a correction in market capacity is likely. Furthermore, the new visa regulations applied to South Africans and foreign tourists travelling with children, has impacted ER Venter P van Hoven negatively on our cross-border tourist destinations, and we are CEO Chairman actively participating in the drive for a more favourable dispensation. 20 October 2015 20 October 2015

Comair Limited 13 Integrated Annual Report 2015 Core values

The Group and its employees support the following core values:

Our customers In our dealings with our customers, we aim to:

• Reflect the image of the company; • Deliver a safe and quality service; • Regard everyone who is dependent on our outputs as a customer; • Meet the expectations of our customers; • Measure customer satisfaction levels; • Respect our customers’ rights to confidentiality; and • Accept responsibility for customer service.

Mutual trust and respect We aim to:

• Share information to the benefit of the Group; • Listen with empathy; • Communicate openly and honestly; • Display respect for the individual and his/her dignity; • Solve problems on a win-win basis for all parties; • Greet and acknowledge one another; • Maintain ethical standards; • Exhibit respect for the individual and his/her dignity; and • Commit to sustainable transformation addressing the inequalities of the past.

Performance driven We seek to always:

• Set objectives and give regular performance feedback; • Ensure that each employee knows what is expected of him/her and what our standards are; • Give recognition to those to whom it is due; • Continuously strive to improve our operating efficiencies; • Eliminate activities that do not add value; • Base appointments and promotions on competence and performance; and • Offer each employee the opportunity to develop his/her potential.

Team approach We:

• Promote positive team behaviour; • Ensure the participation of all role players; and • Exhibit responsible, fair, honest and effective leadership.

Comair Limited 14 Integrated Annual Report 2015 Group objectives

Creating shareholder value • We will continue to optimise operating efficiencies and grow the profitability of the business. • We will continue to optimise our cost base, without compromising safety, reliability and customer services. • We will always look to make investments that will provide incremental growth based on sound investment principles.

Commitment to quality • We will strive to be trusted by all our stakeholders. • We will always ensure that we provide a safe, secure and reliable service. • We will always strive to improve customer satisfaction levels.

Managing risk • We will continue to ensure that our risks are meticulously managed. • We will adopt a proactive approach to ensure compliance with regulatory and legislative change.

Leading as a responsible corporate citizen • We are committed to managing our business in a sustainable way and upholding high standards of ethics and corporate governance practices.

Provide growth and development opportunities for employees • We strive to maintain a corporate culture that provides a working environment which is conducive to employee engagement and productivity and which assists us to attract and retain a talented workforce. • We will provide continuous training and development opportunities to our employees, ensuring that their skills and competencies are relevant and appropriate to our business and the delivery of exceptional service to our customers. • We will strive to be an employer of choice, recognising that market competition for competent resources is increasing.

Operating effectiveness • We will continue to develop core competencies across our operating environment. • We will continue to look for cost-saving initiatives and look to create synergies over our existing and future operations. • We wish to position ourselves as the airline of choice.

Comair Limited 15 Integrated Annual Report 2015 Strategic intent

Cycle of Success

The Group’s Cycle of Success illustrates its strategic intent and purpose, the business model it follows, its vision as well as the action pillars that underpin its core values.

A diagram reflecting the Group’s Cycle of Success is set out below.

Purpose

The Group’s purpose, ‘We Lift You Up’, drives our aspiration to lift people up in an inspiring, empowering, passionate and innovative way, to render a positive impact in the world. The Group’s Cycle of Success depicts how all elements of its business connect to realise its purpose. It also reiterates the behaviour that employees must embrace to fulfil the Cycle of Success.

Comair Limited 16 Integrated Annual Report 2015 The Group believes that:

By lifting myself up, I can lift my colleagues up, To lift our customers up, To lift investors up, To lift society up, To lift nations up, To lift the world up, To lift myself up.

Business model Action pillars

The business model is not unique to the Group or the airline The four action pillars are as follows: industry. The challenge lies in making sure that the Group achieves the ‘cycle’ for sustainability and growth. It means that with the Innovation right equipment and people, the Group can deliver an awesome The Group has a professional approach to everything it does or travel experience to its customers. If our customers are happy, presents and is committed to a consistent high standard. It is they will keep coming back and when they keep coming back, committed to offering world-class products and services in the our investors will continue to invest in the Group. This will allow most efficient way. As a market leader, the Group stays up to the Group to be more resilient to change and together we can date with current trends and can relate and communicate to the move forward in a sustainable way. public, customers, investors, suppliers and employees.

Leadership Vision The Group is a well led and managed South African company. It The Group’s vision is to “deliver an awesome travel experience in leads by example and represents courage and humility. The Group the most efficient way, and be prepared for growth opportunities”. behaves in a responsible way towards the public, customers, It is an aspirational description of what the Group would like to investors, suppliers and employees. achieve and is intended to serve as a clear guide for choosing current and future courses of action. The Group’s vision does Integrity not fit the typical mantra that you would hear echoed by other Safety and security underpin everything the Group does. The organisations. As a Group we went a step further and dug deep to Group reflects poise and reassurance and is trusted by the public, look at our core objectives and tried to define the impact of these customers, investors, suppliers and employees. objectives on our stakeholders where the Group’s business has an influence. The Group acknowledges that the aviation industry Passion for service is volatile and its future is difficult to predict. The Group therefore looks to define behaviour that will allow it to succeed in every The Group is committed to operational efficiency and value. It opportunity it decides to take on. understands and anticipates the needs of its customers, investors, suppliers and employees. Action pillars and values

The four action pillars and Think Vision values guides the Group’s business model.

Comair Limited 17 Integrated Annual Report 2015 Think Vision values and principles The Think Vision formula for success identifies those values and principles that are beneficial (top line) to the Group as well as those values and principles that should be eliminated which could be detrimental (bottom line) to the Group.

Top Line Leveraging Leading Technology Passion for Service Financially Sound Dignity and Respect Expansion and Growth Pursue Operational Excellence Inspiring Leadership Accountable and Responsible Teamwork Socially Responsible Market Leaders High Performing, Professional People Safety First A Great Place to Work

3 2 2

+ + + + + + + + + + x 2 + + +

3 2 2

+ x 2 + + + + + + + + + + + + Broken Lack of Negative Attitudes Inflexible Accepting Standards Arrogance Resources Mediocrity Reputation Dishonesty and Gossip Favouritism Compliance of the Right Not Enough Bureaucracy Bad Planning Dropping our Backstabbing Damaging our Communication Bottom Line

We encourage our employees to apply these values and principles.

Governance of the business

The Group’s governance structures are focused on maintaining and building a sustainable business and being a responsible corporate citizen. The key elements of these governance structures include:

• Providing a safe, secure, reliable and quality airline service (refer to the Sustainable Development Report for more information); • Maintaining principles of good corporate governance, integrity and ethics (see the Corporate Governance Report for more information); • Maintaining effective risk management and internal controls (see the Internal Control and Risk Management Report for further information); • Engaging with stakeholders and responding to their reasonable expectations (see the Report Profile and Sustainable Development Report for more information); • Managing the business in a sustainable manner (see the Sustainable Development Report for more information); and • Offering employees a good working environment and competitive remuneration packages, based on the principles of fairness and affordability (see the Sustainable Development Report and the Remuneration Report for more information).

Comair Limited 18 Integrated Annual Report 2015 Internal control and risk management

Corporate governance which in turn reports to the Board. The Group prioritises risks based on the likelihood of the risk occurring, the impact of the risk The Group is committed to maintaining principles of good corporate and mitigating factors. Each risk is categorised as high, medium governance to ensure that its business is managed in a responsible or low. The Risk Management Forum, comprising the CEO, manner with integrity, fairness, transparency and accountability. Chief Risk Officer, Chief Audit Executive and certain Executive Management, meets at least four (4) times per year to assess Internal control over financial reporting and consider the risks associated with the Group’s operations. The Risk Committee also reviews the risk management process. Internal controls and risk management systems in relation to the Group’s financial reporting process are in place. During the period Given the rapid growth of its business over the past few years under review, there were no material changes in risk management and a constantly changing risk environment, the Group has been and internal control systems. reviewing how far the risk management framework continues to meet its risk management requirements. This work is largely Internal control framework complete and the Group will be rolling out some improvements to ensure greater integration of processes and consistency in The Group continues to review its internal control processes rating risk across the different parts of our operations in the next to ensure it maintains a strong and effective internal control reporting period. environment. During the period under review, the effectiveness of the process was regularly reviewed by the Risk Management In addition to the foregoing, the Group recognises the need for Forum and Audit Committee. For further information on the Group’s its employees and stakeholders to have a confidential reporting internal controls, please refer to page 60 of this report. process (‘whistle blowing’) covering fraud and other risks. In line with its commitment to transparency and accountability, the Risk management Group takes action against employees and others who are guilty Effective risk management is critical to the Group’s operations and of fraud, corruption and other misconduct. Procedures are in is crucial to its continued growth and success. In order to achieve place for the independent investigation of matters reported and its objectives and create shareholder value, the Group does take for appropriate follow-up action. risks, but fully understands and effectively manages the risks it takes in order to minimise loss and maximise opportunities. The The Board believes that the risks described below are the ones objective of risk management is to establish an integrated and that may have the most significant impact on the Group’s ability effective risk management framework where important risks are to achieve its objectives as set out earlier in this report. identified, quantified and managed. In order to give effect to same, the Group follows a comprehensive risk management process, Debt funding which involves identifying, understanding and managing the risks The Group is exposed to a variety of financial risks, including associated with its various businesses. As the Group, through its market risks, credit risks, capital risks and liquidity risks. The various business units, is exposed to a wide range of risks, some Board approves prudent financial policies and delegates certain of which may have serious consequences, the identification of responsibilities to Executive Management, who directly control risk and its management forms part of Executive Management’s day-to-day financial operations and who operate within clearly business plan. Risk registers are used to identify, assess and defined parameters. monitor the risks faced by the Group and are prepared by each business department. The risk registers are combined into a Group The Group carries substantial debt that needs to be repaid. The risk register by the Risk Management Forum and are prepared, ability to finance on-going operations, committed aircraft orders and discussed and assessed by the Risk Management Committee, future fleet growth plans is vulnerable to various factors, including

Comair Limited 19 Integrated Annual Report 2015 institutional appetite for secured aircraft financing. The Group Aircraft safety attempts to maintain substantial cash reserves and committed Maintenance of the Group’s fleet of aircraft is regulated by the financing facilities to mitigate the risk of short-term interruptions South African Civil Aviation Authority and, in certain instances, to the aircraft financing markets. The Group in addition continually the Federal Aviation Authority of the United States, and the monitors its cash position and further undertakes long-term European Aviation Safety Authority. While the Group outsources planning of its capital requirements. the maintenance of its fleet of aircraft and engines to the likes of South African Airways Technical, Israeli Aircraft Industries, and For more information regarding the Group’s response to this risk, ST Aerospace Engines Pte Limited, it maintains an oversight see the Annual Financial Statements in this report. function over all these entities and ensures that it maintains a good relationship with the South African Civil Aviation Authority. Currency fluctuations The Group, in addition, runs a safety management system to The Group reports in South African Rand, the exchange rate of address all aspects of aviation and ground safety. which varies relative to other currencies. A significant portion of the Group’s costs are incurred in foreign currencies, mainly the United For more information regarding the Group’s response to this risk, States Dollar. The movement of these currencies could have a see the Sustainable Development Report in this report. positive or negative impact on the Group’s income, expenses and profitability. Unrealised and realised currency gains or losses may Brand reputation distort the Group’s financial accounts. The Group does, however, The Group’s brands have significant commercial value. Erosion of have a natural hedge in place, by virtue of its foreign currency the brands may adversely impact its position with its customers revenue, thereby decreasing its net foreign currency exposure. and could ultimately affect future revenue and profitability. The Group’s Executive team regularly monitors customer satisfaction For more information regarding the Group’s response to this risk, through monthly surveys, customer reports, as well as media see the Annual Financial Statements in this report. monitoring, including social media. Furthermore, continuous improvements are made to the Group product offering in order Oil price fluctuations to mitigate this risk. The Group allocates substantial resources to As with foreign currencies, the Group incurs substantial costs safety, security, on-board product and new aircraft. with regard to the purchase of fuel for its aircraft. The Group has a policy to hedge a conservative portion of its fuel requirements For more information regarding the Group’s response to this risk, based on various instruments available and where this is achievable. see the Sustainable Development Report in this report.

For more information regarding the Group’s response to this risk, Non-beneficial increases in airline tickets see the Annual Financial Statements in this report. There is an extremely high correlation between the volume of air travel and the average price of airline tickets in the domestic market. Safety of passengers and employees In the past, various state-owned suppliers to the aviation industry A multitude of processes and structures are in place to monitor have implemented tariff increases for users that were significantly and report on aviation safety, quality and security within the greater than the rate of inflation and which threatened to constrict Group and its operating environment. The Group maintains an the size of the market for air travel. Whilst tariff increases effective International Air Transport Association (IATA) Operational Safety 1 April 2014 were more or less in line with the Consumer Price Audit (IOSA) registration, thereby ensuring the implementation Index (CPI), the cumulative effect of previous increases had the of global best practice in managing its operational safety, and is effect of restricting the size of the market for air travel. However, the audited by British Airways Plc as well as the South African Civil Regulating Committee for the Airports Company of South Africa and Aviation Authority. Air Traffic Navigation Services published a draft permission paper for public comment in the Government Gazette on 22 May 2015, For more information regarding the Group’s response to this risk, which could result in a reduction in charges, which will naturally be see the Sustainable Development Report in this report. welcomed by the airline industry. The closing date for receipt of comments was set for 29 May 2015. The effective date of the final

Comair Limited 20 Integrated Annual Report 2015 permission when published was 1 April 2015, with implementation Competition of same expected to be on 1 October 2015. There is also talk of The market in which the Group operates is highly competitive, government imposing carbon taxes on airline tickets. Furthermore, and this is augmented by the fact that the country’s biggest airline the Consumer Protection Act (Act No. 68 of 2008) has, to a limited is owned by the state. Direct competition is faced from other degree, impacted on airline commercial practices, which possibly airlines on the routes the Group operates and from other modes could lead to an increase in ticket prices. As such, increases in of transport. Competitor capacity growth in excess of demand ticket prices do not benefit the airline, and the consequential growth could materially impact the Group’s margins. Some constraint on demand will negatively impact industry revenue. competitors have other competitive advantages, such as being funded and supported through government interventions. Fare For more information regarding the Group’s response to this risk, discounting by competitors has historically had a negative effect see the Sustainable Development Report and the Annual Financial on the Group’s results because a response is generally required Statements in this report. to competitor fares to maintain passenger volumes. The Group has a strong market position, a good alliance with British Airways Political and economic developments Plc and a diverse customer base to address this risk. The state of the local economy impacts on the profitability of the aviation industry, and the political climate affects the number of For more information regarding the Group’s response to this visitors from overseas to the Southern African region. Strikes and risk, see the Sustainable Development Report and the Corporate labour disruptions by suppliers to the Group have the potential to Governance Report in this report. constrain the operation of the airline. The Group monitors global and local trends in order to adapt its business strategy accordingly. Legislation and regulation Political instability in any country into which the Group operates Regulation of the airline industry is increasing and covers many of its services could also affect the Group. The Group therefore the Group’s activities such as safety, security, traffic rights, slot undertakes risk assessments before embarking on new routes control access and environment controls. In order to mitigate in Africa and internationally, and continually reviews those risks, these risks, the Group attempts, amongst other things, to maintain and is assisted in this regard through its Licence Agreement with a good working relationship with the government departments British Airways Plc and through its membership of the International it interacts with, the Airports Company South Africa and other Air Transport Association. regulatory and industry bodies. Air service licensing legislation restricts the percentage of voting rights that may be held in the For more information regarding the Group’s response to this risk, Group by non-South African residents. If the stipulated foreign see the Sustainable Development Report and Annual Financial ownership requirements are exceeded, the Group could face Statements in this report. having it operating licence/s suspended or cancelled. To mitigate this particular risk, the Group continually monitors its foreign Economic and business environment shareholding component to ensure that it does it not exceed the The Group’s revenues are sensitive to the economic and business permissible ownership levels. environment, and can be affected by a downturn in the general economic and business environment. The Group therefore For more information regarding the Group’s response to this risk, continually monitors developments in this environment for trends see the Sustainable Development Report in this report. and early warning indicators. Executive Management and the Audit Committee regularly review the Group’s revenue forecasts. Technical innovation Technology forms an integral part of the Group’s business. While For more information regarding the Group’s response to this risk, the Group’s British Airways brand is, to a large extent, dependent see the Sustainable Development Report and Annual Financial on developments implemented by British Airways Plc, the kulula Statements in this report. brand is not, and the Group devotes significant resources to information technology in respect of this brand, including the development of new products and services, as well as analysing

Comair Limited 21 Integrated Annual Report 2015 emerging trends in information technology and consumer behaviour. Employee relations The Group during 2012 embarked on one of the single biggest A large number of the Group’s employees in South Africa are business transformations in its history whereby a suite of integrated members of trade unions. The Group strives to maintain a good solutions, procured from Sabre Airline Solutions, including a new working relationship with the trade unions, has recognition reservations platform for kulula.com, was implemented. The agreements in place and enters into substantive negotiations transition to the new platform provides the organisation with an annually. The Group further has a strike action plan in place. integrated solution that will in the medium to long term result in greater efficiencies, improved and wider distribution capabilities For more information regarding the Group’s response to this risk, and the benefit of access to a global Sabre user community that see the Sustainable Development Report in this report. is constantly reviewing processes and developing new products. Nevertheless, the Group is always faced with managing the risk Key supplier risk presented by new technology, new developments by its competitors The Group is dependent on suppliers for some principal business or the speed of development. processes. The failure of a key supplier to deliver contractual obligations may cause significant disruption to operations. A close For more information regarding the Group’s response to this risk, relationship is maintained with key supporters in order to ensure see the Sustainable Development Report in this report. awareness of any potential supply chain disruption. The Group Systems security and availability risk further continually monitors its key suppliers. The Group is dependent on information technology (IT) systems for For more information regarding the Group’s response to this risk, most of its principal business processes. The failure of a key system see the Sustainable Development Report in this report. may cause significant disruption and/or result in lost revenue. System controls, disaster recovery and business continuity arrangements Fraud (credit card, cash, system) exist to mitigate the risk of a crucial system failure. The Group has The Group has implemented a number of risk mitigants to cover launched several initiatives to cover not only information system credit card, cash and systems fraud, such as, but not limited security and availability risk, but also IT governance in accordance to, the implementation of Cybersource software as well as the with the requirements of King III. The Board appointed a Chief planned implementation of 3D Secure in respect of credit card Information Officer, and the Group has, in addition, implemented fraud; strict controls and authorisation frameworks for use of Travel software dealing with IT systems security. No security breaches Bank, strict controls over who has access and transfer rights; occurred during the period under review. The Group’s Information regular password changes in respect of bank accounts and daily Technology Department worked closely with its service providers bank reconciliations; and procedures for immediate investigation to ensure that a better than 99% up time was achieved on the of discrepancies in cash reconciliations. The Risk Management Group’s networks and customer facing systems. Committee and, where appropriate, the Audit Committee, consider any incidents of fraud and corruption. For more information regarding the Group’s response to this risk, see the Corporate Governance Report and Annual Financial For more information regarding the Group’s response to this Statements in this report. risk, see the Corporate Governance Report and Annual Financial Landing fees and security charges Statements in this report. Airport taxes, landing fees and security charges represent a State funding of South African Airways significant operating cost to the Group and have an impact on As previously reported, the Group launched a legal challenge in operations. Whilst certain of these charges are passed on to the High Court of South Africa against government’s R5 billion passengers by way of surcharges and taxes, others are not. guarantee provided to SAA on the basis that such action was The Group regularly engages with various industry bodies and contrary to government’s domestic aviation policy implemented government in an attempt to keep these costs under control. just prior to the deregulation of the South African skies to create an equal playing field amongst domestic competitors, and in For more information regarding the Group’s response to this risk, contravention with, amongst others, the Public Finance Management see the Sustainable Development Report and Annual Financial Act (Act No. 1 of 1999), as amended. The matter was heard Statements in this report.

Comair Limited 22 Integrated Annual Report 2015 during the period under review and the Group’s legal challenge Skills shortages was dismissed by the North Gauteng High Court without a cost The training, employment and retention of skilled staff remains a order being made. The Group will continue to monitor the state’s major challenge, with particular regard to pilots from previously funding of the national carrier. disadvantaged groups. The Group has attempted to address this challenge through its Cadet Pilot Training Programme and through For more information regarding the Group’s response to this risk, its policy of having its pilots sign training bonds in an attempt to see the Sustainable Development Report and Annual Financial ensure that they remain in the employ of the Group for a certain Statements in this report. period of time to cover the cost of their training.

Broad-based black economic empowerment For more information regarding the Group’s response to this risk, The Company recognises the importance of implementing a see the Sustainable Development Report. B-BBEE Programme that addresses the inequality of the past, and regularly reviews its B-BBEE Strategy so as to ensure that the Effectiveness of the risk management process Group remains an integral part of the political, social and economic and system of internal control community in South Africa. In addition, the International Air Services Licensing Council and Domestic Air Services Licensing Council The Board, via the Audit and Risk committees, regularly receives reviews the B-BBEE score of companies applying for licences. reports on and considers the activities of the internal and external auditors. The Board, via the Audit and Risk committees, is satisfied For more information regarding the Group’s response to this risk, that there is an effective risk management process in place and that see the Sustainable Development Report. there is an adequate and effective system of internal control to mitigate the significant risks faced by the Group to an appropriate level.

Comair Limited 23 Integrated Annual Report 2015 Sustainable development report

Introduction British Airways

Comair Limited (the Group) is firmly committed to managing its • The Sunday Times Top Brands Awards – first in the Business business in a sustainable way and upholding high standards category; of ethics and corporate governance practices. The benefits • The Sunday Times Top Brands Awards – second in the of delivering on these commitments are many. Through our Consumer category; sustainability efforts we maintain our business integrity, maintain • SA Customer Satisfaction Index research – first position for and improve the confidence, trust and respect of our stakeholders overall customer satisfaction regarding domestic carriers; and and increase our ability to attract and retain staff. Aviation is an • South Africa Travel Online Travel Awards – Best Cabin Crew economically vital activity generating employment and wealth (South Africa). across the world and it is thus important that we develop a truly sustainable industry. kulula.com • The Sunday Times Top Brands Award – second place in the The Group’s track record on delivering growth and creating long- Business category; term value is testament to its strategy of being a long-term player • The Sunday Times Top Brands Award – fourth place in the and delivering a sustainable business. While growth, profitability and Consumer category; creating value are certainly major strategic drivers, these cannot • Airline Ratings.com – awarded “Best Low Cost Airline” for be achieved unless we offer a safe, secure, reliable and quality the Middle East/Africa region, in the International Airline product; value our employees by following fair labour practices Excellence Awards; and offering fair remuneration; provide training and development • SA Customer Satisfaction Index research – second position opportunities; respect the communities in which we operate and for overall customer satisfaction regarding domestic carriers; contribute to the wellbeing of society; and care for and manage • South Africa Travel Online Travel Awards – Best Airline (South our impact on the environment. Africa); and • AirlineRatings.com – Recognised as one of the top 10 safety It is evident from our profile that we operate in a highly regulated low-cost carriers in the world. environment. We manage the risks effectively, as reported in our Corporate Governance and Internal Control and Risk Management Comair Limited Reports, and despite the many challenges faced by the airline • ACSA Feather Award for Best Safety Service Provider in industry, we are confident that we are involved in a growing and respect of its catering operations. sustainable business, delivering value to all our stakeholders in the short, medium and long term. Route network

Through its sustainability efforts, the Group believes that it will: Comair Limited is a South African Group operating scheduled and non-scheduled airline services as its core business under • Maintain its business integrity; both its kulula and British Airways brands (licence from British • Continue to create shareholder value by growing the business; Airways Plc) in South Africa, sub-Saharan Africa and the Indian • Effectively manage its risks; Ocean Islands, as well as providing other travel-related services, • Create a good working environment, attracting and retaining airline pilot training facilities and operating airline lounges. The a talented workforce; and British Airways and kulula brands operate flights into sub-Saharan • Effectively manage and minimise its impact on the environment. Africa and the Indian Ocean Islands, with the kulula brand offering flights through codeshare arrangements acting as the marketing Awards carrier and, although they do advertise their flights for sale through global distribution systems and the internet, the majority of its The Group received the following external recognitions and revenue is earned in South African Rand. During the period under achievements during the period under review: review, the Group operated 42 736 flights and carried 5 140 599

Comair Limited 24 Integrated Annual Report 2015 customers, as opposed to having operated 43 246 flights and brands provided scheduled air services during the period under carried 5 196 507 customers in the previous reporting period. review are set out below. Diagrams reflecting all the destinations to which the Group’s two

British Airways route network

LONDON AND THE WORLD

VICTORIA LIVINGSTONE FALLS HARARE

WINDHOEK MAURITIUS

JOHANNESBURG

DURBAN

PORT ELIZABETH CAPE TOWN

British Airways (Plc) British Airways (operated by Comair) kulula.com route network FRANCE KENYA

JOHANNESBURG (O.R. Tambo and Lanseria)

DURBAN

EAST LONDON CAPE TOWN GEORGE kulula.com kulula.com codeshare

Note: The service between O.R. Tambo International Airport and Nairobi in Kenya is operated on a codeshare basis using Kenya Airways Aircraft. Note: The codeshare agreement between kulula.com and Air France is a one way codeshare, enabling Air France customers the ability to purchase a single Air France ticket and connect seamlessly onto kulula’s domestic route network.

Comair Limited 25 Integrated Annual Report 2015 Management approach used by the Group are Twitter, Facebook, YouTube and Google+ (Google Plus). The Group Sustainable Development Manager is Mr Derek Borer, the Company Secretary, who, as part of the Social and Ethics There have been no incidents of material non-compliance with Committee, is responsible for the compilation of the Sustainable any applicable regulations or legislation concerning marketing Development Report. The Social and Ethics Committee is also communication during the period under review. responsible for developing and reviewing the Group’s policies with regard to social and economic development, good corporate No requests for information were received in terms of the South citizenship and for making recommendations to the Board and/or African Promotion of Access to Information Act (Act No. 2 of 2000). management on matters within its mandate (See the Social and Ethics Report for more information in this regard). The content of As part of its ongoing operations, the Group frequently engages this Sustainable Development Report is driven by the material risks with various stakeholder groups. It defines stakeholders as “anyone and opportunities facing the Group ability to achieve its objectives, who affects or is affected by the Group”, and in deciding which as set out in the Internal Control and Risk Management Report. In stakeholder groups to concentrate its engagement efforts on, it addition, this Sustainable Development Report aims to explain the considered the significance of the various stakeholder groups in stakeholder engagement process undertaken by the Group, as the achievement of its objectives. Only those significant stakeholder well as disclose the key topics raised as a result of this process, groups that could fundamentally impact the ability of the Group and the Group’s response in this regard. to achieve its objectives were engaged.

Engagement with stakeholders Customers Providing a safe, secure, reliable and quality experience on both of The Group’s commitment to its stakeholders to conduct its the Group’s airline brands, as well as in its travel-related business, business in a responsible and sustainable way and to respond to is core to the Group’s business and it therefore strives to deliver “an their needs is entrenched in its values. The nature of its business awesome travel experience in the most efficient way” and hence requires close engagement with its stakeholders, including but be recognised as the airline of choice for all travellers within its not limited to customers, employees and trade unions, suppliers, operating environment. The Group continually measures customer government and authorities, industry associates, investors and satisfaction through various surveys and integrated social media the media. Communication with stakeholders is important to monitoring, to identify areas for improvement, in order to ensure maintaining the Group’s reputation as a trusted and reliable it provides a quality service. No issues of a material or significant provider of airline and related services. One of the Group’s main nature were raised by customers. objectives is to deliver “an awesome travel experience in the most efficient way”, thus becoming the premier domestic and regional The Group does monthly research on its brands to determine its airline in sub-Saharan Africa and the airline of choice for travellers performance and to identify areas that need improvement. The within the its operating environment. The Group, in addition, values result of the research undertaken is shared amongst relevant the importance of its brands, namely British Airways, kulula and staff members, where concerns raised are addressed. Please SLOW, as well as its travel, catering and training brands, and refer to the section in the Sustainable Development Report under has taken the necessary legal steps to protect them. A diagram Customer Experience for more information on the research tools reflecting the Group’s brands is set out on page 6 of this Integrated used and the performance of each of the Group’s airline brands. Annual Report.

To enhance the quality of its service the Group provides access to The Group, having regard for the importance and power of its airline lounges, known as SLOW Lounges. These lounges are social media, adopted a Social Media Strategy enabling two-way located at O.R. Tambo International Airport (in both the domestic communication with customers via this platform. Through the and international terminals), Cape Town International Airport (in use of sophisticated software, the Group is able to monitor all the domestic terminal), King Shaka International Airport (in the social media platforms, and consolidates all direct and non-direct domestic terminal) and SLOW in the City, situated opposite the customer feedback in real-time, enabling it to better manage Gautrain station in Sandton. SLOW Lounges are open to qualifying brand performance and consistency. The social media platforms

Comair Limited 26 Integrated Annual Report 2015 customers (for example, Gold and Silver Executive Club Members, are not flying. In addition to accumulating Avios, members also business class customers, the Group’s VIP guests and FNB and earn Tier Points. Tier Points allow members to move through the RMB qualifying clients). The concept of the SLOW lounges is various tier levels, starting on Blue then Bronze, then Silver and based on the theme that time always plays a significant part in finally Gold Executive Club status. As members progress from people’s lives. Modern day life places numerous demands on one tier level to the next they are able to enjoy additional benefits people’s time and there is generally not enough of it. SLOW was associated with each tier level such as, but not limited to, airline created as a space to get their time back on their own terms, lounge access, dedicated check-in processes and priority waitlists. as, for a few moments they get a chance to catch their breath and relax. The Group wanted to ensure that within the busy The kulula credit card airport environment, it developed a space and offering that was The kulula credit card is a Visa credit card which is issued, owned, conducive to relaxation, comfort and convenience. This is evident financed and administered by FirstRand Bank Limited, which is in the technologies, furnishings and the freshly prepared food an authorised financial services and registered credit provider. and beverage choices delivered through its friendly efficient staff Customers earn kulula moolah when using their kulula credit in the lounges. Since the introduction of the SLOW Lounges the card to purchase various qualifying goods and services. kulula Group has received many accolades, awards and compliments moolah can be used to pay for or towards any kulula flights. kulula from the industry and customers. Demand for the Lounges has moolah is a virtual currency with 1 kulula moolah equating to R1. increased and the Group recently embarked on an expansion programme for the lounges. The Cape Town Domestic Lounge Magazines was revamped and made bigger during the period under review. The Group prints two on-board magazines, namely, Highlife SA The Group is currently increasing the the size of the International for its British Airways brand, and khuluma for its kulula brand, as Airport Lounge at O.R. Tambo International Airport, with the new, well as a magazine titled SLOW for the SLOW Lounges. These increased Lounge due to open in November/December 2015. The magazines cover a number of subjects, including pertinent information extension of this Lounge will afford the Company the opportunity relating to the lifestyle interests of the Group’s customers, as well to allow other international airlines who have contracted with the as information about the Group and its business. Twelve editions Group the opportunity to experience the SLOW concept and will in are printed per year of each magazine title (one per month). The addition accommodate the growth of the Group’s, and RMB and circulation for HighLife SA is 16 000 per month, for khuluma 21 000 FNB customer volumes going forward. The Group also plans to per month and for the SLOW magazine 5 500 per month. The extend and revamp the Domestic Airport Lounges at O.R. Tambo magazines, other than the SLOW magazine, are made available International Airport. The Group will also shortly be opening a new on-board the aircraft and HighLife SA is also available in the SLOW SLOW Lounge concept at Lanseria International Airport. Lounges. Other mediums of communication with customers and potential customers include direct e-mail communications to the The Group actively participates in the British Airways Plc Executive Group’s respective customer databases, on-board announcements Club frequent flyer programme, as well as offering a co-branded and advertising campaigns (including radio, TV, outdoor, print kulula credit card as follows: and online) as well as social media channels such as Facebook, Twitter, Google+ and YouTube. British Airways Executive Club

The Executive Club is British Airways Plc’s global frequent flyer British Airways Plc programme, designed to recognise and reward loyal members, The Group entered into a Licence Agreement with British Airways Plc making their travel more enjoyable and rewarding. Executive (BA) in the 1996 calendar year in terms of which it was granted a licence Club members earn Avios, which are the Executive Club loyalty to operate flights using BA intellectual property and in accordance currency, when they fly with British Airways, a partner airline, or with the BA style of business, tweaked to meet local conditions. In on one of the oneworld® alliance partners. The amount of Avios terms of the Licence Agreement, BA provides other services to the earned depends on the distance flown, the cabin travelled in, Group, such as, but not limited to, access to the BA frequent flyer the type of ticket purchased and the Executive Club tier status. programme. As mentioned above, the Licence Agreement has been Members can also collect Avios with British Airways’ worldwide in operation for almost 19 years and has, in the Group’s view, been hotel, car rental, financial and shopping partners, even when they highly beneficial to both BA and the Group. Notwithstanding the

Comair Limited 27 Integrated Annual Report 2015 Licence Agreement with BA, the Group itself remains actively and • We Lift You Up: This is designed to create a business effectively in control of the airline services it provides. understanding amongst employees in order to obtain their commitment to the Group’s Cycle of Success, as set out Group employees in its Strategic Intent document. In the financial year under review, the focus was on the Employee Value Proposition An integral part of the Group’s business is the people it employs. (Employer vs. Employee Obligations); The Group strives to be an employer of choice and invests • Think Vision: This is the Group’s formula for success and significantly in this relationship. Paying attention and responding was formulated in consultation with employees. The Think to employee needs through effective communication and sound Vision formula constitutes the values and principles that employee relations is critical to the maintenance of a stable and determine the Group’s success and provides guidance to its engaged workforce. Employees are treated with respect, receive employees in their day-to-day thinking and decision-making; fair remuneration and are involved in the day-to-day running of • Catalyst Awards: This is a reward and recognition programme the business and have access to the Group’s e-mail facility and that encourages employees to implement the Think Vision intranet. The Group communicates with its employees in a variety philosophy and to inspire other employees to do the same. of ways including, but not limited, to: Employees may be nominated for Catalyst Awards by their peers, managers or customers, for living one or more of the • The My Comair intranet which provides a platform to inform Think Vision values; employees of current news and events; newsletters from the • The Precious Cargo Programme: This was created to CEO; classifieds; corporate information; social responsibility assist employees with balancing the demands of work and feedback; a library of standard templates to assist employees family life. Details of this programme are dealt with further in the performance of their responsibilities; policies and on in the report; procedures; standard forms for leave and employee travel • Tip Offs Anonymous: This is an anonymous whistle-blowing benefits; as well as travel and related specials made available facility to enable employees to report any unethical activities. to employees, which the Group has been able to secure from • On Track: This is a performance management programme various suppliers; giving employees clarity as to what is expected of them • Direct e-mails to employees; and measuring their performance in respect of certain key • Newsletters to employees from the CEO known as Plane Talk; performance indicators; • We Lift You Up communication which explains the Group’s • Take Off: This is a leadership development programme with employee value proposition; the aim of identifying and developing employees who the • Ad hoc marketing communications in respect of the Group’s Group believes can fill key leadership positions; two brands; • Supervisory Development Programme: This is a programme • Ad hoc IT communications known as IT Talk; developed for junior to middle management for succession • Ad hoc communications from the Human Resources planning at the airports. Department covering matters relating to employee relations, recruitment, organisational development, training, remuneration Trade unions and benefits and employee wellbeing; • Interactions with employees through various workplace As at 30 June 2015, approximately 35% (734 of 2 072) of the Group’s forums, such as the Employment Equity Forum; fulltime permanent employees in South Africa were members of trade • Business Talk with Erik, a quarterly forum for Middle and unions compared to 43% (864 of 2 006 employees) as at 30 June Senior Managers to engage with the CEO and Executive 2014. The Group strives to maintain good working relationships with team on topical matters relating to the business. the trade unions, where it has recognition agreements in place and enters into substantive negotiations annually. These negotiations mainly The Group, in addition, has the following programmes in place focus on salary increases and improvements to employment conditions. for all employees: As at 30 June 2015, union membership was as follows compared with 30 June 2014:

