INTEGRATED annual REPORT 2017 INTEGRATED ANNUAL REPORT 2017
ii Integrated Annual Report 2017 Table of Content
About this Report______2 Performance Highlights/Group Value Added Statement______3 Our Group______4 Chairman and CEO’s Report______11 Our Strategic Intent and Our Stakeholders______16 Our Operations and Customers ______20 Interaction with Government, Regulatory and Industry Bodies______28 Interaction with Investors, Suppliers and Media ______32 Company Employees and Broad-Based Black Economic Empowerment______33 Investing in the Community ______44 Environmental Report ______45 Corporate Governance Report ______55 Audit Committee Report ______64 Remuneration Report______67 Social and Ethics Report______70 Internal Control and Risk Management______72 Report of the Directors______78 Statement of Responsibility by the Board of Directors______84 Certificate of Company Secretary______84 Independent Auditor’s Report______85 Statements of Financial Position______88 Statements of Profit or Loss______89 Statements of Comprehensive Income______89 Statements of Changes in Equity______90 Statements of Cash Flows______91 Accounting Policies______92 Notes to the Financial Statements______101 Notice of Annual General Meeting______137 Directors Standing for Election or Re-election______145 Share Price Performance______148 Shareholder Analysis______149
Integrated Annual Report 2017 1 INTEGRATED ANNUAL REPORT 2017
About this Report
Scope, Boundary and Reporting Cycle into core themes, provides the structure for this discussion. We continually strive to enhance the level of our reporting, and we This Integrated Annual Report (“this Report”) of the Comair Group have attempted to increase the level of connectivity across the (“the Group”) presents the economic, social, governance and various sections of this Report. environmental performance of the Group’s airline and non-airline businesses in respect of its operations in South Africa only, as This Report was prepared in accordance with International Financial well as the financial results of the Group for the financial year Reporting Standards; the Financial Reporting Guides issued by 1 July 2016 to 30 June 2017. While the performance of the the Accounting Practices Committee; the Listings Requirements Group’s associates is discussed in this Report, the Report focuses of the JSE; and the requirements of the Companies Act (No. 71 of more on the performance of the Group’s subsidiaries, since their 2008) as amended. It is also guided by the International Integrated contribution to its performance is more significant. This Report Reporting Council’s Integrated Reporting Framework. The Group’s does not extend to or cover the performance of the Group’s reporting on sustainable development is guided by the Sustainability suppliers in its supply chain, nor its outsourced operations such Reporting Guidelines of the Global Reporting Initiative (“GRI G4”). as, but not limited to, its fleet maintenance or its leased facilities. These limitations are not considered material enough to impair the completeness of this Report. External Audit and Assurance
The Group’s Annual Financial Statements on pages 88 to 136 The Report will be sent to shareholders, who are recorded as were audited by its independent external auditors, Grant Thornton such in the Group’s Securities Register on 22 September 2017, Johannesburg Partnership (“Grant Thornton”), in accordance and is available on the Group’s website at www.comair.co.za. with International Standards of Auditing. Their report is included Printed copies are available on request from the Group Company on pages 85 to 87. Secretary. This is the Group’s seventh Integrated Annual Report. The previous Integrated Annual Report, which covered the period Grant Thornton has provided limited assurance over selected key 1 July 2015 to 30 June 2016, was published on 30 September performance indicators and specific disclosures as set out in this 2016 and is also available on the Group’s website. Report. Based on their work performed, nothing has come to our attention that causes us to believe that the selected key performance Reporting Principles indicators or specific disclosures in the 2017 Integrated Annual Report for the year ended 30 June 2017 have not been fairly stated. The content of this Report is driven by those issues that have the greatest potential to affect the Group’s ability to operate. We For a better understanding of the scope of Grant Thornton’s assurance consider a broad range of external and internal factors, including process, reference should be made to Grant Thornton’s Assurance the outcome of various stakeholder engagement processes that Statement, which can be obtained from the Group Company drive the Group’s integrated reporting process, when deciding Secretary, or accessed via the Group’s website www. comair.co.za. which issues are the most important to address. While this Report attempts to highlight the significant issues raised and the outcomes of these various engagement processes, as well as the risks Board Approval identified during our risk assessment process, the content of this The Board is ultimately responsible for the authenticity of this Report predominantly focuses on the information deemed relevant Report. Together with the appropriate Management and committee to the Group’s shareholders and potential investors. support, the Board reviewed and analysed the information disclosed, and is satisfied with the content of this Report. This The information included in this Report aims to provide Report was approved by the Audit Committee and duly authorised shareholders and investors with a good understanding of the by the Board on 11 September 2017. significant economic, social, governance and environmental risks and opportunities the Group faces in the short and medium term, as well as with the Group’s response, in order to ensure its ability Contact Us to create and sustain value for its shareholders and investors in the We welcome opinions, suggestions and questions from all our long term. In addition, the Group attempts to explain its efforts to stakeholders. Please direct these to the Group Secretary, Derek reduce its impact on the environment and the societies in which it Borer. Our contact details are included on the inside back cover operates. The updated materiality determination process, divided of this Report.
2 Integrated Annual Report 2017 Performance Highlights/Group Value Added Statement
Strategic/ Group Objective Indicator Actual 2014/15 Actual 2015/16 Actual 2016/17
Creating shareholder value Net profit (after tax) 218 776 000 192 702 000 296 970 000 Total turnover/Group revenue 5 890 746 000 5 959 573 000 6 063 737 000 Operating expenses 5 106 894 000 5 129 781 000 4 999 789 000 Dividends paid to shareholders 81 464 000 69 764 000 83 776 000 Interest on loans 72 930 000 170 496 000 250 377 000 Current taxation 40 675 000 5 250 000 4 269 000 Commitment to quality On time performance BA: 87% BA: 85% BA: 85% kulula: 86% kulula: 85% kulula: 85% Investment in assets (property, plant and equipment) 274 982 000 2 012 053 000 965 821 000 Managing risk Number of significant safety incidents 0 1 0 Number of consecutive unqualified audits by IOSA 5 6 6 Leading as a responsible Carbon inventory – all scopes corporate citizen footprint per employee (tonnes of CO2 emissions) 317.10 316.84 331.51 % of carbon emissions relating to scope 1 82% 82% 83% % of carbon emissions relating to scope 2 1% 1% 1% % of carbon emissions relating to scope 3 17% 17% 16% No of legislative/regulatory breaches 0 0 0 Total staff cost 832 050 000 897 467 000 1 001 889 000 Number of South African employees 2 073 2 085 2 105 Overall EE representation 1 359 1 375 1 419 % Staff members belonging to a union 35% 42% 42% Provide growth and % Spend of training or training development opportunities for investment employees (% of salary spend) 3.1% 3.1% 4.4% Employee turnover rate 9.7% 8.0% 10.19% % Female representation 63.8% 64.5% 63.8% Operational effectiveness Quantity of fuel consumed per passenger/fuel burn per passenger (kg per passenger) 32.65 32.14 30.93% Number of passengers carried 5 140 599 5 428 678 5 545 214 Aircraft and flight simulator spend 244 991 000 1 945 164 000 1 083 201 000 Number of owned aircraft 19 19 19 Number of leased aircraft 6 6 7 Electricity consumed (kWh) 7 612 635 5 996 310 5 283 795
Integrated Annual Report 2017 3 INTEGRATED ANNUAL REPORT 2017
Our Group
Our 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 the Group’s business connect, in order to realise its purpose. It also reiterates the behaviour that the Group’s employees must embrace to fulfil the Cycle of Success.
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.
4 Integrated Annual Report 2017 Who We Are and What We Do
Comair Limited (“the Group”) is a South African Company, listed on the Johannesburg Stock Exchange since 1998, which as its core business, offers scheduled and non-scheduled airline services within South Africa, sub-Saharan Africa and the Indian Ocean Islands.
The Group has operated successfully in South Africa since 1946 and is the only known airline to have achieved operating profits for 71 consecutive years, with a safety record which is internationally recognised.
The Group operates its airline services through two (2) brands, namely, the kulula brand and the British Airways brand, the latter under licence from British Airways International. A diagram reflecting all the destinations to which the Group’s two (2) airline brands provided scheduled airline services during the period under review is set out below.
The Group’s headquarters are based at 1 Marignane Drive, consumers and to the retail travel trade. Through acquisitions, Bonaero Park, Kempton Park and, whilst it operates flights destined expansion and partnerships, the Group has established one for locations outside of South Africa, the Group’s operations are of the country’s largest and broadest digital travel distribution based in South Africa. In addition to scheduled and non-scheduled networks. The brands under the Group’s travel and holiday airline services, the Group also offers the following non-airline package banner include kulula holidays, MTbeds, African related services: Images and African Dream Holidays. In addition, the Group has a Harvey World Travel Holiday Retail Travel Agency. The • Travel and holiday packaging service using advanced Group continues to form partnerships with industry leaders technology to deliver travel and holiday packages to many in travel reward and recognition programmes as part of its destinations locally and internationally, both directly to objective to continuously expand and grow this business.
Integrated Annual Report 2017 5 INTEGRATED ANNUAL REPORT 2017
• In 2009 the Group launched its SLOW Lounges and currently South Africa and is experiencing an increase in demand for operates SLOW Lounges at OR Tambo International Airport its products. Food Directions currently leases the premises in both the domestic and international terminals; Cape from which it operates, which are situated in an office park Town International Airport domestic terminal; King Shaka known as Anchor Industrial Park. The Group’s property owning International Airport domestic terminal; and SLOW in the company is in the process of acquiring Anchor Industrial Park, City in Sandton, Johannesburg. The SLOW Lounges have which will allow for further expansion opportunities for the set a global standard for airport lounges, providing a perfect Food Directions business. Food Directions has recently been sanctuary from the fast pace of travel and modern life, and granted a licence to provide third party catering services at have won numerous awards for their creative excellence. Airports Company South Africa airports, which will allow it Demand for the Lounges has increased and the Group has to provide catering to third party airlines. extended and refurbished its SLOW Lounge at Cape Town • The Group has both a purpose-built simulator and cabin crew International Airport, as well as the SLOW Lounge in the training facility, which are run and managed by the Comair International terminal at OR Tambo International Airport. Training Centre (“CTC”). In addition to training Comair’s The SLOW Lounge in the domestic terminal at OR Tambo own pilots and Cabin Crew, the CTC offers a full range of International Airport is in the process of being revamped and aviation-related ground school subjects and flight simulator increased in size. In addition, the Group has opened a new training for all Boeing 737 type aircraft. The CTC provides a concept SLOW XS Lounge at Lanseria International Airport. variety of ancillary subjects, as well as cabin crew and flight The SLOW XS Lounge will be smaller but similar in quality dispatcher training. In collaboration with Avion de Transport to other SLOW Lounges. The Group is also in the process Regional (“ATR”), the CTC hosts the ATR Reference Training of opening a new concept SLOW in the City restaurant in Centre, which offers simulator training for pilots of ATR Sandton and looking to open a new concept lounge at certain turboprop aircraft. The CTC has a client base of airlines from domestic airports in South Africa. numerous African countries, as well as the Middle East, South • The Group launched its own catering unit in 2012 under the America, Indo-Asia and the Far East. Due to the increase in Food Directions brand. It provides on-board catering services demand for third party training, the Group is in the process to the Group’s kulula and British Airways flights, giving it control of expanding the size of the CTC. and flexibility in terms of cost and product offering. In addition, in 2015, the Group acquired a 39% indirect shareholding in Brands a company known as The Highly Nutritious Food Company A diagram reflecting the various Group brands is set out below. (Pty) Limited trading as Eatrite. This company predominantly kulula.com and British Airways, operated by Comair, are our airline- focuses on producing healthy food products and currently related brands, while the remaining brands are non-airline brands. distributes a variety of these products to various retailers in
6 Integrated Annual Report 2017 How We Are Structured 1. Kulula Air Proprietary Limited trading as SLOW in the City 11. Highly Nutritious Food 2. Alooca Properties Company Proprietary Limited 100% Proprietary Limited trading as Eatrite 39% 100%
10. Comair Catering Proprietary 3. Aconcagua 32 Investments Limited 70% 100% Proprietary Limited
9. Churchill Finance Services 23 100% 4. Comair Retail Travel Services Limited 100% Proprietary Limited
8. Comair Mozambique Limitada 49% 100% 5. Comair Air Cargo Proprietary Limited
7. Commuter Handling Services 40% 49% 6. OR Tambo Hospitality Proprietary Limited Proprietary Limited
1. Kulula Air Proprietary Limited: Holds the liquor licences in respect of certain of the Group’s Lounges, looks after various service agreements relating to the Lounges and operates the SLOW in the City Lounge in Sandton. 2. Alooca Properties Proprietary Limited: Property-owning company, which owns a number of properties in Rhodesfield surrounding the Company’s operations building, as well as properties in Cape Town near Cape Town International Airport. 3. Aconcagua 32 Investments Proprietary Limited: Property-owning company, which owns the property on which the Group’s operations building is situated. 4. Comair Retail Travel Services Proprietary Limited: Operates a Harvey World Travel Agency and offers and provides a ticketing fulfilment service to third parties, previously known as Holiday Tours Proprietary Limited. 5. Comair Air Cargo Proprietary Limited: A cargo and freight company providing cargo and freight services in South Africa. The company is currently dormant. 6. OR Tambo Hospitality Proprietary Limited: Property-owning company (previously known as Protea Hotel ORT Proprietary Limited), which owns the building that constitutes Protea OR Tambo Hotel. 7. Commuter Handling Services Proprietary Limited: Provides ramp-handling services in South Africa to various airlines. 8. Comair Mozambique Limitada: A company established in Mozambique. The Company is currently dormant and is in the process of being deregistered. 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: Provides catering services to the Group airline brands as well as non-airline third parties. The Company is currently dormant. 11. Highly Nutritious Food Company Proprietary Limited: The company provides food items to the Comair Catering Proprietary Limited division and third parties. Comair Catering Proprietary Limited holds 56% interest in the company and the effective shareholding by Comair Limited is 39%. Comair Limited holds the majority voting rights.
Apart from Comair Mozambique Limitada, which is registered in Mozambique, and Churchill Finance Services 23 Limited, which is registered in Mauritius, all the Group’s other subsidiaries and associates are registered in South Africa.
The Group’s affiliated businesses performed well over the period under review and made a meaningful contribution to profits, although they make up a small percentage of the Group’s turnover.
Integrated Annual Report 2017 7 INTEGRATED ANNUAL REPORT 2017
achievements during the period under review:
How We Are Governed The British Airways Brand
The Group’s governance structures are founded on maintaining and • The Sunday Times Top Brand Awards – First place in the building a sustainable business and being a responsible corporate Business to Business Category for Domestic Airlines; citizen. The key elements of these governance structures include: • The Sunday Times Top Brand Awards – Second place in the Consumer Category; • Providing a safe, secure, reliable and quality air transport • Africa Orange Index – Top Airline in the Airline Industry Category. service; • Maintaining principles of good corporate governance, integrity The kulula Brand and ethics; • Maintaining effective risk management and internal controls; • The Sunday Times Top Brand Awards – Second place in the Business Category; • Engaging with our stakeholders and responding to their reasonable expectations; • The Sunday Times Top Brand Awards – Fourth place in the Consumer Category; • Offering employees a good working environment and competitive remuneration packages, based on the principles • Business Traveller Africa Awards – Best African Low Cost of fairness and affordability; Airline; • Managing the business in a sustainable manner. • Airlines Ratings.com – Best Low Cost Airline in Africa and the Middle East Region; • Skytrax World Airline Awards – Best Low Cost Airline in Africa. Awards
The Group attained the following external recognitions and SLOW
8 Integrated Annual Report 2017 • Business Traveller Africa Award – SLOW International Lounge at OR Tambo – Best Business Airport Lounge.
INPUTS OUTPUTS OUTCOMES
Financial Financial Financial
Share capital Cash generated from operations ROI R4 651 000 R1 149 088 000 5.0% Profit from Capital expenditure operations R965 821 000 R637 790 000 Net interest-bearing debt R1 762 878 000
Dividends paid R83 776 000
Interest bearing loans Revenue R2 697 791 000 R6 063 737 000 Manufactured Manufactured Manufactured
We are upgrading our fleet to We have increased the Aircraft Fleet Boeing 737-800s, number of passengers carried by which offer increased seating capacity, lower operating cost 2% Owned Leased and extended potential of since 2016. 19 7 daily utilisation. All of our assets and equipment are maintained to a We have maintained 6 high standard to ensure a successive unqualified safe and audits by IOSA. Property user-friendly Development of property, Alooca Properties (Pty) Ltd environment plant and equipment Aconcagua 32 Investments (Pty) Ltd for our customers and spend was employees. R956 169 000 during the past financial year. Intellectual Intellectual Intellectual
The SLOW lounges Access to the SLOW International Lounge at OR Tambo International at OR Tambo International Airport’s Airport has increased to include domestic terminal is being revamped qualifying clients and guests of and extended in size to allow more international airlines. An increase in passengers to access SLOW. SLOW XS RMB and FNB qualifying guests can is being opened at Lanseria airport. now access the SLOW facilities.
Integrated Annual Report 2017 9 INTEGRATED ANNUAL REPORT 2017
INPUTS OUTPUTS OUTCOMES
Human Human Human
During the past financial year, 1 548 skilled employees Employee training is a key priority and by investing in 1 762 employees 534 semi-skilled employees training and development, we continue received training. 23 unskilled employees to work on developing a more diverse and customer-centric workforce. 4.4% of payroll was spent on employee training. Total South African employees 88% of employees participated in the 2 105 Think Vision survey.
Social and Relationship Social and Relationship Social and Relationship
Community projects The Group has The Group provided the • Red Cross War Memorial sponsored air tickets and critical link Children’s Hospital Trust made cash donations between young patients and their • Food and Trees for Africa to various charitable organisations and required medical facilities and • Smile Foundation community projects during the year. resource needs around the country. • Wings and Wishes • Primestars Marketing The Group contributed to the various • QuadPara Association Youth development programmes community development programmes Employee volunteer by way of free tickets and programmes Investor initiatives cash donations. • Casual Day include road shows and • Mandela Day investor support. Through our organisation and employee volunteer initiatives, we have Investors improved the lives of underprivileged communities to create a positive impact on our society.
Natural Natural Natural
Comair’s aviation emissions intensity We continue to strive towards Water has reduced by 7% since the improving the previous financial year. environmental impact of the footprint of our operations by Electricity emissions decreased by focusing on operational eco-efficiency 14% from the previous financial year. and looking for opportunities to offset the Group’s carbon emissions. Energy Water use decreased marginally by 1% from the previous financial year.
Mobile fuel combustion (primarily aviation fuel) remains the largest emissions impact making up Fuel 83% of the total footprint.
10 Integrated Annual Report 2017 Value We have Created Chairman and CEO’s Report
Group Performance costs and increase business efficiencies continuously. In this regard, we have adopted an approach not dissimilar to that of As Chairman and Chief Executive Officer, it is our privilege to many successful airlines worldwide by acquiring and operating oversee and lead an airline that has grown from its infancy in 1946 newer, bigger but more fuel-efficient aircraft and implementing to the Group known today, operating scheduled airline services in new generation information technology platforms that enable us South Africa, sub-Saharan Africa and the Indian Ocean Islands; to deliver greater efficiencies and new commercial opportunities. and using 26 aircraft made up of sixteen B737-800s and ten B737-400s. During the period under review, the airline operated We are firmly committed to the local aviation industry and to 43 098 sectors, carrying approximately 5.5 million passengers and working with government and other relevant authorities to ensure: employing 2 105 staff members in South Africa. The Group has also diversified into aviation-related businesses including: airport • The maintenance of a safe, reliable, competitive and lounges, catering, travel services and flight and cabin crew training. commercially viable air transport sector, where all operators are afforded equal treatment by government; We remain firmly committed to our vision of offering an exceptional travel experience in the most efficient way. Our focus in delivering • The provision of an air transport infrastructure that is affordable on our strategic intent will enable us to continue to create long- and consistent with the requirements of the air transport term Shareholder value. The Group’s reputation and focus on sector and the travelling public; safety, customer service and efficiency has built a sustainable • The provision of air travel at costs that are affordable to foundation to accommodate growth opportunities and ensure that South African consumers and are in line with internationally we continue to play a major role in the southern African aviation accepted airline service standards and practices. and travel industry. Strategic Priorities The Airline Industry During the period under review, we concentrated on the following The aviation industry worldwide is recognised for its operating strategic priorities: challenges. It is an industry that is capital intensive, has negligible profit margins, and is highly regulated. It is a cyclical industry where • Maintaining revenue in a depressed economic environment, volatility, such as the fuel price, weather, terrorism and politics, combined with increased capacity and uncompetitive pricing is a fact of life. It is also a soft target for taxes, volatile costs and and an extremely volatile exchange rate. Revenue has been increased regulation. Worldwide the industry has recognised the maintained, with similar operating margins as in the previous need for radical change to ensure sustainability and profitability. reporting period, to cover and manage costs without ever compromising the safety, security and reliability of the airline The domestic airline industry is also characterised by low profit service; margins and significant price competition, which is exacerbated • Delivering on our promise to customers by constantly by a volatile fuel price and exchange rate, changes in government improving customer service; laws and regulations, and compliance with future environmental • Enhancing our new, enterprise-wide IT platform; regulation. This requires airlines to constantly innovate and improve on operating efficiency. • Upgrading our fleet, including investment in new aircraft; • Continually monitoring and responding to changes to our Considering the above, Comair has a unique record of delivering macro operating environment; operating profits for 71 years in succession. Comair is therefore • Providing employment security to all our employees; once again delighted to honour its commitment to its shareholders • Diversification of the business into other allied aviation related by paying a dividend. business such as catering, travel management, flight and cabin crew training and airline Lounges. Our top priorities are to improve our customer service, control
Integrated Annual Report 2017 11 INTEGRATED ANNUAL REPORT 2017
We have delivered against these priorities during the period headline earnings per share of 67.0 cents (prior year 36.5 cents). under review. Cash generated from operations grew by R257 million or 28%, resulting in a healthy cash balance of R935 million at the end of the 2017 financial year (prior year R1.12 billion) subsequent to Performance against Objectives Comair’s significant investment of R132 million in pre-delivery Financial Performance payments towards its new fleet of B737-8 MAX aircraft that will be delivered between 2019 and 2022. Dividends declared for the The 2017 financial year represented a return by Comair to historic past 12 months increased by 5 cents per share from 16 cents growth trends in the absence of the extraordinary costs that were per share in the 2016 financial year to 21 cents per share in the incurred in the 2016 financial year, arising from losses on oil hedges 2017 financial year. and the revaluation of a Dollar-based aircraft loan. Customer Experience The total domestic passenger market grew by 2.3% while Comair’s passenger numbers grew by 2%, resulting in an increase in airline We continued to focus on our customers through the application revenue of 2%. This is testament to the strength of the Comair of service metrics, feedback surveys, customer journey mapping, Brands and its ongoing commitment to service. Because there additional product offerings on the kulula.com brand, and extensive has been no meaningful growth in Gross Domestic Product, the investment in training programmes for front-line staff. Operating domestic passenger market has yet to expand into surplus seat performance therefore remained good, with on-time performance capacity, which is constraining industry occupancy levels of below being maintained at our threshold target of 85% across both the the global average of approximately 80.6%. Despite inflationary British Airways and kulula.com brands. pressures and a 5% increase in the Rand price of fuel, Comair’s operating costs, including depreciation and interest expense, Investment remained well contained, with a 1% increase overall. Comair’s new fleet of aircraft continues to contribute towards this efficiency We have entered into an agreement with Boeing for the purchase due to lower fuel burn and maintenance costs. In line with Comair’s of eight B737-8 MAX aircraft, which are currently scheduled to commitment to constantly improve service delivery, it met its on- deliver between 2019 and 2022. Our major investment during time performance target of 85%, achieving on-time performance the year was in the pre-delivery payments towards the first two of 89% in the last six months of the period under review. Boeing 737-8 MAX aircraft to be delivered in January and February 2019. This signals the start of our transition to the next generation The translation loss that was incurred by Comair in the 2016 of Boeing technology. financial year, and which arose from the effect of the Rand exchange rate on a Dollar-based aircraft loan, was partly reversed In addition we took delivery of one new 737-800 from Boeing as the Rand made some headway to close at R13.044 to the in November 2016, being the last of an initial order of eight new Dollar at 30 June 2017 as opposed to the low of R14.765 to the aircraft from Boeing. We also leased in a further 737-800 aircraft Dollar at the same time in the previous financial year. This resulted in December 2016. The ongoing upgrades to the fleet will continue in a profit of R41 million on a loan value of US$21.2 million in the to improve operating efficiency while at the same time enhancing 2017 financial year, compared to a loss of R74 million on the the revenue potential per flight. revaluation of the loan at 30 June 2016. The Dollar price of oil remained relativity stable during the 2017 financial year. The oil We also acquired a fixed-base flight simulator to expand our Boeing hedges that gave rise to a loss of R71 million in the 2016 financial 737-800 training capacity, and commenced with the construction year matured by 31 December 2015, with no subsequent hedges of a third training facility with the potential capacity for a further having been entered into by Comair. two fixed-base simulators and two full motion simulators.
Comair’s non-airline businesses, namely its travel businesses, During the year we made substantial investments in commencing pilot and crew training and the SLOW Lounges, all performed the expansion and upgrading of our SLOW Lounge in the domestic well during the 2017 financial year and grew their contribution terminal at OR Tambo International Airport and have opened a to 20% of earnings, thus justifying further investments into them. new concept SLOW Lounge at Lanseria International Airport. We look forward to expanding this new concept lounge to smaller Profit after taxation for the 2017 financial year consequently airports where we do not yet have a lounge presence. We are increased by 54% to R297 million (prior year R193 million) resulting also looking at opening a new lounge concept at various airports in earnings per share of 63.7 cents (prior year 41.5 cents) and in South Africa.
12 Integrated Annual Report 2017 The Group’s catering operations in Johannesburg and its stores Harvard Manage Mentor. Leadership teams will undergo systemic facility are housed in an office park, known as Anchor Industrial team coaching to reinvigorate them to step up to the challenges of a Park. We have entered into an agreement to purchase this industrial volatile, uncertain, complex and sometimes ambiguous landscape. park to provide capacity for future expansion, with transfer of same expected to take place in the 2018 financial year. In addition we Market Environment have developed offices, catering facilities and storeroom facilities at our properties in the vicinity of Cape Town International Airport Partnerships
Partnerships remain the cornerstone of our business. We continue IT Platform to work closely with the travel agent community in distributing our We are focused on implementing technology solutions to enhance products. Our relationship with Discovery Vitality has grown and our operating performance, customer service experience and includes local, regional and international flights, holiday packages revenue generating opportunities. The pace of development as well as car rental and hotels for Vitality members. We have an in distribution technology is relentless, and Comair is intent on excellent relationship with First National Bank/Rand Merchant extracting the maximum benefit from its customer information Bank in respect of our Slow Lounges, and have made a further data to improve its service offering and the marketing of relevant investment in the SLOW product. Europcar is one of our strongest products to its various customer segments. We are also developing partners, and together we are one of the largest online sellers of new software applications for use on board the aircraft and on the car rental in South Africa. ground to facilitate more efficient operating procedures. Brands Employees Our brands continue to perform well in the market. kulula.com During February 2017, the Group conducted its Think Vision is the market leader in affordable, easily accessible air travel and survey with an 88% participation rate. Employees perceived an continues to grow in the cost conscious business and leisure improvement in the top line principles associated with Inspiring market. It has become one of South Africa’s iconic consumer Leadership, Expansion and Growth, and Teamwork. In addition, brands. they perceived an improvement in the bottom line principles, namely Accepting Mediocrity, Favouritism, and Broken Communication. Our British Airways (“BA”) brand has continued to grow in the Employees are encouraged to participate actively in creating an corporate and public sectors, as well as in the inbound tourist action plan to support the improvement of those behaviours that markets. The BA loyalty programme, Executive Club, the SLOW are relevant to them. Overall, the participation rate continues Lounges and our investment in our catering products, have all to reflect that employees care enough about the Group and its helped grow the appeal of this brand. Our relationship with British culture to complete the survey and this in itself is a good indicator Airways International remains strong, with BA and ourselves seeing of engagement with the Group. great potential to grow our partnership further into Africa. Our SLOW Lounge brand has built great equity amongst business Talent management is considered a key differentiator between the travellers. Group and its domestic competitors. The Group values its talent and continues to make a significant investment in this regard. kulula holidays is building a strong reputation as a package Talent Management practices support business decision-making wholesaler to the travel trade as well as a retailer directly to in terms of building capacity now and into the future, with the consumers, and along with the kulula works brand is supporting dual benefit that employees have information that supports their the growth of our travel distribution business. careers within the Group. Our catering brands, Food Directions and Eatrite, are becoming The Group has identified its mission-critical roles and will focus known in the retail space, although most of our third party food on the sustainability of talent within these roles to ensure the production is still distributed by the associated retailer. attainment of its business objectives. Competition To continuously enhance leadership capability, a new phase of our TakeOff Leadership Development Programme has been launched. As previously reported, the Competition Tribunal ruled in our The programme is multi-faceted and supports both collective and favour in our case against South African Airways (“SAA”) for its individual leadership requirements. The programme will support anti-competitive travel agent incentives and its abuse of dominance. individual leaders with assessments, coaching and access to a We were also successful in the appeal that SAA lodged, and we
Integrated Annual Report 2017 13 INTEGRATED ANNUAL REPORT 2017
issued a multi-million Rand summons against SAA for damages Licence pending a final review application of the Decision. The related to this claim. Our claim against SAA for damages arising review application was heard in the North Gauteng High Court from this anti-competitive conduct, which is in the range of R810– on 16 March 2017. Judgment in the matter was reserved and R898 million (depending on the methodology used), with a similar as at the date of this report, no judgment had been delivered. additional amount in accrued interest and legal costs, was heard in the Gauteng South High Court between 18 April and 24 August While the Group is firmly of the view that it is not in breach of 2016. Judgment in this matter was handed down in February Sections 16(4)(c) and 19(c) of the Air Services Licensing Act, 2017. In terms of the judgment, we were awarded damages in the Group, in order to ensure compliance with the provisions the sum of R554 million, with a similar additional amount being aforementioned, entered into discussion with the JSE to investigate awarded in respect of interest and costs, resulting in damages of the possibility of setting up a variable voting right structure, in terms approximately R1.16 billion. SAA has lodged an appeal against of which foreign shareholders voting rights will be restricted to this judgment. We have lodged a cross-appeal to recover the 24,99%. The JSE approved the variable voting right structure on full amount of the damages we sustained plus interest on same 1 September 2017. The variable voting right structure requires which, if successful, will increase the damages to approximately certain amendments to be made to the Company’s Memorandum R1.9 billion. We anticipate that the appeal will be heard early in 2018. of Incorporation. The Company will shortly be sending a circular to shareholders setting out full details of the variable voting right Government and Regulatory Bodies structure and seeking specific approval for the variable voting right structure at a general meeting of shareholders. The airline industry throughout the world is subject to extensive governmental and regulatory oversight relating to, amongst other In terms of the draft Carbon Tax Bill, issued by National Treasury things, restriction on foreign ownership and voting rights. South in November 2015, the Group could be subject to direct carbon Africa is no exception to this, with restrictions placed on foreign taxation based on aviation turbine fuel use in respect of its voting rights, which restrictions are set out in Sections 16(4)(c) domestic (South African) operations in the near future. In 2016 and 19(a) of the Air Services Licensing Act (No. 118 of 1990) (“the the airline industry signed the world’s first truly global carbon Act”) and requires that a minimum of 75% of voting rights in a emission offsetting scheme at the 39th International Civil Aviation licensee must be held by residents of South Africa. Organisation (“ICAO”) Assembly. As air transport is essential to the world economy, the current thinking within the ICAO and the As previously reported, approximately three years ago, Flysafair International Air Transport Association (“IATA”), is that carbon complained to the Air Services Licensing Council (“Council”) offsetting, as opposed to taxes or other forms of levies, would be alleging, amongst other things, that based on the so called “look- more effective for the aviation industry, and this should be applied through” principle, the Company was not compliant with the to both domestic and international operations, which are supported provisions of the Act. The Company has always maintained the view by the Group. The Carbon Tax Bill excludes international aviation that it complies with the foreign shareholding requirements of the from payment of the Carbon Tax. The Group is of the view that the Act and that the Flysafair complaint has no merit. Notwithstanding introduction and application of Carbon Tax to domestic aviation numerous attempts by the Group to demonstrate to the Council will counteract and compromise what ICAO and IATA are trying that its foreign shareholding was compliant with the Act, the Council to achieve at an international level. decided on 22 April 2016 that the Company was in breach of the foreign shareholding requirement (“the Decision”) and threatened to suspend its domestic air service licence (“Licence”). Once it had Safety and Security received notification of this fact, the Group repeatedly requested The safety and security of our customers is of paramount the Council to provide reasons for the Decision as well as answer importance and the Group therefore ensures that a strong culture to the question as to whether the Council had complied with of safety and security exists among all employees. This goal is the procedural requirements of the Act for the suspension of a supported by a well-defined reporting and management process to licence. The Council refused to respond to these requests and ensure that all safety and security issues are dealt with thoroughly invited the Company to take the Decision on review to the High and effectively. This process is formally documented in a Safety Court. The Company notified the Council that it would do so and Management Manual that has been accepted by the South African requested an undertaking that no steps would be taken by the Civil Aviation Authority (“SACAA”). In addition, the Group maintains Council to suspend its licence pending the outcome of the review an International Operational Safety Audit (“IOSA”) Registration, proceedings. The Council refused to provide such undertaking. In and has been audited and passed all audits. The next bi-annual the circumstances, the Company was left with no alternative but to IOSA audit is due in February 2018. obtain an urgent interdict from the High Court in Pretoria preventing the Council from taking any action to suspend the Company’s
14 Integrated Annual Report 2017 Corporate Governance reduce the adverse impact that aviation has on the local and global environment. Further details are set out on pages 45 We aim to be a good corporate citizen and maintain the highest to 54 of this Report. standards of integrity and ethics in our dealings with stakeholders. To ensure that we offer the best possible airline service, and are regarded as the airline of choice for all travellers within our Transformation operating environment, we manage and control our business The Group continued to progress with its transformation by implementing governance procedures and ensuring that we programme, as confirmed in the most recently issued B-BBEE identify and manage our risks effectively. certificate. The industry is still faced with significant challenges in attracting adequate numbers of matriculants from previously Sustainability disadvantaged Groups with higher-grade mathematics and science, for training in specialised aviation skills. Further details We are committed to managing our business in a sustainable way. are set out on pages 39 to 43 of this Report. This means considering not only the Group’s financial performance and risk profile, but also its human, social, environmental and economic impact. This Integrated Annual Report provides our Looking Ahead shareholders with information regarding the significant human, While profits for the financial year were good, we are still not social, economic, and environmental risks and opportunities achieving the margins that will allow for the optimum pace of that have an impact on our ability to create long-term value for upgrading the fleet. The current weak economy is expected to our shareholders. In addition, we explain our effort to reduce the maintain pressure on consumer spending, and we therefore expect impact on the environment and the societies in which we operate. to see continued pressure on margins particularly in the airline industry, which could result in a decline in passenger volumes. People Comair is, however, well placed to operate in these conditions, We continue to attract the best talent in the business and with strong brands, committed staff, effective equipment, an continually invest in their wellbeing and development. We are efficient cost base and strong cash reserves. also very fortunate to have an extremely dedicated Management team that has a wealth of experience in the industry. We foresee that the non-airline businesses will continue to grow their contributions to profits and will receive ongoing focus.
Training Appreciation Training and skills development is a major priority to ensure that we are able to provide a quality service to our customers. Our sincere appreciation goes to every person within the Comair We spent approximately 4.4% of payroll during the period Group who contributed to the ongoing success of the Group during under review to support this commitment to training and skills the year under review. This includes our Directors, Management development. Further details are set out on pages 35 to 36 and employees, and special thanks are extended to our customers of this Report. and other stakeholders who have chosen to use our services or provide services to us. Society We also thank all the public sector departments and agencies We are a committed corporate citizen and, together with our that we have worked with this year for their shared commitment staff, endeavour to improve the lives of fellow South Africans. to our objectives. We try to make a meaningful impact on our local communities by attempting to alleviate some of their socio-economic challenges. Further details are set out on page 44 of this Report.
Environment Mr ER Venter Mr P van Hoven We are committed to protecting the environment, conserving CEO Chairman natural resources and utilising resources in an effective and 11 September 2017 11 September 2017 responsible way by adopting sound environmental practices in our business and industry. We are also committed to improving our environmental performance by attempting to
Integrated Annual Report 2017 15 INTEGRATED ANNUAL REPORT 2017
Our Strategic Intent and Our Stakeholders
Strategic Intent Action Pillars
The Group’s Cycle of Success illustrates its strategic intent, its Innovation purpose, the business model it follows, its vision as well as the The Group has a professional approach to everything it does or action pillars that underpin its core values. This is reflected in the presents and is committed to a consistent high standard. It is Group’s ‘Cycle of Success’, as set out on page 4. committed to offering world-class products and services in the most efficient way. As a market leader, the Group stays up to Vision date with current trends and can relate and communicate to the public, customers, investors, suppliers and employees. The Group’s vision is to: Leadership Deliver an awesome travel experience in the most efficient way, The Group is a well led and managed South African company. It and be prepared for growth opportunities. leads by example and represents courage and humility. The Group behaves in a responsible way towards the public, customers, This is an aspirational description of what the Group would like investors, suppliers and employees. to 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 underpins everything the Group does. It organisations. As a Group we went a step further, to look at our represents poise and reassurance and is trusted by the public, core objectives, and tried to define the impact of these objectives customers, investors, suppliers and employees. on our stakeholders where the Group’s business has an influence. The Group acknowledges that the aviation industry is volatile Passion for Service and its future is difficult to predict. The Group therefore looks to define behaviour that will allow it to succeed in every opportunity The Group is committed to operational efficiency and value. It on which it decides to embark. understands and anticipates the needs of its customers, investors, suppliers and employees. Business Model Core Values and Principles The business model is not unique to the Group or the airline The Group and its employees support the following Core Values, industry. The challenge lies in making sure the Group achieves which underline the Think Vision formula for success, by applying the ‘cycle’ for sustainability and growth. It means that with the only those Think Vision values and principles that are beneficial right equipment and people, the Group can deliver an awesome to the Group. travel experience to its customers. If our customers are happy, they will keep coming back, and when they keep coming back Core Values our investors will continue to invest in the Group. This will allow us to be more resilient to change and together we can move Our Customers forward in a sustainable way. In our dealings with our customers, we aim to:
• Reflect the image of the company; Action Pillars and Values • Deliver a safe and quality service; The four action pillars (Innovation, Integrity, Leadership, Passion • Regard everyone who is dependent on our outputs as a for service) and Think Vision Values guide the Group in following customer; the business model in the right direction. The four action pillars • Meet the expectations of our customers; are described as follows: • Measure customer satisfaction levels; • Respect our customer’s rights to confidentiality; • Accept responsibility for customer service.
16 Integrated Annual Report 2017 Mutual Trust and Respect Think Vision We aim to: The Think Vision formula for success identifies those values and principles that are beneficial to the Group (Top Line) as well as those • Share information to the benefit of the Group; values and principles that should be eliminated which could be • Listen with empathy; detrimental to the Group (Bottom Line), as illustrated in the table below. • Communicate openly and honestly; Group Objectives • Display respect for the individual and his/her dignity; • Solve problems on a win-win basis for all parties; Our strategic intent has been translated into the following actionable objectives for the Group to achieve: • Greet and acknowledge one another;
• Maintain ethical standards; Creating Shareholder Value • Exhibit respect for the individual and his/her dignity; • We will continue to optimise operating efficiencies and grow • Commit to sustainable transformation addressing the inequalities the profitability of the business; of the past. • We will continue to optimise our cost base, without compromising safety, reliability and customer services; Performance Driven • We will always look to make investments that will provide We seek to always: incremental growth based on sound investment principles.
• Set objectives and give regular performance feedback; Commitment to Quality • Ensure that each employee knows what is expected of him/her • We will strive to be trusted by all our stakeholders; and what our standards are; • We will always ensure that we provide a safe, secure and • Give recognition to those to whom it is due; reliable service; • Continuously strive to improve our operating efficiencies; • We will always strive to improve customer satisfaction levels. • Eliminate activities that do not add value;
• Base appointments and promotions on competence and Managing Risk performance; • We will continue to ensure that our risks are meticulously managed; • Offer each employee the opportunity to develop his/her potential. • We will adopt a proactive approach to ensure compliance with regulatory and legislative change. Team Approach
We: Leading as a Responsible Corporate Citizen • We are committed to managing our business in a sustainable • Promote positive team behaviour; way and upholding high standards of ethics and corporate • Ensure the participation of all role players; governance practices. • Exhibit responsible, fair, honest and effective leadership;
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 Safety First A Great Place to Work Market Leaders High Performing, Professional People
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
Integrated Annual Report 2017 17 INTEGRATED ANNUAL REPORT 2017
• Provide Growth and Development Opportunities for As part of its ongoing operations, the Group frequently engages Employees with various stakeholder Groups. The Group defines stakeholders • We strive to maintain a corporate culture that provides as “anyone who affects or is affected by the Group”, and in deciding a working environment which is conducive to employee on which stakeholder Groups to concentrate its engagement engagement and productivity and which assists us to attract efforts, the Group considered the significance of the various and retain a talented workforce; stakeholder Groups in the achievement of its objectives. Those significant stakeholder Groups that fundamentally affect the ability • We will provide continuous training and development of the Group to achieve its objectives are included in this report. opportunities to our employees, ensuring that their skills and competencies are relevant and appropriate to our business Media and the delivery of exceptional service to our customers; • We will strive to be an employer of choice, recognising that Communities Suppliers market competition for competent resources is increasing.
Operating Effectiveness Employees* Investors* • 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; Government and Industry • We wish to position ourselves as the airline of choice. Regulatory Bodies* Associates Customers*
Stakeholders * Considered to be significant stakeholder Groups
The Group’s commitment to its stakeholders, to conduct its business in a responsible and sustainable way and to respond to The section that follows details how we engage with and respond their needs, is entrenched in its vision, action pillars and values. The to our stakeholders on issues of significance. nature of the Group’s business requires close engagement with its stakeholders including, but not limited to, customers, employees Materiality and trade unions, suppliers, government and authorities, industry We undertook an exercise to determine the most material issues associates, investors and the media. Communication with that would affect the Group’s ability to execute its strategic intent. stakeholders is important in maintaining the Group’s reputation A list of issues, drawn from both internal and external sources of as a trusted and reliable provider of airline and related services. information, was created. Each issue was evaluated to determine One of the Group’s main objectives is to deliver “an awesome its priority, based on its importance to stakeholders and its impact travel experience in the most efficient way” and thus become the on the Group objectives. Below are those issues considered leading premier domestic and regional aviation Group in sub- material and the relevant sections where we have outlined our Saharan Africa, and the airline of choice for travellers within the response to them. environment in which it operates. The Group, in addition, values the importance of its brands, namely British Airways, kulula.com and SLOW, as well as its travel, catering and training brands, and has taken the necessary legal steps to protect them.
