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Integrated Annual Report2014
Performance Highlights for the Past Five Years
7.06.05.04.03.02.01.0
-2010 2011 2012 2013 2014
Revenue (R’billion)
300
250
200
150
100
50
-2010 2011 2012 2013 2014
Profit after taxation (R’mllion)
50,000
40,000
30,000
20,000
10,000
-2010 2011 2012 2013 2014
Sectors flown
800700600500400300200 100
-2010 2011 2012 2013 2014
EBITDA (R’million)
60
50
40
30
20
10
-2010 2011 2012 2013 2014
Profit per passenger (Rand)
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-2010 2011 2012 2013 2014
Passengers carried
45.0040.0035.0030.0025.0020.0015.0010.005.00
-2010 2011 2012 2013 2014
Fuel burn (litres) per 1,000 available
seat kilometers
Integrated Annual Report 2014
1
Report Profile ........................................................................................................ 2
Who We Are and What We Do .............................................................................. 4
Group Value Added Statement .............................................................................. 7
Chairman and CEO’s Report ................................................................................ 8
Core Values ......................................................................................................... 11
Group Objectives ................................................................................................. 11
Strategic Intent .................................................................................................... 12
Internal Control and Risk Management ................................................................ 14
Sustainable Development Report ......................................................................... 18
Corporate Governance ........................................................................................ 42
Audit Committee Report ..................................................................................... 52
Remuneration Report .......................................................................................... 55
Social and Ethics Committee Report ................................................................... 58
Report of the Directors ........................................................................................ 59
Statement of Responsibility by the Board of Directors.......................................... 65
Certificate of Company Secretary ........................................................................ 66
Independent Auditor’s Report .............................................................................. 67
Statements of Financial Position .......................................................................... 68
Statements of Comprehensive Income ................................................................ 69
Statements of Changes in Equity ......................................................................... 70
Statements of Cash Flow ..................................................................................... 71
Segmental Report ............................................................................................... 72
Accounting Policies ............................................................................................. 73
Notes to the Annual Financial Statements ............................................................ 82
Notice of Annual General Meeting ...................................................................... 109
Share Price Performance ................................................................................... 120
Shareholder Analysis ......................................................................................... 121
Contents
2
Report Profile
Scope, Boundary and Reporting Cycle
This Integrated Annual Report (“this Report”) of the Comair Group
(“the Group”) presents the economic, social and environmental performance
of the Group’s airline and non-airline businesses in respect of its operations
in South Africa only, as well as the financial results of the Group for the
financial year 1 July 2013 to 30 June 2014. Whilst the performance of
the Group’s associates is discussed in this Report, the Report focuses
more on the performance of the Group’s subsidiaries as their contribution
to the Group’s performance is more significant. In addition, this Report
does not extend to cover the performance or issues facing the Group’s
suppliers in its supply chain, outsourced operations such as, but not limited
to its fleet maintenance, or its leased facilities. These limitations are not
considered materially to impair the completeness of this Report. There
have been no restatements of previously reported information, nor have
there been changes to the basis of calculations or to the assumptions
and techniques applied in compiling the data presented other than as
detailed in the Report.
The Integrated Annual Report will be sent to shareholders, who are recorded
as such in the Group’s Securities Register on 19 September 2014, and
is available on the Group’s website at www. comair. co.za. Printed copies
are available on request from the Group Company Secretary. This is the
Group’s fourth Integrated Annual Report, and the prior periods’ Integrated
Annual Report, which covered the period 1 July 2012 to 30 June 2013
and was published on 28 September 2013, is also available on the
Group’s website.
Reporting Principles
The content of this Report is driven by those issues that have the greatest
potential to impact on the Group’s ability to operate. We consider a broad
range of external and internal factors, including the outcome of various
stakeholder engagement processes driving the Group’s integrated reporting
process, when deciding which issues are of the utmost importance to
address. Whilst this Report attempts to highlight the significant issues
raised and the outcomes of these various engagement processes, its
content predominantly focuses on the information deemed relevant to
the Group’s shareholders and potential investors.
The information included in this Report aims to provide shareholders and
investors with a good understanding of the significant economic, social
and environmental risks and opportunities the Group faces in the short
and medium term, as well as the Group’s response in order to ensure its
ability to create and sustain value for its shareholders and investors in the
long term. In addition, the Group explains its efforts to reduce its impact
on the environment and the societies in which it operates.
This Report was prepared in accordance with International Financial
Reporting Standards, the Financial Reporting Guides issues by the
Accounting Practices Committee, the Listings Requirements of the JSE
as well as the requirements of the Companies Act (Act No. 71 of 2008),
as amended. The Group’s reporting on sustainable development is guided
by the Sustainability Reporting Guidelines (G3.1) of the Global Reporting
Initiative (GRI) and the International Integrated Reporting Council’s Integrated
Reporting Framework’s Guiding Principles.
The Group has applied the majority of the principles contained in the King
Code of Governance Principles and King Report on Governance (King III).
The Group’s application of the principles of King III as well as the few
instances of non-compliance are recorded and explained in the Group’s
King III register that is continuously updated and maintained and located
on its website www.comair.co.za. A summary report is included in the
Corporate Governance Report.
Our Stakeholders
The Group’s commitment to its stakeholders to conduct its business in
a sustainable way and to respond to their needs is entrenched in its core
values. The nature of the Group’s business implies a close relationship
with its stakeholders such as, but not limited to:
• Its customers who purchase the Group’s products and services and
to whom it must provide, amongst other things, a safe, secure and
reliable service;
• Its employees, who are responsible for providing safe, secure and
reliable services;
• Its various suppliers who form an integral part of the Group’s ability
to provide a safe, secure and reliable service;
• Government Regulatory and Industry Bodies, since the industry in
which the Group operates is subject to extensive government and
regulatory oversight;
• The community, in an attempt to improve the lives of fellow South
Africans;
• The media, who play an important role in the Group’s engagement
with stakeholders; and
• Investors, since one of the main objectives of the Group is to create
wealth for its investors as reflected in the stakeholder diagram set
out below.
Without regular communication with the Group’s various stakeholder
groups, it would not be able to deliver its products and services in a safe,
secure or reliable way. Of the stakeholder groups identified below as part
of the Group’s regular business activities, select stakeholder groups are
considered to be more significant in determining the Group’s ability to
operate and generate value.
Integrated Annual Report 2014
3
Customers*Communities
Media
Investors*Employees and trade unions*
Industry associations*
Government and regulatory
bodies*
Suppliers*
Risk Management
The Group follows a comprehensive and integrated risk management
process where the identification and management of risk forms part
of the Executive Management Business Plan. The Board, through the
Risk Management Committee, actively monitors this process. For more
information on the Group’s risk management process, refer to the Internal
Control and Risk Management Report on pages 14 to 17 of this Report.
Significant Events during the Reporting Period
During the reporting period in question, the Company implemented a share
buy-back in terms of which it repurchased 48,913,372 ordinary shares
amounting to 10% of its ordinary issued share capital in accordance
with a general authority to repurchase shares, granted by the Group’s
shareholders at its Annual General Meeting held on 30 October 2013, and
which share repurchases were announced on SENS on 6 November 2013
and 9 December 2013.
No significant changes regarding the Group’s size, structure or ownership,
apart from the foregoing, occurred during the reporting period compared
to previous financial years. Hence there are no significant changes from
previous reporting periods in the scope, boundary, or measurement
methods applied in this Report.
External Audit and Assurance
The Financial Statements on pages 68 to 108 were audited by the Group’s
independent external auditors, Grant Thornton (Jhb) Inc. (Grant Thornton),
in accordance with International Standards of Auditing. The report of the
external auditors is included on page 67.
Grant Thornton has provided limited assurance over selected key
performance indicators and specific disclosures as set out in this Report.
Based on the work Grant Thornton performed, nothing has come to our
attention that causes us to believe that the selected key performance
indicators and specific disclosures in the Integrated Annual Report for
the year ended 30 June 2014 have not been fairly stated.
For a better understanding of the scope of Grant Thornton’s assurance
process, reference should be made to Grant Thornton’s Assurance
Statement, which can be obtained from the Group Company Secretary,
or accessed via the Group’s website www.comair.co.za.
Contact Us
We welcome the opinions and suggestions of all our stakeholders. Please
address all opinions, suggestions and questions to our Group Company
Secretary, Derek Borer, using our contact details supplied on the inside
back cover of this Report.
4
Who We Are and What We Do
Comair Limited (the Group) is a South African Company listed on the
Johannesburg Stock Exchange since 1998 offering, scheduled and non-
scheduled airline services within South Africa, sub-Saharan Africa and
the Indian Ocean Islands as its core business.
The Group has operated successfully in South Africa since 1946 and is the
only known airline to have achieved operating profits for 69 consecutive
years, with a safety record which is internationally recognised.
The Group operates its scheduled airline services under two (2) brands,
namely, the kulula brand and the British Airways brand under licence from
British Airways Plc. During the period under review the Group operated
43,246 sectors (one-way flights) and carried 5,196,507 passengers,
as opposed to having operated 40,757 sectors and carried 5,050,873
passengers during the prior reporting period. A diagram reflecting all the
destinations to which the Group’s two (2) airline brands provided airline
services during the period under review is set out below. The Group’s
headquarters are based in Bonaero Park, Kempton Park and whilst it
operates flights destined for locations outside of South Africa, the Group’s
operations are based in South Africa.
In addition to providing scheduled and non-scheduled airline services,
the Group offers the following non-airline related services:
• A travel and holiday package service using advanced technology to
deliver travel and holiday packages to many destinations, both locally and
internationally, to consumers directly and the retail travel trade. Through
acquisitions, expansion and partnerships, the Group has established one
of the country’s largest and broadest digital travel distribution networks.
The brands under the Group’s travel and holiday package banner include
kulula holidays, Holiday Tours, GoTravel24, MTBeds and African Dream
Holidays, and the Group also has Harvey World Travel-Holiday Retail
Travel Agency. The Group continues to form partnerships with industry
leaders in travel reward and recognition programmes as part of its
objective to continuously expand and grow this business.
• In 2009 the Group launched its SLOW Lounges and currently operates
SLOW Lounges at OR Tambo International Airport in both the domestic
and international terminals, Cape Town International Airport domestic
terminal, King Shaka International Airport domestic terminal and SLOW
in the City in Sandton, Johannesburg. The SLOW Lounges have set
a global standard for airport lounges, providing a perfect sanctuary
Integrated Annual Report 2014
5
from the fast pace of travel and modern life, and have won numerous
awards for their creative excellence. Demand for the lounges has
increased and the Group is embarking on an expansion programme
for the Cape Town International Airport domestic lounge and the
domestic and international lounges at OR Tambo International Airport.
• The Group launched its own catering unit in 2012 under the Food
Directions brand and provides on-board catering services to its kulula
and British Airways flights, giving the Group control and flexibility in
terms of cost and product offering.
• In addition to training Comair’s own pilots, the Comair Training
Centre (“CTC”) offers a full range of aviation-related ground school
subjects and flight simulator training for the full range of Boeing
737 type aircraft. The CTC also provides a variety of other ancillary
subjects as well as cabin crew and flight dispatcher training. In
collaboration with Avian de Transport Regional (ATR), the CTC is
also the host for the ATR Reference Training Centre which offers
simulator training for pilots of ATR turboprop aircraft. The CTC has
a client base of airlines from numerous African countries, as well
as the likes of the Middle East, South America, Indo-Asia and the
Far East.
A diagram reflecting the various Group brands is set out below.
kulula.com and British Airways, operated by Comair, are our airline related brands, while the balance of the brands are non-airline brands.
As at 30 June 2014, the Group employed 2,006 permanent, full-time employees over its various operating platforms in South Africa as opposed to
having employed 1,912 permanent, full-time employees over its various operating platforms in South Africa as at 30 June 2013.
6
Who We Are and What We Do (continued)
Organisation Structure
Apart from Comair Mozambique Limitada, which is registered in
Mozambique, and Churchill Finance Services 23 Limited, which is
registered in Mauritius, all the Group’s other subsidiaries and associates
are registered in South Africa.
The Group’s affiliated businesses performed well over the period under
review and made a meaningful contribution to profits, although they
make up a small percentage of the Group’s turnover. They are exposed
to immaterial risks and pose no threat to the completeness principle.
100%
100%
100%
100%
100%
25%
40%
49%
100%
100%
Kulula Air (Proprietary) Limited trading as SLOW in the City: Holds the liquor licences in respect of
certain of the Company’s lounges and looks after various service agreements relating to the lounges
Alooca Properties (Proprietary) Limited: Property owning company which owns a number of properties
in Rhodesfield surrounding the Company’s operations building
Aconcagua 23 Properties (Proprietary) Limited: Property owning company which owns the property
on which the Company’s operations building is situated
Amber Capital (Proprietary) Limited: This company was set up as part of a financing transaction for
certain aircraft. It is in the process of being deregistered and is currently dormant
Holiday Tours (Proprietary) Limited: An outbound tour operating company offering holiday packages
to destinations outside of South Africa
49%
30%
Online World Travel 24 (Proprietary) Limited: A full service online travel agency providing travel
services online
Imperial Air Cargo (Proprietary) Limited: A cargo and freight company providing cargo and freight
services in South Africa
Protea Hotel ORT (Proprietary) Limited: Property owning company which owns the building that
constitutes Protea OR Tambo Hotel
Commuter Handling Services (Proprietary) Limited: Provides ramp handling services in South Africa
to various airlines
Comair Mozambique Limitada: The company is currently dormant
Churchill Finance Services 23 Limited: Established in Mauritius for the purposes of financing the
acquisition of aircraft. This company is dormant and is in the process of being deregistered
Comair Catering (Proprietary) Limited: Holds the liquor licence in respect of the Group’s catering
business and looks after various service agreements relating to the catering operation
Integrated Annual Report 2014
7
Group Value Added Statementfor the year ended 30 June 2014
2014 2013
R’000 % R’000 %
Wealth created
Group revenue 6,282,219 5,386,581
Cost of materials and services (4,794,443) (4,112,760)
Value added 1,487,776 1,273,821
Interest income 32,149 20,217
Total value added 1,519,925 1,294,038
Wealth distributed 964,327 824,930
Community investment 1,623 0 660 0
Employees
Salaries, wages and related benefits 738,003 49 671,936 52
Providers of capital
Interest on loans 77,340 5 61,641 5
Dividends paid to shareholders 70,295 5 24,215 2
Government
Taxation expense 77,066 5 66,478 5
Wealth retained 555,598 469,108
555,598 37 469,108 36
Accumulated profits 555,598 469,108
1,519,925 100 1,294,038 100
8
Chairman and CEO’s Report
Group Performance
As Chairman and Chief Executive Officer, it is our privilege to oversee and
lead an airline that has grown from its infancy in 1946 to the Group known
today, operating scheduled airline services in South Africa, sub-Saharan
Africa and the Indian Ocean Islands and using 26 aircraft made up of
B737-800s, B737-400s and B737-300s. During the year under review,
the airline operated 43,246 sectors, carrying 5.2 million passengers and
employing 2,026 staff members.
We remain firmly committed to our vision of offering an exceptional travel
experience in the most efficient way. Our focus in delivering on our strategic
intent will enable us to continue to create long-term shareholder value. The
Group’s reputation and focus on safety, customer service and efficiency
has built a sustainable foundation to accommodate growth opportunities
and ensure that we continue to play a major role in the Southern African
aviation and travel industry.
The Airline Industry
The aviation industry worldwide is recognised for its operating challenges.
It is an industry that is capital intensive, has small profit margins and is
highly regulated. A consistent theme across the global airline industry is
one of poor returns on investment, protected competition and low barriers
to entry. It is an industry that is a soft target for taxes, volatile costs and
increased regulation.
The high and volatile fuel price, and in South Africa, our volatile exchange
rate, requires airlines to constantly innovate and improve on operating
efficiency. Worldwide the industry has recognised the need for radical
change to ensure sustainability and profitability.
Our top priorities are to continuously improve our customer service,
control costs and increase our business efficiencies. In this regard, we
have adopted an approach not dissimilar to many successful airlines
worldwide, of acquiring and operating larger but more fuel-efficient aircraft
and implementing a new generation information technology platform
enabling us to deliver greater efficiencies and new commercial opportunities.
We are firmly committed to the local aviation industry and to working with
government and other relevant authorities to ensure:
• The maintenance of a safe, reliable, competitive and commercially
viable air transport sector, where all operators are afforded equal
treatment by government;
• The provision of an air transport infrastructure that is affordable and
consistent with the requirements of the air transport sector and the
travelling public; and
• The provision of air travel at costs that are affordable to South African
consumers and are in line with internationally accepted airline service
standards and practices.
Strategic Priorities
During the period under review, we concentrated on the following strategic
priorities:
• Improving revenue to cover the rapidly rising fuel price and US
dollar denominated costs and managing these costs without ever
compromising on providing a safe, secure and reliable airline service;
• Constantly delivering on our promise to customers;
• Enhancing our new, enterprise-wide IT platform;
• Upgrading our fleet, including the investment in new aircraft;
• Continually monitoring and responding to changes to our macro-
operating environment; and
• Providing employment security to all of our employees.
We have delivered against these priorities during the period under review.
Performance against Objectives
Financial Performance
Comair has again delivered strong performance against a backdrop
of a contracting domestic market and devaluation of the Rand. Total
comprehensive income increased by 16% to R265 million, while earnings
per share were further improved by the repurchase of 10% of issued
shares, transacted in November and December 2013, resulting in a 24%
increase in earnings per share to 58 cents.
Turnover grew by 17%, with one quarter attributable to an increase in
passengers and three quarters from improved yields. Due to the strength
of the kulula and British Airways brands and the ongoing attention to
customer service, a growth in passengers of 3% was achieved despite
the domestic market contracting by 4%. We continued to focus on our
customers through the application of service metrics, feedback surveys,
customer journey mapping, and extensive investment in training programmes
for front-line staff. Operating performance remained good, with on-time
performance meeting our threshold target of 85% across both the British
Airways and kulula.com brands. The capacity growth by Comair and its
competitors has, however, resulted in a decline of 6% in average seat
occupancy rates compared to the prior year.
Operating costs remain under control. A significant challenge for the 2014
financial year was to accommodate an 18% weakening of the average
exchange rate, contributing to an increase of 19% in the price of fuel and
similar increases in other foreign-based costs. Excluding the effect of the
fuel price increase, the cost per available seat decreased by 1.5%. This
was achieved mainly through the efficiencies derived from the ongoing
fleet upgrade strategy. The new Boeing 737-800s, acquired 18 months
ago, continued to perform exceptionally well, and Comair purchased a
further, pre-owned ’800 early in the year, followed by another ’800 on
lease. Both of these aircraft replaced Boeing 737-300s that were retired.
Integrated Annual Report 2014
9
Cash at year end remained strong at R868 million, after accommodating
outflows of R120 million for the 50% cash component of the purchase
of the 737-800 mentioned above, R151 million for the share buy-back,
R152 million on pre-delivery payments for the four (4) new aircraft to be
delivered in late 2015 and 2016, and a R102 million deposit on eight (8)
new aircraft to be delivered from 2019 to 2021.
Comair achieved a clean safety audit by IATA, thereby renewing its IATA
Operations Safety Audit certification for a further two (2) years.
Our affiliated businesses of flight training, travel product distribution and
airport lounges continued to perform well.
The Group continued to invest in its transformation initiatives, including
its pilot cadet programme, airport learnerships, and social responsibility
initiatives, and anticipates an improvement in its B-BBEE score.