Comair Limited 28 Integrated Annual Report 2015 2015 2014 bargaining and to freedom of association in accordance Solidarity 223 179 with all relevant South African labour legislation. It maintains United Association of South Africa constructive relationships with all representative unions (UASA) 372 167 who enjoy consultative and negotiating rights on issues of South African Aviation and Allied employee rights and mutual interests; Workers Union (SAAAWU) 0 362 • The elimination of all forms of forced and compulsory Comair Pilots Association (which labour: All the Group’s employees are sourced from the open is affiliated to the Airline Pilots Association of South Africa) 139 156 labour market. Employees are provided with employment contracts and are free to resign at any time; There was no strike action during the period under review. However, • The effective abolition of child labour: The Group does during salary negotiation with cabin crew, they threatened to go not make use of child labour and does not support the use on strike and were granted the required certificate to do so. The of child labour in any form whatsoever. It does in certain Group and the union were able to resolve the dispute amicably instances provide employment opportunities for school and avoid strike action, and a three year salary agreement was leavers, provided that such persons meet the International signed. During the period under review, SAAWU was deregistered Labour Organization’s employment age requirements; due to its reduced membership figures. In addition, a number of • The elimination of discrimination in respect of employment airport staff joined UASA and are currently engaging with the Group and occupation: The Group is committed to compliance regarding the signing of a recognition agreement. with the intent and spirit of employment equity legislation in the workplace. It is further committed to meeting its targets Other than the above-mentioned, no other material or significant to achieve an equitable representation of race and gender in issues were raised by employees or trade unions during the the workplace. An analysis of the Group’s employment equity period under review. status is set out later in this Sustainable Development Report; • Businesses should support a precautionary approach Human rights to environmental challenges: This will be the fifth time the Group reports on its emissions in terms of the Corporate The United Nations Global Compact is an international initiative Accounting and Reporting Standards of the Green House that addresses human rights, labour, environmental and corruption Gas Protocol. Its environmental performance is set out later issues through a commitment to ten principals derived from the in this Sustainable Development Report; Universal Declaration of Human Rights. The information set out • Undertake initiatives to promote greater environmental below provides a brief overview of the Group’s implementation responsibility: The Group’s undertakings in this regard are of the ten principles, as further dealt with in this report: set out later in this Sustainable Development Report; • Encourage the development and diffusion of environmentally • Business should support and respect the protection of friendly technologies: The Group is committed to developing International Proclaimed Human Rights: The Group’s and diffusing environmentally friendly technologies where human rights policy is part of the Guidelines to the Code both a clear benefit and business case can be made for the of Ethics. Human rights principles are incorporated in the introduction of this technology, such as, but not limited to, Group’s labour relations policies and practices and corporate the new fleet of aircraft introduced into service, which is more social responsibility initiatives; environmentally friendly, as set out later in this Sustainable • Business should make sure that it is not complicit Development Report; in human rights abuses: The Group adheres to this • Businesses should work against corruption in all its forms, principle through its compliance with all applicable including exploitation and bribery: The Group’s commitment legislation and takes the issue of human rights into account to combating corruption is embodied in its Code of Ethics, as when deciding whether or not to conduct business in detailed in the Corporate Governance Report. Allegations of foreign countries; fraud and corruption are rigorously investigated and where • Business should uphold the freedom of association and sufficient evidence exists, appropriate disciplinary action is effective recognition of the right to collective bargaining: enforced, including the dismissal of offending employees. The Group recognises the rights of employees to collective

Comair Limited 29 Integrated Annual Report 2015 Suppliers security, licensing traffic rights and consumer protection. The Group regularly communicates and interacts with governmental, The Group is dependent on a number of suppliers who form regulatory and industry bodies. During the period under review, an integral part of its ability to provide a safe, secure, reliable the Group was the subject of a complaint laid by Safair Operations and quality service. It attempts to build long-term relations with Proprietary Limited (FlySafair) with the Air Services Licensing Council, suppliers who are of vital importance to it, based on the principle directed against the level of the Group’s current foreign-owned of mutual trust and respect. Regular meetings are held with shareholding. The information relating to the FlySafair complaint suppliers to ensure continuity of service. It further relies on its is set out on page 31 of this report. suppliers to deliver products and services in line with its own standards. Other criteria also play an import role in selecting Government and regulatory bodies suppliers, such as compliance with international and local quality and safety standards, price, stability of the organisation, support Department of Transport network and technical capacity, and the B-BBEE status of South The Department of Transport (DoT) is responsible for providing African suppliers. Any form of purchase incentive is prohibited. secretarial support to the two licensing councils, the Airports Employees involved in the purchasing of equipment are bound by Company of South Africa (ACSA) and the Air Traffic and Navigation strict ethical principles, ensuring that high standards of integrity Services Company (ATNS) and the Regulating Committee; for are maintained in the supplier relationship. ensuring entity oversight over the ATNS and ACSA and the South African Civil Aviation Authority (SACAA); for conducting bilateral air No material or significant issues were raised by suppliers during service negotiations with foreign governments; and for managing the period under review. aviation industry involvement in major events. The Group interacts, co-operates with and provides feedback to the DoT in all these areas. Government and authorities It strongly supports the concept of a deregulated and competitive domestic airline industry where all airlines are required to comply The Group remains committed to working with government and with applicable aviation legislation and compete fairly and equally other relevant authorities to ensure: with one another for market share. During the period under review, the Group continued with its efforts to ensure that the applicable • The maintenance of a safe, reliable, competitive and commercially requirements contained in South African Air Services Licensing viable air transport sector where all operators are afforded Legislation are complied with via engagement with the DoT and equality of treatment by government and the authorities; the two licensing councils mentioned below. • The provision of air transport infrastructure that is affordable to and consistent with the requirements of the air transport The Group continued its participation in the Airlines Association of sector and the travelling public; South Africa (AASA) initiative to assist the DoT and other government • The provision of air travel at a cost that is affordable to South departments to promulgate legislation to fully implement the Cape African consumers and in line with internationally accepted Convention and Aircraft Equipment Protocol (The Convention) into airline service standards and practices; and South African law. Unfortunately, during the year under review, limited • An increase in the number of Black airline pilots as well as progress was made with this initiative. As all South African airlines will greater participation by Black people in the aviation industry benefit from discounted aircraft financing rates once the Convention in line with the revised B-BBEE targets. is fully implemented. The Group will continue to help AASA to lobby Government financial assistance government to introduce the necessary legislative amendments. The Group received no financial assistance from government, nor International Air Services Council did it make any contribution towards any political party. International air services operated by South African carriers between South Africa and other countries remain regulated with Government, regulatory and industry bodies respect to traffic rights, frequency and capacity. The International The airline industry is subject to extensive government and Air Services Council (IASC) is the authority responsible for issuing regulatory oversight relating to, amongst other things, safety, licences to South African operators wishing to operate air services

Comair Limited 30 Integrated Annual Report 2015 to regional and international destinations. During the period under South African Civil Aviation Authority review, the Group received a request from this council to provide The South African Civil Aviation Authority (SACAA) is the body it with details of its Licence Agreement with British Airways. The responsible for controlling and regulating civil aviation safety and Group is currently engaging with the council in this regard, and security in South Africa. As safety and security is the Group’s maintains an excellent working relationship with this council. number one priority, it interacts and co-operates on a regular basis with the SACAA to ensure that it maintains, and in some Air Services Licensing Council areas exceeds, the safety and security standards required by Domestic air services within SA have been de-regulated since the SACAA. Besides the usual interaction between the Group 1990. Therefore the Air Services Licensing Council’s (ASLC) and the safety regulator during the period under review, the responsibilities are restricted to the issuing of air service licences Group’s involvement with the SACAA centred on consulting with to new applicants, ensuring the safety and reliability of air services the regulator to revise the process set out in the Civil Aviation operated within South Africa and adjudicating complaints of non- Regulations (CAR) for the imposition of administrative penalties to compliance with the Air Services Licensing Act (Act No. 115 of take into account voluntary incident reporting in terms of Safety 1990), as ammended. As the Group has held and maintained a Management Systems and ‘just culture’ considerations. The Group, Class I and Class II Air Service Licence, amongst others, for many together with other industry participants, compiled a proposed years, it only appears infrequently before the council to either amendment to the CAR which is currently being considered by the answer questions on its published annual financial results, to Regulating Committee. In addition, the process to develop a more amend certain details on its licence, or to respond to complaints user friendly requirement in line with international best practice for from interested parties. In November 2013, the Group successfully the carriage of special needs passengers, as reported last year, interdicted FlySafair from launching its new scheduled low cost continued during the period under review. As an interim measure, operation as a result of not having complied with the legislated whilst the regulations are being amended, the Group obtained shareholding requirements. an exemption from the SACAA to allow certain special needs passengers to travel without an able-bodied assistant subject to As mentioned above, FlySafair lodged a complaint with the ASLC a medical practitioner certifying that an assistant is not required. against the Group’s domestic air service licence during the previous reporting period. The complaint consists of the allegation that the In addition to the foregoing, the Group is currently assisting the Group breached the Air Services Licensing Act by failing to apply SACAA with crew resource management training for its general for a licence amendment after undertaking a share repurchase aviation pilots. It is also assisting the SACAA with the design and programme, and secondly that when a ‘look through’ construction implementation of performance-based navigation approaches in is applied to the Group’s current foreign shareholding component, SA and the surrounding region. the amount of this shareholding slightly exceeds the restrictions specified in the said Act. In September 2014, the Group and Safair Human Rights Commission of SA appeared before the ASLC to make their respective submissions In November 2014, the Group received a complaint from the Human on the complaint. The ASLC deferred making a final decision on Rights Commission (HRC) alleging that the Group had violated the the complaint and requested further information on the Group’s human rights of a particular person by refusing to allow his seizure shareholding. Detailed submissions were provided by the Group to alert dog to travel with him in the cabin. The Group’s policy only the ASLC. At the end of November 2014, without having reached allows for the carriage of service dogs trained by the Guide Dogs a decision on the Safair complaint, the terms of appointment of Association of South Africa or any other suitably accredited training the members of the ASLC expired. New members to the ASLC organisation. In this case, the dog was self-trained by the owner. The were only appointed by the Minister of Transport in March 2015, carriage of service dogs is not currently regulated by the SACAA. and in July 2015 the new members of the ASLC issued the The Group has made detailed submissions to the HRC as to why Group with a notice requesting it to provide, within a period of certain self-trained dogs are not permitted to travel in the cabin, 120 days, some further shareholding information. The Group is and is still awaiting a final decision on the matter from the HRC. currently engaging with the new members of the ASLC to satisfy and resolve the matter in an amicable way.

Comair Limited 31 Integrated Annual Report 2015 Airports Company of SA with specific airline-related consumer matters and compensation Most large airports in South Africa are owned and operated by Airports issues. The draft Code has been submitted to the NCC and a Company of South Africa (ACSA). On an operational level, the Group response thereon is awaited. interacts with the ACSA on a continuous basis and maintains a fulltime representative in ACSA Airport Management Centre at O.R. Tambo Industry bodies International Airport. The Group, together with AASA, also engages Airlines Association of South Africa with ACSA on the important issues of airport user charges and the The Airlines Association of South Africa (AASA) was formed to standard of service provided by ACSA to airport users. During the promote and protect the interests of its member airlines operating period under review, the Group, via AASA, participated in consultations within the Southern African region. The Group actively participates to agree to a Business Plan for both ACSA and ATNS for the next in both the activities and management of the Association. It believes permission period, being 2015/16–2019/20. that the Association is vital to ensuring a healthy and commercially successful airline sector in Southern Africa. The Group supports In May 2015, the Regulating Committee published a draft Permission, AASA by providing it with data and information on a variety of putting forward a 42.5% decrease in tariffs for the 2015/16 year, airline issues; by giving feedback and comment on AASA position followed by increases of 4.1% and 15.8% for the 2016/17 and 2017/18 papers and submissions; and by participating in the various AASA years respectively. An increase of 15.9% would apply in 2018/19 delegations that attend important stakeholder meetings. During and 4% in 2019/20. ACSA has objected to same and is currently the period under review, the Group continued participating in the engaging the Regulator on why it believes that the proposed tariff, AASA initiative to develop more friendly regulations for the carriage especially that for the 2015/16 year, will weaken its credit profile and of special needs passengers in line with international best practice. increase its borrowing costs. The Final Permission Determination is An airline proposal on new ‘special needs’ regulations has been expected towards the end of the 2015 calendar year. formulated and will be submitted to the SACAA later this calendar year. The Group, together with AASA and other industry players, also Air Traffic and Navigation Services Company worked closely on various health- and immigration-related matters. Air traffic and navigation services in South Africa are provided by the Air Traffic and Navigation Services Company (ATNS). During The International Air Transport Association the period under review, the Group had regular interaction with the ATNS on operational issues and maintained a good relationship The International Air Transport Association (IATA) is an association with the ATNS. The Group did, however, object to the ATNS representing approximately 260 airlines or approximately 83% of requiring a substantial increase in the amount of the standing all air traffic around the world. It is responsible for promoting safe, credit guarantee provided by it to the ATNS. Under protest, the reliable, secure and economical air services and fostering inter- Group has agreed to provide the increased guarantee, but will airline co-operation. IATA also operates the airline clearing house in continue to engage with the ATNS regarding this issue. Geneva, which processes and allocates financial credits and debits between member airlines as well as administering IATA Operational National Consumer Commission Safety Audit (IOSA). The Group maintains its membership of IATA, The Group has co-operated with the National Consumer Commission participates in the clearing house and undergoes a bi-annual IOSA (NCC) by providing expeditious responses on all consumer complaints audit. The Group will be preparing itself for its sixth IOSA audit, referred to it by the NCC, as well as through participating in NCC- due to take place in February 2016. As part of the previous IOSA initiated conciliation proceedings with consumers whose complaints audit, the Group was audited against 998 standards and in this are not initially resolved. Almost all consumer complaints are dealt regard the auditing organisation made no findings, which is a huge with directly between the Group and the consumer. No significant compliment to the Group. complaints were received during the period under review, and almost all complaints were resolved to the satisfaction of the consumer Investors with no complaints having been referred to the National Consumer The Group’s main objective is to create value for its shareholders. Tribunal. The Group, via the AASA, has further co-operated with Reports to its shareholders are aimed at providing a clear the NCC through the development of a draft Airline Industry Code, understanding of the Group’s financial, economic, social and intended to provide guidance on how the airline industry will deal environmental performance, both positive and negative. Policies

Comair Limited 32 Integrated Annual Report 2015 are in place to ensure that communications with shareholders are Commitment to safety and quality made available timeously and simultaneously. Commitment to safety and quality of service The Group endeavours to maintain dialogue with its shareholders The Group is committed to providing a safe, secure, reliable and and other interested parties in the investor community and meets quality service to its customers, and aims to deliver “an awesome with its institutional shareholders twice a year, after the release of its travel experience in the most efficient way” and hence be regarded annual and interim results. The Group’s website, www.comair.co.za, as the airline of choice for corporate and individual travellers in all the contains the latest, as well as historical, financial and other information areas and regions in which it operates. The safety and security of its about the Group, including its Integrated Annual Reports. The Board customers is of paramount importance, and it therefore ensures that encourages shareholders to attend its Annual General Meeting, notice a strong culture of safety and security exists among all employees, of which is contained in this Integrated Annual Report, at which which goal is supported by a well-defined reporting and management shareholders have the opportunity to put questions to the Board. process to ensure that all safety and security issues are dealt with thoroughly and effectively. This is formally documented in a Safety No material issues or topics were raised by investors during the Management Manual that has been accepted by the SACAA. In period under review. addition, the Group maintains an IOSA registration and has been audited and has passed all audits, with the next bi-annual IOSA Community audit due in February 2016. The Company received unqualified audit ratings from British Airways Plc, the Boeing Company and The Group is a committed corporate citizen and, together with its the SACAA. The Group’s Simulator Training Facility has have been employees, endeavours, wherever possible, to improve the lives audited by external airlines interested in making use of the Simulator of fellow South Africans. It believes that social responsibility is a Training Facility and we accordingly have numerous airlines and duty, privilege and obligation to help those less fortunate and to other users currently making use of the facility. Avions de Transport make some impact on society in general. For more information Regional (ATR) conducted an audit of the Group’s Simulator Training regarding the Group’s engagement with the community, refer to Facilities in the 2011 calendar year and the Group passed the audit the section dealing with its community involvement on page 45 with flying colours. of this report.

Media Security of customers is achieved by applying measures such as, but not limited to, ensuring that all customers, including the Group’s The media plays an important role in the Group’s engagement airline crew, prior to entering the secure area of the airport, are with all its stakeholders. The Group interacts on a regular basis screened together with their carry-on baggage; all baggage and with the media by issuing press releases to both the corporate and cargo being placed in the hold of the aircraft is screened; and trade media, as well as granting media interviews to share news no aircraft departs, with certain exceptions, unless the customer on developments related to the Group. No material or significant together with his/her baggage is on board the aircraft. issues were raised by the media during the period under review.

The key safety and quality of service priorities applied by the The Group’s objective is to position it in the media as a trusted Group are detailed below. player in the airline industry – a ‘champion’ of the people; to position its management as leaders on industry issues; to educate the Implementation of the IATA IOSA Programme media about its business and how the industry operates; and to The IOSA Programme is an internationally recognised and accredited broaden the Group’s profile amongst the travel industry media. evaluation system designed to assess the operational management and control systems of an airline. All members of IATA are IOSA The Group’s response to material risks and registered and must remain registered to maintain IATA membership. opportunities identified The Group’s approach to aviation safety is one of oversight and Issues impacting on the Group, its strategic direction audit as defined within the context of the eight disciplines of the and its ability to operate and create value IOSA audit structure, namely, organisational management, flight, dispatch, maintenance, cabin, ground (‘airport’), cargo, and security.

Comair Limited 33 Integrated Annual Report 2015 The Group has participated in the IOSA Programme since 2006 leasing companies, the Federal Aviation Authority of the United and has successfully undergone five unqualified audits. States and the European Aviation Safety Authority. The Group also ensures compliance with airworthiness directives issued by Implementation of runway safety measures the manufacturers of the equipment. Its buildings, plant and other Safety statistics show that runway excursions and incursions are equipment are maintained to a high standard to ensure a safe the most common type of accident or incident reported annually. and user-friendly environment for its employees and customers. In response to this, ACSA has established consultative forums, in the form of local runway safety teams, at each ACSA airport. The Group has, in the past financial year, made the following The Group actively participates in such forums. It also provides investments in respect of equipment, plant and buildings: operational guidance to the Lanseria Airport management team on their airport runway upgrade programme and associated • Continuously invested in maintaining the safety and reliability infrastructure. of its aircraft. The Group subcontracts the maintenance of its aircraft and engines to South African Airways Technical Training on preventing loss of control Proprietary Limited, Israeli Aircraft Industries and ST Aerospace Engines Pte; The Group incorporates loss of control inflight training as part • With the successful implementation of a businesswise airline of its continuous pilot training curriculum. Various exercises are enterprise reservation system from Sabre Airline Solutions practiced during such training. In addition to the foregoing, the in June 2012 at a cost of approximately R52 million, the Group has also: Group continued to improve the system with new modules and updated technology as and when required during the • Introduced a Flight Crew Fatigue Risk Management System period under review. This system has and will continue during the period under review, the purpose of which is to to deliver substantial improvements in revenue integrity, monitor and regulate the risk of fatigue among the Group’s inventory management and optimised ticket pricing, as well pilots and cabin crew; and as improved crew and airport staff productivity; • Re-evaluated its cockpit and pilot recruitment procedures • Made a substantial investment towards the acquisition of a following the Germanwings incident and is relatively confident new fleet of Boeing 737-800 New Generation aircraft which, in that it has put in place all possible risk mitigants to prevent a addition to having delivered substantial fuel savings compared similar incident occurring on the Group’s airline operations. to the B737-400 fleet, also has a greater revenue generating potential with its increased seating capacity, and requires Implementation of safety management system less maintenance downtime. The Group took delivery of The Group has a safety management system (SMS) to address all four new Boeing 737-800 aircraft during the 2013 reporting aspects of aviation and ground safety. The purpose of the SMS is period and will be taking delivery of a further four new Boeing to ensure that safety management protocols are in place and to 737-800 aircraft during the 2015 and 2016 calendar years. In ensure that risks affecting safety are controlled and appropriately addition, the Group has entered into a purchase agreement mitigated against. The Director of Operations monitors the Group’s with Boeing for the purchase of eight Boeing 737 Max aircraft, performance against defined objectives and the Board reviews due for delivery between 2019 and 2021; the aviation safety goal matrix at its quarterly meetings. • Successfully extended and upgraded the SLOW Lounge at Cape Town International Airport at a cost of approximately Quality of equipment R22 million. The Group is currently expanding its International As mentioned above, the Group’s goal is to provide a safe, secure, Airport Lounge at O.R. Tambo International Airport at an reliable and quality service to its customers. It therefore strives to approximate cost of R20 million. In addition, the Group will procure the best and latest equipment and technology affordable be opening a new SLOW Lounge concept at the Lanseria to it in providing such services. International Airport in next reporting period; • Purchased various properties in and around the vicinity of Maintenance of its fleet of aircraft is regulated by the SACAA and, Cape Town International Airport at an approximate cost of as the Group leases a number of aircraft from foreign-owned R25 million. It intends to develop the properties purchased

Comair Limited 34 Integrated Annual Report 2015 into offices, catering facilities and store rooms to house its Group utilises the Global Performance Monitor (GPM) tool employees who need not be at the airport; and for the British Airways brand and the Voice of the Customer • The Group is currently building a state-of-the-art cabin crew (VoC) feedback tool for kulula. training facility at is operations facility in Rhodesfield at a cost of approximately R7.5 million, which will open for cabin crew British Airways training in August 2015. The Group conducts monthly on-board research amongst randomly selected customers. The research methodology is in line with Customer experience the GPM. The overall customer satisfaction performance of the The Group recognises that in order to be a truly customer- British Airways brand during the period under review is reflected centric airline, it needs to consistently listen to its customers’ in the table below. needs. The Group continuously seeks the best and most reliable tools to measure customer satisfaction levels in The Group acknowledges that there are areas for improvement respect of both its British Airways and kulula brands. The and plans are in place to ensure continuous improvement.

British Airways overall performance July 2014–June 2015

Cabin Crew 79%

Likelihood to travel British Airways again 78% SLOW Lounge environment 78% Overall satisfaction with British Airways 77%

Check-in process 77%

Likelihood of recommendation 75%

SLOW Lounge Team 73%

SLOW Lounge refreshments 72%

Departure process 68%

Value for money 64%

Cabin environment 59%

Meal/refreshments service 58%

Comair Limited 35 Integrated Annual Report 2015 kulula.com needs. The feedback reflects the customer’s perception of the As mentioned above, kulula uses the VoC tool. The VoC tool service received at different customer touch points, which in turn receives real-time feedback from customers which is used to informs decisions on how the brand can better serve customers. ensure that the kulula.com brand remains responsive to customer While there are areas for continuous improvement, it is encouraging to note that 87% of customers are likely to fly with kulula again. Fly with us again

100% 89% 87% 87% 87% 87% 86% 87% 87% 90% 86% 85% 83% 85% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jul 2014 Aug 2014 Sep 2014 Oct 2014 Nov 2014 Dec 2014 Jan 2015 Feb 2015 Mar 2015 Apr 2015 May 2015 Jun 2015

In and during the second and third quarters of the 2014 calendar Score Score year, the South African Customer Satisfaction Index surveyed 1 269 Element Indication Weighting 2015 2014 consumers about their satisfaction with South African airlines. The Ownership Black ownership 20 18.74 17.73 industry as a whole was rated at a score of 69.5 out of 100, with Management Black top the British Airways and kulula brands holding the top positions. control management 10 2.75 3.75 In this regard, British Airways brand scored 75 out of 100 and Employment Black the kulula brand 71.5 out of 100. equity managers 15 2.74 2.66 Skills Black training development spend 15 10.02 10.60 Broad-based black economic empowerment Preferential Procurement procurement spend 20 17.10 13.28 The Board views the Group’s business as an integral part of the Enterprise Investment in political, social and economic community in South Africa and is development Black-owned committed to sustainable transformation as part of its Business enterprises 15 15.00 15.00 Strategy. The Group recognises the importance of implementing a Socio- Socio- economic economic broad-based black economic empowerment (B-BBEE) Programme development contribution 5 5.00 3.38 that addresses the inequality of the past through a dedicated and Total point 100 71.35 66.40 ongoing process, and regularly reviews its B-BBEE Strategy with the aim of effecting improvement across all seven pillars of the The assessment indicates that the Group achieved a total of B-BBEE scorecard, as detailed later in this report. The Group is 71.35 in 2015 compared to a total of 66.40 in 2014. The B-BBEE also required to provide both the International Air Services Council recognition level for the Group was maintained at a Level 4. The and Air Services Licensing Council with its verification certificate Group, however, significantly improved its scores in the areas and Employment Equity Plan when making application for licences of preferential procurement and socio-economic development. or amendments to same. Equity ownership The Group’s verification audit for the 2014 and 2015 financial The Group concluded a BEE transaction during the 2007 financial year, years were carried out by Grant Thornton. The comparisons of pursuant to which shares equivalent to 15% of its post-transaction the results of both audits are contained in the following table: issued share capital were issued to a Black Empowerment Consortium

Comair Limited 36 Integrated Annual Report 2015 known as Thelo Aviation Consortium Proprietary Limited (Thelo Currently three of the Group’s 13 Directors (23.07%), excluding Aviation Consortium), led by Thelo Aviation Investments Proprietary the alternate Director, are previously disadvantaged persons, Limited (Thelo Aviation Investments). As noted in this Integrated Annual which is the same as in the previous financial year. At Executive Report, the BEE transaction came to an end during the financial period Management level (which includes both Top Management and under review, with the Thelo Aviation Consortium having been issued Senior Management), two members (20%) of the ten member 29 067 766 ordinary shares, which shares were subsequently sold Executive Committee are previously disadvantaged persons, by the Thelo Aviation Consortium members. As the Thelo Aviation which is the same as for the previous financial year. Consortium shares were only listed after 31 March 2015, they were not taken into account in determining equity ownership. Employment equity The Group’s focus on employment equity is in line with its overall There was also an increase in the ownership score between the Transformation Strategy. 2014 and 2015 financial years due to an increase in the public’s purchase of the Group’s shares in the market. The overall race distribution of the Group’s employees in South Africa as at 30 June 2015 compared to 30 June 2014 is set out below: The Group, on its listing in 1998, implemented a share incentive scheme for all permanent employees, including previously At 30 June 2015 At 30 June 2014 disadvantaged employees, to enable them to purchase shares in White (females and 714 employees 737 employees the Group. This scheme, as a result of certain tax changes, has to males) (constituting 34% of (constituting 37% of a large extent become dormant. The Group Shareholder Analysis the total number of the total number of employees) employees) is set out on pages 137 to 139 of the Integrated Annual Report. African, Coloured, 1 359 employees 1 269 employees Indian (designated (constituting 66 % of (constituting 63% of Management control females and males) the total number of the total number of employees) employees) The Group’s BEE Consortium has representation on its Board, with two of the Consortium members, Mr Ronald Sibongiseni Ntuli, Reflected below is the summarised Employment Equity (EE) Report as the Non-executive Joint Deputy Chairman of the Board and (EEA2) submitted online on 12 January 2015 as required in terms Mr Khutso Ignatius Mampeule as an independent Non-executive of Section 22 of the Employment Equity Act (Act No. 55 of 1998), Director, serving on the Board. as well as the Group’s workforce profile as at 30 June 2015.

Summarised Employment Equity EEA2 Report as at 12 January 2015 Total number of employees (including employees with disabilities) in each of the occupational levels Male Female Foreign nationals Total Occupational level A C I W A C I W Male Female Top management 0 0 0 2 0 0 0 1 0 0 3 Senior management 0 0 0 6 0 0 0 1 0 0 7 Professionally qualified and experienced specialists and mid‑management 6 3 2 141 6 3 6 45 0 0 212 Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents 130 73 54 193 321 163 110 276 2 3 1 325 Semi-skilled and discretionary decision‑making 62 18 12 16 203 47 33 44 1 0 436 Unskilled and defined decision‑making 2 1 0 0 24 2 0 0 1 0 30 Total permanent 200 95 68 358 554 215 149 367 4 3 2 013 Temporary employees 2 0 0 0 6 0 0 0 0 1 9 Grand total 202 95 68 358 560 215 149 367 4 4 2 022

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

Comair Limited 37 Integrated Annual Report 2015 Summarised Employment Equity Report as at 31 July 2014 Total number of employees with disabilities only in each of the occupational levels Male Female Foreign nationals Total Occupational level 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‑management 0 0 0 2 0 0 0 0 0 0 2 Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents 1 2 0 2 2 0 1 1 1 0 10 Semi-skilled and discretionary decision‑making 1 0 0 1 1 0 0 0 0 0 3 Unskilled and defined decision‑making 0 0 0 0 0 0 0 0 0 0 0 Total permanent 2 2 0 5 3 0 1 1 1 0 15 Temporary employees 0 0 0 0 0 0 0 0 0 0 0 Grand total 2 2 0 5 3 0 1 1 1 0 15

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

Workforce profile as at 30 June 2015 for South African employees

Male Female Foreign nationals Total Occupational level A C I W A C I W Male Female 1. Top management 0 0 0 0 0 0 1 0 0 3 2. Senior management 0 0 0 6 0 0 0 1 0 0 7 3. Professionally qualified 10 2 4 144 6 4 6 47 1 1 225 4. Skilled technical 126 76 52 191 336 164 110 268 3 2 1 328 5. Semi-skilled 82 24 11 13 227 53 31 39 0 0 480 6. Unskilled 2 0 0 0 24 0 0 0 1 0 27 Not defined 0 1 0 0 0 1 0 0 0 0 2 Total permanent 220 103 67 356 593 222 147 356 5 3 2 072 5. Semi-skilled 0 0 0 0 0 0 0 1 0 0 1 Total non-permanent 0 0 0 0 0 0 0 1 0 0 1

Grand total 220 103 67 356 593 222 147 357 5 3 2 073

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

The Group is implementing the following action plans to improve during the year, the number of previously disadvantaged representation by previously disadvantaged groups: employees increased to 65% compared to 63% during the previous reporting period. The percentage includes pilots • Recruitment and selection: Active steps have been and technicians, professions where the aviation industry is taken to target and appoint suitably qualified persons from faced with a particular challenge to achieve a more equitable the designated groups. The Group is fully committed to representation. The employment and retention of pilots from increasing the representation amongst and diversity of its previously disadvantaged groups remains a major challenge. workforce. It has an established EE Forum with whom it Notwithstanding the foregoing, the Group has increased its consults at regular intervals on progress toward achieving pilot pool of previously disadvantaged groups by 3% since the EE Plan. Due to the targeted efforts made by the Group the implementation of its EE Plan in 2011;

Comair Limited 38 Integrated Annual Report 2015 • An electronic, web-based recruitment tool was implemented: within the Group. The remuneration policy is consistently This has resulted in various enhancements to the Group’s applied to all positions in the Group. Further, through the recruitment initiatives and process. In a period of months, job profiling process, the critical competencies for each job close to 11 000 people have registered their curriculum have been identified and mapped, which has facilitated the vitaes on the system; development of personal development plans per employee; and • Job profiling, job evaluation and grading: All jobs in the • The Group has established an electronic EE monitoring Group have been evaluated and assigned job grades. This system: This tracks in real time the EE profile and the Group’s enables the provision of a logical graded hierarchy and progress towards achieving its EE targets. pay structure, as well as valid benchmarking of positions and remuneration, both internally and externally. This has The Group’s five-year EE Plan (2011–2016), reflecting the numerical significantly improved transparency with regard to recruitment goals/targets that it has set and hopes to achieve, is set out below. and the filling of vacancies, as well the remuneration policy

Foreign Budget Male Female Total nationals % SA black head Level EE goal target count A C I W A C I W M F M F Top 2011 2 0 0 0 2 0 0 0 0 0 0 2 0 management 2016 0% 2 0 0 0 2 0 0 0 0 0 0 2 0 Senior 2011 12 0 0 2 8 0 0 0 2 0 0 10 2 management 2016 30% 10 1 0 1 5 1 0 0 2 0 0 7 3 Mid 2011 205 4 2 0 145 0 3 6 45 0 0 151 54 management 2016 17% 195 14 3 1 121 12 2 1 41 0 0 139 56 Junior 2011 1 292 128 74 42 197 311 152 95 289 0 3 441 850 management 2016 76.9% 1 276 241 34 18 131 555 80 42 175 0 0 424 852 Semi-skilled 2011 421 67 20 13 22 118 68 28 84 1 0 123 298 2016 86% 444 87 12 7 27 203 29 16 63 0 0 133 311 Unskilled 2011 25 1 0 0 0 23 0 0 0 0 1 1 24 2016 89% 27 4 1 0 1 16 2 1 3 0 0 6 22 Disabled 2011 10 2 0 0 3 2 1 1 1 0 0 5 5 employees 2016 32 5 0 0 2 12 2 1 10 0 0 7 25

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

Skills development with such suppliers in an attempt to ensure that such standards are met and maintained. Other important factors play a role in The Group’s commitment to providing a quality air service means that selecting suppliers, including, but not limited to compliance with skills development is a priority. The Group invested approximately local and international laws and regulations (particularly those R21 million (compared to R16.3 million in the prior financial year) or related to aviation), good quality service and products, reliability approximately 3% (which is approximately the same for the prior and stability, cost effectiveness, support networks, with particular financial year) of payroll in support of its commitment to training reference to suppliers of aircraft parts, components and fuel and and skills development. See the section dealing with the Group’s the availability of products and services. The B-BBEE status of training and development initiatives on page 44 for more details. South African suppliers is also taken into account. Preferential procurement While the Group attempts to source products and services from The Group is committed to the concept of preferential procurement. South African suppliers, this is not always possible, having regard It relies on its suppliers to deliver products and services in line to the nature of its business, where the acquisition of aviation with its required standards, such as, but not limited to quality equipment or specialised airline branded products needs to be and safety of the product and timeous delivery and availability of procured and sourced from foreign companies, based mainly in supply, and, where possible, it enters into service level agreements

Comair Limited 39 Integrated Annual Report 2015 Europe and the United States of America. The proportion of spend Economic impact with foreign suppliers varies significantly year-on-year due to the The Group, like many other companies, has many impacts on capital value of spend on aircraft, aircraft engines and aircraft its stakeholders through, amongst others, the creation of wealth; spares. For the period under review, and excluding spend on the creation of employment opportunities; remunerating its employees leasing and purchase of aircraft, aircraft engines and aircraft spares, fairly, being competitively based on industry standards; and its the Company spent approximately 87% of its total procurement corporate social investment. Kindly refer to the Group’s Value- spend with South African suppliers. added Statement as set out on page 9. The Group’s economic impacts are driven and influenced by the following factors. In the period under review, the Group substantially increased its score for preferential spend from 13.28 to 17.02 points. It will continue to focus on channelling procurement through to Access to affordable flights black-owned qualifying small enterprises and exempted micro The airline industry is fraught with many challenges involving, enterprises. It is also improving its systems to more accurately but not limited to, the cost of equipment, oil price and currency reflect its data collection with respect to preferential procurement. fluctuations, airport charges and taxes and, consequently, access to affordable flights. For this reason the Group was Enterprise development the first in South Africa to launch a low fares airline, making air travel affordable for a larger portion of the population that would The Group scored full points for enterprise development, mainly previously not have flown. To enable it to continue to offer access as a result of a loan that was provided to Imperial Air Cargo to affordable flights, the Group continuously looks at ways in Proprietary Limited, a black empowered company, as well as which to improve its efficiency and cost effectiveness, such as, the funding and setting up by the Group of an academy which but not limited to: grooms unemployed school leavers for entry into the workforce.

Socio-economic development • Implementing a progressive fleet replacement programme: By operating more modern and fuel efficient aircraft, it The success of the Group’s Corporate Social Investment Strategy has achieved a consistent reduction in the cost of aircraft and initiatives is reflected in the fact that it scored full marks in this maintenance as well as the amount of fuel used per seat; category. The Group has several social development initiatives in • The introduction of a comprehensive Fuel Savings Programme place including a number of programmes to support and assist with the co-operation of its pilots; the community throughout the country on a variety of initiatives. • The weight of an aircraft impacts on fuel burn, and the Group Current partnerships include: has, through the installation of lightweight seats and catering equipment, substantially reduced aircraft weight; • A partnership with the Red Cross War Memorial Children’s • The Group has maximised the use of available technology Hospital in the Western Cape through which the Group has to reduce airline distribution costs through the use of the donated air tickets for the transport of sick children and internet and by introducing self-service check-in for customers, their immediate family members to and from the hospital as thereby eliminating the use of traditional paper tickets; well as the transportation of specialised medical personnel • The Group’s Flight Operations Department, working with Air to hospitals in South Africa where their expertise may be Traffic Control and Navigation Services, has developed the required, in addition to making a cash donation; most efficient routing of aircraft between airports and has • The Group has also donated air tickets to Wings and Wishes developed more efficient landing approach profiles resulting for the purpose of transporting children in need of life-saving in substantial fuel savings; and medical treatment. • The Group has set up its own catering department known as Food Directions, thereby reducing the cost of on-board Further details on the Group’s corporate social investment strategies catering, while at the same time ensuring a better quality of and initiatives are dealt with on page 45 of this report. catering for customers.