18 Integrated Annual Report 2017 Group Objective Material Issues Relevant Section Creating Shareholder performance • Growth opportunities Interaction with Investors, Suppliers, • Financial sustainability Media; Financial Statements; Chairman and CEO’s Report; Our Operations and • Current economic climate Customers • Capital funding Commitment to quality • Customer satisfaction Our Operations and Customers. • Brand value/reputation Managing risk • Safety Internal Control and Risk Management; • Terrorism Interaction with Government, Regulatory and Industry Bodies; Chairman and • Licensing Council CEO’s Report • Anti-competitive behaviour by competitors • New entrants Leading as a responsible corporate • Carbon taxes Investing in the Community; citizen • Fraud Environmental Report; Corporate Governance Report Provide growth and development • Transformation Company Employees and Broad- opportunities for employees • Staff productivity Based Black Economic Empowerment; Remuneration Report; Report of the • Talent management Directors • Executive remuneration • Training and development Operating effectiveness • Fuel efficiency Environmental Report; Our Operations • Fleet management and Customers • Technology solutions
Integrated Annual Report 2017 19 INTEGRATED ANNUAL REPORT 2017
Our Operations and Customers
Our Route Network
Comair Limited (“Group”) is a South African Group operating scheduled and non-scheduled airline services as its core business under both its kulula.com and British Airways brands in South Africa, sub-Saharan Africa and the Indian Ocean Islands, as well as providing aviation-related services such as travel management services, pilot and cabin crew training, catering and operating airline lounges. The British Airways and kulula.com brands operate flights into sub-Saharan Africa and the Indian Ocean Islands, with the kulula.com brand offering such flights through codeshare arrangements, acting as the marketing carrier and, although flights are advertised for sale through global distribution systems and the internet, the majority of its revenue is earned in South African Rand. During the period under review, the Group operated 43 098 flights and carried 5 545 214 customers, as opposed to having operated 43 499 flights and carried 5 428 678 customers in the previous reporting period. Diagrams are set out below reflecting all the destinations to which the Group’s two brands provided scheduled air services during the period under review.
British Airways International
The Group entered into a Licence Agreement with British Airways International (“BA”) during 1996, in terms of which it was granted a licence to operate flights using BA intellectual property and in accordance with the BA style of business, tweaked to meet local conditions. In terms of the Licence Agreement, BA provides other services to the Group such as, but not limited to, access to the BA frequent flyer programme known as Executive Club. The Licence Agreement has now been in operation for almost 21 years and has, in the Group’s view, been highly beneficial to both BA and the Group. Notwithstanding the Licence Agreement with BA, the Group itself remains actively and effectively in control of the airline services it provides.
British Airways Route Network
DOHA LONDON LONDON
SPAIN
HONG KONG
VICTORIA LIVINGSTONE FALLS HARARE
WINDHOEK MAURITIUS
JOHANNESBURG
DURBAN
PORT ELIZABETH CAPE TOWN
British Airways (operated by Comair) British Airways (operated by Comair) codeshare British Airways International
Note: The British Airways (operated by Comair) brand has entered into unilateral codeshare agreements with Cathay Pacific, Qatar Airways and Iberia, enabling their customers to purchase a single ticket on such carriers and connect seamlessly onto the British Airways (operated by Comair) route network.
20 Integrated Annual Report 2017 kulula.com kulula.com Route Network
FRANCE ABU DHABI KENYA
JOHANNESBURG (OR Tambo and Lanseria)
DURBAN
EAST LONDON CAPE TOWN GEORGE
kulula.com kulula.com codeshare
Note: The kulula brand entered into a reciprocal codeshare agreement with Kenya Airways, allowing the kulula brand to codeshare on the services between OR Tambo International Airport and Nairobi in Kenya, using Kenya Airways aircraft, and allowing Kenya Airways to codeshare on the kulula network, using kulula branded aircraft. Note: The kulula.com brand has entered into unilateral codeshare agreement with Air France and Etihad Airways, enabling their customers to purchase a single ticket on such carriers and connect seamlessly onto the kulula.com route network.
SLOW Lounges
To enhance the quality of its service, the Group provides access to its airline lounges, known as SLOW Lounges. These SLOW Lounges are located at OR Tambo International Airport (in both the domestic and international terminals), Cape Town International Airport (in the domestic terminal), King Shaka International Airport (in the domestic terminal) and SLOW in the City (situated opposite the Gautrain station in Sandton). SLOW Lounges are open to qualifying customers (for example, Gold and Silver Executive Club Members, business class customers, the Group’s VIP guests and FNB and RMB qualifying clients).
The concept of the SLOW Lounges is based on the theme that time plays a significant part in people’s lives. Modern-day life places numerous demands on people’s time and there is generally not enough of it. SLOW was created as a space for people to get their time back on their own terms, when during a few moments of sensibility, they have a chance to catch their breath and relax. The Group wanted to ensure that within the busy airport environment it developed a space and offering that was conducive to relaxation, comfort and convenience. This is evident in the technologies, furnishings and the freshly prepared food and beverage choices delivered through its friendly, efficient staff in the Lounges. Since the introduction of the SLOW Lounges the Group has received many accolades, awards and compliments from the industry and customers.
Demand for the Lounges has increased and the Group recently embarked on an expansion programme. The Cape Town Domestic SLOW Lounge and the SLOW International Lounge at OR Tambo International Airport were revamped and made larger during the previous reporting period. The extension of the international Lounge has afforded the Group the opportunity to allow other international airlines, who have contracted with the Group, the opportunity to experience the SLOW concept and has, in addition, accommodated the growth of the Group’s, RMB’s and FNB’s customer volumes going forward. The domestic SLOW Lounge at OR Tambo International Airport is in the process of being revamped and extended in size. The Group has opened a new SLOW Lounge concept at Lanseria
Integrated Annual Report 2017 21 INTEGRATED ANNUAL REPORT 2017
Airport known as SLOW XS and intends to expand this new Business rewards the organisation as a whole for corporate travel Lounge concept to other domestic airports in South Africa. While spend. Organisations have a choice between earning On Business the SLOW XS Lounges will provide a lesser portfolio of services points, which can then be accumulated and redeemed towards than the SLOW Lounges, they will not in any way be an inferior or flights and upgrades, or the option of a discount on selected flights. budget version of the SLOW Lounges, but rather a sibling brand, leveraging the growing trend of small-scale, local production and There are three tiers within the On Business Programme, which modern connoisseurship. The Group, in addition, is looking to are based on overall spend on flights. The higher the tier, the open lounges under a different brand at various domestic airports greater the number of On Business points earned. in South Africa. Avios Travel Rewards Programme for kulula.com
Our Customers Through a partnership with Avios, a global travel rewards Providing a safe, secure, reliable and quality experience on both programme, kulula.com customers are able to join Avios, and of its airline brands, as well as in its travel-related businesses, is as an Avios member they are able to earn Avios points when core to the Group’s business. It therefore strives to deliver “an travelling with kulula.com as well as at various other Avios partners, awesome travel experience in the most efficient way” and hence including British Airways. In addition, Avios points can be earned by be recognised as the airline of choice for all travellers within its spending at certain retailers, fuel companies and banking parties. operating environment. On kulula.com, Avios points are earned at a rate of three Avios for every R10 spent. Avios points earned by Avios members can Our Travel-related Offerings be redeemed for flights on kulula.com in any fare class, subject to seat availability. Avios points can be redeemed in increments The Group actively participates in the British Airways International of 1 000 points, which currently equates to R60.00. Executive Club frequent flyer programme as well as the On Business Programme for its British Airways brand. In terms of the kulula.com brand, the Group has partnered with the Avios Travel Rewards The kulula Credit Card Programme and it also offers a co-branded kulula credit card. The kulula credit card is a Visa credit card, which is issued, owned, financed and administered by First Rand Bank Limited, British Airways Executive Club and Avios an Authorised Financial Services and Registered Credit Provider. Customers earn kulula moolah when using their kulula credit card The Executive Club is British Airways International’s global to purchase various qualifying goods and services. kulula moolah frequent flyer programme, designed to recognise and reward can be used to pay for or towards any kulula.com flights. kulula loyal members, with the aim of making their travel more enjoyable moolah is a virtual currency with 1 kulula moolah equating to R1. and rewarding. Executive Club members earn Avios, which is the Executive Club loyalty currency, when they fly with British Airways, a partner airline, or on one of the oneworld® alliance partners. The Magazines number of Avios that members earn depends on the distance they The Group prints two on-board magazines, namely, High Life fly, the cabin they travel in, the type of ticket they purchase, and SA for its British Airways brand, and khuluma for its kulula. their Executive Club tier status. Members can also collect Avios com brand, as well as a magazine titled SLOW for the SLOW with British Airways’ worldwide hotel, car rental, financial and Lounges. These magazines cover a number of subjects, including shopping partners, even when they are not flying. In addition to pertinent information relating to the lifestyle interests of the Group’s accumulating Avios, members earn Tier Points. Tier Points allow customers as well as information about the Group and its business. members to move through the various tier levels, starting at Blue, Twelve editions of each magazine title (one per month) are printed then Bronze, then Silver and finally Gold Executive Club status. per year. The circulation for High Life SA is approximately 16 500 As members progress from one tier level to the next they are able per month, khuluma is approximately 21 000 per month and the to enjoy additional benefits associated with each tier level such SLOW magazine approximately 5 500 per month. The magazines, as, but not limited to, airline lounge access, dedicated check-in other than SLOW, are made available on board the aircraft and High processes and priority waitlists. Life SA is also available in the SLOW Lounges. Other mediums of communication with customers and potential customers include On Business Programme direct e-mail communications to the Group’s respective customer databases, on-board announcements and advertising campaigns The On Business Programme is a global British Airways loyalty (including radio, TV, outdoor, print and on-line) as well as social programme offering aimed at companies. Unlike the Executive media channels such as Facebook, Twitter, Google+ and YouTube. Club, which recognises and rewards the individual traveller, On
22 Integrated Annual Report 2017 Customer Experience the “Voice of the Customer” (“VoC”) feedback tool to measure customer satisfaction on the British Airways brand. The kulula. The Group recognises that in order to be a truly customer-centric com brand used the “VoC” tool to measure customer satisfaction airline, it needs to listen constantly to its customer’s needs. It during the entire period under review. continuously seeks the best and most reliable tools to measure customer satisfaction levels in respect of both its British Airways GPM and kulula.com brands. GPM research was conducted monthly on board the British During the period 1 July 2016 to 28 February 2017 the Group Airways brand via randomly selected customers. The overall used the Global Performance Monitor (“GPM”) tool to measure customer satisfaction level for the British Airways brand during customer satisfaction on the British Airways brand and for the the period 1 July 2016 to 28 February 2017 is reflected in the period from 1 May 2017 to 30 June 2017, the Group used table below.
British Airways Overall Performance July 2016–February 2017
Meal/refreshment service 63% Cabin environment 63% Likelihood to travel British Airways again 64% SLOW Lounge team 67% SLOW Lounge environment 71% Departure process 72% SLOW Lounge refreshment 73% Check-in process 74% Value for money 74% Overall satisfaction with British Airways 76% Likelihood of recommendation 79% Cabin crew 82%
Voice of Customer (“VoC”) • Overall loyalty;
As mentioned above, a VoC monitoring programme was used by • Experiences; the kulula.com brand during the entire period under review, while • Shopping; the British Airways brand made use of the VoC programme for the • Modify booking; period 1 May 2017 to 30 June 2017. The reason for switching the • Delay; methodology for measuring customer satisfaction on the British • Flight; Airways Brand from the GPM programme to the VoC programme is that the VoC programme provides a larger sample size and richer data • Club (This is only applicable to those customers who travelled and provides real-time feedback from customers, enabling both brands in business class (“Club”) on the British Airways brand). to be more responsive to customer needs. The feedback received from the VoC programme also reflects the customer’s perception of Each of these touchpoints has been assigned quality attributes the service received at different customer touchpoints. The primary that are measured. The following high-level metrics are used: objective is to identify problematic areas and address improvements as quickly as possible to enhance customers’ experiences. • Net promoter score; • Overall satisfaction; A number of surveys were run across the customer journey, • Satisfaction by experience; measuring various customer touchpoints such as: • Customer effort by experience.
Integrated Annual Report 2017 23 INTEGRATED ANNUAL REPORT 2017
The VoC upgrade programme currently offers: • Operational reporting for all critical business areas (still in progress). • Reporting for all channels; • Reports integrated in feedback system (case management); To the right are snapshots of high-level metrics for both brands. • Structured and unstructured feedback (free text) tied back to customer journey;
kulula.com brand
Net Promoter Score for the period 1 July 2016–30 June 2017 Customer Satisfaction Score for the period 1 July 2016–30 June 2017
36.00 35.98 79.67 35.40 80.00 78.00 34.00 76.57 76.00 32.00 74.83 30.60 74.00 30.00 72.24 73.84 72.00 70.85 29.45 71.17 28.00 70.00 26.76 27.37 26.46 28.01 27.25 68.00 26.00 67.35 25.13 24.96 66.00 24.00 64.93 64.00 22.00 63.53 62.00 20.20 60.95 20.00 60.00 Jul 2016 Jul 2016 Apr 2017 Oct 2016 Jan 2017 Jun 2017 Apr 2017 Feb 2017 Oct 2016 Jan 2017 Jun 2017 Mar 2017 Feb 2017 Aug 2016 Sep 2016 Nov 2016 Dec 2016 Mar 2017 Aug 2016 Sep 2016 Nov 2016 Dec 2016 May 2017 May 2017
Overall Satisfaction Rel. NPS
British Airways Brand Net Promoter Score for the period 1 May 2017–30 June 2017 Customer Satisfaction Score for the period 1 May 2017–30 June 2017
43.4 78.4 43.4 78.4 43.2 43.0 78.3 42.8 42.6 78.2 42.4 78.1 42.2 42.0 78.0 41.8 41.6 77.9 41.4 77.9 41.3 41.2 77.8 May 2017 June 2017 May 2017 June 2017 Rel. NPS Overall Satisfaction
24 Integrated Annual Report 2017 Based on the feedback received from customers, the Group to the likes of Lufthansa Technik AG, GE Aviation Services acknowledges that there are areas for improvement and and SAFRAN Aircraft Engines. continuously works at addressing them. • Following the successful implementation of a business-wide airline enterprise system from Sabre Airline Solutions in Operating Effectiveness, Commitment to June 2012, at a cost of approximately R52 000 000 (fifty- Quality and Safety of Equipment two million Rand), the Group has continued to improve the system with new modules and updated technology as and Operating Effectiveness and Quality of Equipment when required during the period under review. This system has and will continue to deliver substantial improvements in As mentioned, the Group’s goal is to provide a safe, secure, revenue integrity, inventory management and optimised ticket reliable and quality service to its customers and it strives to procure pricing, as well as improved crew and airport staff productivity. the best and latest equipment and technology affordable to it in • A substantial investment has been made towards the acquisition providing such services. of a new fleet of Boeing 737-800 New Generation aircraft. In addition to having delivered substantial fuel savings of The Group maintains a high daily aircraft utilisation rate. This is between 6% and 7% compared to the B737-400 fleet, the achieved by reducing the turnaround times of its aircraft at the new aircraft have a greater revenue-generating potential airports to which they operate, so that the aircraft can fly more hours with their increased seating capacity and also require less on average over a day. As far as the Group is aware, its turn-around maintenance downtime. It is estimated that the Boeing times are the shortest in the South African domestic market. High 737-800 New Generation aircraft with its greater seating daily aircraft utilisation allows the Group to generate more revenue capacity burns 33% less fuel per passenger than the older from the aircraft. Delays and cancellations, however, some of which and smaller Boeing 737-400. As previously reported, the are beyond the Group’s control (for example adverse weather Group took delivery of four New Generation Boeing 737- conditions, air traffic congestion and unscheduled maintenance), 800 aircraft during the 2013 reporting period, and a further reduce the Group’s aircraft utilisation rate. This in turn affects its three New Generation Boeing 737-800 aircraft during the on-time performance target, which is currently set at 85%. During previous reporting period. It took delivery of the final New the period under review the Group’s on-time performance remained Generation Boeing 737-800 in the consignment of eight (8) consistent with that reported in the previous financial year, namely in November 2016. It also took delivery of a leased Boeing 85% for the British Airways brand and 85% for the kulula.com 737-800 aircraft in December 2016. In addition, the Group brand. On-time performance means that an aircraft has departed has entered into a purchase agreement with Boeing for the within 15 minutes of its scheduled departure time. acquisition of eight Boeing 737-8 MAX aircraft for delivery between 2019 and 2022. The Group has also entered into a Maintenance of the Group’s fleet of aircraft is regulated by the purchase agreement to purchase a pre-owned Boeing 737- South African Civil Aviation Authority (“SACAA”) and, as the 800 aircraft which will be delivered in the 2018 financial year. Group leases a number of aircraft from foreign-owned leasing companies, the Federal Aviation Authority of the United States • The Group’s major investment during the financial year and the European Aviation Safety Authority. The Group also was in making pre-delivery payments towards the first two ensures compliance with airworthiness directives issued by the Boeing 737-8 MAX aircraft to be delivered in January and manufacturers of the equipment and the SACAA. February 2019. • The Group is currently finalising the upgrading and size of its Its buildings, plant and other equipment are also maintained to a Domestic Airport Lounge at OR Tambo International Airport at high standard to ensure a safe and user-friendly environment for an approximate cost of R23 million. In addition, a new SLOW employees and customers. Lounge concept known as the SLOW XS Lounge has been opened at Lanseria International Airport during August 2017. The Group has, in the past financial year, made the following • As previously mentioned, the Group purchased various investments in respect of equipment, plant and buildings: properties in the vicinity of Cape Town International Airport and has developed, on certain of the properties, office facilities, • The Group continuously invests in maintaining the safety and catering facilities and storeroom facilities at an approximate reliability of its aircraft. It subcontracts the maintenance of its cost of R27 million, to accommodate its employees who are aircraft and engines to South African Airways Technical (SOC) not necessarily required to be at the airport. Limited, Israeli Aircraft Industries Limited, and Koninklijke • The Group is in the process of building a new a state-of-the- Luchtvaart Maatschaapij NV (“KLM”) and, on an ad hoc basis art simulator building at its operations facility in Rhodesfield
Integrated Annual Report 2017 25 INTEGRATED ANNUAL REPORT 2017
at a cost of approximately R67 million. This will be used to the Republic of South Africa. From an aviation perspective, the expand the Group’s flight training facilities. National Aviation Safety Committee (“NASC”) recently passed a • The Group has purchased a fixed base Collimated Visual resolution in terms of which it stated that currently there was no System Multi Pilot Simulator from Multi Pilot Simulations specific threat to civil aviation in the Republic of South Africa. The B.V. at a cost of €1 300 000. This will be installed in the NASC, however, did advise that globally civil aviation remained new simulator building and used to provide ground training an attractive target for terrorists and that heightened security to third party pilots operating Airbus A320 aircraft. measures at airports needed to be maintained. • The Group has recently entered into an agreement to purchase From a Group perspective, and having regard to its Licence an office park known as Anchor Industrial Park for a purchase Agreement with British Airways International (“BA”), the Group’s consideration of R75 million. Anchor Industrial Park currently security officers remain in contact with their security counterparts houses the Group’s catering division, Food Directions, and at BA in the United Kingdom, who work closely with the United the company’s stores building, among a range of other Kingdom Government, to discuss security issues affecting the tenants. Transfer of this property will take place during the airline. In addition, the Group, together with the Airports Company 2018 financial year. of South Africa (“ACSA”), the Airlines Association of Southern Africa and other airlines, has put measures in place, such as, but Safety of Equipment not limited to, ensuring that all passengers, including the Group’s airline crew, prior to entering the secure area at the airport, are The airline industry has become synonymous with ensuring that, screened together with their carry-on baggage. All baggage and through a combination of rigorous regulation, robust self-regulation cargo being placed in the hold of the aircraft is screened and no and learning, air transport becomes the undoubted leader in aircraft departs, with certain exceptions, unless the customer and the safe transportation of people. Each year, more and more his/her baggage is on board the aircraft. passengers take to the skies with incident rates for the industry continuing to improve. This remarkable achievement has been The key safety and quality of service priorities applied by the brought about through a highly regulated system of ensuring Group are detailed below. that manufacturers, airlines, regulators and maintenance service providers continually review their procedures and learn from one The Group another through the sharing of information and practices. The Group puts the safe transportation of its passengers as The safety and security of customers is of paramount importance its number one priority. Part of its success in building a long- and the Group therefore ensures that a strong culture of safety standing, profitable and sustainable business model has been and security exists among all employees, which goal is supported ensuring that continual investment is made in its maintenance by a well-defined reporting and management process to ensure and fleet replacement programmes. Passenger safety includes a that all safety and security issues are dealt with thoroughly and number of other components outside of the aircraft fleet. All these effectively. This is formally documented in a Safety Management components are formally documented in a Safety Management Manual that has been accepted by the SACAA In addition, the Manual that has been accepted and signed off by the SACAA, Group maintains an International Operational Safety Audit (“IOSA”) as mentioned above. Safety also extends to detailed pilot training Registration, and has been audited and passed all audits. The programmes and continual simulator performance assessment. next bi-annual IOSA audit is due in February 2018. Cabin crews additionally go through rigorous training and continued refresher training to ensure they are equipped to handle all on- The Company has also received unqualified audit ratings from board situations pertaining to the safe and orderly transportation British Airways International, the Boeing Company and the SACAA. of passengers. The Group’s Flight Training Centre has been audited by external airlines interested in making use of the Flight Training Centre and Boeing Company we accordingly have numerous airlines and other users currently The Group’s fleet is entirely made up of Boeing aircraft. Aircraft making use of the Centre. manufacturers play a critical role in passenger safety. Not only do they continually update their new models in terms of safety, efficiency No major safety or security issues occurred during the period and reliability, they also ensure full support is provided for their aircraft under review. types, old or new. Boeing additionally consolidates all industry information and keeps all airlines updated on any fixes, issues or Terrorism is unfortunately a threat to the entire world, including changes that are required to ensure that all aircraft perform as they
26 Integrated Annual Report 2017 should. Boeing has a field office based at OR Tambo International sessions; and improving the empathy of Management to Airport, with staff dedicated to the Group. All delays, significant the personal challenges that may be experienced by pilots. defects and other information are communicated to Boeing. Implementation of Safety Management System Implementation of the International Air Transport The Group has a safety management system (“SMS”) to address all Association (“ IATA”) International Operational Safety aspects of aviation and ground safety. The purpose of the SMS is Audit (“IOSA”) to ensure that risks affecting safety are controlled and appropriately The IOSA programme is an internationally recognised and accredited mitigated. The Director of Operations monitors the Group’s evaluation system, designed to assess the operational management performance against defined objectives and the Board reviews the and control systems of an airline. All members of IATA are IOSA Aviation Safety Goal matrix at its quarterly Board meetings. registered and must remain registered to maintain IATA membership. Access to Affordable Flights The Group’s approach to aviation safety is one of oversight and audit, as defined within the context of the eight disciplines of the The airline industry is fraught with many challenges, involving, IOSA audit structure namely, organisational management, flight, but not limited to the cost of equipment, oil price and currency dispatch, maintenance, cabin, ground (“airport”), cargo, and fluctuations, airport charges and taxes and, consequently, access security. The Group has participated in the IOSA programme since to affordable flights. It was for this reason that the Group was 2006 and has successfully undergone six unqualified audits. The the first in South Africa to launch a low fares airline, making air next IOSA audit will take place in February 2018. travel affordable for a larger portion of the population who would previously not have flown. Implementation of Runway Safety Measures To enable the Group to continue to offer access to affordable Safety statistics show that runway excursions and incursions are flights, it continuously looks at ways in which to improve its the most common type of accident or incident reported annually. efficiency and cost effectiveness, such as, but not limited to: In response to this, ACSA has established consultative forums, in the form of local Runway Safety teams, at each ACSA airport. • Implementing a progressive fleet replacement programme. The Group actively participates in such forums. By operating more modern and fuel-efficient aircraft, it has achieved a consistent reduction in the cost of aircraft Training on Preventing Loss of Control maintenance as well as the amount of fuel used per seat; The Group incorporates loss of control in-flight training, as part • Introduced and continuously refines its comprehensive fuel of its continuous pilot training curriculum. Special emphasis is savings programme with the co-operation of its pilots; placed on ensuring that the Group’s pilots retain their basic flying handling skills. Various exercises are practiced during such training. • Installing lightweight seats and catering equipment to reduce In addition to the foregoing, the Group has: the weight of its aircraft. Weight impacts on fuel burn and the Group has, through this initiative, substantially reduced • Introduced a Flight Crew Fatigue Risk Management System aircraft weight; to monitor and regulate the risk of fatigue among the Group’s • Maximising the use of available technology to reduce airline pilots and cabin crew. This programme is run and monitored distribution costs through the use of the internet and by by the Group and the Comair Pilot’s Union, to ensure that introducing self-service check-in for customers at the airports; pilots only fly within the limits set by the SACAA. • Developing the most efficient routing of aircraft between • At the request of the Board, and through the Risk Committee, airports, and developing more efficient landing approach the Group re-evaluated its cockpit and pilot recruitment profiles, resulting in substantial fuel savings. This was achieved procedures following the Germanwings incident and it is through the Group’s Flight Operations Department, working relatively confident that it has put in place all possible risk with Air Traffic Control and Navigation Services; mitigants to prevent a similar incident occurring within the • Setting up its own catering department, Food Directions, Group’s airline operations. The risk mitigants implemented thereby reducing the cost of on-board catering, while at the include, amongst others, access by pilots to peer support; same time ensuring a better quality of catering for customers. the Pilot Well-being Programme; monitoring of possible stress-related issues during crew resource management
Integrated Annual Report 2017 27 INTEGRATED ANNUAL REPORT 2017
Interaction with Government, Regulatory and Industry Bodies
Government and Authorities of 75% of the voting rights in a licensee must be held by residents of South Africa. The Group has always maintained the view that The Group remains committed to working with government and it complies with the foreign shareholding requirements of the Act other relevant authorities to ensure: and that the Flysafair complaint has no merit. Notwithstanding numerous attempts by the Group to demonstrate to the Council • The maintenance of a safe, reliable, competitive and that its foreign shareholding was compliant with the Act, the Council commercially viable air transport sector, where all operators are decided on 22 April 2016 that the Group was in breach of the afforded equality of treatment by government and authorities; foreign shareholding requirement (“the Decision”) and threatened • The provision of air transport infrastructure that is affordable to suspend its domestic air service licence (“Licence”). Once it had to the travelling public, and consistent with the requirements received notification of this fact, the Group repeatedly requested of the air transport sector; the Council to provide reasons for the Decision as well as an • The provision of air travel at a cost that is affordable to South answer to the question as to whether the Council had complied African consumers and in line with internationally accepted with the procedural requirements of the Act for the suspension airline service standards and practices; of a licence. The Council refused to respond to these requests • An increase in the number of black airline pilots as well as and invited the Group to take the Decision on review to the High greater participation by black people in the aviation industry, Court. The Group then notified the Council that it would do so and in line with the revised Broad-Based Black Economic requested an undertaking that no steps would be taken by the Empowerment (“B-BBEE”) targets. Council to suspend its Licence pending the outcome of the review proceedings. The Council refused to provide such undertaking. In the circumstances, the Group was left with no alternative but to Government Financial Assistance obtain an urgent interdict from the North Gauteng High Court in Pretoria preventing the Council from taking any action to suspend The Group received no financial assistance from government, nor the Group’s Licence pending a final review application of the did it make any contribution towards any political party. Decision. The review application was heard in the North Gauteng High Court in Pretoria on 10 March 2017. Judgment in the review Government, Regulatory and Industry application was reserved and to date no judgment in respect of Bodies this matter has been delivered. The interdict obtained by the Group remains in place until this matter has been finally adjudicated. The airline industry is subject to extensive government and regulatory oversight relating to, amongst other things, safety, Government and Regulatory Bodies security, licensing, traffic rights, and consumer protection. The Department of Transport Group regularly communicates and interacts with governmental, regulatory and industry bodies. During the period under review, The Department of Transport (“DoT”) is responsible for: the Group is still the subject of a historic complaint laid by Safair Operations Proprietary Limited (“Flysafair”) with the Air Services • Providing secretarial support to the two licensing councils, Licensing Council, directed against the level of the Group’s foreign- and the Regulating Committee for the Airports Company owned shareholding. The background relating to the Flysafair South Africa (“ACSA”) and the Air Traffic and Navigation complaint is set out below. Services Company (“ATNS”); • Entity oversight of ATNS, ACSA and the South African Civil Approximately three years ago, Flysafair complained to the Air Aviation Authority (“SACAA”); Services Licensing Council (“the Council”) alleging, amongst other • The conducting of bilateral air service negotiations with things, that based on the so called “look-through” principle the foreign governments; Company was not compliant with the provisions of Sections 16(4)(c) • Managing aviation industry involvement in major events. and 19(a) of the Air Services Licensing Act (No. 118 of 1990) (“the Act”). Section 16(4)(c) and 19(a) of the Act requires that a minimum
28 Integrated Annual Report 2017 • The Group interacts, co-operates with, and provides feedback South African Civil Aviation Authority to the DoT in all these areas. The Group strongly supports The South African Civil Aviation Authority (“SACAA”) is the body the concept of a de-regulated and competitive domestic responsible for controlling and regulating civil aviation safety and airline industry where all airlines are required to comply security in South Africa. As safety and security is the Group’s with applicable aviation legislation and compete fairly and number one priority, it interacts and co-operates on a regular basis equally with one another for market share. During the period with the SACAA to ensure that it maintains, and in some areas under review, the Group has continued to comply with the exceeds, the safety and security standards required by the SACAA. applicable requirements, as set out in the South African Air Services Licensing Legislation and to engage with the Besides the usual interaction between the Group and the DoT and the two licensing councils mentioned below. The safety regulator during the period under review, the Group and Group continued to participate in the Airlines Association of other aviation industry stakeholders finalised the consultation Southern Africa (“AASA”) initiative to persuade the DoT and process with the regulator to amend the requirements of Part other government departments to promulgate legislation to 185 (Enforcement) of the Civil Aviation Regulations (“CAR”). The fully implement the Cape Town Convention on Interests in intention is to make the “enforcement process”, which is followed Mobile Equipment and Aircraft Equipment Protocol (“The Cape by the SACAA when the CAR is breached, more transparent and Town Convention”) into South African law. Unfortunately, cognisant of a just culture and voluntary reporting principles. During during the year under review, limited progress was made the period under review, aviation industry stakeholders and the with this initiative. As all South African airlines will benefit regulator agreed to certain limitations on when enforcement action from discounted aircraft financing rates once the Cape Town could be taken and that the regulator could not use information Convention is fully implemented, the Group will continue to obtained via the voluntary reporting system in enforcement help AASA to lobby government to introduce the necessary action against the reporter. The relevant amendments to Part legislative amendments. 185 have been promulgated and took effect in the period under review. In addition, the process to develop a more user-friendly International Air Services Council requirement for the carriage of special needs passengers, in line International air services operated by South African carriers with international best practice, as reported in the previous financial between South Africa and other countries remain regulated with year, was completed in this reporting period, with the approval respect to traffic rights, frequency and capacity. The International of new regulations by the Civil Aviation Regulations Committee Air Services Council (“IASC”) is the authority responsible for issuing (“CARCOM”). The new regulations are awaiting promulgation by licences to South African operators wishing to operate air services the Minister of Transport. to regional and international destinations. Human Rights Commission of SA Air Services Licensing Council As previously reported, the Group received a complaint from the Domestic air services within the Republic have been deregulated Human Rights Commission (“HRC”) alleging that it had violated since 1990. Therefore the Air Services Licensing Council’s (“ASLC”) the human rights of a particular person by refusing to allow his responsibilities are restricted to the issuing of air service licences emotional support dog to travel with him in the cabin of the aircraft. to new applicants; ensuring the safety and reliability of air services The Group’s policy only allows for the carriage of service dogs, operated within South Africa; and adjudicating complaints of non- trained by the Guide Dogs Association of South Africa or any other compliance with the Air Services Licensing Act. As the Group has suitably accredited training organisation, in the cabin. In this case, held and maintained a Class I and Class II Air Service Licence, the dog was trained by an organisation lacking the necessary amongst others, for many years, it only appears infrequently accreditation. The carriage of service dogs is not currently regulated before the ASLC to either answer questions on its published by the SACAA. As previously reported, the Group made detailed annual financial results or to amend certain details on its licence submissions to the HRC as to why dogs trained by organisations or respond to complaints from interested parties. lacking the necessary accreditation were not permitted to travel in the cabin. In January 2016, the Group received a “Provisional In November 2013, the Group interdicted Flysafair from launching Report” on the matter from the HRC, which provisionally found its new scheduled low-cost operation because it had not complied that the Group had discriminated against this person by refusing with the legislated shareholding requirements. As mentioned to carry his service dog in the cabin. The Group has again made above, approximately three years ago Flysafair lodged a complaint lengthy submissions on the matter and is still awaiting a final with the ASLC against the Group’s domestic air service licence, determination from the HRC. details of which are set out above.
Integrated Annual Report 2017 29 INTEGRATED ANNUAL REPORT 2017
As mentioned above, a special working Group consisting of the National Consumer Commission airlines, the SACAA and members of the special needs community The Group co-operates with the National Consumer Commission has been established to develop a more user-friendly policy for (“NCC”) by providing expeditious responses to all consumer the carriage of special needs passengers. complaints referred to it by the NCC as well as by participating in NCC-initiated conciliation proceedings with consumers Airports Company South Africa whose complaints have not been initially resolved. No significant Most large airports in South Africa are owned and operated by complaints were received during the period under review and the Airports Company South Africa (“ACSA”). At an operational almost all complaints were resolved to the satisfaction of the level, the Group interacts with ACSA on a continuous basis and consumer, with no complaints being referred to the Consumer maintains a fulltime representative in the ACSA Airport Management Tribunal. The Group, via the AASA, has further co-operated with Centre at OR Tambo International Airport. The Group, together the NCC by developing a draft Airline Industry Code, intended to with AASA, also engages ACSA on the important issues of airport provide guidance on how the airline industry will deal with specific user charges and the standard of service provided by ACSA to airline-related consumer matters and compensation issues. airport users. Industry Bodies As regards airport user charges, the tariffs for the final two years Airlines Association of Southern Africa (2015 and 2016) of the current five-year permission cycle should The Airlines Association of Southern Africa (“AASA”) was formed to have been approved at the beginning of the 2015 calendar year. The promote and protect the interests of its member airlines operating tariff announcement was delayed due to ongoing disagreements within the Southern African region. The Group actively participates between ACSA, the Regulating Committee and the Office of the in both the activities of and management of AASA. It believes that Minister of Transport, due, amongst other reasons, to the under- the association is vital to ensuring a healthy and commercially spending of budgeted capital investment in the first three (3) years successful airline sector in Southern Africa. The Group supports of the permission period by ACSA. As a result, the Regulating AASA by providing it with data and information on a variety of Committee required a significant decrease in tariffs charged by airline issues; giving feedback and comment on AASA’s position ACSA. An interim “increase” of 0% was gazetted for the 2015/16 papers and submissions; and participating in the various AASA year, whilst the Office of the Minister of Transport reviewed the delegations that attend important stakeholder meetings. During matter. The Regulating Committee has now finalised the tariffs the period under review, with assistance from AASA, the Group for ACSA for the years 2015/16 to 2019/20 and has confirmed finalised a proposal to insert a new definition and associated a 0% increase for the years 2015/16 and 2016/17. With effect requirements for “Supernumeraries” into the CAR. This amendment from 1 April 2017 and for the period 2017/18 the ACSA Service gives recognition to a residual class of persons that travel on board Charge was reduced by 35.5%. Notwithstanding the foregoing, aircraft that are neither passengers, cabin crew or flight crew, a minority shareholder in ACSA launched an application to the such as SACAA authorised officers/inspectors and IOSA auditors/ High Court to have the 35.5% reduction in tariff set aside, which inspectors. The Group was requested by IATA to propose this application has been opposed by the airlines through AASA. change to the regulations. The Group has also supported AASA in its efforts to oppose any action by the Department of Science As indicated in the previous reporting period, the process of and Technology (“DST”) to re-route the Johannesburg-Cape finalising ACSA tariffs over the last few years has been disrupted Town air corridor away from the Square Kilometre Array (“SKA”). by the delay in appointing a new regulating committee in 2016 The location of the current air corridor has been in place for many and the time taken for the new committee to familiarise itself with years and any re-routing thereof would substantially increase airline the permission process. The airlines, via AASA, are currently in operating costs on the route. AASA holds the view that relocating the process of agreeing on the tariffs for the 2019 to 2023 ACSA the air corridor will not protect the SKA from radio interference, permission cycle. as radio waves generated by non-aviation activities cannot be prevented from transiting through the SKA site. Public hearings Air Traffic and Navigation Services Company on the matter have been conducted by the DST but thus far, no Air traffic and navigation services in South Africa are provided by technical solution has been found for the problem. During the the Air Traffic and Navigation Services Company (“ATNS”). During next reporting period AASA, with support from the Group, will the period under review, the Group had regular interaction with continue to engage with the DST on the matter. ATNS on operational issues and maintained a good relationship with ATNS. The airlines, via AASA, are currently in the process of agreeing the tariffs for the 2019 to 2023 ATNS permission cycle.
30 Integrated Annual Report 2017 As indicated in the previous report the Group as part of the been finalised, and the new amendments are currently awaiting AASA delegation, consulted with the Department of Transport promulgation by the Minister of Transport. and civil society Groups on the development of a new Domestic The International Air Transport Association Aviation B-BBEE Charter and Scorecard. The Minister of Trade The International Air Transport Association (“IATA”) represents and Industry published the Charter and Scorecard for public approximately 260 airlines or approximately 83% of all air traffic comment in February 2016. In June 2017, the Department of around the world. It is responsible for promoting safe, reliable, Transport advised that in light of public comment received, various secure and economical air services and fostering inter-airline co- changes were being proposed to the draft Scorecard, the most operation. IATA also operates the airline clearing house in Geneva, important being an increase in the number of black pilots required which processes and allocates financial credits and debits between to be undergoing Airline Transport Pilot (“ATP”) Licence training member airlines, and administers the IATA Operational Safety as a percentage of ATP holders from 10% to 40%. In light of the Audit (“IOSA”). The Group maintains its membership of IATA, practical difficulties in achieving this target for black ATPs, AASA participates in the clearing house, and undergoes a bi-annual has made further submissions to the Department of Transport IOSA audit. The Group successfully submitted to its sixth IATA on this, as well as the other proposed changes, and is currently Operational Safety Audit in February 2016. As part of this IOSA awaiting a final response thereon. audit, the Group was audited against 1 070 standards and in this regard the auditing organisation made two findings which were The AASA initiative to develop more friendly regulations for the resolved, which is a huge compliment to the Group. The next carriage of special needs passengers in line with international best IOSA audit is due to take place in February 2018. practice, which was discussed in the previous reporting period, has
Integrated Annual Report 2017 31 INTEGRATED ANNUAL REPORT 2017
Interaction with Investors, Suppliers and Media
Investors African suppliers, and also whether the latter are registered with the South African Revenue Service. Any form of purchase incentive The Group’s main objective is to create value for its shareholders. is prohibited. Employees involved in the purchasing of equipment Reports to its shareholders are aimed at providing a clear are bound by strict ethical principles, ensuring that high standards understanding of the Group’s financial, economic, social and of integrity are maintained in the supplier relationship. environmental performance, both positive and negative. Policies are in place to ensure that communications with shareholders are No material or significant issues were raised by suppliers during made available timeously and simultaneously. the period under review.
The Group endeavours to maintain dialogue with its shareholders and other interested parties in the investor community and Media meets with its institutional shareholders twice a year, after the The media plays an important role in the Group’s engagement release of its annual and interim results. The Group’s website, with its stakeholders. The Group interacts on a regular basis with www.comair.co.za, contains the latest, as well as historical, the media by issuing press releases to corporate, consumer and financial and other information about the Group, including its trade media and by granting media interviews to share news on Integrated Annual Reports. The Board encourages shareholders developments related to the Group. No material or significant to attend its Annual General Meeting, notice of which is contained issues were raised by the media during the period under review. in this Report, at which shareholders have the opportunity to put questions to the Board. The Group’s objective is to position itself in the media as a trusted player in the airline industry – a ‘champion’ of the people, to position No material issues or topics were raised by investors during the its Management as leaders on industry issues, to educate the period under review. media about its business and how the industry operates, as well as broaden the Group’s profile amongst the travel industry media. Suppliers The Group, having regard for the importance and power of The Group is dependent on a number of suppliers who form an social media, has adopted a social media strategy enabling integral part of its ability to provide a safe, secure, reliable and two-way communication with customers via this platform. Using quality service. The Group attempts to build long-term relations sophisticated software, the Group is able to monitor all social with suppliers who are of vital importance to it, based on the media platforms, and consolidates all direct and non-direct principle of mutual trust and respect. Regular meetings are held customer feedback in real-time, enabling it to better manage with suppliers to ensure continuity of service. The Group further brand performance and consistency. The social media platforms relies on its suppliers to deliver products and services in line with used by the Group are Twitter, Facebook, YouTube and Google+. its own standards. Other criteria play an import role in selecting suppliers, such as compliance with international and local quality There have been no instances of material non-compliance with and safety standards, price, stability of the organisation, support any applicable legislation or regulations concerning the Group’s network and technical capacity, the B-BBEE status of South marketing communications during the period under review.
32 Integrated Annual Report 2017 Company Employees and Broad-Based Black Economic Empowerment
Employee Composition and Turnover Rate Our People
The success of the Group is dependent on the commitment of its An integral part of the success of the Group’s business is the 2 121 employees, 2 105 of whom are South African-based and people it employs. The Group strives to be an employer of choice 16 of whom are Zimbabwe-based, who deliver a safe, secure, and invests significantly in its relationship with its people by reliable and quality service. The composition of its employees in delivering a holistic employee value proposition, which we regard South Africa is made up as follows: as core to our business. The Group strives to achieve this through effective communication, building sound employee relations and Workforce composition by employment type making the Group a great place to work. It communicates with its employees in a variety of ways including, but not limited to: 2017 2016 Financial Financial Employment Type Year End Year End • My Comair intranet – provides a platform to inform employees of Permanent employees 2 054 2 085 current news and events, newsletters from the CEO, classifieds, Temporary employees (PTE/ corporate information, social responsibility feedback, a library Learners/LDC/Interns) 51 0 of standard templates to assist employees in the performance of their responsibilities, policies and procedures, electronic Workforce composition by gender facilities for leave, personal information, payslips and tax 2017 2016 certificates, and employee travel benefits, as well as travel Financial Financial and related specials made available to employees, which Gender Year End Year End the Group has been able to secure from various suppliers; Male 762 741 • HR platforms – includes Employee Self Service, HR helpdesk, Female 1 343 1 344 Talent Management, E-Recruitment and E-learning; Workforce composition by age distribution • Direct communication from the CEO – in the form of newsletters 2017 2016 to employees known as Plane Talk and Business Talk with Financial Financial Erik, an annual forum for Management to address topical Age Year End Year End matters relating to the business; Number of employees • Ad hoc communications – from various divisions focusing younger than 30 552 684 on relevant information for employees; Number of employees between 30 and 50 1 360 1 233 • Face-to-face interactions with employees – through various Number of employees forums, including workshops, workplace forums, committees older than 50 193 168 and Management meetings;
Note 1: Of the Group’s total number of permanent employees, it has seven • Regular employee engagement surveys. (7) foreign nationals in its employ. All these foreign nationals are employed in South Africa. The Group, in addition, has the following programmes in place Note 2: The total number of employees, as set out above, excludes 16 of for all employees: the Group’s permanent employees who are employed in Zimbabwe.
• We Lift You Up: This is designed to create a business While the Group does not maintain data on turnover rate by age understanding amongst employees to obtain their commitment group and gender, its staff attrition rate during the 2017 financial to the Group’s Cycle of Success, as set out in the Group’s year was 10.19% as opposed to 7.98% in the prior reporting Strategic Intent document. In the financial year under review, period. While the turnover rate increased by 2.21% year-on-year, the focus has been on the Employee Value Proposition by the turnover rate is still considered to be at an acceptable level. empowering employees and developing career opportunities within the organisation.
