Annual Report 2016 About this report SCOPE AND REPORTING CYCLE This is the Annual Report for South African Express SOC SA Express Mandate 04 Limited, a State-Owned Company (SOC), and provides SA Express Strategy 05 Route Network 06 an overview of SA Express’ overall performance for the Network Strategy and other Initiatives 07 reporting period 1 April 2015 to 31 March 2016. This report KEY RESULTS 08 is available on the www.fyexpress.aero website. On Time Performance (OTP) & Customers 08 Revenue & Net Profit 09 OUR LEADERSHIP 12 Board Members 12 STRUCTURE OF THIS REPORT Governance Report is guided by the King Executive Management 14 This report addresses the Company’s Report on Governance (King III). Chairman's Report 16 performance in terms of its strategic 8 objectives, statutory mandate, the SAX This report contains all strategic, fnancial Chief Executive Note 1 and operational matters that had the 22 20/20 Vision Strategy and the Austerity Chief Financial Officer’s Statement Measures Plan. The report covers the greatest impact on the airline’s year-todate SUSTAINABILITY REPORT 26 performance in terms of the Company’s performance. Sustainability Performance 26 four objectives in terms of the SAX 20/20 Vision Strategy and the Austerity The report aims to provide the Department Key Environment Sustainability 27 of Public Enterprises, the National 27 Measures Plan, namely: Key Developments in 2015/16 Treasury and the general public, with a full INTERNAL CONTROL AND RISK 36 Q Leverage state capabilities to improve understanding of the various signifcant risks and opportunities the airline has Internal Control and risk 36 sustainability and economic viability; 36 Q Improve collaboration, through deeper faced in the year under review. The annual Risk Management Process integration and increased trade with report also includes the Shareholder Internal Control System 36 its regional trade partners in Africa; Compact and performance to targets Risk Categorisation 36 Q Lower the cost of doing business; and contained in the Compact and these are Q Service delivery. addressed in detail within the document. ERM Process -in brief 36 Furthermore, the airline, as an SOC, Risk Profile 37 The Report is broadly divided into six has a dual mandate and it is important SA Express ERM Goals 38 subcategories, namely: that it achieves both the fnancial and Fraud Prevention Plan 39 a) About SA Express; developmental mandates respectively. It is important to SA Express’ existence Ethics 39 b) Internal Controls and Risk Management; that the airline ensures sustainable value Legal Compliance 39 c) Sustainability; creation for its stakeholders in the short Aviation Specific Internal Controls 39 d) Corporate Governance; and long term. CORPORATE GOVERNANCE e) Auditor-General’s Report; and 42 The report also aims to provide an Interaction between the board and shareholder f) The Annual Financial Statements. 42 understanding of the various signifcant Board of Directors 42 All six categories are complementary. economic, social and environmental Board meetings 43 risks and opportunities that the industry Audit and Risk Committee 44 faces, in the short and medium term REPORTING PRINCIPLES respectively. It further demonstrates Human Resources, remuneration and 45 The 2015/16 Annual Report is prepared in the Company’s unique response in Transformation Committee accordance with International Financial mitigating the above-mentioned risks Safety and Security, Health Environment and Reporting Standards (IFRS) and the and ensures that the airline continues 45 Financial Reporting Guides issues by Quality Committee to be regarded as a sustainable entity the Accounting Practices Committee. (in terms of environmental and human Social and Ethics Committee 46 The Sustainability Report is prepared capital sustainability). Procurement Committee 46 in accordance with the Sustainability Human Resources Committee Reporting Guidelines of the Global 47 Reporting Initiative. The Corporate ANNEXURES Annexure A: Strategic Deliverables 52 Annexure B: Financial Performance 57 Annexure C: Operational Performance 58 Annexure D: Social Impact 58 Annexure E: Economic Impact 58 Annexure F: Energy Efficiency 60 ANNUAL FINANCIAL STATEMENTS SA Express 1 About this report continued Additionally, the report highlights the for ensuring the airline operates daily with airline’s focus on environmental a focus on safety and comfort; our various sustainability as well as profling SA suppliers, who form an integral part of the ability of the Company to fy; Government Express as a leader in transformation and regulatory and industry bodies, since the human capital development, as aligned with industry in which the Company operates the Shareholder’s development mandate. is subject to