Comair Limited 40 Integrated Annual Report 2015 Public-private partnerships While the Group does not maintain data on turnover rate by age Group and gender, its staff attrition rate during the 2015 financial The Group believes that public-private partnerships (PPPs) and year was 9.7% as opposed to 12.4% in the prior reporting period. other joint initiatives with government could have a meaningful role in ensuring access to affordable airfares. It continuously looks Employee remuneration at opportunities for PPPs, however, no PPPs were entered into during the period under review. The Group offers fair salaries and competitive benefits to its employees based on the principles of equity and fairness. Further details of its remuneration policies are set out in the Remuneration Social impact report on pages 65 to 67. The Group’s objective to create and sustain value for all its stakeholders is impacted by its ability to achieve its goal of being an Remuneration and reward guidelines serve to create a platform employer of choice and creating a positive impact on society as a for fair and transparent human resource practices so as to ensure whole. How it ensures that it achieves these goals is set out below. consistency and non-discrimination among employees and thereby eliminate any form of subjectivity or favouritism. The Group’s position The Company’s employees on salaries is to remunerate at the median of the applicable salary Employee composition and turnover rate band. However, salary progression for new employees will range from the lower quartile to the median and from the median to the The success of the Group is dependent on the commitment of upper quartile for scarce/high risk/critical skills. its 2 088 employees to deliver a safe, secure, reliable and quality service. The composition of its employees in South Africa is made The Group offers employee benefits to its permanent employees up as follows: employed in South Africa. Where possible, due to legal parameters, it also offers employee benefits to its permanent employees employed Workforce composition by employment type in Zimbabwe. The Group has a defined contribution pension scheme 2015 financial 2014 financial year end year end in place for its permanent employees in South Africa, which is an Permanent employees 2 072 2 006 umbrella scheme known as The Superfund, administered by Old Temporary employees 1 5 Mutual. In addition, it offers its permanent employees in South Africa risk benefits in the form of death and disability benefits, which scheme Workforce composition per gender is administered by Discovery Life. The Group’s permanent employees in 2015 financial 2014 financial South Africa contribute 7% towards retirement funding, with the Group year end year end contributing 10% to cover both retirement funding and risk benefits. Male 751 727 Female 1 322 1 284 A medical aid scheme is also in place for permanent employees in South Africa, which scheme is administered by Discovery Health. Workforce composition per age distribution The Group contributes 50% of the cost in respect of the Discovery 2015 financial 2014 financial Essential Comprehensive Plan for such permanent employees. An year end year end equal value is contributed to permanent employees in Zimbabwe. Number of employees younger than 30 683 666 The Group also provides post-retirement medical aid funding, which Number of employees equates to 50% of the Essential Saver Plan. between 30 and 50 1 239 1 177 Number of employees Labour relations older than 50 151 168 The Group’s aim is to create and maintain sound labour relations, Note 1: Of the Group’s total number of permanent employees, it has eight which support its goal of being the employee of choice in the foreign nationals in its employ which increased from seven in the South African airline industry. The Group regularly reviews its 2014 financial year. All these foreign nationals are employed in employment conditions and policies. It tries to ensure that all South Africa. employees are made aware of their benefits and this information Note 2: The total number of employees, as set out above, excludes 15 of is furnished to employees during induction sessions and via the the Group’s permanent employees who are employed in Zimbabwe.

Comair Limited 41 Integrated Annual Report 2015 Group’s intranet, newsletters sent directly to staff by the Group, • The education of management to reiterate the criticality of Old Mutual and Discovery, and other communication methods performance management to the achievement of the Group’s referred to earlier in the report. Cycle of Success; and • The procurement of a ‘best in class’ talent solution that will The Group was not subject to any strikes during the period under increase the availability of information to inform decision- review. Its disciplinary and grievance procedures are communicated making and take the focus off the ‘paperwork’ and onto the to new employees as part of their induction into the Group and value of the feedback. are also available to all employees to ensure that they are aware of the process in place to lodge grievances, should they have Through the performance management process, the Group aims the need to do so. to create an environment in which individuals obtain direction, guidance and feedback in order to perform optimally. The practice of The percentage of the Group’s employees represented by trade performance management also forms the basis for recognising the unions or collective bargaining agreements is reflected on page Group’s talent and investing in the development of future leaders. 28 of this Sustainable Development Report. Talent management The minimum notice periods for employees, as set out in the The management of talent is considered to be a key differentiator employees’ letters of appointment, are as follows: of the Group in comparison to its domestic competitors. It will continue to invest in the development of talent and leadership Pilots: 3 months capacity through the continuous education of leadership on the All other employees: 4 weeks effective delivery of an integrated talent management process. The Group will utilise innovative methods to support the building Top and Senior Management enter into employment contracts of a talent mindset and to create the platform to enhance the with the Group which are subject to termination on four weeks’ attraction, retention and development of talent. notice and are not subject to any fixed term or form of restraint. The Group’s leadership framework will be a key driver of effective Performance management leadership behaviour and for identifying and developing future The Group’s performance management philosophy aims to leadership that will support its sustainability as it continues to grow. ensure that all employees are aligned to deliver against the Cycle of Success and strategic objectives. As the Group continues to Recruitment and retention of skilled staff embrace the opportunities it encounters in the market, it remains The recruitment and retention of the right calibre of employee is critical to ensure that all employees have the capacity to develop vital to enable the Group to deliver on its goal of becoming the and perform against Group objectives, now and in the future. airline of choice. It acknowledges that its ability to recruit and This applies to every level in the organisation and focuses on retain skilled employees is a critical factor in driving the Group’s both Group and divisional performance, as well as individual performance in the intensely competitive and dynamic business performance. Employees are provided with regular feedback to environment in which it operates. support continued development, both in role as well as towards future career opportunities. The emphasis is on quality, face-to-face The employment and retention of pilots remains a major challenge discussions on performance, and aims to contribute to a culture to the Group, particularly pilots from previously disadvantaged of giving and receiving constructive and developmental feedback. groups. As part of its commitment to transformation and skills development in the aviation industry, the Cadet Pilot Programme The performance management process is ever evolving, as is the sponsors individuals from previously disadvantaged groups to obtain business, and the Group has embarked on a drive to optimise their commercial pilots licences. The cost to sponsor each cadet the practice through three key pillars namely: is approximately R400 000. Once the cadets graduate from the programme, they are placed with selected commercial operators • The refinement of the mechanisms used to measure to obtain sufficient flying experience to enable consideration for performance; employment with the Group. The Group, in addition, having regard

Comair Limited 42 Integrated Annual Report 2015 to the fact that each pilot that joins the Group has to be trained and attending Health and Safety Committee meetings on a monthly to fly on its aircraft, requires that the pilots sign training bonds, to basis. The occupational health and safety representatives conduct ensure that they remain in the employ of the Group for a certain monthly inspections within their departments and annual audits period to cover the cost of such training. are conducted by the Quality Assurance Department, which ensures compliance with the Occupational Health and Safety Act The Group’s recruitment and selection practices are carried out (Act No. 85 of 1993) and identifies any further risks and/or trends. in accordance with all applicable labour legislation and are based on the principles of fairness, transparency and consistency. This Health and Safety Committee is achieved through the use of objective and validated tools, The Group pays due regard to the health and safety of its employees including, but not limited to, competency-based interviews and and strives to provide employees, customers and stakeholders psychometric assessments. The recruitment and selection process with a clean and safe working environment. Safety incidents and entails achieving a balance between employing the best person for damage are reported though a safety management system. A the position and the achievement of the numerical goals, as set formal structure exists within each department to allow safety issues out in the Group’s EE Plan, to achieve an equitable representation to be addressed. The Group has an open reporting culture and of designated groups in all occupational levels within the Group. encourages the reporting of all incidents. Safety representatives are appointed in each department and trained in various areas of Diversity and equal opportunities health and safety. The Group has a Health and Safety Committee The Group is committed to non-discriminatory treatment in all of its that meets at regular intervals to discuss pertinent issues. The Group employment practices and to providing equal opportunities to all is fully compliant with the Occupational Health and Safety Act. employees, and does not accept any form of unfair discrimination based on gender, race, nationality or religion. Its employment Staff welfare policies, including hiring, training, working conditions, compensation Balancing the demands of work and family life is not always easy, and benefits, promotion, termination and retirement are based on and it was with this in mind that the Group entered into a contract individual qualifications. It treats its employees equally, irrespective with Independent Counselling Advisory Services (ICAS) and the of gender, age, race, sexual orientation, disability or other status Group’s Precious Cargo Wellness Programme was born. ICAS unrelated to performing the job. The Group’s focus on diversity provides a confidential 24-hour a day, 365-day a year personal and EE is in line with its overall transformation objectives and this support and information service for employees and their families is dealt with in the section of this report relating to B-BBEE. During to call for help in dealing with everyday situations and more the financial year under review no incidents of discrimination were serious concerns. In this regard, the Group has set up an on-site observed or reported. clinic, manned once a month by a registered psychologist, at the Group’s Head Office, Operations Department, O.R. Tambo Health and safety at work International Airport and Cape Town International Airport. The The Group pays special attention to health and safety in the service, provided by ICAS, includes telephone consulting, face-to- workplace so as to ensure that there is a safe environment for its face counselling, life management services and HIV counselling. employees, customers and invitees. The health of its employees In addition, employees have access to e-Care services, which is important to ensure the sustainability of the Group. is an online comprehensive health portal providing valuable and interactive resources on a wide range of topics approved by During the period under review, 24 minor incidents were reported qualified health professionals. During the reporting period, 49% (as opposed to 20 in the previous reporting period) which injuries of the staff made contact telephonically with the ICAS advisors ranged from slipping on wet floors, falling incidents and other minor and 20% made use of the counselling services. incidents. There were no fatalities during the period under review. In addition, health and wellness days are held for all employees The Group’s CEO ensures that all health and safety duties are to attend, which enables them to get health checks done at their discharged as a shared responsibility throughout the organisation – place of work. These health checks include blood pressure, height, from appointing occupational health and safety representatives who age, weight and HIV/AIDS tests. know their functions, to positively enforcing monthly inspections

Comair Limited 43 Integrated Annual Report 2015 The Group’s HIV/AIDS Programme forms part of the Precious • Workplace Experiential Learning (WEL): During the period Cargo Wellness Programme and allows all employees to undergo under review, the Group was involved with various tertiary voluntary HIV testing and, if need be, counselling. Employees education providers to provide students in the travel-related who test positive are referred for additional counselling through disciplines offered by such tertiary education facilities with the programme, and are provided with medical support through six months’ WEL experience. Ten students from the Durban the Group’s medical aid scheme. The Group runs HIV awareness University of Technology completed six months’ WEL at King workshops which allow employees the opportunity to learn more Shaka International Airport, while 17 students from the University about HIV and AIDS. of Johannesburg completed their WEL at O.R. Tambo International Airport, with all subsequently being offered employment as Training and skills development Customer Service Agents by the Group. Five students from the The Group’s training programmes are focused on improving its Cape Town University of Technology completed their WEL at human capital, improving business processes and procedures, Cape Town International Airport and four students completed maintaining and promoting quality service delivery in all aspects their WEL at Lanseria International Airport; of its business and alleviating, within affordable boundaries, skills • Skills Development: The Group contributed R7.2 million shortages amongst pilots. towards skills development in the country in the form of the skills levy which is paid to the Department of Labour as compared Employee training to R6.2 million contributed during the prior reporting period. The Group commenced a Skills and Enterprise Development The Group makes a significant investment in training, investing initiative with Carpe Diem Kaleidoscope on the East Rand in approximately 3.09% (which is similar to the previous financial 2013. To date, 56 learners have completed the programme, year) of payroll on training. 93% of whom have been employed as Customer Service Agents at O.R. Tambo International Airport; The Group has implemented the following training programmes: • Supervisory Development Programme (SDP): This programme is modelled on the GIBS Take Off Programme, and was • Take Off: As part of its succession planning, a leadership developed for Middle Management (supervisors) ground staff development programme called Take Off, has been running at the airports to develop to the next level of management. for six consecutive years. The programme is delivered in Nine supervisors at O.R. Tambo International Airport, nine conjunction with the Gordon Institute of Business Science at Cape Town International Airport and 13 at King Shaka (GIBS), which is underwritten by the University of Pretoria. As International Airport have completed the programme; and part of this programme, the Group’s potential future leaders are • Cabin Crew Training Facility: The Group has developed a identified and undertake courses covering several key areas new purpose-built Cabin Crew Training Facility at its Operations of business management in a mini-MBA styled programme. Centre in Rhodesfield. This facility will be used to train both the 157 employees have completed the programme to date, with Group’s cabin crew as well as cabin crews of third parties. a further 24 employees currently involved in the programme; • Cadet Pilot Training Programme: The Group remains In addition to the aforementioned, the Group has provided training committed to its Cadet Pilot Training Programme, and two and development courses to its employees in areas such as, but cadet pilots were recruited during the period under review. not limited to, passenger handling, Group orientation, passenger Since the initiation of the programme, 13 cadets have obtained check-in, dangerous goods, customer service, station emergency their commercial pilot licences, six of whom are currently awareness, aviation safety and security, fares and ticketing, customer employed by the Group, while some of the others have experience, safety and emergency procedures, type-rating for been employed at other smaller airlines to obtain sufficient pilots in respect of the aircraft types operated by the Company flying experience to qualify for employment as a pilot with the and crew resource management training, so as to ensure that the Group. The Department of Transport has commended the highest standards of safety, security and service are maintained Group on the programme, having regard to the challenges throughout the Group. In total, 1 591 employees participated in faced by the aviation industry in recruiting and training cadets training and development courses during the period under review. from previously disadvantaged groups;

Comair Limited 44 Integrated Annual Report 2015 Investing in the community cabin crew wore the official diabetes badge to promote World Diabetes Day. The Group is a committed corporate citizen and, together with its staff, endeavours, wherever possible, to improve the lives of Cycle of Life fellow South Africans. It believes that social responsibility is a duty, privilege and an obligation to help those less fortunate and The Group donated prizes in the form of air tickets in the amount to make a positive impact on society in general. In this regard, of R57 000 to Cycle of Life to assist with the DSTV Mitchell’s the Group has assisted the community as follows: Plain Festival.

The Red Cross War Memorial Children’s Hospital Trust Wings and Wishes During the previous reporting period, the Group formed a This organisation flies critically ill children from all over the country partnership with and made donations to the Red Cross Children’s to various hospitals for life-saving surgery and medical care. Hospital Trust to assist sick children needing medical assistance The Group provided air tickets to this organisation to the value at the Red Cross War Memorial Children’s Hospital. The Group’s of R500 000 to assist in transporting such children during the contribution comprised R500 000 worth of flight tickets to be used period under review. to transport children, as well as their parents/family members to and from the hospital to receive medical treatment. The flight ticket Primestars Marketing contribution can also be used by certain staff members from the The company specialises in facilitating youth development hospital who need to travel for work purposes. In addition to the programmes for high school learners from underprivileged flight ticket contribution, the Group has made a cash donation of communities. By supporting this programme, the Group is R500 000 to the hospital, which was used towards the building supporting initiatives that educate disadvantaged learners. The of a new accommodation facility for the parents and caregivers Group sponsored air tickets to the value of R300 000 for this of the children receiving treatment at the hospital. worthy cause.

Food and Trees for Africa QuadPara Association of South Africa This project was launched in 2007 to raise money to care for the This is a new initiative, through which the Group sponsored air environment, while also offsetting the Group’s carbon emissions tickets to the value of R250 000. In addition, it made a cash through the sustainable greening of townships in South Africa. This donation of R200 000 to be used towards nominated outreach year, the Group was unable to collect donations from customers programmes of the QuadPara Association of South Africa. directly due to its new Sabre Reservation System not offering this facility, but it continued with its investment in Food and Trees for Environmental impact Africa and donated R200 000 worth of air tickets to this worthy cause during the period under review. The Group’s ability to operate and create and sustain value is largely driven by its environmental impact. It is therefore committed Smile Foundation to protecting the environment, conserving natural resources and The Group continued to put smiles on children’s faces by donating utilising resources in an effective and responsible way, by adopting R250 000 in the form of air tickets to the Smile Foundation which is sound environmental practices in its business. dedicated to transforming the lives of children with facial conditions. Responsible aviation starts with safety and security, and that is Casual Day the Group’s fundamental duty to its customers and colleagues. Its responsibilities also extend to the impact that it has on the The Group sold stickers on board its flights in support of the environment. Casual Day charity, and raised approximately R6 850.

This section of the report deals with the environmental performance Diabetes SA of the Group and reflects its carbon footprint based on the To promote awareness of diabetes, the Group worked with Corporate Accounting and Reporting Standard of the Greenhouse Diabetes SA by providing free exposure in khuluma (kulula’s on Gas Protocol (GHG Protocol). The organisational boundary of the board magazine), and during the month of November the kulula report is reflected in the table below.

Comair Limited 45 Integrated Annual Report 2015 Organisational entity Comair Limited These objectives enable the Group to identify aspects of its Operational control 100% business that could have an effect on the environment with a Operational boundary Operational control view to reducing such impact, and it works closely with aviation Reporting period 1 July 2014 to 30 June 2015 policymakers in South Africa to influence the development and implementation of effective environmental regulations. In addition, Base year 2011 the AASA has established an Environmental Committee to co- Methodology GHG Protocol Corporate Accounting and Reporting Standard ordinate and drive initiatives that have to be undertaken by the Number of permanent Group, other member airlines and aviation service providers so employees 2 079 as to achieve the international and domestic goals of reducing Number of sites 17 GHG emissions. Square metreage of facilities 22 044 m2 The Group’s Chief Executive Officer is responsible for ensuring KPI: passengers carried 5 140 599 compliance with these goals and delegates this responsibility to Senior Managers within the Group. As mentioned at the outset, this report deals only with the Group and its operations in South Africa and does not deal with Environmental management risk assessment its associated companies. The report includes the compulsory reporting requirements of the GHG Protocol by quantifying the The Group is committed to ensuring that it complies with Group’s emissions that are categorised as Scope 1 and Scope 2 environmental legislation and regulations applicable to it. The and includes selected Scope 3 emissions and fugitive emissions main environmental impact being managed is the utilisation of as optimal information. fuel and oil which have a direct effect on its carbon emissions.

The activities listed in the table below have been reported on. The Group assesses the risks faced by it associated with climate Scope 1 Scope 2 Scope 3 change, which include: (a) Mobile fuel Purchased Water use combustion in electricity Material use • Regulatory risks: Compliance with environmental legislation; Group-owned/ (electricity Waste disposal and leased aircraft and usage) Well to tank emission Group-owned/ (fuel and energy- • Physical risks: Interruption to supply and fuel shortages and leased vehicles related activity) the risks associated with load shedding in South Africa. (b) Stationary fuel combustion in No fines or sanctions were imposed upon the Group for non- Group-owned assets (generators compliance with any environmental laws or regulations during and catering the period under review. equipment) Emissions Environmental objectives Climate change is the most urgent and significant sustainability The Group’s environmental objectives focus on assessing and issue. The vast majority of the Group’s climate impact (approximately minimising its impact on the environment and are currently aimed at: 99%) results from GHG emissions released through the burning of fossil-based jet fuel in aircraft engines. The international community • Identifying and complying with environmental legislation aims to limit GHG concentrations in the atmosphere so that global and regulations; temperatures do not increase by more than 2°C by 2050. The • Identifying and managing all risks relating to the Group’s Group wishes to ensure that it makes a fair contribution towards impact on the environment with regard to water use, energy achieving this aim. use and conservation and emissions and climate change; • Creating environmental awareness amongst all employees; Globally, aviation produces around 700 million tons of carbon • Limiting aircraft noise without compromising safety; and dioxide (CO2) per year, which represents approximately 2% of total • Linking fuel saving initiatives to an environmental saving manmade emissions. This share is projected to grow. The aviation objective.

Comair Limited 46 Integrated Annual Report 2015 industry is extremely vulnerable to climate change response policies, firm belief that sustainable bio-jet fuels will play a pivotal role in especially where these involve the pricing of carbon emissions. helping to meet the carbon emission targets. In this regard there On the other hand, the industry has to contribute its fair share are still hurdles to overcome, which are mainly commercial in to efforts to limit climate change. Slowing down aviation growth nature, and the need to establish a level playing field for suppliers to reduce carbon emissions is in no-one’s interest. It will create to produce aviation bio-jet fuel against road transportation and unemployment and undermine efforts to reduce poverty. As it other energy products. currently stands, it is estimated that tourism sustains one in every 12 jobs globally and contributes approximately 9% of worldwide British Airways Plc, the Group licensor in respect of its BA brand gross domestic product. Aviation is not only a key enabler of and a shareholder, is playing a leading role within the aviation tourism, but also of trade, investment and global integration. industry in developing and promoting proactive schemes for a

However, while slowing down aviation growth is not an option, post-Kyoto aviation policy. They believe that CO2 emissions from being complacent and doing nothing is not one either, as the international aviation must be integrated within a global agreement growth of emissions will not be environmentally and economically and that this must be done in a way that ensures equal treatment sustainable. The Group therefore welcomes the progress made at of all airlines. The Group supports the approach adopted by British the ICAO General Assembly in October 2010 where 190 member Airways Plc and is committed to improving its environmental states agreed to the aspiration of achieving carbon neutral growth performance and reducing the adverse impact that its activities from 2020. This is in line with the global airline industry vision have on the local and global environment. for a sector-wide approach to enabling carbon neutral growth by 2020 and a huge reduction in net emissions by 2050. The Insofar as the Group’s emissions are concerned, its GHG inventory, Group supports a framework for reducing aviation emissions by scope and expressed in metric tonnes of carbon dioxide based on carbon trading that is applied equally to all airlines and equivalent (CO2e) is detailed in the tables and graphs below, with all industries as a whole, i.e. the burden on aviation should not comparatives between the financial year in question and the base be disproportionate to that of other economic sectors. Aviation year, where applicable. The Group also reflects its GHG Inventory cannot be the ‘cash cow’ of the climate regime. There is also a for the 2014 financial year.

Inventory 2015 Total GHG emissions by source

Emission source by scope % of footprint Tonnes of CO2e % change from 2011 Scope 1 direct emissions 82% 540 162.63 1% Stationary fuel combustion <1% 87.74 35% Mobile fuel consumption 82% 540 074.89 1% Scope 2 indirect emissions 1% 7 688.76 7% Purchased electricity 1% 7 688.76 7% Total Scope 1 and 2 emissions 547 851.39 1% Scope 3 indirect emissions 17% 111 393.26 NM1 Fuel- and energy-related activities 17% 111 348.38 NM1 Material use <1% 25.41 NM1 Water use <1% 19.22 11% Waste disposal <1% 0.26 NM1 Total Scope 1, 2 and 3 emissions 659 244.65 NM1

1 The reason for non-measurement is that a comparison is not appropriate due to the addition of Scope 3 emissions since 2011.

Out of Scope emissions As there was no recharge of airconditioning gas at the premises and any re-installation of airconditioning units come fully recharged, there is no out of scope emissions to report on.

Comair Limited 47 Integrated Annual Report 2015 Emission Intensities

Emission intensities Tonnes of CO2e % change from 2011 All Scopes footprint per passenger 0.13 9% Aviation fuel footprint per passenger 0.10 9% All Scopes footprint per employee 317.10 NM1 Scope 1 and 2 footprint per employee 263.52 5% Site specific emissions per 2m 0.39 45%2

1 Comparison not appropriate due to the addition of Scope 3 emission sources since 2011. 2 Site specific emissions include stationary fuel combustion and electricity.

2014/15 GHG Inventory by Emission Source Tonnes of CO2e

0 100,000 200,000 300,000 400,000 500,000 600,000

Scope 1

Scope 2

Scope 3

Stationary fuel combustion Mobile fuel combustion Purchased electricity Fuel- and energy-related activities Material use Water use Waste disposal

Mobile fuel combustion (primarily aviation fuel) remains the largest emission impact making up 82% of the total footprint and 99% of Scope 1 and Scope 2 emissions. While aviation emissions increased marginally (0.2%), passengers carried decreased (1.1%).

Stationary fuel combustion emissions, while immaterial, have increased by 14% from the previous financial year due to the growth in the Group’s catering facilities. This growth has also increased purchased electricity by 8% from the previous year.

Fluctuations in material use (paper) and waste disposal emissions have had a negligible effect on scope totals.

The total GHG inventory of the Group for the 2015 financial year was 659 244.65 metric tonnes of CO2e made up as follows:

Direct emissions (Scope 1) Scope 1 emissions

Emission source Unit of measure Emission factor Consumption Tonnes of CO2e Mobile fuel consumption: aircraft kg Various 169 608 694 539 563.08 Mobile fuel consumption: vehicles lt Various 201 331 511.81 Stationary combustion: generator fuel use lt Various 34 745 55.04 and LPG fuel use kg Various 11 114 32.70 Total Scope 1 540 162.63

Comair Limited 48 Integrated Annual Report 2015 The direct emissions reflected above are broken down as follows:

Detailed breakdown of mobile fuel combustion in Company owned/leased vehicles/aircraft

Emissions Source Unit of measure Consumption kg CO2e per unit Tonnes of CO2e Mobile fuel combustion Company owned and controlled assets Aviation Turbine Fuel kg 169 608 694 3.181223 539 563.08 Diesel (100% mineral diesel) lt 129 659 2.67614 346.99 Petrol (100% mineral petrol) lt 71 672 2.29968 164.82 Total 540 074.89

Detailed breakdown of stationary fuel combustion

Emissions Source Unit of measure Consumption kg CO2e per unit Tonnes of CO2e Stationary fuel combustion Company owned and controlled assets Diesel (100% mineral diesel) lt 2 226 2.67614 5.96 LPG lt 32 519 1.50938 49.08 LPG kg 11 114 2.942-64 32.70 Total 87.74

Scope 2 emissions Detailed breakdown of purchased electricity

Emissions Source Unit of measure Consumption kg CO2e per unit Tonnes of CO2e Purchased electricity Purchased electricity kWh 7 612 635 1.01 7 688.76 Total 7 688.76

Scope 3 emissions Detailed breakdown of Scope 3 emissions

Emission Source Unit of measure Consumption kgCO2e per unit Tonnes of CO2e Fuel related well- to-tank activities Stationary fuel combustion Diesel (100% mineral diesel) lt 2 226 0.57960 1.29 LPG lt 32 519 0.18960 6.17 LPG kg 11 114 0.36970 4.11 Mobile fuel combustion Aviation Turbine Fuel kg 169 608 964 0.65580 111 229.38 Diesel (100% mineral diesel) lt 129 659 0.57960 75.15 Petrol (100% mineral petrol) lt 71 672 0.45040 32.28 Material use Paper: Primary Material Production Tonnes 27.06 939.0000 25.41 Water use Water Supply kl 55 868 0.34400 19.22 Waste disposal Paper Tonnes 12.36 21.0000 0.25 Total 113 393.26

Comair Limited 49 Integrated Annual Report 2015 GHG Inventory 2014

GHG Inventory 2014 Scope 1 Scope 2 Scope 3 Total

Metric tonnes of CO2e 539,293.08 7,146.53 111,132.57 657,572.18

The total GHG Inventory of the Group for the 2014 financial year was 657,572.18 metric tonnes of CO2e made up as follows:

Direct emissions (Scope 1) Scope 1 emissions

Emission source Unit of measure Consumption Tonnes of CO2e Mobile fuel consumption lt/kg 169 469 918 539 216.08 Stationary fuel combustion lt 50 373 77 Total 539 293.08

The direct emissions reflected above are broken down as follows:

Detailed breakdown of mobile fuel combustion in Group’s owned/leased aircraft and owned/leased vehicles

Emission source Unit of measure Emission factor Consumption Tonnes of CO2e Aviation Fuel kg Various 169 354 931 538 924.33 Diesel lt Various 73 916 197.29 Petrol lt Various 41 071 94.46 Total 539 216.08

Detailed breakdown of stationary fuel combustion (generator, gas)

Emission source Unit of measure Emission factor Consumption Tonnes of CO2e Diesel lt Various 1 134 3.03 LPG lt Various 49 239 73.97 Total 77

Indirect emissions (Scope 2) Detailed breakdown of electricity

Emission source Unit of measure Emission factor Consumption Tonnes of CO2e Purchased Electricity kWh 1.03 kg 6 983 381 7 146.53

Scope 3 emissions Detailed breakdown of Scope 3 emissions

Emission factor

Emission source Unit of measure KgCO2e per unit Consumption Tonnes of CO2e Fuel related well-to-tank activities Mobile fuel combustion Aviation Fuel kg 0.6550 169 354 931 111 012.16 Petrol lt 0.45040 41 071 18.5 Diesel lt 0.57850 73 916 42.76 Stationary fuel combustion Diesel lt 0.57850 1 134 0.66 LPG lt 0.18890 49 239 9.29 Material use Paper t 956 31.09 29.72 Water use Water supply kl 0.34410 56 184 19.33 Paper, closed loop disposal method t 21 6.93 0.15 Total 111 132.57

Comair Limited 50 Integrated Annual Report 2015 In comparing our GHG Inventory for 2015 with 2014, it must be • The new 737-800 use approximately 6% less fuel per seat noted that: than the older 737-800 aircraft and 24% less fuel per seat relative to the 737-400 aircraft. In addition, the Group will be 1. The major reason for the increase in Scope 1 emissions is placing “Scimitar” split winglets on all the B737-800 aircraft due to the following factors: it owns, which should result in a further 2% reduction in fuel consumption on the Group’s owned B737-800 aircraft. (a) While the increase in aircraft fuel consumption between • Implemented a programme to reduce weight on board the aircraft, the 2015 and 2014 periods was negligible, the increase approximately four years ago, by implementing a paperless could be attributed to weather conditions, aircraft diversions cockpit, reducing the amount of potable water carried on board during the 2015 period and tankering of fuel. the aircraft and reducing the weight of the aircraft galleys and (b) The increase in the stationary fuel combustion was due thus reducing the fuel used on board the aircraft. to the Group increasing the size of the SLOW Lounges • In conjunction with Air Traffic Control, has, where possible, and catering division as well as increased load shedding implemented a Continuous Descent Approach to achieve during the reporting period. fuel efficiency and reduce the impact of noise. • Where such stands are assigned to us by ACSA, used fixed 2. The major reason for the increase in the Scope 2 emissions ground power units as opposed to auxiliary power units to during the period under review could be attributed to the reduce fuel consumption and noise. Group having increased the size of the premises it owns and • Attempted to reduce the impact of noise, as annoyance and leases, as well as metre readers being installed in a number sleep disturbance are the most commonly reported adverse of premises, where same did not previously exist. effects of aircraft noise. The Group’s objective is to try to reduce or limit the total number of people exposed to high 3. The major reason for the increase in the Scope 3 emissions levels of aircraft noise. Current regulations and voluntary is as a result of the increase in the size of the SLOW Lounges actions by the Group, such as phasing out its older aircraft, and catering facilities, as well as load shedding that occurred ensuring that all its engines are stage 3 noise compliant, as during the reporting period. It must be noted that well-to-tank well as restrictions on the use of airspace, night-time flying activities account for upstream Scope 3 emissions associated and ground operations restrictions, have, to a large extent, with the extraction and refining of raw fuel sources to the resulted in reduced aircraft noise. Group’s aircraft, prior to the combustion. • Is currently investigating implementing various energy saving initiatives with regard to electricity consumption such as, but In order to reduce the effect that the Group has with respect to not limited to, changing all light fittings and globes to more Scope 1, Scope 2 and Scope 3 emissions, it has: energy efficient ones. • Implemented a number of initiatives to reduce water • Over the years, implemented a fleet replacement programme consumption, including the use of borehole water at its and during the period under review operated 11 Boeing head office and operational buildings. Other initiatives to 737- 800 New Generation aircraft, 12 Boeing 737-400 aircraft reduce water consumption include employee awareness, and two Boeing 737-300 aircraft. It will during the course of monitoring of uncontrolled leakages and monitoring garden the next two financial years be taking delivery of a further four irrigation cycles. Boeing 737-800 New Generation aircraft. These new aircraft • In conjunction with its pilots, designed and implemented a will replace the older B737-400 aircraft. It has also entered comprehensive fuel savings programme according to best into an agreement with the Boeing Company to purchase practice while taking local operating conditions into account. eight B737 MAX aircraft for delivery between 2019 to 2021. This has already resulted in a further 1.4% reduction in fuel These aircraft are an upgrade to the B737-800 aircraft and consumption across its fleet. The Boeing 737-800 aircraft will offer even better performance, fuel efficiency and lower have also reduced the Group’s fuel burn per passenger as engine emissions, as well as, being quieter than the older it has the capacity to carry 21 more passengers and burns generation B737 aircraft. Since the introduction of the new 200ℓ per hour less fuel than the Boeing 737-400 aircraft. Boeing 737-800 aircraft, the average fuel burn per passenger is now approximately 30 kg per passenger.

Comair Limited 51 Integrated Annual Report 2015 Waste management and recycling material, in accordance with their own policies and procedures relating to waste management and recycling. The Group implemented a programme to recycle paper and this is the third year in which it has been able to measure the tonnage Refuse removal in the Group complies with South African laws of the paper recycled. The comparative measurement is included and regulations. in its carbon footprint measurement. Compliance The Group outsources the maintenance of its aircraft and aircraft To the best of the Group’s knowledge and belief there have been engines to third party suppliers as detailed earlier in this report. no incidents of material non-compliance with any environmental These third party suppliers dispose of waste arising from the laws or regulations and no fines were imposed on it during the maintenance of the aircraft and aircraft engines, including radioactive period under review.

Glossary of terms used in this environment impact section

Boundaries The inventory boundaries to determine which emissions are accounted for and reported. Boundaries include organisational, operational, geographic and business unit structures. Carbon footprint The total greenhouse gas emissions caused directly and indirectly by an organisation, typically over a period of 12 months.

CO2e Carbon dioxide equivalent is the standardisation of all greenhouse gases to reflect its warming equivalent

to CO2. This is used to evaluate different greenhouse gases against a common basis. Direct emissions GHG emissions from facilities or sources owned or controlled by the Group, e.g. generator, company- owned vehicles, etc. Emissions The release of greenhouse gases into the atmosphere. Emission factor Conversion factor to translate activity data, e.g. tonnes of fuel consumed, into emission data. GHG Greenhouse gases. Under the GHG Protocol standard six gases are accounted for, namely carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, per fluorocarbons and sulphur hexafluoride. GHG Inventory A listing of the GHG emissions and sources that are attributable to the Group. GHG Protocol GHG Protocol Corporate Accounting and Reporting Standard. Indirect emissions Emissions that are a consequence of the operations of the Group, but occur at sources owned or controlled by another company. Operational boundary The boundary to establish the operations and sources of emissions included in the GHG Inventory. Organisational boundary The boundary to establish business units or entities of an organisation included in the GHG Inventory. An equity or control approach can be taken. Reporting period The period of time, typically a calendar or financial year, which the report covers. Scope 1 emission Direct emission from Group-owned or controlled equipment, vehicles or aircraft. Scope 2 emission Indirect emission from the consumption of purchased electricity. Scope 3 emission Indirect emission from other activities associated with the activities of the Group, e.g. commuting travel, business air travel and paper or water consumption.