Customer Experience
We continued to focus on our customers through the application of feedback
surveys, customer journey mapping, service metrics and extensive training
programmes for front-line staff. Operating performance remained good,
with on-time departures meeting our threshold target of 85% on both the
British Airways and kulula.com brands.
Investment
During the year we made substantial investments towards the ongoing
upgrading of the fleet by placing an order for eight Boeing 737-8 MAX
aircraft for delivery from 2019 to 2021. This was the first order in Africa
for the new generation MAX aircraft.
We also acquired a B737-800 in October 2013, which became the first
of its type in our British Airways fleet. A second, leased B737-800 will
join our British Airways fleet in December 2014, followed by the next
four (4) new B737-800s on delivery from Boeing in late 2015 and 2016.
All of the aforementioned aircraft are currently designated to replace
existing aircraft. We are also in the process of upgrading our SLOW
Lounge in Cape Town.
Market Environment
Partnerships
Partnerships are still the cornerstone of our business. We continue to
work closely with the travel agent community in distributing our products.
Our relationship with Discovery Vitality has also grown and now includes
local, regional and international flights, holiday packages as well as car
rental and hotels for Vitality members. We have extended our First National
Bank/Rand Merchant Bank relationship with further investment in the
SLOW Lounge at Cape Town International Airport. Europcar is one of
our strongest partners, and together we believe we are the largest online
car rental business in South Africa.
Brands
Our brands continue to perform well in the market. kulula.com is the
market leader in affordable, easily accessible air travel and continues to
grow in the cost-conscious business and leisure market. kulula.com has
become one of South Africa’s iconic consumer brands and is estimated
to be the country’s largest online retailer by annual sales value.
Our British Airways (BA) brand has continued to grow in the corporate and
public sectors, as well as in the inbound tourist markets. The BA loyalty
programme, Executive Club, the SLOW Lounges and our investment in our
catering products, have all helped to grow the appeal of this brand. Our
relationship with British Airways Plc remains strong, with BA and ourselves
seeing great potential to grow our partnership further into Africa. Our
SLOW Lounge brand has built great equity amongst business travellers.
Competition Tribunal Claim
As previously reported, the Competition Tribunal ruled in our favour in our
case against SAA for its anti-competitive travel agent incentives and its
abuse of dominance. We also won the appeal which SAA lodged, and
have issued a multi-million Rand summons against SAA for damages
related to this claim. We are currently waiting for a date in the High Court
of South Africa to have our damages claim against SAA heard.
State Funding of SAA
Comair’s entry onto the main South African routes, and its ongoing
sustainability, relied on the commitments made by government in various
policies and legislation to create a pro-competitive aviation industry. Failure
by government and the state-owned airlines to adhere to these principles,
including the ongoing state funding of SAA, has led to an uneven playing
field for competitors. The resulting, often irrational, commercial behaviour
of the state-owned airlines remains the most disruptive challenge to
the sustainability of the domestic industry, and to us delivering on our
obligations to our customers, employees and shareholders.
As previously reported, the Group found it necessary to challenge, by way of
an action before the South African High Court, the R5 billion State guarantee
provided by government to SAA. This challenge is on the basis that such
funding is contrary to government’s domestic aviation policy, the Constitution,
the Public Finance Management Act, the Promotion of Administrative Justice
Act and the SAA Act. The Group is awaiting a court date for its challenge
but sincerely hopes that the matter will be amicably settled with government
and a solution will be found whereby SAA is held accountable to operate in
a commercially responsible manner in the domestic market.
Affiliate businesses
Our affiliates’ businesses performed well over the period and we continued to
look for aligned business opportunities. While these businesses contribute a
small percentage of our turnover, they are making an increasing contribution
to our profits. Specifically, our online travel business, lounges and flight
training business performed well during the year.
10
Chairman and CEO’s Report (continued)
Corporate Governance
We aim to be a good corporate citizen and maintain the highest standards
of integrity and ethics in our dealings with our stakeholders. To ensure that
we offer the best possible airline service and are regarded as the airline
of choice for all travellers within our operating environment, we manage
and control our business by implementing governance procedures and
ensuring that we identify and manage our risks effectively. During the
year the Group achieved a clean safety audit by IATA, thereby renewing
its IATA Operations Safety Audit certification for a further two (2) years.
Further information in this regard can be found in our Internal Control and
Risk Report on pages 14 to 17 of our Integrated Annual Report.
Sustainability
We are committed to managing our business in a sustainable way. This
means considering not only the Group’s financial performance and risk
profile, but also its social, environmental and economic impact. Included
in the Integrated Annual Report is our Sustainable Development Report,
which provides our shareholders with information regarding the significant
social and environmental risks and opportunities that have an impact on
our ability to create long-term value for our stakeholders. In addition,
we explain our effort to reduce the impact on the environment and the
societies in which we operate.
People
We continue to attract the best talent in the business and continually
invest in their wellbeing and development. We are also very fortunate to
have a highly experienced and dedicated management team that has a
wealth of experience in the industry.
Training
Training and skills development is a major priority to ensure that we
are able to provide a quality service to our customers, and we spent
approximately 3% of payroll during the period under review to support
our commitment to this priority. Further details in this regard are set out
in our Sustainable Development Report.
Society
We are a committed corporate citizen and, together with our staff,
endeavour to improve the lives of fellow South Africans. We try to make
a meaningful impact on our local communities by attempting to alleviate
some of their socio-economic challenges. Our Sustainable Development
Report provides further information in this regard.
Environment
We are committed to protecting the environment, conserving natural resources
and utilising resources in an effective and responsible way by adopting sound
environmental practices in our business and industry. We are also committed
to improving our environmental performance by attempting to reduce the
adverse impact that aviation has on the local and global environment. Further
details are set out in our Sustainable Development Report.
Transformation
The Group continued to progress with its transformation programme, as
seen in the most recently issued B-BBEE certificate where the score has
improved from a level 5 to a level 4 contributor. The industry is still faced
with significant challenges in attracting adequate numbers of matriculants
with higher grade mathematics and science from previously disadvantaged
groups for training in aviation specialised skills. Further details on this
matter are set out in the Sustainable Development Report.
Looking Ahead
We remain concerned with the sluggish economy, declining domestic
passenger market and the high operating costs faced by the aviation
industry. The total market size remains below the peak volume of 2008
and does not currently show signs of returning to historic levels.
Nevertheless, looking further ahead, we remain confident that there is
scope for further growth in the profits of the Group. The ongoing upgrades
to the fleet will continue to improve operating efficiency, while at the
same time enhancing the revenue potential per flight. We are scheduled
to take delivery of the next four new 737-800s from Boeing in late 2015
and 2016. During the year Comair placed the first African order for the
next generation of Boeing 737, the 737-8 MAX. Eight (8) of these aircraft
will be delivered to Comair from 2019 to 2021.
We are also focused on implementing technology solutions to enhance
our operating performance, customer service experience and revenue
generating opportunities. The pace of development in distribution
technology is relentless, and Comair is intent on extracting the maximum
benefit from its customer information data in order to improve its service
offering, and the marketing of relevant products to its various customer
segments. We are also developing new software applications for use
on board the aircraft and on the ground to facilitate more efficient
operating procedures.
Appreciation
Our sincere appreciation goes to every person within the Comair Group
who contributed to the ongoing success of the Group during the year
under review. This includes our Directors, management and employees.
We extend special thanks to our customers and other stakeholders who
have chosen to use our services or provide services to us.
We also thank all the public sector departments and agencies that we
have worked with this year for their shared commitment to our objectives.
Integrated Annual Report 2014
11
Core Values Group Objectives
The Group and its employees support the following core values.
Our Customers
In our dealings with our customers, we aim to:
• Reflect the image of the Company;
• Deliver a safe and quality service;
• Regard everyone who is dependent on our outputs as a customer;
• Meet the expectations of our customers;
• Measure customer satisfaction levels;
• Respect our customers’ rights to confidentiality; and
• Accept responsibility for customer service.
Mutual Trust and Respect
We aim to:
• Share information to the benefit of the Group;
• Listen with empathy;
• Communicate openly and honestly;
• Display respect for the individual and his/her dignity;
• Solve problems on a win-win basis for all parties;
• Greet and acknowledge one another;
• Maintain ethical standards;
• Exhibit respect for the individual and his/her dignity; and
• Commit to sustainable transformation addressing the inequalities of
the past.
Performance Driven
We seek to always:
• Set objectives and give regular performance feedback;
• Ensure that each employee knows what is expected of him/her and
what our standards are;
• Give recognition to those to whom it is due;
• Continuously strive to improve our operating efficiencies;
• Eliminate activities that do not add value;
• Base appointments and promotions on competence and performance;
and
• Offer each employee the opportunity to develop to his/her full potential.
Team Approach
We:
• Promote positive team behaviour;
• Ensure the participation of all role players; and
• Exhibit responsible, fair, honest and effective leadership.
Creating Shareholder Value
• We will continue to optimise operating efficiencies and grow the
profitability of the business.
• We will continue to optimise our cost base, without compromising
safety, reliability or customer services.
• We will always look to make investments that will provide incremental
growth based on sound investment principles.
Commitment to Quality
• We will strive to be trusted by all our stakeholders.
• We will always ensure that we provide a safe, secure and reliable
service.
• We will always strive to improve customer satisfaction levels.
Managing Risk
• We will continue to ensure that our risks are meticulously managed.
• We will adopt a proactive approach to ensure compliance with
regulatory and legislative change.
Leading as a Responsible Corporate Citizen
• We are committed to managing our business in a sustainable way
and upholding high standards of ethics and corporate governance
practices.
Provide Growth and Development Opportunities for Employees
• We strive to maintain a corporate culture that provides a working
environment which is conducive to employee engagement and
productivity and which assists us to attract and retain a talented
workforce.
• We will provide continuous training and development opportunities
to our employees, ensuring that their skills and competencies are
relevant and appropriate to our business and the delivery of exceptional
service to our customers.
• We will strive to be an employer of choice, recognising that market
competition for competent resources is increasing.
Operating Effectiveness
• We will continue to develop core competencies across our operating
environment.
• We will continue to look for cost-saving initiatives and look to create
synergies over our existing and future operations.
• We wish to position ourselves as the airline of choice.
12
Strategic Intent
Cycle of Success
The Comair ‘Cycle of Success’ illustrates the Group’s strategic intent, its purpose, the business model it follows, its vision as well as the action pillars
that underpin its core values. A diagram reflecting the Group’s ‘Cycle of Success’ is set out below:
Purpose
The Group’s purpose, ‘We Lift You Up’, drives our aspiration to lift people
up in an inspiring, empowering, passionate and innovative way, to render
a positive impact on the world.
The Group believes that:
By lifting myself up,
I can lift my colleagues up,
To lift our customers up,
To lift investors up,
To lift society up,
To lift nations up,
To lift the world up,
To lift myself up.
Business Model
The business model is not unique to the Group or the airline industry. The
challenge lies in making sure the Group achieves the ‘cycle’ for sustainability
and growth. It means that with the right equipment and people, the
Group can deliver an awesome travel experience to its customers. If our
customers are happy, they will keep coming back and when they keep
coming back, our investors will continue to invest in the Group. This will
allow the Group to be more resilient to change and together we can move
forward in a sustainable way.
Vision
The Group’s vision is to ‘Deliver an awesome travel experience in the
most efficient way’. It is an aspirational description of what the Group
would like to achieve and is intended to serve as a clear guide when
choosing current and future courses of action.
Integrated Annual Report 2014
13
Action Pillars and Values
The four action pillars and Think Vision Values guide the Group in following
the business model in the right direction.
Action Pillars
The four action pillars are as follows:
Innovation: The Group has a professional approach to everything
it does or presents and is committed to a consistent
high standard. It is committed to offering worldclass
products and services in the most efficient way. As a
market leader, the Group stays up to date with current
trends and can relate and communicate to the public,
customers, investors, suppliers and employees.
Leadership: The Group is a well led and managed South African
company. It leads by example and represents
courage and humility. The Group behaves in a
responsible way towards the public, customers,
investors, suppliers and employees.
Integrity: Safety and security underpin everything the Group
does. The Group represents poise and reassurance
and is trusted by the public, customers, investors,
suppliers and employees.
Passion for service: The Group is committed to operational efficiency and
value. It understands and anticipates the needs of
its customers, investors, suppliers and employees.
‘Think Vision’ Values and Principles
The ‘Think Vision’ formula for success identifies those values and
principles that are beneficial (Top Line) to the Group as well as those
values and principles that should be eliminated which could be detrimental
(Bottom Line) to the Group.
We encourage our employees to apply these values and principles.
Governance of the Business
The Group’s governance structures are focused on maintaining and
building a sustainable business and being a responsible corporate citizen.
The key elements of these governance structures include:
• Providing a safe, secure, reliable and quality airline service (refer to
the Sustainable Development Report for more information);
• Maintaining principles of good corporate governance, integrity and
ethics (see the Corporate Governance Report for more information);
• Maintaining effective risk management and internal controls (see the
Internal Control and Risk Management Report for further information);
• Engaging with stakeholders and responding to their reasonable
expectations (see the Report Profile and Sustainable Development
Report for more information);
• Managing the business in a sustainable manner (see the Sustainable
Development Report for more information); and
• Offering employees a good working environment and competitive
remuneration packages, based on the principles of fairness and
affordability (see the Sustainable Development Report and the
Remuneration Report for more information).
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14
Internal Control and Risk Management
Corporate Governance
The Group is committed to maintaining principles of good corporate
governance to ensure that its business is managed in a responsible manner
with integrity, fairness, transparency and accountability.
Internal Controls over Financial Reporting
Internal controls and risk management systems in relation to the Group’s
financial reporting process are in place. During the period under review,
no material changes in risk management and internal control systems
over financial reporting occurred.
Internal Control Framework
The Group continues to review its internal control processes to ensure
it maintains a strong and effective internal control environment. During
the period under review, the effectiveness of the process was regularly
reviewed by the Group’s Risk Management Forum and Audit Committee.
For further information on the Group’s internal controls, please refer to
pages 48 and 49 of this Report.
Risk Management
Effective risk management is critical to the Group’s operations and is crucial
to the continued growth and success of the Group. In order to achieve its
objectives and create shareholder value, the Group does take risks but fully
understands and effectively manages the risks it takes in order to minimise
loss and maximise opportunities. The objective of risk management in
the Group is to establish an integrated and effective risk management
framework where important risks are identified, quantified and managed.
In order to give effect to same, the Group follows a comprehensive risk
management process, which involves identifying, understanding and
managing the risks associated with its various businesses. As the Group,
through its various business units, is exposed to a wide range of risks,
some of which may have serious consequences, the identification of risk
and its management forms part of Executive Management’s Business
Plan. Risk Priority Registers are used to identify, assess and monitor the
risks faced by the Group and are prepared by each business department.
The Risk Priority Registers are combined into a Group Risk Register by
the Group’s Risk Management Forum and are prepared, discussed and
assessed by the Group’s Risk Management Committee, which in turn
reports to the Board. The Group prioritises risks based on the likelihood
of the risk occurring, the impact of the risk and mitigating factors, and
categorises each risk as high, medium or low. The Risk Management Forum,
comprising the CEO, the Chief Risk Officer, the Chief Audit Executive and
certain Executive Management, meets at least four (4) times per year to
assess and consider the risks associated with the Group’s operations.
The Risk Committee also reviews the risk management process.
In addition to the foregoing, the Group recognises the need for its employees
and stakeholders to have a confidential reporting process (whistle blowing)
covering fraud and other risks. In line with its commitment to transparency
and accountability, the Group takes action against employees and others
who are guilty of fraud, corruption and other misconduct. Procedures
are in place for the independent investigation of matters reported and
for appropriate follow-up action.
The Board believes that the risks described below are the ones that may
have the most significant impact on the Group’s ability to achieve its six (6)
objectives set out earlier on in this Report.
Debt Funding
The Group is exposed to a variety of financial risks, including market
risks, credit risks, capital risks and liquidity risks. The Board approves
prudent financial policies and delegates certain responsibilities to Executive
Management who directly control day-to-day financial operations and
who operate within clearly defined parameters.
The Group carries substantial debt that needs to be repaid. The ability
to finance ongoing operations, committed aircraft orders and future fleet
growth plans is vulnerable to various factors, including institutional appetite
for secured aircraft financing. The Group attempts to maintain substantial
cash reserves and committed financing facilities to mitigate the risk of
short-term interruptions to the aircraft financing markets. The Group, in
addition, continually monitors its cash position and further undertakes
long-term planning of its capital requirements.
For more information regarding the Group’s response to this risk, see the
Annual Financial Statements in this Report.
Currency Fluctuations
The Group reports in South African Rands, the exchange rate of which
varies relative to other currencies. A significant portion of the Group’s
costs are incurred in foreign currencies, mainly the United States Dollar.
The movement of these currencies could have a positive or negative
impact on the Group’s income, expenses and profitability. Unrealised
and realised currency gains or losses may distort the Group’s financial
accounts. The Group has a policy in place to govern the hedging of
currency exposure.
For more information regarding the Group’s response to this risk, see the
Annual Financial Statements in this Report.
Oil Price Fluctuations
As with foreign currencies, the Group incurs substantial costs with regard
to the purchase of fuel for its aircraft. The Group has a policy to hedge
a portion of its fuel requirements based on various instruments available
and where this is achievable.
For more information regarding the Group’s response to this risk, see the
Annual Financial Statements in this Report.
Integrated Annual Report 2014
15
Safety of passengers and employees
A multitude of processes and structures are in place to monitor and report
on aviation safety, quality and security within the Group and its operating
environment. The Group maintains an IOSA (IATA Operational Safety Audit)
registration, thereby ensuring the implementation of global best practice
in managing its operational safety, and is also audited by British Airways
Plc as well as the South African Civil Aviation Authority.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Aircraft Safety
Maintenance of the Group’s fleet of aircraft is regulated by the South African
Civil Aviation Authority and, in certain instances, the Federal Aviation Authority
of the United States, and the European Aviation Safety Authority. While the
Group outsources the maintenance of its fleet of aircraft and engines to
the likes of South African Airways Technical, Israeli Aircraft Industries, and
ST Aerospace Engines Pte Ltd, it maintains an oversight function over all
these entities and ensures that it maintains a good relationship with the
South African Civil Aviation Authority. The Group, in addition, runs a safety
management system to address all aspects of aviation and ground safety.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Brand Reputation
The Group’s brands have significant commercial value. Erosion of the brands
may adversely impact the Group’s position with its customers and could
ultimately affect future revenue and profitability. The Group’s Executive
Team regularly monitors customer satisfaction through monthly surveys and
integrated social media monitoring, as well as ongoing improvements in the
Group’s product offering in order to mitigate this risk. The Group allocates
substantial resources to safety, security, on-board product and new aircraft.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Non-beneficial Increases in Airline Tickets
There is an extremely high correlation between the volume of air travel
and the average price of airline tickets in the domestic market. In the past,
various state-owned suppliers to the aviation industry implemented tariff
increases for users that were significantly greater than the rate of inflation
and threatened to constrict the size of the market for air travel. While it
must be noted that tariff increases effective 1 April 2014 were more or less
in line with CPI, the cumulative effect of previous increases may restrict
the size of the market for air travel. There is further talk of government
imposing carbon taxes on airline tickets and the Consumer Protection Act
has, to a limited degree, impacted on airline commercial practices, which
could lead to an increase in ticket prices. Such increases in ticket prices
do not benefit the airline. On the contrary, the consequential constraint
on demand negatively impacts industry revenue.