extensive government and regulatory oversight; and the South African OUR STAKEHOLDERS public, who are our key shareholders. The Company, as a strategic asset of the Republic of South Africa, reports to the Shareholder’s representative, the RISK MANAGEMENT The Company follows a comprehensive and Minister of Public Enterprises and is integrated risk management process where committed to the founding mandate of the identifcation and management of risk the airline and to the Preamble of the SA forms part of the Executive Management Express Act of 2007. The Mandate of the business plan. The Board, through the Audit Leverage state capabilities airline is to offer seamless air travel and to and Risk Sub-Committee of the Board, to improve sustainability and offer connectivity to secondary and main actively monitors this process. airports while being a feeder airline to the economic viability national carrier, South African Airways (SAA). SIGNIFICANT EVENTS DURING In addition to domestic operations, the THE REPORTING PERIOD airline is mandated to ensure No signifcant changes regarding the size connectivity and economic growth in of the Company, its structure or ownership, the region, thus its commitment to occurred during the reporting period operating in fve of the Southern African compared to previous fnancial years. Hence Improve there are no signifcant changes from Development Community (SADC) collaboration, previous reporting periods with respect to countries, namely: Botswana, the scope, boundary, or measurement Austerity through deeper Namibia, Zambia, Zimbabwe and the methods applied in this report. Democratic Republic of Congo. measures integration and THE COMPANY FOLLOWS plan increased trade A COMPREHENSIVE The Company’s commitment to its EXTERNAL AUDIT AND SAX with regional AND INTEGRATED RISK stakeholders is to conduct its business in ASSURANCE 20/20 partners in Africa MANAGEMENT PROCESS a sustainable and responsible manner and The Annual Financial Statements on pages to respond to their respective needs as 72 to 101 are audited by the Auditor- WHERE THE IDENTIFICATION effectively and timeously as possible. The VISION AND MANAGEMENT OF General of South Africa, in accordance with nature of the airline business implies a International Standards of Auditing and RISK FORMS PART OF THE close relationship with its stakeholders, IFRS. EXECUTIVE MANAGEMENT which comprises – but are not limited to – those customers whom we fy, with a BUSINESS PLAN. commitment to safe, secure and reliable service; our employees, who are responsible Service Lower the cost of delivery doing business Pursuant to the 2013 SA Express turnaround Q Foster performance excellence through strategy - the SAX 20/20 Vision Strategy, the development of people, skills and jobs; aligned to the South African Airways’ long Q Become a catalyst for key developmental term turnaround strategy (LTTS) and the state objectives, including the Austerity Measures Plan – the Company has, development of infrastructure, the in the period under review, entered into facilitation of trade and the growth of an annual Shareholder Compact with the the tourism industry; and Shareholder Oversight Department and has Q Expand the airline’s services throughout agreed that the airline would focus on the Africa. following strategic priorities: SA Express has delivered against the Q Consolidate and cement its business majority of these priorities during the model, which predominantly was that of 2015/16 fscal year. The Company will a regional carrier, with a strong focus on continue to ensure that the airline is business travel; prudent in all its commercial endeavours. Q Be a sustainable, well managed and proftable airline; Q Provide consistent and effcient customer service; 2 SA Express SA Express 3 Who we are and what we do THE SA EXPRESS STRATEGY SA EXPRESS AT A The Long Term Strategy is called the SAX 20/20 vision and is aligned to SAA’s Long Term Turnaround Strategy (LTTS), in support SA EXPRESS MANDATE GLANCE of the’ Whole of State Aviation approach’, At the core of the issues identifed are issues relating to: • Collaboration with SAA and Star Alliance, SA Express’ statutory mandate, as a strategic asset to the Republic of South • The single feeder regional airline to SAA, Africa, is defned in the preamble of the SA Express Act and • Optimised extensive network, the Strategic Intent Statement 2016-19 as follows: Our PURPOSE is to be: • The right feet for the region, • An integrated, sustainable • Technical as a proft centre and critical revenue stream and Q PROVIDE transportation of passengers, cargo and mail, air regional airline connecting • Adequate funding with suitable cash. charters and other related aviation services; secondary and main Q PROMOTE frequency of services