Comair Limited 52 Integrated Annual Report 2015 Corporate governance

Introduction Code of ethics

The Group is subject to the Listings Requirements of JSE Limited The Group has a strong culture of entrenched values, which (JSE) as well as the requirements of the Companies Act (Act No. 71 forms the cornerstone of the behaviour expected of it towards its of 2008), as amended (Companies Act). The Group supports the stakeholders. These values are embodied in a written document governance principles and guidelines contained in the King Code known as the Group Code of Ethics. Conducting business in an of Governance Principles and King Report on Governance (King honest, fair and legal manner is a fundamental principle of the III) and is comfortable that effective controls have been put in Group. Ethical behaviour has always been a fundamental guiding place and complied with. principle and management continually focuses on establishing a culture of responsibility, fairness, honesty, accountability and Compliance with the JSE Listings Requirements and the Companies transparency. The Group has adopted a Guide to the Code of Act is monitored by the Group’s Company Secretary and Compliance Ethics to further explain to employees what constitutes ethical Officer and reported to the Board. conduct and to provide guidance on how to make ethically correct decisions. The Group is committed to maintaining principles of good corporate governance to ensure that its business is managed in Confidential reporting process a responsible manner with integrity, fairness, transparency and The Group recognises the need for a confidential reporting accountability. The Board supports the governance principles process (whistle blowing) covering fraud and other risks. In line and guidelines contained in the Companies Act, the JSE Listing with its commitment to transparency and accountability, it takes Requirements and King III. action against persons who are guilty of fraud, corruption and other misconduct. Any employee or external stakeholder is able Statement of compliance to report wrongdoing on a confidential and anonymous basis to an independent service provider, which ensures that all calls are In terms of the JSE Listings Requirements, the Group is required to treated confidentially. The number of calls or e-mails received report in respect of King III for its financial year ended 30 June 2015. during the reporting period was seven (7). All calls and e-mails were followed up by the Group and, where necessary, appropriate The JSE Listings Requirements require all JSE-listed companies action was instituted. to comply with certain principles of King III and to report on the application of the King III principles in accordance with the Corruption ‘apply or explain’ approach of King III. While the vast majority The Group has a no-tolerance approach with regard to unethical of King III principles were applied by the Group for the duration conduct, in particular to fraud and corruption. Strict policies of the period under review, those principles that have not been relating to gifts and donations received from third parties are in complied with are explained in the King III Application Register place compelling employees or management to declare same. referred to below. The Group currently maintains an overall AAA compliance rating as assessed by the Global Platform for Intellectual The Group further prohibits the making of donations to political Property (TGPIP) Governance Assessment Instrument, licensed parties, unless same have been pre-approved by the Board. No by the Institute of Directors SA. A summary King III check list is donations to political parties were made by the Group during the included at the end of this Corporate Governance Report. The period under review. full King III Application Register appears on the Group website at www.comair.co.za. The Risk Management Committee and, where appropriate, the Audit Committee, consider any incidents of fraud and corruption.

Comair Limited 53 Integrated Annual Report 2015 Any material incidents of fraud or corruption are reported to the anti-trust or monopoly practices was instituted against the Group Risk Management Committee and, where appropriate, to the during the period under review. Audit Committee. There were no incidents of corruption or fraud brought to the attention of the Risk and Audit committees. The Competition Commission, based on a complaint received from one of the Group’s competitors, is currently investigating In order to prevent credit card fraud, the Group implemented the Group’s travel agent incentive schemes and its involvement a card-not-present fraud detection and prevention programme as an affiliated member of the Oneworld Alliance. The Group known as Cybersource in 2010. In the 2012 financial year, the formally responded to the Competition Commission in respect Group experienced spikes in card-non-present credit card fraud of the complaints. As mentioned, the Competition Commission as a result of the implementation of its new information technology is currently investigating the complaint and no legal action has platform known as Sabre. To counter same, system developments been brought in this respect to date. were implemented on the Cybersource Programme and the Group has since been able to maintain significantly reduced credit card Compliance chargebacks by 80% since 2012. Compliance with all relevant laws, regulations or codes is integral to the Group’s risk management approach. There were no This reduction has been achieved by a combination of systems significant non-compliance by, nor significant fines, nor non- and controls including: monetary sanctions or prosecutions against the Group during the period under review. • The Cybersource Fraud Detection System being enabled to make the necessary verification call prior to confirmation of Customer privacy and information security the flight booking; Information security policies are in place throughout the Group • System development enabling the transmittal of the credit card regulating, inter alia, the processing and protection of own and CVV number to banks, enabling them to conduct additional third party information. verification checks on the credit card; and • Constant monitoring and regular amendment of the parameters Legitimate requests for information can be made in terms of the and rules within Cybersource, based on fraudulent behaviours Promotion of Access to Information Act (Act No. 2 of 2000). No and trends. requests for information were made in terms of the Act.

The Payments Association of South Africa (PASA) continues The Protection of Personal Information Act (Act No. 4 of 2013), to drive its enforcement of 3D Secure on all card-not-present has been passed in South Africa, but the date of implementation, transactions. Online retailers (excluding airlines), went live with apart from a few enabling sections, has yet to be determined. The 3D Secure in February 2014. The results and feedback from this Act will require further actions on the part of the Group to ensure activation have not been very positive, and the Group remains privacy of personal information. The Group will put measures in concerned about the readiness of the inter-banking systems and place to ensure that it will be able to comply with the requirements communication networks to cope with the additional volumes of of the Act. electronic messaging, come the activation of 3D Secure within the airline industry. The airline industry accounts for approximately 80% There were no complaints regarding breach of customer privacy of all online sales in South Africa. Activation of 3D Secure in the or loss of customer data against the Group during the year. airline environment could therefore result in significant strain on the inter-banking systems and communication networks. The Group, regardless of the aforementioned concerns, has completed the Financial reporting and going concern development work for implementation of 3D Secure and remains The Directors are responsible for the preparation of the Annual committed to this initiative in its bid to reduce its exposure to fraud. Financial Statements in a manner that fairly and accurately represents the state of affairs and results of the Group. The Directors are Competition responsible for adopting sound accounting practices, maintaining The Group supports and adheres to the relevant competition adequate accounting records, ensuring an effective system of internal laws applicable to it. No legal action for anti-competitive conduct, controls and for safeguarding of assets. The financial statements

Comair Limited 54 Integrated Annual Report 2015 of the Group have been prepared on the going concern basis and Role and function of the Board the Board is of the view that the Group has adequate resources The Board retains full and effective control of the Group and is to continue operating for the foreseeable future. accountable and responsible for the performance and affairs of the Group. All material resolutions have to be approved by the Board of Directors Board. The Board is accountable to all of the Group’s stakeholders for exercising leadership, integrity and judgment in pursuit of the Composition of the Board strategic goals and objectives of the Group. Formal requirements The Group has a unitary Board structure. The composition of the specifying the responsibilities of and type of conduct expected Board is set out on page 72. The roles of the Chairman and the Chief from the Directors, the Group Company Secretary, the Chairman Executive Officer (CEO) are separate. The Non-executive Directors, and the CEO are set out in the Group’s Board Charter, which is with a strong independent element, are of sufficient number to ensure reviewed annually. The Board’s primary functions include: that no single individual has unfettered power of decision-making and authority. As at 30 June 2015, the Board comprised eight • Determining the Group’s vision; independent Non-executive Directors, two Non-executive Directors • Determining and providing strategic direction to the Group; and four Executive Directors (including the alternate Directors) as • Adopting strategic plans and ensuring that same, through required in the Listings Requirements of the JSE. the Executive Directors, are communicated to the applicable management levels and further ensuring that the objectives, The Board is considered to be appropriately skilled with regard to as set out in the Strategic Plan, are met; its responsibilities and the activities of the Group and is involved • Approving and evaluating the Annual Business Plan in all material business decisions, enabling it to contribute to the and Budget compiled by management and monitoring strategic and general guidance of management and the business. Management on the implementation of the approved Annual Newly appointed Directors are informed of their fiduciary duties Budget and Annual Business Plan; and in this regard are provided with a Director’s Manual which • Approving the Group’s Financial Statements and interim contains guidelines regarding their duties and responsibilities as reports; Directors. The skills and experience profiles of the Board members • Appointing the CEO, who reports to the Board and ensuring are regularly reviewed to ensure an appropriate and relevant that succession is planned; Board composition. • Determining Director selection and evaluation; • Evaluating the viability of the Group on a going concern basis; Dealing in securities • Ensuring that the Group has appropriate risk management, The Group has a formal policy in place to ensure that the Directors internal control and regulatory compliance procedures in and Senior Management do not trade in the Group’s shares during place. It further identifies and continually reviews key risks price-sensitive or closed periods. In terms of the policy, closed as well as the mitigation thereof by management; periods commence from the last day of the financial year or the • Approving of major capital expenditure and significant last day of the end of the first six-month period of the financial year acquisitions and disposals; up to the day after the publication of the annual or interim results. • Monitoring non-financial aspects pertaining to the business Directors are required to obtain approval from the Chairman or a of the Group; designated Director before dealing in any securities. • Monitoring of compliance with laws, regulations and the Group’s Code of Ethics; Conflict of interest • Ensuring that the remuneration of Directors and Executive All Board members and the Group Company Secretary are required Managers occurs in accordance with the Group’s remuneration to disclose their shareholding in the Group, other directorships policy; and potential conflicts of interest. Where potential conflicts of • Identifying and managing potential conflicts of interest; interest exist, Directors are expected to recuse themselves from • Setting principles for recommending the use of external relevant discussions and decisions. In addition, employees within auditors for non-audit services; the Group are obliged to disclose any conflicts of interest. • Establishing Board committees with clear terms of reference and responsibility;

Comair Limited 55 Integrated Annual Report 2015 • Defining levels of authority and delegating required authority Retirement and re-election of Directors to the committees and management; Under the Group’s Memorandum of Incorporation (MOI), a third of the • Considering and, if appropriate, declaring payment of dividends Directors retire by rotation each year and are eligible for re-election by to shareholders; shareholders at the Annual General Meeting. Details of the Directors • Evaluating the effectiveness of the Board and its committees; retiring by rotation are set out in the Notice of Annual General Meeting. • Conducting an evaluation of the Group Company Secretary; The appointment of Directors is a function of the entire Board, based and on recommendations made by the Nominations Committee. • Ensuring the creation of sustainable shareholder value. Chairman To fulfil their responsibilities adequately, Board members and The Group’s Chairman, Mr P van Hoven, is an independent members of the sub-committees receive Board and sub-committee Non-executive Director. In addition to playing a key role within agendas ahead of any meeting. In addition, Directors have the Group, he provides guidance to the Board as a whole and unrestricted access to timely financial and other information relating ensures that the Board is efficient, focused and operates as a to the Group, as well as free access to Senior Management and unit. He acts as a facilitator at Board meetings to ensure a flow of the Group Company Secretary. During the financial year under opinions, and attempts to lead discussions to optimal outcomes review, the Board received presentations from various Senior in the interests of good governance. Executive Managers, enabling it to explore specific issues and developments in greater depth. The CEO Induction of new Directors and independent advice The CEO, who reports to the Board, is responsible for the running Newly appointed Directors are informed of their fiduciary duties of the day-to-day business of the Group and for the implementation by the Group Company Secretary. They also receive information of policies and strategies adopted by the Board. The Executive on the JSE Listings Requirements and the obligations therein Directors and Executive Managers of the various business units imposed upon Directors and are informed of any amendments and subsidiaries assist him in this task. to legislation and regulations.

Individual Directors may, after consulting with the Chairman or The Group Company Secretary the CEO, seek independent professional advice, at the expense The Group Company Secretary plays a pivotal role in the continuing of the Group, on any matter connected with the discharge of his/ effectiveness of the Board, ensuring that all Directors have full and her responsibilities as a Director. timely access to the information that helps them to perform their duties and obligations properly, and enables the Board to function effectively. Board evaluations The Board conducts informal evaluations of its performance. The Group Company Secretary is responsible for providing During the evaluation process, it identified improved sustainability guidance to the Board collectively and to the Directors individually management and governance of information technology as areas with regard to their duties, responsibilities and powers. requiring attention. The Group Company Secretary’s key duties with regard to the Board meetings and attendance Directors include, but are not limited to, the following: The Board meets at least four (4) times a year with the proviso that additional meetings could be called when certain important matters • Collating and distributing relevant information, such as arise and measures exist to accommodate resolutions that have corporate announcements, investor communications and to be approved between meetings. Details of attendance at Board any other developments affecting the Group or its operations; meetings are provided on page 72 of this Integrated Annual Report. • Inducting new Directors, including briefing them on their fiduciary and statutory duties and responsibilities (including those arising from the JSE Listings Requirements);

Comair Limited 56 Integrated Annual Report 2015 • Providing regular updates on effective and proposed Board committees changes to laws and regulations affecting the Group and/ The Board has created an Audit Committee, Risk Management or its businesses; and Committee, Nominations Committee, Remuneration Committee • Monitoring Directors’ dealings in securities and ensuring and a Social and Ethics Committee, as set out below, to enable it that prior approval to deal in securities is obtained from the to properly discharge its duties and responsibilities and to effectively Chairman or another designated Director. fulfil its decision-making process. The Board and its committees are supplied with relevant and timely information enabling them The Group Company Secretary reports to the CEO and has a to discharge their responsibilities. direct channel of communication to the Chairman. He meets with the Chairman before each Board and Annual General Meeting to While the Board remains accountable for the performance and affairs prepare for and discuss important issues. of the Group, it does delegate certain functions to the committees and management to assist it in carrying out its functions, duties He is responsible for the functions specified in Section 88 of the and responsibilities. The Chairman of each committee reports to Companies Act (Act No. 71 of 2008), as amended. All meetings the Board at each Board meeting. of shareholders, Directors and Board committees are properly recorded as per the requirements of the Act. The removal of the The Chairman of each committee, other than the Social and Ethics Group Company Secretary would be a matter for the Board as Committee, which has a Non-executive Director as its Chairman, is a whole. an independent Non-executive Director and is requested to attend the Group’s Annual General Meeting to answer any questions The Group Company Secretary is an alternate Director of the posed by shareholders. In addition, all members of the committees, Company, and a Director of some of the Group’s subsidiaries. other than the Social and Ethics Committee and Nominations The Board is of the opinion that, in view of the fact that the Committee, are independent Non-executive Directors. Group Company Secretary is an alternate Director of the Group, an arm’s length relationship may not be feasible. However, the The Board committees have specific terms of reference, appropriately Board annually evaluates the competency and effectiveness of skilled members, membership by Non-executive Directors who act the Company Secretary as required in terms of the JSE Listings independently, Executive Directors and Executive Management Requirements. The Board carried out a formal review of the participation and access to specialist advice when considered competence, qualification and experience of the Group Company necessary. Secretary during the period under review. The Board is satisfied that no conflict of interest exists in that, during the period under review, notwithstanding the fact that the Group Company Secretary Audit Committee is an alternate Director, he has served the Board purely in his The role of the Audit Committee is to review the Group’s financial capacity as Group Company Secretary and is not considered for position and make recommendations to the Board on all financial voting on Board resolutions. The Board is further satisfied that the matters and internal controls. The committee also reviews the Group Company Secretary is competent and has the requisite nature and extent of non-audit services provided by the external qualifications and experience to effectively execute his duties and auditors to ensure that the fees for such services do not become has done so during the period under review. so significant as to call into question their independence. The Chairman of the committee reports on the committee’s activities at each Board meeting. Executive Management

The Group’s Executive Management Committee meets on a regular The members of this committee are independent Non-executive basis to consider, inter alia, investment opportunities, operational, Directors. All members are financially literate and all possess financial and other aspects of strategic importance to the Group. substantial business and financial expertise and comply with Section Executive Managers have specific roles and responsibilities with 94 and Regulation 42 of the Companies Act. The committee meets specific reference to their authority levels. at least three (3) times per year. Both internal and external auditors have unrestricted access to the committee.

Comair Limited 57 Integrated Annual Report 2015 The Chairman of the Board, CEO, Financial Director, Chief Audit • Monitoring and evaluating the performance of the Financial Executive (CAE) and external auditors attend the Audit Committee Director; meetings by invitation. The committee held four (4) meetings • Identifying and evaluating exposure to financial risks; during the reporting period. • Evaluating the effectiveness of the internal auditing function, including its activities, scope and adequacy, and receiving Composition of the committee and meeting attendance and approving the Internal Audit Plan, internal audit reports

Membership Attendance and material changes to same; Chairman: • Evaluating procedures and systems including, but not limited Dr PJ Welgemoed 4/4 to, internal controls, disclosure controls and the internal audit Members: function; Mr KI Mampeule 3/4 • Considering legal matters which could financially affect the Ms WD Stander 2/4 Group; and Mr GJ Halliday 4/4 • Recommending principles for the use of external auditors Mr HR Brody 3/4 for non-audit services and ensuring that the fees for such services do not become so significant as to call into question The committee, amongst other things, identifies and evaluates the their independence. adequacy of internal controls and provides effective communication between Directors, management and the internal and external The committee’s report, describing how it discharges its statutory auditors. The responsibilities of the Audit Committee are contained duties and the additional duties assigned to it by the Board, is in a formal mandate from the Board (terms of reference) which is included in this Integrated Annual Report on pages 62 to 64. reviewed annually. Its main responsibilities include: Risk Management Committee • Performing the statutory functions of an Audit Committee The role of the Risk Management Committee is to review the in terms of the Companies Act (Act No. 71 of 2008), as risks facing the Group’s business and to ensure compliance amended, and other functions delegated by the Board; with all required legislation, regulations and codes affecting the • Reviewing and recommending to the Board for approval business. The members of this committee, who also serve as the Group’s Annual Integrated Report, interim reports and members of the Audit Committee, are independent Non-executive results announcement; Directors. The committee meets at least three (3) times per year. • Nominating and approving the terms of engagement and The Chairman of the Board, CEO, Financial Director, CAE and remuneration of registered auditors who, in the opinion of external auditors (where appropriate) attend committee meetings the committee, are independent of the Group, and ensuring by invitation. The committee held four (4) meetings during the that their appointment complies with the provisions of the reporting period. Companies Act, King III and other legislation relating to their appointment; Composition of the committee and meeting attendance • Reviewing and evaluating the effectiveness and performance Membership Attendance of the external auditors as well as the scope, adequacy and Chairman: costs of audits to be performed and report thereon to the Dr PJ Welgemoed 4/4 Board and shareholders; Members: • Evaluating and approving the external auditors’ plans, findings Mr KI Mampeule 3/4 and reports; Ms WD Stander 2/4 • Receiving and dealing appropriately with any concerns or Mr GJ Halliday 4/4 complaints, whether received internally or externally, dealing Mr HR Brody 3/4 with the Group’s accounting practices and internal audits, the Financial Statements, internal financial controls or related matters;

Comair Limited 58 Integrated Annual Report 2015 The main responsibilities of the Risk Management Committee Composition of the committee and meeting attendance are, amongst others, to: Membership Attendance Chairman: • Oversee the development and annual review of the Risk Mr P van Hoven 1/1 Management Policy and Plan for recommendation to the Members: Board for approval; Mr JM Kahn 1/1 • Monitor implementation of the Risk Management Policy and Mr KI Mampeule 1/1 the Plan; Mr MD Moritz 1/1 • Make recommendations to the Board concerning the levels of tolerance and appetite and ensure that risks are managed Amongst others, the main responsibilities of the Nomination within the levels of tolerance and appetite as approved by Committee are to: the Board; • Ensure that the Risk Management Plan is widely disseminated • Make recommendations on the appointment of new Executive throughout the Group and integrated in the day-to-day and Non-executive Directors; activities of the Group; • Make recommendations on the composition of the Board • Ensure that risk management assessments are performed generally and the balance between Executive and Non- on a continuous basis; executive Directors; • Ensure that frameworks and methodologies are implemented • Review plans for succession and ensure their adequacy, for to increase the possibility of anticipating unpredictable risks; the Chairman, the CEO and Executive Directors; • Ensure that management considers and implements appropriate • Review the Board structure, size and composition and make risk responses; recommendations with regard to any adjustments deemed • Liaise closely with the Audit Committee to exchange information necessary; and relevant to risk; • Ensure that Board appointment policies and procedures • Review reports concerning risk management that are to are formal and transparent and a matter for the Board as a be included in the Integrated Report to ensure that such whole, and that such appointment policies and procedures reporting is timely, comprehensive and relevant; are reviewed and updated when necessary. • Evaluate procedures and systems introduced including, without limitation, the Company’s information technology Remuneration Committee systems. The members of this committee are all independent Non-executive Directors. The CEO attends meetings by invitation only and is For more information regarding the Group’s risk management and not entitled to vote. The CEO does not participate in discussions the material issues facing it that have been identified as a result regarding his own remuneration. The committee met twice during of its risk management procedures, refer to the internal control the financial year under review. The composition of the committee and risk management report on pages 19 to 23. and attendance at meetings is set out below.

Nominations Committee Composition of the committee and meeting attendance

The members of this committee are all Non-executive Directors Membership Attendance who act independently. Chairman: Mr JM Kahn 2/2 This committee, as well as the Remuneration Committee, considers Members: the issue of succession planning at Board and Executive Management Mr RC Sacks 1/2 level. The CEO, in consultation with the Board Chairman and Mr P van Hoven 2/2 Remuneration and Nominations committees, is responsible for Ms WD Stander 1/2 ensuring that adequate succession plans are in place. The remuneration policy and the execution thereof is the responsibility The committee met once during the financial year under review. of the Remuneration Committee. The composition of the committee and attendance at meetings are set out below.

Comair Limited 59 Integrated Annual Report 2015 The fees for Non-executive Directors and the remuneration The main responsibilities of the Social and Ethics Committee are, packages of Executive Directors for the financial year under amongst others, to: review are disclosed in the Remuneration report on page 67 of this Integrated Annual Report. As recommended by King III, the • Assist the Board in ensuring that the Group is compliant with Group’s Remuneration Policy was approved by its shareholders all legislation and other requirements relating to social and at its last Annual General Meeting, held on 5 November 2014, by economic development and remains a good corporate citizen way of a non-binding advisory vote. by monitoring the sustainable development performance of the Group; and Amongst other things, the main responsibilities of the Remuneration • Perform the statutory functions of a Social and Ethics Committee are to: Committee in terms of the Companies Act (No. 71 of 2008), as amended and other functions delegated to it by the Board. • Determine the Group’s general policy on remuneration as well as specific policies in respect of Executive Directors’ The committee’s report, describing how it discharged its statutory and Executive Managers’ remuneration; duties, is included in this Integrated Report on pages 68 to 69. • Review and determine remuneration packages for Executive Directors and Executive Management, including but not limited Discharge of responsibilities to basic salary, annual bonuses, benefits, performance-based The Board is of the view that the committees discharged their incentives and Share Incentive Scheme awards; responsibilities for the financial year under review in compliance • Annually appraise the performance of the CEO; with their terms of reference. • Annually review the general level of remuneration of the Directors of the Board, as well as its committees and recommend proposals in this respect for approval by shareholders at Internal control the Annual General Meeting; and Internal control systems • Make recommendations in respect of awards from the Comair The Board has responsibility for ensuring that the Group implements Share Incentive Scheme. and monitors the effectiveness of its systems of internal control. The identification of risk and the implementation and monitoring of adequate Social and Ethics Committee systems of internal control to manage both financial and operational The role and responsibilities of the committee are codified in a risk are delegated to the CAE, who in turn makes recommendations mandate from the Board (terms of reference), which is reviewed to Executive Management as well as the Audit Committee. annually. The members of this committee consist of independent Non-executive Directors, Executive Directors and Senior Executives While all internal control systems do have inherent shortcomings, the of the Group, who are suitably experienced. The Chairman of Group’s internal control system is designed to provide reasonable the Board, Financial Director, CAE, representatives from other assurance as to the reliability of financial information, in particular the assurance providers, professional advisors and Board members Financial Statements, as well as to safeguard, verify and maintain are entitled to attend committee meetings. The committee met accountability of its assets and to detect fraud and potential liability, four times during the period under review. The composition of the while complying with applicable laws and regulations. committee and attendance at meetings is set out below. The Group’s external auditors consider the internal control systems Composition of the committee and meeting attendance of the Group as part of their audit, and advise of deficiencies Membership Attendance when identified. Chairman: Mr MD Moritz 4/4 Members: Internal audit Mr ER Venter 4/4 Mr DH Borer 4/4 The internal audit function is an independent appraisal mechanism Mr KI Mampeule 4/4 which evaluates the effectiveness of the applicable operational activities, Ms KV Gorringe 4/4 the attendant business risks and the systems of internal control, Ms EA Liebetrau 4/4 so as to bring material deficiencies, instances of non-compliance Ms WD Stander 2/4 and development needs to the attention of the Audit Committee,

Comair Limited 60 Integrated Annual Report 2015 external auditors and operational management for resolution. The scope of the external audit, and any other audit matters that may CAE co-ordinates with the external auditors so as to ensure proper arise. The external auditors attend Audit and Risk Committee coverage and minimise duplication of effort. Internal audit plans meetings and have unrestricted access to the Chairmen of the are tabled at the Audit Committee meetings and follow up audits committees. The Audit Committee is responsible for nominating are concluded in areas where weakness is identified. The Internal the Company’s external auditors and determining the terms Audit Plan, approved by the Audit Committee, is based on risk of engagement. assessments which are of a continuous nature, so as to identify not only existing and residual risk, but also emerging risks and issues Investor relations highlighted by the committee and Senior Executive Management. The Board is committed to keeping shareholders and the investor External audit community informed of developments in the Group’s business. For further information in this regard, please refer to the Sustainable The independence of the external auditors is recognised. The Development Report. Audit Committee meets with external auditors to review the

Summarised King III checklist

Comair Limted – 1967/006783/06 IoDSA GAI score Applied/partially applied/not applied + Chapter 1: Ethical leadership and corporate citizenship AAA Applied + Chapter 2: Board and directors AAA Applied + Chapter 3: Audit committees AAA Applied + Chapter 4: The governance of risk AAA Partially not applied + Chapter 5: The governance of information technology AAA Applied + Chapter 6: Compliance with laws, rules, codes and standards AAA Applied + Chapter 7: Internal audit AAA Applied + Chapter 8: Governing stakeholder relationships AA Partially not applied + Chapter 9: Integrated reporting and disclosure AAA Applied Overall score AAA

Key: AAA – Highest application AA – High application BB – Notable application B – Moderate application C – Application to be improved L – Low application

The full King III Application Register appears on the Group website at www.comair.co.za

Comair Limited 61 Integrated Annual Report 2015 Audit Committee report

This report is presented by the Group’s Audit Committee, committee members at its Annual General Meeting to be held approved by the Board and the shareholders, in respect of the on 3 December 2015. financial year ended 30 June 2015. It is prepared in accordance with the recommendations of King III and the requirements of the Role and function of the committee Companies Act (Act No. 71 of 2008), as amended, and describes how the committee has discharged its statutory duties in terms The roles and functions of the committee, including its statutory of the Companies Act and the additional duties assigned to it by duties, are set out in the Corporate Governance Report on pages the Board in respect of the financial year ended 30 June 2015. 57 to 58 of this Integrated Annual Report.

Audit Committee mandate The committee is satisfied that it has fulfilled all its statutory duties, including those prescribed by the Companies Act and The committee has adopted a formal mandate setting out its those assigned to it by the Board during the financial year under responsibilities and functioning, that has been approved by the Board review. In addition, the committee did not receive or deal with and which is reviewed annually. The committee has conducted its any concerns related to matters listed in Section 94(7)(g)(i)–(iv) affairs in compliance with this mandate and is satisfied that it has of the Companies Act. fulfilled all its statutory duties and duties assigned to it by the Board during the financial year under review as further detailed below. External audit

Composition and meetings The committee has, during the period under review, nominated external auditors, Grant Thornton Johannesburg Partnership The committee consists of five (5) independent Non-executive (GT), approved its fee and determined its terms of engagement. Directors and meets at least three (3) times per annum. The appointment will be presented to shareholders of the Group at the Annual General Meeting for approval. The committee has The Chairman of the Board, CEO, Financial Director, Chief Audit further satisfied itself that GT is accredited and appears on the Executive (CAE) and external auditor attend committee meetings JSE’s List of Accredited Auditors and that the designated auditor, by invitation. Theunis Schoeman, is not disqualified from acting as such. The committee has further satisfied itself that the external auditors, During the year the committee held four (4) meetings. GT, are independent of the Group as contemplated in Sections 90(2)(b), (c) and 94(8) of the Companies Act. Committee members, qualifications and meeting attendance

Date of A formal policy governs the process whereby the external auditors Name appointment Qualifications Attendance are considered for non-audit-related services. The committee Dr PJ Welgemoed 28/03/1996 BCom (Hons), 4/4 approved the terms of the policy for the provision of non-audit MCom, DCom services by the external auditors and approved the nature and Mr KI Mampeule 05/09/2005 BA, MSc, MBA 3/4 extent of non-audit services that the external auditors may provide. Ms WD Stander 15/09/2008 BA (Hons), 2/4 MBA During the period under review, the external auditors did provide Mr GJ Halliday 06/06/2013 BA (Hons), 4/4 non-audit services to the Group, namely in the form of tax advice MBA and assurance on selected information in this Integrated Annual Mr HR Brody 09/06/2014 BAcc (Hons) 3/4 Report and they attended to the Group’s verification audit on its B-BBEE scorecard. The use of the external auditors for such The Board re-appointed the committee members, which services was pre-approved by the committee. appointments are subject to the shareholders re-electing the

Comair Limited 62 Integrated Annual Report 2015 Internal financial control details of the Company’s risk management function can be found in the Corporate Governance and the Internal Control and Risk The committee is responsible for assessing the Group’s system of Management reports. internal financial control, has considered reports from the internal and external auditors and has satisfied itself with the adequacy and The committee is satisfied that the system as well as the process effectiveness of the Group’s system of internal financial control. of risk management is effective.

Expertise and experience of the Financial Financial Statements Director and finance function The committee has reviewed the financial statements of the The committee performed a review of the Financial Director Group and is satisfied that they comply with International Financial and the finance function and is satisfied with the expertise and Reporting Standards. experience of the Financial Director and the appropriateness of the finance function. Compliance Internal audit The committee is responsible for reviewing any major breach of relevant legal, regulatory and other responsibilities. The committee is Internal audit forms an integral part of the Group’s risk management satisfied that there has been no material non-compliance with laws process and system of internal control. The committee is satisfied and regulations during the period under review. Notwithstanding with the independence, quality and scope of the internal audit the foregoing, a company known as Safair Operations Proprietary function. Mr Sean Percival Miller was appointed as CAE, and Limited submitted a complaint to the Domestic Air Services has developed a sound working relationship with the committee Licensing Council on the grounds that the Company’s foreign in that he: shareholding component does not comply with the provisions of the Air Services Licensing Act (No. 83 of 1995). The council, • Provides an objective set of eyes and ears across the Group; subsequent to a meeting held on 10 July 2015, issued a notice • Provides assurance and awareness on risks and controls requesting the Group to explain within a period of 120 days some of specific to the Group and the industry in which he is involved; its shareholding information and to provide additional shareholding • Has positioned himself as a trusted strategic adviser to the documentation. The Group is seeking to satisfy the requirements committee; of council and to resolve this matter in an amicable way. • Confirms to the committee at least once a year the independence of the internal audit function; and • Communicates regularly with the committee Chairman. Going concern The committee, based on an assessment received from Executive Further details of the Group’s internal audit function are contained Management, is of the view that the Group will be a going concern in the Corporate Governance Report on pages 60 to 61. The for the foreseeable future. committee has considered and recommended the Internal Audit Charter for approval by the Board. The CAE’s Annual Audit Plan was approved by the committee. Duties assigned by the Board The committee fulfils an oversight role over the Group’s Integrated Risk management Annual Report and the reporting process, including the system of internal financial control. It is responsible for ensuring that the internal The Board has assigned oversight over the Group’s risk management audit function is independent and has the necessary resources, function to the Risk Management Committee. The members of standing and authority to enable it to effectively discharge its the Audit Committee are also members of the Risk Management duties. The committee also oversees co-operation between the Committee. The committee fulfils an oversight role over financial internal and external auditors, and serves as a link between the reporting risks, internal financial controls and fraud risk as it relates Board and their functions. to financial reporting and safety and security issues. Further

Comair Limited 63 Integrated Annual Report 2015 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 GT, an external independent assurance provider, to perform an assurance engagement with the purpose of expressing a limited assurance opinion in terms of ISAE 3000 on whether selected key performance indicators and specific disclosures, as contained in the Integrated Annual Report, have been fairly stated and meet reasonable reporting expectations. The assurance statement can be accessed via the Company’s website, www.comair.co.za.

The committee has considered the Group’s sustainability information, as disclosed in the Integrated Annual Report, and has assessed its consistency with operational and other information known to committee members and for consistency with the Annual Financial Statements. The committee is satisfied that the sustainability information is reliable and consistent with the financial results.

Recommendation of this Integrated Annual Report for Board approval

The committee recommended this Integrated Annual Report for approval by the Board.

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 20 October 2015

Comair Limited 64 Integrated Annual Report 2015 Remuneration report

The Group has a dedicated Board Committee that, inter alia, Remuneration structures determines the governance of remuneration matters, the Group’s Management remuneration structures comprise fixed and variable remuneration philosophy, remuneration of Executive Directors and components: Senior Managers, as well as the compensation of Non-executive Directors, which is ultimately approved by the shareholders. • Fixed pay: base salary and benefits; and • Variable pay: short-term merit bonus and a long-term Detail on the mandate, composition and attendance of meetings executive incentive scheme based on Group profits before held by the Remuneration and Nominations committees are set tax and the Group’s share price performance (payable every out in the Corporate Governance Report. three years).

Remuneration approach Fixed pay

The Group’s remuneration policy aims to ensure that it remunerates Base salary Directors and Senior Managers in a manner that supports the Market data is used to benchmark individual salary levels for achievements of its strategic objectives, while attracting and Directors and Senior Managers. This information, combined with retaining scarce skills and rewarding high levels of performance. the individual’s performance assessment, is the key consideration The remuneration offered by the Group needs to be competitive for the annual salary reviews. in order to attract, retain and incentivise high calibre staff. Retirement benefits The remuneration philosophy is based on the following principles: The Group offers membership to a defined contribution pension fund to all permanent employees in South Africa. This fund is • Affordability; part of an umbrella arrangement known as the Superfund and is • Internal fairness; and administered by Old Mutual. • External fairness. Other benefits The remuneration approach that furthermore guides the level This includes benefits, such as medical aid, risk benefits insurance of salaries of all Directors and Senior Management is aimed at: (i.e. death and disability), to permanent employees in South Africa, and leave. • Ensuring that no discrimination occurs; • Recognising exceptional and value-adding performance; Pilots • Encouraging team performance and participation; th • Promoting cost-effectiveness and efficiency; and Pilots are currently guaranteed a 13 cheque. • Achieving the strategic objectives of the Group. Variable pay In order to balance external equity with affordability and to Short-term incentives ensure that market-related salaries are offered to staff, the Group Executive Directors and Senior Managers participate in a short-term participates in several salary surveys and uses that information cash-based management incentive scheme. Payment in terms for benchmarking purposes. of the short-term incentive scheme depends on the achievement against key performance criterion, namely, profit after tax and is subject to three (3) components:

Comair Limited 65 Integrated Annual Report 2015 • Achievement by the qualifying employee of key performance Executive Directors’ remuneration indicators (40%); Remuneration of Executive Directors is compared to the market • Group profit performance (40)%; and for comparable roles in companies of a similar size. • 20% of the bonus is payable at the discretion of the Board.

The annual bonus payable to Executive Directors in terms of the The payment of any short-term incentive to Executive Directors short-term management incentive scheme is limited to 100% of and Senior Managers is subject to Board approval. their annual base salary.

Employees who do not participate in the short-term incentive The long-term incentive scheme came to fruition with both the scheme would be entitled to a 13th cheque or a portion thereof profit-linked and share price-linked components having been met, based on personal performance and company affordability and and the incentive associated therewith was paid to Executive a discretionary amount based on the Group’s performance. This Directors and designated Senior Managers still in the employ of does not apply to pilots, who are guaranteed a 13th cheque. the Group as at 30 September 2015.

Long-term incentive scheme Executive Directors have standard service contracts with no fixed (1 December 2012–30 September 2015) duration, no restraint and with a one-month notice period. Executive Directors and designated Senior Managers who were in the employ of the Group on or prior to 31 December 2012 Details of the remuneration of individual Executive and Non- and who are still in the employ of the Group as at 30 September executive Directors are set out in the Report of the Directors on 2015, participate in the long-term executive incentive scheme. pages 73 to 74.

The purpose of the scheme is to retain talent and to reward Non-executive Directors’ remuneration participants of the scheme based on the Group’s performance. Non-executive Directors do not receive any benefits or share It comprises two components: options from the Group, apart from Directors’ fees, which fees were approved by shareholders at the Group’s Annual General • Profit-linked component (35%): In terms of this component Meeting on 5 November 2014. The Non-executive Directors of the scheme, 7% of the aggregated headline profits before fees for the year ended 30 June 2015 are included in the joint tax (excluding profits from damages awards and profits remuneration payable to the Group’s Non-executive Directors, as from new business ventures that are not managed by the indicated in Special Resolution Number 1 in the Notice of Annual participants), made by the Group during the 2013, 2014 and General Meeting to be held on 3 December 2015. 2015 financial years in excess of R250 million, but capped to a maximum of R17.5 million, would be allocated to participants The Directors’ fees per meeting, for the financial years ended in the scheme in proportion to their basic salary versus the 30 June 2014 and 30 June 2015, as well as the proposed fee per combined basic salary of the participants in the scheme; and meeting for the financial year ending 30 June 2016, are set out in • Share price-linked component (65%): This component is based the table below. Members of the committees are also remunerated on the trade weighted average share price of the Group for for their participation in these committees. the six months to 30 June 2015, with the bonus payable to participants being the difference between the Group share price as determined on 30 June 2015 and a share price of R1.50, but capped to a maximum of R32.5 million.