For more information regarding the Group’s response to this risk, see
the Sustainable Development Report and Annual Financial Statements
in this Report.
Political and Economic Developments
The state of the local economy impacts on the profitability of the aviation
industry, and the political climate affects the number of visitors from
overseas to the Southern African region. Strikes and labour disruptions
by suppliers to the Group have the potential to constrain the operation of
the airline. The Group monitors global and local trends in order to adapt its
business strategy accordingly. Political instability in any country into which
the Group operates its services could also affect the Group. It therefore
undertakes risk assessments before embarking on new routes in Africa
and internationally. It continually reviews those risks and is assisted in
this regard through its Licence Agreement with British Airways Plc and
through its membership of the International Air Transport Association.
For more information regarding the Group’s response to this risk, see
the Sustainable Development Report and Annual Financial Statements
in this Report.
Economic and Business Environment
The Group’s revenues are sensitive to the economic and business
environment. A downturn in the general economic and business environment
could affect the Group’s revenues and operations. It therefore continually
monitors developments in the economic and business environment for
trends and early warning indicators. Executive Management and the Audit
Committee regularly review the Group’s revenue forecasts.
For more information regarding the Group’s response to this risk, see
the Sustainable Development Report and Annual Financial Statements
in this Report.
Competition
The market in which the Group operates is highly competitive and this
risk is augmented by the fact that the country’s biggest airline is owned
by the State. Direct competition is faced from other airlines on the routes
the Group operates and from other modes of transport. Competitor
capacity growth in excess of demand growth could materially impact the
Group’s margins. Some competitors have other competitive advantages
such as being funded and supported by government intervention. Fare
discounting by competitors has historically had a negative effect on the
Group’s results because a response is generally required to competitor
fares to maintain passenger volumes. The Group has a strong market
position, a good alliance with British Airways Plc and a diverse customer
base to address this risk.
16
Internal Control and Risk Management (continued)
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Legislation and Regulation
Regulation of the airline industry is increasing and covers many of the Group’s
activities such as safety, security, traffic rights, slot control access and
environment controls. In order to mitigate these risks, the Group attempts,
amongst other things, to maintain a good working relationship with the
government departments with which it interacts, the Airports Company
South Africa and other regulatory and industry bodies. Notwithstanding,
bilateral treaties governing route rights within the African continent have
had a major impact on the Group’s ability to expand its operations into
the African region.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Technical Innovation
Technology forms an integral part of the Group’s business. While the
British Airways brand is, to a large extent, dependent on developments
implemented by British Airways Plc, the kulula brand is not, and the
Group devotes significant resources to information technology in respect
of this brand, including the development of new products and services,
as well as analysing emerging trends in information technology (IT) and
consumer behaviour. The Group, during 2012, embarked on one of the
single biggest business transformations in its history whereby a suite of
integrated solutions procured from Sabre Airline Solutions, including a new
reservations platform for kulula.com, was implemented. The transition to
the new platform provides the organisation with an integrated solution that
will in the medium to long term result in greater efficiencies, improved and
wider distribution capabilities and the benefit of access to a global Sabre
user community that is constantly reviewing processes and developing new
products. Nevertheless, the Group is constantly faced with managing the
risk presented by new technology, new developments by its competitors
or the speed of development.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Information Systems Security and Availability Risk
The Group is dependent on IT systems for most of its principal business
processes. The failure of a key system may cause significant disruption
and/ or result in lost revenue. System controls, disaster recovery and business
continuity arrangements exist to mitigate the risk of a crucial system failure.
The Group has launched several initiatives to cover not only information
system security and availability risk, but also IT governance in accordance
with the requirements of King III. The Board has also appointed a Chief
Information Officer. The Group has, in addition, implemented software
dealing with IT systems security. No security breaches occurred during
the period under review. As regards systems and network availability,
the Group’s Information Technology Department worked closely with its
service providers to ensure that a better than 99% up-time was achieved
on the Group’s networks and customer facing systems.
For more information regarding the Group’s response to this risk, see
the Corporate Governance Report and Annual Financial Statements in
this Report.
Landing Fees and Security Charges
Airport taxes, landing fees and security charges represent a significant
operating cost to the Group and have an impact on operations. Whilst certain
of these charges are passed on to passengers by way of surcharges and
taxes, others are not. The Group regularly engages with various industry
bodies and government in an attempt to keep these costs under control.
For more information regarding the Group’s response to this risk, see
the Sustainable Development Report and Annual Financial Statements
in this Report.
Employee Relations
A large number of the Group’s employees in South Africa are members of
trade unions. The Group strives to maintain a good working relationship
with the trade unions where it has recognition agreements in place and
enters into substantive negotiations annually. The Group further has a
strike action plan in place.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Key Supplier Risk
The Group is dependent on suppliers for certain principal business
processes. The failure of a key supplier to deliver on contractual obligations
may cause significant disruption to operations. A close relationship is
maintained with key suppliers to ensure awareness of any potential supply
chain disruption. The Group further continually monitors its key suppliers.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Fraud (Credit Card, Cash, System)
The Group has implemented a number of risk mitigants to cover credit card,
cash and systems fraud such as, but not limited to, the implementation
of Cybersource software as well as the planned implementation of 3D
Secure in respect of credit card fraud; strict controls and authorisation
frameworks for use of Travel Bank’s accounts and strict control over
access and transfer rights; regular password changes in respect of bank
accounts; and daily bank reconciliations and procedures for immediate
Integrated Annual Report 2014
17
investigation of discrepancies in cash reconciliations. The Risk Management
Committee and, where appropriate, the Audit Committee, considers any
incidents of fraud and corruption.
For more information regarding the Group’s response to this risk, see
the Corporate Governance Report and Annual Financial Statements in
this Report.
State Funding of SAA
During the prior financial year, the Group launched a legal challenge in
the High Court of South Africa against government’s R5 billion guarantee
provided to SAA, on the basis that such action was contrary to government’s
domestic aviation policy, implemented just prior to the deregulation of the
South African skies to create an equal playing field amongst domestic
competitors, and in contravention with, amongst others, the Public Finance
Management Act. While it was hoped that the matter would go to trial in
August and/or a settlement would be reached with government, it appears
more likely, but not certain as yet, that the matter could be set down for
hearing in October/November 2014 about a settlement with government.
For more information regarding the Group’s response to this risk, see
the Sustainable Development Report and Annual Financial Statements
in this Report.
Broad-based Black Economic Empowerment
The Group recognises the importance of implementing a broad-based
black economic empowerment (B-BBEE) programme that addresses
the inequality of the past, and regularly reviews its B-BBEE strategy so
as to ensure that it remains an integral part of the political, social and
economic community of South Africa. In addition, the International Air
Services Licensing Council and Domestic Air Services Licensing Council
review the B-BBEE score of companies applying for licences.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Skills Shortages
Training, employment and retention of skilled staff remains a major challenge,
with particular regard to pilots from previously disadvantaged groups.
The Group has attempted to address this challenge through its cadet
pilot training programme and through its policy of having its pilots signing
training bonds in an attempt to ensure that they remain in the employ of
the Group for a certain period of time to cover the cost of their training.
For more information regarding the Group’s response to this risk, see the
Sustainable Development Report in this Report.
Effectiveness of the Risk Management Process and System of Internal Controls
The Board, via the Audit and Risk Committees, regularly receives reports
on, and considers the activities of, the internal and external auditors of
the Group. The Board, via the Audit and Risk Committees, is satisfied
that there is an effective risk management process in place and that there
is an adequate and effective system of internal controls to mitigate the
significant risks faced by the Group to an appropriate level.
18
Sustainable Development Report
Introduction
Comair Limited (the Group) is firmly committed to managing its business in
a sustainable way and upholding high standards of ethics and corporate
governance practices. The benefits of delivering on these commitments
are many. Through its sustainability efforts the Group maintains business
integrity; maintains and improves the confidence, trust and respect of its
stakeholders; and increases its ability to attract and retain staff. Aviation
is an economically vital activity generating employment and wealth
across the world and it is thus important that the Group develops a truly
sustainable industry.
The Group’s track record on delivering growth and creating long-term
value is testament to its strategy of being a long-term player and delivering
a sustainable business. While growth, profitability and creating value are
certainly major strategic drivers, this cannot be achieved by the Group unless
it offers a safe, secure, reliable and quality product; values its employees
by following fair labour practices and offering fair remuneration as well
as training and development opportunities; respects the communities in
which it operates and contributes to the wellbeing of society; and cares
for and manages its impact on the environment.
It is evident from the Group profile that it operates in a highly regulated
environment. Risks are managed effectively as reported in the Corporate
Governance and Internal Control and Risk Management Reports and despite
the many challenges faced by the airline industry, the Group is confident
that it is involved in a growing and sustainable business, delivering value
to all its stakeholders in the short, medium and long term.
Through its sustainability efforts, the Group believes that it will:
• Maintain its business integrity;
• Continue to create shareholder value by growing the business;
• Effectively manage its risks;
• Attract and retain a talented workforce by creating a good working
environment; and
• Effectively manage and minimise its impact on the environment.
Awards
The Group received the following external recognitions and achievements
during the reporting period under review.
British Airways:
• The Sunday Times Top Brands Awards – Second place in the
Business category; and
• ACSA Feather Awards for Best Domestic Full Service Airline at
OR Tambo International Airport.
kulula.com:
• The Sunday Times Top Brands Award – First place in the Business
category;
• The Sunday Times Top Brands Award – Third place in the Business
category for “Company most spontaneously aware of” by business
sample; and
• ACSA Feather award for best low cost airline at OR Tambo International
Airport.
Route Network
Comair Limited is a South African Group operating scheduled and non-scheduled
airline services as its core business under both its kulula. com and British
Airways brands (the latter under licence from British Airways Plc) in South
Africa, sub-Saharan Africa and the Indian Ocean Islands, as well as providing
other travel-related services, airline pilot training facilities and operating airline
lounges. While the British Airways brand does operate flights into sub-Saharan
Africa and the Indian Ocean Islands, and does advertise its flights on both
its kulula.com and British Airways brands for sale through global distribution
systems, the majority of its revenue is earned in South African Rand, with
a small portion being earned in foreign currency, which foreign currency
is repatriated to South Africa. During the period under review, the Group
operated 43,246 flights and carried 5,196,507 customers, against 40,757
flights operated and 5,050,873 customers carried in the previous reporting
period. The British Airways brand operated 18,594 flights on the domestic
routes and 3,650 flights to regional destinations and carried 1,745,154
passengers on its domestic routes and 289,653 passengers on its regional
routes. The kulula.com brand operated 21,002 flights on domestic routes
and carried 3,161,700 passengers to domestic destinations operated by the
brand. The destinations to which the Group’s two brands provided scheduled
air services during the period under review are depicted on page 19.
Management Approach
The Group Sustainable Development Manager is Mr Derek Borer, the
Group’s Company Secretary, who, as part of its Social and Ethics
Committee, is responsible for the compilation of this Sustainable
Development Report. The Social and Ethics Committee is also responsible
for developing and reviewing the Group policies with regard to social
and economic development, good corporate citizenship and for making
recommendations to the Board and/or management on matters within its
mandate. See the Social and Ethics Report for more information in this
regard. The content of this Sustainable Development Report is driven by
the material risks and opportunities facing the Group’s ability to achieve
its objectives, as set out in the Internal Control and Risk Management
Report. In addition, this Sustainable Development Report aims to explain
the stakeholder engagement process undertaken by the Group, as well
as to disclose the key topics raised as a result of this process, and the
Group’s response in this regard.
Integrated Annual Report 2014
19
KENYA
DURBAN
EAST LONDON
GEORGECAPE TOWN
JOHANNESBURG(OR Tambo and Lanseria)
kulula.comkulula.com codeshare
British Airways Route Network
Note: Effective 8 February 2014, the Group discontinued its services to Maputo from OR Tambo International Airport and hence the route is not reflected above.
kulula.com Route Network
Note: The service between OR Tambo International Airport and Nairobi in Kenya is operated on a codeshare basis using Kenya Airways Aircraft.
LONDON AND THE WORLD
HARARE
MAURITIUS
DURBAN
PORT ELIZABETHCAPE TOWN
JOHANNESBURG
British Airways (Plc)British Airways (operated by Comair)
WINDHOEK
VICTORIA FALLSLIVINGSTONE
20
Sustainable Development Report (continued)
Engagement with Stakeholders
The Group’s commitment to its stakeholders to conduct its business
in a responsible and sustainable way and to respond to their needs is
entrenched in the Group’s values. The nature of the Group’s business
requires close engagement with its stakeholders, including but not limited
to customers, employees and trade unions, suppliers, government and
authorities, industry associates, investors and the media. Communication
with stakeholders is important in maintaining the Group’s reputation as
a trusted and reliable provider of airline and related services. One of the
Group’s main objectives is to deliver “an awesome travel experience in the
most efficient way” and thus become the premier domestic and regional
airline in sub-Saharan Africa and the airline of choice for travellers within
its operating environment. The Group, in addition, values the importance
of its brands, namely British Airways, kulula.com, SLOW and its travel,
catering and training brands, and has taken the necessary legal steps
to protect them. A diagram reflecting the Group’s brands is set out on
page 5 of this Integrated Annual Report.
The Group, having regard to the importance and power of social media,
has adopted a social media strategy allowing it to communicate with
its customers through these media and in this regard has recently
introduced sophisticated software that monitors all social media channels,
consolidating all the direct and non-direct customer feedback in real-time
allowing the Group the ability to better manage brand performance and
consistency. The social media platforms used by the Group are mainly
Twitter, Facebook and YouTube.
There have been no incidents of material non-compliance with any applicable
regulations or legislation concerning marketing communication during the
period under review. The Group was, during its previous financial year,
taken to the Advertising Standards Tribunal by South African Airways in
respect of its “Most South African Way To Travel” advertising campaign
on the basis that the advertising campaign was a flagrant breach of the
Advertising Standards Authority Code. The Advertising Standards Tribunal
dismissed South African Airways’ application. South African Airways took
the decision on appeal to the Final Appeal Committee of the Advertising
Standards Authority, which was defended by the Group. The appeal was
heard on 26 September 2013 and the Final Appeal Committee of the
Advertising Standards Authority found in the Group’s favour by upholding
the decision given by the Advertising Standards Tribunal.
No requests for information were received in terms of the Promotion of
Access to Information Act (Act No. 2 of 2000) of South Africa.
As part of its ongoing operations, the Group frequently engages with
various stakeholder groups. It defines stakeholders as “anyone who
affects or is affected by the Group”, and in deciding which stakeholder
groups to concentrate its engagement efforts on, the Group considered
the significance of the various stakeholder groups in the achievement of
the Group’s objectives. Only those significant stakeholder groups that
could fundamentally have an impact on the ability of the Group to achieve
its objectives were engaged.
Customers
Providing a safe, secure, reliable and quality experience on both of the
Group’s airline brands as well as in its travel-related business is core to
the Group’s business and it therefore strives to deliver “an awesome
travel experience in the most efficient way” and hence be recognised as
the airline of choice for all travellers within its operating environment. The
Group continually measures customer satisfaction through various surveys
and integrated social media monitoring, to identify areas for improvement
in order to ensure it provides a quality service. No issues of a material or
significant nature were raised by customers.
The Group undertakes monthly research on its brands to determine its
performance and identity areas that need improvement. The result of the
research is shared amongst relevant staff members, where concerns raised
are addressed. Please refer to the section in the Sustainable Development
Report titled Customer Experience for more information on the research
tools used and the performance of each of the Group’s airline brands.
To enhance the quality of its service, the Group provides access for
qualifying customers (i.e. Gold and Silver Executive Club members,
business class customers, the Group’s VIP guests and RMB qualifying
clients) to its airline lounges, known as SLOW Lounges. These are situated
at OR Tambo International Airport, Cape Town International Airport, King
Shaka International Airport and SLOW in the City, situated opposite the
Gautrain Station in Sandton. The concept of the SLOW Lounges is based
on the theme that time always plays a significant part in people’s lives.
Modern day life places numerous demands on people’s time and there
is generally not enough of it. SLOW was created as a space for people
to get their time back on their own terms when, for a few moments,
they have a chance to catch their breath and relax. The Group wanted
to ensure that within the busy airport environment it developed a space
and offering that was conducive to relaxation, comfort and convenience.
This is evident in the technologies, furnishings and the freshly prepared
food and beverage choices delivered through its friendly, efficient staff in
the lounges. Since the introduction of the SLOW Lounges, the Group has
received many accolades, awards and compliments from industry and
customers alike. Demand for the lounges has increased and the Group
recently embarked on an expansion programme, with extensions to the
Cape Town domestic lounge expected to be complete by mid-September
2014. Plans are also under way to expand the OR Tambo domestic and
international lounges.
The Group actively participates in the British Airways Plc Executive Club
loyalty programme, as well as offering a co-branded kulula credit card
as follows.
Integrated Annual Report 2014
21
British Airways Executive Club
The Executive Club is British Airways Plc’s global frequent flyer programme
designed to recognise and reward loyal members, with the aim of making
their travel more enjoyable and rewarding. Executive Club members
earn Avios points (previously referred to as BA Miles) whenever they fly
with British Airways, a partner airline or on one of the oneworld® alliance
partners. The number of Avios points that members earn, depends
on the distance they fly, the cabin they travel in, the type of ticket they
purchase and their Executive Club tier status. Members can also collect
Avios points with British Airways’ worldwide hotel, car rental, financial
and shopping partners, even when they are not flying. In addition to
Avios points, members also earn Tier Points. Tier Points allow members
to move through the various tier levels, starting with Blue, then Bronze,
then Silver and finally Gold Executive Club status. As members progress
from one tier level to the next they are able to enjoy additional benefits
associated with each tier level such as, but not limited to, airline lounge
access, dedicated check-in processes and priority waitlists.
The kulula credit card
The kulula credit card is a Visa credit card which is issued, owned, financed
and administered by FirstRand Bank Limited, which is an authorised
financial services and registered credit provider. Customers can earn
up to 3% back in kulula moolah when using their kulula credit card to
purchase various goods and services. kulula moolah can be used to pay
for, or towards, any kulula flights. kulula moolah is a virtual currency with
1 kulula moolah equating to R1.
On-board Magazines
The Group, in addition, prints two on-board magazines, namely High Life
South Africa for its British Airways brand, and khuluma for its kulula. com
brand. Both magazines cover a number of subjects, including pertinent
information relating to the Group and its business. The Group has recently
introduced a magazine in the SLOW Lounges, titled SLOW, which offers
readers information and articles of general interest. Twelve issues are
printed per year of each magazine title (one per month). The circulation
for High Life South Africa is 16,000 per month, for khuluma, 21,000 per
month and for the SLOW magazine 5,500 per month. The magazines,
other than the SLOW magazine, are made available on board the aircraft
and the High Life South Africa magazine is also available in the SLOW
Lounges. Other mediums of communication with customers and potential
customers include direct e-mail communications to the Group’s respective
customer databases, on-board announcements and advertising campaigns
(including radio, TV, outdoor, print and online) as well as social media
channels such as Facebook, Twitter and YouTube.