Integrated Annual Report 2017 33 INTEGRATED ANNUAL REPORT 2017
• Think Vision: This is the Group’s formula for success and • Supervisory Development Programme: This is a programme was formulated in consultation with employees. The Think developed for junior to middle management for succession Vision formula constitutes the values and principles that planning at the airports as further detailed under the Employee determine the Group’s success and provides a framework Training section of this Report. for how we work and conduct ourselves. The Group surveys its employees annually (with the exception of 2016, when an external engagement survey was used) to receive feedback on Performance Management how it is doing as an organisation in terms of the Think Vision The Group’s performance management philosophy aims to ensure principles and values. In 2016 this survey was conducted by that all employees are aligned to deliver against the Cycle of an external service provider. Success and Strategic Objectives. As the Group continues to During February 2017, the Group conducted its Think Vision embrace the opportunities it encounters in the market, it remains survey with an 88% participation rate. Employees perceived critical to ensure that all employees have the capacity to develop an improvement in the top line principles associated with and perform against the Group’s objectives, now and in the future. Inspiring Leadership, Expansion and Growth, and Teamwork. The Group has invested significantly in evolving its performance They also perceived an improvement in the bottom line management practices and has subsequently implemented a principles, namely Accepting Mediocrity, Favouritism, and framework for driving enterprise-wide performance. This has Broken Communication. Employees are encouraged to been applied to every level in the organisation and focuses on the participate actively in creating an action plan to support the Group divisional performance, as well as individual performance. improvement of the behaviours that are relevant to them Employees are provided with regular feedback to support • Catalyst Awards: This reward and recognition programme continued development, both in-role as well as towards future encourages employees to implement the Think Vision career opportunities. The emphasis is on quality, face-to-face philosophy and to inspire other employees to do the same. discussions on performance, and aims to contribute to a culture Employees may be nominated for Catalyst Awards by their of giving and receiving constructive and developmental feedback. peers, managers or customers, by living one or more of The procurement of the “best in class” talent solution has created the Think Vision values. During the period under review 44 greater efficiencies, including the streamlining of recruitment and employees were recognised for their contributions. applicant tracking processes. It has further allowed greater access to talent within the South African market. • The Precious Cargo Programme: This is an employee assistance programme that supports employee wellbeing, Through the performance management process, the Group aims enabling employees to manage and balance the demands to create a collaborative environment in which individuals drive not of work and family life. Details of this programme are dealt only their own performance, but contribute to the performance with on page 39 of this Report. of their peers to create broader performance efficiencies. The • Tip Offs Anonymous: This is an anonymous whistle-blowing practice of performance management also forms the basis for facility to enable employees to report any unethical activities. All recognising the Group’s talent and investing in the development tip offs are monitored, investigated and actioned appropriately of future leaders. and reported to the Social and Ethics Committee. During the period under review, eight (8) calls/e-mails were received. All calls and e-mails were followed up by the Group and, where Talent Management necessary, appropriate action was instituted. No calls or e-mails The management of talent is considered a key differentiator of the resulted in disciplinary action in this reporting period, largely Group in comparison to its domestic competitors, and continues due to a lack of evidence, however a number of the Group’s to be a core focus. The Group values its talent and has made processes were adjusted as a result of the calls/e-mails. a significant investment in the procurement and implementation • On Track: The Group’s performance management processes of an Integrated Talent Management Platform. This platform has are designed to drive enterprise performance, ensuring that provided the foundational capabilities to implement fundamental our teams are enabled and engaged to deliver on an individual talent management practices. These practices support business and collective basis. On Track performance scores assist in decision-making in terms of building capacity now and into the incentivising employees within the Group. future, with the dual benefit to employees of having information • Take Off: This is a leadership development programme aimed that supports their careers within the Group. at developing employees in leadership positions, as further dealt with under the Employee Training section of this Report. The Group will continue to invest in the development of talent and leadership capacity through the continuous education of leadership
34 Integrated Annual Report 2017 and the effective delivery of an integrated talent management assessments. The recruitment and selection process entails process. In addition, it will continue to provide career workshops achieving a balance between employing the best person for for non-management staff to support their career planning. The the position and the achievement of the numerical goals as set Group will use innovative methods to support the building of a out in the Group’s Employment Equity (“EE”) Plan to achieve an talent mindset and to create the platform to enhance the attraction, equitable representation of designated Groups in all occupational retention and development of talent. levels within the Group.
As a key focus area, the Group has identified its mission critical Training and Skills Development positions and is actively working to ensure the sustainability of talent in these roles by exploring various talent strategies that will The Group’s training programmes are focused on improving its be formalised in the course of the next financial year. human capital, improving business processes and procedures, maintaining and promoting quality service delivery in all aspects The Group’s objectives will be utilised as the basis of identifying of its business and alleviating, within affordable boundaries, skills talent risks and opportunities to build further capability that will shortages. strengthen the Group’s leadership. In light of this, the leadership framework will be a key driver of effective leadership behaviour Employee Training and for identifying and developing future leaders who will support the sustainability of the Group as it continues to grow. During the period under review, the Group made a significant investment in training, investing 4.4% of payroll on training. This A multi-faceted approach will be used to support our leaders in amount reflects an increase of 1.26% on the prior year. their development as well as to identify talent that has the potential for future development and progression. The Group has the following training programmes:
• Take Off: As part of its succession planning, a leadership Recruitment and Retention of Skilled Staff development programme called Take Off has been running The recruitment and retention of the right calibre of employee is for ten consecutive years. This is a bespoke programme, vital to enable the Group to attain its goal of becoming the airline catering for individual development gaps amongst leaders of choice. It acknowledges that its ability to recruit and retain and teams. One of the offerings is delivered in conjunction skilled employees is a critical factor in driving performance in the with Harvard Publishing. As part of this programme, the intensely competitive and dynamic business environment in which Group’s potential future leaders are identified and undertake the Group operates. courses covering several key areas of business management. A total of 100 employees have been identified from EXCO, The employment and retention of pilots remains a major challenge, HOD, management and specialist levels to complete the particularly pilots from previously disadvantaged Groups. As part programme over a two-year period. of its commitment to transformation and skills development in the • Cadet Pilot Training Programme: The Group remains aviation industry, the Group’s Cadet Pilot Programme sponsors committed to its Cadet Pilot Training Programme, which individuals from previously disadvantaged Groups to obtain their is aimed at training previously disadvantaged persons to Commercial Pilot Licences. The cost to sponsor each cadet is complete the hour-building component of their frozen ATPL. approximately R600 000. Once the cadets graduate from the Since the Group initiated the programme in 2000, 13 cadets programme with the requisite number of hours, they will be have obtained their commercial pilots licences, four (4) of considered for employment by the Group. In addition, since whom are currently employed by the Group, with one (1) of each cadet has been sponsored to obtain their commercial pilot the cadets having risen through the ranks to be appointed licence, and, if employed by the Group, has to be trained to fly as Chief Pilot, and two (2) now being Captains. Some of the Group’s aircraft, they are required to sign training bonds to the others have been employed by smaller airlines to obtain ensure that they remain in its employ for a period that will cover sufficient flying experience to qualify for employment as a pilot the cost of such sponsorship and training. with the Group. Three (3) of the cadets who were employed by the Group have subsequently left to fly larger aircraft on The Group’s recruitment and selection practices are carried out international routes. The Department of Transport has previously in accordance with all applicable labour legislation and are based commended the Group on the programme, having regard on the principles of fairness, transparency and consistency. This to the challenges faced by the aviation industry in recruiting is achieved using objective and validated tools including, but and training cadets from previously disadvantaged Groups. not limited to, competency-based interviews and psychometric
Integrated Annual Report 2017 35 INTEGRATED ANNUAL REPORT 2017
• Workplace Experiential Learning: During the period under time that employees spend away from work. This training review, the Group was involved with various tertiary education methodology also caters for different learning styles and the providers to provide students in travel-related disciplines rate and pace of individual learning. This technology-driven offered by such tertiary education facilities with six (6) platform embraces the new generation of technology savvy months’ workplace experiential training (“WEL”). Twenty- individuals who value an alternative methodology of learning two (22) students from the following universities completed over traditional classroom-based interventions. The time saved their WEL practical component, namely: Durban University over the past year through e-learning interventions amounted of Technology; Walter Sisulu University; Nelson Mandela to 5 412 hours, which translates into a monetary saving of Metropolitan University and University of Johannesburg. R409 500. Overall, 1 762 employees underwent training Training was completed at the following facilities: King Shaka and development courses during the period under review. International Airport; Port Elizabeth Airport; George Airport; East London Airport; Lanseria International Airport; and OR Tambo International Airport, with most students subsequently Employee Remuneration being offered employment as Customer Service Agents by The Group offers fair remuneration and competitive benefits to the Group. its employees, based on the principles of equity and fairness. • Skills Development: The Group contributed approximately Further details of the Group’s remuneration policies are set out R9.3 million to the skills development in the country in the in the Remuneration Report on pages 67 to 69. form of the Skills Levy, which was paid to the Department of Labour, as compared to R8.3 million contributed during Remuneration, recognition and reward guidelines create a platform the prior reporting period. The Group commenced a skills for fair and transparent human resource practices to ensure and enterprise development initiative with CDK Coaching consistency and non-discrimination among employees and thereby and Recruitment Academy Proprietary Limited on the East eliminate any form of subjectivity or favouritism. The Group’s Rand in 2013. Ninety-four (94) learners have completed the position on salaries is to remunerate at the median of the applicable programme, 89% of whom have been employed as Customer salary band; however, salary progression for new employees will Service Agents at OR Tambo International Airport. range from the lower quartile to the median, and from the median • Supervisory Development Programme (“SDP”): This to the upper quartile for scarce/high risk/critical skills. is modelled on the GIBS Take Off Programme, and was developed for junior management (supervisors) at the airports, The Group offers employee benefits to its permanent employees to develop to the next level of Management. To date 44 employed in South Africa. Where possible, due to legal parameters, supervisors have completed the programme. the Group also offers employee benefits to its permanent employees employed in Zimbabwe. The Group has a defined contribution • Comair Training Facility: The Group has developed a Pilot pension scheme in place for its permanent employees in South and Cabin Crew Training facility at its Operations Centre in Africa, which is an umbrella scheme known as the Superfund, Rhodesfield. This facility is used to train both its pilots and administered by Old Mutual. In addition, it offers its permanent cabin crew as well as pilots and cabin crews of third parties. employees in South Africa risk benefits in the form of death and • Training and Development Interventions: In addition to the disability benefits, which scheme is administered by Discovery aforementioned, the Group has provided 9 298 training and Life. The Group’s permanent employees in South Africa contribute development interventions to its employees in areas such as, 7% towards retirement funding, with the Group contributing 10% but not limited to, passenger handling; Group orientation; to cover both retirement funding and risk benefits. A medical passenger check-in; dangerous goods; customer service; aid scheme is also in place for permanent employees in South station emergency awareness; aviation safety and security; Africa, which is administered by Discovery Health. The Group fares and ticketing; customer experience; safety and emergency contributes 50% of the cost in respect of the Discovery Essential procedures; soft skills (diversity management, motivating self Comprehensive Plan for such permanent employees. An equal and others, customer service); type-rating for pilots in respect value is contributed to permanent employees in Zimbabwe. The of the aircraft types operated by the Group; and crew resource Group also provides post-retirement medical aid funding, which management training, to ensure that the highest standards equates to 50% of the Essential Saver Plan. of safety, security and service are maintained throughout the Group. In addition to classroom-based traditional learning interventions and a blended learning approach, a major focus has been courses offered as an e-learning option. This minimises classroom-based interventions and reduces the
36 Integrated Annual Report 2017 Labour Relations Union 2017 2016
The Group’s aim is to create and maintain sound labour relations, Solidarity 176 205 which support its goal of being the employer of choice in the United Association of South Africa (“UASA”) 331 515 South African airline industry. The Group regularly reviews its South African Aviation and Allied employment conditions and policies. It tries to ensure that all Workers Union (“SAAAWU”) 0 0 employees are made aware of their benefits and this information Comair Pilots Association (which is furnished to employees during induction sessions and via the is affiliated to the Airline Pilots Group’s intranet, newsletters sent directly to staff by the Group, Association of South Africa) 141 152 Old Mutual and Discovery, and other communication methods National Union of Metalworkers of referred to earlier in this Report. South Africa (“NUMSA”) 225 0 South African Transport and Allied Disciplinary and grievance procedures are communicated to Workers Union (“SATAWU”) 10 0 new employees as part of their induction into the Group and are also available to all employees to ensure that they are aware of No strike action occurred during the period under review. There the process in place to lodge grievances, should they have the has, however, been considerable growth in membership of need to do so. NUMSA, with the majority of members being made up of those who left UASA following the strike action in the previous reporting The percentage of the Group’s employees represented by trade period. The majority of NUMSA members are based at OR Tambo unions or collective bargaining agreements is reflected below. International Airport.
The minimum notice periods for employees, as set out in the Other than the above-mentioned, no additional material or employees’ letters of appointment, are as follows: significant issues were raised by employees or trade unions during the period under review. Pilots: 3 months All other employees: 4 weeks Diversity and Equal Opportunities
Top and Senior Management enter into employment contracts The Group is committed to non-discriminatory treatment in all its with the Group, which are subject to termination on four weeks’ employment practices and to providing equal opportunities to all notice and are not subject to any fixed term or form of restraint. employees, and does not accept any form of unfair discrimination based on gender, race, nationality or religion. Its employment Trade Unions policies, including hiring, training, working conditions, compensation and benefits, and promotion, are based on individual qualifications. As at 30 June 2017, 41.95% (883 of 2 105) of the Group’s full- It treats its employees equally, irrespective of gender, age, race, time, permanent employees in South Africa were members of sexual orientation, disability or other status unrelated to performing trade unions compared with 41.82% (872 of 2 085 employees) the job. The Group’s focus on diversity and employment equity as at 30 June 2016. The Group strives to maintain good working is in line with its overall transformation objectives, as dealt with in relationships with the trade unions, where it has recognition the section relating to B-BBEE on pages 39 to 43 of this Report. agreements in place and enters into substantive negotiations During the period under review, no incidents of discrimination annually. These negotiations mainly focus on salary increases were observed or reported. and improvements to employment conditions.
As at 30 June 2017 compared with 30 June 2016 union membership was as follows:
Integrated Annual Report 2017 37 INTEGRATED ANNUAL REPORT 2017
Human Rights representation of race and gender in the workplace. An analysis of The United Nations Global Compact is an international initiative the Group’s employment equity status is set out later in this Report. that addresses human rights, labour, environmental and corruption issues through a commitment to ten principals derived from the 7. Businesses should support a precautionary Universal Declaration of Human Rights. The information set out approach to environmental challenges below provides a brief overview of the Group’s implementation of This is the sixth time that the Group reports on its emissions in the ten principles, as further dealt with in this report. terms of the Corporate Accounting and Reporting Standards of the Green House Gas Protocol. Its environmental performance 1. Business should support and respect the protection is set out later in this Report. of international proclaimed human rights The Group’s human rights policy is part of the Guidelines to the 8. Undertake initiatives to promote greater Code of Ethics. Human rights principles are incorporated in the environmental responsibility Group’s labour relations policies and practices and corporate The Group’s undertakings in this regard are set out later in this social responsibility initiatives. Report.
2. Make sure that they are not complicit in human 9. Encourage the development and diffusion of rights abuses environmentally friendly technologies The Group adheres to this principle through its compliance with The Group is committed to developing and implementing all applicable legislation and takes the issue of human rights into environmentally friendly technologies where both a clear benefit account when deciding whether to conduct business in foreign and business case can be made for the introduction of this countries. technology, such as, but not limited to, the new fleet of aircraft introduced into service, which are more environmentally friendly, 3. Business should uphold the freedom of association as set out in this Report. and effective recognition of the right to collective bargaining 10. Businesses should work against corruption in all its The Group recognises the rights of employees to collective forms, including exploitation and bribery bargaining and to freedom of association in accordance with all The Group’s commitment to combating corruption is embodied in relevant South African labour legislation. It maintains constructive its Code of Ethics, as detailed in the Corporate Governance Report. relationships with all representative unions who enjoy consultative Allegations of fraud and corruption are rigorously investigated and, and negotiating rights on issues of employee rights and mutual where sufficient evidence exists, appropriate disciplinary action is interests. enforced, including the dismissal of offending employees.
4. The elimination of all forms of forced and compulsory labour Health and Safety at Work All the Group’s employees are sourced from the open labour The Group pays special attention to health and safety in the market. Employees are provided with employment contracts and workplace to ensure that there is a safe environment for its are free to resign at any time. employees, customers and invitees. The health of its employees is important to ensure the sustainability of the Group. During the 5. The effective abolition of child labour period under review, 30 minor incidents were reported (as opposed to 27 in 2016), including falling and bumping, to other minor The Group does not make use of child labour and does not incidents. There were no fatalities during the period under review. support the use of child labour in any form whatsoever. It does, in certain instances, provide employment opportunities for school The Group’s CEO ensures that all health and safety duties are leavers, provided that such persons meet the International Labour discharged as a shared responsibility throughout the organisation, Organization’s employment age requirements. from appointing occupational health and safety representatives who 6. The elimination of discrimination in respect of know their functions, to positively enforcing monthly inspections and employment and occupation attending health and safety committee meetings. The occupational health and safety representatives conduct monthly inspections The Group is committed to compliance with the intent and within their departments and annual audits are conducted by the spirit of employment equity legislation in the workplace. It is Quality Assurance Department, ensuring compliance with the Act further committed to meeting its targets to achieve an equitable and identifying any further risks and/or trends.
38 Integrated Annual Report 2017 Health and Safety Committee A total of 485 individuals accessed the services:
The Group pays due regard to the health and safety of its • 355 were female; employees and strives to provide employees, customers and invitees with a clean and safe working environment. Safety incidents • 130 were male; and damage are reported though a safety management system. • 433 were employees; A formal structure exists to allow safety issues to be addressed • 52 were family members. within each department. The Group has an open reporting culture and encourages the reporting of all incidents. Occupational health Health and wellness days are held for all employees, which enable and safety representatives are appointed in each department and them to have health checks done at their place of work. These trained in various areas of health and safety, and the Group has a health checks include blood pressure, height, age, weight and regional Health and Safety Committee Forum that meets at regular HIV/AIDS tests. intervals to discuss pertinent issues. The Group is fully compliant with the Occupational Health and Safety Act. The Group’s HIV/AIDS Programme forms part of the Precious Cargo Wellness Programme for all employees and allows all Staff Welfare employees to undergo voluntary HIV testing and, if need be, Balancing the demands of work and family life is not always counselling. Employees who test positive are referred for additional easy, and with this in mind the Group entered into a contract counselling through the programme and are provided with medical with independent Counselling Advisory Services (“ICAS”) and its support through the Group medical aid scheme. The Group Precious Cargo Wellness Programme was born. ICAS provides runs HIV awareness workshops that provide employees with the a confidential 24/7 personal support and information service opportunity to learn more about HIV and AIDS. for employees and their families to call for help in dealing with everyday situations and more serious concerns. In this regard, Broad-Based Black Economic the Group has set up an on-site clinic, manned once a month by Empowerment a registered psychologist, at the Group’s Head Office, Operations Department, OR Tambo International Airport and Cape Town The Board views the Group’s business as an integral part of the International Airport. The service provided by ICAS includes political, social and economic community in South Africa and is telephone consulting, face-to-face counselling, life management committed to sustainable transformation as part of its business services and HIV counselling. In addition, employees have access strategy. The Group recognises the importance of implementing to the e-Care service, which is a comprehensive, online health a B-BBEE Programme that addresses the inequality of the past portal providing valuable interactive resources on a wide range through a dedicated and ongoing process and regularly reviews of topics approved by qualified health professionals. its B-BBEE strategy with the aim of effecting improvement across all seven pillars of the B-BBEE scorecard, as detailed later in this During the period under review, 1 270 engagements took place section. The Group is also required to provide both the International with ICAS, which included: Air Services Council and Air Services Licensing Council with its verification certificate and B-BBEE Plan when making application • 284 Telephonic counselling sessions; for, or amendments to, licences. • 159 Face-to-face counselling cases; The Group’s verification audits for the periods 10 May 2016 to • 36 Cases at on-site clinics; 9 May 2017 and 10 May 2017 to 9 May 2018 were carried out • 96 Legal consultations; by Grant Thornton. The comparisons of the results of both audits • 18 Family care cases; are contained in the following table. • 21 Financial consultations; • 167 Individuals received services in Group settings.
Integrated Annual Report 2017 39 INTEGRATED ANNUAL REPORT 2017
Elements Indication Weighting Score 2017 Score 2016 Ownership Black ownership 20 19.51 19.49 Management Control Black Board members 10 2.82 3.56 Employment Equity Black managers 15 2.74 3.07 Skills Development Black training spend 15 10.73 11.29 Preferential Procurement Procurement spend 20 17.26 17.85 Enterprise Development Investment in black-owned enterprises 15 10.84 12.99 Socio-economic Development Socio-economic contribution 5 3.41 5 Total Points 100 67.31 73.25
The assessment indicates that the Group achieved a total score in the Group. This scheme, as a result of certain tax changes, of 67.31 in 2017 compared to a total score of 73.25 in 2016. has to a large extent become dormant. The Group Shareholder Analysis is set out on page 149 of this Report. The B-BBEE recognition level for the Group was maintained at a Level 4. A copy of the Group’s verification certificate for the Management Control period 10 May 2017 to 9 May 2018 is available for inspection on the Group’s website www.comair.co.za. Although the Thelo Aviation Consortium sold its shares in the Group during March 2015, Mr Ronald Sibongiseni Ntuli remained on the Board as an Independent Non-executive Director and Equity Ownership Deputy Chairman of the Group. Unfortunately Mr Kutso Mampeule The Group concluded a Black Economic Empowerment (“BEE”) resigned from the Comair Board on 31 March 2017, for personal transaction during the 2007 financial year pursuant to which reasons. shares equivalent to 15% of its post-transaction issued share capital were issued to a black empowerment consortium known Currently three (3) of the Group’s 13 Directors (23%), excluding the as Thelo Aviation Consortium Proprietary Limited (“Thelo Aviation alternate Director, are black, as opposed to the previous financial Consortium”) led by Thelo Aviation Investments Proprietary Limited year when five (5) of the Group’s 16 Directors (31.1%), excluding (“Thelo Aviation Investments”). This BEE transaction ended during the alternate Director, were black. the 2015 financial period, however, the Group was able to claim recognition for the 29 067 766 ordinary shares, which were Employment Equity subsequently sold by the Thelo Aviation Consortium members. The Group’s focus on employment equity (“EE”) is in line with its There was a slight increase in the ownership score for the period overall transformation strategy. under discussion due to an increase in the purchase of the Group’s shares in the market by black people. The B-BBEE Employment Equity score decreased slightly from 3.07 in the previous reporting period to 2.74, due to the The Group, on its listing in 1998, implemented a share incentive resignation of certain black specialists and junior management scheme for all permanent employees, including previously level employees. The workforce profile as at 30 June 2017 for disadvantaged employees, to enable them to purchase shares South African employees was as follows:
Male Female Foreign Nationals Total Head Occupational Level A C I W A C I W Male Female Count 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 Middle Management 12 3 4 142 9 4 7 51 1 1 234 Junior Management 138 64 50 179 346 163 106 254 2 2 1 304 Semi-Skilled 104 28 11 12 264 55 30 30 0 0 534 Unskilled 2 0 0 1 19 0 0 0 1 0 23 Total Permanent 256 95 65 342 638 222 143 337 4 3 2 105 Temporary Employees 0 0 0 0 0 0 0 0 0 0 0 Grand Total 256 95 65 342 638 222 143 337 4 3 2 105
Note: A = African, C = Coloured, I = Indian, W = White
40 Integrated Annual Report 2017 The overall race distribution of the Group’s employees in South Africa as at 30 June 2017 compared to 30 June 2016 is set out below:
Race Distribution (South African Employees) At 30 June 2017 At 30 June 2016 White (Females and Males) 679 Employees 703 Employees (constituting 32% of the total (constituting 34% of the total number of employees) number of employees) African, Coloured, Indian (Designated Females and Males) 1 426 Employees 1 375 Employees (constituting (constituting 68% of the total 66% of the total number of number of employees) employees)
Note: The table above for 2016 excludes seven foreign nationals
Reflected below is the summarised Employment Equity Report (“EEA2”) submitted online to the Department of Labour on 23 December 2016, as required in terms of Section 22 of the Employment Equity Act 2003. The reporting period of the EEA2 ran from 01 August 2015 to 31 July 2016.
Summarised Employment Equity EEA2 Report as at 31 July 2016 The report includes all employees (including those with disabilities) in each occupational level.
Male Female Foreign Nationals Total Head Occupational Level A C I W A C I W Male Female Count 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 Middle Management 10 3 3 139 7 4 6 44 1 1 218 Junior Management 128 70 53 187 343 172 106 268 2 2 1 331 Semi-Skilled 88 22 12 12 250 54 32 35 0 0 505 Unskilled 2 0 0 0 23 0 0 0 1 0 26 Total Permanent 228 95 68 346 623 230 144 349 4 3 2 090 Temporary Employees 0 0 0 0 0 0 0 0 0 0 0 Grand Total 228 95 68 346 623 230 144 349 4 3 2 090
Note: A = African, C = Coloured, I = Indian, W = White
Summarised Employment Equity Report for Employees with Disabilities as at 31 July 2016 Total number of employees with disabilities in each of the occupational levels:
Male Female Foreign Nationals Total Head Occupational Level A C I W A C I W Male Female Count 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 Middle Management 0 0 0 2 0 0 0 0 0 0 2 Junior Management 1 2 0 2 2 0 1 1 1 0 10 Semi-Skilled 1 0 0 1 1 0 0 0 0 0 3 Unskilled 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
Note: A = African, C = Coloured, I = Indian, W = White
Integrated Annual Report 2017 41 INTEGRATED ANNUAL REPORT 2017
• The employment and retention of pilots from previously Progress on the Employment Equity Plan for the period 2011–2016 disadvantaged Groups remains a major challenge. However, During the period 2011–2016, the Group made reasonable the Group will endeavour to increase the number of pilots from progress towards achieving its 2016 Employment Equity Goals designated Groups through its Cadet Pilot Programme. The in line with its Employment Equity Plan. This progress included: black pilot percentage increased from 4.8% in the previous reporting period to 6.8% (as a percentage of total pilots). • Development and implementation of new policies and practices • Job profiling, job evaluation and grading – All positions in such as a Disability Management Policy and Retention Policy; the Group have been profiled, evaluated and assigned job • Implementation of Learnership Programmes that assisted grades, which are consistently reviewed and updated where with the employment of staff on the Junior Management applicable. This enables the provision of a logical graded level and below; hierarchy and pay structure, as well as valid benchmarking • Implementation of Leadership Development Programmes of positions and remuneration, both internally and externally. that assisted with the appointment of professional staff on These measures have significantly improved transparency the Middle Management level. with respect to recruitment and the filling of vacancies, as well as the Remuneration Policy within the Group. The Remuneration Policy is consistently applied to all positions Employment Equity Plan in the Group. Further, through the job profiling process, the During the previous reporting period, the Group initiated the critical competencies for each job have been identified and development of a new EE Plan for the period 2016–2021 as mapped, which has facilitated the establishment of personal required in terms of Section 23 of the EE Act. development plans for employees. • An electronic web-based recruitment tool was implemented In terms of the new plan, the Group is committed to increasing in the previous financial year, which resulted in various representation of designated Groups by focusing on diversity enhancements to the Group’s recruitment initiatives and training, increased recruitment of and leadership development for processes. Currently there are approximately 21 500 people persons from designated Groups, and greater accommodation who have registered their curricula vitae on the system. of women and people with disabilities. Active steps will also be taken to retain persons from the designated Groups. • The Group has an electronic EE Monitoring System in place, which tracks the EE profile and the Group’s progress towards The Group’s Employment Equity Plan for the period 2016–2021, achieving its employment equity targets. Reports generated reflecting the numerical targets and goals that it has set, are by the EE Monitoring System are provided to the Group’s specified below: Employment Equity Forum and Steering Committee to assist them in their monitoring functions.
% SA Budget Foreign EE Black Head Male Female Nationals Total Level Goal Target Count A C I W A C I W M F M F 2016 3 0 0 0 2 0 0 0 1 0 0 2 1 Top 33% Management 2021 3 1 0 0 1 0 0 0 1 0 0 2 1 Senior 2016 7 0 0 0 6 0 0 0 1 0 0 6 1 14.3% Management 2021 7 1 0 0 5 0 0 0 1 0 0 6 1 Middle 2016 224 10 3 4 142 6 4 6 47 1 1 160 64 20.5% Management 2021 229 15 4 5 138 10 6 7 41 2 1 164 65 Junior 2016 1 337 127 75 52 191 339 173 110 265 3 2 448 889 72.7% Management 2021 1 431 195 81 53 166 426 177 109 219 3 2 498 933 Semi-Skilled 2016 490 83 21 14 12 235 53 33 39 0 0 130 360 94.7% 2021 514 90 21 14 4 274 55 33 23 0 0 129 385 2016 27 2 0 0 0 24 0 0 0 1 0 3 24 Unskilled 96.2% 2021 27 2 0 0 0 24 0 0 0 1 0 3 24 Persons with 2016 15 2 2 0 5 3 0 1 1 1 0 10 5 61% Disabilities 2021 18 3 2 0 5 5 0 1 1 1 0 11 7
Note: A = African, C = Coloured, I = Indian, W = White
42 Integrated Annual Report 2017 Skills Development In order to effectively manage the procurement process, the The Group’s commitment to providing a quality air service means Group has developed a Contract Management System to record that skills development is a priority. In the period under review, all contracts, credit applications, valid B-BBEE Certificates, and the score received for the Skills Development element decreased Tax Clearance Certificates from its suppliers. from 11.29 points in the previous reporting period to 10.73 points in the period under review. The decrease is due to decreased Enterprise Development skills development expenditure for black employees (including During the period under review, the Group provided a loan of black women) from R31 million in the previous reporting period R3.8 million to CDK Coaching Academy (“CDK”), an academy that to R16.3 million in this reporting period (see the section dealing grooms unemployed school leavers for entry into the workforce and with the Group’s training and development initiatives on pages with whom the Group has a longstanding relationship. However, 35 to 36 for further details). there was a decrease in the Enterprise Development score from 12.99 points in the previous reporting period to 10.84 in the period Preferential Procurement under review due to an increase in the Group’s net profit after As proof of its commitment to preferential procurement, in tax without a commensurate increase in the Group’s Enterprise the period under review, the Group procured from over 116 Development spend. Exempted Micro Enterprises (“EMEs”) and over 110 Qualifying Small Enterprises (“QSEs”). The products and services procured Socio-Economic Development from the EMEs and QSEs (including black-owned entities) included The success of the Group’s Corporate Social Investment Strategy sourcing of personnel and premises, aircraft cleaning and hotel and initiatives is reflected in the fact that it scored full marks in this services. In the period under review, the Group decreased its category in the previous financial year. However, in the current B-BBEE Preferential Procurement score from 17.85 in the previous reporting period, the score for this element decreased from 5 points reporting period to 17.26 points. The slight decrease in score is to 3.41 points due to the Group’s higher net profit after tax. The due to a decrease in the number of QSEs and EMEs supplying Group has several social development initiatives in place including: the Group. • Red Cross War Memorial Children’s Hospital Trust; While the Group attempts to source products and services from • Wings and Wishes; South African suppliers, this is not always possible given the • Smile Foundation; nature of its business, where the acquisition of aviation equipment or specialised airline branded products need to be procured • QuadPara Association; and sourced from foreign companies, based mainly in Europe • Food and Trees for Africa; and the United States of America. The proportion of spend with • Primestars Marketing; foreign suppliers varies significantly year-on-year due to the capital • A number of smaller programmes that support and assist value of spend on aircraft, aircraft engines and aircraft spares. the community throughout South Africa. For the period under review and excluding spend on the leasing and purchase of aircraft, aircraft engines and aircraft spares, the Further details on the Group’s corporate social investment Company spent approximately 90% of its total procurement spend strategies and initiatives are dealt with on page 44 of this Report. with South African suppliers. This is an increase of 3% compared to the total spent in the previous reporting period.
Integrated Annual Report 2017 43 INTEGRATED ANNUAL REPORT 2017
Investing in the Community
The Group is a committed corporate citizen and, together with Wings and Wishes its staff, endeavours, wherever possible, to improve the lives of The Group continued its partnership with Wings and Wishes fellow South Africans. It believes that social responsibility is a duty, by providing air tickets to this organisation to the value of R500 privilege and an obligation to help those less fortunate and to make 000. Wings and Wishes flies critically ill children from all over the a positive impact on society in general. In this regard, the Group country, including the Southern African Development Community has formed partnerships with the following charitable institutions: (“SADC”) region, to various hospitals for life-saving surgery and medical care. The Red Cross War Memorial Children’s Hospital Trust Primestars Marketing During the previous reporting period, the Group made donations The Group recognises the need to contribute to uplifting youth to the Red Cross War Memorial Children’s Hospital Trust, to assist and preparing them adequately for entry into the workplace. Once sick children needing medical assistance at the Red Cross War again Comair partnered with Primestars Marketing, a company Memorial Children’s Hospital. The Group’s contribution comprised specialising in youth development programmes for high school R500 000 worth of flight tickets to be used to transport children and learners from underprivileged communities. Air tickets to the value their parents/family members to and from the hospital to receive of R300 000 were sponsored for the purposes of transporting medical treatment. The flight ticket contribution is also available to learners and staff to various centres at which the educational medical staff members from the hospital who need to travel to other upliftment programmes were hosted. hospitals across the country for the purposes of conducting surgery or related professional activities. The contribution is currently still being used by the Red Cross War Memorial Children’s Hospital QuadPara Association of South Africa Trust. In addition to the flight ticket contribution, the Group made The Group recognises the need for inclusion of disabled members a cash donation of R500 000 to the Red Cross War Memorial of our community and continued to sponsor air tickets to the Children’s Hospital in the previous reporting period, which was value of R250 000 toward the QuadPara Association of South used for the building of a new facility to accommodate the parents Africa (“QASA”). and caregivers of the children receiving treatment at the hospital.
Mandela Day Food and Trees for Africa Every year on Mandela Day, the Group encourages staff to dedicate This project was launched in 2007 to raise money to care for the 67 minutes of their time to enhancing and uplifting the needy in environment, through the sustainable greening of townships in our communities. These efforts are facilitated and co-ordinated South Africa. The Group continued with its investment in Food under the auspices of the Group’s Human Resources Department, and Trees for Africa and donated R200 000 worth of air tickets which approves each division’s initiative of choice. Some of to this worthy cause during the period under review. the initiatives in the reporting period included Head Office and Operations staff joining in a sandwich making initiative. The staff Smile Foundation made over 3 500 sandwiches which were distributed to various children’s homes and nursery schools in the Kempton Park area. The Group has continued to put smiles on children’s faces by Cape Town staff went to Hanover Park Day Hospital with the Love donating an amount of R200 000 (in the form of air tickets) to A Baby Project, and also to the Red Cross Children’s Hospital. the Smile Foundation, which is dedicated to transforming the Durban staff volunteered their time and made donations at Haven lives of children requiring facial reconstruction. In addition, during of Rest in Tongaat. September 2016, a number of Comair employees were sponsored to participate in the Smile Foundation Cycleathon. A cash amount of R83 881 was donated for this purpose.
44 Integrated Annual Report 2017 Environmental Report
Environmental Impact Organisational entity Comair Limited Operational control 100% Although customer choices are not materially affected by Operational boundary Operational control environmental performance, changes in behaviour are being driven by increasing awareness of social, ethical and moral Reporting period 1 July 2016 to 30 June 2017 responsibilities. The Group takes this responsibility very seriously, Base year 2011 understanding that while air transport plays a central role in global Methodology GHG Protocol Corporate Accounting and Reporting social and economic development, it has an increasing impact Standard (Revised Edition) on the environment. Number of employees 2 105 Number of sites 16 The Group is therefore committed to reducing its impact on the Square meterage of 26 773 m² environment, protecting the environment, conserving natural facilities resources and utilising resources in an effective and responsible KPI: Passengers carried 5 545 214 way. To achieve these commitments, it has consistently, year- on-year looked for further ways to reduce its carbon footprint by This Report deals only with the Group and its operations in adopting sound environmental practices in its business. South Africa and does not deal with its associated companies. The Report includes the compulsory reporting requirements of The Group is committed to working alongside its regulators, the GHG Protocol by quantifying the Group’s emissions that are government and customers to mitigate the impact its business has categorised as Scope 1 and Scope 2, and includes selected on the environment. The Group has reported its carbon footprint Scope 3 emissions and fugitive emissions as optional information. based on the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (Revised Edition) (“GHG Protocol”) The activities listed in the table below have been reported on: using UK factors to measure its emissions. In South Africa the National Greenhouse Gas Emission Reporting Regulations Scope 1 Scope 2 Scope 3 (“Final Regulations”) took effect on 3 April 2017, introducing a (a) Mobile fuel Purchased Water use single national reporting system for the transparent reporting of combustion in electricity Material use greenhouse gas emissions. The Final Regulations also require Group owned/ (electricity Waste disposal entities conducting emission source activities above a certain leased aircraft and usage) Well to tank emission threshold to register and report those emissions. In its operations, Group owned/ (fuel- and energy- the Group emits a significant amount of greenhouse gases from leased vehicles related activity) fossil fuel combustion and, to a lesser degree, other activities. The (b) Stationary fuel combustion in Group has accordingly registered with the National Atmospheric Group-owned Emission Inventory System (“NAEIS”) and will submit data on its assets (generators greenhouse gas emissions by 31 March 2018. and catering facility) This section of the Report deals with the environmental performance of the Group and reflects its carbon footprint based on the GHG Protocol. The organisational boundary of the Report is reflected in the following table.
Integrated Annual Report 2017 45 INTEGRATED ANNUAL REPORT 2017
Environmental Objectives Important Facts on Aviation and Climate
The Group’s environmental objectives focus on assessing and Change minimising its impact on the environment. They are currently Climate change is the most urgent and significant sustainability aimed at: issue. The vast majority of our climate impact (approximately 99%) results from greenhouse gas (“GHG”) emissions, released • Identifying and complying with environmental legislation through the burning of fossil-based jet fuel in aircraft engines. The and regulations; international community aims to limit GHG concentrations in the • Identifying and managing all risks relating to the Group’s atmosphere so that global temperatures do not increase by more impact on the environment with regard to water use, energy than 2°C by 2050. The Group wishes to ensure that it makes a fair use and conservation, and emissions and climate change; contribution towards achieving this aim. It is important, however, to note the following facts on climate change: • Creating environmental awareness amongst all employees; • Limiting aircraft noise without compromising safety; • Air transport accounts for 2% of global manmade CO2 • Linking fuel saving initiatives to an environmental saving emissions, which is a relatively small component of the total objective. amount of CO2 produced; • Air transport’s contribution to GHG emissions has remained These objectives enable the Group to identify aspects of its almost constant over the past 20 years; business that could have an effect on the environment with a • New aircraft today are almost 80% more fuel-efficient than view to reducing such impact, and it works closely with aviation the first jet aircraft produced; and policymakers in South Africa to influence the development and • Since the year 2000, the aviation industry’s fuel efficiency has implementation of effective environmental regulations. In addition, improved by 32.8% and CO tonnes per thousand kilometres the Airlines Association of Southern Africa has established an 2 flown have improved from 1.35 to 0.91. Environmental Committee to co-ordinate and drive initiatives that have to be undertaken by the Group, other member airlines and aviation service providers to achieve the international and The Group considers environmental responsibility to be one of its domestic goals of reducing greenhouse gas (“GHG”) emissions. top priorities alongside safety and security. It therefore participates in the International Air Transport Association (“IATA”) led initiative The Group’s Chief Executive Officer is responsible for ensuring to achieve carbon neutral growth for the global airline industry by
compliance with these goals and delegates this responsibility to 2020 and a halving of CO2 emissions produced by the world’s Senior Managers within the Group. airlines by 2050.
IATA has a four-pillar strategy to reduce the global industry’s Environmental Management Risk carbon footprint. The strategy comprises firstly investing in Assessment technological progress, secondly flying aircraft more efficiently, The Group is committed to ensuring that it complies with thirdly building and using efficient ground and air infrastructure, environmental legislation and regulations applicable to it. The and finally using economic instruments such as emission trading or main environmental impact being managed is the utilisation of carbon offsetting. With respect to the fourth pillar, IATA has been fuel and oil, which have a direct effect on its carbon emissions. working closely with the International Civil Aviation Organization (“ICAO”) to put in place market-based measures (“MBM”) in the The Group assesses the risks faced by it associated with climate form of a global carbon offsetting scheme, which IATA believes change, which include: will be the swiftest and most effective approach to addressing aviation related emissions. In 2016, the airline industry signed the • Regulatory risks: Compliance with environmental legislation; and world’s first truly global carbon emission offsetting scheme at the 39th ICAO Assembly. • Physical risks: Interruption to fuel supply and fuel shortages and the risks associated with load shedding in South Africa. As air transport is essential to the world economy, the current thinking within IACO and IATA is that carbon offsetting, which is the concept of reducing emissions in another sector rather
46 Integrated Annual Report 2017 than reducing an emitter’s own emissions, will be the most cost- Based on the proposed tax rate of R120 per tonne of carbon effective solution for the aviation industry. IATA believes that dioxide equivalent (“CO2e”) emissions and the 60% threshold, an international carbon reduction scheme should be used by the effective tax rate would amount to R48.00 per tonne of CO2. airlines involved in both domestic and international operations. This would result in a potential carbon tax exposure to the Group The rationale for introducing a global MBM system is to prevent of approximately R28 million or R5.02 per passenger carried, incompatible regional and national measures that will be less calculated according to the number of passengers carried during effective and a lot more costly to the airlines. The Group supports the 2017 financial year. the framework for reducing carbon emissions based on carbon offsetting or carbon trading that is applied equally to all airlines As air transport is essential to the world economy, the current and industries as a whole. thinking within ICAO and IATA, as mentioned above, is that carbon offsetting, as opposed to taxes or other forms of levies, would be British Airways International, the Group licensor in respect of its more effective for the aviation industry, and this should be applied BA brand and a Shareholder, is playing a leading role within the to both domestic and international operations. This thinking is aviation industry in developing and promoting proactive schemes supported by the Group. The Carbon Tax Bill excludes international for a post-Kyoto aviation policy. They believe that CO2 emissions aviation from payment of the Carbon Tax. The Group is of the view from international aviation must be integrated within a global that the introduction and application of Carbon Tax to domestic agreement and that this must be done in a way that ensures equal aviation will counteract and compromise what ICAO and IATA treatment of all airlines. The Group supports the approach adopted are trying to achieve at the international level referred to above. by British Airways International and is committed to improving its environmental performance and reducing the adverse impact that On 3 April 2017, the Department of Environmental Affairs published its activities have on the local and global environment. the National Greenhouse Gas Emission Reporting Regulations (“Final Regulations”) under the National Environmental Management: Air Quality Act (No. 39 of 2004). This requires the Group to report Carbon Taxes its aviation fuel GHG emissions by 31 March 2018 and annually According to the Draft Carbon Tax Bill, issued by National thereafter. While this emissions assessment report applies the Treasury in November 2015, the Group could be subject to global warming potential factors from the Intergovernmental Panel direct carbon taxation, based on aviation turbine fuel use. While on Climate Change (“IPCC”) 4th Assessment Report, which factors its implementation date is still unknown, National Treasury and the are the standard in best international practice, the Department of Department of Environmental Affairs have put the mechanisms Environmental Affairs requires the reporting in terms of the Final in place during the reporting period, and the implementation of a Regulations to be based on the global warming potential factors carbon tax in respect of domestic (South African) operation is likely as published in the IPCC 3rd Assessment Report. The impact of to be introduced in the near future. The design of the taxation is the different calculation methodologies on the GHG emissions largely determined by thresholds, with a basic threshold of 60% is set out below. being in place from the implementation date until 2020, after which the thresholds will be reduced and eventually fall away.
Tier 1 Methodology (Historical Methodology Tier 2 Methodology Tier 2 Methodology and use of UK AR4-100 (IPCC 4th TAR-100 (IPCC 3rd Government Fuel Aviation Jet Fuel Assessment Report) Assessment Report) Emission Factor)
Emissions t CO2e t CO2e t CO2e Difference International 44 070.10 44 066.51 Domestic 534 723.92 534 680.43 Total 578 794.02 578 746.94 545 567.35 6% Use of AR4 GWPs Use of TAR GWPs recommended by GHG required by Department of Protocol and international Environmental Affairs bodies
Integrated Annual Report 2017 47 INTEGRATED ANNUAL REPORT 2017
Group Emissions
Insofar as Group emissions are concerned, the Group’s GHG inventory, by scope and expressed in metric tonnes of CO2e is detailed in the tables and graphs below, with comparatives between the financial year in review and the base year, where applicable. The Group also reflects GHG Inventory for 2016 financial year.