Comair Limited 66 Integrated Annual Report 2015 Directors’ fees

Approved annual fee for the Approved annual fee for the Proposed annual fee for the year ended 30 June 2014 year ended 30 June 2015 year ended 30 June 2016 Chairperson: Board 1 200 000 1 280 000 1 348 200 Vice-Chairperson: Board 350 000 374 500 393 225 Member: Board 150 000 160 500 168,525

Approved fee per meeting Approved fee per meeting for the year ended for the year ended Proposed fee per meeting for 30 June 2014 30 June 2015 the year ended 30 June 2016 Chairperson: Audit Committee 13 000 13 910 14 606 Member: Audit Committee 6 500 6 955 7 303 Chairperson: Risk Committee 13 000 13 910 14 606 Member: Risk Committee 6 500 6 955 7 303 Chairperson: Nominations Committee 13 000 13 910 14 606 Member: Nominations Committee 6 500 6 955 7 303 Chairperson: Social and Ethics Committee 13 000 13 910 14 606 Member: Social and Ethics Committee 6 500 6 955 7 303 Chairperson: Remuneration Committee 13 000 13 910 14 606 Member: Remuneration Committee 6 500 6 955 7 303 Chairperson: Pension Fund 13 000 13 910 14 606

Comair Limited 67 Integrated Annual Report 2015 Social and Ethics Committee report

The Social and Ethics Committee assists the Board in ensuring that The committee’s monitoring role includes the monitoring of the Group is and remains a good and responsible corporate citizen relevant legislation, other legal requirements or prevailing codes by monitoring the Group’s sustainable development performance, of good practice, specifically with regard to matters relating to and performing the statutory functions required of a Social and social and economic development, good corporate citizenship, Ethics Committee in terms of the Companies Act (Act No.71 of the environment, health and public safety as well as labour 2008), as amended, as well as the additional functions assigned and employment. to it by the Board. The responsibilities and functioning of the committee are governed by a formal mandate approved by and The committee is further responsible for annually reviewing, in subject to annual review by the Board. The committee is satisfied conjunction with Executive Management, the Group’s material that it has fulfilled all its statutory duties, as well as those duties sustainability issues. The committee must also review and approve assigned to it by the Board during the financial year under review. the sustainability content included in this Integrated Annual Report.

The composition and number of meetings held or to be held by During the past financial year, the following reports relating to the committee is set out in the Group’s Corporate Governance the committee’s functions were produced by management and Report in this Integrated Annual Report on page 60. reviewed by the committee:

The committee is responsible for developing and reviewing the • The Group’s standing with respect to consumer relations Group’s policies with regard to social and economic development, and compliance with consumer protection laws; good corporate citizenship and reporting on the Group’s sustainable • The Group’s compliance with applicable advertising and development performance and for making recommendations to marketing laws; and the Board and/or management on matters within its mandate. • The Group’s record of sponsorship, donations and charitable giving. The committee performs a monitoring role in respect of the • The Group’s B-BBEE audit and status. sustainable development performance of the Group relating, amongst others, to: Each of the above-mentioned reports was analysed in depth and in one case, namely in the area of donations and charitable giving, • Environmental, health and public safety, which includes management was requested to identify one particular charitable occupational health and safety; cause with whom an ongoing relationship could be created. This • Broad-based black economic empowerment and employment resulted in the Group concluding an arrangement with the Red equity; Cross War Memorial Children’s Hospital in Cape Town in terms of • Labour relations and working conditions; which the Group is providing free travel to patients at the hospital • Consumer relationships (advertising, public relations and and made a donation of R500 000 during the current financial compliance with consumer protection laws); year to assist with the construction of new accommodation for • Training and skills development of the Group’s employees; family visiting or staying over with patients. This relationship with • Management of the Group’s environmental impacts; the Red Cross War Memorial Children’s Hospital is expected • Ethics and compliance; and to continue into the future. All the reports were subsequently • Corporate social investment. also approved by the Board, upon the recommendation of the committee. The committee is satisfied with the Group’s standing The committee is satisfied with the Group’s performance in each in the areas reviewed and that the current level of combined of the areas listed above and as further reported in the Sustainable assurance provides the necessary independent assurance over Development Report of this Integrated Annual Report. the quality and reliability of the information presented.

Comair Limited 68 Integrated Annual Report 2015 The committee is required to report through one of its members to the Group’s shareholders on matters within its mandate at the Group’s Annual General Meeting. Shareholders will be referred to this report, read together with the Sustainable Development Report, at the Annual General Meeting on 3 December 2015.

MD Moritz Chairman: Social and Ethics Committee 20 October 2015

Comair Limited 69 Integrated Annual Report 2015 Report of the Directors

The Directors take pleasure in presenting their report, which forms In accordance with the provisions of Strate, the electronic settlement part of the Annual Financial Statements of the Group for the year and custody system used by the JSE Limited, the relevant dates ended 30 June 2015. for the dividend are as follows:

Nature of business Event Date Last day to trade (cum dividend) Friday, 16 October 2015 The main business of the Group is the provision of domestic and Shares commence trading (ex dividend) Monday, 19 October 2015 regional air services in the Southern African market, trading under Record date (date shareholders Friday, 23 October 2015 recorded in books) the names of British Airways and kulula. In addition to the foregoing, Payment date Monday, 26 October 2015 the Group provides other travel-related services, undertakes third party flight simulator and crew training, operates airline lounges Share certificates may not be dematerialised or rematerialised and currently provides airline catering for its own services, as well between Monday,19 October 2015 and Friday, 23 October 2015, as limited third party catering. both days inclusive.

General review of main activities Share capital The Group currently operates a fleet of 25 aircraft flying to the The authorised share capital of the Group remained unchanged destinations as set out on page 5 of this Integrated Annual Report. during the reporting period. The Directors have performed the solvency and liquidity test required by the Companies Act, the outcome of which is that the Group is a going concern with adequate resources to continue BEE scheme operating for the foreseeable future. During the period under review, the Group finalised and wound up its BEE transaction with Thelo Aviation Consortium Proprietary Limited, Financial results details of which scheme were set out in a Circular to Shareholders dated 23 August 2006 and approved by shareholders by way Full details of the financial results are set out on pages 78 to 124 of a special resolution in September 2006. As part of the BEE of this Integrated Annual Report for the year ended 30 June 2015. transaction, the Company, with the approval of the JSE, converted 29 067 766 ‘A’ class shares to ordinary shares to Thelo Aviation Dividends Consortium Proprietary Limited, from its authorised share capital.

Notice is hereby given that a gross cash dividend of 10 cents per ordinary share has been declared payable to shareholders. The Share buy-back and issues for cash dividend has been declared out of income reserves. Other than the issue of ordinary shares mentioned above, the Group did not buy-back nor issue any ordinary shares for cash The dividend will be subject to a local dividend tax rate of 15% during the period under review. or 1.5 cents per ordinary share, resulting in a net dividend of 8.5 cents per ordinary share, unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of the Issued share capital applicable double tax agreement. The Company’s tax reference Following the winding up of the BEE transaction, as mentioned number is 9281/874/7/1/0 and the number of ordinary shares in above, the Group’s issued share capital has increased from issue at the date of this declaration is 469 330 865. 440 263 099 ordinary shares of 1 cents each to 469 330 865 ordinary shares of 1 cents each.

Comair Limited 70 Integrated Annual Report 2015 Subsidiaries and associates There has been a change in the Directors’ interests in share capital from 30 June 2015 to the date of posting of this Integrated Details of the Group’s subsidiaries and associates are recorded in Annual Report, in that Mr MN Louw purchased 89 268 Comair notes 5 and 7 of this Integrated Annual Report on pages 96 to 100. ordinary shares on 22 September 2015, taking his direct beneficial holdings to 201 000 ordinary shares, and Mr ER Venter purchased Subsequent events 968 271 Comair ordinary shares on 2 October 2015, taking his direct beneficial holdings to 2 500 154 ordinary shares. 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.

Directors’ interest in share capital

The following Directors of the Group held direct and indirect interests in the issued share capital of the Group at 30 June 2015 as set out below.

2015 2014 Direct Indirect Held by Total Direct Indirect Held by Total Director beneficial beneficial associates shares % beneficial beneficial associates shares % Mr MD Moritz - 50 000 000 9 462 50 009 462 10.66 - 50 000 000 9 462 50 009 462 11.35 Mr P van Hoven 204 647 - - 204 647 0.04 204 647 - - 204 647 0.05 Mr ER Venter 1 531 883 - - 1 531 883 0.33 1 531 883 - - 1 531 883 0.35 Mr MN Louw 111 732 - - 111 732 0.03 111 732 - - 111 732 0.03 Dr PJ Welgemoed 118 788 - - 118 788 0 03 118 788 - - 118 788 0.03 Mr DH Borer* 88 000 - - 88 000 0 02 188 000 - - 188 000 0.04 Total 2 055 050 50 000 000 9 462 52 064 512 11.09 2 155 050 50 000 000 9 462 52 164 512 11.85 * Alternate Director Note: The difference in the percentage shareholding is as a result of the increase in the Group’s issued share capital, other than in respect of Directors who disposed of their share capital during the period under review.

Special resolutions Other than the aforementioned, no other special resolutions were passed. Since its last annual report, the Group passed four (4) special resolutions at its Annual General Meeting, held on 5 November 2014, As required in terms of Section 8.63(i) of the JSE Listings Requirements, namely: no special resolutions were passed by the Group’s subsidiaries relating to borrowing powers, the object clause contained in • A special resolution for approval of Non-executive Directors’ the MOI or other material matters that affect the Group and the remuneration for 2013/14; subsidiaries for the period under review. • A special resolution for the approval of Non-executive Directors’ remuneration for 2014/15; • A special resolution giving the Group a general authority to Board of Directors, Company Secretary and re-purchase its shares; and Board meeting attendance • A special resolution as contemplated in Section 45(3)(a)(ii) The names, ages, qualifications, nationality, business addresses, of the Companies Act, i.e. a general authority to provide attendance at Board meetings and occupations of the Directors financial assistance to related and interrelated companies and the Group Company Secretary who served during the period or corporations. under review, are set out below. Four Board meetings were held during the period under review.

Comair Limited 71 Integrated Annual Report 2015 Name, age, qualification, gender Meeting and race Nationality Business address attendance Occupation Mr P van Hoven South African 1 Marignane Drive, Bonaero Park, 4/4 Independent Age: 71 (M) (W) Kempton Park, 1619 Non-executive Chairman Mr MD Moritz South African 1 Marignane Drive, Bonaero Park, 4/4 Non-executive Joint Deputy Age: 70 (M) (W) Kempton Park, 1619 Chairman (BCom, LLB) Mr RC Sacks South African 550 Monica Circle, Suite 201, Corona, 1/4 Independent Age: 65 (M) (W) CA 92880, USA Non-executive Director (HDip Law, HDip Tax) Dr PJ Welgemoed South African 1 Marignane Drive, Bonaero Park, 4/4 Independent Age: 72 (M) (W) Kempton Park, 1619 Non-executive Director (BCom (Hons), MCom, DCom) Mr JM Kahn South African Retired Chairman of SABMiller plc, 4/4 Independent Age: 76 (M) (W) 4 East Road, Morningside 2057 Non-executive Director (BA Law, MBA (UP), DCom (hc), SOE) Mr MN Louw South African 1 Marignane Drive, Bonaero Park, 3/4 Director: Operations Age: 60 (M) (W) Kempton Park, 1619 (BMil) Mr ER Venter South African 1 Marignane Drive, Bonaero Park, 4/4 CEO Age: 45 (M) (W) Kempton Park, 1619 (BCom, CA(SA)) Mr KI Mampeule South African C/o Lefa Group Holdings Proprietary 4/4 Independent Age: 50 (M) (B) Limited, Mulberry Hill Office Park, Non-executive Director (BA, MSc, MBA) Broad Acres Ave, Dainfern, 2191 Mr RS Ntuli South African Thelo Group Proprietary Limited, Ground 4/4 Non-executive Joint Deputy Age: 45 (M) (B) Floor, Block 9, St. Andrews Inanda Chairman (LLB (Edinburgh University)) Greens Business Park, 54 Wierda Road West, Wierda Valley, 2196 Ms WD Stander South African 272 Kent Avenue, Randburg, 2194 2/4 Independent Age: 49 (F) (B) Non-executive Director (BA (Hons) MBA) Mr GJ Halliday British British Airways plc, Waterside (HAA2)), 4/4 Independent Age: 51 (M) (W) Harmondsworth, Middlesex UB7 OGB, Non-executive Director (BA Hons Economics, Geography UK MBA (Lancaster University)) Mr HR Brody South African 79 Boeing Road, East Bedfordview, 3/4 Independent Age: 51 (M) (W) Gauteng, 2007 Non-executive Director (BAcc (Hons)) Ms KE King South African 1 Marignane Drive, Bonaero Park, 4/4 Financial Director Age: 37 (F) (W) Kempton Park, 1619 (BCom (Hons) Accounting (CTA Equivalent), CA(SA)) Mr DH Borer South African 1 Marignane Drive, Bonaero Park, 4/4 Alternate Director to MN Louw Age: 53 (M) (W) Kempton Park, 1619 and RC Sacks, and Group (BCom, LLB) Company Secretary Key: M = Male F = Female W = White B = Black, Coloured or Indian Directors appointments and resignations a) No Directors were appointed, nor did any resign during the period under review. b) After the year end the following Directors were appointed and one resigned: 1. Mr Li Neng was appointed as a Non-executive Director on 1 August 2015; 2. Mr Luo Cheng was appointed as a Non-executive Director on 1 August 2015; 3. Mr Naran Maharajh was appointed as an independent Non-executive Director on 1 August 2015; 4. Ms Phuti Mahanyele was appointed as an independent Non-executive Director on 1 August 2015; 5. Mr Hurbert Rene Brody resigned as an independent Non-executive Director on 20 October 2015.

Comair Limited 72 Integrated Annual Report 2015 Share incentive scheme

Executive Directors participate in a share incentive scheme with no allocations made or options exercised during the financial year in question.

No share options were issued to employees through the share incentive scheme during the year, and 4 985 798 options remain available for issue at year end. There were share options exercised by employees during the previous reporting period, with the transfers effected during this reporting period.

Directors’ remuneration

Directors’ remuneration 2015

Share- For Related Group based Services as Committee Performance- Life and Payments Total Directors Work Package1 related2 Pension Disability Medical as per IFRS 2015 Name R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Executives Mr ER Venter - - 2 727 2 809 385 75 42 - 6 038 Mr MN Louw - - 1 990 1 602 264 51 38 - 3 945 Mr DH Borer - - 1 538 1 233 195 38 42 - 3 046 Ms Kirsten King - - 1 347 1 202 117 22 21 - 2 709 Sub-total - - 7 602 6 846 961 186 143 - 15 738

Non-executives Mr MD Moritz 375 63 ------438 Mr RS Ntuli 375 ------375 Dr PJ Welgemoed 161 111 ------272 Mr JM Kahn 161 35 ------196 Mr KI Mampeule 161 77 ------238 Mr P van Hoven 1 284 56 ------1 340 Mr HR Brody 161 42 ------203 Sub-total 2 678 384 ------3 062 Share-based - - - - - 10 834 10 834 payment Total 2 678 384 7 602 6 846 961 186 143 10 834 29 634 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 allowance (2) ‘Performance-related’ refers to the incentive rewards in respect of the financial year ended 30 June 2015 (3) Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares

Comair Limited 73 Integrated Annual Report 2015 Directors’ remuneration 2014

Share- For Related Group based Services as Committee Performance- Life and Payments Total Directors Work Package1 related2 Pension Disability Medical as per IFRS 2014 Name R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Executives Mr ER Venter - - 2 525 3 500 342 67 38 - 6 472 Mr MN Louw - - 1 858 1 872 235 46 35 - 4 046 Mr RY Sri Chandana - - 988 - 90 17 20 - 1 115 Mr DH Borer - - 1 430 1 423 174 34 38 - 3 099 Ms KE King - - 50 158 7 3 3 - 221 Sub-total - - 6 851 6 953 848 167 134 - 14 953

Non-executives Mr MD Moritz 350 59 ------409 Mr RS Ntuli 350 ------350 Dr PJ Welgemoed 150 65 ------215 Mr JM Kahn 150 20 ------170 Mr KI Mampeule 150 72 ------222 Mr P van Hoven 1 200 39 ------1 239 Ms WD Stander ------Mr HR Brody 75 ------75 Sub-total 2 425 255 ------2 680 Share-based ------17 416 17 416 payment Total 2 425 255 6 851 6 953 848 164 134 17 416 35 049

Notes: (1) ‘Package’ includes the following regular payments made in respect of the financial year while actively employed: cash salary, S&T allowances and vehicle allowance (2) ‘Performance-related’ refers to the incentive rewards in respect of the financial year ended 30 June 2014 (3) Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares

Further details regarding the Company’s remuneration policies are set out in the Remuneration report, which can be found on pages 65 to 67 of this Integrated Annual Report.

Comair Limited 74 Integrated Annual Report 2015 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 78 to 124 have been prepared in accordance with International Financial Reports Standards (IFRS) and the requirements of the Companies Act, 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, Grant Thornton Johannesburg Partnership, 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 78 to 124 were approved by the Board of Directors on 20 October 2015 and signed on its behalf.

ER Venter P van Hoven CEO Chairman 20 October 2015 20 October 2015

Comair Limited 75 Integrated Annual Report 2015 Certificate of Company Secretary

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

Mr DH Borer Company Secretary 20 October 2015

Comair Limited 76 Integrated Annual Report 2015 Independent Auditor’s report

We have audited the consolidated and separate financial statements We believe that the audit evidence we have obtained is sufficient of Comair Limited set out on pages 78 to 124, which comprise and appropriate to provide a basis for our audit opinion. the statements of financial position as at 30 June 2015, and the statements of comprehensive income, statements of changes Opinion in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting In our opinion, the consolidated and separate financial statements policies and other explanatory information. present fairly, in all material respects, the consolidated and separate financial position of Comair Limited as at 30 June 2015, and its Directors’ responsibility for the financial consolidated and separate financial performance and consolidated statements and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements The company’s directors are responsible for the preparation and of the Companies Act of South Africa. fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Other reports required by the Companies Act Standards and the requirements of the Companies Act of South Africa and for such internal control as the directors determine is As part of our audit of the consolidated and separate financial necessary to enable the preparation of consolidated and separate statements for the year ended 30 June 2015, we have read the financial statements that are free from material misstatements, Directors’ Report, Audit Committee’s Report and Company whether due to fraud or error. Secretary’s Certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited Auditor’s responsibility consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading Our responsibility is to express an opinion on these consolidated these reports we have not identified material inconsistencies and separate financial statements based on our audit. We between these reports and the audited consolidated and separate conducted our audit in accordance with International Standards financial statements. However, we have not audited these reports on Auditing. Those standards require that we comply with ethical and accordingly do not express an opinion on these reports. requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence Grant Thornton Johannesburg Partnership about the amounts and disclosures in the financial statements. Registered Auditors The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement T Schoeman of the financial statements, whether due to fraud or error. In Partner making those risk assessments, the auditor considers internal Registered Auditor control relevant to the entity’s preparation and fair presentation of Chartered Accountant (SA) the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of 20 October 2015 expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of @Grant Thornton accounting policies used and the reasonableness of accounting Wanderers Office Park estimates made by management, as well as evaluating the overall 52 Corlett Drive presentation of the financial statements. Illovo, 2196

Comair Limited 77 Integrated Annual Report 2015 Statements of Financial Position as at 30 June 2015 Group Company

2015 2014 2015 2014

Notes R’000 R’000 R’000 R’000

Assets Non-current assets Property, plant and equipment 3 2 760 584 2 545 033 2 709 206 2 493 813 Intangible assets 4 27 490 31 106 27 490 31 106 Loan to Share Incentive Trust 5 - - 3 054 3 814 Investments in and loans to subsidiaries 6 - - 20 172 21 862 Investments in associates 7 28 411 6 612 - - Goodwill 8 6 615 3 668 - - Deferred taxation 14 4 965 - - - 2 828 065 2 586 419 2 759 922 2 550 595 Current assets Inventories 9 10 482 7 608 10 437 7 608 Trade and other receivables 10 303 056 523 226 302 238 508 056 Investments in and loans to subsidiaries 6 - - 33 203 31 353 Investments in and loans to associates 7 7 852 7 852 7 852 7 852 Taxation 36 650 30 540 37 678 28 999 Cash and cash equivalents 849 278 867 703 832 027 858 118 1 207 318 1 436 929 1 223 435 1 441 986 Total assets 4 035 383 4 023 348 3 983 357 3 992 581 Equity and liabilities Equity Equity attributable to equity holders of parent Share capital 12 4 643 5 094 4 693 5 144 Non-distributable reserves (40 387) 27 424 (40 387) 27 424 Accumulated profits 1 201 045 1 035 452 1 161 563 1 025 027 1 165 301 1 067 970 1 125 869 1 057 595 Non-controlling interest 889 - - - 1 166 190 1 067 970 1 125 869 1 057 595 Liabilities Non-current liabilities Interest-bearing liabilities 13 982 052 1 183 072 982 052 1 183 072 Deferred taxation 14 217 316 167 689 217 316 169 226 Share-based payments - 21 666 - 21 666 1 199 368 1 372 427 1 199 368 1 373 964 Current liabilities Trade and other payables 15 785 080 1 076 171 773 433 1 054 242 Unutilised ticket liability 233 015 270 391 233 015 270 391 Provisions 16 109 263 99 719 109 205 99 719 Interest-bearing liabilities 13 469 580 136 670 469 580 136 670 Share-based payments 32 500 - 32 500 - Financial liabilities 17 40 387 - 40 387 - 1 669 825 1 582 951 1 658 120 1 561 022 Total liabilities 2 869 193 2 955 378 2 857 488 2 934 986 Total equity and liabilities 4 035 383 4 023 348 3 983 357 3 992 581

Net asset value per share (cents) 251.5 245.3

Comair Limited 78 Integrated Annual Report 2015 Statements of Profit or Loss for the year ended 30 June 2015 Group Company

2015 2014 2015 2014

Notes R’000 R’000 R’000 R’000

Revenue 19 5 890 746 5 903 219 5 868 226 5 893 870 Operating expenses (5 157 578) (5 198 457) (5 152 312) (5 187 380) Operating profit before depreciation, amortisation, impairment and profit on sale of assets 733 168 704 762 715 914 706 490 Depreciation and amortisation (405 812) (290 747) (405 754) (290 140) (Impairment) reversal of impairment (1 530) 2 235 (6 269) - Profit on sale of assets 1 231 524 1 231 524

Profit from operations 20 327 057 416 774 305 122 416 874 Interest income 40 428 32 149 39 841 31 515 Interest expense 21 (72 930) (77 340) (72 915) (77 317) Income from equity accounted investments 7 6 799 2 327 - - Profit before taxation 301 354 373 910 272 048 371 072 Taxation 22 (82 578) (109 059) (83 092) (108 864) Profit for the year 218 776 264 851 188 956 262 208 Profit attributable to: Owners of the parent 217 887 264 851 188 956 262 208 Non-controlling interest 889 - - - 218 776 264 851 188 956 262 208

Earnings per share (cents) 23 47.8 58.4 Diluted earnings per share (cents) 23 47.8 56.1

Statements of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2015

Profit for the year 218 776 264 851 188 956 262 208

Other comprehensive income:

Items that may be reclassified to profit or loss: Effects of cash flow hedges recognised in other comprehensive income (40 387) - (40 387) - Other comprehensive income for the year net of taxation (40 387) - (40 387) - Total comprehensive income for the year 178 389 264 851 148 569 262 208 Total comprehensive income for the year attributable to: Owners of the parent 177 500 264 851 148 569 262 208 Non-controlling interest 889 - - - 178 389 264 851 148 569 262 208

Comair Limited 79 Integrated Annual Report 2015 Statements of Changes in Equity as at 30 June 2015

Total attributable to equity Share-based holders of Non- Share Share Hedging payment Total Accumulated the Group/ controlling capital premium reserve reserve reserves profit Company interest Total equity R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000

Group Balance at 01 July 2013 5 578 123 631 - 23 996 153 205 867 995 1 021 200 - 1 021 200 Total comprehensive income for the year - - - - - 264 851 264 851 - 264 851 Repurchase of ordinary shares (489) (123 631) - - (124 120) (27 093) (151 213) - (151 213) BEE share-based payments - - - 3 428 3 428 - 3 428 - 3 428 Shares sold by Share Trust 5 - - - 5 (6) (1) - (1) Dividend paid - - - - - (70 295) (70 295) - (70 295) Movement for the year (484) (123 631) - 3 428 (120 687) 167 457 46 770 - 46 770 Balance at 30 June 2014 5 094 - - 27 424 32 518 1 035 452 1 067 970 - 1 067 970

Total comprehensive income for the year - - (40 387) - (40 387) 218 776 178 389 - 178 389 Repurchase of shares (451) - - - (451) - (451) - (451) Transfer BEE reserves and accumulated profit - - - (28 281) (28 281) 28 281 - - - BEE share-based payment - - - 857 857 - 857 - 857 Dividend paid - - - - - (81 464) (81 464) - (81 464) Business combinations ------889 889 Movement for the year (451) - (40 387) (27 424) (68 262) 165 593 97 331 889 99 220 Balance at 30 June 2015 4 643 - (40 387) - (35 744) 1 201 045 1 165 301 889 1 166 190 17 15:19

Company Balance at 01 July 2013 5 633 123 742 - 23 996 153 371 860 732 1 014 103 - 1 014 103 Total comprehensive income for the year - - - - - 262 208 262 208 - 262 208 Repurchase of ordinary shares (489) (123 742) - - (124 231) (26 982) (151 213) - (151 213) BEE share-based payments - - - 3 428 3 428 3 428 3 428 Dividend paid - - - - - (70 931) (70 931) - (70 931) Movement for the year (489) (123 742) - 3 428 (120 803) 164 295 43 492 - 43 492 Balance at 30 June 2014 5 144 - - 27 424 32 568 1 025 027 1 057 595 - 1 057 595

Total comprehensive income for the year - - (40 387) - (40 387) 188 956 148 569 148 569 Repurchase of ‘A’ shares (451) - - (451) - (451) (451) BEE share-based payments - - - 857 857 - 857 857 Transfer BEE reserves and accumulated profit - - - (28 281) (28 281) 28 281 - - Dividend paid - - - - - (80 701) (80 701) (80 701) Movement for the year (451) - (40 387) (27 424) (68 262) 136 536 68 274 - 68 274 Balance at 30 June 2015 4 693 - (40 387) - (35 694) 1 161 563 1 125 869 - 1 125 869 17 15:19

Comair Limited 80 Integrated Annual Report 2015 Statements of Cash Flows as at 30 June 2015 Group Company

2015 2014 2015 2014

Notes R’000 R’000 R’000 R’000

Cash generated from operating activities Cash receipts from customers 6 147 759 6 281 836 6 108 741 6 217 549 Cash paid to suppliers (5 467 684) (5 193 498) (5 440 444) (5 133 275) Cash generated from operations 24 680 075 1 088 338 668 297 1 084 274 Interest paid (72 930) (77 340) (72 915) (77 317) Interest received 40 428 32 149 39 841 31 515 Taxation paid 25 (46 785) (76 664) (43 680) (74 757) Net cash from operating activities 600 788 966 483 591 543 963 715

Cash utilised in investing activities Additions to property, plant and equipment 3 (274 981) (611 366) (274 765) (611 152) Proceeds on disposal of property, plant and equipment 1 269 524 1 269 524 Additions to intangible assets 4 (6 753) - (6 753) - Decrease in loan to share incentive trust - - 760 1 523 (Decrease) increase in subsidiary loans - - (160) 3 499 Net cash from investing activities (280 465) (610 842) (279 649) (605 606)

Cash utilised in financing activities Repurchase of share capital (451) (151 214) (451) (151 214) Raising of interest-bearing liabilities - 174 675 - 174 675 Repayment of interest-bearing liabilities (256 833) (219 149) (256 833) (219 149) Dividends paid (81 464) (70 295) (80 701) (70 931) Net cash from financing activities (338 748) (265 983) (337 985) (266 619)

Total cash movement for the year (18 425) 89 658 (26 091) 91 490 Cash and cash equivalents at the beginning of the year 867 703 778 045 858 118 766 628 Cash and cash equivalents at end of the year 849 278 867 703 832 027 858 118

Comair Limited 81 Integrated Annual Report 2015 Accounting Policies

1. Principal accounting policies 1.2 Consolidation

The Financial Statements are presented in South African Rands Basis of consolidation as this is the currency of the economic environment in which the The Group Financial Statements consolidate those of the parent Group operates. company and all of its subsidiaries as of 30 June 2015. The parent controls a subsidiary if it is exposed, or has rights, to variable The Financial Statements are prepared in accordance with returns from its involvement with the subsidiary and has the ability International Financial Reporting Standards as well as the SAICA to affect those returns through its power over the subsidiary. All Financial Reporting Guides as issued by the Accounting Practices subsidiaries have a reporting date of 30 June. Committee in terms of the Listings Requirements of the JSE Limited and the Companies Act (Act No. 71 of 2008). The Annual All transactions and balances between Group companies are Financial Statements have been prepared on the historical cost eliminated on consolidation, including unrealised gains and losses basis, except for the measurement of certain financial instruments on transactions between Group companies. Where unrealised at fair value, and incorporate the principal accounting policies and losses on intra-Group asset sales are reversed on consolidation, measurement bases listed below. the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the Financial Statements of Except for the adoption of the new and revised accounting standards subsidiaries have been adjusted where necessary to ensure the principal accounting policies of the Group are consistent with consistency with the accounting policies adopted by the Group. those applied in the audited consolidated Financial Statements Profit or loss and other comprehensive income of subsidiaries for the year ended 30 June 2014. acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of 1.1 Adoption of standards and interpretations disposal, as applicable. effective in 2015 The following new standards were adopted during the financial Non-controlling interests, presented as part of equity, represent a year under review, however none had significant financial impacts subsidiaries’ profit or loss and net assets that are not held by the for the Group: Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non- • IFRS 2 Share Based Payments; controlling interests based on their respective ownership interests. • IIFRS 3 Business Combinations; • IFRS 8 Operating Segments; Business combinations • IFRS 10 Consolidated Financial Statements; The Group applies the acquisition method in accounting for • IFRS 12 Disclosure of Interest in Other Entities; business combinations. The consideration transferred by the • IFRS 13 Fair Value Measurement; Group to obtain control of a subsidiary is calculated as the • IAS 16 Property, Plant and Equipment; sum of the acquisition-date fair values of assets transferred, • IAS 19 Employee Benefits; liabilities incurred and the equity interests issued by the Group, • IAS 24 Related Party Disclosures; which includes the fair value of any asset or liability arising from • IAS 34 Interim Financial Reporting; a contingent consideration arrangement. Acquisition costs are • IAS 38 Intangible Assets; expensed as incurred. • IAS 40 Investment Properties; and • Interpretations: IFRIC Interpretation 21 Levies. The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they A full list of standards that will become effective in the next financial year are disclosed in note 34.

Comair Limited 82 Integrated Annual Report 2015 have been previously recognised in the acquiree’s Financial the Group’s share of inter-company losses is only eliminated if the Statements prior to the acquisition. transaction does not provide evidence of impairment of the asset transferred. Investments in associates are disclosed as the initial Assets acquired and liabilities assumed are generally measured investment plus the aggregate of loans made to the associate plus at their acquisition-date fair values. the Group’s aggregate share of post-acquisition equity. Investments in associates are accounted for at cost less any impairment losses Goodwill is stated after separate recognition of identifiable intangible in the Company’s stand-alone Financial Statements. assets. It is calculated as the excess of the sum of: Subsidiaries • Fair value of consideration transferred; Subsidiaries are companies and entities of which the Company • The recognised amount of any non-controlling interest in the has the ability to control the financial and operating activities so as acquiree; and to obtain benefit from their activities. Investments in subsidiaries • Acquisition-date fair value of any existing equity interest in the are carried at cost less any impairment losses in the Company’s acquiree, over the acquisition-date fair values of identifiable stand-alone Financial Statements. net assets. The cost of an investment in a subsidiary is the aggregate of: If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is • The fair value, at the date of exchange, of assets given, recognised in profit or loss immediately. liabilities incurred or assumed, and equity instruments issued by the Company; and Investment in associates • Plus any costs already attributable to the purchase of the Associates are those entities over which the Group is able to exert subsidiary. significant influence but which are not subsidiaries. An adjustment to the cost of a business combination contingent Investments in associates are accounted for using the equity on future events is included in the profit or loss of the combination method. Any goodwill or fair value adjustment attributable to the if the adjustment is probable and can be measured reliably. Group’s share in the associate is not recognised separately and The cost includes an estimate of contingent consideration payable is included in the amount recognised as investment. at fair value at acquisition date.

The carrying amount of the investment in associates is increased The Group Share Incentive Trust is included in the consolidated or decreased to recognise the Group’s share of the profit or loss Financial Statements as a subsidiary. and other comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting 1.3 Property, plant and equipment policies of the Group. Freehold property, aircraft and related equipment, vehicles, furniture, computers and flight simulator equipment are depreciated systematically Unrealised gains and losses on transactions between the Group on the straight-line basis, which is estimated to depreciate the assets and its associates are eliminated to the extent of the Group’s to their anticipated residual values through a component approach interest in those entities. Where unrealised losses are eliminated, over their planned useful lives. Land is not depreciated. the underlying asset is also tested for impairment. Property, plant and equipment are stated at cost less accumulated The Group’s share of movements in the associate’s other comprehensive depreciation and impairment. income is recognised in other comprehensive income. The Group’s share of the aggregate loss in any associate is limited to its net Cost includes expenditure that is directly attributable to the acquisition investment in the associate, unless the Group has incurred an of the asset. Subsequent costs are included in the asset’s carrying obligation or made payments on the associate’s behalf. The Group’s value or recognised as a separate asset as appropriate, only when share of inter-company gains is eliminated on consolidation, whilst it is probable that future economic benefits associated with the

Comair Limited 83 Integrated Annual Report 2015 specific asset will flow to the Group and costs can be measured • there is an intention to complete and use or sell it; reliably. The carrying values are assessed at each reporting date • there is an ability to use or sell it; and only written down if there are impairments in value. The useful • it will generate probable future economic benefits; life, depreciation method and residual values are assessed at the • there are available technical, financial and other resources end of each reporting period and revised if necessary. to complete the development and to use or sell the asset; and Depreciation rates for property plant and equipment • the expenditure attributable to the asset during its development Property and buildings 2% can be measured reliably. Furniture and equipment 7% Motor vehicles 20% Intangible assets are carried at cost, being fair value at the date Computer equipment 20% to 50% of revaluation less any subsequent accumulated amortisation and Second-hand flight simulator equipment 20% any subsequent accumulated impairment losses. New simulator equipment 7% Leasehold improvements Life of the lease agreement An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to 1.4 Aircraft the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets, Aircraft are initially recognised at spot rate at date of purchase. The but they are tested for impairment annually and whenever there carrying values of aircraft are assessed annually for impairment. is an indication that the asset may be impaired. Aircraft modifications are capitalised only to the extent that they materially improve the value of the aircraft from which further For all other intangible assets amortisation is provided on a future economic benefits are expected to flow. Maintenance and straight-line basis over their useful life. repairs which neither materially or appreciably prolong their useful lives are charged against income. C and D Checks are capitalised The amortisation period and the amortisation method for intangible and expensed over their useful lives. The gain or loss on disposal assets are reviewed every period-end. of an asset is determined as the difference between the sales Reassessing the useful life of an intangible asset with a finite useful proceeds and the carrying amount of the asset and recognised life after it was classified as indefinite is an indicator that the asset in the Statements of Comprehensive Income. The aircraft residual may be impaired. As a result the asset is tested for impairment values are between 0 and 10%. and the remaining carrying amount is amortised over its useful life. Internally generated brands, mastheads, publishing titles, customer Depreciation rates for aircraft lists and items similar in substance are not recognised as Aircraft and related equipment 4% to 20% intangible assets. C Checks 18 months D Checks 72 months Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values as follows: 1.5 Intangible assets An intangible asset is recognised when: • Internally generated intangible assets: research and development expenditure. • it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and Costs associated with developing and maintaining computer software • the cost of the asset can be measured reliably. programs are recognised as expenses when incurred. Costs that are directly associated with the development of identifiable and Intangible assets are initially recognised at cost. unique software products controlled by the Group and that will probably generate economic benefits exceeding costs beyond An intangible asset arising from development (or from the one year, are recognised as intangible assets. Costs include the development phase of an internal project) is recognised when: software development employee costs and an appropriate portion of relevant overheads. Amortisation is charged on a straight-line • it is technically feasible to complete the asset so that it will basis over their estimated useful lives of two to five years. Software be available for use or sale; is carried at cost less accumulated amortisation and impairment.