British Airways Plc
The Group entered into a Licence Agreement with British Airways Plc (BA)
during the 1996 calendar year in terms of which it was granted a licence
to operate flights using BA intellectual property and in accordance with
BA’s style of business, tweaked to meet local conditions. In terms of
the Licence Agreement, BA provides other services to the Group such
as, but not limited to, access to the BA frequent flyer programme. As
mentioned above, the Licence Agreement has been in operation for
almost 18 years and has, in the Group’s view, been highly beneficial to
both BA and the Group.
Employees and Trade Unions
An integral part of the Group’s business is about the people it employs.
The Group strives to be an employer of choice and invests significantly in
this relationship. Paying attention to and responding to employee needs
through effective communication and sound labour relations is critical
to the maintenance of a stable and engaged workforce. Employees are
treated with respect, receive competitive remuneration and are involved
in the day-to-day running of the business and have access to the Group’s
e-mail facility and intranet. The Group communicates with its employees
in a variety of ways including, but not limited, to:
• The My Comair intranet: This provides a platform to inform employees
of current news and events, newsletters from the CEO, classifieds,
corporate information, social responsibility feedback, a library of
standard templates to assist employees in the performance of
their duties, policies and procedures, standard forms for leave and
employee travel benefits, as well as travel and related specials made
available to employees, which the Group has been able to secure
from various suppliers;
• Direct e-mails to employees;
• Newsletters to employees from the CEO known as Plane Talk;
• Ad hoc marketing communications in respect of the Group’s two
brands;
• Ad hoc IT communications known as IT Talk;
• Ad hoc communications from the Learning and Development
Department;
• E-mail notification to employees regarding changes in policies and
procedures;
• Interactions with employees through various workplace forums;
• ‘Business Talk with Erik’ – a quarterly forum for middle and senior
managers to engage with the CEO and Executive team on topical
matters relating to the business.
The Group, in addition, has the following programmes in place for all
employees:
• We Lift You Up: This is designed to create a business understanding
amongst employees in order to obtain their commitment to the
Group’s Cycle of Success as set out in the Group’s Strategic Intent
document;
22
Sustainable Development Report (continued)
• Think Vision: This is the Group’s formula for success and was
formulated in consultation with employees to identify values and
principles that are beneficial to the Group and to eliminate those
values and principles which are detrimental. The Think Vision values
and principles are the DNA of the Group and their purpose is to guide
the thinking, decision-making and actions of all employees;
• Catalyst Awards: This is a reward and recognition programme that
encourages employees to implement the Think Vision philosophy
and to inspire other employees to do the same. Employees may be
nominated for Catalyst Awards by their peers, managers or customers,
by living one or more of the Think Vision values;
• The Precious Cargo Programme: This was created to assist
employees with balancing the demands of work and family life.
Details of this programme are dealt with further on in this Sustainable
Development Report;
• Tip Offs Anonymous: This is an anonymous whistle-blowing facility
to enable employees to report any suspicious activities;
• On Track: This is a performance management programme giving
employees clarity as to what is expected of them and measuring
their performance in respect of certain key performance indicators;
• Take Off: This is a leadership development programme with the aim
of identifying and developing employees who the Group believes can
fill key leadership positions; and
• Succession Development Programme: This is a programme developed
for middle management for succession planning at the airports.
As at 30 June 2014, approximately 43% (864 of 2,006) of the Group’s
full-time, permanent employees in South Africa were members of trade
unions compared with 50% (946 of 1,912 employees) as at 30 June 2013.
The Group strives to maintain good working relationships with the trade
unions, and has recognition agreements in place and enters into substantive
negotiations annually. These negotiations mainly focus on salary increases
and improvements to employment conditions. As at 30 June 2014 union
membership was as follows:
2014 2013
Solidarity 179 188
United Association of South Africa (UASA) 167 89
South African Aviation and Allied Workers Union (SAAAWU) 362 517
Comair Pilots Association (which is affiliated to the Airline Pilots Association of South Africa) 156 152
There was no strike action during the period under review. However,
SAAWU raised several disputes during this period, mainly relating to a
refusal by the Group to bargain with this union as they were no longer
representative within the Airport bargaining unit. SAAWU also raised a
dispute with regard to the Group’s refusal to provide them with recognition
within the Cabin Crew bargaining unit due to insufficient representation.
There is an ongoing dispute with SAAWU around their membership
levels which has yet to be resolved by the CCMA. A further dispute with
the Comair Pilots Association in regard to their entitlement to a special
bonus paid to other employees was settled in private arbitration, with
the dispute being resolved in the Group’s favour. As there are multi-year
salary agreements in place, there was no negotiation with unions around
wages during the period under review.
Other than the above-mentioned, no other material or significant issues
were raised by employees or trade unions during the period under review.
Human Rights
The United Nations Global Compact is an international initiative that
addresses human rights, labour, environmental and corruption issues
through a commitment to ten principles derived from the Universal
Declaration of Human Rights. The information set out below provides
a brief overview of the Group’s implementation of the ten principles as
further dealt with in this Sustainable Development Report.
• Business should support and respect the protection of International
Proclaimed Human Rights.
The Group’s human rights policy is part of the ‘Guidelines to the
Code of Ethics’. Human rights principles are incorporated in the
Group’s labour relations policies and practices and corporate social
responsibility initiatives.
• Business should make sure that it is not complicit in human
rights abuses.
The Group adheres to this principle through its compliance with all
applicable legislation.
• Business should uphold the freedom of association and effective
recognition of the right to collective bargaining.
The Group recognises the rights of employees to collective bargaining
and to freedom of association in accordance with all relevant South
African labour legislation. It maintains constructive relationships with
all representative unions who enjoy consultative and negotiating rights
on issues of employee rights and mutual interests.
• The elimination of all forms of forced and compulsory labour.
All the Group’s employees are sourced from the open labour market.
Employees are provided with employment contracts and are free to
resign at any time.
• The effective abolition of child labour.
The Group does not make use of child labour and does not support
the use of child labour in any form whatsoever. It does, in certain
instances, provide employment opportunities for school leavers,
provided that such persons meet the International Labour Organization’s
employment age requirements.
Integrated Annual Report 2014
23
• The elimination of discrimination in respect of employment and
occupation.
The Group is committed to compliance with the intent and spirit of
employment equity legislation in the workplace. It is further committed
to meeting its targets to achieve an equitable representation of race
and gender in the workplace. An analysis of the Group’s employment
equity status is set out later in this Sustainable Development Report.
• Businesses should support a precautionary approach to
environmental challenges.
This will be the fourth time the Group reports on its emissions in
terms of the Corporate Accounting and Reporting Standards of the
Green House Gas Protocol. Its environmental performance is set
out later in this Sustainable Development Report.
• Undertake initiatives to promote greater environmental
responsibility.
The Group undertakings in this regard are set out later in this
Sustainable Development Report.
• Encourage the development and diffusion of environmentally
friendly technologies.
The Group is committed to developing and diffusing environmentally
friendly technologies where both a clear benefit and business case
can be made for the introduction of this technology, such as, but
not limited to, the new aircraft introduced into service, which are
more environmentally friendly, as set out later in this Sustainable
Development Report.
• Businesses should work against corruption in all its forms,
including exploitation and bribery.
The Group’s commitment to combating corruption is embodied in
its Code of Ethics as detailed in the Corporate Governance Report.
Allegations of fraud and corruption are rigorously investigated and
where sufficient evidence exists, appropriate disciplinary action is
enforced, including the dismissal of offending employees.
Suppliers
The Group is dependent on a number of suppliers who form an integral
part of its ability to provide a safe, secure, reliable and quality service.
The Group attempts to build long-term relations with suppliers who
are of vital importance to it based on the principle of mutual trust and
respect. Regular meetings are held with suppliers to ensure continuity
of service. The Group further relies on its suppliers to deliver products
and services in line with its own standards. Other criteria also play an
import role in selecting suppliers, such as compliance with international
and local quality and safety standards, price, stability of the organisation
support network and technical capacity and the B-BBEE status of South
African suppliers. Any form of purchase incentive is prohibited and the
Group’s whistle-blowing facility is available to suppliers. Employees
involved in the purchasing of equipment are bound by strict ethical
principles ensuring that high standards of integrity are maintained in
the supplier relationship.
No material or significant issues were raised by suppliers during the
period under review.
Government and Authorities
The Group remains committed to working with government and other
relevant authorities to ensure:
• The maintenance of a safe, reliable, competitive and commercially
viable air transport sector where all operators are afforded equality
of treatment by government and the authorities;
• The provision of air transport infrastructure that is affordable to and
consistent with the requirements of the air transport sector and the
travelling public; and
• The provision of air travel at a cost that is affordable to South African
consumers and is in line with internationally accepted airline service
standards and practices.
Government Financial Assistance
The Group received no financial assistance from government nor did it
make any contribution towards any political party.
Government, Regulatory and Industry Bodies
The airline industry is subject to extensive government and regulatory
oversight relating to, amongst other things, safety, security, licensing traffic
rights and consumer protection. The Group regularly communicates and
interacts with governmental, regulatory and industry bodies.
Government and Regulatory Bodies
Department of Transport
The Department of Transport (DoT) is responsible for providing secretarial
support to the two licensing councils, the Airports Company of South
Africa (ACSA) and the Air Traffic and Navigation Services Company (ATNS)
Regulating Committee; for ensuring entity oversight of ATNS, ACSA and the
South African Civil Aviation Authority (SACAA); for conducting bilateral air
service negotiations with foreign governments; and for managing aviation
industry involvement in major events. The Group interacts, co-operates with
and provides feedback to the DoT in all these areas. The Group strongly
supports the concept of a deregulated and competitive domestic airline
industry where all airlines are required to comply with applicable aviation
legislation and compete fairly and equally with one another for market
share. During the period under review, the Group continued with its efforts
to ensure that the applicable requirements contained in South African Air
24
Sustainable Development Report (continued)
Services Licensing Legislation are complied with via engagement with the
DoT and the two licensing councils mentioned below. The Group continued
its participation in the Airlines Association of South Africa (AASA) initiative
to assist the DoT and other government departments to promulgate
legislation to fully implement the Cape Convention and Aircraft Equipment
Protocol (The Convention) into South African Law. Unfortunately, during
the year under review, limited progress was made with this initiative. As
all South African airlines will benefit from discounted aircraft financing
rates once the Convention is fully implemented, the Group will continue
to help AASA to lobby government for the introduction of the necessary
legislative amendments.
International Air Services Council
International air services operated by South African carriers between South
Africa and other countries remain regulated with respect to traffic rights,
frequency and capacity. The International Air Services Council (IASC) is
the authority responsible for issuing licences to South African operators
wishing to operate air services to regional and international destinations.
During the period under review, the Group abandoned its licence to operate
on the Johannesburg-Maputo (Mozambique) route. The Group also made
representations to the IASC against an application by Flysafair to change
its shareholding. In the submission, the Group raised its concerns that
the Flysafair corporate structure might not comply with the requirements
of the International Air Services Act (Act No. 60 of 1993) (the Act) and
requested the IASC to subpoena certain documents that might clarify the
matter. After receiving argument as to whether the Act allowed the Council
to consider objections from interested parties regarding an applicant’s
shareholding, the IASC found that although the Council did indeed have
such powers, it decided to dismiss the Group’s objections and granted
the Flysafair amendment application. The Group maintains an excellent
working relationship with this Council.
Air Services Licensing Council
Domestic air services within the Republic have been deregulated since
1990. Therefore the Air Services Licensing Council’s (ASLC) responsibilities
are restricted to the issuing of air service licences to new applicants,
ensuring the safety and reliability of air services operated within South
Africa and adjudicating complaints of non-compliance with the Air
Services Licensing Act (Act No. 115 of 1990). As the Group has held
and maintained a Class I and Class II Air Service Licence, amongst
others, for many years, it only appears infrequently before the Council
to either answer questions on its published annual financial results or
to amend certain details on its licence. In November 2013, the Group
successfully interdicted Flysafair from launching its new scheduled low
cost operation, pending a review by the High Court of the scheduled
licence granted by the ASLC. The Group based its application on the
fact that 75% of the Flysafair shareholding was not held by South African
residents. In light of the outcome of the interdict application and prior to
the hearing of the review application, Flysafair surrendered the disputed
licence to the ASLC and thereafter submitted a new application for a
licence. The Group again objected to the content of the application,
which resulted in Flysafair abandoning this process and submitting a
fresh application. Although the Group made submissions to the ASLC
that the fresh application, did not comply with the foreign ownership
requirements of the licensing legislation, the ASLC saw fit to ignore
these representations and granted Flysafair a new licence in April 2014.
In addition to the foregoing and as mentioned above, Flysafair lodged a
complaint with the ASLC against the Group’s domestic air service licence.
The complaint consists of the allegation that the Group breached the Air
Services Licensing Act by failing to apply for a licence amendment after
undertaking a share repurchase programme and secondly that when
a ‘look through’ construction is applied to the Group’s current foreign
shareholding component, the amount of this shareholding slightly exceeds
the restrictions specified in the said Act. The Group is certain that there
is no substance in either fact or law to both aspects of this complaint.
The complaint has still to be adjudicated by the ASLC.
South African Civil Aviation Authority
The South African Civil Aviation Authority (SACAA) is the body responsible
for controlling and regulating civil aviation safety and security in South
Africa. As safety and security is the Group’s number one priority, it interacts
and co-operates on a regular basis with the SACAA to ensure that it
maintains and in some areas exceeds the safety and security standards
required by the SACAA. Besides the usual interaction between the Group
and the safety regulator during the period under review, the Group’s
involvement with the SACAA has concentrated on aircraft registration
and deregistration processes as aircraft have moved into and out of
the Group’s fleet. In addition, in light of the complaint received from the
Human Rights Commission regarding the Group’s denied boarding of a
passenger with special needs, the Group has engaged the SACAA with
respect to possible changes to the Civil Aviation Regulations (CAR) that
apply to the carriage of special needs passengers. The Group, through
AASA, is working with the SACAA to align the CAR applying to special
needs passengers with international best practice.
In January 2014, the SACAA issued the Group with a Notice of Intended
Enforcement Action (the Notice) alleging that the Group had committed
an offence by failing to comply with a portion of an Airworthiness Directive
applicable to certain B737 aircraft and was therefore liable to a fine or
imprisonment or both. As there was no safety risk associated with this
non-compliance and as this incident had been voluntarily reported to
the SACAA, the Group filed two sets of objections to the SACAA. These
objections were mainly centred on the ‘Just Culture’ principle, (which is a
widely recognised international aviation safety principle protecting those
who voluntarily report safety incidents from punitive sanction in order to
advance aviation safety), and objecting to the sanctions described in the
Integrated Annual Report 2014
25
Notice. In June 2014, the Director of Civil Aviation, acting as the final appeal
authority, dismissed the Group’s objection and levied a fine against the
Group for its non-compliance. The Group has paid this fine under protest
and will continue, together with other stakeholders, to engage the SACAA
on an acceptable application of the Just Culture principle in South African
aviation. The Group’s management continues to maintain a positive and
good working relationship with the Authority.
Human Rights Commission of SA
In January 2014, the Group received a complaint from the Human Rights
Commission alleging that it had violated the human rights of one of its
special needs passengers by denying him boarding on one of its flights
during August 2013. The Group had denied the boarding of this special
needs passenger on the grounds that the Civil Aviation Regulations (CAR)
required this passenger to travel with an able-bodied assistant and that
no arrangements had been made with the Group to accommodate the
need for such an assistant. The Group’s written response to the Human
Rights Commission was accepted and the Commission decided to close
its file in this matter. The Group is, however, working with the SACAA
to establish whether the CAR complies with International Civil Aviation
Organisation (ICAO) standards and other international best practice for
the carriage of special needs passengers. The matter was in addition
satisfactorily resolved with the special needs passenger.
Airports Company of SA
Most large airports in South Africa are owned and operated by the Airports
Company of South Africa (ACSA). On an operational level, the Group
interacts with ACSA on a continuous basis and maintains a full-time
representative in the ACSA Airport Management Centre at OR Tambo
International Airport. The Group, together with AASA, also engages
ACSA on the important issues of airport user charges and the standard
of service provided by ACSA to airport users. As 2014 constitutes the fifth
financial year of the current ACSA/ATNS Permission, the Group has been
participating via AASA in consultations to agree on a business plan for the
Group for the next Permission period. During the period under review, as
part of the IATA Runway Excursions and Incursions Initiative, the Group
attended the ACSA Runway Safety Team meetings for the purpose of
identifying and mitigating runway hazards. The Group participates, on an
ongoing basis, with AASA to implement regulations to better structure
the permission process for the setting of ACSA tariffs.
Air Traffic and Navigation Services Company
Air traffic and navigation services in South Africa are provided by the
Air Traffic and Navigation Services Company (ATNS). During the period
under review, the Group held regular meetings with ATNS and co-
operated in developing the first Global Navigation Satellite System (GNSS)
VNAV Baro Approach into Lanseria International Airport, Runway 06L.
This has resulted in significant cost reductions and improvement in
efficiencies for the Group. The Group regularly interacts with ATNS on
an operational level and maintains a very good relationship with this
service provider.
National Consumer Commission
The Group has co-operated with the National Consumer Commission
(NCC) by providing expeditious responses to all consumer complaints
referred to it by the NCC as well as by participating in NCC initiated
conciliation proceedings with consumers whose complaints are not
initially resolved. Almost all consumer complaints are dealt with directly
between the Group and the consumer. No significant complaints were
received during the period under review and almost all complaints were
resolved to the satisfaction of the consumer, with no complaints having
been referred to the NCC. The Group, via the Airline Association of SA,
has further co-operated with the NCC through the development of a
draft Airline Industry Code intended to provide guidance on how the
airline industry will deal with specific airline-related consumer matters and
compensation issues. The draft Code has been submitted to the NCC
and a response thereon is awaited.
Industry Bodies
Airlines Association of South Africa
The Airlines Association of Southern Africa (AASA) is an organisation formed
to promote and protect the interests of its member airlines operating within
the Southern African region. The Group actively participates in both the
activities and management of the Association. It believes that the Association
is vital to ensuring a healthy and commercially successful airline sector in
Southern Africa. The Group supports AASA by providing it with data and
information on a variety of airline issues; by giving feedback and comment
on AASA position papers and submissions; and by participating in the
various AASA delegations that attend important stakeholder meetings.
During the period under review, in addition to participating in the standard
AASA activities, the Group continued to participate in the AASA initiative to
engage government on certain deficiencies in South Africa’s implementation
of the Cape Town Convention and Aircraft Equipment Protocol. The
Group has also participated with AASA in consultations over the content
of the ACSA and ATNS business plans for the next five-year permission
cycle. There has also been valuable interaction between the Group and
AASA with respect to the air travel requirements pertaining to special
needs passengers. At the request of the Group, AASA has undertaken
a benchmarking exercise to compare the content of the South African
requirements for the carriage of special needs passengers with the
aviation laws existing in other jurisdictions such as the United States and
the European Union. This research forms the basis of the engagement
with the SACAA on these matters.
26
Sustainable Development Report (continued)
The International Air Transport AssociationThe International Air Transport Association (IATA) is responsible for
promoting a safe, reliable, secure and economical air services and fostering
inter-airline co-operation. IATA also operates the airline clearing house
in Geneva, which processes and allocates financial credits and debits
between member airlines and administers the International Operational
Safety Audit (IOSA) scheme. The Group maintains its membership of
IATA, participates in the clearing house and undergoes a bi-annual IOSA
audit. During the period under review, the Group successfully undertook
its fifth bi-annual IOSA audit, which is valid until 16 May 2016. As part
of the IOSA audit, the Group was audited against 998 standards and in
this regard the auditors made no findings, which is a huge compliment
to the Group.