Inventory 2017
GHG Emissions by Source
Emission Source by Scope Metric Tonne CO2e % Change from 2011 Scope 1 direct emissions 579 469.56 ↑ 8% Stationary fuel combustion 72.03 ↑ 11% Mobile fuel consumption 579 397.53 ↑ 8% Scope 2 indirect emissions 5 178.12 ↓ 28% Purchased electricity 5 178.12 ↓ 28% Total Scope 1 and 2 emissions 584 647.68 ↑ 8% Scope 3 indirect emissions 113 189.03 Comparison not Fuel- and energy-related activities 113 153.17 appropriate as Scope 3 Material use 24.37 emission sources were Water use 11.37 not measured in base Waste disposal 0.12 year 2011 Total Scope 1, 2 and 3 emissions 697 836.70
Out of Scope Emissions While it is optional to report Out of Scope emissions, the Group replaced 34 air conditioner units during the year under review. The units emitted R22 refrigerant gas, which is no longer permitted, and 8.5 kg of gas was collected and safely destroyed or recycled.
Emission Intensities GHG Emission Intensities
Emission Intensities t CO2e % Change from 2011 Aviation fuel footprint per passenger 0.10 ↓ 10% Scope 1 and 2 footprint per passenger 0.11 ↓ 10% All scopes footprint per passenger 0.13 n/a1 All scopes footprint per employee 331.51 n/a2 Scope 1 and 2 footprint per employee 277.74 0% Site-specific emissions per 2m 0.31 ↑ 13%3
1 Comparison not appropriate due to the addition of Scope 3 emission source since 2011. 2 Comparison not appropriate due to the addition of Scope 3 emission source since 2011. 3 Site-specific emissions include stationary fuel combustion and electricity.
48 Integrated Annual Report 2017 Emissions by Emission Source
2016/17 GHG Inventory by Emission Source Tonnes of CO2e
Scope 1
Scope 2
Scope 3
0 100 000 200 000 300 000 400 000 500 000 600 000
t CO2e
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 source of emissions, with the greatest impact, making up 83% of the total footprint and 99% of Scope 1 and Scope 2 emissions. While aviation emissions increased by 7% from the previous year, this was primarily due to a change in the methodology and factors applied to estimate emissions. The aviation fuel footprint per passenger carried remained static from the previous year and the change in calculation methodology has absorbed efficiencies within the year.
Stationary fuel combustion emissions decreased significantly by 47% from the prior financial year due to a stable electricity supply.
Electricity emissions decreased by 14% from the prior financial year, although this year’s electricity emissions are underestimated as a result of not having electricity usage data available for nine (9) months of the year for the new Cape Town catering site.
Paper usage decreased by 6% from the prior financial year, waste disposal emissions by 36% and water use decreased marginally by 1%. These changes had an immaterial impact on the Group’s total emissions.
The total GHG Inventory of the Group for the 2017 financial year was 697 836.70 metric tonnes of CO2e made up as follows:
Direct Emissions (Scope 1) Scope 1 Emissions
Emissions Source Unit of Measure Emission Factor Consumption Tonnes of CO2e Mobile fuel consumption: Aircraft kg Various 171 496 217 578 794.02 Mobile fuel consumption: Vehicles ℓ Various 207 018 603.51 Stationary combustion: Generator fuel ℓ Various 2 057 5.83 use and LPG fuel use kg 22 738 66.20 Total Scope 579 469.56
Integrated Annual Report 2017 49 INTEGRATED ANNUAL REPORT 2017
The direct emissions reflected above are broken down as follows:
Detailed Breakdown of Mobile Fuel Combustion in Company Owned/Leased Vehicles
Unit of Kg CO2e
Emissions Source Measure Cycles Consumption MJ/Unit per Unit t CO2e Mobile fuel combustion Company owned and controlled assets Landing and take-off cycles B737-400 LTO cycle 14 082 2 511.80 35 371.17 B737-800W LTO cycle 29 864 2 811.55 83 964.13 LTO Jet Fuel ℓ 47 169 975 Aviation turbine fuel ℓ 169 913 847 37.5 0.0721085 459 458.72 Diesel (100% mineral diesel) ℓ 139 054 38.1 0.082727 438.28 Petrol (100% mineral petrol) ℓ 67 964 34.2 0.071086 165.23 Total 579 397.53
Detailed Breakdown of Stationary Fuel Combustion
Kg CO2e
Emissions Source Unit of Measure Consumption MJ/Unit per MJ t CO2e Stationary fuel combustion Company owned and controlled assets Diesel (100% mineral diesel) ℓ 2 057 38.1 0.074354 5.83 LPG kg 22 738 46.1 0.063155 66.20 Total 72.03
Scope 2 Emissions Detailed Breakdown of Purchased Electricity
Kg CO2e
Emissions Source Unit of Measure Consumption per Unit t CO2e Purchased electricity kWh 5 283 795 0.98 5 178.12 Total 5 178.12
50 Integrated Annual Report 2017 Scope 3 Emissions Detailed Breakdown of Scope 3 Emissions
Kg CO2e
Emissions Source Unit of Measure Consumption per Unit t CO2e Fuel related well-to-tank activities stationary fuel combustion Diesel (100% mineral diesel) ℓ 2 057 0.62566 1.29 LPG kg 22 738 0.36970 8.41 Mobile fuel combustion Aviation turbine fuel kg 171 496 217 0.65900 113 016.01 Diesel (100% mineral diesel) ℓ 139 054 0.62566 87.00 Petrol (100% mineral petrol) ℓ 67 964 0.59549 40.47 Material use Paper: Primary material production tonnes 26.25 928.5997 24.36 Water use Water supply kℓ 33 044 0.34400 11.37 Waste disposal Paper tonnes 5.288 21.7600 0.12 Total 113 189.03
GHG Inventory 2016
The total GHG Inventory of the Group for the 2016 financial year was 658 949.12 metric tonnes of CO2e made up as follows:
GHG Inventory Scope 1 Scope 2 Scope 3 Total
Metric tonnes of CO2e 543 621.34 5 996.31 109 331.47 658 949.12
Direct Emissions (Scope 1) Scope 1 Emissions
Emission Source Unit of Measure Consumption Tonnes of CO2e Mobile fuel consumption ℓ/kg 170 884 396 543 485.76 Stationary fuel combustion ℓ/kg 63 412 135.58 Total 543 621.34
The direct emissions reflected above are broken down as follows:
Detailed Breakdown of Mobile Fuel Combustion in Group Owned/Leased Aircraft and Owned/Leased Vehicles
Emission
Emission Source Unit of Measure Factor Consumption Tonnes of CO2e Aviation fuel kg Various 170 678 498 542 960.02 Diesel ℓ Various 138 208 369.87 Petrol ℓ Various 67 690 155.87 Total 543 485.76
Integrated Annual Report 2017 51 INTEGRATED ANNUAL REPORT 2017
Detailed Breakdown of Stationary Fuel Combustion (Generator, Gas)
Emission
Emission Source Unit of Measure Factor Consumption Tonnes of CO2e Diesel ℓ Various 18 848 50.44 LPG ℓ Various 31 987 48.14 LPG kg Various 12 577 37.00 Total 135.58
Indirect Emissions (Scope 2) Detailed Breakdown of Electricity
Emission
Emission Source Unit of Measure Factor Consumption Tonnes of CO2e Purchased electricity kWh 1.00 5 996 310 5 996.31
Scope 3 Emissions Detailed Breakdown of Scope 3 Emissions
Emission
Factor kgCO2e
Emission Source Unit of Measure per Unit Consumption Tonnes of CO2e Fuel-related well-to-tank activities Mobile fuel combustion Aviation fuel kg 0.63960 170 678 498 109 165.97 Petrol ℓ 9.45040 67 690 30.49 Diesel ℓ 0.55266 138 208 76.38 Stationary fuel combustion Diesel ℓ 0.55266 18 848 10.42 LPG ℓ 0.8916 31 987 6.05 LPG kg 0.36970 12 577 4.65 Material use Paper tonnes 939 27.52 25.84 Water use Water supply kℓ 0.34400 33 433 11.50 Waste disposal Paper tonnes 21 8.76 0.17 Total 109 331.47
In comparing our GHG Inventory for 2017 with 2016, it must be 2. The decrease in Scope 2 emissions can be attributed to a noted that: decrease in the number of premises the Group occupies, as well as the usage data not being available for nine (9) months 1. The major reason for the increase in Scope 1 emissions is of the year for the new Cape Town catering facilities. due to the following factors: 3. Scope 3 emissions increased compared to the previous • Aviation emission increased by 7% from the previous financial year but paper use decreased by 6%, waste disposal financial year. This is attributable to the change in emissions decreased by 36% and water use decreased methodology and the factors applied in the calculation marginally by 1% compared to the previous financial year. of the emissions to comply with the new Department of Environmental Affairs reporting guidelines. • While stationary combustion emissions are immaterial, they did decrease significantly by 47% from the prior financial year. This is attributable to a stable electricity supply during the year.
52 Integrated Annual Report 2017 In order to reduce the effect that it has in respect of Scope 1, • Implemented various energy saving initiatives with regard to Scope 2 and Scope 3 emissions, the Group has: electricity consumption such as, but not limited to, changing light fittings and globes to more energy efficient ones; • Made a substantial investment towards the acquisition of a • Continued with initiatives to reduce water consumption, new fleet of Boeing 737-800 New Generation aircraft. The including the use of borehole water at its Head Office and New Generation B737-800 aircraft are not only quieter than Operations buildings. Other initiatives to reduce water the older generation aircraft, but also offer better performance consumption include employee awareness, monitoring of and fuel efficiency, reduced noise on take-off and landing, uncontrolled leakages and monitoring garden irrigation cycles; and lower engine emissions. Since the introduction of the • In conjunction with its pilots, continued to implement a new B737-800 aircraft, the average fuel burn per passenger comprehensive fuel savings programme according to world is now approximately 30 kg per passenger. The new B737- best practice, while also considering local operating conditions. 800 use approximately 6% less fuel per seat than the older This has resulted in a 1.4% reduction in fuel consumption B737-800 aircraft and 33% less fuel per passenger relative across its fleet. The B737-800 aircraft have also reduced the to the B737-400 aircraft. In addition, the Group has placed Group’s fuel burn per passenger as they have the capacity “Scimitar” split winglets on all the B737-800 aircraft it to carry 21 more passengers and burn 200 ℓ per hour less owns, which has resulted in a further 2% reduction in fuel fuel than the B737-400 aircraft; and consumption. In addition to having delivered substantial fuel savings, the new aircraft have a greater revenue generating • In accordance with section 12.L of the South African Income potential with their increased seating capacity and require Tax Act, the Group is in the process of compiling a report less maintenance downtime. As previously reported, the to reflect the energy it has saved from burning less fuel, Group took delivery of four New Generation Boeing 737-800 which could have a positive effect on the Group’s income aircraft during the 2013 reporting period and took delivery of tax exposure. a further three aircraft during the 2016 reporting period. In the current reporting period, the Group took delivery of one Waste Management and Recycling New Generation Boeing 737-800 in November 2016 and a leased 737-800 aircraft in December 2016. In addition, the This is the fifth year in which the Group has been able to measure Group has entered into a purchase agreement with Boeing the tonnage of the paper recycled, which measurement was for the purchase of eight Boeing 737 Max aircraft for delivery included in its carbon footprint measurement. between 2019 and 2022. • Approximately six (6) years ago, implemented a programme The Group outsources the maintenance of its aircraft and aircraft to reduce weight on board the aircraft by implementing a engines to third party suppliers as detailed earlier in this Report. paperless cockpit, reducing the amount of potable water These third party suppliers dispose of waste arising from the carried on board the aircraft and reducing the weight of the maintenance of the aircraft and aircraft engines, including aircraft galleys and thus reducing the fuel used; radioactive material, in accordance with their own policies and procedures relating to waste management and recycling. • In conjunction with Air Traffic Control, where possible, continued to implement a Continuous Descent Approach Refuse removal in the Group complies with South African laws to achieve fuel efficiency and reduce the impact of noise; and regulations. • Where such stands are assigned to it by the Airports Company South Africa, used fixed ground power units as opposed to auxiliary power units to reduce fuel consumption and noise; Compliance • Attempted to reduce the impact of noise, as annoyance and To the best of the Group’s knowledge and belief there have been sleep disturbance are the most commonly reported adverse no incidents of non-compliance with any environmental laws or effects of aircraft noise. The Group’s objective is to try to regulations and no fines were imposed upon it during the period reduce or limit the total number of people exposed to high under review. levels of aircraft noise. Current regulations and voluntary actions by the Group, such as phasing out its older aircraft, ensuring that all its engines are stage 3 noise compliant, as well as restrictions on the use of airspace, night time flying and ground operations restrictions, have, to a large extent, resulted in reduced aircraft noise;
Integrated Annual Report 2017 53 INTEGRATED ANNUAL REPORT 2017
Glossary of Terms Used in this Environmental Impact Section
Boundaries The inventory boundaries to determine which emissions are accounted for and reported. Boundaries include organisational, operational, geographic and business unit structures.
Carbon footprint The total greenhouse gas emissions caused directly and indirectly by an organisation, typically over a period of 12 months.
CO2e Carbon dioxide equivalent – standardisation of all greenhouse gases to reflect their warming
equivalent to carbon dioxide (“CO2”). This is used to evaluate different greenhouse gases against a common basis.
Direct emissions GHG emissions from facilities or sources owned or controlled by the Group, e.g. 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, seven gases are accounted for, namely carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride.
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 (Revised Edition).
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. commuter travel, business air travel and paper or water consumption.
Well-to-tank Well-to-tank accounts for upstream Score 3 emissions associated with the extraction, refining and transportation of the raw fuel services to the Group’s site or asset, prior to their combustion.
This Report has been compiled with the assistance of The Carbon Report (a division of SustainableIT).
54 Integrated Annual Report 2017 Corporate Governance Report
Introduction of this Corporate Governance Report. The full King III Application Register appears on the Group website at www.comair.co.za. Governance is integral to the Group’s approach of running a sustainable long-term business. In this regard, its attempts to enforce good corporate governance standards, acts as a Code of Ethics responsible corporate citizen, attempts to build constructive The Group has a strong culture of entrenched values, which relationships with its stakeholders and attempts to act as a valued forms the cornerstone of the behaviour expected of it towards its member of the community in which it operates. Stakeholders. These values are embodied in the Group Code of Ethics. Conducting business in an honest, fair and legal manner The Group is subject to the listings requirements of the JSE Limited is a fundamental principle of the Group. Ethical behaviour has (“JSE”) as well as the requirements of the Companies Act (No. 71 always been a fundamental guiding principal and Management of 2008) as amended (“Companies Act”). The Group supports the continually focuses on establishing a culture of responsibility, governance principles and guidelines contained in the King Code fairness, honesty, accountability and transparency. The Group on Governance for South Africa 2009 and the King Report on has implemented a Guide to the Code of Ethics to further explain Governance for South Africa 2009 (“King III”) and is comfortable to employees what constitutes ethical conduct and to provide that effective controls have been put in place and that the Group guidance on how to make ethically correct decisions. The Code has complied with the governance principles and guidelines of Ethics and Guide to the Code of Ethics provides a framework contained in the Companies Act, the JSE Listings Requirements of the standards of conduct that are required by the Directors and King III. As from the next financial year, the Group will report and employees within the Group to promote and enforce ethical in accordance with the King IV code of Corporate Governance. business practices throughout the Group. The Code of Ethics and Guide to the Code of Ethics is available to all employees and Compliance with the JSE Listings Requirements and the is communicated to new employees as part of their induction Companies Act is monitored by the Group Company Secretary and training process. the Group’s Chief Compliance Officer and reported to the Board.
The Group is committed to maintaining principles of good corporate Confidential Reporting Process governance to ensure that its business is managed in a responsible The Group recognises the need for its employees to have a manner with integrity, fairness, transparency and accountability. confidential reporting process (“Whistle Blowing”) covering fraud The Board supports the governance principles and guidelines and other risks. In line with its commitment to transparency and contained in the Companies Act, the JSE Listings Requirements accountability, it takes action against persons who are guilty of and King III. fraud, corruption and other misconduct. Any employee or external stakeholder is able to report wrong-doing on a confidential and Statement of Compliance anonymous basis to an independent service provider. Procedures are in place for the independent investigation of matters reported In terms of the JSE Listings Requirements, the Group is required to and for appropriate follow-up action. The number of calls or report in respect of King III for its financial year end 30 June 2017. e-mails received during the reporting period was eight (8). All calls and e-mails were followed up by the Group and, where The JSE Listings Requirements require all JSE-listed companies necessary, appropriate action was instituted. No call resulted in to mandatorily comply with certain principles of King III and to disciplinary action, mainly due to lack of evidence. The Group, report on the application of the King III principles in accordance however, has put a number of processes in place as a result of with the “apply or explain” approach of King III. While the vast the reports received. majority of King III principles are applied by the Group, those principles that have not been complied with are explained in the full Corruption King III Application Register referred to below. The Group currently maintains an overall AAA compliance rating, as assessed by the The Group has a no-tolerance approach with regard to unethical Global Platform for Intellectual Property (“TGPIP”) Governance conduct, in particular to fraud and corruption. Strict policies Assessment Instrument, licensed by the Institute of Directors relating to gifts and donations received from third parties are in Southern Africa. A summary King III checklist is included at the end place, compelling employees or Management to declare same.
Integrated Annual Report 2017 55 INTEGRATED ANNUAL REPORT 2017
The Group further prohibits the making of donations to political Competition parties, unless pre-approved by the Board. No donations to political The Group supports and adheres to the relevant competition parties were made by the Group during the period under review. laws applicable to it. No legal action for anti-competitive conduct, anti-trust or monopoly practices was instituted against the Group The Risk Committee and, where appropriate, the Audit Committee, during the period under review. considers any material incidents of fraud and corruption. There were no incidents of corruption or fraud brought to the attention of the Risk and Audit committees during the financial period Human Rights under review. During the period under review, no incidents of discrimination or violation of human rights were reported. To prevent credit card fraud, the Group implemented a “card- not-present” fraud detection and prevention system known Broad-Based Black Economic Empowerment as Cybersource in 2010 and has since made a number of (“B-BBEE”) enhancements to same, which has resulted in the Group being able to maintain significantly reduced credit card chargebacks. The Group forms an integral part of the political, social and These reductions were achieved by a combination of systems economic community in South Africa and is committed to and controls including: sustainable transformation as part of its business strategy. The Group is responsible for ensuring that appropriate focus is placed • The Cybersource fraud detection system, which verifies the on its commitment to the development and implementation of relevant card information, including transmission of the card sustainable B-BBEE initiatives. verification value (“CVV”) to the relevant issuing bank prior to confirmation of the flight booking and enables the bank The Group is audited annually by an accredited verification agency to conduct additional verification checks on the credit card; against the general score card criteria set by the Department of • Constant monitoring and regular amendment of the parameters Trade and Industry. Further details of the verification audit are set and rules within Cybersource, based on fraudulent behaviours, out on pages 39 to 42 of this report. patterns and trends; • Co-operation across the various airline fraud departments, Compliance the South African Banking Risk Identification Centre and Compliance with all relevant laws, regulations or codes is integral to other online retailer fraud divisions in an effort to identify the Group’s risk management approach. During the period under fraud syndicates and close them down. review, the Group approved and implemented a new risk-based compliance framework which defines its regulatory universe and The Payments Association of South Africa (“PASA”) continues delegates the management of compliance to the Chief Compliance to drive its enforcement of 3D Secure on all “card-not-present” Officer, other compliance owners and the Group’s Compliance transactions. Online retailers (excluding airlines), went live with Forum. Regular audits are conducted on the legislation and 3D Secure in February 2014. The results and feedback from this standards forming part of the Regulatory Universe, using the activation were not very positive and the Group was concerned Advanced Safety and Quality Solutions automated management about the readiness of the inter-banking systems and the ability tool. Reports on these audits are provided to the Compliance of communication networks to cope with the additional volumes Forum. The Group incurred no fines, non-monetary sanctions or of electronic messaging that would be experienced on activation prosecutions during the period under review. of 3D Secure across the airline industry, which accounts for approximately 80% of all online sales in South Africa. The Group, however, remains committed to the 3D Secure initiative in its bid Customer Privacy and Information Security to reduce exposure to fraud, and has approved a three-phase Information security policies are in place throughout the Group, roll-out plan for the implementation of 3D Secure across its regulating inter alia the processing and protection of own and multiple e-commerce distribution channels. The first phase has third party information. been completed. It is anticipated that the second phase will be completed by November 2017 and the third phase will be Legitimate requests for information can be made in terms of completed by the final quarter of the 2018 financial year. the Promotion of Access to Information Act (No. 2 of 2000). No requests for information were made in terms of the Act.
56 Integrated Annual Report 2017 The Protection of Personal Information Act (No. 4 of 2013), has Board and its committees and to increase female and black been passed in South Africa, but the date of implementation, apart representation on the Board. During the period under review, the from a few enabling sections, has yet to be determined. The Act will Nominations Committee approved an Appointment of Board of require further actions on the part of the Group to ensure privacy Directors Policy, which includes a Gender Diversity Policy requiring of personal information. The Group will put measures in place to that the promotion of gender diversity must be taken into account ensure that it will be able to comply with the requirements of the when appointing Board members. No quotas regarding gender Act, as set out in the Internal Control and Risk Management Report. diversity have been set. However, the Board and Nominations Committees remain committed to ensuring that the Group benefits There have been no complaints against the Group regarding breach from a diverse Board. of customer privacy or loss of customer data during the year. The Board is considered appropriately skilled with regard to its responsibilities and the activities of the Group and is involved in Financial Reporting and Going Concern all material business decisions, enabling it to contribute to the The Directors are responsible for the preparation of the Annual strategic and general guidance of Management and the business. Financial Statements in a manner that fairly and accurately Newly-appointed Directors are informed of their fiduciary duties represents the state of affairs and results of the Group. The and in this regard are provided with a Director’s Manual, which Directors are responsible for adopting sound accounting practices, contains guidelines regarding their duties and responsibilities. maintaining adequate accounting records, ensuring an effective system of internal controls and for safeguarding of assets. The Dealing in Securities Financial Statements of the Group have been prepared on the going-concern basis and the Board is of the view that the Group The Group has a formal policy in place to ensure that the Directors has adequate resources to continue operating for the foreseeable and Senior Management do not trade in the Group’s shares during future. price-sensitive or closed periods. In terms of the policy, closed periods commence from the last day of the financial year or the last day of the end of the first six-month period of the financial year, Board of Directors up to the day after the publication of the annual or interim results. Directors are required to obtain approval from the Chairman or a Composition of the Board and Diversity designated Director before dealing in any securities. The Group has a unitary Board structure. The composition of the Board is set out on pages 80 to 81. The roles of the Chairman Conflict of Interest and the Chief Executive Officer, (“CEO”) are separate. The All Board members and the Group Secretary are required to Non-executive Directors, with a strong independent element, disclose their shareholding in the Group, other directorships and are of sufficient number to ensure that no single individual has potential conflicts of interest. Where potential conflicts of interest unfettered power of decision-making and authority. As at 30 exist, Directors are expected to recuse themselves from relevant June 2017, the Board comprised seven (7) Independent Non- discussions and decisions. In addition, employees within the Group executive Directors, three (3) Non-executive Directors and four (4) are obliged to disclose any conflicts of interest. Executive Directors (including the Alternate Director) as required in the Listings Requirements of the JSE. More than half the Board consists of Independent Non-executive Directors, if one excludes Role and Function of the Board the alternate director. The Board retains full and effective control of the Group and is accountable and responsible for the performance and affairs of the The Group recognises the importance of having a diverse Board Group. All material resolutions have to be approved by the Board. and believes that diversity is essential to maintaining a competitive The Board is accountable to the Group’s stakeholders for exercising advantage. The Board is of the view that diversity is not limited leadership, integrity and judgment in pursuit of the strategic goals to gender and that a diverse board should include different and objectives of the Group. Formal requirements specifying the skills, experience, race, gender and other characteristics. The responsibilities and types of conduct expected from the Directors, Nominations Committee is responsible for the nomination of Board the Group Company Secretary, the Chairman and the CEO are appointments, as detailed in the Nomination Committee section set out in the Group’s Board Charter, which is reviewed annually. of this report below. While the Board recognises that the existing skills of the current Directors are extensive, the Nominations Committee continues to consider the appointment of additional Independent Non-executive Directors to further strengthen the
Integrated Annual Report 2017 57 INTEGRATED ANNUAL REPORT 2017
The Board’s primary functions include, amongst others: have unrestricted access to timely financial and other information relating to the Group as well as free access to Senior Management • Determining the Group’s vision; and the Group Company Secretary. During the financial year under • Determining and providing strategic direction to the Group; review, the Board received presentations from various Senior Executive Managers, enabling it to explore specific issues and • Adopting strategic plans and ensuring that same, through developments in greater depth. the Executive Directors, are communicated to the applicable Management levels and further ensuring that the objectives The Group provides its Directors with Directors’ and Officers’ as set out in the strategic plan are met; Legal Liability Insurance in connection with their duties and • Approving and evaluating the annual business plan and budget responsibilities. compiled by Management and monitoring the implementation of the approved annual budget and business plan; Induction of New Directors and Independent • Approving the Group’s Financial Statements and interim reports; Advice • Appointing the CEO who reports to the Board and ensuring Newly appointed Directors are informed of their fiduciary duties by that succession is planned; the Group Company Secretary. Newly appointed Directors receive • Determining Director selection, which includes gender a file with information on the JSE Listings Requirements and the diversity and evaluation; obligations therein imposed upon Directors and are informed of • Evaluating the viability of the Group on a going-concern basis; any amendments to legislation and regulations. • Ensuring that the Group has appropriate risk management, internal control and regulatory compliance procedures in Individual Directors may, after consulting with the Chairman or place. It further identifies and continually reviews key risks the CEO, seek independent professional advice, at the expense as well as the mitigation thereof by Management; of the Group, on any matter connected with the discharge of his/ her responsibilities as a Director. • Approving of major capital expenditure and significant acquisitions and disposals; Board Evaluations • Monitoring non-financial aspects pertaining to the business of the Group; The Board conducts informal evaluations of its performance. • Monitoring of compliance with laws, regulations and the Evaluation in the review period focused on areas of Board Group’s Code of Ethics; composition, the Board’s role in setting strategy, oversight of the strategic plan, risk management and internal controls and • Ensuring that the remuneration of Directors, Executive succession planning. Managers and all other employees occurs in accordance with the Group’s remuneration policy; Board Meetings and Attendance • Identifying and managing potential conflicts of interest; • Settling principles for recommending the use of external The Board meets at least four (4) times a year with the proviso auditors for non-audit services; that additional meetings could be called when certain important matters arise and measures exist to accommodate resolutions that • Establishing Board committees with clear terms of reference have to be approved between meetings. Details of attendance at and responsibility; Board meetings are provided on pages 80 to 81 of this Report. • Defining levels of authority and delegating required authority to the committees and Management; Retirement and Re-election of Directors • Considering and, if appropriate, declaring payment of dividends to shareholders; Under the Group’s Memorandum of Incorporation, a third of the Directors retire by rotation each year and are eligible for re-election • Evaluating the effectiveness of the Board and its committees; by shareholders at the Annual General Meeting. Details of the • Conducting an evaluation of the Group Company Secretary; and Directors retiring by rotation are set out in the Notice of Annual • Ensuring the creation of sustainable shareholder value. General Meeting. The appointment of Directors is a function of the entire Board based on recommendations made by the To fulfil their responsibilities adequately, Board members and Nominations Committee. members of the sub-committees receive Board and sub- committee agendas ahead of any meeting. In addition, Directors
58 Integrated Annual Report 2017 Chairman The Group Company Secretary reports to the CEO and has a direct channel of communication to the Chairman. He meets with The Group’s Chairman, Mr Pieter van Hoven, is an Independent the Chairman before each Board and general meeting to prepare Non-executive Director. In addition to playing a key role within for and discuss important issues. the Group, he provides guidance to the Board as a whole and ensures that the Board is efficient, focussed and operates as a He is responsible for the functions specified in Section 88 of the unit. He acts as a facilitator at Board meetings to ensure a flow of Companies Act (as amended). All meetings of shareholders, opinions, and attempts to lead discussions to optimal outcomes Directors and Board sub-committees are properly recorded as per in the interests of good governance. the requirements of the Act. The removal of the Group Company Secretary would be a matter for the Board as a whole. The CEO
The CEO, Mr Erik Venter, who reports to the Board, is responsible The Group Company Secretary is an alternate Director of the for the running of the day-to-day business of the Group and for the Company, and a Director of some of the Group’s subsidiaries. implementation of policies and strategies adopted by the Board. The Board is of the opinion that, in view of the fact that the The Executive Directors and Executive Managers of the various Group Company Secretary is an alternate Director of the Group, business units and subsidiaries assist him in this task. an arm’s length relationship is not feasible. However, the Board annually evaluates the competency and effectiveness of the Company Secretary, as required in terms of the JSE Listings Directors Requirements. The Board carried out a formal review of the The Chairman meets with each Non-executive Director, where competence, qualification and experience of the Company possible, to discuss his/her contribution to the Board. The Board is Secretary during the period under review. The Board is satisfied of the view that the Directors have fulfilled their duties and provide that no conflict of interest exists since, during the period under a valuable contribution to the effective functioning of the Board. review, notwithstanding the fact that the Company Secretary is an alternate Director, he served the Board purely in his capacity The Group Company Secretary as Company Secretary and is not considered for voting on Board resolutions. The Board is further satisfied that the Company The Group Company Secretary plays a pivotal role in the continuing Secretary is competent, has the requisite qualifications and effectiveness of the Board, ensuring that all Directors have full experience to execute his duties effectively, and has done so and timely access to the information that helps them to perform during the period under review. their duties and obligations properly, and enables the Board to function effectively. Executive Management
The Group Company Secretary is responsible for providing The Group’s Executive Management Committee meets on a regular guidance to the Board collectively and to the Directors individually basis to consider, inter alia, investment opportunities, operational, with regard to their duties, responsibilities and powers. financial and other aspects of strategic importance to the Group. Executive Managers have specific roles and responsibilities with The Group Company Secretary’s key duties with regard to the specific reference to their authority levels. Directors include, but are not limited to, the following: Board Committees • Collating and distributing relevant information, such as corporate announcements, investor communications and The Board has created an Audit Committee, Risk Committee, any other developments affecting the Group or its operations; Nominations Committee, Remuneration Committee and a Social and Ethics Committee, as set out below, to enable it to properly • Inducting new Directors, which includes a briefing on their discharge its duties and responsibilities and to effectively fulfil fiduciary and statutory duties and responsibilities (including its decision-making process. The Board and its committees are those arising from the JSE Listings Requirements, King III supplied with relevant and timely information, enabling them to and King IV; discharge their responsibilities. • Providing regular updates on effective and proposed changes to laws and regulations affecting the Group and/or its While the Board remains accountable for the performance and businesses; and affairs of the Group, it does delegate certain functions to the • Monitoring of Directors’ dealings in securities and ensuring committees and Management to assist it in carrying out its that prior approval to deal in securities is obtained from the functions, duties and responsibilities. The Chairman of each Chairman or another designated Director. committee reports to the Board at each Board meeting.
Integrated Annual Report 2017 59 INTEGRATED ANNUAL REPORT 2017
The Chairman of each committee, other than the Social and The Committee, amongst other things, identifies and evaluates the Ethics Committee, which has a Non-executive Director as its adequacy of internal controls and provides effective communication Chairman, is an Independent Non-executive Director and is between Directors, Management and the internal and external requested to attend the Group’s Annual General Meeting to auditors. The responsibilities of the Audit Committee are contained answer any questions posed by shareholders. In addition, all in a formal mandate from the Board (“Terms of Reference”) members of the committees, other than the Risk Committee, which is reviewed annually, with the main responsibilities being, Social and Ethics Committee and Nominations Committee, are amongst others, to: Independent Non-executive Directors. • Perform the statutory functions of an Audit Committee in The Board Committees have specific terms of reference, terms of the Companies Act and other functions delegated appropriately skilled members, membership by Non-executive by the Board; Directors who act independently, Executive Directors and Executive • Review and recommend to the Board for approval the Management participation and access to specialist advice when Group’s Integrated Annual Report, interim reports and results considered necessary. announcement; • Nominate and approve the terms of engagement and Audit Committee remuneration of registered auditors who, in the opinion of The role of the Audit Committee is to review the Group’s financial the committee, are independent of the Group, and ensure position and make recommendations to the Board on all financial that their appointment complies with the provisions of the matters and internal controls. The Committee also reviews Companies Act, King III and other legislation relating to their the nature and extent of non-audit services provided by the appointment; external auditors. The Chairman of the Committee reports on the • Review and evaluate the effectiveness and performance of Committee’s activities at each Board meeting. the external auditors as well as the scope, adequacy and costs of audits to be performed and report thereon to the The members of this Committee are Independent Non-executive Board and to the shareholders; Directors. All members are financially literate and all possess • Evaluate and approve the external auditors’ plans, findings substantial business and financial expertise and comply with and reports; Section 94 and Regulation 42 of the Companies Act. The • Receive and deal appropriately with any concerns or complaints, Committee meets at least three (3) times per year. Both internal whether received internally or externally, dealing with the and external auditors have unrestricted access to the Committee. Group’s accounting practices and internal audits, Financial Statements, internal financial controls or related matters; The Chairman of the Board, CEO, Financial Director, Chief Audit Executive and external auditors attend the Audit Committee • Monitor and evaluate the performance of the Financial Director; meetings by invitation. The Committee held four (4) meetings • Identify and evaluate exposure to financial risks; during the reporting period. • Evaluate the effectiveness of the internal audit function, including its activities, scope and adequacy and receive Composition of Committee and Attendance and approve the internal audit plan, internal audit reports Members Appointed/Resigned Attendance and material changes to same; Mr N Maharajh 4/4 • Evaluate procedures and systems, including but not limited (Chairman) to, internal controls, disclosure controls and the internal Dr PJ Welgemoed 4/4 audit function; Mr KI Mampeule Resigned 1/3 • Consider legal and regulatory compliance to the extent that 31 March 2017 it may impact on the Financial Statements; and Ms WD Stander Resigned 28 1/1 November 2016 • Recommend principles for the use of external auditors for Mr GJ Halliday Resigned 5 April 2017 3/3 non-audit services. Mr RS Ntuli Appointed 0/1 5 June 2017 The Committee’s report, describing how it discharges its statutory duties and the additional duties assigned to it by the Board, is included in this Integrated Annual Report on pages 64 to 66.
60 Integrated Annual Report 2017 Risk Committee • Evaluate procedures and systems introduced including, without The role of the Risk Committee is to review the risks facing the limitation, the Company’s information technology systems. Group’s business and to ensure compliance with all required legislation, regulations and codes affecting the business. The For more information regarding the Group’s risk management and members of this Committee consist of both Non-executive the material issues facing the Group that have been identified as Directors and Executive Directors, who act independently. The a result of the Group’s risk management procedures, refer to the Committee meets at least three (3) times per year. The Chairman Internal Control and Risk Management Report. of the Board, CEO, Financial Director, Chief Audit Executive and external auditors (where appropriate) attend Risk Management Nominations Committee meetings by invitation. The Committee held four (4) meetings during the reporting period. The members of this Committee are all Non-executive Directors who act independently. Composition of Committee and Attendance This Committee, as well as the Remuneration Committee, Members Appointed/Resigned Attendance considers the issue of succession planning at Board and Executive Dr PJ Welgemoed 4/4 Management level. The CEO, in consultation with the Board (Chairman) Chairperson, Remuneration and Nominations Committees, is Mr KI Mampeule Resigned 1/3 31 March 2017 responsible for ensuring that adequate succession plans are in place. Ms WD Stander Resigned 1/1 28 November 2016 The Committee met twice during the financial year under review. Mr GJ Halliday Resigned 5 April 2017 3/3 The composition of the Committee and attendance at meetings Mr N Maharajh Appointed 1/1 are set out below: 13 February 2017 Mr MN Louw Appointed 1/1 Composition of Committee and Attendance 13 February 2017 Members Appointed/Resigned Attendance Mr P van Hoven 2/2 The main responsibilities of the Risk Committee are, amongst (Chairman) others, to: Mr JM Kahn 2/2 Mr KI Mampeule Resigned 0/2 • Oversee the development and annual review of a Risk 31 March 2017 Management Policy and Plan for recommendation to the Mr MD Moritz 2/2 Board for approval; • Monitor implementation of the Risk Management Policy Amongst others, the main responsibilities of the Nominations and the Plan; Committee are to: • Make recommendations to the Board concerning the levels of tolerance and appetite and ensure that risks are managed within • Make recommendations on the appointment of new Executive the levels of tolerance and appetite as approved by the Board; and Non-executive Directors, taking into account the need and requirements for gender diversity at Board level; • Ensure that the Risk Management Plan is widely disseminated throughout the Group and integrated in the day-to-day • Make recommendations on the composition of the Board activities of the Group; generally and the balance between Executive, Independent Non-executive and Non-executive Directors; • Ensure that risk management assessments are performed on a continuous basis; • Review plans for succession and ensure their adequacy, for the Chairperson, the CEO and Executive Directors; • Ensure that frameworks and methodologies are implemented to increase the possibility of anticipating unpredictable risks; • Review the Board structure, size and composition and make recommendations with regard to any adjustments deemed • Ensure that management considers and implements appropriate necessary, taking into account the need and requirements risk responses; for gender diversity at Board level; and • Liaise closely with the Audit Committee to exchange information • Ensure that Board appointment policies and procedures relevant to risks; are formal and transparent and a matter for the Board as a • Review reports concerning risk management that are to whole, and that such appointment policies and procedures be included in the Integrated Annual Report to ensure that are reviewed and updated when necessary. such reporting is timely, comprehensive and relevant; and
Integrated Annual Report 2017 61 INTEGRATED ANNUAL REPORT 2017
Remuneration Committee Non-executive Directors, Non-executive Directors, Executive Directors and Senior Executives of the Group who are suitably The members of this Committee are all Independent Non-executive experienced. The Chairman of the Board, Financial Director, Chief Directors. The CEO attends meetings by invitation only and is Audit Executive, representatives from other assurance providers, not entitled to vote. The CEO does not participate in discussions professional advisors and Board Members are entitled to attend regarding his own remuneration. The Committee met once during Committee meetings. The Committee met four (4) times during the period under review. The composition of the Committee and the period under review. The composition of the Committee and attendance at meetings is set out below. attendance at meetings is set out below:
Composition of Committee and Attendance Composition of the Committee and Attendance Members Appointed/Resigned Attendance Members Appointed/Resigned Attendance Mr JM Kahn 1/1 (Chairman) MD Moritz 3/4 (Chairman) Mr RC Sacks 0/1 ER Venter 3/4 Mr P van Hoven 1/1 DH Borer 4/4 Ms WD Stander Resigned 28 0/0 November 2016 KI Mampeule Resigned 1/3 31 March 2017 The remuneration policy and the execution thereof is the KV Gorringe 4/4 responsibility of the Remunerations Committee. EA Liebetrau 4/4 WD Stander Resigned 28 0/1 The fees for Non-executive Directors are disclosed in the November 2016 Remuneration Report on pages 67 to 69 and the remuneration N Maharajh Appointed 13 0/1 February 2017 packages of Executive Directors and Non-executive Directors for the financial year under review are disclosed in the Report of the The main responsibilities of the Social and Ethics Committee are, Directors on pages 78 to 83 of this Report. As recommended amongst others, to: by King III, the Group’s remuneration policy was approved by shareholders of the Group by way of a non-binding advisory vote, • Assist the Board in ensuring that the Group is compliant with at its last Annual General Meeting, held on 10 November 2016. all legislation and other requirements relating to social and economic development and remains a good corporate citizen Amongst other things, the main responsibilities of the Remuneration by monitoring the sustainable development performance of Committee are to: the Group; and • Determine the Group’s general policy on remuneration as • Perform the statutory functions of a social and ethics committee well as specific policies in respect of Executive Directors’ in terms of the Companies Act and other functions delegated and Executive Managers’ remuneration; to it by the Board. • Review and determine remuneration packages for Executive Directors and Executive Management including, but not limited The Committee’s report, describing how it discharged its statutory to, basic salary, annual bonuses, benefits, performance-based duties, is included in this Report on pages 70 to 71. incentives, and share incentive scheme awards; • Annually appraise the performance of the CEO; Discharge of Responsibilities • Annually review the general level of remuneration for Directors The Board is of the view that the committees have discharged their of the Board as well as its committees and recommend responsibilities for the financial year under review in compliance proposals in this respect for approval by shareholders at with their Terms of Reference. general meetings; and • Annually review the general salary increase for all other Internal Control employees. The Group has a system of internal controls in place designed to ensure that risks are mitigated and that its objectives are attained. The Board is accountable for reviewing and approving the Social and Ethics Committee effectiveness of the controls implemented by the Group, including The role and responsibilities of the Committee are codified in a financial, operational and compliance controls and risk management mandate from the Board (“Terms of Reference”), which is reviewed controls. The Board recognises its responsibility in respect of the annually. The members of this Committee consist of Independent
62 Integrated Annual Report 2017 Group’s risk management process and systems of internal controls, Internal Audit and oversees the activities of the Group’s external auditors and the The internal audit function is an independent appraisal mechanism, risk management function, which has been delegated to the Audit which evaluates the effectiveness of the applicable operational Committee and Risk Committee, as appropriate. activities, the attendant business risks and the systems of internal control to bring material deficiencies, instances of non-compliance Internal Control Systems and development needs to the attention of the Audit Committee, external auditors and operational management for resolution. The Board is responsible for ensuring that the Group implements The Chief Audit Executive is responsible for co-ordinating with and monitors the effectiveness of its systems of internal control. the external auditors to ensure proper coverage and minimise The identification of risk and the monitoring of adequate systems duplication of effort. Internal audit plans are tabled at the Audit of internal control to manage financial risks, are delegated to the Committee meetings and follow-up audits are conducted in areas Chief Audit Executive, who in turn makes recommendations to where weakness is identified. The Internal Audit Plan is based on Executive Management as well as to the Audit Committee. risk assessments which are of a continuous nature to identify not only existing and residual risk, but also emerging risks and issues While all internal control systems do have inherent shortcomings, highlighted by the Committee and Senior Executive Management. the Group’s internal control system is designed to provide reasonable assurance as to the reliability of financial information External Audit and in particular the Financial Statements, as well as to safeguard, verify and maintain accountability of its assets and to detect fraud The independence of the external auditors is recognised. The and potential liability, while complying with applicable laws and Audit Committee meets with external auditors to review the regulations. scope of the external audit, and any other audit matters that may arise. The external auditors attend Audit and Risk committees’ The Group’s external auditors consider the internal control systems meetings (where appropriate) and have unrestricted access to the of the Group as part of their audit, and advise of deficiencies Chairmen of the committees. The Audit Committee is responsible when identified. for nominating the Company’s external auditors and determining the terms of engagement. The Group continues to review its internal control processes to ensure it maintains a robust and effective internal control environment. During the period under review, the effectiveness Investor Relations of the process was regularly reviewed by the Group’s Risk The Board is committed to keeping shareholders and the investor Management Forum and Audit Committee. community informed of developments in its business.
Summary of King III Compliance
Comair Limited – 1967/006783/06 IoDSA Applied/ Partially GAI Score 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 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 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
A full summary of the Group’s compliance with the King III principles is accessible on the Comair Limited website at www.comair.co.za.