Comair Limited 84 Integrated Annual Report 2015 1.6 Pre-delivery payments Operating leases – lessee Aircraft pre-delivery payments and security deposits are capitalised Leases of assets to the Group under which all risks and rewards to property, plant and equipment once all conditions precedent of ownership are effectively retained by the lessor, are classified cruical to the legal agreements are met and construction of the as operating leases. Payments made under operating leases are aircraft has begun. Prior to being capitalised to property, plant and charged against income on a straight-line basis over the period of equipment, aircraft pre-delivery payments and security deposits the lease. A straight-line asset/liability is raised for the difference are accounted for as deposits in other receivables. Aircraft pre- between the leased payment and the lease expense. delivery payments and security deposits are not depreciated. Upon delivery of the relevant aircraft, the pre-delivery payments are 1.10 Financial instruments transferred to the cost of the aircraft at spot rate on delivery date. Initial recognition The Group classifies financial instruments, or their component 1.7 Borrowing costs parts, on initial recognition as a financial asset, a financial liability Borrowing costs directly attributable to the acquisition, construction or an equity instrument in accordance with the substance of the or production of a qualifying asset are capitalised during the period contractual arrangement. of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed Financial assets and financial liabilities are recognised on the in the period in which they are incurred and reported in finance Group’s Statement of Financial Position when the Group becomes costs (see note 21). party to the contractual provisions of the instrument.

1.8 Goodwill Derecognition Goodwill represents the excess of the cost of an acquisition of a Financial assets (or a portion thereof) are derecognised when the business over the fair value of the Group’s share of the net identifiable Group realises the rights to the benefits specified in the contract, assets of the acquired subsidiary at the date of acquisition. Goodwill the rights expire, or the Group surrenders or otherwise loses is tested at reporting date for impairment and carried at cost less control of the contractual rights that comprise the financial asset. In accumulated impairment losses. Impairment losses on goodwill derecognition, the difference between the carrying amount of the are not reversed. Gains and losses on the disposal of an entity financial asset and proceeds receivable and any prior adjustment include the carrying amount of goodwill relating to the entity sold. to reflect fair value that had been reported in other comprehensive income are included in profit or loss. Financial liabilities (or a portion 1.9 Leases thereof) are derecognised when the obligation specified in the Finance leases and instalment sale agreements – contract is discharged, cancelled or expires. On derecognition, lessee the difference between the carrying amount of the financial liability, Leases, whereby the lessor provides finance to the Group and including related unamortised costs and the amount paid for it, where the Group assumes substantially all the benefits and risks are included in profit or loss. of ownership, are classified as finance leases. Fair value determination The amount capitalised at inception of the lease is the lower of If the market for a financial asset is not active (and for unlisted the fair value of the leased asset and the present value of the securities), the Group establishes fair value by using valuation minimum lease payments. The discount rate used in calculating techniques. These include the use of recent arm’s length transactions, the present value of the minimum lease payments is the interest reference to other instruments that are substantially the same, rate implicit in the lease or the Group’s incremental borrowing discounted cash flow analysis, and option pricing models making rate if rate implicit in the lease is not practicable to determine. The maximum use of market inputs and relying as little as possible on capital element of future obligations under leases is included as a entity-specific inputs. liability in the Statement of Financial Position. Each lease payment is allocated between the liability and finance charges so as to Loans to (from) Group companies achieve a constant rate on the finance balance outstanding. The These include loans to subsidiaries, associates and share incentive interest element of the instalments is charged against income trust (accounted for as a subsidiary) and are recognised initially over the lease period. at fair value plus direct transaction costs. Subsequently, these

Comair Limited 85 Integrated Annual Report 2015 loans are measured at amortised cost using the effective interest Cash and cash equivalents rate method, less any impairment loss recognised to reflect Cash and cash equivalents comprise cash on hand and demand irrecoverable amounts. deposits, and other short-term, highly liquid investments that are readily convertible to a known amount of cash, and are subject to an On loans receivable an impairment loss is recognised in profit insignificant risk of changes in value. These are initially recognised or loss when there is objective evidence that it is impaired. The at fair value including transaction costs and subsequently measured impairment is measured as the difference between the instrument’s at amortised cost using the effective interest rate method. These carrying amount and the present value of estimated future cash instruments are classified as loans and receivables. flows discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent Interest-bearing liabilities periods when an increase in the instrument’s recoverable Interest-bearing liabilities are initially measured at fair value less amount can be related objectively to an event occurring after transaction cost, and are subsequently measured at amortised the impairment was recognised, subject to the restriction that cost, which includes all interest-bearing liabilities, using the effective the carrying amount of the instrument at the date the impairment interest rate method. Any difference between the proceeds (net of is reversed shall not exceed what the amortised cost would transaction costs) and the settlement or redemption of borrowings have been had the impairment not been recognised. Loans to is recognised over the term of the borrowings in accordance with (from) Group companies are classified as loans and receivables the Group’s accounting policy for borrowing costs. (financial liabilities at amortised cost).

Other financial liabilities are measured initially at fair value less Trade and other receivables transaction cost and subsequently at amortised cost using the Trade receivables are measured at initial recognition at fair effective interest rate method. value plus transaction costs, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate Derivatives allowances for estimated irrecoverable amounts are recognised Derivative financial instruments, which are not designated as hedging in profit or loss when there is objective evidence that the asset is instruments, consisting of foreign exchange contracts and interest impaired. The allowance recognised is measured as the difference rate swaps, are initially measured at fair value on the contract date, between the asset’s carrying amount and the present value of and are re-measured to fair value at subsequent reporting dates. estimated future cash flows discounted at the effective interest rate computed at initial recognition. Derivatives embedded in other financial instruments or other non- The carrying amount of the asset is reduced through the use of financial host contracts are treated as separate derivatives when an allowance account, and the amount of the loss is recognised their risks and characteristics are not closely related to those of in the Statement of Comprehensive Income within operating the host contract and the host contract is not carried at fair value expenses. When a trade receivable is uncollectable, it is with unrealised gains or losses reported in profit or loss. written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are Changes in the fair value of derivative financial instruments are credited against operating expenses in the Statement of recognised in profit or loss as they arise. Comprehensive Income. Derivatives are classified as financial assets at fair value through Trade and other receivables are classified as loans and receivables. profit or loss.

Trade and other payables Hedge accounting Trade payables are initially measured at fair value less transaction The Group designates certain derivatives as either: costs, and are subsequently measured at amortised cost, using the effective interest rate method. • hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge);

Comair Limited 86 Integrated Annual Report 2015 • hedges of a particular risk associated with a recognised asset 1.11 Inventories or liability or a highly probable forecast transaction (cash flow Inventory is stated at the lower of cost and net realisable values. hedge); Cost is determined on the first-in-first-out basis. Net realisable value • hedges of a net investment in a foreign operation (net is the estimated selling price in the ordinary course of business investment hedge). less the estimated cost of completion and the estimated cost necessary to make the sale. The cost of inventories comprises The Group documents at the inception of the transaction the all cost of purchase, cost of conversion and other costs incurred relationship between hedging instruments and hedged items, as in bringing the inventories to their present location and condition. well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its 1.12 Share capital assessment, both at hedge inception and on an ongoing basis, An equity instrument is any contract that evidences a residual of whether the derivatives that are used in hedging transactions interest in the assets of an entity after deducting all of its liabilities. are highly effective in offsetting changes in fair values or cash Ordinary shares are classified as equity. If the Group re-acquires flows of hedged items. its own equity instruments, the consideration paid, including any directly attributable incremental costs (net of income taxes) on those The full fair value of a hedging derivative is classified as a non-current instruments is deducted from equity. No gain or loss is recognised asset or liability when the remaining hedged item is more than in profit or loss on the purchase, sale, issue or cancellation of the 12 months, and as a current asset or liability when the remaining Group’s own equity instruments. Consideration paid or received maturity of the hedged item is less than 12 months. shall be recognised directly in equity.

Cash flow hedge 1.13 Share-based payment transactions The effective portion of changes in the fair value of derivatives that Cash settled are designated and qualify as cash flow hedges is recognised to other comprehensive income and accumulated in equity. The gain Options are granted to certain employees in the Group. The fair or loss relating to the ineffective portion is recognised immediately value of the amount payable to the employee is recognised as an in the Statement of Profit or Loss within profit or loss. expense with a corresponding increase in liabilities. The fair value is initially measured at grant date using the Black-Scholes Model The amount of gains/losses in other comprehensive income is and expensed over the period during which the employee becomes reclassified to profit or loss in the period when the hedged item unconditionally entitled to payment. Management assesses the affects profit or loss. number of options that will ultimately vest based on non-market vesting conditions at each reporting period until vesting, but the However, when the forecast transaction that is hedged results in the assessment of the fair value of the option against the market recognition of a non-financial asset (for example, inventory or fixed performance of the share price, is done at each reporting period assets) the gains and losses previously deferred in the Statement of end up to and including settlement date. Comprehensive Income are transferred from other comprehensive income and included in the initial measurement of the cost of the asset. Share options that expire or are forfeited are reversed against The deferred amounts are ultimately recognised in cost of goods sold the liability raised with an adjustment to profit or loss. The fair in the case of inventory or in depreciation in the case of fixed assets. value of the instruments granted is measured against market performance of the share price. The liability is measured at each If a legally enforceable right exists to set off recognised amounts reporting date and at settlement date, with all movements in fair of financial assets and liabilities and there is an intention to settle value being recognised in profit or loss. net, the relevant financial assets and liabilities are offset. Where options are issued that provide the holder the choice of Where the impact of discounting is not considered to be material, settlement (equity or cash) these are accounted for as a compound financial instruments carried at amortised costs are not discounted financial instrument. First the fair value of the debt component due to the fact that their carrying values approximate amortised cost. is determined and then the difference between the value of the

Comair Limited 87 Integrated Annual Report 2015 compound instrument and the fair value of the debt component has flown. Unflown ticket revenue is recognised as a liability until is recognised as the equity component. such time as the passenger has flown. Revenue is measured at the fair value of consideration received and is exclusive of VAT, Equity settled discounts received and returns. Convertible ‘A’ class shares and options were issued in terms of a Black Economic Empowerment Deal. The fair value of the equity Revenue from sale of goods is recognised when risks and rewards instrument is measured at grant date using the Black-Scholes transfer and excludes value added tax. Model and recognised as an expense with corresponding increase in equity over the vesting period of the share-based payment. Non-airline revenue relates to services relating to the hiring of Management reassesses the number of options expected to simulator equipment, commission from airport lounges and the ultimately vest based on non-market vesting conditions. The impact sale of holiday packages. of the revision to the original estimates, if any, is recognised in the Statement of Comprehensive Income, with a corresponding International Loyalty Programme revenue is income received from adjustment to equity. Proceeds received net of any directly BA Executive Club members using the Group’s services, and is attributable transaction costs are credited to share capital and recognised on the accrual basis in profit or loss. share premium when the options are exercised. Subsequent to vesting, management no longer makes any adjustments to the Interest is recognised on the accrual basis, in profit or loss, using cost of the share-based payments recognised. Options that expire the effective interest rate method. Dividends are recognised or are forfeited, are removed from equity with a corresponding in profit or loss when the Group’s right to receive payment has adjustment to the Statement of Comprehensive Income. been established.

1.14 Provisions 1.16 Tax The amount of a provision is the present value of the expenditure Current tax and deferred taxes are recognised as income or an expected to be required to settle the obligation. Where some or all expense and included in profit or loss for the period, except to of the expenditure required to settle a provision is expected to be the extent that the tax arises from: reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will • A transaction or event which is recognised, in the same or be received if the entity settles the obligation. The reimbursement a different period, directly in other comprehensive income; shall be treated as a separate asset. The amount recognised for or the reimbursement shall not exceed the amount of the provision. • A business combination. Provisions are not recognised for future operating losses. Current tax and deferred taxes are charged or credited directly If an entity has a contract that is onerous, the present obligation to other comprehensive income if the tax relates to items that are under the contract shall be recognised and measured as a credited or charged in the same or a different period, to other provision. The rate applied to present value the expenditure is comprehensive income. the pre-tax market related rate adjusted for the risks associated with the obligation. Current tax is calculated at rates (tax laws) enacted or substantively enacted at reporting period end in accordance with the South Provisions were raised and management determined an estimate African Income Tax Act (Act No. 58 of 1962). based on the information available. Additional disclosure of these estimates of provisions is included in the provisions note. Deferred taxation Deferred tax is the tax expected to be payable or recoverable on 1.15 Revenue recognition differences between the carrying amount of assets and liabilities in Revenue comprises all airline-related and non-airline revenue the Financial Statements and the corresponding tax basis used in earned. Revenue arising from the provision of transportation the computation of taxable profit, and is accounted for using the services to passengers is recognised on an accrual basis in the comprehensive liability method. Deferred tax liabilities are recognised period in which the services are rendered and the passenger for all taxable temporary differences and deferred tax assets are

Comair Limited 88 Integrated Annual Report 2015 recognised to the extent that it is probable that taxable profits will The carrying value less impairment provision of trade receivables be available against which deductible temporary differences can and payables is assumed to approximate their fair values. The fair be utilised. Such assets and liabilities are not recognised if the value of financial liabilities for disclosure purposes is estimated temporary differences arise from goodwill (or negative goodwill) or by discounting the future contractual cash flows at the current from the initial recognition (other than in a business combination) market interest rate that is available to the Group for similar of other assets and liabilities in a transaction affecting neither the financial instruments. tax profit or losses, nor the accounting profit or losses. Impairment Deferred tax liabilities are recognised for taxable temporary differences Future cash flows expected to be generated by the asset are arising on investments in subsidiaries and associates, except projected, taking into account market conditions and the expected where the Group is able to control the reversal of the temporary useful lives of the assets. The present value of these cash flows, differences and it is probable that the temporary difference will not determined using an appropriate discount rate, is compared to reverse in the foreseeable future. The carrying amount of deferred the current asset value and, if lower, the assets are impaired to tax assets is reviewed at each reporting date and reduced to the the present value. extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Asset lives and residual values Property, plant and equipment are depreciated over their useful Deferred tax assets and liabilities are measured at the tax rates lives taking into account residual values, where appropriate. The expected to apply to the period when the asset is realised or the actual lives of the assets and residual values are assessed at liability is settled, based on the tax rates (and tax laws) enacted each reporting date and may vary depending on a number of or substantively enacted by the reporting date. factors. In re-assessing asset lives, factors such as technological innovation, product lifecycles and maintenance programmes are 1.17 Accounting estimates and judgements taken into account. Residual value assessments consider issues Sources of estimation and uncertainty such as future market conditions, the remaining life of the asset and projected disposal values. In preparing the Financial Statements, management is required to make estimates and assumptions that affect the amounts Loans and other receivables represented in the Financial Statements and related disclosures. The Group assesses its trade and other receivables for impairment Use of available information and the application of judgement is at the end of each reporting period. In determining whether an inherent in the formation of estimates. Actual results in the future impairment loss should be recorded in profit or loss, the Group could differ from these estimates which may be material to the makes judgements as to whether there is observable data indicating Financial Statements. Significant judgements include: a measurable decrease in the estimated future cash flows from a financial asset. Fair value estimation The fair value of financial instruments that are not traded in 1.18 Contingencies an active market (for example, over the counter derivatives) is determined by using valuation techniques. The Group uses a After initial recognition, contingent liabilities recognised in business variety of methods and makes assumptions that are based on combinations that are recognised separately are subsequently market conditions existing at the end of each reporting period. measured at the higher of: Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as estimated • The amount that would be recognised as a provision; and discounted cash flows, are used to determine fair value for the • The amount initially recognised less cumulative amortisation. remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future Contingent assets and liabilities that do not form part of a business cash flows. The fair value of forward foreign exchange contracts combination are not recognised, but are disclosed in the notes is determined using quoted forward exchange rates at the end to the financial statements. of the reporting period.

Comair Limited 89 Integrated Annual Report 2015 1.19 Impairment of assets • first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit; and The Group assesses at each end of the reporting period whether • then, to the other assets of the unit, pro rata on the basis of there is any indication that an asset may be impaired. If any such the carrying amount of each asset in the unit. indication exists, the Group estimates the recoverable amount of the asset. The Group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods Irrespective of whether there is any indication of impairment, the for assets other than goodwill may no longer exist or may have Group also: decreased. If any such indication exists, the recoverable amounts of those assets are estimated. • tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by The increased carrying amount of an asset other than goodwill comparing its carrying amount with its recoverable amount. attributable to a reversal of an impairment loss does not exceed This impairment test is performed during the annual period the carrying amount that would have been determined had no and at the same time every period. impairment loss been recognised for the asset in prior periods. • tests goodwill acquired in a business combination for impairment annually. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill If there is any indication that an asset may be impaired, the is recognised immediately in profit or loss. Any reversal of an recoverable amount is estimated for the individual asset. If it is impairment loss of a revalued asset is treated as a revaluation not possible to estimate the recoverable amount of the individual increase. asset, the recoverable amount of the cash-generating unit to which the asset belongs is determined. 1.20 Employee benefits The recoverable amount of an asset or a cash-generating unit is Short-term employee benefits the higher of its fair value less costs to sell and its value in use. If The cost of short-term employee benefits, (those payable within the recoverable amount of an asset is less than its carrying amount, 12 months after the service is rendered, such as paid vacation the carrying amount of the asset is reduced to its recoverable leave and sick leave, bonuses, and non-monetary benefits such amount. That reduction is an impairment loss. as medical care), are recognised in the period in which the service is rendered and are not discounted. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit The expected cost of compensated absences is recognised as or loss. Any impairment loss of a revalued asset is treated as a an expense as the employees render services that increase their revaluation decrease. entitlement or, in the case of non-accumulating absences, when the absence occurs. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, or groups The expected cost of profit sharing and bonus payments is of cash-generating units, that are expected to benefit from the recognised as an expense when there is a legal or constructive synergies of the combination, irrespective of whether other obligation to make such payments as a result of past performance. assets or liabilities of the acquiree are assigned to those units or groups of units. Retirement and medical funds Current contributions to the Group’s defined contribution retirement An impairment loss is recognised for cash-generating units if the fund are based on current salary and are recognised when they recoverable amount of the unit is less than the carrying amount of fall due. The Group has no further payment obligations once the the unit. The impairment loss is allocated to reduce the carrying payments have been made. amount of the assets of the unit in the following order:

Comair Limited 90 Integrated Annual Report 2015 1.21 Foreign currency that were initially recorded, such differences will impact the income taxation and deferred taxation provisions in the period in which Foreign currency transactions are recorded at the exchange rate such determination is made. ruling on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange Recovery of deferred tax assets ruling at the reporting date. Profits or losses arising on translation of foreign currency transactions are included in profit or loss. The Group recognises the net future taxation benefit related to deferred income taxation assets to the extent that it is probable that Non-monetary assets and liabilities are translated at the prevailing the deductible temporary differences will reverse in the foreseeable rate at the date of acquisition. Exchange differences on non- future. Assessing the recoverability of deferred income taxation monetary assets classified as available for sale financial instruments assets requires the Group to make significant estimates related are recognised as part of the fair value movement in other to expectations of future taxable income. Estimates of future comprehensive income. All foreign exchange movements are taxable income are based on forecast cash flows from operations recognised in profit or loss, unless they relate to non-monetary and the application of existing taxation laws in each jurisdiction. assets classified as available for sale financial instruments where To the extent that future cash flows and taxable income differ that movement is then recognised in equity, or they form part of significantly from estimates, the ability of the Group to realise the the borrowing costs capitalised to qualifying assets. net deferred taxation assets recorded at the end of the reporting period could be impacted. 1.22 Critical judgements in applying the entity’s accounting policies Management has applied a probability analysis to determine future taxable income against which calculated tax losses will be utilised. Judgements made by management are continually evaluated and are based on historical experience and the expectation of future Segmental information events that are believed to be reasonable under the circumstances. Operating segments are reported in a manner consistent with the Borrowing costs internal reporting provided to the chief operating decision-maker (Financial Director). The chief operating decision-maker, who is Pre-delivery payment assets are regarded as qualifying assets for responsible for allocating resources and assessing performance of the purpose of the capitalisation of borrowing costs. Exchange the segments, has been identified as the Chief Executive Officer. differences arising from foreign currency borrowings, to the Segments are presented in terms of IFRS extent that they are regarded as an adjustment to interest costs, are capitalised as part of borrowing costs as these expenses At year end, the Group was organised into two main operating are considered part of the cost of borrowing in foreign currency. segments:

Taxation • Airline; and Judgement is required in determining the provision for income taxes • Non-airline, which comprises the travel business, property due to the complexity of legislation. There are many transactions investments,simulator business, Slow Lounges and Slow in and calculations for which the ultimate taxation determination the City. is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated taxation audit issues based on estimates of whether additional taxes will be due. Where the final taxation outcome of these matters is different from the amounts

Comair Limited 91 Integrated Annual Report 2015 Notes to the Financial Statements

2. Segmental information

Airline Non-airline Total

R’000 R’000 R’000

30 June 2015 Revenue 5 645 467 245 279 5 890 746

Operating profit before depreciation, impairment and profit on sale of assets 645 608 87 560 733 168 Profit on sale of assets 1 231 - 1 231 Reversal of impairment (1 530) - (1 530) Depreciation (397 352) (8,460) (405 812) Profit from operations 247 957 79 100 327 057

Segmental assets and liabilities Segmental assets 3 860 891 158 546 4 019 437 Segmental interest-bearing liabilities (1 451 632) - (1 451 632) Other segmental liabilities (1 291 932) (108 156) (1 400 088) Segmental net asset value 1 117 327 50 390 1 167 717 Segmental capital additions (excluding borrowing costs capitalised) during the year 558 145 11 082 569 227

30 June 2014 Revenue 5 819 632 83 587 5 903 219

Operating profit before depreciation, impairment and profit on sale of assets 654 252 50 510 704 762 Profit on sale of assets 524 - 524 Impairment 2 235 - 2 235 Depreciation (280 475) (10 272) (290 747) Profit from operations 376 536 40 238 416 774

Segmental assets and liabilities Segmental assets 3 858 702 164 646 4 023 348 Segmental interest-bearing liabilities (1 284 833) (34 909) (1 319 742) Other segmental liabilities (1 540 481) (95 155) (1 635 636) Segmental net asset value 1 033 388 34 582 1 067 970 Segmental capital additions (excluding borrowing costs capitalised) during the year 510 381 668 511 049

Comair predominately operates within South Africa and as a result no Geographic Segmental Report is presented.

Revenue earned from flights, other than in South Africa, is not considered to be significant and is generated from assets in control of the South African operation.

Inter-segmental revenue is not material and has therefore not been presented.

Refer to note 29 Reclassification of comparatives and segmental reclassification.

Comair Limited 92 Integrated Annual Report 2015 3. Property, plant and equipment

2015 2014

Accumulated Accumulated Group depreciation Carrying depreciation Carrying Cost and impairment value Cost and impairment value

R’000 R’000 R’000 R’000 R’000 R’000

Properties and buildings 98 593 (8 263) 90 330 92 811 (7 473) 85 338 Leasehold improvements 66 860 (43 703) 23 157 63 266 (33 961) 29 305 Aircraft and flight simulator equipment 3 103 013 (1 053 564) 2 049 449 3 319 371 (1 135 952) 2 183 419 Pre-delivery payments 566 388 - 566 388 230 331 - 230 331 Vehicles, furniture and equipment and computer equipment 105 323 (74 063) 31 260 84 308 (67 668) 16 640 Total 3 940 177 (1 179 593) 2 760 584 3 790 087 (1 245 054) 2 545 033

2015 2014

Accumulated Accumulated Company depreciation Carrying depreciation Carrying Cost and impairment value Cost and impairment value

R’000 R’000 R’000 R’000 R’000 R’000

Properties and buildings 47 568 (8 263) 39 305 41 786 (7 473) 34 313 Leasehold improvements 66 703 (43 546) 23 157 63 266 (33 961) 29 305 Aircraft and flight simulator equipment 3 103 013 (1 053 564) 2 049 449 3 319 371 (1 135 952) 2 183 419 Pre-delivery payments 566 388 - 566 388 230 331 - 230 331 Vehicles, furniture and equipment and computer equipment 104 508 (73 601) 30 907 84 096 (67 651) 16 445 Total 3 888 180 (1 178 974) 2 709 206 3 738 850 (1 245 037) 2 493 813

Reconciliation of property, plant and equipment – Group – 2015

Foreign Opening Payments Interest exchange balance Additions made Disposals capitalised movements Depreciation Total

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

Properties and buildings 85 338 5 782 - - - - (790) 90 330 Leasehold improvements 29 305 3 437 - - - - (9 585) 23 157 Aircraft and flight simulator equipment 2 183 419 244 991 - - - - (378 961) 2 049 449 Pre-delivery payments 230 331 - 288 161 - 10 647 37 249 - 566 388 Vehicles, furniture and equipment and computer equipment 16 640 20 772 - (44) - - (6 108) 31 260 2 545 033 274 981 288 161 (44) 10 647 37 249 (395 444) 2 760 584

Comair Limited 93 Integrated Annual Report 2015 3. Property, plant and equipment (continued)

Reconciliation of property, plant and equipment – Group – 2014

Foreign Opening Interest exchange balance Additions capitalised movements Depreciation Total

R’000 R’000 R’000 R’000 R’000 R’000

Properties and buildings 85 992 95 - - (749) 85 338 Leasehold improvements 29 854 10 336 - - (10 885) 29 305 Aircraft and flight simulator equipment 2 154 929 290 359 - - (261 869) 2 183 419 Pre-delivery payments 24 568 205 483 1 490 (1 210) - 230 331 Vehicles, furniture and equipment and computer equipment 18 739 4 776 - - (6 875) 16 640 2 314 082 511 049 1 490 (1 210) (280 378) 2 545 033

Reconciliation of property, plant and equipment – Company – 2015

Foreign Opening Payments Interest exchange balance Additions made Disposals capitalised movements Depreciation Total

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

Properties and buildings 34 313 5 782 - - - - (790) 39 305 Leasehold improvements 29 305 3 437 - - - - (9 585) 23 157 Aircraft and flight simulator equipment 2 183 419 244 991 - - - - (378 961) 2 049 449 Pre-delivery payments 230 331 - 288 161 - 10 647 37 249 - 566 388 Vehicles, furniture and equipment and computer equipment 16 445 20 556 - (44) - - (6 050) 30 907 2 493 813 274 766 288 161 (44) 10 647 37 249 (395 386) 2 709 206

Reconciliation of property, plant and equipment – Company – 2014

Foreign Opening Interest exchange balance Additions capitalised movements Depreciation Total

R’000 R’000 R’000 R’000 R’000 R’000

Properties and buildings 34 967 95 - - (749) 34 313 Leasehold improvements 29 854 10 336 - - (10 885) 29 305 Aircraft and flight simulator equipment 2 154 929 290 359 - - (261 869) 2 183 419 Pre-delivery payments 24 568 205 483 1 490 (1 210) - 230 331 Vehicles, furniture and equipment and computer equipment 18 149 4 564 - - (6 268) 16 445 2 262 467 510 837 1 490 (1 210) (279 771) 2 493 813

Comair Limited 94 Integrated Annual Report 2015 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 (2014: R129 million).

The net book value of property, plant and equipment held under instalment sale and finance lease agreements is disclosed in note 13.

Pre-delivery payments are payments made to the Boeing Company for the remaining four (4) of eight (8) new Boeing 737-800 aircraft which arrived in South Africa from July 2012. The finance for the aircraft was partly through a rights issue during the 2010 financial year and a further loan through Investec Limited which is disclosed in note 13. Future capital commitments relating to the Boeing 737-800s are disclosed in note 26. Borrowing costs capitalised to the pre-delivery payments are incurred at a rate of 3.7% on a US Dollar-based facility concluded in 2012.

4. Intangible assets

2015 2014

Accumulated Accumulated Group and Company Cost/Valuation amortisation Carrying value Cost/Valuation amortisation Carrying value

R’000 R’000 R’000 R’000 R’000 R’000

Computer software 58 596 (31 106) 27 490 51 844 (20 738) 31 106

Reconciliation of intangible assets – Group and Company – 2015

Opening balance Additions Amortisation Total

R’000 R’000 R’000 R’000

Computer software 31 106 6 753 (10 369) 27 490

Reconciliation of intangible assets – Group and Company – 2014

Opening balance Additions Amortisation Total

R’000 R’000 R’000 R’000

Computer software 41 475 - (10 369) 31 106

Other information The Intangible asset relates to the implementation of SABRE Airline Solutions which was fully operational in the 2012 financial and Openjaw Travel Portal development costs.

Comair Limited 95 Integrated Annual Report 2015 5. Loan to Share Incentive Trust

Group Company

2015 2014 2015 2014

Notes R’000 R’000 R’000 R’000

Loan to Share Incentive Trust - - 3 054 3 814

This loan relates to the Comair Share Incentive Trust’s acquisition of 21 million ordinary shares at 72 cents per share in June 1998. The term of the loan is unspecified and it bears no interest.

At year end the Trust held 4 983 598 shares representing 1.1% of shares in issue (prior year: 4 992 531 shares representing 1.1%) at a closing price of 430c (2014: 448c).

6. Investments in and loans to subsidiaries

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Non-current portion

Aconcagua 32 Investments Proprietary Limited Investment at cost - - 16 732 16 732 Loan receivable - - 837 2 527

1 ordinary share of R1 at cost (100% shareholding)

The company is the owner of Erf 700, Rhodesfield Township. This is the only asset in its books, valued at R22 million. There are no material liabilities in this company. The share in the company was acquired during May 2008. The loan is interest free and not repayable in the next 12 months.

Holiday Tours Proprietary Limited Investment at cost - - 2 593 2 593

1 million shares of 1 cent each at cost (100% shareholding)

The Company acquired 65% of the issued share capital in the 2011 financial year. In December 2011, the remaining 35% shareholding was acquired at a cost of R35 000. The company is a tour operating company offering holiday packages.

Comair Limited 96 Integrated Annual Report 2015 Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Churchill Finance Services 23 Limited Investment at cost - - 10 10

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.

The company is currently being liquidated.

Imperial Air Cargo Proprietary Limited Investment at cost - - - -

100 ordinary shares of R 1 at cost (100% shareholding )

The company is currently dormant

Total non-current portion - - 20 172 21 862

Alooca Technologies Proprietary Limited Loan receivable - - 26 589 27 517

100 ordinary shares of R1 at cost (100% shareholding)

The company acquired Erven 674, 684, 685, 687, 688, 689, 690, 695 and 1040 in Rhodesfield Township with funding from Comair Limited. The properties at cost are valued at R30.8 million (2014: R30.8 million).

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

Kulula Air Proprietary Limited Loan receivable - - 4 739 3 823 Impairment of loan - - (4 739) - 100 ordinary shares of R1 at cost (100% shareholding)

This company operates a Business Lounge situated opposite the Gautrain Station in Sandton. The Lounge commenced operations in August 2011.

Comair Limited 97 Integrated Annual Report 2015 6. Investments in and loans to subsidiaries (continued)

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Comair Catering Proprietary Limited - - 13 13 Loan receivable

100 ordinary shares of R1 at cost (100% shareholding)

This dormant company has a bank account which has been funded by Comair Limited.

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

Holiday Tours Propreitary Limited Loan receivable - - 6 601 -

The loan is unsecured, has no fixed repayment term and is interest free. Total current portion - - 33 203 31 353

Total investment in subsidiaries - - 53 375 53 215 Maximum amount exposed to credit risk - - 38 779 33 880

7. Investments in associates Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interests in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.

The following table lists all of the associates in the Group:

% ownership % ownership Carrying Carrying Name of company interest interest amount amount 2015 2014 2015 2014

R’000 R’000

Commuter Handling Services Proprietary Limited held by Comair Limited 40.00% 40.00% 14 114 10 104 Imperial Air Cargo Proprietary Limited held by Comair Limited - % 30.00% - - OR Tambo Hospitality Proprietary Limited held by Aconcagua 32 Investments Proprietary Limited 49.00% 25.00% 22 149 4 360 Comair Mozambique Limitada held by Comair Limited 49.00% 49.00% - - 36 263 14 464

Long-term portion 28 411 6 612 Short-term portion 7 852 7 852 36 263 14 464

Comair Limited 98 Integrated Annual Report 2015 Reconciliation to carrying amounts – 2015

Group share of Loans to/(from) retained income/ Total associate (accumulated loss) Loan impairment carrying value

R’000 R’000 R’000 R’000

Commuter Handling Services Proprietary Limited 7 852 6 262 - 14 114 OR Tambo Hospitality Proprietary Limited 15 000 7 149 - 22 149

Reconciliation to carrying amounts – 2014

Group share of Loans to/(from) retained income/ Total associate (accumulated loss) Loan impairment carrying value

R’000 R’000 R’000 R’000

Commuter Handling Services Proprietary Limited 7 852 2 252 - 10 104 Imperial Air Cargo Proprietary Limited 15 559 (12 977) (2 582) - OR Tambo Hospitality Proprietary Limited - 4 360 - 4 360

The summarised financial information in respect of the Group’s associates is set out below.

Summarised financial information of material associates

2015

Non-current Net current Capital and Total equity Summarised Statement of assets assets Total assets reserves Liabilities and liabilities Financial Position R’000 R’000 R’000 R’000 R’000 R’000

Commuter Handling Services Proprietary Limited 8 071 47 596 55 667 11 934 43 733 55 667 OR Tambo Hospitality Proprietary Limited 51 341 21 398 72 739 42 336 30 403 72 739

Profit (loss) from Total continuing comprehensive Summarised Statement of Comprehensive Income Revenue operations income

R’000 R’000 R’000

Commuter Handling Services Proprietary Limited 239 339 10 026 10 026 OR Tambo Hospitality Proprietary Limited 13 655 5 588 5 588 252 994 15 614 15 614

Comair Limited 99 Integrated Annual Report 2015 7. Investments in associates (continued)

2014

Non-current Net current Capital and Summarised statement of assets assets Total assets reserves Liabilities Total liabilities financial position R’000 R’000 R’000 R’000 R’000 R’000

Commuter Handling Services Proprietary Limited 9 241 8 642 17 883 (1 908) 19 791 17 883 Imperial Air Cargo Proprietary Limited 3 722 26 278 30 000 (43 257) 73 257 30 000 OR Tambo Hospitality Proprietary Limited 112 437 8 205 120 642 17 439 103 203 120 642

Profit (loss) Total from continuing comprehensive Summarised statement of comprehensive income Revenue operations income

R’000 R’000 R’000

Commuter Handling Services Proprietary Limited 203 236 3 703 3 703 Imperial Air Cargo Proprietary Limited 167 826 7 450 7 450 OR Tambo Hospitality Proprietary Limited 22 251 12 324 12 324

During the course of the year the Company acquired the remaining 70% shareholding of Imperial Air Cargo Proprietary Limited from Imperial Holdings Limited resulting in Imperial Air Cargo becoming a wholly owned subsidiary.

The maximum credit exposure for the Company and Group amount to R22 852 000 (2014: R23 411 000). The balance of the loans receivable is considered to be recoverable and not past due.