Investors
The Group’s main objective is to create value for its shareholders. Reports
to its shareholders are aimed at providing a clear understanding of the
Group’s financial, economic, social and environmental performance, both
positive and negative. Policies are in place to ensure that communications
with shareholders are made available timeously and simultaneously.
The Group endeavours to maintain dialogue with its shareholders and
other interested parties in the investor community and meets with its
institutional shareholders twice a year, after the release of its annual
and interim results. The Group’s website, www.comair.co.za, contains
the latest, as well as historical, financial and other information about the
Group, including its Integrated Annual Reports. The Board encourages
shareholders to attend its Annual General Meeting, notice of which is
contained in this Integrated Annual Report, at which shareholders have
the opportunity to put questions to the Board.
Apart from an incorrect SENS announcement, which was investigated
by both the JSE and the Financial Services Board as reported on in this
Integrated Annual Report, no material issues or topics were raised by
investors during the period under review.
Community
The Group is a committed corporate citizen and, together with its
employees, endeavours wherever possible to improve the lives of fellow
South Africans. It believes that social responsibility is a duty, privilege and
obligation to help those less fortunate and to make some impact on society
in general. For more information regarding the Group’s engagement with
the community, refer to the section dealing with community involvement
on page 36 of this Sustainable Development Report.
Media
The media plays an important role in the Group’s engagement with all its
stakeholders. The Group interacts on a regular basis with the media by
issuing press releases to both the corporate and trade media, as well as
granting media interviews to share news on developments related to the
Group. No material or significant issues were raised by the media during
the period under review.
The Group’s objective is to position it in the media as a trusted player
in the airline industry – a ‘champion’ of the people, and to position its
management as leaders on industry issues, to educate the media about its
business and how the industry operates as well as broaden the Group’s
profile amongst the travel industry media.
The Group’s Response to Material Risks and Opportunities Identified
Issues Impacting the Group, its Strategic Direction and its Ability to Operate and Create Value
Commitment to Quality
Commitment to Safety and Quality of Service
The Group is committed to providing a safe, secure, reliable and quality
service to its customers, and aims to deliver ‘an awesome travel experience
in the most efficient way’ and hence be regarded as the airline of choice
for corporate and individual travellers in all the areas and regions in which
it operates. The safety and security of its customers is of paramount
importance and the Group therefore ensures that a strong culture of
safety and security exists among all employees, which goal is supported
by a well-defined reporting and management process to ensure that all
safety and security issues are dealt with thoroughly and effectively. This
is formally documented in a Safety Management Manual that has been
accepted by the South African Civil Aviation Authority. In addition, the Group
maintains an International Operational Safety Audit (IOSA) Registration and
has been audited and has passed all audits, with the next bi-annual IOSA
audit due in February 2016. The Company has also received unqualified
audit ratings from British Airways Plc, the Boeing Company and the South
African Civil Aviation Authority. The Group’s simulators have been audited
by external airlines interested in making use of the simulator training facility
and accordingly, numerous airlines are currently making use of the facility.
Avions de Transport Regional (ATR) conducted an audit of the Group’s
ATR72 simulator training facilities in the 2011 calendar year and the Group
passed the audit with flying colours.
Security of customers is achieved by applying measures such as, but not
limited to, ensuring that all customers, including the Group’s airline crew,
prior to entering the secure area of the airport, are screened together with
their carry-on baggage; all baggage and cargo being placed in the hold of
the aircraft is screened; and no aircraft departs, with certain exceptions,
unless the customer and his/her baggage is on board the aircraft.
Integrated Annual Report 2014
27
The key safety and quality of service priorities applied by the Group are
detailed below.
• Implementation of the IATA IOSA
IOSA is an internationally recognised and accepted evaluation system
designed to assess the operational management and control systems
of an airline. The Group’s approach to aviation safety is one of oversight
and audit as defined within the context of the eight (8) disciplines of
the IOSA audit structure, namely organisational management, flight,
dispatch, maintenance, cabin, ground (airport), cargo and security.
The Group has participated in the IOSA programme since 2006 and
has successfully undergone a total of five unqualified audits.
• Implementation of runway safety measures
Safety statistics show that runway excursions and incursions are
the most common type of accident or incident reported annually.
In response to this, ACSA has established consultative forums, in
the form of local Runway Safety teams, at each ACSA airport. The
Group actively participates in such forums. It also provides operational
guidance to the Lanseria Airport management team on their airport
runway upgrade programme and associated infrastructure.
• Training on preventing loss of control
The Group incorporates loss of control in-flight training as part of its
continuous pilot training curriculum. Various exercises are practiced
during such training.
• Implementation of safety management system
The Group has a safety management system (SMS) to address all
aspects of aviation and ground safety. The purpose of the SMS is to
ensure that safety management systems are in place and to ensure
that risks affecting safety are controlled and appropriately mitigated.
The Director of Operations monitors the Group’s performance against
defined objectives and the Board reviews the Aviation Safety Goal
matrix at its quarterly Board Meetings.
Quality of Equipment
As mentioned above, the Group’s goal is to provide a safe, secure, reliable
and quality service to its customers and it strives to procure the best and
latest equipment and technology affordable to it in providing such services.
Maintenance of the fleet of aircraft is regulated by the South African
Civil Aviation Authority and, as the Group leases in a number of aircraft
from foreign-owned leasing companies, the Federal Aviation Authority
of the United States and the European Aviation Safety Authority. The
Group ensures compliance with airworthiness directives issued by the
manufacturers of the equipment. Buildings, plant and other equipment
are maintained to a high standard to ensure a safe and user-friendly
environment for employees and customers.
The Group has, in the past financial year, made the following investments
in respect of its equipment, plant and buildings:
(a) Continuous investment in maintaining the safety and reliability of
aircraft. The Group subcontracts the maintenance of its aircraft and
engines to South African Airways Technical (Pty) Ltd, Israeli Aircraft
Industries and ST Aerospace Engines Pte.
(b) Following the successful implementation of a businesswide airline
enterprise reservation system from Sabre Airline solutions in June
2012 at a cost of approximately R52 million, the Group has continued
to improve the system with new modules and updated technology
as and when required. This system has and will continue to deliver
substantial improvements in revenue integrity, inventory management
and optimised ticket pricing as well as improved crew and airport
staff productivity.
(c) A substantial investment towards the acquisition of a new fleet of
Boeing 737-800 new generation aircraft was made which, in addition
to having delivered substantial fuel savings compared to the B737-400
fleet, also has a greater revenue-generating potential with its greater
seating capacity and requires less maintenance downtime. The
Group took delivery of four (4) new Boeing 737-800 aircraft during
the previous reporting period and will be taking delivery of a further
four (4) new Boeing 737-800 aircraft during 2015/16. In addition, the
Group has entered into a purchase agreement with Boeing for the
purchase of eight (8) Boeing 737-8 MAX aircraft for delivery during
2019 to 2021. During the period under review, the Group purchased
one (1) second-hand Boeing 737-800 aircraft and leased a second-
hand Boeing 737-800 aircraft.
(d) An upgrade of the SLOW Lounge at Cape Town International Airport
is currently being implemented, and should be completed by mid-
September 2014 and the Group plans to upgrade its lounge at OR
Tambo International Airport in the next financial year.
Customer Experience
The Group recognises that in order to be a truly customer-centric airline, it
needs to consistently listen to its customers’ needs. The Group therefore
continuously seeks the best and most reliable tools to measure customer
satisfaction levels in respect of both its British Airways and kulula.com
brands. In this regard, the Global Performance Measurement (GPM) tool
is used for the British Airways brand and the Voice of the Customer (VoC)
feedback tool is used for kulula.com.
British Airways
The Group conducts monthly on-board research amongst randomly
selected customers. The research methodology is in line with the GPM.
The overall customer satisfaction performance of the British Airways brand
during the period under review is reflected in the table below.
28
Sustainable Development Report (continued)
British Airways overall performance
July 2013–June 2014
Value for money 62%
SLOW Lounge team 74%
SLOW Lounge refreshment 77%
SLOW Lounge environment 81%
Overall satisfaction with British Airways 76%
Meal/refreshment service 57%
Likelihood to travel British Airways again 76%
Likelihood of recommendation 72%
Departure process 65%
Check-in process 76%
Cabin environment 60%
Cabin crew 78%
The Group acknowledges that there are areas for improvement and plans
are in place to address these.
kulula.com
As mentioned above, kulula.com uses the VoC tool. The VoC tool receives
real-time feedback from customers which is used to ensure that the
brand remains responsive to customer needs. The feedback reflects the
customer’s perception of the service experienced at different customer
touch points, which in turn informs decisions on how the brand can better
serve customers. While there are areas for improvement, it is encouraging
to note that 87% of customers are likely to fly with kulula.com again.
Customers likely to fly with kulula.com again
Jul
100%90% 89% 86% 89% 88% 84% 88% 89% 87% 88% 89% 85% 87%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
Broad-based Black Economic Empowerment
The Board views the Group’s business as an integral part of the political,
social and economic community in South Africa and is committed to
sustainable transformation as part of its business strategy. The Group
recognises the importance of implementing a broad-based black economic
empowerment (B-BBEE) programme that addresses the inequality of the
past through a dedicated and ongoing process and regularly reviews its
B-BBEE strategy with the aim of effecting improvement across all seven
pillars of the B-BBEE scorecard, as detailed later in this Report. The Group
is also required to provide both the International Air Services Council and Air
Services Licensing Council with its verification certificate and Employment
Equity Plan when applying for licences or amendments to same.
In order to facilitate better preparation for the purposes of its B-BBEE
Verification, the Group decided to skip the financial year 2012–2013 and
conduct a verification assessment for the financial year 2013–2014. The
B-BBEE audit for the 2013–2014 financial year was conducted by the
verification services of Grant Thornton. A comparative of the results for the
2011–2012 and 2013–2014 financial year is contained in the table below.
Element Indication Weighting
Financial year
2013/14
Financial year
2011/12Ownership Black
ownership 20 17.73 14.88Management control
Black top management 10 3.75 2.63
Employment equity
Black managers15 2.66 2.39
Skills development
Black training spend 15 10.60 3.66
Preferential procurement
Procurement spend 20 13.28 12.42
Enterprise development
Investment in black-owned enterprises 15 15 15
Socio-economic development
Socio-economic contribution 5 3.38 4.44
Total point 100 66.40 55.42
The assessment indicates that the Group achieved a total of 66.40 in the
2013–2014 financial year compared to a total of 55.42 in the 2011–2012
financial year. The B-BBEE recognition level for the Group increased from
Level 5 to Level 4, indicating an improvement due to its focus on several
elements of the B-BBEE scorecard.
Equity Ownership
The Group concluded a Black Economic Empowerment (BEE) transaction
during the 2007 financial year pursuant to which shares equivalent to 15% of
its post-transaction issued share capital were issued to a BEE Consortium
known as Thelo Aviation Consortium (Proprietary) Limited (Thelo Aviation
Consortium) led by Thelo Aviation Investments (Proprietary) Limited (Thelo
Integrated Annual Report 2014
29
Aviation Investments). In addition to the above-mentioned BEE transaction,
Thelo Aviation Investments, the biggest shareholders in the Thelo Aviation
Consortium, purchased an additional 6,172,550 shares in the Company
for cash from various shareholders. Thelo Aviation Investments disposed
of its 6,172,550 shares during the reporting period in question.
The increase in ownership score between the 2011–2012 and 2013–2014
financial years is as a result of the public purchasing of the Group’s shares
in the market.
The Group, on its listing in 1998, implemented a share incentive scheme for
all permanent employees, including previously disadvantaged employees,
to enable them to purchase shares in the Group. This scheme, as a result
of certain tax changes, has to a large extent become dormant. The Group
Shareholder Analysis is set out on pages 121 to 123 of this Integrated
Annual Report.
Management Control
The Group’s BEE Consortium has representation on its Board, with two
of the Consortium members having been appointed to the Board, namely
Mr Ronald Sibongiseni Ntuli as the Non-executive Joint Deputy Chairman
of the Board and Mr Khutso Ignatius Mampeule being an independent
Non-executive Director.
Currently three (3) of the Group’s 14 Directors (21.4%), excluding the
alternate Director, are previously disadvantaged persons, as opposed
to 30.8% (four (4) of 13) during the previous financial year. At Executive
Management level (which includes both top management and senior
management), two (2) members (18%) of the 11 member Executive
Committee are previously disadvantaged persons, which is the same as
during the previous financial year.
Employment Equity
The Group’s focus on employment equity (EE) is in line with its overall
transformation strategy.
The overall race distribution of the Group’s permanent employees in South
Africa as at 30 June 2014, compared to 30 June 2013, is set out below:
At 30 June 2014 At 30 June 2013
White (Females and Males)
737 employees(constituting 37% of the total number of employees)
742 employees(constituting 38% of the total number of employees)
African, Coloured, Indian (designated Females and Males)
1,269 employees(constituting 63% of the total number of employees)
1,170 employees(constituting 62% of the total number of employees)
Reflected below is the summarised employment equity reports (EEA2)
submitted online on 6 December 2013 as required in terms of section 22
of the Employment Equity Act, as well as the Group’s workforce profile
as at 30 June 2014.
Summarised Employment Equity EEA2 Report as at 31 July 2013
Total number of employees (including employees with disabilities) in each of the occupational levels
Occupational level
Male FemaleForeign
nationalsTotal Total
head countA C I W A C I W Male Female Male Female
Top management 0 0 0 2 0 0 0 0 1 0 3 0 3
Senior management 0 0 1 6 0 0 0 1 0 0 7 1 8
Professionally qualified and experienced specialists and mid-management
4 2 2 145 4 3 6 45 0 0 153 58 211
Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents
127 73 46 187 327 151 93 284 2 3 435 858 1,293
Semi-skilled and discretionary decision-making
57 13 14 22 123 53 52 48 1 0 107 276 383
Unskilled and defined decision-making
2 1 0 0 21 2 0 0 1 0 4 23 27
Total permanent 190 89 63 362 475 209 151 378 5 3 709 1,216 1,925
Temporary employees 0 0 0 0 1 0 0 1 0 0 0 2 2
Grand total 190 89 63 362 476 209 151 379 5 3 709 1,218 1,927
(A = African, C = Coloured, I = Indian, W = White)
30
Sustainable Development Report (continued)
Summarised Employment Equity Report as at 31 July 2013
Total number of employees with disabilities only in each of the occupational levels
Occupational level
Male FemaleForeign
nationalsTotal Total
head countA C I W A C I W Male Female Male Female
Top management 0 0 0 0 0 0 0 0 0 0 0 0 0
Senior management 0 0 0 0 0 0 0 0 0 0 0 0 0
Professionally qualified and experienced specialists and mid-management
0 0 0 2 0 0 0 0 0 0 2 0 2
Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents
0 1 0 1 0 0 1 0 1 0 3 1 4
Semi-skilled and discretionary decision-making
2 0 0 1 1 0 0 0 0 0 3 1 4
Unskilled and defined decision-making
0 0 0 0 0 0 0 0 0 0 0 0 0
Total permanent 2 1 0 4 1 0 1 0 1 0 8 2 10
Temporary employees 0 0 0 0 0 0 0 0 0 0 0 0 0
Grand total 2 1 0 4 1 0 1 0 1 0 8 2 10
(A = African, C = Coloured, I = Indian, W = White)
Workforce profile as at 30 June 2014
Occupational level
Male FemaleForeign
nationalsTotal Total
head countA C I W A C I W Male Female Male Female
Top management 0 0 0 2 0 0 0 1 0 0 2 1 3
Senior management 0 0 1 6 0 0 0 1 0 0 7 1 8
Middle management 6 2 3 142 5 3 6 46 0 0 153 60 213
Junior management 127 73 52 192 315 161 108 277 2 3 446 864 1,310
Semi-skilled 63 16 13 18 201 49 36 45 1 0 111 331 442
Unskilled 2 1 0 0 24 2 0 0 1 0 4 26 30
Total permanent 198 92 69 360 545 215 150 370 4 3 723 1,283 2,006
Temporary employees 4 0 0 0 1 0 0 0 0 0 4 1 5
Grand total 202 92 69 360 546 215 150 370 4 3 727 1,284 2,011
(A = African, C = Coloured, I = Indian, W = White)
Integrated Annual Report 2014
31
The Group is implementing the following action plans in order to improve
representation by previously disadvantaged groups:
• Workforce and succession planning: The Group has identified
areas and positions in the organisation at specialist, scarce skills,
and senior management levels and has implemented targeted plans
and initiatives to identify and fast track high potential candidates.
• Recruitment and selection: Active steps have been taken to target
and appoint suitably qualified persons from designated groups. The
Group is fully committed to increasing the representation amongst,
and diversity of, its workforce. It has an established Employment
Equity Forum with whom it consults at regular intervals on progress
towards achieving the EE Plan. Due to the targeted efforts made by
the Group during the year, the number of previously disadvantaged
employees increased to 63% compared to 62% during the previous
reporting period. The percentage includes pilots and technicians,
professions where the aviation industry is faced with a particular
challenge to achieve a more equitable representation. The employment
and retention of pilots from previously disadvantaged groups remains
a major challenge. Notwithstanding the foregoing, the Group has
increased its pilot pool of previously disadvantaged groups by 3%
since the implementation of its EE Plan in 2011.
• Job profiling, job evaluation and grading: All jobs in the Group
have been profiled, evaluated and assigned job grades. This enables
valid benchmarking of positions and remuneration both internally and
externally. This has significantly improved transparency in terms of
recruitment and the filling of vacancies, as well the remuneration
policy within the Group. Further, through the job profiling process, the
critical competencies for each job have been identified and mapped
which has facilitated the development of personal development plans
per employee.
• The Group has established an electronic EE Monitoring System which
tracks in real time the EE profile and the Group’s progress towards
achieving its employment equity targets.
The Group’s five-year EE Plan (2011–2016) reflecting the numerical
goals/ targets that it has set and hopes to achieve, is set out below.
LevelEE
goal
% SA black target
Budgetheadcount
Male FemaleForeign
nationals Total
A C I W A C I W M F M F
Top management2011
0%2 0 0 0 2 0 0 0 0 0 0 2 0
2016 2 0 0 0 2 0 0 0 0 0 0 2 0
Senior management2011
30%12 0 0 2 8 0 0 0 2 0 0 10 2
2016 10 1 0 1 5 1 0 0 2 0 0 7 3
Mid-management2011
17%205 4 2 0 145 0 3 6 45 0 0 151 54
2016 195 14 3 1 121 12 2 1 41 0 0 139 56
Junior management 2011
76.9%1,282 128 74 42 197 311 152 95 289 0 3 441 850
2016 1,276 241 34 18 131 555 80 42 175 0 0 424 852
Semi-skilled2011
86%421 67 20 13 22 118 68 28 84 1 0 123 298
2016 444 87 12 7 27 203 29 16 63 0 0 133 311
Unskilled2011
89%25 1 0 0 0 23 0 0 0 0 1 1 24
2016 27 4 1 0 1 16 2 1 3 0 0 6 22
Disabled employees2011
-10 2 0 0 3 2 1 1 1 0 0 5 5
2016 32 5 0 0 2 12 2 1 10 0 0 7 25
(A = African, C = Coloured, I = Indian, W = White)
Skills Development
The Group’s commitment to providing a quality air service means that skills development is a priority. The Group invested approximately R16.3 million
during the period under review (compared to R14 million in the prior financial year) or approximately 3% of payroll (which is the same for the prior financial
year) in support of its commitment to training and skills development. See the section dealing with the Group’s training and development initiatives on
pages 35 to 36 for more details.