Integrated Annual Report 2017 63 INTEGRATED ANNUAL REPORT 2017
Audit Committee Report
Introduction all its statutory, regulatory and legal duties and responsibilities assigned to it by the Board during the financial year under review, This report is presented by the Group’s Audit Committee (the as further detailed below. “Committee”) and approved by the Board in respect of the financial year ended 30 June 2017. It is prepared in accordance with the recommendations of King III, the requirements of the Composition and Meetings Companies Act (No. 71 of 2008) as amended, and the JSE The Committee consists of three (3) Independent Non-executive Listings Requirements. The report describes how the Committee Directors. The Committee meets at least three (3) times during has discharged its statutory duties in terms of the Companies Act each financial year. and the additional duties assigned to it by the Board in respect of the financial year ended 30 June 2017. The Chairman of the Board, CEO, Financial Director, Chief Audit Executive and external auditor attend Committee meetings by Audit Committee Mandate invitation.
The Committee has adopted a formal mandate setting out its During the year the Committee held four (4) meetings. responsibilities and functioning, which has been approved by the Board of Directors (“Board”) and is reviewed annually. The The members who were in office during the financial year and Committee has conducted its affairs in compliance with this details of Audit Committee meetings attended by each member mandate and is satisfied that it has fulfilled and complied with are set out below.
Members Date of Qualifications No. of Attendance Appointment Meetings Held Mr N Maharajh 02/11/2015 BAcc, Post-Graduate Diploma in Accounting 4 4/4 Dr PJ Welgemoed 28/03/1996 BCom (Hons), MCom, DCom 4 4/4 Mr KI Mampeule 1 05/09/2005 BA, MSc, MBA 4 1/3 Ms WD Stander 2 15/09/2008 BA (Hons), MBA 4 1/1 Mr GJ Halliday 3 06/06/2013 BA (Hons), MBA 4 3/3 Mr RS Ntuli 4 05/06/2017 LLB 4 0/1
Notes: 1. Mr KI Mampeule resigned as a Board Member and a member of the Audit Committee on 31 March 2017 2. Ms WD Stander resigned as a Board Member and as a member of the Audit Committee on 28 November 2016 3. Mr GJ Halliday resigned as a Board Member and as a member of the Audit Committee on 5 April 2017 4. Mr RS Ntuli, an Independent Non-executive Director, was appointed to the Audit Committee on 5 June 2017
Abridged curricula vitae of the Committee members appear on pages 145 to 148 of this Report.
The Board re-appointed the Committee members, which appointments are subject to shareholders re-electing the Committee members at its Annual General Meeting.
Role and Functions of the Committee
A summary of the roles and functions of the Committee, including its statutory duties, are set out in the Corporate Governance Report on pages 55 to 63 of this Report.
The Committee is satisfied that it has fulfilled all its statutory duties, including those prescribed by the Companies Act, and those assigned to it by the Board during the financial year under review. The Committee did not receive or deal with any concerns related to matters listed in Section 94(7)(g)(i)-(iv) of the Companies Act.
64 Integrated Annual Report 2017 External Audit Internal Financial Controls
The Committee has, during the period under review, nominated The Committee is responsible for assessing the Group systems external auditors, Grant Thornton Johannesburg Partnership of internal financial controls. (“Grant Thornton”); approved its fee; and determined its terms of engagement. Details of the external auditor’s fees are set out in The Committee has: note 19 to the Financial Statements. • Considered reports from the external auditors and management; A formal policy governs the process whereby the external auditors • Reviewed significant issues raised by the external audit are considered for non-audit related services. The Committee process, including the manner in which they were resolved; and approved the terms of the policy for the provision of non-audit • Reviewed the report from the Institute of Internal Auditors services by the external auditors and approved the nature and and made certain changes as a result of same. extent of non-audit services that the external auditors may provide. During the period under review, the external auditors did provide non-audit services to the Group, namely in the form of tax advice, Based on these processes and the assurances obtained, the and assurance on selected information in this Integrated Annual Committee is satisfied with the adequacy and effectiveness of Report. In addition they conducted the Group’s verification audit on the Group’s system of internal financial controls. its Broad-Based Black Economic Empowerment scorecard. The use of the external auditors for such services was pre-approved Expertise and Experience of the Financial Director by the Committee. and Finance Function
The Committee performed a review of the Financial Director and The appointment of Grant Thornton will be presented to the finance function and the Committee is satisfied with the: shareholders of the Group at the Annual General Meeting for approval. The Committee has further satisfied itself that Grant • Expertise and experience of the Financial Director; Thornton is accredited and appears on the JSE list of Accredited • Resources within the finance function and their experience Auditors, and that the designated auditor is not disqualified from and expertise; and acting as such. The Committee has further satisfied itself that Grant Thornton is independent of the Group, as contemplated in • Continuous professional development of senior members Sections 90(2)(b),(c) and 94(8) of the Companies Act. of the finance function.
Internal Audit In performing the review, the Committee obtained feedback from both the internal and external auditors. Details of the Group’s internal audit function are contained in the Corporate Governance Report. During the reporting period the Institute of Internal Auditors was appointed to conduct an Risk Management independent review of the Group’s Internal Audit function and The Board has assigned oversight of the Group’s risk management as a result, a number of changes were made to the internal audit function to the Risk Committee. Two of the members of the approach and methodology. In addition, on 1 June 2017, Mr Ashley Audit Committee are also members of the Risk Committee. The Ragunanan was appointed as the Chief Audit Executive (“CAE”) Committee fulfils an oversight role regarding financial reporting and Mr Sean Percival Miller, the previous CAE, was promoted to risks, internal financial controls and fraud risk as it relates to manage the Group’s property portfolio. The Audit Committee is financial reporting and safety and security issues. Further details satisfied that the CAE possesses the appropriate expertise and of the Company’s risk management function can be found in the experience to meet the responsibilities of his position and that Corporate Governance Report and the Internal Control and Risk the Internal Audit Function is adequately resourced. Management Report.
The Audit Committee oversees co-operation between internal The Committee is satisfied that the system, as well as the process and external auditors, and serves as a link between the Board of risk management, is effective. of Directors and these functions. The CAE reports functionally to the chair of the committee and administratively to the Chief Risk and Compliance Officer.
Integrated Annual Report 2017 65 INTEGRATED ANNUAL REPORT 2017
Financial Statements Whistle Blowing
The Committee has reviewed the Financial Statements of the The Committee is satisfied that all instances of whistle blowing Group and is satisfied that they comply with International Financial have been appropriately dealt with during the period under review. Reporting Standards. Sustainability Reporting Compliance The Committee recommended to the Board the appointment of The Committee is responsible for reviewing any major breach of Grant Thornton, an external independent assurance provider, to relevant legal or regulatory requirements and other responsibilities. perform an assurance engagement with the purpose of expressing a The Committee is satisfied that there has been no material non- limited assurance opinion in terms of ISAE 3000 on whether selected compliance with laws and regulations during the period under key performance indicators and specific disclosures, as contained review. in the Integrated Annual Report, have been fairly stated and meet reasonable reporting expectations. The assurance statement can The Committee has received no complaints relating to the be accessed via the Company’s website, www.comair.co.za. accounting practices and internal audit function of the Group, the content or auditing of its Financial Statements, internal financial The Committee has considered the Group’s sustainability controls or other related matters. information as disclosed in this Report and has assessed its consistency with operational and other information known to Committee members, and for consistency with the Annual Financial Going Concern Statements. The Committee is satisfied that the sustainability The Committee, based on an assessment received from Executive information is reliable and consistent with the financial results. Management, is of the view that the Group will be a going concern for the foreseeable future. Recommendation of this Integrated Annual Report for Approval by the Board Duties Assigned by the Board The Committee has recommended this Integrated Annual Report The Committee fulfils an oversight role regarding the Group’s for approval by the Board. Integrated Annual Report and the reporting process, including the systems of internal financial controls. It is responsible for ensuring that the internal audit function is independent and has the necessary resources, standing and authority to enable it to discharge its duties effectively. The Committee also oversees co- operation between the internal and external auditors, and serves Mr N Maharajh as a link between the Board and its functions. Chairman: Audit Committee, Comair Limited 11 September 2017
66 Integrated Annual Report 2017 Remuneration Report
The Group has a dedicated Board Committee that, inter alia, Remuneration Structures determines the governance of remuneration matters, Group Executive Directors and Senior Managers remuneration structures remuneration philosophy, remuneration of Executive Directors comprise fixed and variable components: and other Senior Managers, as well as the compensation of Non-executive Directors, which is ultimately approved by the • Fixed pay: Base salary and benefits; and shareholders. • Variable pay: Short-term annual merit bonus and a long- Detail on the mandate, composition and attendance of meetings term executive incentive scheme, based on Group profits held by the Remuneration and Nominations committees are set before tax and the Group’s share price performance (payable out in the Corporate Governance Report. every three years).
Fixed Pay Remuneration Policy Base Salary The Group’s remuneration policy aims to ensure that it remunerates Directors, Senior Managers and all other employees in a manner The Group’s intention in setting the base salary for Executive that supports the achievements of its strategic objectives, while Directors and Senior Managers is aimed at retaining, attracting attracting and retaining scarce skills and rewarding high levels of and motivating key individuals who are important to its success. In performance. The remuneration offered by the Group needs to setting the base salary, market data is used to benchmark individual be competitive to attract, retain and incentivise high calibre staff. salary levels for Directors and Senior Managers. This information, combined with the individual’s performance assessment and the The Remuneration philosophy is based on the following principles: level of increases applied throughout the organisation, are key considerations for the annual salary reviews. Base salaries are • Affordability; reviewed annually by the Committee or in the event of a change in the Executive Director’s or Senior Manager’s positions or • Internal fairness; and responsibilities. • External fairness. Retirement Benefits The remuneration approach that furthermore guides the level The Group offers membership to a defined contribution pension of salaries of all Directors, Senior Management and all other fund to all permanent employees in South Africa. This fund is employees is aimed at: part of an umbrella arrangement known as the Superfund and is administered by Old Mutual. Details of the benefits are set out • Ensuring that no discrimination occurs; on page 36 of this Report. • Recognising exceptional and value-adding performance; • Encouraging team performance and participation; Other Benefits • Promoting cost effectiveness and efficiency; This includes benefits such as medical aid, risk benefit insurance (i.e. death and disability) and leave, to permanent employees in • Achieving the strategic objectives of the Group; South Africa. Details of the benefits are set out on page 36 of • Aligning with the interests of shareholders. this Report.
To balance external equity with affordability and to ensure that Pilots market-related salaries are offered to staff, the Group participates in Pilots are currently guaranteed a 13th cheque. several salary surveys and uses that information for benchmarking purposes.
Integrated Annual Report 2017 67 INTEGRATED ANNUAL REPORT 2017
Variable Pay Scheme in proportion to their basic salary versus the combined basic salary of the participants in the Scheme. Short-term Incentives
Executive Directors and Senior Managers participate in a short- Share price-linked Component (50%) term, cash-based management incentive scheme. Payment in This component is based on the average share price of the Group terms of the short-term incentive scheme is dependent upon weighted 10% for 2016, 20% for 2017 and 70% for the 2018 achievement against three (3) components as follows: financial year, with the bonus payable to participants being the difference between the Group’s average share price as determined • Achievement by the qualifying employee of personal key above, and a share price of R4.50, but capped to a maximum performance indicators (40%); of R40 million. • Their personal key performance indicators are reviewed annually and are linked to the strategic objectives of the Group; Executive Directors’ Remuneration • Group profit performance against budget (40%); and • A portion payable at the discretion of the Board (20%). Remuneration of Executive Directors is compared to the market for comparable roles in companies of similar size.
The payment of any short-term incentive to Executive Directors The annual bonus payable to Executive Directors, other than the and Senior Managers is subject to Board approval. CEO, in terms of the short-term management incentive scheme is limited to 100% of their annual base salary. Employees who do not participate in the short-term incentive scheme would be entitled to a 13th cheque or a proportion thereof, Executive Directors have standard service contracts with no fixed based on personal performance and company affordability, and duration, no restraint and with a one-month notice period. a discretionary amount based on the Group’s performance. This does not apply to pilots, who are guaranteed a 13th cheque. Details of the remuneration of individual Executive and Non- executive Directors are set out in the Report of the Directors on Long-term Incentive Scheme (“Scheme”) pages 78 to 83. The purpose of the Scheme is to retain talent as well as to reward participants in the Scheme, based on the Group’s performance, and comprises two components, namely a profit-linked component Non-executive Directors’ Remuneration and a share price-linked component. Non-executive Directors’ fees are determined by the Remuneration Committee in consultation with the CEO and are reviewed annually Long-term Incentive Scheme (1 July 2015 to 30 September 2018) or when there is a change of position or responsibility of a Non- Executive Directors and designated Senior Managers who were executive Director. In determining Non-executive Directors’ fees, in the employ of the Group on or prior to 1 July 2015 and who account is taken of the general increase provided to the Group’s are still in the employ of the Group as at 30 September 2018, employees. Non-executive Directors do not receive any benefits participate in this long-term executive incentive scheme. Payment or share options from the Group apart from Directors’ fees, which of the long-term incentives for this three-year period will be made fees were approved by shareholders at the Group’s Annual General at the end of September 2018 if the targets, which comprise a Meeting on 10 November 2016. The Non-executive Directors’ profit-linked component and a share price-linked component, as fees for the year ended 30 June 2017 are included in the joint set out below, are met. remuneration payable to the Group’s Non-executive Directors, as indicated in Special Resolution Number 1 in the Notice of Annual Profit-linked Component (50%) General Meeting. In terms of this component of the Scheme, 4% of the aggregated headline profits before tax (excluding profits from damages awards The Directors’ fees per meeting, for the financial years ended and profits from new business ventures that are not managed by 30 June 2016 and 30 June 2017, as well as the proposed fee the participants), made by the Group during the 2016, 2017 and per meeting for the financial year ending 30 June 2018, are set 2018 financial years in excess of R1 billion (being the rounded out in the following table. Members of the committees are also aggregate for the previous three (3) years), but capped to a remunerated for their participation as members of the various maximum of R40 million, will be allocated to participants in the committees.
68 Integrated Annual Report 2017 Proposed Annual Annual Fee for the Annual Fee for the Meeting Fee for the Year Year Ended Year Ended Ended 30 June 2018 30 June 2017 30 June 2016 Chairperson: Board 1 516 981 1 429 092 1 348 2001 Vice-Chairperson: Board 442 453 416 819 393 225 Member: Board 189 623 178 637 168 525
Proposed Fee per Fee per Meeting for Proposed Fee per Meeting for the Year the Year Ended Meeting for the Year Ended 30 June 2018 30 June 2017 Ended 30 June 2016 Chairperson: Audit Committee 16 434 15 481 14 606 Member: Audit Committee 8 217 7 741 7 303 Chairperson: Risk Committee 16 434 15 481 14 606 Member: Risk Committee 8 217 7 741 7 303 Chairperson: Nominations Committee 16 434 15 481 14 606 Member: Nominations Committee 8 217 7 741 7 303 Chairperson: Social and Ethics Committee 16 434 15 481 14 606 Member: Social and Ethics Committee 8 217 7 741 7 303 Chairperson: Remuneration Committee 16 434 15 481 14 606 Member: Remuneration Committee 8 217 7 741 7 303 Chairperson: Pension fund 16 434 15 481 14 606
Integrated Annual Report 2017 69 INTEGRATED ANNUAL REPORT 2017
Social and Ethics Report
The Social and Ethics Committee (“the Committee”) assists The Committee is further responsible for annually reviewing, in the Board in ensuring that the Group is and remains a good conjunction with Executive Management, the Group’s material and responsible corporate citizen by monitoring the Group’s sustainability issues. The Committee must also review and approve sustainable development performance, performing the statutory the sustainability content included in this Report. functions required of a social and ethics committee in terms of the Companies Act, and executing any additional functions During the financial year under review, the following reports relating assigned to it by the Board. The responsibilities and functioning to the Committee’s functions were produced by Management and of the Committee are governed by a formal mandate, approved reviewed by the Committee: by, and subject to annual review by the Board. The Committee is satisfied that it has fulfilled all its statutory duties and duties • A Social and Economic Development Report indicating the assigned to it by the Board during the financial year under review. Company’s standing in terms of various international ethical and socio-economic principles, as well as domestic Employment The composition and number of meetings held by the Committee is Equity and Broad-Based Black Economic Empowerment laws. set out in the Group’s Corporate Governance Report on page 62. This report illustrated that in nearly all cases, the Company was fully compliant with the relevant requirements, and in a The Committee is responsible for developing and reviewing the few cases the Company was generally compliant with the Group policies with regard to social and economic development; stipulated social and economic development indicators. There good corporate citizenship; reporting on the Group’s sustainable were no instances where the Company was non-compliant. development performance; and making recommendations to the • A Labour and Employment Report analysing how the Company Board and/or Management on matters within its mandate. complied with the International Labour Organization (“ILO”) principles on decent work and working conditions and the The Committee performs a monitoring role in respect of the Company’s achievements in the areas of labour and union sustainable development performance of the Group relating, relations, gender diversity and retention of staff. The report amongst others, to: showed that the Company had proactively implemented progressive people practices, which made the Group fully • Environmental health and public safety, which includes compliant with ILO principles and domestic labour legislation. Occupational Health and Safety; • An Environmental Health and Public Safety Report, which • Broad-Based Black Economic Empowerment and Employment measured the Company’s performance in protecting the Equity; environment as well as the health and safety of staff and • Labour relations and working conditions; the traveling public. This report illustrated that the Company • Consumer relationships (advertising, public relations and was currently exceeding the IATA global emission reduction compliance with consumer protection laws); targets as well as the IATA 2015 safety performance targets for the African region. • Training and skills development of the Group’s employees; • A Good Corporate Citizenship Report, which documented the • Management of the Group’s environmental impacts; measures implemented to promote staff equality, prevent unfair • Ethics and compliance; discrimination, and contribute to surrounding communities • Corporate social investment. through donations, sponsorship and charitable work. The report indicated that the Company was making a positive The Committee is satisfied with the Group’s performance in each contribution in all these areas. of the areas listed. A new B-BBEE Strategy designed to address the requirements The Committee’s monitoring role also includes the monitoring of of a new Domestic Aviation B-BBEE Scorecard was presented relevant legislation, other legal requirements or prevailing codes for approval. The strategy caters for a set of flexible responses of good practice, specifically with regard to matters relating to to achieve specific levels of B-BBEE compliance over a five-year social and economic development, good corporate citizenship, period. the environment, health and public safety as well as labour and employment.
70 Integrated Annual Report 2017 All the reports, as well as the B-BBEE Strategy, were subsequently approved by the Board, upon the recommendation of the Committee. The Committee is satisfied with the Group’s standing in the areas reviewed and that the current level of combined assurance provides the necessary independent assurance over the quality and reliability of the information presented.
The Committee has also reviewed and updated its Terms of Reference as well as the Company’s Code of Ethics in preparation for the implementation of King IV.
The Committee is required to report, through one of its members, to the Group’s shareholders, on the matters within its mandate at the Group’s Annual General Meeting. Shareholders will be referred to this Report, read with the Sustainable Development Report, at the Company’s Annual General Meeting.
Mr MD Moritz Chairman: Social and Ethics Committee 11 September 2017
Integrated Annual Report 2017 71 INTEGRATED ANNUAL REPORT 2017
Internal Control and Risk Management
Corporate Governance risks in line with its defined risk appetite but fully understands and effectively manages the risks it takes in order to minimise loss and The Group is committed to maintaining principles of good maximise opportunities. corporate governance to ensure that the business is managed in a responsible manner with integrity, fairness, transparency and The objective of risk management in the Group is to establish accountability. an integrated and effective risk management framework where important risks are identified, quantified and managed. To give The Board is ultimately accountable for the Group’s risk effect to this, the Group follows a comprehensive risk management management process and systems of internal controls. In terms process, which involves identifying, assessing and managing the of a mandate from the Board, the Risk Committee and the Audit risks associated with its various businesses. As the Group, through Committee in respect of internal controls and certain financial its various business units, is exposed to a wide range of risks, risks, monitor the risk management process as further detailed some of which may have serious consequences, the identification in this Report. of risk and its management forms part of Executive Management’s business plan and performance management scorecard. Internal Controls over Financial Reporting Risk registers are used to identify, assess and monitor the risks Internal controls and risk management systems in relation to the faced by the Group and are prepared by each business department. Group’s financial reporting process are in place. During the period The risk registers are combined into a Group risk register by the under review, there were no material changes in risk management Group’s Risk Management Forum. The Risk Management Forum or internal control systems. comprises the CEO, the Chief Risk and Compliance Officer, the Chief Audit Executive and certain Executive Management and Internal Control Framework meets at least four (4) times per year to assess and consider the risks associated with the Group’s operations. The Group continues to review its internal control processes to ensure it maintains a strong and effective internal control The Group prioritises risks based on the residual likelihood of environment. During the period under review, the effectiveness the risk occurring and the residual severity of its impact once of the process was regularly reviewed by the Group’s Risk mitigating actions and plans have been applied. An 8 by 8 matrix Management Forum and Audit Committee. For further information is used to rate all inherent and residual risks out of a total possible on the Group’s internal controls, please refer to page 62 to 63 score of 64. Once all risks have been scored in this manner, a of this Report. graph tracking the risks with the highest scores, is presented to the Risk Management Forum and the Risk Committee. The Risk Risk Management Committee also reviews the risk management process and in turn reports to the Board. The following graph illustrates the key Effective risk management is critical to the Group’s operations risks impacting on the Group’s strategic objectives and its ability and is crucial to its continued growth and success. To achieve to transform the Six Capitals. the Group’s objectives and create shareholder value, it does take
72 Integrated Annual Report 2017 Key Risks Group Objectives Capitals • Capital requirement fluctuations • Create shareholder performance • Interest rate fluctuations • Provide growth and development • Currency and oil price fluctuations opportunities for employees • Funding Financial • Fuel price • Loss of key individuals • Create shareholder performance • Effect of industrial action • Provide growth and development • B-BBEE compliance opportunities for employees • Standards of service from suppliers Human • Risks of fraud, corruption and unethical business conduct • Legislation and conduct regulation • Commitment to quality • Brand reputation • Manage risk • Terrorism Social and relationship • Competition • Technical failures and information • Operating effectiveness system security and privacy • Technical innovation Intellectual • Carbon emissions • Leading as a responsible corporate • Inefficient use of resources citizen • Extreme weather • Operating effectiveness Natural • Safety of passengers and employees • Commitment to quality
Manufactured
The Board has formulated a Risk Appetite Statement, which has Financial – The funding Available for Purchases been communicated throughout the Group and is actively being such as Aircraft applied in the management of risk. A risk instrument facilitates Debt Funding the archiving, management and scoring of the Group’s corporate risks and the presentation thereof to the Risk Management Forum The Group is exposed to a variety of financial risks, including market and Risk Committee. risks, credit risks, capital risks and liquidity risks. The Board approves prudent financial policies and delegates certain responsibilities to In addition to the foregoing, the Group recognises the need for Executive Management who directly control day-to-day financial its employees and stakeholders to have a confidential reporting operations and who operate within clearly defined parameters. process (“whistle blowing”) covering fraud and other risks. In line with its commitment to transparency and accountability, the The Group carries substantial debt that needs to be repaid. The Group takes action against employees and others who are found ability to finance ongoing operations, committed aircraft orders and guilty of fraud, corruption and other misconduct. Procedures are future fleet growth plans is vulnerable to various factors including in place for the independent investigation of matters reported and the appetite of financial institutions for secured aircraft financing. for appropriate follow-up action. While the country’s recent credit downgrade has created some uncertainty, which is never welcome, we do not believe that The Board believes that the risks described below are the ones in the longer term this will undermine the fundamentals of the that may have the most significant impact on the Group’s ability Group’s business. to achieve its objectives as set out earlier on in this Report.
Integrated Annual Report 2017 73 INTEGRATED ANNUAL REPORT 2017
The Group attempts to maintain substantial cash reserves and Manufactured – Manufactured Objects Used by committed financing facilities to mitigate the risk of short-term the Business, such as Aircraft, Buildings and interruptions to the aircraft financing markets. In addition, the Equipment Group continually monitors its cash position and further undertakes Safety of Passengers and Employees long-term planning of its capital requirements by comparing its business development strategy with current capital resources. A multitude of processes and structures are in place to monitor and The Audit Committee reviews the Group’s debt covenants on report on aviation safety, quality and security within the Group and a quarterly basis. its operating environment. All operational decision-making is based on safety first. The Group maintains an IATA Operational Safety For more information regarding the Group’s response to this risk, Audit (“IOSA”) registration, thereby ensuring the implementation see the Annual Financial Statements in this Report. of global best practice in managing its operational safety, and is audited by British Airways Plc, as well as the South African Civil Currency Fluctuations Aviation Authority (“SACAA”). The Group’s financial performance is dependent on the fluctuating For more information regarding the Group’s response to this risk, value of the South African Rand against foreign currencies. A see the section Our Operations and Customers in this Report. significant portion of the Group’s costs is incurred in foreign currencies, mainly the US Dollar. The movement of these currencies Aircraft Safety could have a positive or negative impact on the Group’s income, expenses and profitability. The Group does, however, have a Maintenance of the Group’s fleet of aircraft is regulated by the natural hedge in place by virtue of its foreign currency revenue, SACAA and, in certain instances, the Federal Aviation Authority thereby decreasing its net foreign currency exposure. When (“FAA”) of the United States, and the European Aviation Safety financing aircraft, the loan repayment profile is assessed against Authority (“EASA”). While the Group outsources the maintenance the expected fluctuations in the Rand to determine whether to of its fleet of aircraft and engines to the likes of South African finance the transaction in Rand or US Dollar. Airways Technical (SOC) Limited, Israeli Aircraft Industries Limited, Koninklike Luchvaart Maatschapij NV, and, on an ad hoc basis, to For more information regarding the Group’s response to this risk, the likes of Lufthansa Technik, GE Aviation Services, and Safran see the Annual Financial Statements in this Report Aircraft Engines, it maintains an oversight function over all these entities and ensures that it maintains a good relationship with Oil Price Fluctuations the SACAA. As with foreign currencies, the Group incurs substantial costs The Group, in addition, runs a safety reporting and quality with regard to the purchase of jet fuel. Volatility in the price of assurance management system to address all aspects of aviation fuel and lubricants can have a material impact on the Group’s and ground safety and quality assurance. operating results. Although the risk of fuel price increases also applies to the Group’s competitors, and will to a degree be offset For more information regarding the Group’s response to this risk, by all airlines increasing ticket prices, the Group does regularly see the Our Operations and Customers section in this Report. review its hedging opportunities and revenue recovery structures.
For more information regarding the Group’s response to this risk, Societal and Relationship – The Relationship and see the Annual Financial Statements in this Report. Interaction between the Group, its Customers, Society and Government for Mutual Benefit Landing Fees and Security Charges Brand Reputation Airport taxes, landing fees and security charges represent a The Group’s brands have significant commercial value. Erosion significant operating cost to the Group and have an impact on of the brands may adversely influence the Group’s position with operations. Whilst certain of these charges are passed on to its customers and could ultimately affect future revenue and passengers by way of surcharges and taxes, others are not. profitability. The Group’s Executive team regularly monitors The Group regularly engages with various industry bodies and customer satisfaction through surveys, customer reports as government in an attempt to keep these costs under control. well as media monitoring, including social media. Furthermore, continuous improvements are made to the Group’s product For more information regarding the Group’s response to this risk, offering to mitigate this risk. The Group allocates substantial see the Interaction with Government, Regulatory and Industry resources to safety, security, on board products and new aircraft. Bodies Report and Annual Financial Statements in this Report.
74 Integrated Annual Report 2017 For more information regarding the Group’s response to this risk, From a Group perspective, and having regard to its Licence see the section Our Operations and Customers in this Report. Agreement with British Airways International (“BA”), the Group’s security officers remain in contact with their security counterparts Price Rises due to Increases in Government Tariffs at BA in the United Kingdom who work closely with the United There is an extremely high correlation between the volume of Kingdom Government, to discuss security issues affecting the air travel and the average price of airline tickets in the domestic airline. In addition, the Group, together with ACSA, the AASA market. In the past, various state-owned suppliers to the aviation and other airlines, has put in place enhanced screening measures industry have implemented tariff increases for users that have been for all passengers and crew members entering the secure area significantly greater than the rate of inflation and which threatened of the airport, as well as additional measures to ensure that no to constrict the size of the market for air travel. aircraft departs without the customer and his/her baggage being on board. In terms of its own security risk mitigants, the Group In December 2016, the Regulating Committee reached a belated strenuously implements and audits the security requirements decision on the ACSA and ATNS Permissions. The new Permissions contained in its Operator Security Programme, which is aligned confirmed a 0% increase for both ACSA and ATNS for the years with the National Aviation Security Programme (“NASP”). The 2015/16 and 2016/17 and allow ATNS a 1.5% tariff increase Group’s Risk Management Forum and Risk Committee regularly for 2017/18. However, the ACSA Permission reduces ACSA assess and monitor this risk. charges by 35.5% for 2017/18. Subsequent to the determination by the Regulating Committee, African Harvest, which owns a For more information regarding the Group’s response to this risk, small stake in ACSA, and was opposed to a reduction in ACSA see the Operations and Customers section in this Report. charges, applied to court to interdict the implementation of the new charges as well as review and set aside the Regulating Competition Committee’s ACSA determination, citing the scheduled airlines The South African domestic market within which the Group and their representative bodies as respondents. The scheduled operates is highly competitive. Competitor capacity growth, in airlines, represented by the Airlines Association of Southern African excess of demand, could materially influence Group margins. Some (“AASA”), the Board of Airline Representatives SA (“BARSA”) and competitors have cost structures that are lower than those of the the International Air Transport Association (“IATA”), opposed both Group or, as in the case of South African Airways (“SAA”), have the parts of the application. The interdict portion of the application advantage of being supported by government intervention. Fare was subsequently withdrawn by African Harvest, but the review discounting by some competitors has historically had a negative is continuing in terms of the normal High Court rules. effect on the Group’s results because a response to competitor’s fares is generally required to maintain passenger traffic. Although It is possible that, in the near future, domestic airlines will pay the Group’s legal challenge against the State funding of SAA was a carbon tax in the form of a fuel levy. Based on the Group’s unsuccessful, it will continue to monitor the State’s funding of the current direct emission figures, and taking into account the 60% national carrier. The Group’s strong branding, effective marketing thresholds, Comair can expect to pay approximately R28 million. channels and strategic code share arrangements continue to As such increases in ticket prices do not benefit the airline, the address this risk. consequent constraint on demand will negatively impact industry revenue. The Group’s claim against SAA for damages, arising from anti- competitive conduct, which is in the range of R810 to R898 million, For more information regarding the Group’s response to this risk, with a similar additional amount in accrued interest and legal see the Interaction with Government, Regulatory Bodies and costs, was heard in the Gauteng South High Court between 18 Industry Associations section as set out under Our Operations and April and 24 August 2016. Judgment in the matter was handed Customers in this Report, as well as the Environmental Report. down in February 2017 in terms of which the Company was awarded damages in an amount of approximately R554 million, Terrorism with a similar additional amount being awarded in respect of Terrorism is unfortunately a threat to the entire world today, including interest and costs amounting to a total damages amount of the Republic of South Africa. From an aviation perspective, the approximately R1.1 billion. SAA has lodged an appeal in respect South African National Aviation Safety Committee (“NASC”) has of the judgment. The Group has lodged a cross-appeal to recover decided that there is no specific threat to civil aviation in South the full amount of its damages and interest, which amounts to Africa. The NASC did advise, however, that globally, civil aviation approximately R1.9 billion. remained an attractive target for terrorists and that heightened security measures at airports needed to be maintained.
Integrated Annual Report 2017 75 INTEGRATED ANNUAL REPORT 2017
For more information regarding the Group’s response to this its kulula.com brand is not, and it devotes significant resources risk, see the Chairman and CEO’s Report and the Corporate to information technology in respect of this brand, including the Governance section in this Report. development of new products and services and the analysis of emerging trends in information technology and consumer Legislation and Regulation behaviour. In 2012, the Group procured an integrated business Regulation of the airline industry is increasing and covers many and reservation system from Sabre Airlines Solutions. Since then, of the Group’s activities, such as safety, security, traffic rights, the Group has continually managed the risk presented by new slot control access and environment controls. To mitigate these technology as well as the need to develop and upgrade the system risks, the Group attempts, amongst other things, to maintain a in response to new market developments. The Group continued to good working relationship with the government departments it improve the system with new modules and updated technology as interacts with, ACSA and other regulatory and industry bodies. and when required during the period under review. This system has and will continue to deliver substantial improvements in revenue Air service licensing legislation restricts the percentage of voting integrity, inventory management and optimised ticket pricing, as rights that may be held in the Group by non-South African residents well as improved crew and airport staff productivity. to not more than 24.99%. If the stipulated foreign ownership requirements are exceeded, the Group could face having its For more information regarding the Group’s response to this risk, operating licence/s suspended or cancelled. To ensure compliance see the Operations and Customers section in this Report. with this requirement, at the end of each month Management obtains a report from its transfer secretary, Computershare, Information Systems Security and Availability Risk reflecting the percentage of non-resident shareholding for that The Group is dependent on information technology (“IT”) systems month. Every quarter, the level of foreign shareholding is formally for most of its principal business processes. The failure of a reported to the Risk Committee. The Group is of the view that key system may cause significant disruption and/or result in currently, based on the reports received from Computershare, lost revenue. System controls, disaster recovery and business foreign shareholder voting rights do not exceed the amount as continuity arrangements exist to mitigate the risk of a critical set out in the Air Services Licensing Act. Notwithstanding same, system failure. The Group has launched several initiatives to cover the Company has been in discussion with the JSE to explore the not only information system security and availability risk, but also possibility of setting up a variable voting rights structure, which IT governance, in accordance with the requirements of King III. would restrict foreign shareholding voting rights to 24.99%. The Group continually updates antivirus and IT security systems. The JSE approved the variable voting right structure on the In addition, access to all IT systems is controlled and penetration 1st of September 2017. To implement the variable voting right audits are performed on an ongoing basis. No security breaches structure certain amendments will need to be made to the Groups occurred during the period under review. As regards systems Memorandum of Incorporation (“MoI”). The Group will shortly be and network availability, for the third year in a row, the Group’s sending out a circular to shareholders, setting out full details of Information Technology Department managed to ensure network the variable voting right structure and requesting approval from and customer-facing system “uptime” in excess of 99%. The Group shareholders to amend the Groups MoI to approve the variable has also made progress in preparing for the imminent coming voting right structure at a general meeting of shareholders. into operation of the Protection of Personal Information Act, 2013 (“the POPI Act”). In the period under review, a gap analysis audit For more information regarding the Group’s response to this risk, was done to ascertain the Group’s compliance status. This has see the Interaction with Government, Regulatory Bodies and identified some areas where the Group is not fully compliant with Industry Associations section in this Report. the POPI Act, and it is currently developing systems and policies to ensure full compliance. A new Group Privacy Policy has been Intellectual – Organisational Knowledge Including developed addressing both the IT and human resource privacy Intellectual Property such as Patents, Copyrights non-compliances identified in the gap audit. and Brands For more information regarding the Group’s response to this risk, Technical Innovation see the Corporate Governance section in this Report. Technology forms an integral part of the Group’s business. While the Group’s British Airways brand is, to a large extent, dependent on developments implemented by British Airways International,
76 Integrated Annual Report 2017 Human – Includes all Interactions that the Group For more information regarding the Group’s response to this has with the Human Element such as Relationships risk, see the Corporate Governance section and Annual Financial with Staff, Suppliers and Criminal Elements Statements in this Report. Employee Relations Broad-Based Black Economic Empowerment A large number of the Group’s employees in South Africa are The Company recognises the importance of implementing a broad- members of trade unions. The Group strives to maintain a good based black economic empowerment (“B-BBEE”) programme working relationship with the trade unions where it has recognition that addresses the inequality of the past, and contributes in agreements in place and enters into substantive negotiations a meaningful way to the transformation of the South African annually. economy. It regularly reviews its B-BBEE strategy to ensure that the Group maintains a level of B-BBEE compliance equivalent to For more information regarding the Group’s response to this risk, or better than that of its competitors. The Group also ensures that see the Company’s Employees and B-BBEE section in this Report. its B-BBEE compliance is such that it qualifies for those licences, certificates and approvals necessary for the business to operate. Key Supplier Risk
The Group is dependent on suppliers for some principal business For more information regarding the Group’s response to this risk, processes. The failure of a key supplier to deliver contractual see the Company’s Employees and B-BBEE section in this Report. obligations may cause significant disruption to operations. A close relationship is maintained with key suppliers to ensure awareness of Natural – Environmental requirements impacting on any potential supply chain disruption. The Group further continually the Group monitors its key suppliers and has service disruption plans in place for the most important services rendered. South Africa is enacting an increasing number of laws and requirements relating to protection of the environment, some of For more information regarding the Group’s response to this which apply to the activities of the Group. The Group is required to, risk, see the Investors, Suppliers and Media, and the Company and does, report its annual fuel utilisation figures to the Department Employee and B-BBEE sections in this Report. of Environmental Affairs. In the near future, the Group may be subject to a carbon tax in the form of a fuel levy on all jet fuel Material Fraud (Credit Card, Cash, System) purchased for domestic operations. The resultant fare price The Group is continuing to pursue a number of risk mitigants increase may have an adverse impact on demand for air travel to cover credit card, cash and systems fraud, such as, but not and/or reduce the profit margin per ticket. limited to, the implementation of the latest version of Cybersource software. During the current reporting period, the Group has For more information regarding the Group’s environmental focused on implementing 3D Secure, which is a system that protection activities, see the Environment section in this Report. will authenticate user information by delivering a One Time Pin (“OTP”). The 3D Secure system is up and running on the Discovery Effectiveness of the Risk Management Vitality booking channel and will be progressively implemented Process and Systems of Internal Control on other payment channels up until 2018. A proof of concept analysis has been conducted on a product called EmailIage. The Board, via the Audit and Risk committees, regularly receives This product validates the authenticity of a specific email address reports on and considers the activities of the internal and and domain. These improvements will make it more difficult for external auditors of the Group. The Board, via the Audit and Risk fraudsters to use bogus information to purchase Group inventory, committees, is satisfied that there is an effective risk management thereby saving the Group lost revenue as well as charge backs process in place and that there is an adequate and effective system on fraudulent transactions. of internal controls to mitigate the significant risks faced by the Group to an appropriate level for the Group. The Risk Committee and, where appropriate the Audit Committee, continue to consider any incidents of fraud and corruption. In the period under review, other than credit card fraud, no material incidents of fraud took place.
Integrated Annual Report 2017 77 INTEGRATED ANNUAL REPORT 2017
Report of the Directors
The Directors take pleasure in presenting their report, which forms In accordance with the provisions of Strate, the electronic part of the Annual Financial Statements of the Group for the year settlement and custody system used by the JSE Limited, the ended 30 June 2017. relevant dates for the dividend are as follows:
Nature of Business Event Date Last day to trade (cum Tuesday, 24 October 2017 The main business of the Group is the provision of domestic dividend) and regional air services in the Southern African market, trading Shares commence trading (ex Wednesday, 25 October under the names of British Airways and kulula.com. In addition to dividend) 2017 the foregoing, the Group provides other travel-related services, Record date (date Friday, 27 October 2017 undertakes third party flight simulator and crew training, operates shareholders recorded in books) airline lounges and currently provides airline catering for its own Payment date Monday, 30 October 2017 services, as well as limited third party catering.
Share certificates may not be dematerialised or rematerialised General Review of Main Activities between Wednesday, 25 October 2017, and Friday, 27 October 2017, both days inclusive. The Group currently operates a fleet of 26 aircraft flying to the destinations as set out on page 5 and pages 20 to 21 of this Integrated Annual Report. The Directors have performed the Share Capital solvency and liquidity test required by the Companies Act, the The authorised share capital of the Group remained unchanged outcome of which is that the Group is a going concern with during the period under review. adequate resources to continue operating for the foreseeable future. Issued Share Capital
Financial Results The Group’s issued share capital is 469 330 865 ordinary shares of 1 cent each. Full details of the financial results are set out on pages 88 to 136 of this Integrated Annual Report for the year ended 30 June 2017. Subsidiaries and Associates
Dividend Details of the Group’s subsidiaries and associates are recorded in notes 6 and 7 of this Integrated Annual Report on pages 106 Notice is hereby given that a final gross cash dividend of to 111. 14.00000 cents per ordinary share has been approved and declared by the Board, which is payable to shareholders for the financial year ended 30 June 2017. The dividend has been Subsequent Events declared out of income reserves. R70 million was paid on 31 August 2017, for the purchase of an office park, known as Anchor Industrial Park. Transfer is expected The dividend will be subject to a local dividend tax rate of 20% or to take place in the near future at which time the remaining R5 2.80000 cents per ordinary share, resulting in a net dividend of million will be paid in full and final settlement of the transaction. 11.20000 cents per ordinary share, unless the Shareholder is exempt from paying dividend tax or is entitled to a reduced rate in The Directors are not aware of any other matters or circumstances terms of the applicable double taxation agreement. The Company’s arising since the end of the period under review that would tax reference number is 9281/874/1/0 and the number of ordinary significantly affect or have a material impact on the financial shares in issue at the date of this declaration is 469 330 865. position of the Group.
78 Integrated Annual Report 2017 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 2017, as set out below.
2017 2016 Direct Indirect Held by Total Direct Indirect Held by Total % % Director Beneficial Beneficial Associates Shares Beneficial Beneficial Associates Shares MD Moritz - 50 000 000 9 462 50 009 462 10.66 - 50 000 000 9 462 50 009 462 10.66 P van Hoven 204 647 - - 204 647 0.04 204 647 - - 204 647 0.04 ER Venter 2 550 154 - - 2 550 154 0.54 2 500 154 - - 2 500 154 0.53 MN Louw 201 000 - - 201 000 0.04 201 000 - - 201 000 0.04 P Welgemoed 118 788 - - 118 788 0.03 118 788 - - 118 788 0.03 N Maharajh 200 - - 200 0.00 200 - - 200 0.00 DH Borer* 88 000 - - 88 000 0.02 88 000 - - 88 000 0.02 Total 3 162 789 50 000 000 9 462 53 172 251 11.33 3 112 789 50 000 000 9 462 53 122 251 11.32
* Alternate Director
There has been no change in the Directors’ interests in share capital from 30 June 2017 to the date of posting of this Integrated Annual Report.
Special Resolutions
Since its last Integrated Annual Report, the Group has passed six (6) special resolutions at its Annual General Meeting held on 10 November 2016, namely:
1. A special resolution for approval of Non-executive Directors’ remuneration for 2015/16; 2. A special resolution for the approval of Non-executive Directors’ remuneration for 2016/17; 3. A special resolution giving the Group a general authority to re-purchase its shares; 4. A special resolution as contemplated in Section 45(3)(a)(ii) of the Companies Act, i.e. a general authority to provide financial assistance to related and interrelated companies or corporations; 5. A special resolution to amend the Company’s MoI to provide for the rounding down of fractional entitlements to shares to the nearest whole number and a cash payment of fractions; 6. A special resolution to amend the Company’s MoI to provide for written resolutions of the shareholders.
Other than the foregoing, no other special resolutions were passed.
Integrated Annual Report 2017 79 INTEGRATED ANNUAL REPORT 2017
Board of Directors, Company Secretary and Board Meeting Attendance
The names, ages, qualifications, nationality, business addresses, attendance at Board Meetings and occupations of the Directors and the Group Company Secretary who served during the period under review, are set out below.