8. Goodwill

2015 2014

Cost Accumulated Carrying Accumulated Carrying Group impairment value Cost impairment value R’000 R’000 R’000 R’000 R’000 R’000

Gross amount and carrying value 6 615 - 6 615 3 668 - 3 668

Reconciliation of goodwill

Additions through Opening business balance combinations Total

R’000 R’000 R’000

Reconciliation of goodwill – Group – 2015 3 668 2 947 6 615

Reconciliation of goodwill – Group – 2014 3 668 - 3 668

Comair Limited 100 Integrated Annual Report 2015 The net book value of goodwill has been allocated to the following cash generating units (CGU’s):

Group

2015 2014

Holiday Tours Proprietary Limited 3 668 3 668 Highly Nutritious Food Company Proprietary Limited 2 947 - 6 615 3 668

Goodwill arising in business combinations is allocated, at acquisition, to the CGUs acquired and those expected to benefit from that business combination. The Group tests goodwill for impairment at least annually by estimating the recoverable amount of any CGU to which goodwill has been allocated. The recoverable amount of all significant amounts of goodwill are estimated by using the higher of the value in use method and the fair value less cost to sell. During the current year, all recoverable amounts were based on value in use. A discounted cash flow valuation model is applied using five-year forecasts based on detailed budgets and management estimates. The process ensures that all significant risks and sensitivities are appropriately considered and factored into these forecasts. Key assumptions are based on industry-specific performance levels as well as economic indicators approved by the executive and their impact on turnover and operating margins. These assumptions are generally consistent with external sources of information and with past experience of the impact thereof on the Group’s cash flow. Cash flows for the second and third years are forecast by applying individual estimated sustainable levels of growth for the specific businesses, taking into account the drivers of the economic sectors in which they operate and their expected impact on turnover and margins, their business strategies and the risks they face. For the fourth and fifth years and terminal value, cash flows are determined by using estimated sustainable growth levels for CGUs ranging from 5% to 10% and 5% to 7% per annum, respectively. Beyond the short-term, they are derived from the use of a common forecasting process followed across the Group. Discount rates applied to cash flow projections are based on a South African-specific weighted average cost of capital (WACC), which takes into account appropriate risk-free rates adjusted for market risk, company-specific risk, effective rates of taxation, cost of debt and the relevant weighting between debt and equity. The WACC applied to all CGUs is 8.07% (2014: 8.06%). Consideration was given as to whether the factors pertaining to any of the CGUs warranted the use of an adjusted rate, but it was not considered necessary. No impairment losses were required to be recognised during the current year.

9. Inventory

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Catering equipment and consumables 10 482 7 608 10 437 7 608

Comair Limited 101 Integrated Annual Report 2015 10. Trade and other receivables

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Trade receivables 165 768 351 750 164 937 336 580 Impairment allowance (4 876) (1 096) (4 876) (1 096) 160 892 350 654 160 061 335 484 Deposits 142 164 140 716 142 177 140 716 Other receivables - 31 856 - 31 856 303 056 523 226 302 238 508 056

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 to sell air tickets for cash rather than on credit.

Included in the Group’s trade receivables balance are debtors with a carrying value of R2.0 million (2014: R4 million) which are past due at the reporting date for which the Group has not provided an impairment as the amounts are still considered recoverable.

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Trade and other receivables past due but not impaired 120 days - 1 234 2 403 1 234 2 403 120 days + 785 1 640 785 1 640

Trade and other receivables impaired 120 days - - - - - 120 days + 4 876 1 096 4 876 1 096

Reconciliation of provision for impairment of trade and other receivables Opening balance 1 096 3 030 1 096 3 030 Provision for impairment 3 780 3 780 - Reversal during the period - (1 934) - (1 934) 4 876 1 096 4 876 1 096

11. Cash Encumbered

The Group has pledged cash totalling £500 000 to the St Helena Government for the operation of its new route to St Helena which will commence in March 2016. The Company has pledged cash balances in favour of the Air Traffic and Navigation Services of R7.5 million and to the SA Insurance Company of R250 000 (2014: R20 million in respect of aircraft lease obligations).

Comair Limited 102 Integrated Annual Report 2015 12. Share capital

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

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 1 000 000 Preference shares of 1 cent each 10 10 10 10 10 760 10 760 10 760 10 760

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Issued 440 263 099 (2014: 489 176 471) ordinary shares of 1 cent each 4 403 4 892 4 403 4 403 Repurchase of 10% of share capital (48 913 372 ordinary shares of 1 cent each) - (489) - (489) Conversion of 29 067 766 ‘A’ Class shares into ordinary shares 290 - 290 - 74 117 647 ‘A’ Class shares of 1 cent each 741 741 741 741 Conversion of 29 067 766 ‘A’ Class shares into ordinary shares (290) - (290) - Repurchase of 45 049 881 ‘A’ Class shares (451) - (451) - Adjustment in respect of consolidation of Share Trust 4 983 598 (2014: 4 992 531) (50) (50) - - 4 643 5 094 4 693 5 144

At a general meeting of the Group held on 14 September 2006, shareholders approved by way of various special resolutions the creation, specific issue and re-purchase of the ‘A’ shares, as well as the dividend and voting policy relating to those shares. The ‘A’ shares will be converted to equity if the hurdle rate is achieved. The hurdle rate is set out as per the circular issued on the 23 August 2006. Refer to note 20 below. The ‘A’ shares shall vote as a single class at all meetings of shareholders of the Group, save for resolutions of the Group relating to the rights and privileges of the ‘A’ shares such that the holders of the ‘A’ shares shall not be entitled to vote or approve any resolution that would otherwise have been passed or not by the required majority of votes, collectively, of the holders of the ordinary shares and the ‘A’ shares (other than resolutions relating to the rights and privileges of the ‘A’ shares.) The ‘A’ shares will not be listed on the JSE and will not be taken into account for the purposes of categorisation transactions under the JSE Listings Requirements. The ‘A’ shares will not be listed on any security exchange but are convertible into ordinary shares on a ‘one-for-one’ basis and are not entitled to dividends and voting rights. The Group wound up its BEE transaction during the year resulting in the conversion of 29 067 766 ‘A’ class shares into ordinary shares and the repurchase of the remaining 45 049 881 shares at a cost of 1 cent each.

Comair Limited 103 Integrated Annual Report 2015 13. Interest-bearing liabilities

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Rand Merchant Bank Aircraft instalment sale agreements Aircraft instalment sale agreement 243 972 276 232 243 972 276 232 Less: Finance raising fees (10 771) (12 224) (10 771) (12 224)

Instalment sale agreement payable in 40 quarterly instalments with the final payment due on 12 October 2022. Interest is charged at a variable rate – currently 7.4% (prior year: 7.1%). The current instalment is R12 million.

One aircraft mortgage serves as collateral covering security with a net book value of R323 million (prior year: R333 million).

Aircraft instalment sale agreement 243 929 276 193 243 929 276 193 Less: Finance raising fees (10 661) (12 114) (10 661) (12 114)

Instalment sale agreement payable in 40 quarterly instalments with the final payment due on 12 October 2022. Interest is charged at a variable rate – currently 7.4% (prior year: 7.1%). The current instalment is R12 million.

One aircraft mortgage serves as collateral covering security with a net book value of R319 million (prior year: R329 million).

Aircraft instalment sale agreement 224 265 254 909 224 265 254 909 Less: Finance raising fees (9 897) (11 278) (9 897) (11 278)

The instalment sale agreement was payable in 41 quarterly instalments with the final payment due on 12 July 2022. RMB has entered into a selldown agreement with Nedbank for this loan. Interest is charged at a variable rate – currently 7.4% (prior year: 7.1%). The current instalment is R12 million.

One aircraft mortgage serves as collateral covering security with a net book value of R293 million (prior year: R303 million).

Simulator loan Instalment sale agreement - 34 909 - 34 909

Instalment sale agreement payable in 30 quarterly instalments with the final payment due on 8 June 2018. Interest was charged at a variable rate of 10%. The loan was early settled on the 8 December 2014.

Comair Limited 104 Integrated Annual Report 2015 Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Private Export Funding Corporation Aircraft instalment sale agreement 344 307 331 452 344 307 331 452 Less: Finance raising fees (10 960) (12 438) (10 960) (12 438)

A US$ based aircraft instalment sale agreement payable in 40 quarterly instalments with the final payment due on 15 November 2022. Interest is charged at a fixed rate of 2.35% The current instalment is US$1 million.

Investec Limited Mortgage finance agreement 15 729 19 425 15 729 19 425

This mortgage finance agreement is payable in 28 quarterly instalments with the final payment due on 30 September 2019. Erf 700 Rhodesfield Township has been pledged as collateral for this mortgage finance agreement. A mortgage bond of R25 9 million has been registered against this property. Interest is charged at a variable rate – currently 9.9% (prior year 9.5%). The current instalment is R1 3 million.

Working capital loan 39 651 120 463 39 651 120 463

This loan forms part of a facility granted by the bank. Cross collaterisation of properties serves as security for this loan. There are no repayment terms and interest is charged quarterly at a variable rate – currently 9.6% (prior year 9.3%.) Capital of R80 million was repaid during the current year.

Boeing 737-800 382 068 54 213 382 068 54 213

A facility for pre-delivery payments required for four new 737-800 aircraft on order. Cross-collateralisation 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 quarterly – currently 4.0% (prior year 4.0%.) The aircraft will be delivered between August 2015 and November 2016. Sub-total 1 451 632 1 319 742 1 451 632 1 319 742 Less: current portion (469 580) (136 670) (469 580) (136 670) Non-current portion 982 052 1 183 072 982 052 1 183 072

Total value of interest-bearing liabilities 1 451 632 1 319 742 1 451 632 1 319 742 Finance charges 234 915 279 114 234 915 279 114 Total interest-bearing liability commitments 1 686 547 1 598 856 1 686 547 1 598 856

Comair Limited 105 Integrated Annual Report 2015 13. Interest-bearing liabilities (continued)

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Total commitments for year one 524 545 201 527 524 545 201 527 Total commitments for years two to five 798 680 867 027 798 680 867 027 Total commitments after year five 363 322 530 302 363 322 530 302 Total commitments for the year 1 686 547 1 598 856 1 686 547 1 598 856

Capital commitments for year one 469 580 136 670 469 580 136 670 Capital commitments for years two to five 696 763 689 623 696 763 689 623 Capital commitments after year five 285 289 493 449 285 289 493 449 Allocation of present valued amounts 1 451 632 1 319 742 1 451 632 1 319 742

14. Deferred taxation Net deferred tax liability

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Deferred tax liability (217 316) (167 689) (217 316) (169 226) Deferred tax asset 4 965 - - - Net deferred tax liability (212 351) (167 689) (217 316) (169 226)

On temporary differences arising from:

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Plant and equipment (319 948) (269 507) (314 983) (269 507) Staff obligations and accruals 69 663 63 390 64 429 63 390 Unflown ticket liability 39 104 48 060 39 104 48 060 Prepayments (6 135) (9 632) (5 866) (11 169) Calculated tax loss 4 965 - - - (212 351) (167 689) (217 316) (169 226)

Comair Limited 106 Integrated Annual Report 2015 Reconciliation of deferred tax asset/(liability)

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

At beginning of year (167 689) (135 696) (169 226) (136 678) Accelerated capital allowances (50 441) (51 878) (45 476) (51 878) Staff obligations and accruals 6 273 3 361 1 039 3 361 Unflown ticket liability (8 956) 14 745 (8 956) 14 745 Prepayments 3 497 1 779 5 303 1 224 Increase in tax loss available for set-off against future taxable income 4 965 - - - (212 351) (167 689) (217 316) (169 226)

Recognition of deferred tax asset There are no unrecognised deferred taxation assets or losses.

15. Trade and other payables

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Trade payables 751 577 1 039 856 739 934 1 017 927 - - - - Share options granted to employees (32 500) (21 666) (32 500) (21 666) Share options recognised as short-term portion (2014: long-term portion) 32 500 21 666 32 500 21 666 Other payables 33 503 36 315 33 499 36 315 785 080 1 076 171 773 433 1 054 242

Trade creditor terms vary, depending on the agreements. An average of 30 days from statement is fair. Average days outstanding is 37 days.

Cash settled, share-based payments – 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.

16. Provisions Reconciliation of provisions – Group – 2015

Opening balance Raised Utilised Total

R’000 R’000 R’000 R’000

Leave pay provision 48 128 15 322 (12 709) 50 741 Bonus provision 51 591 85 738 (78 807) 58 522 99 719 101 060 (91 516) 109 263

Comair Limited 107 Integrated Annual Report 2015 16. Provisions (continued)

Reconciliation of provisions – Group – 2014

Opening balance Raised Utilised Total

R’000 R’000 R’000 R’000

Leave pay provision 43 994 15 305 (11 171) 48 128 Bonus provision 72 218 68 258 (88 885) 51 591 116 212 83 563 (100 056) 99 719

Reconciliation of provisions – Company – 2015

Opening balance Raised Utilised Total

R’000 R’000 R’000 R’000

Leave pay provision 48 128 15 294 (12 679) 50 743 Bonus provision 51 591 85 630 (78 759) 58 462 99 719 100 924 (91 438) 109 205

Reconciliation of provisions – Company – 2014

Opening balance Raised Utilised Total

R’000 R’000 R’000 R’000

Leave pay provision 43 994 15 305 (11 171) 48 128 Bonus provision 72 218 68 258 (88 885) 51 591 116 212 83 563 (100 056) 99 719

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 July.

17. Financial liabilities Fair value hierarchy of derivative used for hedging For financial liabilities recognised at fair value, disclosure is required of a fair value hierarchy which reflects the significance of the inputs used to make the measurement.

Level 2 applies inputs other than quoted prices that are observed for the liabilities either directly (as prices) or indirectly (derived from prices). Group Company

2015 2014 2015 2014 Level 2 R’000 R’000 R’000 R’000

Financial derivative – Oil hedges 40 387 - 40 387 -

The open hedge contracts have been revalued at year end using the confirmed mark to market from Investec Bank Limited.

Comair Limited 108 Integrated Annual Report 2015 18. Risk management

The Group finances its operations through a combination of accumulated profits, current borrowings and non-current borrowings. The Group also enters into Forward Exchange Contracts to manage the currency risks of its operations. The main risks arising in the normal course of business from the Group’s financial instruments are currency, interest rate, price and liquidity risk. This note presents information on the Group’s exposure to these risks. The Board of Directors is responsible for risk management activities in the Group. The carrying values equate to the fair values of each financial instrument.

The carrying value of short-term financial instruments approximates fair value due to their short-term nature, and all interest-bearing financial liabilities carried at amortised cost bear interest at market-related rates. Hence the carrying values of these financial instruments equate to their fair values.

Identification of financial instruments

At fair value Financial through profit Loans and liabilities at Non-financial 2015 (loss) receivables amortised cost instruments Total

R’000 R’000 R’000 R’000 R’000

Assets Non-current assets Property, plant and equipment - - - 2 760 584 2 760 584 Intangible assets - - - 27 490 27 490 Investments in and loans to associates - - - 28 411 28 411 Goodwill - - - 6 615 6 615 Deferred taxation - - - 4 965 4 965 Current assets Inventories - - - 10 482 10 482 Trade and other receivables - 160 892 - 142 164 303 056 Investments in and loans to associates - 7 852 - - 7 852 Taxation - - - 36 650 36 650 Cash and cash equivalents - 849 278 - - 849 278 Total assets - 1 018 022 - 3 017 361 4 035 383

Comair Limited 109 Integrated Annual Report 2015 18. Risk management (continued)

At fair value Financial through profit Loans and liabilities at Non-financial 2015 (loss) receivables amortised cost instruments Total

R’000 R’000 R’000 R’000 R’000 Equity and liabilities Capital and reserves Share capital - - - 4 643 4 643 Non-distributable reserves - - - (40 387) (40 387) Accumulated profit - - - 1 201 045 1 201 045 Non-controlling interest - - - 889 889 Liabilities Interest-bearing liabilities - - 982 052 - 982 052 Deferred taxation - - - 217 316 217 316 Current liabilities Trade and other payables - - 785 080 - 785 080 Unutilised ticket liability - - - 233 015 233 015 Provisions - - - 109 263 109 263 Interest-bearing liabilities - - 469 580 - 469 580 Share-based payment - - - 32 500 32 500 Financial liabilities 40 387 - - - 40 387 Total equity and liabilities 40 387 - 2 236 712 1 758 284 4 035 383

At fair value Financial through profit Loans and liabilities at Non-financial 2014 (loss) receivables amortised cost instruments Total

R’000 R’000 R’000 R’000 R’000

Assets Non-current assets Property, plant and equipment - - - 2 545 033 2 545 033 Intangible assets - - - 31 106 31 106 Investments in associates - - - 6 612 6 612 Goodwill - - - 3 668 3 668 Current assets Inventories - - - 7 608 7 608 Trade and other receivables - 350 654 - 172 572 523 226 Investments in and loans to associates - 7 852 - - 7 852 Current tax receivable - - - 30 540 30 540 Cash and cash equivalents - 867 703 - - 867 703 Total assets - 1 226 209 - 2 797 139 4 023 348

Comair Limited 110 Integrated Annual Report 2015 At fair value Financial through profit Loans and liabilities at Non-financial 2014 (loss) receivables amortised cost instruments Total

R’000 R’000 R’000 R’000 R’000

Equity and liabilities Capital and reserves Share capital - - - 5 094 5 094 Non-distributable reserves - - - 27 424 27 424 Accumulated profit - - - 1 035 452 1 035 452 Non-current liabilities Interest-bearing liabilities - - 1 183 072 - 1 183 072 Deferred taxation - - - 167 689 167 689 Share-based payments - - - 21 666 21 666 Current liabilities Trade and other payables - - 1 076 171 - 1 076 171 Unutilised ticket liability - - - 270 391 270 391 Provisions - - - 99 719 99 719 Interest-bearing liabilities - - 136 670 - 136 670 Total liabilities - - 2 395 913 1 627 435 4 023 348

Financial assets are substantially the same for the Group and the Company, however loans to subsidiaries amount to R53.3 million (2014: R37.3 million) and are classified as loans and receivables.

Financial liabilities are substantially the same for the Group and the Company.

Interest rate risk The Group is exposed to interest rate risk as it borrows and places funds. This risk is managed by managing the Group’s exposure on long-term loans and placing surplus funds in investments that yield a market-linked return.

Management reviews the interest rate risk on an ongoing basis. Where new loans are entered into, management compares interest rates offered by various institutions and where considered more favourable, may enter into loans in foreign currency. The interest rate risk is viewed in conjunction with the foreign exchange risk.

The Group, as part of its financing activities, enters into foreign denominated interest-bearing loans. The foreign exchange rate exposure is monitored by management in conjunction with the interest rate exposure which would have been incurred had a Rand-denominated loan been taken out. Refer to sensitivity analysis below.

Credit risk Credit risk relates to the potential of non-recovery of bank and call deposits and loans and trade receivables. At the reporting date, the Group did not consider there to be any significant concentration of credit risk which has not been adequately provided for.

Liquidity risk The liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash resources and unutilised borrowing facilities are maintained. The maturity profile of financial liabilities is as follows:

Comair Limited 111 Integrated Annual Report 2015 18. Risk management (continued)

Carrying Contractual Within Two to More than amount cash flows one year five years five years No fixed terms

R’000 R’000 R’000 R’000 R’000 R’000

2015 Secured non-current borrowings 982 052 1 162 002 - 798 680 363 322 - Secured short-term borrowings 469 580 524 545 524 545 - - - Trade and other payables 783 080 783 080 783 080 - - - Total financial liabilities – Group and Company 2 235 165 2 469 627 1 307 625 798 680 363 322 - Total financial assets – Group 875 201 - 160 892 - - 7 852

2014 Secured non-current borrowings 1 183 072 1 397 329 - 867 027 530 302 - Secured short-term borrowings 136 670 201 527 201 527 - - - Trade and other payables 1 076 171 1 076 171 1 076 171 - - - Total financial liabilities – Group and Company 2 395 913 2 675 027 1 277 698 867 027 530 302 - Total financial assets – Group 1 232 821 1 232 821 1 218 357 - - 14 464

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.

Exchange rates used for conversion of foreign items were: 2015 2014

US$ (spot at 30 June) 12.128 10.417 GBP 19.081 17.793

Approximately 50% of operating costs are incurred and approximately 31% of revenue is based in foreign currency. The following uncovered foreign currency amounts are included in the Financial Statements at year end: net short-term liabilities of US$5 889 064 (2014: US$6 744 987) and GBP439 334 (2014: GBP1 480 062) and net short-term receivables of GBP3 639 494 (2014: GBP3 393 836).

The Group, as part of its financing activities, enters into foreign denominated interest-bearing loans. The foreign exchange rate exposure is monitored by management in conjunction with the interest rate exposure which would have been incurred had a Rand-denominated loan been taken out.

Sensitivity analysis The sensitivity analysis below calculates the impact of movements in the foreign exchange rates in which the Group transacts as well as in interest rates on the Group’s profits. The analysis is based on closing balances at year end.

Interest and related foreign currency amounts incurred on account of aircraft and other qualifying assets under construction are capitalised and added to the asset concerned and therefore do not affect profit or loss.

The movements are recognised in other property, plant and equipment until such time as the other qualifying asset is complete and the aircraft has been delivered and recognised, in which case these amounts are no longer recognised and are expensed in profit or loss when incurred.

Comair Limited 112 Integrated Annual Report 2015 The effect of the movement in the interest rate was only calculated for the estimated period that the loan will be outstanding.

Foreign exchange risk profit (loss) should the Rand Interest rate risk profit (loss) should the exchange rate change by 5% interest rate change by 2%

Amount Amount Group Carrying exposed to Rand Rand exposed to Rate Rate value risk appreciation depreciation risk increase decrease

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

2015 Financial asset Trade and other receivables 160 892 8 171 (409) 409 - - - Cash and cash equivalents 849 278 251 299 (12 565) 12 565 849 278 16 986 (16 986) Impact of financial assets on: - profit before tax - - (12 974) 12 974 - 16 986 (16 986) - profit after tax - - (9 341) 9 341 - 12 230 (12 230)

Financial liabilities Interest bearing liabilities 1 451 632 333 347 16 667 (16 667) 1 451 632 (29 033) 29 033 Trade and other payables 783 553 79 806 3 990 (3 990) - - - Impact of financial liabilities on: - profit before tax - - 20 657 (20 657) - (29 033) 29 033 - profit after tax - - 14 873 (14 873) - (20 904) 20 904

Overall impact on profit after taxation - - (5 532) 5 532 - (8 674) 8 674

Foreign exchange risk profit (loss) should the Rand Interest rate risk profit (loss) should the exchange rate change by 5% interest rate change by 2%

Amount Amount Group Carrying exposed to Rand Rand exposed to Rate Rate value risk appreciation depreciation risk increase increase

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

2014 Financial assets Cash and cash equivalents 867 703 285 754 (14 288) 14 288 867 703 17 354 (17 354) Trade and other receivables 350 654 70 148 (3 507) 3 507 - - - Impact of financial assets on: - profit before tax - - (17 795) 17 795 - 17 354 (17 354) - profit after tax - - (12 812) 12 812 - 12 495 (12 495) Financial liabilities Interest-bearing liabilities 1 319 742 331 452 - - 1 319 742 (26 395) 26 395 Trade and other payables 1 076 171 323 062 16 153 (16 153) - - - Impact of financial assets on: - profit before tax - - 16 153 (16 153) - (26 395) 26 395 - profit after tax - - 11 630 (11 630) - (19 004) 19 004 Overall impact on profit after taxation - - (1 182) 1 182 - (6 509) 6 509

Comair Limited 113 Integrated Annual Report 2015 18. Risk management (continued)

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 2015 and 2014 were as follows:

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Total liabilities, excluding deferred taxation 2 651 877 2 787 689 2 640 172 2 765 760 Less: Cash and cash equivalents 849 278 867 703 832 027 858 118 Net debt 1 802 599 1 919 986 1 808 145 1 907 642 Adjusted equity 1 166 190 1 067 970 1 125 869 1 057 595 Adjusted capital ratio 1.54:1 1.80:1 1.61:1 1.80:1

19. Revenue

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Flight revenue 5 651 656 5 722 816 5 648 893 5 722 816 Rendering of services 157 616 136 768 156 595 126 715 Commissions received 55 702 34 191 36 966 34 895 Other 25 772 9 444 25 772 9 444 5 890 746 5 903 219 5 868 226 5 893 870

20. Profit from operations

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Operating expenses are stated after incorporating the following items: Auditors remuneration 1 118 779 1 042 670

Comair Limited 114 Integrated Annual Report 2015 Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Managerial, technical, administrative and secretarial services 43 622 55 583 43 622 55 583 Directors' remuneration (included in total staff costs) - for services as Directors and related committee work 3 062 2 680 3 062 2 680 - for managerial and other services 14 448 13 804 14 448 13 804 - retirement and medical benefits 1 290 1 149 1 290 1 149 - share-based payments 10 834 17 416 10 834 17 416 29 634 35 049 29 634 35 049

Only Directors are considered key management. A comprehensive breakdown per Director is included in the Report of Directors on pages 73 to 74.

Rentals under operating leases Property - Contractual amounts 27 018 20 171 29 758 22 647 Equipment and vehicles - Contractual amounts 5 095 4 800 4 669 4 800 Aircraft leases - Contractual amounts 203 491 193 644 203 491 193 644 235 604 218 675 237 918 221 091 Employment costs 772 792 693 728 769 236 690 629 Contributions to defined contribution funds 59 258 44 275 59 258 44 275 Total staff costs 832 050 738 003 828 494 734 904 Number of employees 2 088 2 026 - - Impairments Loan to associate 1 530 (2 235) - - Trading loan in subsidiary 6 269 - (Loss)/profit on exchange differences (36 680) 34 350 (36 680) 34 350

Equity-settled share-based payment (BEE transaction) This amount relates to the BEE transaction concluded in 2007 and is being equity accounted for (in terms of IFRS 2) using the Black-Scholes Option Valuation Model. The principal assumptions in applying the value of the options were as follows: 857 3 428 857 3 428 a. Volatility of 50%; b. Eight years to date of exercise; c. Dividend yield of 5%; d. Risk-free rate of 9.15%; and e. Strike price of R3.03.

Comair Limited 115 Integrated Annual Report 2015 20. Profit from operations (continued)

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Cash-settled, share-based payments This amount relates to the long-term incentive scheme concluded in 2013 and is being cash accounted for (in terms of IFRS 2) using the Black-Scholes Option Valuation Model. The principal assumptions in applying the value of the options were as follows: 15 084 17 416 15 084 17 416 a. Total vesting period is 36 months; b. Only holders in the employment of the Group after the vesting period will be entitled to receive a cash payout. For the purposes of the calculation it was estimated that all employees will remain in the employment of the Group; c. Strike price is R1.50; d. Risk-free rate is 5.22%; and e. Dividend yield was 2%.

Closed hedging positions for the period expensed through profit and loss 61 546 - 61 546 -

21. Interest expense

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Total interest paid 83 577 78 830 83 562 78 807 Bank interest 72 930 77 340 72 915 77 317 Interest capitalised to pre-delivery payments 10 647 1 490 10 647 1 490

Less: amount capitalised as borrowing costs (See note 3) (10 647) (1 490) (10 647) (1 490) Net interest 72 930 77 340 72 915 77 317

22. Taxation Major components of the tax expense

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Current Local income tax – current period 40 675 77 066 35 001 76 316

Deferred Deferred tax – current 25 957 31 993 32 595 32 548 Deferred tax – prior year adjustment 15 946 - 15 946 - 82 578 109 059 83 092 108 864

Comair Limited 116 Integrated Annual Report 2015 Reconciliation of the tax expense Reconciliation between applicable tax rate and average effective tax rate. Group Company

2015 2014 2015 2014

Applicable tax rate 28.00 % 28.00 % 28.00 % 28.00 %

Exempt income - % (0.10) % - % (0.10) % Assessed losses utilised - % (0.10) % - % (0.10) % Disallowable expenditure (0.60) % 1.40 % (0.60) % 1.40 % 27.40 % 29.20 % 27.40 % 29.20 %

23. Earnings per share

Group

2015 2014

R’000 R’000

Reconciliation of profit or loss for the year to basic earnings Earnings attributable to ordinary shareholders 218 777 264 851 Less: IAS 16 (profit) on disposal of property, plant and equipment (1 231) (524) Less: IAS 36 (reversal of impairment) impairment to loans to associates - (2 235) Add: taxation effect of profit on disposal 345 147 Add: IAS 36 impairment of loan to subsidiaries 1 530 - Headline earnings attributable to ordinary shareholders 219 421 262 239

Ordinary shares in issue ('000) 469 331 440 263 Adjustment in respect of share buy-back (6 692) 18 586 Adjustment in respect of consolidation of Share Trust (4 984) (4 993) Weighted ordinary shares in issue ('000) 457 655 453 856 Adjusted for dilutive effect of share options in issue - 483 Adjusted for dilutive effect of BEE transaction - 17 512 457 655 471 851 Earnings per share (cents) 47,8 58,4 Headline earnings per share (cents) 47,9 57,8 Diluted earnings per share (cents) 47,8 56,1 Diluted headline earnings per share (cents) 47,9 55,6 Dividends per share paid (cents) 18.0 15.0

Comair Limited 117 Integrated Annual Report 2015 24. Cash generated from operations

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Profit before taxation 301 354 373 910 272 048 371 072 Adjustments for: Depreciation and amortisation 405 812 290 747 405 754 290 140 Profit on sale of assets (1 231) (524) (1 231) (524) Income from equity accounted investments (6 799) (2 327) - - Interest received - investment (40 428) (32 149) (39 841) (31 515) Interest expense 72 930 77 340 72 915 77 317 Impairment loss (reversal) 1 530 (2 235) 6 269 - Cash-settled share-based payments 10 834 17 416 10 834 17 416 Equity-settled BEE transaction 857 3 428 857 3 428 Changes in working capital: Inventories (2 874) (522) (2 829) (522) Trade and other receivables 257 013 4 995 240 515 (5 161) Trade and other payables (318 923) 358 259 (296 994) 362 623 680 075 1 088 338 668 297 1 084 274

25. Taxation paid

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Balance at beginning of the year 30 540 30 942 28 999 30 558 Current tax for the year recognised in profit or loss (40 675) (77 066) (35 001) (76 316) Balance at end of the year (36 650) (30 540) (37 678) (28 999) (46 785) (76 664) (43 680) (74 757)

26. Commitments and contingencies

Group and Company capital commitments and contingencies Comair made pre-delivery payments of R288 million prior to year-end towards the delivery of four Boeing 737-800 aircraft due for delivery in late 2015 and early 2016. The Group had a remaining commitment to Boeing for R1.9 billion at year end (prior year: R1.5 billion), the funding of which will be finalised closer to the time of delivery of the aircraft. Pre-delivery payment finance has been arranged through Investec Bank.

Comair has also made deposits of R102 million towards the purchase of eight Boeing 737-8 MAX aircraft due for delivery from 2019 to 2021. Pre-delivery payments on these aircraft will commence in 2017. At year end, the Group had a remaining commitment to Boeing of R5.4 billion (2014: R4.6 billion), payable from 2017 to 2021, the funding of which will be finalised closer to the time of delivery.

Comair Limited 118 Integrated Annual Report 2015 Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Financial year 2015 - 315 652 - 315 652 Financial year 2016 1 143 368 982 063 1 143 368 982 063 Financial year 2017 392 117 336 797 392 117 336 797 1 535 485 1 634 512 1 535 485 1 634 512

Operating lease commitments

Group Company

2015 2014 2015 2014

R’000 R’000 R’000 R’000

Aircraft Commitments for year one 180 756 188 567 180 756 188 567 Commitments for years two to five 539 957 555 464 539 957 555 464 Commitments after year five 50 210 116 847 50 210 116 847 770 923 860 878 770 923 860 878

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

The Group acquired three previously Rand denominated leased aircraft for R107 million. The Group has six US$ denominated leases averaging US$204 000 per month, each which have no escalation clauses. These leases are included in the operating lease commitments outlined above.

Contingent liabilities The Company has signed subordination agreements with Imperial Air Cargo Proprietary Limited and Kulula Air Proprietary Limited (per note 6), which would represent a contingent liability in the amount of R29 million (2014: R10.3 million).

27. Borrowing powers

There are no restrictive funding arrangements in place.

28. Share incentive trust

Staff Share Incentive Scheme (Excluding BEE Equity-settled, share-based payment)

In terms of the Staff Share Incentive Scheme, shares are offered on an option or outright sale basis. Options vest over a period of one to five years. All options must be taken up by way of purchase by no later than ten years after the date of grant The exercise price of the option is not less than the market value of the ordinary shares on the date preceding the day of grant and the option is exercisable provided the participant has remained in the Group’s employ until the option vests. In the case of retirement/death/retrenchment, all options immediately vest. Options must be converted into shares.

In the event of retirement/death/retrenchment of a participant, options may be taken up and converted into cash within 12 months of such an event. The Directors of the Group have the discretion to extend this by a further 12 months. In the case of the resignation of a participant, options which have vested may be exercised within 30 days after date of resignation. Options which have not vested will be forfeited.

Comair Limited 119 Integrated Annual Report 2015 28. Share incentive trust (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: 1.1%) of issued share capital. The maximum number of options to be held by any participant in the scheme shall not exceed 1% (4.2 million shares) of the ordinary shares then in issue. The share option liability as per IFRS 2 at year end was R nil (prior year: R nil) based on the closing share price of R4.48 (prior year: R2.65).

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

2015 2014 2015 Weighted 2014 Weighted Number of average Number of average share options exercise price share options exercise price

Balance at the beginning of period 741 334 1.55 741 334 1.55 Balance at the end of the period 741 334 1.55 741 334 1.55

Share options extended and accepted during the year were done at the ruling market price on the date preceding the extension date. The options outstanding at 30 June 2015 become unconditional between the following dates:

Subscription 2015 2014 price Number of Number of R share options share options

1 September 2004 and 1 September 2007 0.80 33 334 33 334 5 December 2005 and 5 December 2010 1.70 133 000 133 000 5 June 2006 and 5 June 2011 1.57 575 000 575 000 741 334 741 334

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

29. Reclassification of comparatives and segmental reclassification

Comair offers travel and holiday package services using advanced technology, both locally and internationally, to consumers directly and via the retail travel trade. This business forms part of the non-airline segment of the Group and is disclosed as such in the Segmental Report. In terms of IAS 18 – Revenue, Comair acts as an agent for the collection of revenue on certain travel packages and these amounts, net of inventory costs, should be accounted for as commission received. In the financial year ended 30 June 2014 gross amounts were included in revenue, and the associated inventory costs were included in operating expenses which gives rise to the restatement. The restatement has no impact on the profit of the Group. The effect is a reduction in both revenue and operating expenses amounting to R379 million in the Statement of Comprehensive Income for the year ended 30 June 2014.

Effect on profit 2014 Re-presented or loss R’000 R’000 R’000

Revenue 6 282 219 5 903 219 379 000 Operating costs (5 577 457) (5 198 457) (379 000)

The Group is organised into two main business segments: Airline and Non-Airline. Previously “Non-airline” comprised the travel business, property investments, simulator business and Slow in the City. Lounges were initially established at main ACSA airports to improve customer experience and were therefore included in the Airline segment. However, the lounge business has since evolved into a self- sustainable business, generating third party Lounge Revenue and can now be considered independent of the Airline segment and will be reported as “Non-airline” for segmental reporting purposes.

Comair Limited 120 Integrated Annual Report 2015 Reclassified 2014 Re-presented segments Difference R’000 R’000 R’000

Segmental revenue Airline 5 819 632 5 730 306 89 326 Non-airline 83 587 172 913 (89 326) 5 903 219 5 903 219 -

Segmental result Airline 681 552 654 252 27 300 Non-airline 23 210 50 510 (27 300) 704 762 704 762 -

Depreciation Airline (285 734) (280 475) (5 259) Non-airline (5 013) (10 272) 5 259 (290 747) (290 747) -

30. Related parties Subsidiaries Inspect note 6 for investments in subsidiaries Associates Inspect note 7 for investments in associates Share Incentive Trust Inspect note 5 for the details Directors Inspect Directors renumeration on pages 73 to 74 of the Report of Directors

Group Company

2015 2014 2015 2014 Loan accounts – Owing (to) by related parties R’000 R’000 R’000 R’000

Related party balances

Alooca Technologies Proprietary Limited - 26 589 27 517 Aconcagua 32 Investments Proprietary Limited - 837 2 527 Kulula Air Proprietary Limited - 4 739 3 823 Commuter Handling Services Proprietary Limited 7 852 7 852 7 852 7 852 Imperial Air Cargo Proprietary Limited - 15 559 - 15 559 Comair Share Incentive Trust - 3 054 3 814 Holiday Tours Proprietary Limited 6 601 -

Amounts included in trade receivable (trade payable) regarding related parties 4 739 3 802 Kulula Air Proprietary Limited

Related party transactions

Rent paid to related parties Aconcagua 32 Investments Proprietary Limited - 1 662 1 510 Alooca Proprietary Limited - 1 078 966

Service Recovery Kulula Air Proprietary Limited 2 405 2 400

Comair Limited 121 Integrated Annual Report 2015 31. Retirement benefits Post-retirement benefits The Group contributes to the Old Mutual Superfund which is governed by the Pension Funds Act (Act No. 24 of 1956). The fund covers the majority of its employees and is a defined contribution scheme. Contributions paid by the Group companies are charged against income as incurred.

32. 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.