32
Sustainable Development Report (continued)
Preferential Procurement
The Group is committed to the concept of preferential procurement. It relies
on its suppliers to deliver products and services in line with its required
standards such as, but not limited to, quality and safety of the product,
timeous delivery and availability of supply. Where possible, the Group enters
into service level agreements with such suppliers in an attempt to ensure
that such standards are met and maintained. Other important factors play
a role in selecting suppliers including, but not limited to, compliance with
local and international laws and regulations (particularly those related to
aviation), good quality service and products, reliability and stability, cost
effectiveness and support networks, with particular reference to suppliers
of aircraft parts, components and fuels and the availability of products
and services. The B-BBEE status of South African suppliers is also taken
into account during selection. The Group is currently implementing a
centralised procurement system which will be able to accurately track
B-BBEE spend in the future.
While the Group attempts to source products and services from South
African suppliers, this is not always possible, having regard to the nature
of the Group’s business, where the acquisition of aviation equipment and
specialised airline-branded products need to be procured and sourced
from foreign companies, based mainly in Europe and the United States of
America. The proportion of spend with foreign suppliers varies significantly
year-on-year due to the capital value of spend on aircraft and aircraft
spares. For the period under review, excluding spend on the leasing and
purchase of aircraft and aircraft spares, the Group spent approximately
87% of its total procurement spend with South African suppliers.
In the period under review, the Group marginally increased its score for
preferential spend from 12.4 to 13.28 points. It will continue to focus
on channelling procurement through to black-owned qualifying small
enterprises and exempted micro-enterprises. It is also improving its
systems to more accurately reflect its data collection with respect to
preferential procurement.
Enterprise Development
The Group scored full points for enterprise development, mainly as a result of
a loan that was provided to BidAir Cargo (Pty) Limited, a black empowered
company, as well as the funding and setting up by the Group of an academy
which grooms unemployed school leavers for entry into the workforce.
Socio-economic Development
The success of the Group’s Corporate Social Investment Strategy and
initiatives is reflected in the fact that it scored 3.38 out of 5 in this category.
The Group has several social development initiatives in place including:
• A programme to support and assist the Ekurhuleni Community through
a variety of initiatives centred around the Reiger Park Community
Crisis Centre;
• Contributions to the Smile Foundation, and Casual Day;
• A partnership with the Red Cross Children’s Hospital in the Western
Cape in which the Group has donated air tickets for the transport of
sick children and immediate family members to and from the hospital
as well as the transportation of specialised medical personnel to
hospitals in South Africa where their expertise may be required; and
• The donation of air tickets to Wings and Wishes for the purpose of
transporting children in need of specialised medical treatment.
Further details on the Group’s Corporate Social Investment Strategy and
initiatives are dealt with on page 36 of this Report.
Economic Impact
The Group, like many other companies, has an impact on its stakeholders
through, amongst others, the creation of wealth; the creation of employment
opportunities; the fair and competitive remuneration of its employees
based on industry standards; and its corporate social investment. Kindly
refer to the Group’s Value Added Statement as set out on page 7 of the
Integrated Annual Report. The Group’s economic impacts are driven and
influenced by the following factors.
Access to Affordable Flights
The airline industry is fraught with many challenges involving, but not
limited to, the cost of equipment, oil price and currency fluctuations,
airport charges and taxes and, consequently, access to affordable flights.
It was for this reason that the Group was the first in South Africa to launch
a low fares airline, making air travel affordable for a larger portion of the
population that would previously not have flown. To enable the Group to
continue to offer access to affordable flights, it continuously looks at ways
in which to improve its efficiency and cost effectiveness. These include:
• Implementing a progressive fleet replacement programme. By
operating more modern and fuel-efficient aircraft, the Group has
achieved a consistent reduction in the cost of aircraft maintenance
as well as the amount of fuel used per seat;
• The introduction of a comprehensive fuel savings programme with
the co-operation of pilots;
• The weight of an aircraft impacts on fuel burn and the Group has,
through the installation of lightweight seats and catering equipment,
substantially reduced aircraft weight;
• Maximised use of available technology to reduce airline distribution
costs through the use of the internet, thereby eliminating the use of
traditional paper tickets and by introducing self-service check-in for
customers;
• The Group’s Flight Operations Department, working with Air Traffic
Control and Navigation Services, has developed the most efficient
routing of aircraft between airports and developed more efficient
landing approach profiles resulting in substantial fuel savings; and
Integrated Annual Report 2014
33
• The setup of the Group’s own catering department known as Food
Directions, thereby reducing the cost of on-board catering, while at
the same time ensuring a better quality of catering for customers.
Despite its many cost-saving initiatives, some of which are mentioned above,
the Group has experienced a significant increase in average airline ticket
prices during the financial year under review as a result of a substantial
rise in the price of fuel and the weak exchange rate, as reflected in the
Group’s Annual Financial Statements.
Public-Private Initiatives
The Group believes that Public-Private Partnerships (PPPs) and other joint
initiatives with government could play a meaningful role in ensuring access
to affordable airfares. The Group continuously looks at opportunities for
PPPs. No PPPs were entered into during the period under review.
Social Impact
The Group’s objective to create and sustain value for all its stakeholders
is impacted by its ability to achieve its goal of being an employer of choice
and creating a positive impact on society as a whole. The manner in which
it ensures that it achieves these goals is set out below.
The Company’s Employees
Employee Composition and Turnover Rate
The success of the Group is dependent on the commitment of its 2,011
employees to deliver a safe, secure, reliable and quality service. The
composition of its employees is made up as follows:
Workforce composition by employment type
2014 Financial year
end
2013 Financial year
end
Permanent employees 2,006 1,912
Temporary employees 5 2
Note 1: Of the Group’s total number of permanent employees, it has seven (7) foreign nationals in its employ, an increase from six (6) in the 2012/13 financial year. All these foreign nationals are employed in South Africa.
Note 2: The total number of employees, as set out above, excludes 15 of the Group’s permanent employees who are employed in Zimbabwe.
Workforce composition per gender
2014 Financial year
end
2013 Financial year
end
Male 727 707
Female 1,284 1,205
Workforce composition per age distribution
2014 Financial year
end
2013 Financial year
end
Number of employees younger than 30 666 581
Number of employees between
30 and 50 1,177 1,178
Number of employees older
than 50 168 153
While the Group does not maintain data on turnover rate by age group
and gender, its staff attrition rate during the 2013/14 financial year was
12.4% as opposed to 9.6% in the prior reporting period.
Employee Remuneration
The Group offers competitive salaries and benefits to its employees
based on the principles of equity and fairness. Further details of the
Group’s remuneration policies are set out in the Remuneration Report
on pages 55 to 57.
Remuneration and reward guidelines serve to create a platform for fair
and transparent human resource practices so as to ensure consistency
and non-discrimination among employees and thereby eliminate any
form of subjectivity or favouritism. The Group’s position on salaries is in
the middle quartile; however, salary progression for new employees will
range from the lower quartile to the upper quartile as determined by the
employees’ skills, experience, qualifications and performance.
The Group offers employee benefits to its permanent employees employed
in South Africa and makes a contribution towards employee benefits
and medical aid schemes to those permanent employees employed in
Zimbabwe. The Zimbabwe employees are free to join the medical aid and
pension scheme if they so wish. The Group has a defined contribution
pension scheme in place for its permanent employees in South Africa,
which is an umbrella scheme known as Evergreen, administered by Old
Mutual. In addition it offers its permanent employees in South Africa risk
benefits in the form of death and disability benefits, which scheme is
administered by Discovery Life. The Group’s permanent employees in
South Africa contribute 7% towards retirement funding with the Group
contributing 10% to cover both retirement funding and risk benefits. A
medical aid scheme is also in place for permanent employees in South
Africa, which scheme is administered by Discovery. The Group contributes
50% of the cost in respect of the Discovery Essential Comprehensive Plan
for such permanent employees.
Labour Relations
The Group’s aim is to create and maintain sound labour relations, which
support its goal of being the employer of choice in the South African
34
Sustainable Development Report (continued)
airline industry. The Group regularly reviews its employment conditions.
It tries to ensure that all employees are made aware of their benefits and
this information is furnished to employees during induction sessions and
via the Group’s intranet, newsletters sent directly to staff by the Group,
Old Mutual and Discovery and other communication methods referred
to earlier in the report.
The Group was not subject to any strikes during the period under review.
Its disciplinary and grievance procedures are communicated to new
employees as part of their induction into the Group and are also available
to all employees to ensure that they are aware of the process in place to
lodge grievances, should they have the need to do so.
The percentage of the Group’s employees represented by trade unions or
collective bargaining agreements is reflected on page 22 of this Sustainable
Development Report.
The minimum notice periods for its employees, as set out in the employees’
letters of appointment, are as follows:
Pilots: 3 months
All other employees: 4 weeks
Top and senior management enter into employment contracts with the
Group, which are subject to termination on four (4) weeks’ notice and
are not subject to any fixed term or form of restraint. This is under review.
Performance Management
A performance management process known as On Track, is carried out
for all employees in terms of which they receive performance and career
development reviews. The On Track process strives to give employees
as much clarity as possible on what is expected of them and how their
performance will be measured. It is designed to give managers and staff
tools and skills to maintain open, empowered and constructive relationships.
The performance management process exists to assist managers to be
fair and consistent and manage accountability throughout the Group. The
emphasis is on quality and face-to-face discussions on performance, with
the aim of contributing to a culture of giving and receiving constructive
and developmental feedback.
In addition to the above philosophy, the functional purpose is to align
individually agreed objectives to ensure that the collective effort will achieve
the Group’s overall Strategic Plan. Through the performance management
process the Group hopes to create an environment in which individuals
receive direction, guidance and feedback in order to perform optimally
by identifying ongoing accountabilities and agreeing to specific task
assignments. Ultimately it enables the Group to recognise and reward
high performance by way of performance incentive pay-outs.
Recruitment and Retention of Skilled Staff
The recruitment and retention of the right calibre of employee is vital to
enable the Group to deliver on its goal of becoming the airline of choice
in the places and regions in which it operates. The Group acknowledges
that its ability to recruit and retain skilled employees is a critical factor in
driving performance in the intensely competitive and dynamic business
environment in which it operates.
The employment and retention of pilots remains a major challenge to
the Group, particularly pilots from previously disadvantaged groups.
As part of its commitment to transformation and skills development in
the aviation industry, the cadet pilot programme sponsors individuals
from previously disadvantaged groups to obtain their commercial pilots
licences. The cost to sponsor each cadet is approximately R400,000.
Once the cadets graduate from the programme, they are placed with
selected commercial operators to obtain sufficient flying experience to
be able to be considered for employment with the Group. The Group,
having regard to the fact that each pilot that joins the Group has to be
trained to fly on its aircraft, requires that the pilots sign training bonds, to
ensure that they remain in the employ of the Group for a certain period
to cover the cost of such training.
The Group’s recruitment and selection practices are carried out in
accordance with all applicable labour legislation and are based on the
principles of fairness, transparency and consistency. This is achieved
through the use of objective and validated tools including, but not limited
to, competency-based interviews and psychometric assessments. The
recruitment and selection process entails achieving a balance between
employing the best person for the position and the achievement of the
numerical goals as set out in the Group’s EE Plan in order to achieve an
equitable representation of designated groups in all occupational levels
within the Group.
Diversity and Equal Opportunities
The Group is committed to non-discriminatory treatment in all its employment
practices and to providing equal opportunities for all employees, and
does not accept any form of unfair discrimination based on gender, race,
nationality or religion. Employment policies, including hiring, training,
working conditions, compensation and benefits, promotion, termination
and retirement are based on individual qualifications. Employees are treated
equally, irrespective of gender, age, race, sexual orientation, disability or
other status unrelated to performing the job. The Group’s focus on diversity
and employment equity is in line with its overall transformation objectives
and this is dealt with in the section of this Report relating to B-BBEE.
During the financial year under review no incidents of discrimination were
observed or reported.
Integrated Annual Report 2014
35
Health and Safety at Work
Special attention is paid to health and safety in the workplace so as to
ensure that there is a safe environment for employees, customers and
invitees. The health of employees is important to ensure the sustainability
of the Group. During the period under review, 20 minor incidents were
reported (as opposed to 52 in the previous reporting period) which injuries
ranged from slipping on wet floors, to falling incidents and other minor
incidents. There were no fatalities during the period under review.
The CEO ensures that all health and safety duties are discharged as a shared
responsibility throughout the organisation, from appointing occupational
health and safety representatives who know their functions, to positively
enforcing monthly inspections and attending Health and Safety Committee
meetings on a monthly basis. Occupational Health and Safety Representatives
conduct monthly inspections within their departments and annual audits
are conducted by the Quality Assurance Department to ensure compliance
with the Act and to identify any further risks and/or trends.
Health and Safety Committees
Due regard is paid to the health and safety of employees. The Group
strives to provide employees, customers and invitees with a clean and safe
working environment, and maintains reporting and notification systems.
The Group has an open reporting culture and encourages the reporting
of all incidents. Safety incidents and damage are reported though a safety
management system and a formal structure exists to allow safety issues
to be addressed within each department. Safety representatives are
appointed in each department and trained in various areas of health and
safety. The Health and Safety Committee meets at regular intervals to
discuss pertinent issues. The Group is fully compliant with the Occupational
Health and Safety Act.
Staff Welfare
Balancing the demands of work and family life is not always easy, and it was
with this in mind that the Group entered into a contract with Independent
Counselling Advisory Services (ICAS) and the Group’s Precious Cargo
Wellness Programme was born. ICAS provides a confidential 24 hour a day,
365 day a year personal support and information service for employees
and their families where they can call for help in dealing with everyday
situations and more serious concerns. On-site clinics have been set up
and are manned by a registered psychologist once a month at the Group’s
Head Office, Operations Department, OR Tambo International Airport
and Cape Town International Airport. The service includes telephone
consulting, face-to-face counselling, life management services and HIV
counselling. In addition, employees have access to e-Care services,
which is an online comprehensive health portal providing valuable and
interactive resources on a wide range of topics approved by qualified health
professionals. Forty-nine percent of staff made contact telephonically with
the ICAS advisors and 20% made use of the counselling services during
the period under review.
Health and wellness days are held annually and enable employees to
have health checks done at their place of work. These include blood
pressure, height, age, weight and HIV/AIDS tests. The Group’s HIV/AIDS
programme forms part of the Precious Cargo Wellness Programme for all
employees and allows them to undergo voluntary HIV testing and, if need
be, counselling. Employees who test positive are referred for additional
counselling through the programme and are provided with medical support
through the Group medical aid scheme. In addition, HIV Awareness
Workshops are conducted to promote the understanding of HIV and AIDS.
Training and Skills Development
Training programmes are focused on improving human capital, improving
business processes and procedures, maintaining and promoting quality
service delivery in all aspects of the business and alleviating, within
affordable boundaries, skills shortages amongst pilots.
Employee Training
The Group makes a significant investment in training, investing approximately
3.0% (the same as in the previous reporting period) of payroll annually.
The Group has the following training programmes in place:
• Take Off: As part of its succession planning, this leadership
development programme has been running for four consecutive years.
The programme is delivered in conjunction with the Gordon Institute
of Business Science (GIBS) and is underwritten by the University
of Pretoria. As part of this programme the Group’s potential future
leaders are identified and undertake courses covering key areas of
business management in a mini-MBA styled programme. To date,
124 employees have completed the programme, with a further 20
employees currently involved in the programme.
• Cadet Pilot Training Programme: The Group remains committed
to its Cadet Pilot Training Programme and two cadet pilots were
recruited during the period under review. Since the initiation of the
programme, 11 cadets have obtained their commercial pilot licences,
six (6) of whom are currently employed by the Group, while some
of the others have been employed at other smaller airlines to obtain
sufficient flying experience to qualify for employment as a pilot with
the Group. The Department of Transport has commended the Group
on the programme, having regard to the challenges faced by the
aviation industry in recruiting and training cadets from previously
disadvantaged groups.
• Workplace Experiential Learning: During the period under review,
the Group was involved with various tertiary education providers to
provide six-month workplace experiential training stints to students
in the travel-related disciplines offered by these tertiary education
facilities. Since the inception of the programme, five (5) students from
the Durban University of Technology have completed the practical
component of their workplace experiential learning (WEL) at King Shaka
36
Sustainable Development Report (continued)
International Airport in Durban; 13 students from the University of
Johannesburg have completed their WEL at OR Tambo International
Airport, with all subsequently being offered permanent employment
as Customer Service Agents by the Group; and six (6) students from
the Cape Town University of Technology have completed their WEL
at Cape Town International Airport.
• Skills Development: The Group contributed R6.2 million to the skills
development of the country in the form of the Skills Levy, which is paid
to the Department of Labour, as compared to R5.7 million contributed
during the prior reporting period. As part of the Group’s contribution
to the community, students from Reiger Park have been provided
with the opportunity of gaining six (6) months’ work experience.
Since the Group commenced this initiative in 2006, it has awarded
135 students from the Ekurhuleni district with passenger handling
certificates; employed nine (9) students from the Ekurhuleni district as
cabin attendants; and offered 14 students permanent employment.
• A Succession Development Programme (SDP): This programme is
modelled on the GIBS Take Off Programme, and was developed for
middle management (supervisors) at the airports to enable ground staff
to develop to the next level of management. Nine (9) supervisors at
OR Tambo International Airport, nine (9) supervisors from Cape Town
International Airport and 13 supervisors from King Shaka International
Airport have completed the programme.
• Training and Development: In addition, training and development
courses were provided to employees in areas such as, but not limited
to, passenger handling, Group orientation, passenger check-in,
dangerous goods, customer service, station emergency awareness,
aviation safety and security, fares and ticketing, customer experience,
safety and emergency procedures, type-rating for pilots in respect
of the aircraft types operated by the Group, and crew resource
management training, so as to ensure that the highest standards of
safety, security and service are maintained throughout the Group. In
total 1,436 employees underwent training and development courses
during the period under review.
Investing in the Community
The Group is a committed corporate citizen and, together with its staff,
endeavours wherever possible to improve the lives of fellow South Africans.
The Group believes that social responsibility is a duty, privilege and an
obligation to help those less fortunate and to make a positive impact on
society in general. In this regard, the Group assisted the community as follows:
The Red Cross Children’s Hospital Trust
During the period under review the Group formed a partnership with and
made a donation to the Red Cross War Memorial Children’s Hospital Trust,
to assist children needing medical assistance at the hospital. The Group’s
contribution comprised R500,000 worth of flight tickets to be used to
transport children, as well as their parents/immediate family members to
and from the hospital for medical treatment. The flight ticket contribution
can also be used by certain staff members from the hospital who need
to travel for work purposes. In addition to the flight ticket contribution,
the Group committed to provide a cash donation of R500,000 to the Red
Cross War Memorial Children’s Hospital, which will be used towards the
building of a new facility to accommodate the parents and caregivers of
the children receiving treatment at the hospital.
Project Green
This project was launched in 2007 to raise money to care for the environment,
while also offsetting the Group’s carbon emissions through the sustainable
greening of townships in South Africa. During this review period, the Group
was unable to collect donations from customers directly, since the Sabre
Reservation System does not offer this facility, but it continued with its
investment in Project Green through the donation of R200,000 worth of
air tickets to this worthy cause.