Name, Age, Qualification Board Meeting Gender and Race M = Male Attendance F = Female W = White (Four (4) B = Black, Coloured or Indian Nationality Business Address Meetings Held) Occupation Pieter van Hoven South African 1 Marignane Drive, Bonaero Park, 4 Independent Age: 73 (M) (W) Kempton Park, 1619 Non-executive Chairman Martin Darryl Moritz South African 1 Marignane Drive, Bonaero Park, 3 of 4 Non-executive Joint Age: 72 (M) (W) Kempton Park, 1619 Deputy Chairman BCom; LLB Rodney Cyril Sacks South African 550 Monica Circle, Suite 201, 1 of 4 Independent Age: 67 (M) (W) Corona, CA 92880, USA Non-executive HDip. Law, HDip. Tax Director Dr Peter Johannes Welgemoed (M) South African 1 Marignane Drive, Bonaero Park, 4 Independent (W) Kempton Park, 1619 Non-executive Age: 74 Director BCom (Honours); MCom; DCom Jacob Meyer Kahn South African Retired Chairman of SABMiller Plc, 3 of 4 Independent Age: 78 (M) (W) 4 East Road, Morningside, 2057 Non-executive BA (Law); MBA (UP); DCom (hc); Director SOE Martin Nicolaas Louw South African 1 Marignane Drive, Bonaero Park, 4 Director Operations Age: 62 (M) (W) Kempton Park, 1619 Executive Director BMil Erik Rudolf Venter South African 1 Marignane Drive, Bonaero Park, 4 CEO Age: 47 (M) (W) Kempton Park, 1619 Executive Director BCom; CA (SA) Khutso Ignatius Mampeule South African C/o Lefa Group Holdings (Pty) 1 of 3 Independent Non- Age: 52 (M) (B) Ltd, Mulberry Hill Office Park, executive Director BA; MSc; MBA Broadacres Ave, Dainfern, 2191 Ronald Sibongiseni Ntuli South African Thelo Group (Pty) Ltd, Ground 4 Independent Age: 47 (M) (B) Floor, Block 9, St. Andrews, Non-executive Joint LLB (Edinburgh University) Inanda Greens Business Park, 54 Deputy Chairman Wierda Road West, Wierda Valley, 2196 Wrenelle Doreen Stander South African 272 Kent Avenue, Randburg, 1 of 1 Independent Non- Age: 51 (F) (B) 2194 executive Director BA (Hons); MBA Gavin James Halliday British British Airways Plc Waterside 3 of 3 Non-executive Age: 53 (M) (W) (HAA2) Harmondsworth, Director BA (Hons) Economics, (Geography); Middlesex UB7 OGB, UK MBA (Lancaster University) Kirsten Emily King South African 1 Marignane Drive, Bonaero Park, 4 Financial Director Age: 39 (F)(W) Kempton Park, 1619 Executive Director BCom (Hons) Accounting (CTA Equivalent); CA (SA) Neng Li Chinese 26/f Three Pacific Place, 1 Queens 0 of 4 Non-executive Age: 36 (M) (W) Road East, Hong Kong Director Bachelor Degree of Business Administration in Finance, Macau University
80 Integrated Annual Report 2017 Name, Age, Qualification Board Meeting Gender and Race M = Male Attendance F = Female W = White (Four (4) B = Black, Coloured or Indian Nationality Business Address Meetings Held) Occupation Cheng Luo Chinese 2a Sencht Street, Off Liberation 0 of 4 Non-executive Age: 48 (M) (W) Road, Kotoka International Airport Director Bachelor Degree, Aeronautical Accra, Ghana Industry Academy in Nanchang City Phuti Mahanyele South African 18 Acacia Road cnr Protea, 1 of 4 Independent Age: 46 (F) (B) Chislehurston, Sandton Non-executive BA Economics; Executive Director Development Programme (Harvard University) Naran Maharajh South African 83 Ramsay Avenue, Berea, 4 Independent Age: 51 (M) (B) Durban, 4000 Non-executive BAcc; Postgraduate Diploma in Director Accountancy Derek Henry Borer South African 1 Marignane Drive, Bonaero Park, 4 Alternate Director Age: 55 (M) (W) Kempton Park, 1619 to Martin Nicolaas BCom; LLB Louw and Rodney Cyril Sacks, and Group Company Secretary
Directors’ Appointments and Resignations
Resignations
• Ms WD Stander resigned as an Independent Non-executive Director (and her associated positions on the Audit Committee, Risk Committee, Remunerations Committee and Social and Ethics Committee) on 28 November 2016 • Mr KI Mampeule resigned as an Independent Non-executive Director (and his associated positions on the Audit Committee, Risk Committee, Nominations Committee and Social and Ethics Committee) on 31 March 2017 • Mr GJ Halliday resigned as an Independent Non-executive Director (and his associated positions on the Audit Committee and Risk Committee) on 5 April 2017 Appointments
• Mr N Maharajh, an Independent Non-executive Director, was appointed as an member of the Risk Committee and Social and Ethics Committee on 13 February 2017 • Mr MN Louw, an Executive Director, was appointed as a member of the Risk Committee on 13 February 2017 • Mr RS Ntuli, an Independent Non-executive Director, was appointed as a member of the Audit Committee on 5 June 2017
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 4 244 464 options remain available for issue at year-end. Share options were exercised by employees during the reporting period, with the transfers effected during this reporting period.
Integrated Annual Report 2017 81 INTEGRATED ANNUAL REPORT 2017
Directors’ Remuneration 2017
Share- based For Payments Services Related Group - as Committee Performance Life and Retention Total Directors Work Package1 Related2 Pension Disability Medical Bonus 2017 Name R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Executives Mr ER Venter - - 3 126 3 840 492 90 51 - 7 599 Mr MN Louw - - 2 300 2 293 332 61 46 - 5 032 Mr DH Borer - - 1 763 1 764 245 45 46 - 3 863 Ms K King - - 1 771 1 764 193 35 26 - 3 789 Sub-total - - 8 960 9 661 1 262 231 169 - 20 283
Non-executives Mr MD Moritz 417 62 ------479 Mr RS Ntuli 417 ------417 Dr PJ Welgemoed 179 93 ------272 Mr JM Kahn 179 31 ------210 Mr KI Mampeule 134 23 ------157 Mr P van Hoven 1 429 70 ------1 499 Ms P Mahanyele 179 ------179 Mr N Maharajh 179 70 ------249 Sub-total 3 113 349 ------3 462 Share-based payment ------4 031 4 031 Total 3 113 349 8 960 9 661 1 262 231 169 4 031 27 776
Notes: 1 “Package” includes the following regular payments made in respect of the financial year while actively employed: Cash salary, S&T allowances and vehicle allowances. 2 “Performance related” refers to the incentive rewards in respect of the financial year ended 30 June 2017. 3 Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares.
82 Integrated Annual Report 2017 Directors’ Remuneration 2016
Share- For based Services Related Group Payments as Committee Performance Life and as per Total Directors Work Package1 related2 Pension Disability Medical IFRS 2016 Name R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 Executives Mr ER Venter - - 2 896 3 200 437 79 46 8 679 15 337 Mr MN Louw - - 2 110 2 058 299 54 42 6 256 10 819 Mr DH Borer - - 1 643 1 632 219 40 43 4 819 8 396 Ms KE King - - 1 608 1 599 145 26 23 - 3 401 Sub-total - - 8 257 8 489 1 100 199 154 19 754 37 953
Non-executives Mr MD Moritz 393 51 ------444 Mr RS Ntuli 393 ------393 Dr PJ Welgemoed 169 87 ------256 Mr JM Kahn 169 36 - - - - - 205 Mr KI Mampeule 169 65 ------234 Mr P van Hoven 1 348 58 - - - - - 1 406 Mr HR Brody 42 15 ------57 Ms P Mahanyele 169 ------169 Mr N Maharajh 169 29 ------198 Sub-total 3 021 341 ------3 362 Share-based payment ------1 001 1 001 Total 3 021 341 8 257 8 489 1 100 199 154 20 755 42 316
Notes: 1 “Package” includes the following regular payments made in respect of the financial year while actively employed: Cash salary, S&T allowances and vehicle allowances. 2 “Performance related” refers to the incentive rewards in respect of the financial year ended 30 June 2016. 3 Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares.
Further details regarding the Company’s remuneration policies are set out in the Remuneration Report on pages 67 to 69 of this Integrated Annual Report.
Integrated Annual Report 2017 83 INTEGRATED ANNUAL REPORT 2017
Statement of Responsibility by the Board of Directors
The Directors are responsible for the preparation, integrity and was given unrestricted access to all financial records and related fair presentation of the Financial Statements and other financial data, including minutes of all meetings of shareholders, the Board information included in this report. of Directors and Committees of the Board. The Directors believe that all representations made to the independent auditors during The Financial Statements, presented on pages 88 to 136, have the audit were valid and appropriate. been prepared in accordance with International Financial Reporting Standards (“IFRS”) and the requirements of the Companies Act The Financial Statements, which appear on pages 88 to 136, (No. 71 of 2008), and include amounts based on judgments and were approved by the Board of Directors on 11 September 2017 estimates made by Management. and signed on its behalf.
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 ER Venter P van Hoven Company and the Group. CEO Chairman 11 September 2017 11 September 2017 The Financial Statements have been audited by the independent accounting firm, Grant Thornton Johannesburg Partnership, which
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 11 September 2017
84 Integrated Annual Report 2017 Independent Auditor’s Report
To the shareholders of Comair Limited report on the Financial Statements
Opinion
We have audited the Consolidated and Separate Financial Statements of Comair Limited (“the Group”) which comprise the Statements of Financial Position as at 30 June 2017, and the Statements of Profit or Loss and Other Comprehensive Income, the Statements of Changes in Equity and the Statements of Cash Flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the Consolidated and Separate Financial Statements present fairly, in all material respects, the consolidated and separate financial position of the Group as at 30 June 2017, and its Consolidated and Separate Financial Performance and Consolidated and Separate Cash Flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Separate Financial Statements section of our report. We are independent of the Group in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Consolidated and Separate Financial Statements of the current period. These matters were addressed in the context of our audit of the Consolidated and Separate Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The following key audit matters relate to the Consolidated and Separate Financial Statements. Key audit matter How our audit addressed the key audit matter Aircraft – componentisation, useful lives, residual values and We performed the following procedures amongst others: impairment • We reviewed the processes adopted by the Directors to componentise the various parts of an aircraft and assign useful As set out in note 1.3 aircraft are componentised into their lives. This includes an assessment of the depreciation period major parts, and useful lives and residual values are assigned by applied to C and D checks; the Directors to each identified part. Major inspections (referred to as C and D checks) are capitalised to the cost of aircraft and • For C and D checks we tested that new inspections were capitalised depreciated over the Directors’ best estimate of their useful life. in line with the approved maintenance plan and that previously capitalised inspection checks were derecognised accordingly. The fleet is tested annually for impairment with reference to For maintenance that does not meet the capitalisation criteria we market values. inspected that these costs have been appropriately expensed; • We have reviewed the Directors’ assessment of asset residual We identified this area as a key audit matter as significant values and performed reasonability checks by comparing this to judgment is required by the Directors in making these historic profits and losses made on retirement or sale of aircraft determinations which have a significant impact on the financial at the end of their useful lives and current market conditions; results. • We recalculated the depreciation charge per component of aircraft and compared this to the amount recorded in the The carrying value of aircraft is R4.2 billion as set out in note 3 accounting records; of the Financial Statements. • We reviewed the impairment test performed by management. This has been done with reference to externally obtained market values for the fleet.
Integrated Annual Report 2017 85 INTEGRATED ANNUAL REPORT 2017
Airline revenue We performed the following procedures amongst others: As set out in note 1.14 airline revenue is recognised on the • Re-performed the reconciliation of the unutilised ticket liability accrual basis in the period in which the services are rendered pertaining to the kulula.com ticket stock. During this re- and the passenger has flown. performance we tested key movements on a total basis such as bookings, total cash receipted and total tickets flown during Unutilised ticket revenue is recognised as a liability until such the year under review; time as the passenger has flown. • For British Airways (operated by Comair Limited) revenue, we reconciled the various amounts recorded as both earned and Airline revenue comprises the major stream of income for the unearned revenue to statements obtained from British Airways Group and Company, comprising 95% of total revenue. The International. main components of an individual transaction are: booking, receipt of cash, and the recognition of revenue at the date of the flight.
We identified this area as a key audit matter due to the significant volume of transactions in revenue recognition.
Other information
The Directors are responsible for the other information. The other information comprises the Directors’ Report, the Audit Committee’s Report and the Company Secretary’s Certificate as required by the Companies Act of South Africa, which we obtained prior to the date of this report, and the Annual Report, which is expected to be made available to us after that date. Other information does not include the Consolidated and Separate Financial Statements and our auditor’s report thereon.
Our opinion on the Consolidated and Separate Financial Statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the Consolidated and Separate Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Consolidated and Separate Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Consolidated and Separate Financial Statements
The Directors are responsible for the preparation and fair presentation of the Consolidated and Separate Financial Statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the Directors determine is necessary to enable the preparation of Consolidated and Separate Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Consolidated and Separate Financial Statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group and / or the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated and separate financial statements
Our objectives are to obtain reasonable assurance about whether the Consolidated and Separate Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Consolidated and Separate Financial Statements.
86 Integrated Annual Report 2017 As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the Consolidated and Separate Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. • Conclude on the appropriateness of the Directors of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Consolidated and Separate Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and / or the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the Consolidated and Separate Financial Statements, including the disclosures, and whether the Consolidated and Separate Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the Consolidated and Separate Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that Grant Thornton has been the auditor of Comair Limited for fifty years.
GRANT THORNTON Registered Auditors Practice Number: 903485E
MA da Costa @Grant Thornton Partner Wanderers Office Park Registered Auditor 52 Corlett Drive Chartered Accountant (SA) Illovo, 2196 11 September 2017
Integrated Annual Report 2017 87 INTEGRATED ANNUAL REPORT 2017 Statements of Financial Position as at 30 June 2017 Group Company
2017 2016 2017 2016
Notes R’000 R’000 R’000 R’000
Assets Non-current assets Property, plant and equipment 3 4 631 326 3 988 323 4 521 782 3 907 078 Intangible assets 4 15 892 21 953 15 892 21 953 Loan to Share Incentive Trust 5 - - 571 2 427 Investments in and loans to subsidiaries 6 - - 19 335 19 367 Investments in associates 7 45 296 36 422 - - Goodwill 8 6 615 6 615 - - Deferred taxation 14 3 902 3 942 - - 4 703 031 4 057 255 4 557 580 3 950 825
Current assets Inventories 9 21 486 21 728 20 997 21 501 Trade and other receivables 10 251 506 374 445 246 140 370 611 Investments in and loans to subsidiaries 6 - - 83 455 55 676 Investments in and loans to associates 7 - 7 852 - 7 852 Taxation 460 29 010 - 29 268 Cash and cash equivalents 934 913 1 120 128 899 548 1 098 978 1 208 365 1 553 163 1 250 140 1 583 886 Non-current assets held for sale Aircraft held for sale 11 7 044 - 7 044 - 7 044 - 7 044 - Total assets 5 918 440 5 610 418 5 814 764 5 534 711 Equity and Liabilities Equity Share capital 12 4 651 4 643 4 693 4 693 Accumulated profits 1 538 211 1 325 964 1 450 005 1 260 525 Equity attributable to equity holders of parent 1 542 862 1 330 607 1 454 698 1 265 218 Non-controlling interest (145) (1 092) - - Total Equity 1 542 717 1 329 515 1 454 698 1 265 218
Liabilities Non-current liabilities Interest-bearing liabilities 13 2 344 926 2 182 459 2 344 926 2 182 459 Deferred taxation 14 435 043 303 848 435 043 303 848 Share-based payments 19 5 032 1 001 5 032 1 001 2 785 001 2 487 308 2 785 001 2 487 308
Current liabilities Trade and other payables 15 798 413 805 974 781 073 794 595 Unutilised ticket liability 322 609 351 061 322 609 351 061 Provisions 16 116 835 98 975 116 805 98 944 Loan from subsidiary 6 - - 1 713 - Interest-bearing liabilities 13 352 865 537 585 352 865 537 585 1 590 722 1 793 595 1 575 065 1 782 185 Total liabilities 4 375 723 4 280 903 4 360 066 4 269 493 Total equity and liabilities 5 918 440 5 610 418 5 814 764 5 534 711
Net asset value per share (cents) 331.7 286.6
88 Integrated Annual Report 2017 Statements of Profit or Loss for the year ended 30 June 2017 Group Company
2017 2016 2017 2016
Notes R’000 R’000 R’000 R’000
Revenue 18 6 063 737 5 959 573 6 040 846 5 932 022 Operating expenses (4 999 789) (5 129 781) (4 992 859) (5 123 007) Operating profit before depreciation, amortisation, impairment, unrealised translation gain/(loss) on Dollar denominated loan, compensation for write-off of damaged aircraft and (loss)/profit on sale of assets 1 063 948 829 792 1 047 987 809 015 Depreciation and amortisation (456 281) (372 103) (455 964) (371 847) Impairment of subsidiary loan - - (1 340) - Write-off of damaged aircraft beyond economical repair - (64 462) - (64 462) Compensation for write-off of damaged aircraft beyond economical repair - 84 155 - 84 155 Unrealised translation gain/(loss) on Dollar denominated loan 40 697 (73 946) 40 697 (73 946) (Loss)/profit on sale of assets (10 574) 12 419 (10 574) 12 419 Profit from operations 19 637 790 415 855 620 806 395 334 Interest income 20 49 670 41 440 48 200 40 360 Interest expense 21 (250 377) (170 496) (250 368) (170 496) Loss on remeasurement of non-current assets held for sale 11 (11 270) - (11 270) - Income from equity accounted investments 7 8 874 8 011 - - Profit before taxation 434 687 294 810 407 368 265 198 Taxation 22 (137 717) (102 108) (133 408) (95 836) Profit for the year 296 970 192 702 273 960 169 362 Profit attributable to: Owners of the parent 296 023 192 555 273 960 169 362 Non-controlling interest 947 147 - - 296 970 192 702 273 960 169 362
Earnings per share (cents) 23 63.7 41.5 Diluted earnings per share (cents) 23 63.7 41.4 Statements of Comprehensive Income for the year ended 30 June 2017
Group Company 2017 2016 2017 2016
Notes R’000 R’000 R’000 R’000
Profit for the year 296 970 192 702 273 960 169 362 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 296 970 233 089 273 960 209 749
Total comprehensive income for the year attributable to: Owners of the parent 296 023 232 942 273 960 209 749 Non-controlling interest 947 147 - - 296 970 233 089 273 960 209 749
Integrated Annual Report 2017 89 INTEGRATED ANNUAL REPORT 2017
Statements of Changes in Equity for the year ended 30 June 2017
Total attributable to Total equity holders Non- Hedging capital and Accumulated of the Group/ controlling Share capital reserve reserves profit Company interest Total equity
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Group Balance at 1 July 2015 4 643 (40 387) (35 744) 1 201 045 1 165 301 889 1 166 190 Total comprehensive income for - 40 387 40 387 192 555 232 942 147 233 089 the year Dividend paid - - - (69 764) (69 764) - (69 764) Change in ownership - - - 2 128 2 128 (2 128) - Movement for the year - 40 387 40 387 124 919 165 306 (1 981) 163 325 Balance at 30 June 2016 4 643 - 4 643 1 325 964 1 330 607 (1 092) 1 329 515
Total comprehensive income for - - - 296 023 296 023 947 296 970 the year Dividend paid - - - (83 776) (83 776) - (83 776) Shares sold by Share Trust 8 - 8 - 8 - 8 Movement for the year 8 - 8 212 247 212 255 947 213 202 Balance at 30 June 2017 4 651 - 4 651 1 538 211 1 542 862 (145) 1 542 717 Notes 12
Company Balance at 01 July 2015 4 693 (40 387) (35 694) 1 161 563 1 125 869 - 1 125 869 Total comprehensive income for - 40 387 40 387 169 362 209 749 - 209 749 the year Dividend paid - - - (70 400) (70 400) - (70 400) Movement for the year - 40 387 40 387 98 962 139 349 - 139 349 Balance at 30 June 2016 4 693 - 4 693 1 260 525 1 265 218 - 1 265 218
Total comprehensive income for - - - 273 960 273 960 - 273 960 the year Dividend paid - - - (84 480) (84 480) - (84 480) Movement for the year - - - 189 480 189 480 - 189 480 Balance at 30 June 2017 4 693 - 4 693 1 450 005 1 454 698 - 1 454 698 Notes 12
90 Integrated Annual Report 2017 Statements of Cash Flows for the year ended 30 June 2017
Group Company
2017 2016 2017 2016
Notes R’000 R’000 R’000 R’000
Cash generated from operations 24 1 149 088 892 231 1 129 326 874 272 Interest paid (250 377) (170 496) (250 368) (170 496) Interest received 49 670 40 546 48 200 39 466 Taxation refunded/(paid) 25 25 034 (6 020) 30 021 - Net cash from operating activities 973 415 756 261 957 179 743 242
Cash utilised in investing activities Additions to property, plant and equipment (323 248) (182 257) (294 632) (151 460) Proceeds on disposal of property, plant and equipment 3 594 100 935 3 594 100 935 Additions to intangible assets 4 (9 652) (13 174) (9 652) (13 174) Pre-delivery payments (132 217) - (132 217) - Decrease in loan to share incentive trust - - 1 856 627 Increase in subsidiary loans - - (27 747) (21 668) Repayment of loan by associate 7 852 - 7 852 - Net cash from investing activities (453 671) (94 496) (450 946) (84 740)
Cash utilised in financing activities Raising of interest-bearing liabilities - 34 790 - 34 790 Refund on aircraft purchase price for pre-delivery payment finance 96 738 282 317 96 738 282 317 Repayment of interest-bearing liabilities (717 921) (638 258) (717 921) (638 258) Dividends paid (83 776) (69 764) (84 480) (70 400) Net cash from financing activities (704 959) (390 915) (705 663) (391 551)
Total cash movement for the year (185 215) 270 850 (199 430) 266 951 Cash and cash equivalents at the beginning of the year 1 120 128 849 278 1 098 978 832 027 Cash and cash equivalents at end of the year 934 913 1 120 128 899 548 1 098 978
Integrated Annual Report 2017 91 INTEGRATED ANNUAL REPORT 2017
Accounting Policies
1. Principal accounting policies Business Combinations
The Financial Statements are presented in South African Rand as this is The Group applies the acquisition method in accounting for business the currency of the economic environment in which the Group operates. combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date The Financial Statements are prepared in accordance with International fair values of assets transferred, liabilities incurred and the equity interests Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the Group, which includes the fair value of any asset or liability issued by the Accounting Practices Committee, the Listings Requirements arising from a contingent consideration arrangement. Acquisition costs of the JSE Limited and the Companies Act (No. 71 of 2008). The Annual are expensed as incurred. Financial Statements have been prepared on the historical cost basis, except for the measurement of certain financial instruments at fair value, The Group recognises identifiable assets acquired and liabilities assumed and incorporate the principal accounting policies and measurement bases in a business combination regardless of whether they have been previously listed below. Ryan de Miranda CA (SA), was responsible for the preparation recognised in the acquiree’s Financial Statements prior to the acquisition. of the Consolidated Financial Statements, under the supervision of Kirsten King CA (SA), the Financial Director. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. The principal accounting policies of the Group are consistent with those applied in the Audited Consolidated Financial Statements for the year Goodwill is stated after separate recognition of identifiable intangible assets. ended 30 June 2016. It is calculated as the excess of the sum of:
• fair value of consideration transferred; 1.1 Consolidation • the recognised amount of any non-controlling interest in the acquiree; and Basis of Consolidation • acquisition-date fair value of any existing equity interest in the acquiree, The Group Financial Statements consolidate those of the parent company over the acquisition-date fair values of identifiable net assets. and all of its subsidiaries as of 30 June 2017. The parent controls a subsidiary if it is exposed, or has rights to, variable returns from its If the fair values of identifiable net assets exceed the sum calculated above, involvement with the subsidiary and has the ability to affect those returns the excess amount (i.e. gain on a bargain purchase) is recognised in profit through its power over the subsidiary. All subsidiaries have a reporting or loss immediately. date of 30 June. Investment in Associates All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions Associates are those entities over which the Group is able to exert significant between Group companies. Where unrealised losses on intra-Group asset influence but which are not subsidiaries. sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the Financial Investments in associates are accounted for using the equity method. Statements of subsidiaries have been adjusted where necessary to ensure Any goodwill or fair value adjustment attributable to the Group’s share in consistency with the accounting policies adopted by the Group. Profit or the associate is not recognised separately and is included in the amount loss and other comprehensive income of subsidiaries acquired or disposed recognised as investment. of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. The carrying amount of the investment in associates is increased or decreased to recognise the Group’s share of the profit or loss and other Non-controlling interests, presented as part of equity, represent a comprehensive income of the associate, adjusted where necessary to subsidiaries’ profit or loss and net assets that are not held by the Group. ensure consistency with the accounting policies of the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non- controlling interests based Unrealised gains and losses on transactions between the Group and its on their respective ownership interests. associates are eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
92 Integrated Annual Report 2017 The Group’s share of movements in the associate’s other comprehensive are assessed at each reporting date and only written down if there are income is recognised in other comprehensive income. The Group’s share impairments in value. The useful life, depreciation method and residual of the aggregate loss in any associate is limited to its net investment in the values are assessed at the end of each reporting period and revised if associate, unless the Group has incurred an obligation or made payments necessary. on the associate’s behalf. The Group’s share of inter-company gains is eliminated on consolidation, whilst the Group’s share of inter-company Depreciation Rates for Property, Plant and Equipment losses is only eliminated if the transaction does not provide evidence of Properties and buildings 2% impairment of the asset transferred. Investments in associates are disclosed Furniture and equipment 7% as the initial investment plus the aggregate of loans made to the associate plus the Group’s aggregate share of post-acquisition equity. Investments Motor vehicles 20% in associates are accounted for at cost less any impairment losses in the Computer equipment 20% to 50% Company’s stand-alone Financial Statements. Second-hand flight simulator equipment 20% New simulator equipment 7% Subsidiaries Leasehold improvements Life of the lease agreement Subsidiaries are companies and entities for which control is achieved where the company is exposed, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns 1.3 Aircraft through its power over the entity. Investments in subsidiaries are carried Aircraft are initially recognised at spot rate at date of purchase. The carrying at cost less any impairment losses in the company’s stand-alone Financial values of aircraft are assessed annually for impairment. Aircraft modifications Statements. are capitalised only to the extent that they materially improve the value of the aircraft from which further future economic benefits are expected The cost of an investment in a subsidiary is the aggregate of: to flow. Maintenance and repairs which neither materially or appreciably prolong their useful lives are charged against income. Major inspections • the fair value, at the date of exchange, of assets given, liabilities incurred (referred to as C and D Checks) are capitalised and expensed over their or assumed, and equity instruments issued by the Company; plus useful lives. The gain or loss on disposal of an asset is determined as • any costs already attributable to the purchase of the subsidiary. the difference between the sales proceeds and the carrying amount of the asset and recognised in profit or loss. The aircraft residual values are An adjustment to the cost of a business combination contingent on future between 0 and 10%. events is included in the profit or loss of the combination if the adjustment is probable and can be measured reliably. The cost includes an estimate Depreciation Rates for Aircraft of contingent consideration payable at fair value at acquisition date. Aircraft Components
The Group Share Incentive Trust is included in the Consolidated Financial Hull 3.33% Statements as a subsidiary. Engines 4% Landing gears 5% 1.2 Property, Plant and Equipment Auxiliary power unit 5% Freehold property, aircraft and related equipment, vehicles, furniture, Winglets 50% computers and flight simulator equipment are depreciated systematically C Checks 18 months on the straight-line basis, which is estimated to depreciate the assets to D Checks 72 months their anticipated residual values through a component approach over their planned useful lives. Land is not depreciated. 1.4 Intangible Assets Property, plant and equipment are stated at cost less accumulated Intangible assets are initially recognised at cost. depreciation and impairment.
Intangible assets are carried at cost, less any subsequent accumulated Cost includes expenditure that is directly attributable to the acquisition of amortisation and any subsequent accumulated impairment losses. the asset. Subsequent costs are included in the asset’s carrying value or recognised as a separate asset as appropriate, only when it is probable An intangible asset is regarded as having an indefinite useful life when, that future economic benefits associated with the specific asset will flow based on all relevant factors, there is no foreseeable limit to the period over to the Group and costs can be measured reliably. The carrying values
Integrated Annual Report 2017 93 INTEGRATED ANNUAL REPORT 2017
which the asset is expected to generate net cash inflows. Amortisation is over the fair value of the Group’s share of the net identifiable assets of not provided for these intangible assets, but they are tested for impairment the acquired subsidiary at the date of acquisition. Goodwill is tested annually and whenever there is an indication that the asset may be impaired. at reporting date for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains For all other intangible assets amortisation is provided on a straight-line and losses on the disposal of an entity include the carrying amount of basis over their useful life. goodwill relating to the entity sold.
The amortisation period and the amortisation method for intangible assets 1.8 Leases are reviewed at every period-end. Finance Leases and Instalment Sale Agreements – Lessee Reassessing the useful life of an intangible asset with a finite useful life Leases, whereby the lessor provides finance to the Group and where the after it was classified as indefinite is an indicator that the asset may be Group assumes substantially all the benefits and risks of ownership, are impaired. As a result the asset is tested for impairment and the remaining classified as finance leases. carrying amount is amortised over its useful life. Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance The amount capitalised at inception of the lease is the lower of the fair are not recognised as intangible assets. value of the leased asset and the present value of the minimum lease payments. The discount rate used in calculating the present value of Amortisation is provided to write-down the intangible assets, on a straight- the minimum lease payments is the interest rate implicit in the lease or line basis, to their residual values as follows: the Group’s incremental borrowing rate if rate implicit in the lease is not practicable to determine. The capital element of future obligations under Costs associated with developing and maintaining computer software leases is included as a liability in the Statement of Financial Position. Each programs are recognised as expenses when incurred. Costs that are lease payment is allocated between the liability and finance charges so as directly associated with the development of identifiable and unique software to achieve a constant rate on the finance balance outstanding. The interest products controlled by the Group and that will probably generate economic element of the instalments is charged against income over the lease period. benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include the software development employee costs and an Operating Leases – Lessor appropriate portion of relevant overheads. Software is amortised on a Operating lease income is recognised as an income on a straight-line straight-line basis over its estimated useful life of two to five years. basis over the lease term.
1.5 Pre-delivery Payments Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as Aircraft pre-delivery payments and security deposits are capitalised to an expense over the lease term on the same basis as the lease income. property, plant and equipment once all conditions precedent cruical to the legal agreements are met and construction of the aircraft has begun. Income for leases is disclosed under revenue from rendering of services Prior to being capitalised to property, plant and equipment, aircraft pre- in profit or loss. delivery payments and security deposits are accounted for as deposits in other receivables. Aircraft pre- delivery payments and security deposits Operating Leases – Lessee are not depreciated. Upon delivery of the relevant aircraft, the pre-delivery payments are transferred to the cost of the aircraft. Leases of assets to the Group under which all risks and rewards of ownership are effectively retained by the lessor, are classified as operating leases. Payments made under operating leases are charged against income 1.6 Borrowing Costs on a straight-line basis over the period of the lease. A straight-line asset/ Borrowing costs directly attributable to the acquisition, construction or liability is raised for the difference between the leased payment and the production of a qualifying asset are capitalised during the period of time lease expense. that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in finance costs (see note 21).
1.7 Goodwill
Goodwill represents the excess of the cost of an acquisition of a business
94 Integrated Annual Report 2017 1.9 Financial Instruments not been recognised. Loans to/(from) Group companies are classified as loans and receivables (financial liabilities at amortised cost). Initial Recognition The Group classifies financial instruments, or their component parts, on initial Trade and Other Receivables recognition as a financial asset, a financial liability or an equity instrument Trade receivables are measured at initial recognition at fair value plus in accordance with the substance of the contractual arrangement. transaction costs, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated Financial assets and financial liabilities are recognised on the Group’s irrecoverable amounts are recognised in profit or loss when there is Statement of Financial Position when the Group becomes party to the objective evidence that the asset is impaired. The allowance recognised is contractual provisions of the instrument. measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective Derecognition interest rate computed at initial recognition. Financial assets (or a portion thereof) are derecognised when the Group realises the rights to the benefits specified in the contract, the rights expire, The carrying amount of the asset is reduced through the use of an allowance or the Group surrenders or otherwise loses control of the contractual rights account, and the amount of the loss is recognised in the Statement of that comprise the financial asset. In derecognition, the difference between Profit or Loss within operating expenses. When a trade receivable is the carrying amount of the financial asset and proceeds receivable and uncollectable, it is written off against the allowance account for trade any prior adjustment to reflect fair value that had been reported in other receivables. Subsequent recoveries of amounts previously written off are comprehensive income are included in profit or loss. Financial liabilities credited against operating expenses in the Statement of Profit or Loss. (or a portion thereof) are derecognised when the obligation specified in the contract is discharged, cancelled or expires. On derecognition, the Trade and other receivables are classified as loans and receivables. difference between the carrying amount of the financial liability, including related unamortised costs and the amount paid for it, are included in Trade and Other Payables profit or loss. Trade payables are initially measured at fair value less transaction costs, Fair Value Determination and are subsequently measured at amortised cost, using the effective interest rate method. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These Cash and Cash Equivalents include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, Cash and cash equivalents comprise cash on hand and demand deposits, and option pricing models making maximum use of market inputs and and other short-term, highly liquid investments that are readily convertible relying as little as possible on entity-specific inputs. to a known amount of cash, and are subject to an insignificant risk of changes in value. These are initially recognised at fair value including Loans to/(from) Group Companies transaction costs and subsequently measured at amortised cost using the effective interest rate method. These instruments are classified as These include loans to subsidiaries, associates and share incentive trust loans and receivables. (accounted for as a subsidiary) and are recognised initially at fair value plus direct transaction costs. Subsequently, these loans are measured at Interest-bearing Liabilities amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts. Interest-bearing liabilities are initially measured at fair value less transaction cost, and are subsequently measured at amortised cost, which includes On loans receivable an impairment loss is recognised in profit or loss all interest-bearing liabilities, using the effective interest rate method. when there is objective evidence that it is impaired. The impairment is Any difference between the proceeds (net of transaction costs) and the measured as the difference between the instrument’s carrying amount settlement or redemption of borrowings is recognised over the term of and the present value of estimated future cash flows discounted at the the borrowings in accordance with the Group’s accounting policy for effective interest rate computed at initial recognition. Impairment losses borrowing costs. are reversed in subsequent periods when an increase in the instrument’s recoverable amount can be related objectively to an event occurring after Other financial liabilities are measured initially at fair value less transaction the impairment was recognised, subject to the restriction that the carrying cost and subsequently at amortised cost using the effective interest rate amount of the instrument at the date the impairment is reversed shall not method. exceed what the amortised cost would have been had the impairment
Integrated Annual Report 2017 95 INTEGRATED ANNUAL REPORT 2017
Derivatives recognition of a non-financial asset (for example, inventory or fixed assets) Derivative financial instruments, which are not designated as hedging the gains and losses previously deferred in the Statement of Comprehensive instruments, consisting of foreign exchange contracts are initially measured Income are transferred from other comprehensive income and included at fair value on the contract date, and are re-measured to fair value at in the initial measurement of the cost of the asset. The deferred amounts subsequent reporting dates. are ultimately recognised in cost of goods sold in the case of inventory or in depreciation in the case of fixed assets. Derivatives embedded in other financial instruments or other non- financial host contracts are treated as separate derivatives when their risks and If a legally enforceable right exists to set off recognised amounts of financial characteristics are not closely related to those of the host contract and assets and liabilities and there is an intention to settle net, the relevant the host contract is not carried at fair value with unrealised gains or losses financial assets and liabilities are offset. reported in profit or loss. Where the impact of discounting is not considered to be material, financial Changes in the fair value of derivative financial instruments are recognised instruments carried at amortised costs are not discounted due to the fact in profit or loss as they arise. that their carrying values approximate amortised cost.
Derivatives are classified as financial assets at fair value through profit 1.10 Inventories or loss. Inventory is stated at the lower of cost and net realisable values. Cost is determined on the first-in-first-out basis. Net realisable value is the estimated Hedge Accounting selling price in the ordinary course of business less the estimated cost The Group designates certain derivatives as either: of completion and the estimated cost necessary to make the sale. The cost of inventories comprises all cost of purchase, cost of conversion and • hedges of the fair value of recognised assets or liabilities or a firm other costs incurred in bringing the inventories to their present location commitment (fair value hedge); and condition. • hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge); and 1.11 Share Capital • hedges of a net investment in a foreign operation (net investment hedge). An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Ordinary shares The Group documents, at the inception of the transaction, the relationship are classified as equity. If the Group re-acquires its own equity instruments, between hedging instruments and hedged items, as well as its risk the consideration paid, including any directly attributable incremental costs management objectives and strategy for undertaking various hedging (net of income taxes) on those instruments is deducted from equity. No transactions. The Group also documents its assessment, both at hedge gain or loss is recognised in profit or loss on the purchase, sale, issue or inception and on an ongoing basis, of whether the derivatives that are cancellation of the Group’s own equity instruments. Consideration paid used in hedging transactions are highly effective in offsetting changes in or received shall be recognised directly in equity. fair values or cash flows of hedged items. 1.12 Share-based Payment Transactions The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months, and Cash Settled as a current asset or liability when the remaining maturity of the hedged Options are granted to certain employees in the Group. The fair value of item is less than 12 months. the amount payable to the employee is recognised as an expense with a corresponding increase in liabilities. The fair value is initially measured at Cash Flow Hedge grant date using the Black-Scholes Model and expensed over the period The effective portion of changes in the fair value of derivatives that are during which the employee becomes unconditionally entitled to payment. designated and qualify as cash flow hedges is recognised to other Management assesses the number of options that will ultimately vest comprehensive income and accumulated in equity. The gain or loss based on non-market vesting conditions at each reporting period until relating to the ineffective portion is recognised immediately in profit or loss. vesting, but the assessment of the fair value of the option against the market performance of the share price, is done at each reporting period The amount of gains/losses in other comprehensive income is reclassified end, up to and including settlement date. to profit or loss in the period when the hedged item affects profit or loss.
However, when the forecast transaction that is hedged results in the
96 Integrated Annual Report 2017 Share options that expire or are forfeited are reversed against the liability Interest is recognised on the accrual basis, in profit or loss, using the raised with an adjustment to profit or loss. The fair value of the instruments effective interest rate method. Dividends are recognised in profit or loss granted is measured against market performance of the share price. The when the Group’s right to receive payment has been established. liability is measured at each reporting date and at settlement date, with all movements in fair value being recognised in profit or loss. 1.15 Tax
Current tax and deferred taxes are recognised as income or an expense 1.13 Provisions and included in profit or loss for the period, except to the extent that the The amount of a provision is the present value of the expenditure expected tax arises from: to be required to settle the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another • a transaction or event which is recognised, in the same or a different party, the reimbursement shall be recognised when, and only when, it is period, directly in other comprehensive income; or virtually certain that reimbursement will be received if the entity settles the • a business combination. obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount Current tax and deferred taxes are charged or credited directly to other of the provision. Provisions are not recognised for future operating losses. comprehensive income if the tax relates to items that are credited or charged in the same or a different period, to other comprehensive income. If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision. The rate Current tax is calculated at rates (tax laws) enacted or substantively enacted applied to present value the expenditure is the pre-tax market related rate at reporting period-end in accordance with the South African Income Tax adjusted for the risks associated with the obligation. Act (No. 58 of 1962).
Provisions were raised and management determined an estimate based Deferred Taxation on the information available. Additional disclosure of these estimates of provisions is included in the provisions note. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the Financial Statements and the corresponding tax basis used in the computation 1.14 Revenue Recognition of taxable profit, and is accounted for using the comprehensive liability Revenue comprises all airline-related and non-airline revenue earned. method. Deferred tax liabilities are recognised for all taxable temporary Revenue arising from the provision of transportation services to passengers differences and deferred tax assets are recognised to the extent that it is recognised on an accrual basis in the period in which the services is probable that taxable profits will be available against which deductible are rendered and the passenger has flown. Unutilised ticket revenue is temporary differences can be utilised. Such assets and liabilities are not recognised as a liability until such time as the passenger has flown. Revenue recognised if the temporary differences arise from goodwill (or negative is measured at the fair value of consideration received and is exclusive of goodwill) or from the initial recognition (other than in a business combination) VAT, discounts received and returns. of other assets and liabilities in a transaction affecting neither the tax profit or losses, nor the accounting profit or losses. Revenue from airline flights is recognised when risks and rewards transfer and excludes VAT. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Non-airline revenue relates to services relating to the hiring of simulator Group is able to control the reversal of the temporary differences and it is equipment, commission from airport lounges and the sale of holiday probable that the temporary difference will not reverse in the foreseeable packages. future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that Non-airline revenue is recognised when risks and rewards transfer and sufficient taxable profit will be available to allow all or part of the asset to excludes VAT. be recovered.
International Loyalty Programme revenue is income received from BA Deferred tax assets and liabilities are measured at the tax rates expected Executive Club members using the Group’s services, and is recognised to apply to the period when the asset is realised or the liability is settled, on the accrual basis in profit or loss. based on the tax rates (and tax laws) enacted or substantively enacted by the reporting date.
Integrated Annual Report 2017 97 INTEGRATED ANNUAL REPORT 2017
1.16 Accounting Estimates and Judgements Loans and Other Receivables Sources of estimation and uncertainty The Group assesses its trade and other receivables for impairment at the end of each reporting period. In determining whether an impairment loss In preparing the Financial Statements, management is required to make should be recorded in profit or loss, the Group makes judgements as to estimates and assumptions that affect the amounts represented in the whether there is observable data indicating a measurable decrease in the Financial Statements and related disclosures. Use of available information estimated future cash flows from a financial asset. and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the Financial Statements. Significant judgements include: 1.17 Contingencies After initial recognition, contingent liabilities recognised in business Fair Value Estimation combinations that are recognised separately are subsequently measured The fair value of financial instruments that are not traded in an active at the higher of: market (for example, over the counter derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes • the amount that would be recognised as a provision; and assumptions that are based on market conditions existing at the end of • the amount initially recognised less cumulative amortisation. each reporting period. Quoted market prices or dealer quotes for similar instruments are used for long-term debt. Other techniques, such as Contingent assets and liabilities that do not form part of a business estimated discounted cash flows, are used to determine fair value for the combination are not recognised, but are disclosed in the notes to the remaining financial instruments. The fair value of interest rate swaps is Financial Statements. calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using quoted 1.18 Non-current Assets (Disposal Groups) Held for Sale forward exchange rates at the end of the reporting period. Non-current assets and disposal groups are classified as held for sale if The carrying value less impairment allowance of trade receivables and their carrying amount will be recovered through a sale transaction rather payables is assumed to approximate their fair values. The fair value of than through continuing use. This condition is regarded as met only when financial liabilities for disclosure purposes is estimated by discounting the sale is highly probable and the asset (or disposal group) is available for the future contractual cash flows at the current market interest rate that immediate sale in its present condition. Management must be committed is available to the Group for similar financial instruments. to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Impairment Future cash flows expected to be generated by the asset are projected, Non-current assets (or disposal groups) held for sale are measured at the taking into account market conditions and the expected useful lives of lower of their carrying amount and fair value less costs to sell. the assets. The present value of these cash flows, determined using an appropriate discount rate, is compared to the current asset value and, if A non-current asset is not depreciated (or amortised) while it is classified lower, the assets are impaired to the present value. as held for sale, or while it is part of a disposal group classified as such.
Asset Lives and Residual Values 1.19 Impairment of Assets
Property, plant and equipment are depreciated over their useful lives taking The Group assesses at each end of the reporting period whether there is into account residual values, where appropriate. The actual lives of the any indication that an asset may be impaired. If any such indication exists, assets and residual values are assessed at each reporting date and may the Group estimates the recoverable amount of the asset. vary depending on a number of factors. In re-assessing asset lives, factors such as technological innovation, product lifecycles and maintenance Irrespective of whether there is any indication of impairment, the Group also: programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset • tests goodwill acquired in a business combination for impairment and projected disposal values. annually; and • tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period.
98 Integrated Annual Report 2017 If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate The expected cost of compensated absences is recognised as an expense the recoverable amount of the individual asset, the recoverable amount as the employees render services that increase their entitlement or, in the of the cash-generating unit to which the asset belongs is determined. case of non-accumulating absences, when the absence occurs.