33. Business combinations

Highly Nutritious Food Company Proprietary Limited and Imperial Air Cargo Proprietary Limited On 1 May 2015, the Group acquired the remaining 70% of the share capital in Imperial Air Cargo Proprietary Limited and 56% of the share capital in the Highly Nutritious Food Company Proprietary Limited. These acquistions were acquired for an aggregate consideration of R210, comprising cash and subscription shares payable.

Imperial Air Cargo Proprietary Limited contributed nil revenue and net profit to the Group and it has been dormant since aquisition.

The Highly Nutritious Food Company Proprietary Limited contributed a net loss after tax of R4 125 and R869 000 in revenue since acquisition.

These amounts have been calculated using the Group’s accounting policies.

Group

2015

R’000

Purchase consideration

The assets and liabilities arising from the acquisitions are as follows: Property, plant and equipment 118 Trade receivables 357 Inventory 50 Cash and cash equivalents 87 Trade and other payables (38) Shareholder loans (4 410) (3 836) Non-controlling interest 889 Goodwill 2 947 Purchase consideration -

Purchase consideration - - Settled in cash - - Settled in amount payable -

Cash outflow on acquisition -

The goodwill arises from the expected synergies from the acquisition.

Comair Limited 122 Integrated Annual Report 2015 34. New accounting pronouncements

Annual periods Standard Details of amendments beginning of after

1 July 2016 IFRS 5 Annual Improvements 2012–2014 Cycle: Amends IFRS 5 to clarify that when an entity reclassifies an Non-current asset (or disposal group) directly from being held for sale to being held for distribution (or vice-versa), Assets Held the accounting guidance in paragraphs 27–29 of IFRS 5 does not apply. The amendments also state for Sale and that when an entity determines that the asset (or disposal group) is no longer available for immediate Discontinued distribution or that the distribution is no longer highly probable, it should cease held-for-distribution Operations accounting and apply the guidance in paragraphs 27–29.

Annual Improvements 2012–2014 Cycle: The amendments provide additional guidance to help 1 July 2016 entities identify the circumstances under which a servicing contract is considered to be 'continuing involvement' for the purposes of applying the disclosure requirements in paragraphs 42E–42H of IFRS 7. Such circumstances commonly arise when, for example, the servicing fee is dependent on the IFRS 7 amount or turning of the cash flows collected from the transferred financial asset or when a fixed fee is Financial not paid in full due to non-performance of that asset. Instruments: Disclosures Annual Improvements 2012–2014 Cycle: These amendments clarify that the additional disclosure 1 July 2016 required by the recent amendments to IFRS 7 Disclosure-Offsetting Financial Assets and Financial Liabilities is not specifically required for all interim periods. However, the additional disclosure is required to be given in condensed interim financial statements that are prepared in accordance with lAS 34 Interim Financial Reporting when its inclusion would be necessary in order to meet the general principles of lAS 34. IFRS 9 1 January 2018 IFRS 9 Financial Instruments (2014) replaces IAS 39 Financial Instruments: Recognition and Financial Measurement. Instruments Amendments to address an acknowledged inconsistency between the requirements in IFRS 10 1 January 2016 Consolidated Financial Statements and those in IAS 28 (2011) Investments in Associates in dealing with the sale or contribution of a subsidiary.

Amendments confirming that the IFRS 10.4(a) consolidation exemption is also available to parent 1 January 2016 entities which are subsidiaries of investment entities where the investment entity measures its IFRS 10 investments at fair value in terms of IFRS 10.31. Consolidated Financial Amendments modifying IFRS 10.32 to state that the consolidation requirement only applies to 1 January 2016 Statements subsidiaries who are not themselves investment entities and whose main purpose is to provide services which relate to the investment entity’s investment activities.

Amendments providing relief to non-investment entity investors in associates or joint ventures that are 1 January 2016 investment entities by allowing the non-investment entity investor to retain, when applying the equity method, the fair value measurement applied by the investment entity associates or joint ventures to their interests in subsidiaries. IFRS 11 1 January 2016 Amendments to provide guidance on the accounting for the acquisition of an interest in a joint Joint operation in which the activity of the joint operation constitutes a business. Arrangements IFRS 15 1 January 2018 New guidance on recognition of revenue that requires recognition of revenue in a manner that depicts Revenue from the transfer of goods or services to customers at an amount that reflects the consideration the entity Contracts with expects to be entitled to in exchange for those goods or services. Customers Amendments clarifying IAS 1’s specified line items on the statement(s) of profit and loss and other 1 January 2016 comprehensive income and the statement of financial position can be disaggregated. IAS 1 Presentation Additional requirements of how entities should present subtotals in the statement(s) of profit or loss and other 1 January 2016 of Financial comprehensive income and the statement of financial position. Statements Clarification that entities have flexibility as to the order in which they present their notesto the financial 1 January 2016 statements, but also emphasising the need to consider fundamental principles of comparability and understandability in determining the order.

Comair Limited 123 Integrated Annual Report 2015 34. New accounting pronouncements (continued)

Annual periods Standard Details of amendments beginning of after

1 January 2016 Amendments to prohibit the use of a revenue-based depreciation method for property, plant and equipment, IAS 16 as well as guidance in the application of the diminishing balance method for property, plant and equipment. Property, Plant and Equipment Amendments specifying that because the operation of bearer plants is similar in nature to manufacturing, 1 January 2016 they should be accounted for under IAS 16 rather than IAS 41. The produce growing on the bearer plants will continue to be within the scope of IAS 41. Annual Improvements 2012–2014 Cycle: lAS 19.83 requires that the currency and term of the corporate 1 July 2016 IAS 19 or government bonds used to determine the discount rate for post-employment benefit obligations must Employee be consistent with the currency and estimated term of the obligations. The amendments clarify that the Benefits assessment of the depth of the corporate bond market shall be made at the currency-level rather than the country-level. IAS 27 1 January 2016 Consolidated Amendments to introducing a third option which allows entities to account for investments in subsidiaries, joint and Separate ventures and associates under the equity method in their separate financial statements. Financial Statements 1 January 2016 Amendments to address an acknowledged inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and those in IAS 28 (2011) Investments in Associates in dealing with the sale or IAS 28 contribution of a subsidiary. In addition IAS 28 (2011) has been amended to clarify that when determining Investments in whether assets that are sold or contributed constitute a business, an entity shall consider whether the sale Associates or contribution of those assets is part of multiple arrangements that should be accounted for as a single transaction.

IAS 34 1 January 2014 The amendment to IAS 36 clarifies the required disclosures of information about the recoverable amount of Interim Financial impaired assets if that amount is based on fair value less costs of disposal. Reporting IAS 38 Amendments present a rebuttable presumption that a revenue-based amortisation method for intangible 1 January 2016 Intangible assets is inappropriate except in two limited circumstances, as well as provide guidance in the application of Assets the diminishing balance method for intangible assets. 1 January 2016 IAS 41 The amendments change the accounting for bearer plants. Agriculture

Comair Limited 124 Integrated Annual Report 2015 Notice of Annual General Meeting (AGM)

A member of the Company entitled to attend and vote at the below-mentioned AGM is entitled to appoint a proxy or proxies to attend, speak and vote in his/ her stead. A proxy need not be a member of the Company. Meeting attendees will be required to provide reasonably satisfactory identification before being allowed to participate in or vote at the AGM. Forms of identification that will be accepted include original and valid South African identity documents, driver’s licences and passports.

This document is important and requires your immediate attention.

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

Notice is hereby given in terms of section 62(1) of the Companies Act (Act No. 71 of 2008), as amended (“the Companies Act”) that the Annual General Meeting (the “AGM”) of shareholders of the Company will be held at Comair’s Operations Building, Corner Whirlwind and Fortress Roads, Rhodesfield, 1619, on 3 December 2015 at 13h00 to consider, and if deemed fit, to pass the ordinary and special resolutions set out below, with or without modification/s.

This notice has been sent to shareholders of the Company who were recorded as such in the Company’s security register on 23 October 2015, 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.

Electronic Participation Shareholders or their proxies are able to attend, but not participate and vote at the AGM by way of a teleconference call. Should you wish to make use of this facility, please contact Derek Borer at e-mail: [email protected], by no later than 12h00 on Tuesday, 1 December 2015. Shareholders will:

• be required to provide reasonably satisfactory identification; and • be billed separately by their own telephone service providers for their telephone call to participate in the meeting.

The notice of meeting includes the attached proxy form.

Ordinary Resolutions

1. Consideration of Annual Financial Statements

Ordinary Resolution Number 1

RESOLVED THAT the Audited Annual Financial Statements, together with the report of the Board of Directors of the Company (the “Board”), the auditors’ report and the report by the Audit Committee of the Company and the Group for the year ended 30 June 2015, be and are hereby received and adopted.

Comair Limited 125 Integrated Annual Report 2015 Reason for and Effect of Ordinary Resolution Number 1 The reason for and the effect of Ordinary Resolution Number 1 is to adopt the complete Audited Annual Financial Statements of the Company, including the Report of the Board, the Auditors’ Report and the Report by the Audit Committee of the Company and the Group for the year ended 30 June 2015.

2. Re-appointment of External Auditors Ordinary Resolution Number 2 RESOLVED THAT the re-appointment of Grant Thornton Johannesburg Partnership (“GT”), as nominated by the Company’s Audit Committee as independent external auditors of the Company, be and is hereby approved until the conclusion of the next AGM.

Reason for and Effect of Ordinary Resolution Number 2 The reason for and the effect of Ordinary Resolution Number 2 is to re-appoint Grant Thornton Johannesburg partnership Thornton Johannesburg (“GT”), as the auditors of the Company to hold office until the conclusion of the next AGM. The Company’s Audit Committee has recommended, and the Board has endorsed, the above re-appointment.

3. Re-election of Directors Directors Retiring by Rotation

Ordinary Resolution Number 3.1 RESOLVED THAT Mr Pieter van Hoven, an independent Non-executive Director, 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 Number 3.2 RESOLVED THAT Mr Martin Darryl Moritz, a Non-executive Director, who retires in terms of the Company’s MOI and who, being eligible, offers himself for re-election, be hereby re-elected as a Director of the Company.

Ordinary Resolutions Number 3.3 RESOLVED THAT Dr Peter J Welgemoed, an independent Non-executive Director, who retires in terms of the Company’s MOI and who, being eligible, offers himself for re-election, be hereby re-elected as a Director of the Company.

Ordinary Resolutions Number 3.4 RESOLVED THAT Mr Erik Rudolf Venter, an Executive Director and CEO, 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 Number 3.5 RESOLVED THAT Mr Jacob Meyer Kahn, an independent Non-executive Director, 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.

Reason for and Effect of Ordinary Resolutions Numbers 3.1 to 3.5 The reason for and the effect of Ordinary Resolutions Numbers 3.1 to 3.5 is to re-elect, by way of separate resolutions, Mr Pieter van Hoven, Mr Martin Darryl Moritz, Dr Peter J Welgemoed, Mr Erik Rudolf Venter and Mr Jacob Meyer Kahn as Directors of the Company.

In terms of Article 41 of the Company’s MOI, one third of the Company’s Directors are required to retire at every AGM. These Directors may offer themselves for re-election. In terms of Article 40 of the Company’s MOI, a person appointed to fill a vacancy or appointed as an additional Director shall retire at the AGM but may offer himself/herself for re-election. The Board recommends to the shareholders the re-election of the Directors mentioned above. A brief CV of each of these Directors appears on pages 133 to 135 of the Integrated Annual Report of which this notice forms part.

Comair Limited 126 Integrated Annual Report 2015 4. Election of Members of Audit Committee Ordinary Resolution Number 4.1 RESOLVED THAT, subject to the re-election of Dr PJ Welgemoed as a Director of the Company pursuant to ordinary resolution No. 3.3, 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 2016.

Ordinary Resolution Number 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 2016.

Ordinary Resolution Number 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 2016.

Ordinary Resolution Number 4.4 RESOLVED THAT Mr GJ Halliday, 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 2016.

Reason for and Effect of Ordinary Resolutions Numbers 4.1 to 4.4 The reason for and the effect of Ordinary Resolutions Numbers 4.1 to 4.4 is to elect, by way of separate resolutions, Dr PJ Welgemoed, Mr KI Mampeule, Ms WD Stander and Mr GJ Halliday as members of the Audit Committee of the Company.

A brief CV of each of the Directors mentioned above is included on pages 133 to 135 of the Integrated Annual Report of which this notice forms part. As is evident from the CVs of these Directors, each of the proposed members of the Audit Committee has the required qualifications and/or experience to fulfil his/her duties.

5. Non-binding Endorsement of Company Remuneration Policy The Company’s Remuneration Policy, as described in the Remuneration report on pages 65 to 67 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 for 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

6. Approval of Non-executive Directors’ Remuneration 2014/2015

Special Resolution Number 1

RESOLVED THAT the joint remuneration of the Non-executive Directors for their services as Directors of the Company in the amount of R3 057 525.00 for the financial year ended 30 June 2015 be and is hereby approved.

Reason for and Effect of Special Resolution Number 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

Comair Limited 127 Integrated Annual Report 2015 Directors for their services as Directors of the Company for the period ended 30 June 2015. The fees payable to Non-executive Directors are based on a fixed annual retainer. The Chairperson and members of every sub-committee, however, are paid an additional fee for each sub-committee meeting chaired and/or attended up until the end of the 2015 financial year. No fees are payable to Mr Sacks, Mr Halliday and Ms Stander. Mr van Hoven, in addition to being the Chairperson of the Board and Nominations Sub-committee, is also 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 AGM on 5 November 2014. The fees payable to each Director and further details on the basis of calculation of the remuneration are respectively included in the annual financial statements on page 115, and in the Remunerations report on pages 65 to 67 of the Integrated Annual Report of which this notice forms part.

7. Approval of Non-executive Directors’ Remuneration – 2015/2016

Special Resolution Number 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 ending 30 June 2016:

30 June 2015 30 June 2016

Chairman of the Board R1 284 000.00 R1 348 200.00 Vice-chairman (2) R374 500.00 R393 225.00 Non-executive Directors (4) R160 500.00 R168 525.00 Chairperson of each Sub-committee per Sub-committee meeting held R13 910.00 R14 606.00 Members of each Sub-committee, per Sub-committee meeting held R6 955.00 R7 303.00 Chairperson of Pension Fund Board R13 910.00 R14 606.00

Reasons for and Effect of Special Resolution Number 2 The reason for and the effect of Special Resolution Number 2 is to approve the basis for calculating the remuneration payable by the Company to its Non-executive Directors for their services as Directors of the Company for the period ending 30 June 2016. The fees payable to Non-executive Directors are based on a fixed annual retainer. The Chairperson and members of each sub-committee, however, will be paid an additional fee for each sub-committee meeting held, subject to attendance at the sub-committee meeting. No fees are payable to Mr Sacks, Mr Halliday and Ms Stander. Mr van Hoven, in addition to being Chairperson of the Board and the Nominations Sub-committee, is also the Chairman of the Comair Pension Fund and as such is paid a fee for each Pension Fund Trustee meeting attended. Further details on the basis of calculation of the remuneration are included in the Remuneration report on pages 65 to 67 of the Integrated Annual Report of which this notice forms part.

8. General Authority to Repurchase Shares

Special Resolution Number 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:

8.1.1 the Company or the relevant subsidiary is authorised thereto by its MOI; 8.1.2 the general repurchase by the Company and/or any subsidiary of the Company of ordinary shares in the aggregate in any one financial year shall not exceed 15% (fifteen percent) 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 10% (ten percent) of the number of issued shares in the Company are held by or for the benefit of all the subsidiaries of the Company taken together;

Comair Limited 128 Integrated Annual Report 2015 8.1.3 at any point in time, the Company may only appoint one agent to effect any repurchases on the Company’s behalf; 8.1.4 the repurchase of securities being effected through the order book operated by the JSE and the counter party (reported trades are prohibited); 8.1.5 this general authority shall only be valid until the date of the next AGM or for 15 (fifteen) months from the date of passing of this Special Resolution Number 3, whichever is the shorter; 8.1.6 in determining the price at which the Company’s ordinary shares are acquired by the Company or any subsidiary in terms of this general authority, the maximum premium at which such ordinary shares may be acquired will be 10% (ten per cent) of the weighted average of the market price at which such ordinary shares are traded on the JSE, as determined over the 5 (five) 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 5 (five) business day period; 8.1.7 the Company or any 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 to the JSE in writing prior to the commencement of the prohibited period; and 8.1.8 when the Company or any subsidiary has cumulatively repurchased 3% (three percent) of the initial number of the relevant class of securities, and for each 3% (three percent) in aggregate of the initial number of that class acquired thereafter, an announcement will be made.

8.2 In terms of the general authority given under this special resolution, any repurchase of ordinary shares shall be subject to – 8.2.1 any applicable exchange control regulations and approval at that point in time; 8.2.2 the Companies Act; 8.2.3 the JSE Listings Requirements and any other applicable stock exchange rules, as may be amended from time to time; 8.2.4 the sanction of any other relevant authority whose approval is required in law; and 8.2.5 a resolution by the Board and/or the relevant subsidiary of the Company confirming that the Board of the Company and/or of such relevant subsidiary has authorised the repurchase, that the Company and/or the relevant subsidiary has satisfied the solvency and liquidity tests contemplated in the Companies Act, and that since the test was done there have been no material changes to the financial position of the Group.

The Board is of the opinion that this authority should be in place should it become appropriate to undertake a share repurchase in the future. After having considered the effect of any repurchases of ordinary shares pursuant to this general authority, the Board, in terms of the Companies Act and the JSE Listings Requirements, confirms and undertakes that it will not implement the proposed authority to repurchase the shares unless it is of the opinion that:

• the Company and the Group will be in a position to repay its debt in the ordinary course of business for a period of 12 (twelve) 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 a period 12 (twelve) months after the date of the general repurchase; • the share capital and reserves of the Company and the Group will be adequate for a period of 12 (twelve) months after the date of the general repurchase; and • the working capital of the Company and the Group will be adequate for ordinary business purposes for a period of 12 (twelve) months after the date of the general repurchase.

Reason for 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 repurchase its issued shares on such terms, conditions and such amounts determined from time to time by the Board subject to the limitations set out above. Please refer to the additional disclosure of information contained in this notice, which disclosure is required in terms of the JSE Listings Requirements.

Comair Limited 129 Integrated Annual Report 2015 Other disclosure in terms of the JSE Listings Requirements Section 11.26 Further to Special Resolution Number 3, the JSE Listings Requirements require the following disclosure, some of which is elsewhere in the Integrated Annual Report of which this notice forms part:

Major shareholders of the Company – page 136 Share capital of the Company – page 103

Directors’ responsibility statement The Directors, whose names are given on page 72 of this Integrated Annual Report, collectively and individually accept full responsibility for the accuracy of the information pertaining to this resolution and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this resolution contains all information required by law and the JSE Listings Requirements.

No material change Other than the facts and developments reported on in the Integrated Annual Report, there have been no material changes in the financial or trading position of the Company and its subsidiaries since the date of signature of the Audit Report and the date of this notice.

Statement of Board’s intention The Board has no specific intention to effect the provisions of Special Resolution Number 3 but will, however, continually review this position having regard to prevailing circumstances and market conditions, in considering whether to effect the provisions of Special Resolution Number 3.

9. General Authority to Provide Financial Assistance to related and inter-related Companies or Corporations

Special Resolution Number 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 2 (two) 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 Thornton Johannesburg partnership the Board the authority to provide intergroup loans and other financial assistance for the purpose of funding the activities of the Group. The Board undertakes that:

9.1 it will not adopt a resolution to authorise such financial assistance unless the Directors are satisfied that 9.1.1 immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test as contemplated in the Companies Act; and 9.1.2 the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company; and

9.2 written notice of such resolution by the Board shall be given to all shareholders of the Company and any trade union representing the employees 9.2.1 within 10 (ten) days after the Board adopted the resolution, if the total financial assistance contemplated in that resolution, together with any previous such resolutions during the financial year, exceeds 0.1% (zero comma one percent) of the Company’s net worth at the time of the resolution; and 9.2.2 within 30 (thirty) days of the end of the financial year, in any other case.

Comair Limited 130 Integrated Annual Report 2015 Reason for 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 Board provided such inter-group financial assistance to subsidiaries as disclosed in the annual financial statements in note 6 on pages 96 to 98 of the Integrated Annual Report of which this notice forms part.

Ordinary Resolution 10. Authorisation for Company Secretary or any Director to sign necessary documents to give effect to resolutions

Ordinary Resolution Number 5 RESOLVED THAT the Company Secretary or any Director be and is hereby authorised on behalf of the Company to sign all documents as may be necessary in order to give effect to the Special and Ordinary Resolutions set out above.

Other Business 11. To transact any other business that may be transacted at annual general meetings.

Approvals Required for Resolutions

Ordinary Resolutions Numbers 1 to 5 contained in this Notice of AGM require the approval by more than 50% (fifty percent) of the votes exercised on the resolutions by shareholders present or represented by proxy at the AGM, and further subject to the provisions of the Companies Act, the MOI of the Company and the JSE Listings Requirements.

Special Resolutions Numbers 1 to 4 contained in this Notice of AGM require the approval by at least 75% (seventy five percent) 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, 27 November 2015. Accordingly the last day to trade in order to be eligible to attend and vote at the meeting is Friday, 20 November 2015.

Proxy and Voting Procedures

A shareholder entitled to attend and vote at the AGM is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy need not be a shareholder of the Company. For the convenience of registered shareholders of the Company, a form of proxy is enclosed herewith.

Shareholders are requested to lodge their forms of proxy with, or to post same to the Company’s Transfer Secretaries, Computershare Investor Services Proprietary 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, 3 December 2015 at 13h00. 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 AGM. Any forms of proxy not received by this time must be handed to the Chairperson of the meeting immediately prior to the meeting.

Comair Limited 131 Integrated Annual Report 2015 On a show of hands, every shareholder of the Company present in person or represented by proxy shall have one vote only. On a poll, every shareholder of the Company shall have one vote for every share held in the Company by such shareholder.

The attached form of proxy is only to be completed by those shareholders who are:

• holding ordinary shares of the Company in certificated form; or • 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 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 AGM must be able to present reasonably satisfactory identification at the meeting for such shareholder or proxy to attend and participate at the meeting. A green bar-coded identification document issued by the South African Department of Home Affairs, a driver’s licence or a valid passport will be accepted as sufficient identification.

By order of the Board

Derek H. Borer Company Secretary

Bonaero Park 20 October 2015

Comair Limited 132 Integrated Annual Report 2015 Directors Standing for Election or Re-Election 1. P van Hoven (Board) (Age: 71)

Pieter 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 and it was under Pieter’s management that Comair’s low cost airline kulula.com took to the skies in August of 2001.

After 41 years with the company, Pieter retired in 2006 but has continued to serve on the Comair Board as an independent Non- executive Director. He 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,

Pieter was a member of the South African Tourism Board throughout the period 1983 to 1997 during which time he served on several committees and was appointed Chairman of the Board in 1989 and continued to serve in this position until 1996.

Pieter was also elected as Chairman of the Airlines Association of South Africa (AASA) for four years during the 1980s, and was active on many other industry committees for the Department of Transport. To date he continues to serve on the Aviation Accident Investigation Panel for the Civil Aviation Authority.

As of 13 February, 2012, Pieter was appointed independent Non-executive Chairman to the Comair Limited Board of Directors, which position he holds to date.

2. MD Moritz (Board) (Age: 70) BCom, LLB

Martin 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 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 Chairperson of Comair.

3. Dr PJ Welgemoed (Board and Audit Committee) (Age: 72) BCom (Hons), MCom, DCom

In 1971 Peter 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 he was appointed Deputy Minister of Mineral and Energy Affairs and Public Enterprises. In 1990 he was appointed as a Member of Cabinet, with the portfolio of Minister of Transport, and in 1992 as Minister of Transport and of Post and Telecommunication. In 1998 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.

Comair Limited 133 Integrated Annual Report 2015 4. ER Venter (Board) (Age: 45)

Erik joined Comair in 1996 as Financial Manager, and has held various positions within the company including Commercial Manager; Commercial Director and Financial Director. In July of 2006 Erik was appointed as Joint CEO of Comair and served in this position until December 2011 when he assumed the sole responsibility for the company as Chief Executive Officer. He remains in this position to date. Whilst attending the University of Cape Town, Erik attained a BCom and Post Graduate Diploma in Accounting and further completed his articles with KPMG, qualifying as a Chartered Accountant (South Africa).

Erik previously served a term as Chairman of the Airlines Association of South Africa and was re-elected to serve a further term at their AGM held on 1 November, 2014. Erik is also currently a Director on the Board of Imperial Air Cargo.

As a married man with two daughters, Erik has a busy lifestyle but finds time for his hobbies which include painting, building custom made cars and re-modelling furniture.

5. JM Kahn (Board) (Age: 76) BA (Law), MBA (UP), DComm (hc), SOE

Meyer joined the South African Breweries Group in 1966 and occupied executive positions in a number of the Group’s former retail interests before being appointed to the Board of South African Breweries Limited (SAB) in 1981. He was appointed Group Managing Director of SAB in 1983 and Executive Chairman in 1990. In 1997, he was seconded full-time to the South African Police Service as its Chief Executive, serving for two and a half years. In 1999 he was appointed Chairman of the Company on its London listing. Amongst other awards, he holds an Honorary Doctorate in Commerce from the University of Pretoria and was awarded the South African Police Star for Outstanding Service (SOE) in 2000. He retired as Chairman of SAB Miller in July 2012.

6. KI Mampeule (Audit Committee) (Age: 50) BA, MSc, MBA

Khutso is the Executive Chairman of Lefa Group Holdings, an investment holding and consulting company he established in 2003. He is a Director of JSE-Listed Niveus Investments Limited (where he is the Chairman of the Audit and Risk Committee) as well as Truworths International Limited. He is the immediate past Chairman of Withmore Investments Proprietary Limited, an empowerment consortium he represented on the KWV Holdings Limited Board. He is also a Director of a few other privately held companies. Until May 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. 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, South African Express Airways. Khutso is a trustee of the World Wide Fund for Nature (WWF, SA), a member of the Institute of Directors SA, the Young President Organisation, and Toastmaster International.

Comair Limited 134 Integrated Annual Report 2015 7. WD Stander (Audit Committee) (Age: 48) BA (Hons), MBA

Over the last 25 years Wrenelle has served across the private, public and NGO sectors.

Wrenelle joined Sasol in May 2008 and prior to her current role as Senior Vice President: Public Affairs, she served as Managing Director of Sasol Gas for almost four years. She currently serves as a Director on a number of subsidiary Boards.

Before joining Sasol, Wrenelle served in various capacities within the public sector including the position of Deputy Chief Executive Officer of the South African Civil Aviation Authority, and the Managing Director of the Air Traffic and Navigation Services Company.

Wrenelle holds a BA (Hons) degree from the University of Cape Town, as well as an MBA from Oxford Brookes University in the United Kingdom.

8. GJ Halliday (Audit Committee) (Age: 51) BA (Hons), Economics, (Geog.), MBA (Lancaster University)

Gavin joined British Airways Plc (“BA”) in 1986, working in customer service, operational research and marketing, before joining sales as part of the airline’s Global Sales team, he was involved in the airline’s launch of e-ticket in 1995. He has since managed sales teams in Miami, UK, and Latin America, and Asia and Pacific region in 2006, where he was responsible for all sales activity, before joining Europe. He is Area General Manager for Europe and Africa.

Comair Limited 135 Integrated Annual Report 2015 Share price performance

2015 2014

c c

Market price (cents per share) 430 448 Closing (30 June) 617 500 High 320 250 Low

Closing price/earnings ratio 9.0 7.7

Number of shares in issue At year end (millions) 469 440 Weighted average (millions) 457 453

Volume of shares traded (millions) 89 116

Volume of shares traded to number in issue at year end 19.0% 26.4% .

Comair Limited 136 Integrated Annual Report 2015 Shareholder analysis

Shareholder Spread

No. of Bands shareholdings % No. of shares %

1–1 000 shares 2 102 53.84 693 770 0.15 1 001–10 000 shares 1 178 30.18 4 388 493 0.93 10 001–100 000 shares 417 10.68 14 861 414 3.17 100 001–1 000 000 shares 164 4.20 51 173 270 10.90 1 000 001 Shares and over 43 1.10 398 213 918 84.85 Total 3 904 100.00 469 330 865 100.00

Distribution of Shareholders

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

Banks and Brokers 21 0.54 16 877 325 3.60 Medical Schemes 4 0.10 1 144 484 0.24 Close Corporations 33 0.85 490 002 0.10 Endowment Funds 20 0.51 4 104 275 0.88 Individuals 3 343 85.63 20 021 564 4.27 Insurance Companies 18 0.46 4 376 472 0.93 Investment Companies 7 0.18 1 289 971 0.28 Mutual Funds 62 1.59 101 953 756 21.72 Nominees and Trusts 184 4.71 10 633 695 2.27 Other Corporations 19 0.49 106 981 0.02 Retirement Funds 119 3.05 30 984 852 6.60 Private Proprietary Companies 71 1.82 218 385 067 46.53 Share Trust 1 0.03 4 985 798 1.06 Public Companies 2 0.04 53 976 623 11.50 3 904 100.00 469 330 865 100.00

Comair Limited 137 Integrated Annual Report 2015 Beneficial Shareholders Holding of 3% or More

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

No. of % Type of shareholder shares Shareholding

BB Investment Company Proprietary Limited 126 320 151 26.91 Allan Gray* 60 533 949 12.90 Britair Holdings Limited 53 966 623 11.50 Innercreek Investments Proprietary Limited 50 000 000 10.65 HNA Group 26 067 766 6.19 Total 316 888 489 68.15

* Allan Gray Allan Gray Balanced Fund 22 009 211 (4.69%) Allan Gray Equity Fund 21 974 221 (4.68%) Allan Gray Domestic Equity Portfolio 5 449 900 (1.16%) Allan Gray Optimal Fund 3 210 978 (0.68%) Allen Gray Global Absolute Portfolio 2 672 172 (0.57%) Allan Gray Global Balanced Portfolio 2 488 891 (0.53%) Allan Gray Domestic Optimal Portfolio 1 102 848 (0.23%) Allan Gray Domestic Absolute Portfolio 824 936 (0.18%) Allan Gray Life Hedged Domestic Equity Portfolio 421 462 (0.09%) Allan Gray Domestic Balanced Portfolio 345 830 (0.07%) Allan Gray SA Equity Fund 33 500 (0.01%) 60 533 949 12.90%

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 93 877 647 20.0 Total 93 877 647 20.0

Comair Limited 138 Integrated Annual Report 2015 Public/Non-public Shareholder Spread (Including Resident and Non-resident Shareholding)

Number of shareholders in Number of shareholders other South Africa than in South Africa Total shareholders Type of shareholder and number of shareholders No. of shares % No. of shares % No. of shares %

Non Public Shareholders Directors and Associates (7) 52 064 512 11.09 52 064 512 11.09 Strategic Holdings (more than 10%) BB Investment Co. Proprietary Limited (1) 126 320 151 26.91 126 320 151 26.91 Britair Holdings Limited (1) 53 966 623 11.50 53 966 623 11.50 Share Trusts Comair Share Incentive Trust (1) 4 985 798 1.06 4 985 798 1.06 Public shareholders Resident (3 825) 172 934 573 36.86 172 934 573 36.86 Non-resident (69) 59 059 208 12.58 59 059 208 12.58 356 305 034 75.92 113 025 831 24.08 469 330 865 100.00

Comair Limited 139 Integrated Annual Report 2015 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)

Comair Limited 140 Integrated Annual Report 2015 K-12591 [www.kashan.co.za] Integrated Annual Report 2015

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”) 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 ordinary shares of the Company in certificated form; or • recorded on the electronic sub-register in ‘own name’ dematerialised form. Shareholders who have dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker and wish to attend the Annual General Meeting, must instruct their CSDP or broker to provide them with a Letter of Representation, or they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement/mandate entered into between them and the CSDP or broker. Shareholders are requested to lodge their forms of proxy or to post same to the Company’s Transfer Secretaries to be received not later than 48 hours (excluding Saturdays, Sundays and public holidays) before the time appointed for the holding of the Annual General Meeting, being Thursday, 3 December 2015 at 13h00. Nevertheless, forms of proxy may be lodged at any time prior to the commencement of voting on the resolutions at the Annual General Meeting. Any shareholder who completes and lodges a form of proxy will nevertheless be entitled to attend and vote in person at the Annual General Meeting. I/We (BLOCK LETTERS) of (address) Telephone: (Work) (area code) Telephone: (Home) (area code) being a holder of certificated shares and ‘own-name’ dematerialised shares of the Company and entitled to votes hereby appoint (see note 1): (Please print) 1. or failing him/her 2. or failing him/her 3. the Chairman of the Annual General Meeting as my/our proxy to vote for me/us at the Annual General Meeting which will be held for the purpose of considering, and, if deemed fit, passing, with or without modifications, the resolutions to be proposed thereat and at each adjournment or postponement thereof, and to vote for/or against the resolutions and/or abstain from voting in respect of the shares in the issued share capital of the Company registered in my/our name/s (see note 2) as follows:

Number of votes For Against Abstain Ordinary Resolutions 1 to 4 1 Consideration of the Annual Financial Statements 2 Re-appointment of external auditors. 3 To re-elect the following Directors: Directors retiring by rotation: 3.1 P van Hoven 3.2 MD Moritz 3.3 Dr PJ Welgemoed 3.4 ER Venter 3.5 JM Kahn 4 To elect the following Directors to the Audit Committee 4.1 Dr PJ Welgemoed 4.2 KI Mampeule 4.3 WD Stander 4.4 GJ Halliday 5. Non-binding endorsement Non-binding endorsement of Company’s Remuneration Policy Special Resolutions 1 to 4 6. Approval of Non-executive Directors’ Remuneration 2014/15 7. Approval of Non-executive Directors’ Remuneration 2015/16 8 General authority to repurchase shares 9. General authority to provide financial assistance to related and inter-related companies and corporations Ordinary Resolution No. 5 10. 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 2015

Signature/s assisted by me (where applicable) Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder/s of the Company) to attend, speak and vote in place of that shareholder at the Annual General Meeting.

Please read the notes on the reverse side hereof Notes to the Form of Proxy

1. A certificated shareholder or “own-name” dematerialised shareholder may insert the names of two alternative proxies of the shareholder’s choice in the space provided, with or without deleting “the Chairman of the Annual General Meeting”. The person whose name appears first on the form of proxy and whose name has not been deleted will be entitled and authorised to act as proxy to the exclusion of those whose names follow.

2. A shareholder’s instructions to the proxy must be indicated by the insertion of an “X” in the appropriate box provided. Failure to comply herewith will be deemed to authorise the proxy to vote or to abstain from voting at the Annual General Meeting as he/she deems fit in respect of all the shareholder’s votes exercisable thereat. Where the proxy is the Chairman, such failure shall be deemed to authorise the Chairman to vote in favour of the resolutions to be considered at the Annual General Meeting in respect of all the shareholder’s votes exercisable thereat.

3. The completion and lodging of this form will not preclude the relevant shareholders from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. Forms of proxy should be lodged with or posted to the Company’s Transfer Secretaries to be received not later than 48 hours before the Annual General Meeting, being Thursday, 3 December 2015 at 13h00. Nevertheless, forms of proxy may be lodged at any time prior to the commencement of voting on the resolutions at the Annual General Meeting. Any forms of proxy not received by this time must be handed to the Chairperson of the meeting immediately prior to the meeting.

4. The Chairman of the Annual General Meeting may accept or reject any form of proxy which is completed and/or received other than in accordance with these notes and instructions, provided that the Chairman is satisfied as to the manner in which the shareholder wishes to vote.

5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative or other legal capacity such as a power of attorney or other written authority must be attached to this form unless previously recorded by the transfer secretaries of the Company or waived by the Chairman of the Annual General Meeting.

6. The Chairman shall be entitled to decline to accept the authority of a person signing the proxy form:

(a) under a power of attorney (b) 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:

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

unless notice as to any of the above-mentioned matters shall have been received by the Company care of its Transfer Secretaries as set out in note 3 or by the Chairman of the Annual General Meeting if not held at the principal place of business of the Company, before the commencement or resumption (if adjourned) of the Annual General Meeting at which the vote was cast or the act was done or before the poll on which the vote was cast.

9. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing 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.

Registered office Transfer Secretaries Principal Place of Business 1 Marignane Drive Computershare Investor Services Proprietary Limited 1 Marignane Drive Bonaero Park Ground Floor Bonaero Park Kempton Park 70 Marshall Street Kempton Park 1619 Johannesburg 1619 2001 (PO Box 61051, Marshalltown, 2107)