Smile Foundation
The Group continued to put smiles on children’s faces by donating R250,000
in the form of air tickets to the Smile Foundation, which is dedicated to
transforming the lives of children with facial conditions.
Casual Day
The Group sold stickers on board its flights in support of the Casual Day
charity initiative, and raised approximately R6,850.
Diabetes SA
The Group worked with Diabetes SA to promote awareness of diabetes,
by providing free exposure in khuluma (kulula’s on-board magazine), and
during the month of November the kulula.com cabin crew wore the official
Diabetes Badge, to promote World Diabetes Day.
For Good Social Network
For Good Social Network is an initiative of Heartlines, a non-profit company
that uses various forms of media to inspire people to live their lives to
the fullest. The Group contributed an amount of R90,000 to this worthy
cause in the form of air tickets.
ORT SA
The Group made a donation of R35,000 in the form of air tickets to ORT
SA to assist them with their Robben Island Swim Initiative.
Cycle for Life
Prizes in the form of air tickets were donated to Cycle for Life in the amount
of R57,000 to assist with the DSTV Mitchell’s Plain Festival.
Wings and Wishes
This organisation flies critically ill children from all over the country to various
hospitals for life saving surgery and medical care. The Group provided
air tickets to the value of R57,247 to assist in transporting such children
during the period under review.
Integrated Annual Report 2014
37
Environmental Impact
The Group’s ability to operate and create and sustain value is largely
driven by its environmental impact. It is therefore committed to protecting
the environment, conserving natural resources and utilising resources
in an effective and responsible way, by adopting sound environmental
practices in its business.
Responsible aviation starts with safety and security and this is the
fundamental duty of the Group to its customers and colleagues.
The Group’s responsibilities also extend to the impact that it has on
the environment.
This section of the Report deals with the environmental performance of the
Group and reflects its carbon footprint based on the Corporate Accounting
and Reporting Standard of the Greenhouse Gas Protocol (GHG Protocol).
The organisational boundary of the report is reflected in the table below.
Organisational entity Comair Limited
Operational control 100%
Operational boundary Operational control
Reporting period 1 July 2013 to 30 June 2014
Base year 2011
Methodology GHG Protocol Corporate Accounting and Reporting Standard
Number of employees 2,006
Number of sites 16
Square meterage of facilities 19,409 m2
KPI: Passengers carried 5,196,507
As mentioned at the outset, this Report deals only with the Group and its
operations in South Africa and does not deal with its associated companies.
The Report includes the compulsory reporting requirements of the GHG
Protocol by quantifying the Group’s emissions that are categorised as
Scope 1 and Scope 2 and includes selected Scope 3 emissions and
fugitive emissions as optional information.
The activities listed in the table below have been reported on.
Scope 1 Scope 2 Scope 3
(a) Mobile fuel combustion in Group-owned/leased aircraft and Group-owned/leased vehicles
Purchased electricity (Electricity (usage))
Water supplyPaper usagePaper recyclingWell-to-tank emission (fuel- and energy-related activity)
(b) Stationary fuel combustion in Group-owned assets (Generators and catering equipment)
Environmental Objectives
The Group’s environmental objectives focus on assessing and minimising
its impact on the environment and are currently aimed at:
• Identifying and complying with environmental legislation and regulations;
• Identifying and managing all risks relating to the Group’s impact on the
environment with regard to water use, energy use and conservation
and emissions and climate change;
• Creating environmental awareness amongst all employees;
• Limiting aircraft noise without compromising safety; and
• Linking fuel saving initiatives with an environmental saving objective.
These objectives enable the Group to identify aspects of its business
that could have an effect on the environment with a view to reducing
such impact and, working closely with aviation policymakers in South
Africa, to influence the development and implementation of effective
environmental regulations.
The Group’s Chief Executive Officer is responsible for ensuring compliance
with these goals and delegates this responsibility to senior managers
within the Group.
Environmental Management Risk Assessment
The Group is committed to ensuring that it complies with the environmental
legislation and regulations applicable to it. The main environmental impact
being managed is the utilisation of fuel and oil which have a direct effect
on carbon emissions.
The Group assesses the risks faced by it that are associated with climate
change, which include:
• Regulatory risks: Compliance with environmental legislation; and
• Physical risks: Interruption to fuel supply, fuel shortages, and the
risks associated with load shedding in South Africa.
No fines or sanctions were imposed upon the Group during the period
under review for non-compliance with any environmental laws or
regulations.
Emissions
Climate change is the most urgent and significant sustainability issue. The
greatest component of the Group’s climate impact (approximately 99%)
results from GHG emissions released through the burning of fossil-based
jet fuel in aircraft engines. The international community aims to limit GHG
concentrations in the atmosphere so that global temperatures do not
increase by more than 2°C by 2050. The Group wishes to ensure that it
makes a fair contribution towards achieving this aim.
38
Sustainable Development Report (continued)
Globally, aviation produces around 700 million tonnes of carbon dioxide
(CO2) per year, which represents approximately 2% of total man-made
emissions. This share is projected to grow. The aviation industry is
extremely vulnerable to climate change response policies, especially
where these involve the pricing of carbon emissions. On the other hand,
the industry has to contribute its fair share to efforts to limit climate
change. Slowing down aviation growth to reduce carbon emissions is not
in anyone’s interest. It will create unemployment and undermine efforts
to reduce poverty. As it currently stands, it is estimated that tourism
sustains one in every 12 jobs globally and contributes approximately 9%
of worldwide gross domestic product. Aviation is not only a key enabler
of tourism, but also of trade, investment and global integration. However,
while slowing down aviation growth is not an option, being complacent
and doing nothing is also not an option, as the continued growth of
emissions will not be environmentally and economically sustainable. The
Group therefore welcomes the progress made at the International Civil
Aviation Organisation (ICAO) General Assembly in October 2010 where
190 member states agreed to the aspiration of achieving carbon neutral
growth from 2020. This is in line with the global airline industry vision for
a sector-wide approach to enable carbon neutral growth by 2020 and a
huge reduction in net emissions by 2050. The Group supports a framework
for reducing aviation emissions based on carbon trading that is applied
equally to all airlines and all industries as a whole, i.e. the burden on
aviation should not be disproportionate to that of other economic sectors.
Aviation cannot be the ‘cash cow’ of the climate regime. There is also a
firm belief that sustainable bio-jet fuels will play a pivotal role in helping
to meet the carbon emission targets. In this regard there are still hurdles
to overcome, which are mainly commercial in nature, and the need to
establish a level playing field for suppliers to produce aviation bio-jet fuel
against road transportation and other energy products.
British Airways Plc, the Group franchisor in respect of its BA brand and a
major shareholder, is playing a leading role within the aviation industry in
developing and promoting proactive schemes for a post-Kyoto aviation
policy. They believe that CO2 emissions from international aviation must
be integrated within a global agreement and that this must be done in a
way that ensures equal treatment of all airlines. The Group supports this
approach and is committed to improving its environmental performance
and reducing the adverse impact that its activities have on the local and
global environment.
Insofar as the Group’s emissions are concerned, its GHG inventory, by
scope and expressed in metric tonnes of carbon dioxide equivalent (CO2e)
is detailed in the tables and graphs below with comparatives between
the financial year in question and the base year. The Group also reflects
GHG Inventory for 2013 financial year.
Inventory 2013/14
Total GHG emissions by source
Emission source by Scope % of
footprint t CO2e% change from 2011
Scope 1 Direct emissions 82.0% 539,293.08 ↑ 1%
Stationary fuel combustion <1% 77.00 ↑ 19%
Mobile fuel consumption 81.9% 539,216.08 ↓ 1%
Scope 2 Indirect emissions 1.1% 7,146.53 ↓ 1%
Purchased electricity 1.1% 7,146.53 ↓ 1%
Total Scope 1 and 2 emissions 546,439.61 ↑ 1%
Scope 3 Indirect emissions 16.9% 111,132.57 NM
Fuel- and energy-related activities 16.9% 111,083.37 NM
Material use <1% 29.72 NM
Water use <1% 19.33 ↑ 11%
Waste disposal <1% 0.15 NM
Total Scope 1, 2 and 3 emissions 657,572.18 ↑ 21%
Out of Scope emissions t CO2e
Fugitive emissions 6.68
Emission intensities t CO2e% change from 2011
All Scopes’ footprint per passenger 0.13 ↑ 8%
Aviation fuel footprint per passenger 0.10 ↓ 10%
All Scopes’ footprint per employee 328.05 ↑ 18%
Scope 1 and 2 footprint per employee 272.62 ↓ 2%
Site specific emissions per m2 1 0.39 ↑ 46%
1 Site-specific emissions includes stationary fuel combustion and electricity consumption only
Emissions by Emission Source
2013/14 GHG Inventory by Emission Source
Tonnes of CO2e
Scope 1
Stationary fuel combustion
Purchased electricity
Material use
Mobile fuel combustion
Fuel- and energy-related activities
Water use
Waste disposal
0 100,000 200,000 300,000 400,000 500,000 600,000
Scope 2
Scope 3
Integrated Annual Report 2014
39
Mobile fuel combustion (primarily aviation fuel) has the largest emission
impact, making up 82% of the total footprint and 99% of Scope 1 and
Scope 2 emissions. It is encouraging to note that emission growth in this
source remains slower than growth in passengers carried, demonstrated
by the 10% decrease in aviation fuel emissions per passenger carried
since the base year.
While immaterial, stationary fuel combustion emissions have increased
from base year (19%), due the Group’s Catering Division which was in
operation for the full financial year.
Scope 3 emissions have increased substantially from previous years,
due to the inclusion, for the first time, of indirect fuel-related emissions,
otherwise known as well-to-tank emissions. This source makes up 17%
of the total footprint.
The total GHG Inventory of the Group for the 2013/14 financial year was
657,572.18 tonnes of CO2e made up as follows:
Direct Emissions (Scope 1)Scope 1 Emissions
Emission sourceUnit of
measure Emission
factor Consumption
Tonnes of CO2e
Mobile fuel consumption: aircraft kg Various 169,354,931 538,924.33Mobile fuel consumption:Vehicles ℓ Various 114,987 291.75Stationary combustion: generator fuel use and LPG fuel use ℓ Various 50,373 77.00Total Scope 1 539,293,08
The direct emissions reflected above are broken down as follows:
Detailed breakdown of mobile fuel combustion in Company-owned/leased
aircraft and owned/leased vehicles
Emission sourceUnit of
measure Emission
factor Consumption
Tonnes of CO2e
Aviation fuel kg Various 169,354,931 538,924.33Petrol ℓ Various 41.071 94,46Diesel ℓ Various 73,916 197.29Total score 539,216.08
Detailed breakdown of stationary combustion
Emission sourceUnit of
measure Emission
factor Consumption
Tonnes of CO2e
Diesel ℓ Various 1,134 3.03LPG ℓ Various 49,239 73.97Total score 77.00
Indirect Emissions (Scope 2)
Emission sourceUnit of
measure
Emission factor
kg C02e per unit Consumption
Tonnes of CO2e
Purchased electricity kWh 1.03 6,938,381 7,146.53 Total Scope 2 7,146.53
Scope 3 Emissions
Emission sourceUnit of
measure
Emission factor
kg C02e per unit Consumption
Tonnes of CO2e
Fuel-related well- to-tank activities Mobile fuel combustionAviation fuel kg 0,6550 169,354,931 111,012.16Petrol ℓ 0,45040 41,071 18,5Diesel ℓ 0,57850 73,916 42.76Stationary fuel combustion
Diesel ℓ 0,57850 1,134 0.66LPG ℓ 0,18890 49,239 9.29Material use
Paper Tonnes 956 31.09 29.72 Water useWater supply K ℓ 0,34410 56,184 19,33Paper, closed-loop disposal method Tonnes 21 6.93 0.15Total Scope 3 111,132.57
40
Sustainable Development Report (continued)
Optional Information
Breakdown of non-Kyoto fugitive emissions from air-conditioning equipment
Emission sourceUnit of
measure Consumption
Tonnes of CO2e
Refrigerant emissions: R22 kg 3.69 6.68
GHG Inventory 2012/13
GHG Inventory 2013/14 Scope 1 Scope 2 Scope 3 Total
Metric tonnes of CO2e 515,870.54 7,281.89 43.33 523,195.76
The total GHG Inventory of the Group for the 2012/13 financial year was
523,195.76 metric tonnes of CO2e made up as follows:
Direct Emissions (Scope 1)Scope 1 Emissions
Emission sourceUnit of
measure Consumption
Tonnes of CO2e
Mobile fuel consumption ℓ 202,927,886 515,797.46Stationary fuel combustion ℓ 47,356 73.08 Total 515,870.54
The direct emissions reflected above are broken down as follows:
Detailed breakdown of mobile fuel combustion in Group-owned/leased
aircraft and owned vehicles
Emission sourceUnit of
measure Emission factor2 Consumption
Tonnes of CO2e
Aviation fuel ℓ Various 202,846,266 515,589.19Diesel ℓ Various 26,928 62.22 Petrol ℓ Various 54,692 146.05 Total 515,797.46
Detailed breakdown of stationary fuel combustion (generator, gas)
Emission sourceUnit of
measure Emission
factor Consumption
Tonnes of CO2e
Diesel ℓ Various 2,025 5,41 LPG ℓ Various 45,331 67.67 Total 73.08
Indirect Emissions (Scope 2)
Emission sourceUnit of
measure Emission
factor Consumption
Tonnes of CO2e
Purchased electricity kWh 1.00 kg 7,281,891 7,281.89
Scope 3 Emissions
Breakdown of paper usage
Emission sourceUnit of
measure Emission
factor Consumption
Tonnes of CO2e
Paper Tonnes 954.51 26.20 25.00 Waste Tonnes 5.19 0.11Water supply (Purchased municipal water) Million ℓ 344 kg 52.97 18.22 Total 43.33
In comparing our GHG Inventory for 2013/14 with 2012/13, and the base
year, it must be noted that:
• The major reason for the increase in Scope 1 emissions is due to
the following factors:
- The Group increased the number of flights operated to 43,246
flights in the 2013/14 financial year compared to 40,757 in the
2012/13 financial year.
- The increase in the stationary fuel combustion was due to the
Group having operated its own Catering Department for a full
financial year.
• The major reason for the increase in the Scope 2 emissions is attributed
to the Group having operated its own Catering Department for a full
financial year (as mentioned previously).
• The major reason for the increase in the Scope 3 emissions is as set
out in 2 above.
In order to reduce the effect that the Group has in respect of Scope 1,
Scope 2 and Scope 3 emissions, it has:
• Over the past number of years, implemented a fleet replacement
programme and during the period under review operated 11 Boeing
737-800 new generation aircraft, ten (10) Boeing 737-400 aircraft and
five (5) Boeing 737-300 aircraft. It has also entered into an agreement
with the Boeing Company to purchase eight (8) B737-8 MAX aircraft
for delivery through 2019 to 2021, which aircraft are an upgrade
to the B737-800 aircraft and will offer even better performance,
fuel efficiency and lower engine emissions. These new generation
B737-800 aircraft are not only quieter than the older generation B737
aircraft, but also offer better performance and fuel efficiency, reduced
noise on take-off and landing, and lower engine emissions. Since
the introduction of the new Boeing 737-800 aircraft, the average fuel
burn per passenger is now at around 30 kg per passenger. The new
aircraft and increased passenger numbers have helped to reduce
the average fuel burn per passenger. In fact the new 737-800 uses
approximately 6% less fuel per seat than the older 737-800 aircraft
and 24% less fuel per seat relative to the 737-400 aircraft;
Integrated Annual Report 2014
41
• Approximately four years ago, implemented a programme to reduce
weight on board the aircraft by implementing a paperless cockpit,
reducing the amount of potable water carried on board the aircraft
and reducing the weight of the aircraft galleys and thus reducing the
fuel used on board the aircraft;
• In conjunction with Air Traffic Control, where possible, implemented a
Continuous Descent Approach to achieve fuel efficiency and reduce
the impact of noise;
• Where such stands are assigned to them by the ACSA, used fixed
ground power units as opposed to auxiliary power units to reduce
fuel consumption and noise;
• Attempted to reduce the impact of noise, as annoyance and sleep
disturbance are the most commonly reported adverse effects of
aircraft noise. The Group’s objective is to try to reduce or limit the
total number of people exposed to high levels of aircraft noise. Current
regulations and voluntary actions by the Group, such as phasing
out its older aircraft, ensuring that all its engines are stage 3 noise
compliant, as well as restrictions on the use of airspace, night time
flying and ground operations restrictions, have, to a large extent,
resulted in reduced aircraft noise;
• Investigated and is currently implementing various energy-saving
initiatives with regard to electricity consumption such as, but not limited
to, changing all light fittings and globes to more energy efficient ones;
• Implemented a number of initiatives to reduce water consumption,
including the use of borehole water at its Head Office and operational
buildings. Other initiatives to reduce water consumption include
employee awareness, monitoring of uncontrolled leakages and
monitoring garden irrigation cycles; and
• In conjunction with its pilots, designed and implemented a comprehensive
fuel savings programme according to world best practice while also
taking local operating conditions into account. This has resulted in a
further 1.4% reduction in fuel consumption across its fleet. The B737-
800 aircraft have also reduced the Group’s fuel burn per passenger,
as the aircraft has the capacity to carry 21 more passengers and
burns 200 kg per hour less fuel than the B737-400.
Waste Management and Recycling
While the Group had previously implemented a programme to recycle
paper, this is the second year in which it has been able to measure the
tonnage of the paper recycled which measurement was included in its
carbon footprint measurement.
The Group outsources the maintenance of its aircraft and aircraft engines
to third party suppliers as detailed earlier in this Report. These third party
suppliers dispose of waste arising from the maintenance of the aircraft and
aircraft engines, including radioactive material, in accordance with their
own policies and procedures relating to water management and recycling.
Refuse removal in the Group complies with South African laws and
regulations.
Compliance
To the best of the Group’s knowledge and belief there have been no incidents
of material non-compliance with any environmental laws or regulations and
no fines were imposed upon it during the period under review.
Glossary of Terms Used in this Environment Impact Section
Boundaries The inventory boundaries to determine which emissions are accounted for and reported. Boundaries include organisational, operational, geographic and business unit structures.
Carbon footprint The total greenhouse gas emissions caused directly and indirectly by an organisation, typically over a period of 12 months.CO2e Carbon dioxide equivalent – standardisation of all greenhouse gases to reflect its warming equivalent to carbon dioxide (CO2).
This is used to evaluate different greenhouse gases against a common basis.Direct emissions GHG emissions from facilities or sources owned or controlled by the Group, e.g. generators, Company-owned vehicles, etc.Emissions The release of greenhouse gases into the atmosphere.Emission factor Conversion factor to translate activity data, e.g. tonnes of fuel consumed, into emission data.GHG Greenhouse gases. Under the GHG Protocol standard six gases are accounted for, namely carbon dioxide, methane, nitrous
oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride.GHG Inventory A listing of the GHG emissions and sources that are attributable to the Group.GHG Protocol GHG Protocol Corporate Accounting and Reporting Standard.Indirect emissions Emissions that are a consequence of the operations of the Group, but occur at sources owned or controlled by another company.Operational boundary The boundary to establish the operations and sources of emissions included in the GHG Inventory.Organisational boundary
The boundary to establish business units or entities of an organisation included in the GHG Inventory. An equity or control approach can be taken.