The recoverable amount of an asset or a cash-generating unit is the higher The expected cost of profit sharing and bonus payments is recognised of its fair value less costs to sell and its value in use. If the recoverable as an expense when there is a legal or constructive obligation to make amount of an asset is less than its carrying amount, the carrying amount such payments as a result of past performance. of the asset is reduced to its recoverable amount. That reduction is an impairment loss. Retirement Fund Current contributions to the Group’s defined contribution retirement fund are An impairment loss of assets carried at cost less any accumulated based on current salary and are recognised when they fall due. The Group depreciation or amortisation is recognised immediately in profit or loss. has no further payment obligations once the payments have been made.
Goodwill acquired in a business combination is, from the acquisition date, 1.21 Foreign Currency allocated to each of the cash-generating units, or Groups of cash-generating units, that are expected to benefit from the synergies of the combination, Foreign currency transactions are recorded at the exchange rate ruling on irrespective of whether other assets or liabilities of the acquiree are assigned the transaction dates. Monetary assets and liabilities denominated in foreign to those units or Groups of units. currencies are translated at rates of exchange ruling at the reporting date. Profits or losses arising on translation of foreign currency transactions are An impairment loss is recognised for cash-generating units if the recoverable included in profit or loss. amount of the unit is less than the carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets Non-monetary assets and liabilities are translated at the prevailing rate of the unit in the following order: at the date of acquisition. Exchange differences on non-monetary assets classified as available for sale financial instruments are recognised as part • first, to reduce the carrying amount of any goodwill allocated to the of the fair value movement in other comprehensive income. All foreign cash-generating unit; and exchange movements are recognised in profit or loss, unless they relate • then, to the other assets of the unit, pro rata on the basis of the to non-monetary assets classified as available for sale financial instruments carrying amount of each asset in the unit. where that movement is then recognised in equity, or they form part of the borrowing costs capitalised to qualifying assets.
The Group assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than 1.22 Segmental Information goodwill may no longer exist or may have decreased. If any such indication Operating segments are reported in a manner consistent with the internal exists, the recoverable amounts of those assets are estimated. reporting provided to the chief operating decision-maker (Financial Director). The chief operating decision-maker, who is responsible for allocating The increased carrying amount of an asset other than goodwill attributable resources and assessing performance of the segments, has been identified to a reversal of an impairment loss does not exceed the carrying amount as the Chief Executive Officer. Segments are presented in terms of IFRS that would have been determined had no impairment loss been recognised for the asset in prior periods. At year end, the Group was organised into two main operating segments:
A reversal of an impairment loss of assets carried at cost less accumulated • Airline; and depreciation or amortisation other than goodwill is recognised immediately • Non-airline, which comprises the travel business, property in profit or loss. investments,simulator business, SLOW Lounges and SLOW in the City.
1.20 Employee Benefits 1.23 Critical Judgements in Applying the Entity’s Short-term Employee Benefits Accounting Policies The cost of short-term employee benefits, (those payable within 12 months Judgements made by management are continually evaluated and are after the service is rendered, such as paid vacation leave and sick leave, based on historical experience and the expectation of future events that bonuses, and non-monetary benefits such as medical care), are recognised are believed to be reasonable under the circumstances. in the period in which the service is rendered and are not discounted.
Integrated Annual Report 2017 99 INTEGRATED ANNUAL REPORT 2017
Borrowing Costs Recovery of Deferred Tax Assets Pre-delivery payment assets are regarded as qualifying assets for the The Group recognises the net future taxation benefit related to deferred purpose of the capitalisation of borrowing costs. Exchange differences income taxation assets to the extent that it is probable that the deductible arising from foreign currency borrowings, to the extent that they are temporary differences will reverse in the foreseeable future. Assessing the regarded as an adjustment to interest costs, are capitalised as part of recoverability of deferred income taxation assets requires the Group to borrowing costs as these expenses are considered part of the cost of make significant estimates related to expectations of future taxable income. borrowing in foreign currency. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing taxation laws in each jurisdiction. Taxation To the extent that future cash flows and taxable income differ significantly Judgement is required in determining the provision for income taxes from estimates, the ability of the Group to realise the net deferred taxation due to the complexity of legislation. There are many transactions and assets recorded at the end of the reporting period could be impacted. calculations for which the ultimate taxation determination is uncertain during the ordinary course of business. The Group recognises liabilities for Management has applied a probability analysis to determine future taxable anticipated taxation audit issues based on estimates of whether additional income against which calculated tax losses will be utilised. taxes will be due. Where the final taxation outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income taxation and deferred taxation provisions in the period in which such determination is made.
100 Integrated Annual Report 2017 Notes to the Financial Statements
2. Segmental Information
Airline Non-airline Total
R’000 R’000 R’000
30 June 2017 Revenue 5 796 443 267 294 6 063 737
Operating profit before depreciation, amortisation, impairment,unrealised translation gain/(loss) on Dollar denominated loan, compensation for write-off of aircraft and (loss)/profit on sale of assets 964 559 99 389 1 063 948 Loss on sale of assets (10 574) - (10 574) Unrealised translation gain on Dollar denominated loan 40 697 - 40 697 Depreciation and amortisation (438 115) (18 166) (456 281) Profit from operations 556 567 81 223 637 790 Segmental assets and liabilities Segmental assets 5 398 905 519 535 5 918 440 Segmental interest-bearing liabilities (2 697 791) - (2 697 791) Other segmental liabilities (1 563 374) (114 558) (1 677 932) Segmental net asset value 1 137 740 404 977 1 542 717 Segmental capital additions (excluding borrowing costs capitalised) during the year 886 615 79 206 965 821
30 June 2016 Revenue 5 725 892 233 681 5 959 573 Operating profit before depreciation, amortisation, impairment,unrealised translation gain/(loss) on Dollar denominated loan, compensation for write-off of aircraft and (loss)/profit on sale of assets 743 896 85 896 829 792 Profit on sale of assets 12 419 - 12 419 Unrealised translation loss on Dollar denominated loan (73 946) - (73 946) Depreciation and amortisation (361 072) (11 031) (372 103) Write-off of damaged aircraft beyond economical repair (64 462) (64 462) Compensation for write-off of damaged aircraft beyond economical repair 84 155 - 84 155 Profit from operations 340 990 74 865 415 855 Segmental assets and liabilities Segmental assets 5 288 207 322 211 5 610 418 Segmental interest-bearing liabilities (2 720 044) - (2 720 044) Other segmental liabilities (1 438 389) (122 470) (1 560 859) Segmental net asset value 1 129 774 199 741 1 329 515 Segmental capital additions (excluding borrowing costs capitalised) during the year 1 480 618 12 569 1 493 187
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 under the control of the South African operation.
Inter-segmental revenue is not material and has therefore not been presented.
Integrated Annual Report 2017 101 INTEGRATED ANNUAL REPORT 2017
3. Property, Plant and Equipment
2017 2016
Accumulated Accumulated depreciation depreciation and Carrying and Carrying Cost impairment value Cost impairment value
Group R’000 R’000 R’000 R’000 R’000 R’000
Properties and buildings 154 205 (8 440) 145 765 126 369 (6 958) 119 411 Leasehold improvements 95 212 (36 183) 59 029 66 144 (21 140) 45 004 Aircraft and related equipment 5 111 280 (944 120) 4 167 160 4 290 461 (742 794) 3 547 667 Flight simulator equipment 113 685 (55 339) 58 346 92 065 (50 264) 41 801 Pre-delivery payments 156 890 - 156 890 204 353 - 204 353 Vehicles, furniture and equipment and computer equipment 133 709 (89 573) 44 136 111 604 (81 517) 30 087 Total 5 764 981 (1 133 655) 4 631 326 4 890 996 (902 673) 3 988 323
2017 2016
Accumulated Accumulated depreciation depreciation and Carrying and Carrying Cost impairment value Cost impairment value
Company R’000 R’000 R’000 R’000 R’000 R’000
Properties and buildings 46 305 (8 440) 37 865 46 252 (6 958) 39 294 Leasehold improvements 95 055 (36 026) 59 029 66 144 (21 140) 45 004 Aircraft and related equipment 5 111 280 (944 120) 4 167 160 4 290 461 (742 794) 3 547 667 Flight simulator equipment 113 685 (55 339) 58 346 92 065 (50 264) 41 801 Pre-delivery payments 156 890 - 156 890 204 353 - 204 353 Vehicles, furniture and equipment and computer equipment 130 940 (88 448) 42 492 109 923 (80 964) 28 959 Total 5 654 155 (1 132 373) 4 521 782 4 809 198 (902 120) 3 907 078
102 Integrated Annual Report 2017 Reconciliation of Property, Plant and Equipment – Group – 2017
Aircraft Transfer transferred of pre- to non- delivery Transfers of current payment pre-delivery Foreign Opening Pre-delivery assets held from payments Interest exchange balance Additions payments Disposals for sale deposits in/(out) capitalised movements Depreciation Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Properties and buildings 119 411 27 835 ------(1 481) 145 765 Leasehold improvements 45 004 28 970 ------(14 945) 59 029 Aircraft and related equipment 3 547 667 855 886 - (13 859) (18 314) - 205 695 - - (409 915) 4 167 160 Flight simulator equipment 41 801 21 620 ------(5 075) 58 346 Pre-delivery payments 204 353 - 132 217 - - 24 673 (205 695) 13 211 (11 869) - 156 890 Vehicles, furniture and equipment and computer equipment 30 087 23 201 ------(9 152) 44 136 3 988 323 957 512 132 217 (13 859) (18 314) 24 673 - 13 211 (11 869) (440 568) 4 631 326
Reconciliation of Property, Plant and Equipment – Group – 2016
Aircraft Write-off of transferred damaged to non- aircraft Transfers of current beyond pre-delivery Foreign Opening Pre-delivery assets held economical payments Interest exchange balance Additions payments Disposals for sale repair in/(out) capitalised movements Depreciation Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Properties and buildings 90 330 30 501 ------(1 420) 119 411 Leasehold improvements 23 157 29 820 ------(7 973) 45 004 Aircraft and related equipment 2 002 782 1 426 276 - (4 425) - (64 462) 518 866 - - (331 370) 3 547 667 Flight simulator equipment 46 667 22 ------(4 888) 41 801 Pre-delivery payments 566 388 - 67 871 - - - (518 866) 11 722 77 238 - 204 353 Vehicles, furniture and equipment and computer equipment 31 260 6 568 ------(7 741) 30 087 2 760 584 1 493 187 67 871 (4 425) - (64 462) - 11 722 77 238 (353 392) 3 988 323
Integrated Annual Report 2017 103 INTEGRATED ANNUAL REPORT 2017
3. Property, Plant and Equipment (continued)
Reconciliation of Property, Plant and Equipment – Company – 2017
Aircraft Transfer transferred of pre- to non- delivery Transfers of current payment pre-delivery Foreign Opening Pre-delivery assets held from payments Interest exchange balance Additions payments Disposals for sale deposits in/(out) capitalised movements Depreciation Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Properties and buildings 39 294 52 ------(1 481) 37 865 Leasehold improvements 45 004 28 970 ------(14 945) 59 029 Aircraft and related equipment 3 547 667 855 886 - (13 859) (18 314) - 205 695 - - (409 915) 4 167 160 Flight simulator equipment 41 801 21 620 ------(5 075) 58 346 Pre-delivery payments 204 353 - 132 217 - - 24 673 (205 695) 13 211 (11 869) - 156 890 Vehicles, furniture and equipment and computer equipment 28 959 22 368 ------(8 835) 42 492 3 907 078 928 896 132 217 (13 859) (18 314) 24 673 - 13 211 (11 869) (440 251) 4 521 782
Reconciliation of Property, Plant and Equipment – Company – 2016
Aircraft Write-off of transferred damaged to non- aircraft Transfers of current beyond pre-delivery Foreign Opening Pre-delivery assets held economical payments Interest exchange balance Additions payments Disposals for sale repair in/(out) capitalised movements Depreciation Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Properties and buildings 39 305 1 409 ------(1 420) 39 294 Leasehold improvements 23 157 29 820 ------(7 973) 45 004 Aircraft and related equipment 2 002 782 1 426 276 - (4 425) - (64 462) 518 866 - - (331 370) 3 547 667 Flight simulator equipment 46 667 22 ------(4 888) 41 801 Pre-delivery payments 566 388 - 67 871 - - - (518 866) 11 722 77 238 - 204 353 Vehicles, furniture and equipment and computer equipment 30 907 5 537 ------(7 485) 28 959 2 709 206 1 463 064 67 871 (4 425) - (64 462) - 11 722 77 238 (353 136) 3 907 078
104 Integrated Annual Report 2017 Property and buildings owned consist of Erf 1092 and 1096 Bonaero Park extension 2, Erf 931, Bonaero Park extension 1, Erf 700, Rhodesfield Township, Erven 674, 684, 685, 687, 688, 689, 690, 695 and Erf 1040, Rhodesfield Township and Erf 174495, Cape Town. Additional properties, Erven 177263, 177264, 177268, 177269, 177270 in Cape Town Flats, Cape Town were acquired during the year. Valuations of the properties are performed every three years, and based on this the estimated Directors’ value of these properties is approximately R186 million (2016: R158 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 two of eight new Boeing 737-8 MAX aircraft which are due to arrive in South Africa from January 2019 onwards. The pre-delivery payment finance for these aircraft has been mandated to Investec Bank. Future capital commitments relating to the Boeing 737-8 MAX are disclosed in note 26. Borrowing costs capitalised to the pre-delivery payments are incurred at a rate of 4.4% on a US Dollar-based facility concluded in 2017.
On 26 October 2015, a Boeing 737-400 aircraft, registration ZS-OAA, with 100 passengers and crew on board, on a scheduled domestic flight between Port Elizabeth and Johannesburg suffered damage after the left hand main landing gear detached from the aircraft after landing. The aircraft was subsequently declared to be beyond economical repair, and an impairment expense of R64.5 million was realised. Subsequent compensation from the insurance provider was received totalling R84.2 million. There were no further impairments of any other aircraft and flight simulator equipment.
4. Intangible Assets
2017 2016
Accumulated Carrying Accumulated Carrying Cost amortisation value Cost amortisation value
Group and Company R’000 R’000 R’000 R’000 R’000 R’000
Computer software 81 422 (65 530) 15 892 71 770 (49 817) 21 953
Reconciliation of Intangible Assets – Group and Company – 2017
Opening balance Additions Amortisation Total
R’000 R’000 R’000 R’000
Computer software 21 953 9 652 (15 713) 15 892
Reconciliation of Intangible Assets – Group and Company – 2016
Opening balance Additions Amortisation Total
R’000 R’000 R’000 R’000
Computer software 27 490 13 174 (18 711) 21 953
Other Information The intangible assets relate to the implementation of Sabre Airline Solutions which was fully operational in the 2012 financial year and Openjaw Travel Portal development costs.
The remaining useful life of the computer software is an average of 2 years (2016: 2 years).
Integrated Annual Report 2017 105 INTEGRATED ANNUAL REPORT 2017
5. Loan to Share Incentive Trust
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Loan to Share Incentive Trust - - 571 2 427
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 4 244 464 shares representing 0.9% of shares in issue (prior year: 4 983 598 shares representing 1.1%) at a closing price of 515c (2016: 310c).
6. Investments in and Loans to/from Subsidiaries
Group Company
2017 2016 2017 2016
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 - - - 32
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.
Comair Retail Travel Services 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.
Churchill Finance Services 23 Limited Investment at cost - - 10 10
2 shares of USD1 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 deregistered.
106 Integrated Annual Report 2017 Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Comair Air Cargo Proprietary Limited Investment at cost - - - -
100 ordinary shares of R 1 at cost (100% shareholding)
The company is currently dormant
Highly Nutritious Food Company Proprietary Limited Investment at cost - - - -
56 ordinary shares of R1 at cost - 56% shareholding held by Comair Catering Proprietary Limited
Total non-current portion - - 19 335 19 367
Current Portion
Alooca Properties Proprietary Limited Loan receivable - - 82 625 55 430
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 and Erf 174495 in Cape Town with funding from Comair Limited. During the year, the company aquired an additional properties, Erven 177263, 177264, 177268, 177269, 177270 in Cape Town Flats, Cape Town with funding from Comair Limited. The properties at cost are valued at R87.4 million (2016: R59.7 million).
The loan is unsecured, has no fixed repayment terms and is interest free.
Kulula Air Proprietary Limited Loan receivable - - 6 078 4 761 Impairment of loan - - (6 078) (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.
The loan is unsecured, has no fixed repayment terms and is interest free.
The loan has been subordinated in favour of all other creditors of the company until such time as the assets of the company, fairly valued, exceed its liabilities.
Integrated Annual Report 2017 107 INTEGRATED ANNUAL REPORT 2017
6. Investments in and Loans to/from Subsidiaries (continued)
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Comair Catering Proprietary Limited Loan receivable - - 72 23
70 ordinary shares of R1 at cost – 70% 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.
Comair Retail Travel Services Proprietary Limited Loan receivable - - 751 201
The loan is unsecured, has no fixed repayment terms and is interest free.
Comair Air Cargo Proprietary Limited Loan receivable - - 7 - The loan is unsecured, has no fixed repayment terms and is interest free. The company is currently dormant
Total current portion - - 83 455 55 676
Current liability portion
Aconcagua 32 Investments Proprietary Limited Loan payable - - (1 713) -
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.
Total current liability portion - - (1 713) -
Total investment and loans to subsidiaries - - 101 077 75 043
Maximum amount exposed to credit risk relating to loan receivables 89 533 60 447
108 Integrated Annual Report 2017 7. Investments and Loans to Associates
The following table lists all of the associates in the Group: % ownership % ownership Carrying Carrying interest interest amount amount
2017 2016 2017 2016
Name of company R’000 R’000
Commuter Handling Services Proprietary Limited held by Comair Limited 40.00% 40.00% 14 868 18 377 OR Tambo Hospitality Proprietary Limited held by Aconcagua 32 Investments Proprietary Limited 49.90% 49.90% 30 428 25 897 Comair Mozambique Limitada held by Comair Limited 49.00% 49.00% - - 45 296 44 274
Long-term portion 45 296 36 422 Short-term portion - 7 852 45 296 44 274
Reconciliation to Carrying Amounts – 2017
Loans to/ Group share Total (from) of retained carrying associate income value
R’000 R’000 R’000
Commuter Handling Services Proprietary Limited - 14 868 14 868 OR Tambo Hospitality Proprietary Limited - 30 428 30 428 - 45 296 45 296
Reconciliation to Carrying Amounts – 2016
Loans to/ Group share Total (from) of retained carrying associate income value
R’000 R’000 R’000
Commuter Handling Services Proprietary Limited 7 852 10 525 18 377 OR Tambo Hospitality Proprietary Limited - 25 897 25 897 7 852 36 422 44 274
The loan to Commuter Handling Services Proprietary Limited is unsecured, has no fixed repayment terms and is interest free.
Integrated Annual Report 2017 109 INTEGRATED ANNUAL REPORT 2017
7. Investments and Loans to Associates (continued)
The summarised financial information in respect of the Group’s associates is set out below.
Summarised Financial Information of Material Associates
2017
Non-current Net-current Total Capital and Total equity assets assets assets reserves Liabilities and liabilities Summarised Statement of Financial Position R’000 R’000 R’000 R’000 R’000 R’000
Commuter Handling Services Proprietary Limited 4 518 48 460 52 978 29 633 23 345 52 978 OR Tambo Hospitality Proprietary Limited 46 245 21 568 67 813 58 929 8 884 67 813
Profit from Total continuing comprehensive Revenue operations income
Summarised Statement of Comprehensive Income R’000 R’000 R’000
Commuter Handling Services Proprietary Limited 301 387 10 857 10 857 OR Tambo Hospitality Proprietary Limited 15 332 9 080 9 080 316 719 19 937 19 937
2016
Non-current Net-current Total Capital and Total equity assets assets assets reserves Liabilities and liabilities Summarised Statement of Financial Position R’000 R’000 R’000 R’000 R’000 R’000
Commuter Handling Services Proprietary Limited 6 062 59 469 65 531 18 776 46 755 65 531 OR Tambo Hospitality Proprietary Limited 48 546 26 600 75 146 49 849 25 297 75 146
Profit from Total continuing comprehensive Revenue operations income
Summarised Statement of Comprehensive Income R’000 R’000 R’000
Commuter Handling Services Proprietary Limited 285 746 10 658 10 658 OR Tambo Hospitality Proprietary Limited 13 980 7 512 7 512 299 726 18 170 18 170
110 Integrated Annual Report 2017 Reconciliation of Summarised Financial Information to the Carrying Amount of the Group’s Investment in Associates
2017
Comair's Comair's share of net Total Total Net ownership equity of Loan assets liabilities assets interest investee investment Goodwill Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000
Commuter Handling Services Proprietary Limited 52 978 23 345 29 633 40.00% 11 853 - 3 015 14 868 OR Tambo Hospitality Proprietary Limited 67 813 8 884 58 929 49.90% 29 406 - 1 022 30 428
2016
Comair’s share of net Total Total Net equity of Loan assets liabilities assets Comair's investee investment Goodwill Total ownership R’000 R’000 R’000 interest R’000 R’000 R’000 R’000
Commuter Handling Services Proprietary Limited 65 531 46 755 18 776 40.00% 7 510 7 852 3 015 18 377 OR Tambo Hospitality Proprietary Limited 75 146 25 297 49 849 49.90% 24 875 - 1 022 25 897
8. Goodwill
2017 2016
Accumulated Carrying Accumulated Carrying Cost impairment value Cost impairment value
Group R’000 R’000 R’000 R’000 R’000 R’000
Gross amount and carrying value 6 615 - 6 615 6 615 - 6 615
Reconciliation of Goodwill
Opening balance Total
R’000 R’000
Reconciliation of goodwill – Group – 2017 6 615 6 615
Reconciliation of goodwill – Group – 2016 6 615 6 615
Integrated Annual Report 2017 111 INTEGRATED ANNUAL REPORT 2017
8. Goodwill (continued)
The net book value of goodwill has been allocated to the following cash-generating units (CGUs): Group
2017 2016
R’000 R’000
Comair Retail Travel Services Proprietary Limited 3 668 3 668 Highly Nutritious Food Company Proprietary Limited 2 947 2 947 6 615 6 615
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 three-year forecasts and terminal values 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 terminal value, cash flows are determined by using estimated sustainable growth levels for CGUs of 5% per annum. 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 16.0% (2016: 16.0%). 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. Inventories
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Catering equipment and consumables 23 006 21 728 22 517 21 501 Allowance for obsolete stock (1 520) - (1 520) - 21 486 21 728 20 997 21 501
Carrying value of inventory carried at net realisable value - - - -
112 Integrated Annual Report 2017 10. Trade and Other Receivables
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Trade receivables 134 174 241 838 140 289 245 972 Impairment allowance (12 397) (10 177) (23 510) (18 244) 121 777 231 661 116 779 227 728 Deposits 129 729 142 784 129 361 142 883 251 506 374 445 246 140 370 611
The standard credit period is 30 days from date of statement. The average age of the trade receivables is 8 days (2016: 15 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.
Trade and other receivables which are less then five months past due are not considered to be impaired. Included in the Group’s trade receivables balance are debtors with a carrying value of R8.3 million (2016: R3.3 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
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Trade and other receivables past due but not impaired 120 days - 4 247 1 988 4 247 1 234 120 days + 4 064 1 279 4 064 785
Trade and other receivables impaired 120 days - 58 - 1 903 1 602 120 days + 12 339 10 177 21 607 16 642
Reconciliation of allowance for impairment of trade and other receivables Opening balance 10 177 4 876 18 244 4 876 Allowance for impairment 2 220 5 301 5 266 13 368 12 397 10 177 23 510 18 244
Integrated Annual Report 2017 113 INTEGRATED ANNUAL REPORT 2017
11. Non-current Assets Held for Sale
The Company entered into an agreement on 22 June 2017 for the sale of three Boeing 737-400 Aircraft that have been retired or are scheduled to be retired within the coming year as part of the Company’s fleet replacement programme. One aircraft was retired at the end of May 2017 and has already been sold, with the loss on the sale of aircraft being included in (profit)/loss on sale of fixed assets. A further two aircraft are now classified as held for sale, as they will be sold when they are withdrawn from service which is expected to be in October 2017 and March 2018 respectively.
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Carrying value of aircraft held for sale 18 314 - 18 314 - Fair value less costs to sell of aircraft 7 044 - 7 044 - Loss on remeasurement to fair value less costs to sell 11 270 - 11 270 -
12. Share Capital
Group Company
2017 2016 2017 2016
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
Issued Opening balance – ordinary shares of 1 cent each 4 693 4 693 4 693 4 693 Adjustment in respect of consolidation of Share Trust 4 244 464 (2016: 4 983 598) (42) (50) - - 4 651 4 643 4 693 4 693
Group Company 2017 2016 2017 2016
Reoconciliation of number of shares issed 469 330 865 (2016: 469 330 865) ordinary shares of 1 cent each 469 330 865 469 330 865 469 330 865 469 330 865 Adjustment in respect of consolidation of Share Trust 4 244 464 (2016: 4 983 598) (4 244 464) (4 983 598) - - 465 086 401 464 347 267 469 330 865 469 330 865
114 Integrated Annual Report 2017 13. Interest-bearing Liabilities
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Rand Merchant Bank Aircraft instalment sale agreement 179 383 211 958 179 383 211 958 Less: Finance raising fees (7 866) (9 319) (7 866) (9 319)
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 8.6% (prior year: 8.6%). The current instalment is R12 million.
One aircraft mortgage serves as collateral covering security with a net book value of R290 million (prior year: R305 million).
Aircraft instalment sale agreement 179 393 211 970 179 393 211 970 Less: Finance raising fees (7 753) (9 207) (7 753) (9 207)
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 8.6% (prior year: 8.6%). The current instalment is R12 million.
One aircraft mortgage serves as collateral covering security with a net book value of R284 million (prior year: R300 million).
Aircraft instalment sale agreement 162 863 193 848 162 863 193 848 Less: Finance raising fees (7 135) (8 516) (7 135) (8 516)
Instalment sale agreement payable in 40 quarterly instalments with the final payment due on 12 July 2022. Rand Merchant Bank has entered into a selldown agreement with Nedbank for this loan. Interest is charged at a variable rate – currently 8.6% (prior year: 8.6%). The current instalment is R11 million.
One aircraft mortgage serves as collateral covering security with a net book value of R262 million (prior year: R280 million).
Private Export Funding Corporation Aircraft instalment sale agreement 277 743 367 402 277 743 367 402 Less: Finance raising fees (8 005) (9 482) (8 005) (9 482)
A USD 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 USD1 million.
One aircraft mortgage serves as collateral covering security with a net book value of R295 million (prior year: R311million).
Integrated Annual Report 2017 115 INTEGRATED ANNUAL REPORT 2017
13. Interest-bearing Liabilities (continued)
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Investec Limited Mortgage finance agreement - 12 036 - 12 036
This mortgage finance agreement was payable in 28 quarterly instalments with the final payment due on 30 September 2019. Erf 700 Rhodesfield Township had been pledged as collateral for this mortgage finance agreement. A mortgage bond of R25.9 million had been registered against this property. Interest was charged at a variable rate (prior year 11.1%). Capital of R 12 million was repaid during the year.
Working capital loan - 7 - 7
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 (prior year 10.8%.) Capital of R7 000 was repaid during the current year.
Boeing 737-800 - 190 786 - 190 786
A facility for pre-delivery payments required for four 737-800 aircraft previously on order. Cross-collateralisation of other Investec loans stood as security for this loan. The facility was repayable on delivery of the relevant aircraft. The last aircraft was delivered during the course of the financial year. The facility was in USD and earned a variable interest rate quarterly (prior year 4.4%). Capital of R191 million was repaid during the current year.
Nedbank Aircraft instalment sale agreement 422 439 473 512 422 439 473 512 Less: Finance raising fees (25 763) (28 950) (25 763) (28 950)
Aircraft instalment sale agreement payable in 40 quarterly instalments with the final payment due on the 6 August 2025. Interest is charged at a fixed rate of 9.4%. The current instalment is R22 million.
One aircraft mortgage serves as collateral covering security with a net book value of R487 million (prior year: R511 million).
Aircraft instalment sale agreement 476 282 532 180 476 282 532 180 Less: Finance raising fees (28 572) (32 035) (28 572) (32 035)
Aircraft instalment sale agreement payable in 40 quarterly instalments with the final payment due on the 8 October 2025. Interest is charged at a fixed rate of 9.4%. The current instalment is R25 million.
One aircraft mortgage serves as collateral covering security with a net book value of R541 million (prior year: R568 million).
116 Integrated Annual Report 2017 Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Aircraft instalment sale agreement 559 895 623 854 559 895 623 854
Aircraft instalment sale agreement payable in 40 quarterly instalments with the final payment due on the 11 February 2026. Interest is charged at a variable rate – currently 11.6% (prior year: 11.8%). The current instalment is R32 million.
One aircraft mortgage serves as collateral covering security with a net book value of R674 million (prior year: R706 million).
Aircraft instalment sale agreement 524 887 - 524 887 -
Aircraft instalment sale agreement payable in 40 quarterly instalments with the final payment due on the 30 November 2026. Interest is charged at a variable rate – currently 11.8%. The current instalment is R29 million.
One aircraft mortgage serves as collateral covering security with a net book value of R628 million.
Sub-total 2 697 791 2 720 044 2 697 791 2 720 044 Less: current portion (352 865) (537 585) (352 865) (537 585) Non-current portion 2 344 926 2 182 459 2 344 926 2 182 459
Total value of interest-bearing liabilities 2 697 791 2 720 044 2 697 791 2 720 044 Future finance charges 1 076 631 980 156 1 076 631 980 156 Total interest-bearing liability commitments 3 774 422 3 700 200 3 774 422 3 700 200
Maturity Analysis Total repayments for year one 629 973 719 069 629 973 719 069 Total repayments for years two to five 2 091 512 2 005 905 2 091 512 2 005 905 Total repayments after year five 1 052 937 975 226 1 052 937 975 226 Total repayments 3 774 422 3 700 200 3 774 422 3 700 200
Capital repayments for year one 352 865 537 585 352 865 537 585 Capital repayments for years two to five 1 423 240 1 234 233 1 423 240 1 234 233 Capital repayments after year five 921 686 948 226 921 686 948 226 Allocation of present valued amounts 2 697 791 2 720 044 2 697 791 2 720 044
Integrated Annual Report 2017 117 INTEGRATED ANNUAL REPORT 2017
14. Deferred Taxation
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Deferred tax liability (435 043) (303 848) (435 043) (303 848) Deferred tax asset 3 902 3 942 - - Net deferred tax liability (431 141) (299 906) (435 043) (303 848)
On Temporary Differences Arising from:
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Plant, equipment and intangible assets (694 291) (469 815) (698 166) (474 712) Staff obligations and accruals 48 263 39 626 48 235 40 581 Unutilised ticket liability 90 330 98 300 90 330 98 300 Pre-payments (6 575) (2 944) (6 574) (2 944) Calculated tax loss 131 132 34 927 131 132 34 927 (431 141) (299 906) (435 043) (303 848)
Reconciliation of Deferred Tax Asset/(Liability)
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
At beginning of year (299 906) (212 351) (303 848) (217 316) Accelerated capital allowances on plant, equipment and intangible assets (224 476) (149 867) (223 454) (159 729) Staff obligations and accruals 8 637 (30 037) 7 654 (23 848) Unutilised ticket liability (7 970) 59 196 (7 970) 59 196 Pre-payments (3 631) 3 191 (3 630) 2 922 Increase in tax loss available for set-off against future taxable income 96 205 29 962 96 205 34 927 (431 141) (299 906) (435 043) (303 848)
Recognition of Deferred Tax Asset There is an unrecognised deferred taxation asset in Kulula Air Proprietary Limited amounting to R2.9 million (2016: R1.7 million) on calculated assessed losses amounting to R10.5 million (2016: R6.08 million).
118 Integrated Annual Report 2017 15. Trade and Other Payables
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Trade payables 763 503 772 615 746 190 761 254 Other payables 34 910 33 359 34 883 33 341 798 413 805 974 781 073 794 595
Trade creditor terms vary, depending on the agreements. An average of 30 days from statement is fair. Average days outstanding is 53 days (2016: 55 days).
16. Provisions
Reconciliation of Provisions – Group – 2017
Opening balance Raised Utilised Total
R’000 R’000 R’000 R’000
Leave pay provision 53 470 14 162 (10 393) 57 239 Bonus provision 45 505 95 540 (81 449) 59 596 98 975 109 702 (91 842) 116 835
Reconciliation of Provisions – Group – 2016
Opening balance Raised Utilised Total
R’000 R’000 R’000 R’000
Leave pay provision 50 741 16 072 (13 343) 53 470 Bonus provision 58 522 77 750 (90 767) 45 505 109 263 93 822 (104 110) 98 975
Reconciliation of Provisions – Company – 2017
Opening balance Raised Utilised Total
R’000 R’000 R’000 R’000
Leave pay provision 53 667 13 947 (10 375) 57 239 Bonus provision 45 277 95 430 (81 141) 59 566 98 944 109 377 (91 516) 116 805
Integrated Annual Report 2017 119 INTEGRATED ANNUAL REPORT 2017
16. Provisions (continued)
Reconciliation of Provisions – Company – 2016
Opening balance Raised Utilised Total
R’000 R’000 R’000 R’000
Leave pay provision 50 743 16 211 (13 287) 53 667 Bonus provision 58 462 77 498 (90 683) 45 277 109 205 93 709 (103 970) 98 944
In terms of the Group 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 expected to be paid in September (prior year: September).
17. 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
2017
At fair value Financial through profit/ Loans and liabilities at Non-financial (loss) receivables amortised cost instruments Total
R’000 R’000 R’000 R’000 R’000
Assets Non-current assets Property, plant and equipment - - - 4 631 326 4 631 326 Intangible assets - - - 15 892 15 892 Investments in and loans to associates - - - 45 296 45 296 Goodwill - - - 6 615 6 615 Deferred taxation - - - 3 902 3 902
Current assets Inventories - - - 21 486 21 486 Trade and other receivables - 121 777 - 129 729 251 506 Taxation - - - 460 460 Cash and cash equivalents - 934 913 - - 934 913 Aircraft held for sale - - - 7 044 7 044 Total assets - 1 056 690 - 4 861 750 5 918 440
120 Integrated Annual Report 2017 2017
At fair value Financial through profit/ Loans and liabilities at Non-financial (loss) receivables amortised cost instruments Total
R’000 R’000 R’000 R’000 R’000
Equity and Liabilities Capital and reserves Share capital - - - 4 651 4 651 Accumulated profit - - - 1 538 211 1 538 211 Non-controlling interest - - - (145) (145)
Non-current liabilities Interest-bearing liabilities - - 2 344 926 - 2 344 926 Deferred taxation - - - 435 043 435 043 Share-based payment - - - 5 032 5 032
Current liabilities Trade and other payables - - 798 413 - 798 413 Unutilised ticket liability - - - 322 609 322 609 Provisions - - - 116 835 116 835 Interest-bearing liabilities - - 352 865 - 352 865 Total equity and liabilities - - 3 496 204 2 422 236 5 918 440
2016
At fair value Financial through profit/ Loans and liabilities at Non-financial (loss) receivables amortised cost instruments Total
R’000 R’000 R’000 R’000 R’000
Assets Non-current Assets Property, plant and equipment - - - 3 988 323 3 988 323 Intangible assets - - - 21 953 21 953 Investments in associates - - - 36 422 36 422 Goodwill - - - 6 615 6 615 Deferred taxation - - - 3 942 3 942
Current assets Inventories - - - 21 728 21 728 Trade and other receivables - 231 661 - 142 784 374 445 Investments in and loans to associates - 7 852 - - 7 852 Taxation - - - 29 010 29 010 Cash and cash equivalents - 1 120 128 - - 1 120 128 Aircraft held for sale - - - - - Total assets - 1 359 641 - 4 250 777 5 610 418
Integrated Annual Report 2017 121 INTEGRATED ANNUAL REPORT 2017
17. Risk Management (continued)
2016
At fair value Financial through profit/ Loans and liabilities at Non-financial (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 Accumulated profit - - - 1 325 964 1 325 964 Non-controlling interest - - - (1 092) (1 092)
Non-current liabilities Interest-bearing liabilities - - 2 182 459 - 2 182 459 Deferred taxation - - - 303 848 303 848 Share-based payment - - - 1 001 1 001
Current liabilities Trade and other payables - - 805 974 - 805 974 Unutilised ticket liability - - - 351 061 351 061 Provisions - - - 98 975 98 975 Interest-bearing liabilities - - 537 585 - 537 585 Total liabilities - - 3 526 018 2 084 400 5 610 418
Financial assets are substantially the same for the Group and the Company, however loans to subsidiaries and the Share trust amount to R84.0 million (2016: R58.1 million) and are classified as loans and receivables.
Financial liabilities are substantially the same for the Group and the Company, however there is a loan from subsidiary amounting to R1.7 million and is classified as loans and receivables.
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.
122 Integrated Annual Report 2017 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:
Carrying Contractual Within Two to More than No fixed amount cash flows one year five years five years terms
R’000 R’000 R’000 R’000 R’000 R’000
2017 Secured non-current borrowings 2 344 926 3 144 449 - 2 091 512 1 052 937 - Secured short-term borrowings 352 865 629 973 629 973 - - - Trade and other payables 798 413 798 413 798 413 - - - Total financial liabilities – Group 3 496 204 4 572 835 1 428 386 2 091 512 1 052 937 -
2016 Secured non-current borrowings 2 182 459 2 981 131 - 2 005 905 975 226 - Secured short-term borrowings 537 585 719 069 719 069 - - - Trade and other payables 805 974 805 974 805 974 Total financial liabilities – Group 3 526 018 4 506 174 1 525 043 2 005 905 975 226 -
Foreign Currency Risk The Group undertakes certain transactions denominated in foreign currencies, 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.
2017 2016
Exchange rates used for conversion of foreign items were:
USD (spot at 30 June) 13.044 14.765 GBP (spot at 30 June) 16.963 19.573
Approximately 42% 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 USD4 168 385 (2016: USD4 275 948) and GBP1 065 675 (2016: GBP1 024 876) and net short-term receivables of GBP3 644 074 (2016: GBP5 323 498).
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 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.
The effect of the movement in the interest rate was only calculated for the estimated period that the loan will be outstanding.
Integrated Annual Report 2017 123 INTEGRATED ANNUAL REPORT 2017
17. Risk Management (continued)
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 Carrying exposed to Rand Rand exposed to Rate Rate value risk appreciation depreciation risk increase decrease
Group R’000 R’000 R’000 R’000 R’000 R’000 R’000 2017 Financial asset Trade and other receivables 121 777 ------Cash and cash equivalents 934 913 327 202 (16 360) 16 360 934 913 18 698 (18 698) Impact of financial assets on: - profit before tax - - (16 360) 16 360 - 18 698 (18 698) - profit after tax - - (11 779) 11 779 - 13 463 (13 463)
Financial liabilities Interest bearing liabilities 2 697 791 269 738 13 487 (13 487) 2 697 791 (53 956) 53 956 Trade and other payables 798 413 87 374 4 369 (4 369) - - - Impact of financial liabilities on: - profit before tax - - 17 856 (17 856) - (53 956) 53 956 - profit after tax - - 12 856 (12 856) - (38 848) 38 848
Overall impact on profit after taxation - - 1 077 (1 077) - (25 386) 25 386
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 Carrying exposed to Rand Rand exposed to Rate Rate value risk appreciation depreciation risk increase decrease
Group R’000 R’000 R’000 R’000 R’000 R’000 R’000 2016 Financial assets Trade and other receivables 231 661 119 054 (5 953) 5 953 - - - Cash and cash equivalents 1 120 128 515 430 (25 772) 25 772 1 120 128 22 403 (22 403) Impact of financial assets on: - profit before tax - - (31 724) 31 724 - 22 403 (22 403) - profit after tax - - (22 841) 22 841 - 16 130 (16 130)
Financial liabilities Interest bearing liabilities 2 720 044 357 920 17 896 (17 896) 2 720 044 (54 401) 54 401 Trade and other payables 805 974 83 194 4 160 (4 160) - - - Impact of financial liabilities on: - profit before tax - - 22 056 (22 056) - (54 401) 54 401 - profit after tax - - 15 880 (15 880) - (39 169) 39 169
Overall impact on profit after taxation - - (6 961) 6 961 - (23 039) 23 039
124 Integrated Annual Report 2017 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 and accumulated profits).
The debt-to-adjusted capital ratios at 30 June 2017 and 2016 were as follows:
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Total liabilities, excluding deferred taxation 3 940 680 3 977 055 3 925 023 3 965 645 Less: Cash and cash equivalents (934 913) (1 120 128) (899 548) (1 098 978) Net debt 3 005 767 2 856 927 3 025 475 2 866 667 Adjusted equity 1 542 717 1 329 515 1 454 698 1 265 218 Adjusted capital ratio 1.95:1 2.15:1 2.08:1 2.27:1
18. Revenue
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Flight revenue 5 761 093 5 690 186 5 761 174 5 692 582 Rendering of services 230 375 207 268 223 491 192 755 Commissions received 62 570 58 067 52 415 42 633 Other 9 699 4 052 3 766 4 052 6 063 737 5 959 573 6 040 846 5 932 022
Integrated Annual Report 2017 125 INTEGRATED ANNUAL REPORT 2017
19. Profit from Operations
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Operating expenses are stated after incorporating the following items:
Auditors’ remuneration 1 600 883 1 470 789 Managerial, technical, administrative and secretarial services 44 325 70 708 44 325 70 708
Directors' remuneration (included in total staff costs) - for services as Directors and related committee work 3 462 3 362 3 462 3 362 - for managerial and other services 18 621 16 746 18 621 16 746 - retirement and medical benefits 1 662 1 453 1 662 1 453 - share-based payments – 2016 Scheme 4 031 1 001 4 031 1 001 - share-based payments paid relating to retention bonuses - 19 754 - 19 754 27 776 42 316 27 776 42 316
Only Directors are considered to be key management. A comprehensive breakdown per Director is included in the Report of Directors on pages 82 to 83.
Rentals under operating leases Property - Straightlined amounts 37 023 39 761 38 069 37 016 Equipment and vehicles - Straightlined amounts 5 003 5 684 4 857 4 729 Aircraft leases - Straightlined amounts 223 781 217 345 223 781 217 345 265 807 262 790 266 707 259 090
Employment costs 929 587 831 827 927 351 827 799 Contributions to defined contribution funds 72 302 65 640 72 302 65 640 Total staff costs 1 001 889 897 467 999 653 893 439 Number of employees 2 121 2 085
Impairments Debtor in subsidiary - - 3 342 5 488
Profit/(loss) on exchange differences 38 958 (62 135) 38 958 (62 135)
126 Integrated Annual Report 2017 Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Cash-settled, Share-based Payments This amount relates to the long-term incentive scheme concluded in 2016 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: 4 031 1 001 4 031 1 001 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 R4.50; d. Risk-free rate is 8.82%; and e. Dividend yield was 2.90%.
Closed hedging positions for the period expensed through profit and loss - 71 461 - 71 461
20. Interest Income
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Bank interest 46 704 40 546 45 234 39 466 South African Revenue Service 2 966 894 2 966 894 49 670 41 440 48 200 40 360
21. Interest Expense
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Total interest paid 263 589 182 218 263 580 182 218 Bank interest 250 377 170 496 250 368 170 496 Interest capitalised to pre-delivery payments 13 212 11 722 13 212 11 722
Less: Amount capitalised as borrowing costs (See note 3) (13 212) (11 722) (13 212) (11 722) Net interest 250 377 170 496 250 368 170 496
Integrated Annual Report 2017 127 INTEGRATED ANNUAL REPORT 2017
22. Taxation
Major Components of the Tax Expense
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Current Local income tax – current period 4 269 5 250 - - Local income tax – prior periods 2 213 9 304 2 213 9 304
Deferred Deferred tax – current 131 235 86 574 131 195 86 532 Deferred tax – prior year adjustment - 980 - - 137 717 102 108 133 408 95 836
Reconciliation of the Tax Expense Reconciliation between applicable tax rate and average effective tax rate.
Group Company
2017 2016 2017 2016
Applicable tax rate 28.00% 28.00% 28.00% 28.00%
Exempt income -0.57% -0.76% 0.00% 0.00% Disallowable expenditure 3.44% 3.91% 4.23% 4.63% Current tax for prior periods 0.51% 3.49% 0.55% 3.51% 31.38% 34.64% 32.78% 36.14%
No provision has been made for 2017 tax, as the company has no taxable income. The estimated tax loss available for set off against future taxable income is R468.3 million (2016: R124.7 million).
128 Integrated Annual Report 2017 23. Earnings per Share
Group
2017 2016
R’000 R’000
Reconciliation of profit or loss for the year to basic earnings Earnings attributable to ordinary shareholders 296 023 192 555 Add: IAS 16 loss on disposal of property, plant and equipment 10 574 - Less: taxation effect of loss on disposal (2 961) - Less: IAS 16 profit on disposal of property, plant and equipment - (12 419) Add: taxation effect of profit on disposal - 3 477 Add: IAS 36 impairment due to write-off of damaged aircraft beyond economical repair - 64 462 Less: taxation effect of IAS 36 impairment due to write-off of damaged aircraft beyond economical repair - (18 049) Less: IAS 16 compensation for write-off of damaged aircraft beyond economical repair - (84 155) Add: taxation effect of IAS 16 compensation for write-off of damaged aircraft beyond economical repair - 23 563 Add: IFRS 5 impairment on remeasurement of non-current assets held for sale 11 270 - Less: taxation effect of IFRS 5 impairment on remeasurement of non-current assets held for sale (3 156) - Headline earnings attributable to ordinary shareholders 311 751 169 434
Ordinary shares in issue ('000) 469 331 469 331 Adjustment in respect of consolidation of Comair Share Incentive Trust (4 242) (4 984) Weighted ordinary shares in issue ('000) 465 089 464 347 Adjusted for dilutive effect of share options in issue - 369 465 089 464 716
Earnings per share (cents) 63.7 41.5 Headline earnings per share (cents) 67.0 36.5 Diluted earnings per share (cents) 63.7 41.4 Diluted headline earnings per share (cents) 67.0 36.5 Dividends per share paid (cents) 18.0 15.0
Integrated Annual Report 2017 129 INTEGRATED ANNUAL REPORT 2017
24. Cash Generated from Operations
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Profit before taxation 434 687 294 810 407 368 265 198
Adjustments for: Depreciation and amortisation 456 281 372 103 455 964 371 847 Loss/(profit) on sale of assets 10 574 (12 419) 10 574 (12 419) (Profit) on write-off of damaged aircraft beyond economical repair net of insurance proceeds - (19 693) - (19 693) Income from equity accounted investments (8 874) (8 011) - - Interest received – investment (49 670) (41 440) (48 200) (40 360) Interest expense 250 377 170 496 250 368 170 496 Impairment of subsidiary loan - - 1 340 - Unrealised foreign exchange gains and losses (39 944) 121 868 (39 580) 121 192 Loss on remeasurement of non-current assets held for sale 11 270 - 11 270 - Non-cash movement in provisions 17 860 (10 288) 17 862 (10 261) Non-cash share-based payments movement 4 031 (31 499) 4 031 (31 499)
Changes in working capital: Inventories 242 (11 246) 504 (11 064) Trade and other receivables 98 267 46 656 99 799 49 673 Trade and other payables (36 013) 20 894 (41 974) 21 162 1 149 088 892 231 1 129 326 874 272
25. Taxation Paid
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Balance at beginning of the year 29 010 36 650 29 268 37 678 Current tax for the year recognised in profit or loss (6 482) (14 554) (2 213) (9 304) Interest accrual - 894 - 894 Interest received 2 966 - 2 966 - Balance at end of the year (460) (29 010) - (29 268) 25 034 (6 020) 30 021 -
26. Commitments and Contingencies
Group and Company Capital Commitments and Contingencies Comair made pre-delivery payments of R68 million during the prior year towards the delivery of one Boeing 737-800 aircraft which was delivered at the end of November 2016. The Group had no remaining commitment to Boeing for this order at year-end (prior year: R477 million).
Comair has also made deposits of R132 million in the current year, in addition to R102 million in preceding years, towards the purchase of eight Boeing 737-8 MAX aircraft due for delivery from 2019 to 2022. At year-end, the Group had a remaining commitment to Boeing of R5.7 billion (prior year: R6.6 billion), payable from 2018 to 2022. The funding of pre-delivery payment finance has been mandated to Investec Bank. Senior debt financing will be arranged closer to the delivery dates of these aircraft.
130 Integrated Annual Report 2017 Comair has committed itself to the purchase of an industrial commerical park at a cost of R75 million, the construction of a fourth simulator building at a cost of R67 million, the purchase of an Airbus A320 Fixed Base Simulator Trainer at a cost of EUR1.3 million and a pre-owned Boeing 737-800 aircraft at a cost of USD24.2 million. The Group is in the process of securing the related financing for this capital expenditure.
Expected Cash Flows in Relation to Commitments
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Financial year 2017 - 477 386 - 477 386 Financial year 2018 876 184 - 801 184 - Financial year 2019 393 938 - 393 938 - 1 270 122 477 386 1 195 122 477 386
Operating Lease Commitments
Group Company
2017 2016 2017 2016
R’000 R’000 R’000 R’000
Aircraft Commitments for year one 249 061 243 972 249 061 243 972 Commitments for years two to five 670 151 643 009 670 151 643 009 Commitments after year five 50 204 42 539 50 204 42 539 969 416 929 520 969 416 929 520
Leasing Arrangements – Aircraft Generally medium-term (five-year) leasing agreements on aircraft.
The Group has seven USD denominated leases averaging USD201 000 per month, each which have no escalation clauses. The Group has entered into an additional lease, commencing in July 2017 for USD180 000 per month, which has no escalation clause. These leases are included in the operating lease commitments outlined above.
Contingent Liabilities The Company has signed a subordination agreement with Kulula Air Proprietary Limited (per note 6), which would represent a contingent liability in the amount of R19 million (2016: R14 million).
Contingent Assets The Company’s claim against South African Airways SOC Limited for damages, arising from anti-competitive conduct, was heard in the Gauteng South High Court between 18 April and 24 August 2016. Judgement in this matter was handed down on 15 February 2017. In terms of the judgement, Comair was awarded damages in the sum of R554 million, with a similar additional amount being awarded in respect of interest and costs, resulting in total damages of approximately R1.16 billion. SAA has lodged an appeal against this judgement. Comair has lodged a cross appeal to recover the full amount of the damages sustained, plus interest on the total amount, which if successful, will increase the damages awarded to approximately R1.9 billion. It is anticipated the appeal will be heard in early 2018.
Guarantees The Company has guaranteed R12.5 million (2016: R12.5 million) in favour of the Air Traffic and Navigation Services, R638 000 (2016: R250 000) in favour of the SA Insurance Company, USD19 000 (2016: USD nil) in favour of the Indian Air Force and GBP500 000 (2016: GBP nil) in favour of St Helena Island.
Integrated Annual Report 2017 131 INTEGRATED ANNUAL REPORT 2017
27. Share Incentive Trust
Staff Share Incentive Scheme 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 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.
The Staff Share Incentive Scheme is allowed to hold a total of 7.5% of issued share capital in Comair Limited. Currently the scheme holds 0.9% (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 following table illustrates the number and weighted average exercise prices of share options held by eligible participants, including directors:
2017 2016
Weighted Weighted average average exercise price exercise price Number of Number of share options R share options R
Balance at the beginning of period 741 334 1.55 741 334 1.55 Options exercised during the period (741 334) - - - Balance at the end of the period - - 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 2017 become unconditional between the following dates:
Subscription 2017 2016 price Number of Number of R share options share options
1 September 2004 and 1 September 2007 0.80 - 33 334 5 December 2005 and 5 December 2010 1.70 - 133 000 5 June 2006 and 5 June 2011 1.57 - 575 000 - 741 334
132 Integrated Annual Report 2017 28. 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 remuneration on pages 82 to 83 of the Report of Directors
Group Company
2017 2016 2017 2016
Loan accounts – Owing (to) by related parties R’000 R’000 R’000 R’000
Related Party Balances
Alooca Properties Proprietary Limited - - 82 625 55 430 Aconcagua 32 Investments Proprietary Limited - - (1 713) 32 Kulula Air Proprietary Limited - - - 22 Commuter Handling Services Proprietary Limited - 7 852 - 7 852 Comair Share Incentive Trust - - 571 2 427 Comair Retail Travel Services Proprietary Limited - - 751 201 Comair Catering Proprietary Limited - - 72 23 Comair Air Cargo Proprietary Limited - - 7 -
Amounts included in trade receivable/(trade payable) regarding related parties
Kulula Air Proprietary Limited - - 12 609 9 267 Kulula Air Proprietary Limited – Impairment allowance - - (12 609) (9 267) Kulula Air Proprietary Limited - - (65) (6) Comair Retail Travel Services Proprietary Limited - - (32 387) (30 953)
Related Party Transactions
Rent paid to related parties Aconcagua 32 Investments Proprietary Limited - - 2 011 1 828 Alooca Properties Proprietary Limited - - 3 005 1 169
Dividends paid to related parties Comair Share Incentive Trust - - 704 636
Catering costs paid to related parties Highly Nutritious Food Company Proprietary Limited - - 3 496 1 936
Service Recovery Kulula Air Proprietary Limited - - (3 092) (1 807)
Integrated Annual Report 2017 133 INTEGRATED ANNUAL REPORT 2017
29. Retirement Benefits
Post-retirement Benefits The Group contributes to the Old Mutual Superfund which is governed by the Pension Funds 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.
30. Subsequent Events
R70 million was paid on 31 August 2017, for the purchase of the office park, known as Anchor Industrial Park. Transfer is expected to take place in the near future at which time, the remaining R5 million will be paid in full and final settlement of the transaction.
No other matters have occurred between the reporting date and the date of approval of the Financial Statements which would have a material effect on these Financial Statements.
31. Business Combinations
2017 There were no business combinations entered into or disposals during the current year.
2016 Disposal of Part of Subsidiary not Resulting in Loss of Control During the year, the Group disposed of 30% of its shareholding in Comair Catering Proprietary Limited. This disposal resulted in proportional disposal of the Highly Nutritious Food Company Proprietary Limited.
At year-end, the Group still holds 39.2% of the Highly Nutritious Food Company Proprietary Limited and still holds the majority of the voting rights of the Board of Directors.
32. New Accounting Pronouncements
Annual periods Standard Details of Amendments Expected impact beginning of after IFRS 2 Classification and Measurement of Share-based Payment 1 January 2018 The impact of this amendment Share based Transactions: A collection of three distinct narrow-scope on the Group’s Financial payment amendments dealing with classification and measurement of share- Statements is still being based payments. assessed.
The amendments address: – The effects of vesting conditions on the measurement of a cash-settled share-based payment; – The accounting requirements for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity- settled; and – Classification of share-based payment transactions with net settlement features.
134 Integrated Annual Report 2017 Annual periods Standard Details of Amendments Expected impact beginning of after IFRS 9 A final version of IFRS 9 has been issued which replaces IAS 1 January 2018 The impact of this amendment Financial 39 Financial Instruments: Recognition and Measurement. The on the Group’s Financial Instruments completed standard comprises guidance on Classification and Statements is still being Measurement, Impairment Hedge Accounting and Derecognition: assessed.
– IFRS 9 introduces a new approach to the classification of financial assets, which is driven by the business model in which the asset is held and their cash flow characteristics. A new business model was introduced which does allow certain financial assets to be categorised as “fair value through other comprehensive income” in certain circumstances. The requirements for financial liabilities are mostly carried forward unchanged from IAS 39. However, some changes were made to the fair value option for financial liabilities to address the issue of own credit risk. – The new model introduces a single impairment model being applied to all financial instruments, as well as an “expected credit loss” model for the measurement of financial assets. – IFRS 9 contains a new model for hedge accounting that aligns the accounting treatment with the risk management activities of an entity, in addition enhanced disclosures will provide better information about risk management and the effect of hedge accounting on the financial statements. – IFRS 9 carries forward the derecognition requirements of financial assets and liabilities from IAS 39 IFRS 10 Sale or Contribution of Assets between an Investor and its The effective date It is unlikely that the Consolidated Associate or Joint Venture (Amendments to IFRS 10 and IAS of this amendment amendment will have a Financial Statements 28): Narrow scope amendment address an acknowledged has been deferred material impact on the inconsistency between the requirements in IFRS 10 and those in indefinitely until Group’s Financial Statements. IAS 28 (2011), in dealing with the sale or contribution of assets further notice between an investor and its associate or joint venture. IFRS 12 Annual Improvements 2014-2016 Cycle: Clarification of the scope 1 January 2017 It is unlikely that the Disclosure of of IFRS 12 with respect to interests in entities classified as held for amendment will have a Interest in Other sale in accordance with IFRS 5 Non-current Assets Held for Sale material impact on the Entities and Discontinued Operations. Group's Financial Statements. IFRS 15 New standard that requires entities to recognise revenue to depict 1 January 2018 The impact of this amendment Revenue from the transfer of promised goods or services to customers in an on the Group's Financial Contracts with amount that reflects the consideration to which the entity expects Statements is still being Customers to be entitled in exchange for those goods or services. This core assessed. principle is achieved through a five step methodology that is required to be applied to all contracts with customers. 1 January 2018
The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple- element arrangements.
The new standard supersedes: – IAS 11 Construction Contracts; – IAS 18 Revenue; – IFRIC 13 Customer Loyalty Programmes; – IFRIC 15 Agreements for the Construction of Real Estate; – IFRIC 18 Transfers of Assets from Customers; and – SIC-31 Revenue – Barter Transactions Involving Advertising Services.
Integrated Annual Report 2017 135 INTEGRATED ANNUAL REPORT 2017
32. New Accounting Pronouncements (continued)
Annual periods Standard Details of Amendments Expected impact beginning of after IFRS 16 New standard that introduces a single lessee accounting model 1 January 2019 The impact of this amendment Leases and requires a lessee to recognise assets and liabilities for all leases on the Group's Financial with a term of more than 12 months, unless the underlying asset is Statements is still being of low value. A lessee is required to recognise a right-of-use asset assessed. representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. A lessee measures right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents them in the statement of cash flows applying IAS 7 Statement of Cash Flows.
IFRS 16 contains expanded disclosure requirements for lessees. Lessees will need to apply judgement in deciding upon the information to disclose to meet the objective of providing a basis for users of financial statements to assess the effect that leases have on the financial position, financial performance and cash flows of the lessee.
IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.
IFRS 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.
IFRS 16 supersedes the following Standards and Interpretations: – IAS 17 Leases; – IFRIC 4 Determining whether an Arrangement contains a Lease; – SIC-15 Operating Leases—Incentives; and – SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IAS 7 Disclosure Initiative: Amendments requiring entities to disclose 1 January 2017 The impact of this amendment Statement of Cash information about changes in their financing liabilities. The additional on the Group’s Financial Flows disclosures will help investors to evaluate changes in liabilities arising Statements is still being from financing activities, including changes from cash flows and non- assessed. cash changes (such as foreign exchange gains or losses). IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses 1 January 2017 It is unlikely that the Income Tax (Amendments to IAS 12): Narrow-scope amendment to clarify the amendment will have a requirements on recognition of deferred tax assets for unrealised material impact on the losses on debt instruments measured at fair value. Group's Financial Statements. IAS 40 Transfers of Investment Property: Clarification of the requirements 1 January 2018 It is unlikely that the Investment Property on transfers to, or from, investment property. amendment will have a material impact on the Group's Financial Statements.
Annual periods Intepretations Details of Amendments Expected impact beginning of after IFRIC 22 This interpretation addresses the exchange rate to use in 1 January 2018 The impact of this amendment Foreign Currency transactions that involve advance consideration paid or received in on the Group's Financial Transactions a foreign currency. Statements is still being and Advance assessed. Consideration IFRIC 23 IFRIC 23 addresses uncertainty over how tax treatments should 1 January 2019 It is unlikely that the Uncertainty over affect the accounting for income taxes. amendment will have a Income Tax material impact on the Treatments Group’s financial statements.
136 Integrated Annual Report 2017 Notice of Annual General Meeting
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 (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 28 November 2017 at 12h00 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 22 September 2017, being the notice record date set by the Board of the Company in terms of the Companies Act determining which shareholders are entitled to receive notice of the Annual General Meeting.
Agenda
Presentation of the audited Financial Statements of the Company, including the reports of the Directors and the Audit Committee for the year ended 30 June 2017. The Integrated Annual Report, of which this notice forms part, contains the Consolidated Financial Statements and the aforementioned reports. The Financial Statements, including the unmodified Audit Opinion, are available on the Company’s website at www.comair.co.za, or may be requested and obtained in person, at no charge, at the registered office of the Company during office hours.
Electronic Participation
Shareholders or their proxies are able to attend, but not participate and vote at the Annual General Meeting by way of a teleconference call. Should you wish to make use of this facility, please contact Derek Borer at email: [email protected], by no later than 12h00 on Friday, 21 November 2017. 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 Directors of the Company (“the Board”), the Independent Auditor’s Report and the report by the Audit Committee of the Company and the Group for the year ended 30 June 2017, be and are hereby received and adopted.
Integrated Annual Report 2017 137 INTEGRATED ANNUAL REPORT 2017
Reason 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 Group and Company, including the Report of the Board, the Independent Auditor’s Report and the report by the Audit Committee of the Company and the Group for the year ended 30 June 2017.
2. Re-appointment of External Auditors Ordinary Resolution Number 2 RESOLVED THAT the re-appointment of Grant Thornton Johannesburg Partnership (“Grant Thornton”), as nominated by the Company’s Audit Committee, as independent external auditors of the Company, be and is hereby approved until the conclusion of the next AGM.
Reason and effect of Ordinary Resolution Number 2 The reason for and the effect of Ordinary Resolution Number 2 is to re-appoint Grant Thornton as the auditors of the Company to hold office until the conclusion of the next AGM. The Company’s Audit Committee has recommended, and the Board has endorsed, the above re-appointment.
3. Re-election of Directors Ordinary Resolution Number 3.1 Directors Retiring by Rotation RESOLVED THAT Mr Jacob Meyer Kahn, 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 and is hereby re-elected as a Director of the Company.
Ordinary Resolution Number 3.2 RESOLVED THAT Mr Ronnie Siboniseni Ntuli, an Independent Non-executive Director, who retires in terms of the Company’s MoI and who, being eligible, offers himself for re-election, be and is hereby re-elected as a Director of the Company.
Ordinary Resolution Number 3.3 RESOLVED THAT Mr Rodney Cyril Sacks, an Independent Non-executive Director, who retires in terms of the Company’s MoI and who, being eligible, offers himself for re-election, be and is hereby re-elected as a Director of the Company.
Ordinary Resolution Number 3.4 RESOLVED THAT Dr Peter Johannes 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 and is hereby re-elected as a Director of the Company.
Ordinary Resolution No. 3.5 RESOLVED THAT Mr Pieter van Hoven, an Independent Non-executive Director, who retires in terms of the Company’s MoI and who, being eligible, offers himself for re-election, be and is hereby re-elected as a Director of the Company.
Reasons and effect of Ordinary Resolution Numbers 3.1 to 3.5 The reasons for and the effect of Ordinary Resolution Numbers 3.1 to 3.5 is to re-elect, by way of separate resolutions, Mr Jacob Meyer Kahn, Mr Ronnie Sibongioseni Ntuli, Mr Rodney Cyril Sacks, Dr Peter Johannes Welgemoed and Mr Pieter van Hoven 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 addition, 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 Director appears on pages 145 to 148 of the Integrated Annual Report of which this notice forms part.
138 Integrated Annual Report 2017 4. Election of Members of the Audit Committee Ordinary Resolution Number 4.1 RESOLVED THAT, Mr Naran Maharajh, who is as an Independent Non-executive Director of the Company, be and is hereby elected as a member of the Company’s Audit Committee for the financial year ending 30 June 2018.
Ordinary Resolution Number 4.2 RESOLVED THAT, subject to the election of Dr Peter Johannes Welgemoed as an Independent Non-executive Director of the Company pursuant to Ordinary Resolution Number 3.4, Dr Peter Johannes Welgemoed be and is hereby elected as a member of the Company’s Audit Committee for the financial year ending 30 June 2018.
Ordinary Resolution Number 4.3 RESOLVED THAT, subject to the election of Mr Ronnie Siboniseni Ntuli as an Independent Non-executive Director of the Company pursuant to Ordinary Resolution No 3.2, Mr Ronnie Siboniseni Ntuli be and is hereby elected as a member of the Company’s Audit Committee for the financial year ending 30 June 2018.
Ordinary Resolution Number 4.4 RESOLVED THAT, Ms Phuti Mahanyele who is an Independent Non-executive Director of the Company, be and is hereby elected as a member of the Comapny’s Audit Committee with effect from 1 October 2017 for the financial year ending 30 June 2018.
Reasons for and effect of Ordinary Resolution Numbers 4.1 to 4.4 The reason for and the effect of Ordinary Resolution Numbers 4.1 to 4.4 is to elect, by way of separate resolutions, Mr Naran Maharajh, Dr Peter Johannes Welgemoed, Mr Ronnie Siboniseni Ntuli and Ms Phuti Mahanyele as members of the Audit Committee of the Company.
A brief CV of each of the Directors mentioned above is included on pages 145 to 148 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
RESOLVED THAT the shareholders endorse, by way of a non-binding advisory vote, the Company’s remuneration policy as set out on pages 67 to 69 of the Integrated Annual Report.
Reason for and effect of non-binding endorsement The reason for and the effect of ordinary resolution number 5 is that the King Code of Governance Principles and King Report on Governance (“King III”) recommends that the remuneration policy of the Company be endorsed through a non-binding advisory vote by shareholders.
Special Resolutions
6. Approval of Non-executive Directors’ Remuneration 2016/17 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 462 000 for the financial year ended 30 June 2017 be and is hereby approved.
Reasons 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 Directors for their services as Directors of the Company for the period ended 30 June 2017. 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 2017 financial year. No fees are payable to Mr Sacks, Mr N Li and Mr C Luo. Mr van Hoven, in addition to being the Chairperson of the Board and the Nominations Committee, is also Chairman of
Integrated Annual Report 2017 139 INTEGRATED ANNUAL REPORT 2017
the 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 previous AGM on 10 November 2016. The fees payable to each Director, and further details on the basis of calculation of the remuneration, are respectively included in the Report of the Directors on page 78 to 83, and in the Remuneration Report on pages 67 to 69 of the Integrated Annual Report of which this notice forms part.
7. Approval of Non-executive Directors’ Remuneration – 2017/18 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 2018:
30 June 2018 30 June 2017
Chairperson of the Board R1 516 981.00 R1 429 092.00 Deputy Chairperson (2) R442 453.00 R416 819.00 Non-executive Directors (4) R189 623.00 R178 637.00 Chairperson of each sub-committee, per sub-committee meeting held R16 434.00 R15 481.00 Members of each sub-committee, per sub-committee held R8 217.00 R7 741.00 Chairperson of Pension Fund Board R16 434.00 R15 481.00
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 2018. 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 N Li and Mr C Luo. Mr van Hoven, in addition to being Chairperson of the Board and the Nominations Committee, is also 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 67 to 69 of the Integrated Annual Report of which this notice forms part.
8. General Authority to Repurchase Shares Special Resolution Number 3 8.1 RESOLVED THAT the Board 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 fifteen percent (15%) of the Company’s issued ordinary share capital as at the beginning of the financial year, provided that the acquisition of shares as treasury shares by a subsidiary of the Company shall not be effected to the extent that, in aggregate more than ten percent (10%) of the number of issued shares in the Company are held by or for the benefit of all the subsidiaries of the Company taken together;
8.1.3 at any point in time, the Company may only appoint one agent to effect any repurchases on the Company’s behalf;
8.1.4 the repurchase of securities being effected through the order book operated by the JSE trading system and done without any prior understanding or arrangement between the Company and the counterparty (reported trades are prohibited);
8.1.5 this general authority shall only be valid until the date of the next AGM or for fifteen (15) months from the date of passing of this Special Resolution Number 3, whichever is the shorter;
8.1.6 in determining the price at which the Company’s ordinary shares are acquired by the Company or any subsidiary in terms of this general authority, the maximum premium at which such ordinary shares may be acquired will be ten percent (10%)
140 Integrated Annual Report 2017 of the weighted average of the market price at which such ordinary shares are traded on the JSE, as determined over the five (5) trading days immediately preceding the date of the repurchase of such ordinary shares by the Company. The JSE should be consulted for a ruling if the Company’s securities have not traded in such five (5) day business day period;
8.1.7 the Company or its subsidiary may not repurchase securities during a prohibited period as defined in the JSE Listings Requirements unless they have in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed (not subject to any variation) and full details of the programme have been disclosed to the JSE in writing prior to the commencement of the prohibited period;
8.1.8 when the Company or any subsidiary has cumulatively repurchased three percent (3%) of the initial number of the relevant class of securities, and for each three percent (3%) in aggregate of the initial number of that class acquired thereafter, an announcement will be made.
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 twelve (12) months after the date of the general repurchase; • the assets of the Company and the Group, fairly valued in accordance with International Financial Reporting Standards, will be in excess of the liabilities of the Company and the Group for a period of twelve (12) months after the date of the general repurchase; • the share capital and reserves of the Company and the Group will be adequate for a period of twelve (12) 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 twelve (12) 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.
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 149; • Share capital of the Company – page 114.
Integrated Annual Report 2017 141 INTEGRATED ANNUAL REPORT 2017
Directors’ Responsibility Statement The Directors, whose names are given on pages 80 to 81 of the Integrated Annual Report, collectively and individually accept full responsibility for the accuracy of the information pertaining to this resolution and certify that to the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this resolution contains all information required by law and the JSE Listings Requirements.
No Material Change Other than the facts and developments reported on in this 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 Independent Auditor’s 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 9.1 RESOLVED THAT the Board is hereby authorised in terms of section 45(3)(a)(ii) of the Companies Act, as a general approval (which approval will be in place for a period of two (2) years from the date of adoption of this Special Resolution Number 4), to authorise the Company to provide any direct or indirect financial assistance (“financial assistance” will herein have the meaning attributed to such term in section 45(1) of the Companies Act), that the Board may deem fit, to any related or inter-related company or corporation of the Company (“related and inter-related” will herein have the meaning attributed to these terms in section 2 of the Companies Act), on the terms and conditions and for the amounts that the Board may determine.
The main purpose for this authority is to grant the Board the authority to provide inter-Group loans and other financial assistance for the purpose of funding the activities of the Group.
The Board undertakes that:
9.1.1 it will not adopt a resolution to authorise such financial assistance unless the Directors are satisfied that:
9.1.1.1 immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test as contemplated in the Companies Act; and
9.1.1.2 the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company; and
9.1.2 written notice of such resolution by the Board shall be given to all shareholders of the Company and any trade union representing the employees:
9.1.2.1 within ten (10) 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 zero point one percent (0.1%) of the Company’s net worth at the time of the resolution; and
9.1.2.2 within thirty (30) days of the end of the financial year, in any other case.
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 106 to 108 of the Integrated Annual Report of which this notice forms part.
142 Integrated Annual Report 2017 Ordinary Resolution
10. Authorisation for the Company Secretary or any Director to sign the 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 Resolution Numbers 1 to 5 contained in this Notice of AGM require approval by more than fifty percent (50%) of the votes exercised on the resolutions by shareholders present or represented by proxies at the AGM, and are further subject to the provisions of the Companies Act, the MoI of the Company and the JSE Listings Requirements.
Special Resolution Numbers 1 to 4 contained in this Notice of AGM require the approval by at least seventy five percent (75%) of the votes exercised on the resolutions by shareholders present or represented by proxies 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, 17 November 2017. Accordingly, the last day to trade in order to be eligible to attend and vote at the meeting is Tuesday, 14 November 2017.
Proxy and Voting Procedures
A Shareholder entitled to attend and vote at the AGM is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy need not be a Shareholder of the Company. For the convenience of registered shareholders of the Company, a Form of Proxy is enclosed herewith.
Shareholders are requested to lodge their Forms of Proxy with, or to post same to the Company’s Transfer Secretaries, Computershare Investor Services (Pty) Ltd, 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 Tuesday, 28 November 2017 at 12h00, provided that any form of proxy not delivered to the Transfer Secretary by this time may be handed to the Chairman of the Annual General Meeting prior to the commencement of the Annual General Meeting, at any time before the appointed proxy exercises any Shareholder rights 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. Any Forms of Proxy not received by this time must be handed to the Chairperson of the meeting immediately prior to the meeting.
On a show of hands, every Shareholder of the Company present in person or represented by proxy shall have one vote only. On a poll, every Shareholder of the Company shall have one vote for every share held in the Company by such Shareholder.
Integrated Annual Report 2017 143 INTEGRATED ANNUAL REPORT 2017
The attached Form of Proxy is only to be completed by those shareholders who:
• hold ordinary shares of the Company in certificated form; or • are recorded on the electronic sub-register in “own name” dematerialised form.
Shareholders who have dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker and wish to attend the AGM, must instruct their CSDP or broker to provide them with a Letter of Representation, or they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement/mandate entered into between them and the CSDP or broker.
Equity securities held by a Share Trust or Scheme will not have their votes at Annual General Meetings taken into account for the purposes of resolutions proposed in terms of the JSE Listings Requirements.
Note that holders of unlisted securities and treasury shares are not entitled to vote at the AGM.
Proof of Identification Required
The Companies Act requires that any person who wishes to attend or participate in a Shareholder’s 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. An 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
Date: 11 September 2017 Place: Bonaero Park
144 Integrated Annual Report 2017 Directors Standing for Election or Re-election
1. Mr JM Kahn (Board)
(Age: 78)
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 SAB 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.
2. Mr RS Ntuli (Board and Audit Committee)
(Age: 47)
Ronnie is an established South African-born entrepreneur and financier. He is:
1. The founder of Kerma Global Limited (Kerma), a company that holds the global private equity interests on behalf of the Ntuli family. Kerma is also involved in financing and commercialising new sector or market disrupting cutting edge industries that have global market potential such as: • Olduvai – an artificial intelligence company; • Room 31 – a New York City based co-working property company; • Thelo – an Africa wide capital equipment financing company.
2. The founder and Chairman of Thelo Group (Thelo), a South African based independent and diversified investment company with interests in the aviation, railway, and financial services sectors.
He currently serves as Chief Executive of Thelo Rolling Stock, a joint venture between Thelo and the Industrial Development Corporation (the largest industrial development financier on the African continent). Thelo Rolling Stock applies its balance sheet to financing the acquisition of rolling stock (Locomotives and Freight Wagons) for rail operators, concession holders and freight owners throughout the Sub-Saharan region of Africa.
Ronnie is passionate about economic development and is also:
• a member on the board of the African Export-Import Bank (AFRIEXIMBANK). Headquartered in Cairo, Egypt, the bank was established by African Governments, African private and institutional investors as well as non-African financial institutions and private investors for purposes of financing, promoting and expanding intra-African and extra-African trade. AFRIEXIMBANK has the status of an international multilateral organisation • a member of the Honorary International Investor Council (HIIC) for the President of the Federal Republic of Nigeria. The HIIC is a body of leading international business persons that advise the President and members of the Federal Government of Nigeria on the economy and development. • a member of the Pan-African Private Sector Trade Policy Committee (PAFTRAC) which along with African Ministers of Trade and Industry is responsible for developing Africa’s Trade Policy issues and position at the World Trade Organization (WTO). • a member on the board of directors for P&O Ferries, a United Kingdom based international ferries company. • a member of the board of directors of Dangote Cement, South Africa which, is a subsidiary of the Dangote Group of companies, the leading industrial Group on the continent of Africa.
Integrated Annual Report 2017 145 INTEGRATED ANNUAL REPORT 2017
• the Deputy Chairman of Comair Limited, a Johannesburg Stock Exchange listed company with investments in the Aviation and Travel sectors, operating airlines such as British Airways and kulula.com • former Chairman of the National Empowerment Fund (NEF), a multi-billion Rand development finance agency established by the government of the Republic of South Africa to promote and drive economic transformation and development of the South African economy. • Chairman of the board of directors of the Desmont Tutu African Leadership Institute. With Archbishop Emeritus Desmont Tutu as the patron, the Institute’s mandate, is to develop the next generation of leaders on the African continent. The Institute has a number of programmes with the flagship being the Archbishop Tutu Leadership Fellowship Programme where, through a competitive and rigorous annual process, the Institute identifies high calibre professionals in all sectors (private, public, NGO etc.) from countries across the African continent and with the support of Oxford University puts them through this leadership development programme. • along with some globally renowned artists, Ronnie is a patron of the Hugh Masekela Heritage Foundation (HMHF). The HMHF is involved in projects that celebrate, produce, publish and promote various aspects of African arts including but not limited to music, cinema, visual and performing arts.
Preceding these roles, Ronnie founded Andisa Capital, in partnership with one of Africa’s largest banking Groups. Andisa is an independent and diversified financial services Group with interests in private equity, stock-broking, capital markets, corporate finance and treasury solutions, for which he was the founding Chief Executive.
Ronnie is the former President of the Johannesburg Chamber of Commerce and Industry and holds a LLB from Edinburgh University. He has been a formal adviser on economic development, to a number of heads of state in Africa and has in a number of continents, delivered papers on financing, economic development and entrepreneurship.
3. Mr RC Sacks (Board)
(Age: 67)
Rodney was born and grew up in South Africa. He graduated from the University of the Witwatersrand in Johannesburg with a law degree and post-graduate higher diploma in tax law. Rodney was one of the youngest attorneys to be made a partner at Werksmans, one of the leading and largest corporate law firms in South Africa. Rodney was a senior partner when he emigrated to California with his family in August 1989 after spending nearly 20 years with Werksmans.
In 1990 a consortium headed up by Rodney and his partner, Hilton Schlosberg, acquired control of a publicly traded company which was ultimately merged into and became known as Hansen Natural Corporation. Hansen Natural Corporation (now known as Monster Beverage Corporation) acquired Hansen’s Natural Soda and Apple Juice business in 1992 for a purchase consideration of $14.5 million. At that time sales were $17.5 million and the business had 12 employees.
Rodney has been Chairman and Chief Executive Officer of Hansen Natural Corporation since 1990. In 2002 Hansen Beverage Company (now known as Monster Energy Company) launched the well-known Monster Energy drink line which has risen to become the best- selling energy drink in the United States and is now sold internationally in more than 114 countries. Under Rodney’s stewardship Monster Energy Company’s sales have grown to in excess of $2.5 billion and today employs more than 2,000 people.
Rodney is currently a Director of Comair as well.
4. Mr PJ Welgemoed (Board and Audit Committee)
(Age: 74)
In 1971 Peter obtained a Doctorate in Transport Economics at Rand Afrikaans University. In 1974, he was appointed Professor and Chairman of the Department of Transportation Economics and Director of the Research Centre for Physical Distribution and Transportation Studies at Rand Afrikaans University. Thereafter he served on various boards of 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
146 Integrated Annual Report 2017 was appointed as a Member of the Cabinet, with the portfolio of Minister of Transport, and in 1992 as Minister of Transport and of Post and Telecommunication. In 1998 he was appointed Executive Chairman of the Board of Market Power (SA) in South America. He controlled the daily operations of the Group in Chile, Argentina and Uruguay from the Head Office in Santiago. At present is he is involved in private business through directorships and consultancy.
5. Mr P van Hoven (Board)
(Age: 73)
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 South African Civil Aviation Authority.
As of 13 February, 2012, Pieter was appointed Independent Non-executive Chairman to the Comair Limited Board of Directors, a position he still holds to date.
6. Mr N Maharajh (Audit Committee)
(Age: 51) BAcc, Postgraduate Diploma in Accountancy
Naran is a practising chartered accountant and director of BCA Chartered Accountants. He completed his training at PwC, and then spent two years lecturing in Accounting at the University of KwaZulu-Natal. In 1997 he was appointed as a partner at KPMG. In 2007, together with other colleagues, he founded BCA Chartered Accountants. He is the Non-executive Chairman of the Audit Committee of the South African Sugar Association, and a member of the Council of the University of KwaZulu Natal.
He previously served as a director of the South African Civil Aviation Authority, Mercedes-Benz South Africa Ltd and Masonite Africa
7. Ms P Mahanyele (Audit Committee)
(Age: 46) BA Economics
Phuti Mahanyele is the Executive Chairperson of Sigma Capital, a majority black-owned investment holding company launched in 2015 in South Africa, which focuses on enabling sustainable partnerships in such fields as power and infrastructure, real estate, consumer goods, technology, media and financial services. Mahanyele’s experience in the region dates back to 1993. She joined Fieldstone as an intern in Manhattan, NYC in 1997. Fieldstone is an international advisory firm specialising in infrastructure. She rose through the ranks to the position of vice-president, after moving to the firm’s South Africa office. She then accepted a position leading the Project Finance South Africa business unit of the Development Bank of Southern Africa. Most recently, she was the chief executive officer of Shanduka Group, a South African investment holding company she joined in 2004 and left in 2015.
Integrated Annual Report 2017 147 INTEGRATED ANNUAL REPORT 2017
Among her many accolades, Mahanyele was recognised as the Forbes Woman Africa 2014 Business Woman of the Year, as well as one of the 50 Women to Watch by the Wall Street Journal in 2008. Mahanyele was selected as a Global Young Leader in 2007 by the World Economic Forum and was recognised by Africa Investor, as a Leading Africa Woman in Business in 2012. Her philanthropic efforts are focused on empowering the next generation. In addition to mentoring young professionals and students, Mahanyele is a participant in Dignity Day, a programme led by the Young Global Leaders of the World Economic Forum, which focusses on reinforcing the value of dignity in young people. She is also an honourary member of the Golden Key International Honour Society, a patron of the Bosele Foundation and a member of the advisory board of Stellenbosch University.
Mahanyele holds a Bachelor of Arts Degree in Economics from Rutgers University and a Master of Business Administration Degree from De Montfort University in Leicester, United Kingdom. In 2008, Mahanyele completed the Kennedy School of Government Executive Education programme, Global Leadership and Public Policy for the 21st Century, at Harvard University. She is on the boards of Comair Limited (a listed airline business), Reunert Limited (a listed electronics business) and also chairs the Bain Academy which supports professionals in corporate Africa.
Share Price Performance
2017 2016
c c
Market price (cents per share) Closing (30 June) 515 310 High 590 440 Low 296 230
Closing price/Earning ratio 7.8 7.5
Number of shares in issue at year end (millions) 469 469 Weighted average (millions) 465 313
Volume of shares traded (millions) 28 58
Volume of shares traded to number in issue at year end 6% 12%
148 Integrated Annual Report 2017 Shareholder Analysis
Shareholder Spread
No. of Bands Shareholdings % No. of Shares %
1 – 1 000 Shares 2 142 58.75 636 612 0.14 1 001 – 10 000 Shares 942 25.84 3 492 941 0,74 10 001 – 100 000 Shares 374 10.26 13 450 836 2.87 100 001 – 1 000 000 Shares 144 3.95 49 630 824 10.57 1 000 001 Shares and over 44 1.21 402 119 652 85.68 Total 3 646 100.00 469 330 865 100.00
Distribution of Shareholders
No. of Type of Shareholder Shareholdings % No. of Shares %
Banks and Brokers 25 0,69 21 103 530 4.50 Medical Schemes 3 0.08 1 610 126 0.34 Close Corporations 24 0.66 364 659 0.08 Endowment Funds 12 0.33 1 709 569 0.36 Individuals 3 195 87.63 19 741 591 4.21 Insurance Companies 14 0.38 4 719 520 1.01 Trusts 144 3.95 13 583 274 2.89 Mutual Funds 53 1.45 102 350 554 21.81 Nominees and Trusts 6 0.16 59 863 0.02 Other Corporations 14 0.38 50 184 0.01 Retirement Funds 87 2.39 34 845 460 7.42 Private (Pty) Companies 64 1.76 235 879 677 50.26 Share Trusts 1 0.03 4 244 464 0.90 Public Companies 4 0.11 29 068 394 6.19 Total 3 646 100.00 469 330 865 100.00
Beneficial Shareholders holding 3% or more as of 30 June 2017
The following shareholders hold more than 3% of the issued share capital of the Company as of 30 June 2017:
Number of % Shares Shareholding
BB Investment Company (Pty) Ltd 126 320 151 26.91 Allan Gray* (Unit Trusts Grouped) 70 562 420 15.03 Britair Holdings Limited 53 966 623 11.50 Innercreek Investments (Pty) Limited 50 000 000 10.65 HNA Group 29 067 766 6.19 Total 329 916 960 70.28
Integrated Annual Report 2017 149 INTEGRATED ANNUAL REPORT 2017
* Allan Gray
Allan Gray Balanced Fund 23 296 877 (4.96%) Allan Gray Equity Fund 21 974 221 (4.68%) Allan Gray Optimal Fund 6 825 551 (1.45%) Allan Gray Domestic Equity Portfolio 5 437 630 (1.16%) Allan Gray Life Global Balanced Fund 3 860 941 (0.82%) Allen Gray Global Absolute Portfolio 2 672 172 (0.57%) Allan Gray Domestic Optimal Portfolio 1 731 094 (0.37%) Allan Gray SA Equity Fund 1 399 595 (0.30%) Allan Gray Domestic Absolute Portfolio 1 219 426 (0,26%) Allan Gray Global Balanced Portfolio 884 423 (0.19%) Allan Gray Domestic Balanced Portfolio 579 130 (0.12%) Allan Gray Life Alignment Portfolio No. 87 300 000 (0.06%) Allan Gray Life Hedged Domestic Equity Portfolio 196 462 (0.04%) Allan Gray Tax Free Balanced Fund 184 898 (0.04%) Total 70 562 420 (15.03%)
Fund managers holding 3% or more as of 30 June 2017
The following fund managers hold 3% or more of the issued share capital of the Company as of 30 June 2017:
Number of % Shares Shareholding
Allan Gray Asset Management 121 896 022 25.97 Total 121 896 022 25.97
Public/non-public Shareholder spread (including resident and non-resident shareholding)
Number of shareholders Number of shareholders in South Africa other than in South Africa Total shareholders Shareholder type and number of shareholders No. of Shares % No. of Shares % No. of Shares %
Non-public shareholders Directors and associates (11) 53 172 251 11.33 - - 53 172 251 11.33 Strategic holdings (more than 10%) BB Investment Company (Pty) Ltd (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) 4 244 464 0.90 - - 4 244 464 0.90 Public shareholders Resident (3 572) 178 369 419 38.01 - - 178 369 419 38.01 Non-resident (61) 53 257 957 11.35 53 257 957 11.35 Total 362 106 285 77.15 107 224 580 22.85 469 330 865 100.00
150 Integrated Annual Report 2017 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” or “the Group”)
The form of proxy is only to be completed by those shareholders who: • hold 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 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 Tuesday, 28 November 2017 at 12h00. 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/or “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: 3.1 JM Kahn 3.2 RS Ntuli 3.3 RC Sacks 3.4 PJ Welgemoed 3.5 P van Hoven 4 To elect the following Directors to the Audit Committee 4.1 N Maharajh 4.2 PJ Welgemoed 4.3 RS Ntuli 4.4 P Mahanyele Non-binding Endorsement 5. Non-binding Endorsement of Company’s Remuneration Policy Special Resolutions 1 to 4 6. Approval of Non-executive Directors’ Remuneration 2016/2017 7. Approval of Non-executive Directors’ Remuneration 2017/2018 8 General Authority to repurchase shares 9. General Authority to provide financial assistance to related and inter-related companies and corporations Ordinary Resolution 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 2016
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 Tuesday, 28 November 2017 at 12h00. 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 Annual General Meeting.
4. The Chairman of the Annual General Meeting may accept or reject any form of proxy that 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. Administration
Registered Office
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)
Principal Place of Business
1 Marignane Drive Bonaero Park Kempton Park 1619 Integrated Annual Report 2017
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”)