Reporting period The period of time, typically a calendar or financial year, which the report covers.Scope 1 emission Direct emission from Group-owned or controlled equipment, vehicles or aircraft.Scope 2 emission Indirect emission from the consumption of purchased electricity.Scope 3 emission Indirect emission from other activities associated with the activities of the Group, e.g. commuting travel, business air travel and
paper or water consumption.
42
Corporate Governance
Introduction
The Group is subject to the Listings Requirements of JSE Limited (JSE)
as well as the requirements of the Companies Act (Act No. 71 of 2008),
as amended (Companies Act). The Group supports the governance
principles and guidelines contained in the King Code of Governance
Principles and King Report on Governance (King III) and is comfortable
that it has complied with effective controls that have been put in place.
Compliance with the JSE Listings Requirements and the Companies Act is
monitored by the Group Company Secretary and the Group’s Compliance
Officer and reported to the Board.
The Group is committed to maintaining principles of good corporate
governance to ensure that its business is managed in a responsible
manner with integrity, fairness, transparency and accountability. The
Board supports the governance principles and guidelines contained in
the Companies Act, the JSE Listing Requirements and King III.
Statement of Compliance
In terms of the JSE Listings Requirements the Group is required to report
in respect of King III for its financial year ending 30 June 2014.
The JSE Listings Requirements require all JSE-listed companies to comply
with King III and to report on the application of the King III principles in
accordance with the ‘comply or explain’ approach of King III. While the vast
majority of King III principles were applied by the Group for the duration
of the period under review, those principles that were not complied with
are explained in this Report. A summary King III Checklist is included at
the end of this Corporate Governance Report. The full King III Application
Register appears on the Group’s website at www.comair.co.za.
Code of Ethics
The Group has a strong culture of entrenched values, which forms the
cornerstone of the behaviour expected of it towards its stakeholders.
These values are embodied in a written document known as the Group
Code of Ethics. Conducting business in an honest, fair and legal manner
is a fundamental principle of the Group. Ethical behaviour has always been
a fundamental guiding principal and management continually focuses on
establishing a culture of responsibility, fairness, honesty, accountability
and transparency. The Group has adopted a Guide to the Code of Ethics
to further explain to employees what constitutes ethical conduct and to
provide guidance on how to make ethically correct decisions.
Confidential Reporting Process
The Group recognises the need for a confidential reporting process (whistle
blowing) covering fraud and other risks. In line with its commitment to
transparency and accountability, it takes action against persons who
are guilty of fraud, corruption and other misconduct. Any employee or
external stakeholder is able to report wrongdoing on a confidential and
anonymous basis to an independent service provider, which ensures
that all calls are treated confidentially. The number of calls or e-mails
received during the reporting period was five (5). All calls and e-mails
were followed up by the Group and, where necessary, appropriate
action was instituted.
Corruption
The Group has a no-tolerance approach with regard to unethical conduct,
in particular to fraud and corruption. Strict policies relating to gifts and
donations received from third parties are in place, compelling employees
or management to declare same.
The Group further prohibits the making of donations to political parties
unless same have been pre-approved by the Board. No donations to
political parties were made by the Group during the period under review.
Any material incidents of fraud or corruption are reported to the Risk
Management Committee and in addition, where appropriate, to the Audit
Committee. The following incidents of fraud and corruption were brought
to the attention of both the Risk and Audit Committees and reported to
the Board:
Credit Card Fraud
The Group first experienced increased levels of credit card fraud in 2010
and as a result implemented a software program (Cybersource Fraud
Detection), which resulted in a significant reduction in credit card fraud.
The Group has been able to maintain these reduced credit card fraud
levels, and credit card chargebacks incurred for fraudulent bookings are
down by approximately 83% from the peak levels experienced in previous
years. This reduction has been achieved by a combination of systems
and controls including:
• The Cybersource Fraud Detection System which makes the necessary
verification call prior to confirmation of the flight booking;
• System development, enabling the transmission of credit card CVV
numbers to the banks, which went live in the second quarter of
the period under review and allows the relevant bank to conduct
additional verification on the credit card presented; and
• Constant monitoring and regular amendment of the parameters
and rules within Cybersource, based on fraudulent behaviours and
trends.
The Payments Association of South Africa (PASA) has continued to drive
its enforcement of 3D Secure on all ‘card not present’ transactions. Online
retailers (excluding airlines), went live with 3D Secure in February 2014.
Integrated Annual Report 2014
43
The results and feedback from this activation have not been very positive
and the Group remains concerned about the readiness of the inter-banking
systems and communication networks to cope with the additional volumes
of electronic messaging, come the activation of 3D Secure within the airline
industry. The airline industry accounts for approximately 80% of all online
sales in South Africa. Activation of 3D Secure in the airline environment
will therefore result in significant strain on the inter-banking systems and
communication networks. Regardless of the aforementioned concerns,
the Group has completed the development work for implementation of
3D Secure and remains committed to this initiative in its bid to reduce
its exposure to fraud.
Travel Bank Fraud
Travel Bank is a tool used by the Group to provide, amongst other things,
a credit to customers inconvenienced due to flight delays, cancellations,
overbookings, etc. In March 2013 there were substantial credits allocated
to Travel Bank accounts that appeared unusual relative to the size of the
expected account. Following a detailed investigation, the Group established
that substantial credits had been fraudulently allocated to various Travel
Bank accounts by a supervisor in the Group’s outsourced call centre in
Cape Town. It was further established that the supervisor in question was
working within a syndicate advertising cheap flights on both kulula and
British Airways through Facebook. Four people were arrested in connection
with this fraud, all of whom have since appeared in court. The first accused
entered into a plea agreement with the State. The Group expects that
accused two and three will receive minimum sentences of ten years but
the outcome of court proceedings, which commenced in June 2014, is
awaited. Accused four entered into a plea agreement with the State and
it is expected that the accused will to be fined a maximum of R200,000.
The Group has, in addition, implemented a number of corrective measures
to prevent the recurrence of this kind of fraud.
Electronic Fund Transfer (EFT) fraud
The Group experienced a loss of approximately R1 million resulting from
EFT fraud. Investigations to date indicate that a yet unknown external party
managed to intercept certain electronic communications between the Group
and one of its suppliers. The fraudster ‘disguised’ himself, by electronic means,
as an employee of the supplier and, together with fraudulently completed
documentation, succeeded in having the Group amend the EFT beneficiary
details of the supplier to his/her own bank account details. This subsequently
led to the Group making a supplier payment into a fraudulent bank account.
The fraud was duly reported to the South African Police Service. Additional
controls were implemented with immediate effect, including the online
confirmation of beneficiary banking details before making amendments to
any EFT beneficiary details. The Group is further exploring the possibility
of pursuing a claim against the bank at which the fraudulent bank account
was opened, as the bank account holder is listed as a known fraudster per
the South African Banking Risk Information Centre.
Competition
The Group supports and adheres to the relevant competition laws
applicable to it. No legal action for anti-competitive conduct, anti-trust
or monopoly practices was instituted against the Group during the
period under review.
Compliance
Compliance with all relevant laws, regulations or codes is integral to the
Group’s risk management approach. Other than a R70,000 fine imposed
by the Financial Services Board and a private censure that was received
from the JSE in respect of an incorrect SENS announcement released in
November 2013 reflecting that certain Directors had purchased shares as
opposed to having sold shares, and which was immediately corrected once
the Company became aware of the mistake, there has been no significant
non-compliance by, nor significant fines, nor non-monetary sanctions or
prosecutions against the Group during the period under review.
Customer Privacy and Information Security
Information security policies are in place throughout the Group regulating,
inter alia, the processing and protection of own and third party information.
Legitimate requests for information can be made in terms of the Promotion
of Access to Information Act. No requests for information we made in
terms of the Act in the review period.
The Protection of Personal Information Act (Act No. 4 of 2013) has been
passed in South Africa, but the date of implementation, apart from a few
enabling sections, has yet to be determined. The Act will require further
actions on the part of the Group to ensure privacy of personal information.
The Group will put measures in place to ensure that it will be able to
comply with the requirements of the Act.
There were no complaints against the Group regarding breach of customer
privacy or loss of customer data during the period under review.
Financial Reporting and Going Concern
The Directors are responsible for the preparation of the Annual Financial
Statements in a manner that fairly and accurately represents the state
of affairs and results of the Group. The Directors are responsible for
adopting sound accounting practices, maintaining adequate accounting
records, ensuring an effective system of internal controls and for
safeguarding of assets. The Financial Statements of the Group have
been prepared on the going-concern basis and the Board is of the
view that the Group has adequate resources to continue operating for
the foreseeable future.
44
Corporate Governance (continued)
Board of Directors
Composition of the Board
The Group has a unitary Board structure. The composition of the Board
is set out on pages 61 and 62. The roles of the Chairman and the Chief
Executive Officer (CEO) are separate. The Non-executive Directors, with
a strong independent element, are of sufficient number to ensure that no
single individual has unfettered power of decision-making and authority. As
at 30 June 2014, the Board comprised eight independent Non-executive
Directors, two Non-executive Directors and four Executive Directors (including
the alternate Directors) as required by the Listings Requirements of the JSE.
The Board is considered to be appropriately skilled with regard to its
responsibilities and the activities of the Group and are involved in all material
business decisions enabling them to contribute to the strategic and general
guidance of management and the business. Newly appointed Directors
are informed of their fiduciary duties and in this regard are provided with
a Director’s Manual which contains guidelines regarding their duties and
responsibilities as Directors. The skills and experience profiles of the Board
members are regularly reviewed to ensure an appropriate and relevant
Board composition.
Dealing in Securities
The Group has a formal policy in place to ensure that the Directors and
senior management do not trade in the Group’s shares during price-sensitive
or closed periods. In terms of the policy, closed periods commence from
the last day of the financial year or the last day of the end of the first six
month period of the financial year up to the day after the publication of the
annual or interim results. Directors are required to obtain approval from
the Chairman or a designated Director before dealing in any securities.
Conflict of Interest
All Board members and the Group Company Secretary are required
to disclose their shareholding in the Group, other directorships and
potential conflicts of interest. Where potential conflicts of interest exist,
Directors are expected to recuse themselves from relevant discussions
and decisions. In addition, employees within the Group are obliged to
disclose any conflict of interest.
Role and Function of the Board
The Board retains full and effective control of the Group and is accountable
and responsible for the performance and affairs of the Group. All material
resolutions have to be approved by the Board. The Board is accountable
to all of the Group’s stakeholders for exercising leadership, integrity and
judgment in pursuit of the strategic goals and objectives of the Group.
Formal requirements specifying the responsibilities of and type of conduct
expected from the Directors, the Group Company Secretary, the Chairman
and the CEO are set out in the Group’s Board Charter, which is reviewed
annually. The Board’s primary functions include, amongst others:
• Determining the Group’s vision;
• Determining and providing strategic direction to the Group;
• Adoption of strategic plans and ensuring that same, through the
Executive Directors, are communicated to the applicable management
levels and further ensuring that the objectives as set out in the strategic
plan are met;
• Approving and evaluating the annual business plan and budget
compiled by management and monitoring management on the
implementation of the approved Annual Budget and Business Plan;
• Approving the Group’s Financial Statements and Interim Reports;
• Appointing the CEO who reports to the Board and ensuring that
succession is planned;
• Determining Director selection and evaluation;
• Evaluating the viability of the Group on a going-concern basis;
• Ensuring that the Group has appropriate risk management, internal
control and regulatory compliance procedures in place. It further
identifies and continually reviews key risks as well as the mitigation
thereof by management;
• Approving major capital expenditure and significant acquisitions and
disposals;
• Monitoring non-financial aspects pertaining to the business of the
Group;
• Monitoring compliance with laws, regulations and the Group’s Code
of Ethics;
• Ensuring that the remuneration of Directors and Executive Managers
occurs in accordance with the Group’s remuneration policy;
• Identifying and managing potential conflicts of interest;
• Settling principles for recommending the use of external auditors for
non-audit services;
• Establishing Board committees with clear terms of reference and
responsibility;
• Defining levels of authority and delegating required authority to the
Committees and management;
• Considering and, if appropriate, declaring payment of dividends to
shareholders;
• Evaluating the effectiveness of the Board and its committees;
• Conducting an evaluation of the Group Company Secretary; and
• Ensuring the creation of sustainable shareholder value.
To fulfil their responsibilities adequately, Board members and members
of the sub-committees receive Board and sub-committee agendas
ahead of any meeting. In addition, Directors have unrestricted access
to timely financial and other information relating to the Group as well as
free access to senior management and the Group Company Secretary.
During the financial year under review, the Board received presentations
from various senior Executive Managers enabling it to explore specific
issues and developments in greater depth.
Integrated Annual Report 2014
45
Induction of New Directors and Independent Advice
Newly appointed Directors are informed of their fiduciary duties by the
Group Company Secretary. Newly appointed Directors receive information
on the JSE Listings Requirements and the obligations therein imposed
upon Directors, and are informed of any amendments to legislation and
regulations.
Individual Directors may, after consulting with the Chairman or the CEO,
seek independent professional advice, at the expense of the Group, on
any matter connected with the discharge of his/her responsibilities as a
Director.
Board Evaluations
The Board conducts informal evaluations of its performance. During the
evaluation process, the Board identified improved sustainability management
and governance of information technology as areas requiring attention.
Board Meetings and Attendance
The Board meets at least four (4) times a year with the proviso that
additional meetings could be called when certain important matters arise
and measures exist to accommodate resolutions that have to be approved
between meetings. Details of attendance at Board meetings are provided
on page 61 and 62 of this Report.
Retirement and Re-election of Directors
Under the Group’s Memorandum of Incorporation, a third of the Directors
retire by rotation each year and are eligible for re-election by shareholders
at the Annual General Meeting. Details of the Directors retiring by rotation
are set out in the Notice of Annual General Meeting. The appointment of
Directors is a function of the entire Board based on recommendations
made by the Nominations Committee.
Chairman
The Group’s Chairman, Mr P van Hoven, is an independent Non-executive
Director. In addition to playing a key role within the Group, he provides
guidance to the Board as a whole and ensures that the Board is efficient,
focused and operates as a unit. He acts as a facilitator at Board meetings
to ensure a flow of opinions, and attempts to lead discussions to optimal
outcomes in the interests of good governance.
The CEO
The CEO, who reports to the Board, is responsible for the running of
the day-to-day business of the Group and for the implementation of
policies and strategies adopted by the Board. The Executive Directors
and Executive Managers of the various business units and subsidiaries
assist him in this task.
The Group Company Secretary
The Group Company Secretary plays a pivotal role in the continuing
effectiveness of the Board, ensuring that all Directors have full and timely
access to the information that helps them to perform their duties and
obligations properly, and enables the Board to function effectively.
The Group Company Secretary is responsible for providing guidance to
the Board collectively and to the Directors individually with regard to their
duties, responsibilities and powers.
The Group Company Secretary’s key duties with regard to the Directors
include, but are not limited to, the following:
• Collating and distributing relevant information such as corporate
announcements, investor communications and any other developments
affecting the Group or its operations;
• Inducting new Directors. This includes a briefing on their fiduciary
and statutory duties and responsibilities (including those arising from
the JSE Listings Requirements);
• Providing regular updates on effective and proposed changes to
laws and regulations affecting the Group and/or its businesses; and
• Monitoring of Directors’ dealings in securities and ensuring that
prior approval to deal in securities is obtained from the Chairman or
another designated Director.
The Group Company Secretary reports to the CEO and has a direct channel
of communication to the Chairman. He meets with the Chairman before each
Board and general meeting to prepare for and discuss important issues.
He is responsible for the functions specified in section 88 of the Companies
Act 2008 (as amended). All meetings of shareholders, Directors and
Board committees are properly recorded as per the requirements of the
Act. The removal of the Group Company Secretary would be a matter
for the Board as a whole.
The Group Company Secretary is a Director of the Company, albeit an
alternate Director, and a Director of some of the Group’s subsidiaries. The
Board is of the opinion that, in view of the fact that the Group Company
Secretary is an alternate Director of the Group, an arm’s length relationship
is not feasible. However, the Board annually evaluates the competency
and effectiveness of the Group Company Secretary as required in terms
of the JSE Listings Requirements. The Board has considered and is
satisfied that no conflict of interest exists and that the Group Company
Secretary is competent and has the requisite qualifications and experience
to effectively execute his duties.
The name and qualifications of the Group Company Secretary appear
on page 62 of this Report.
46
Corporate Governance (continued)
Executive Management
The Group’s Executive Management Committee meets on a regular basis
to consider, inter alia, investment opportunities, operational, financial and
other aspects of strategic importance to the Group. Executive Managers
have roles and responsibilities that are specific to their levels of authority.
Board Committees
The Board has created an Audit Committee, Risk Management Committee,
Nominations Committee, Remuneration Committee and a Social and
Ethics Committee, as set out below, to enable it to properly discharge
its duties and responsibilities and to effectively fulfil its decision-making
process. The Board and its committees are supplied with relevant and
timely information enabling them to discharge their responsibilities.
While the Board remains accountable for the performance and affairs
of the Group, it does delegate certain functions to its committees
and management to assist it in carrying out its functions, duties and
responsibilities. The Chairman of each committee reports to the Board
at each Board meeting.
The Chairmen of the committees, other than the Social and Ethics
Committee, which has a Non-executive Director as its Chairman, are
all independent Non-executive Directors and are requested to attend
the Group’s Annual General Meeting to answer any questions posed
by shareholders.
The Board committees have specific terms of reference, appropriately skilled
members, membership by Non-executive Directors who act independently,
Executive Directors and Executive Management participation and access
to specialist advice when considered necessary.
Audit Committee
The role of the Audit Committee is to review the Group’s financial position
and make recommendations to the Board on all financial matters and
internal controls. The Committee also reviews the nature and extent
of non-audit services provided by the external auditors to ensure that
the fees for such services do not become so significant as to call into
question their independence. The Chairman of the Committee reports on
the Committee’s activities at each Board meeting.
The members of this Committee are independent Non-executive Directors.
All members are financially literate and all possess substantial business
and financial expertise and comply with section 94 and Regulation 42 of
the Companies Act. The Committee meets at least three (3) times per
year. Both internal and external auditors have unrestricted access to the
Committee.
The Chairman of the Board, CEO, Financial Director, Chief Audit
Executive (CAE) and external auditors attend the Audit Committee
meetings by invitation. The Committee held three (3) meetings during
the reporting period.
Composition of Committee and Attendance
Membership Attendance
Chairman Dr PJ Welgemoed 2/3
Members Mr KI Mampeule 3/3
Ms WD Stander 2/3
Mr GJ Halliday 3/3
Mr HR Brody (Appointed to the Audit Committee on 9 June 2014)
0/0
The Committee, amongst other things, identifies and evaluates the
adequacy of internal controls and provides effective communication
between Directors, management and the internal and external auditors.
The responsibilities of the Audit Committee are contained in a formal
mandate from the Board (terms of reference) which is reviewed annually
with the main responsibilities being, amongst others, to:
• Perform the statutory functions of an Audit Committee in terms of
the Companies Act and other functions delegated by the Board;
• Review and recommend to the Board for approval the Group’s
Integrated Annual Report, interim reports and results announcement;
• Nominate and approve the terms of engagement and remuneration
of registered auditors, who in the opinion of the Committee, are
independent of the Group, and ensure that their appointment complies
with the provisions of the Companies Act, King III and other legislation
relating to their appointment;
• Review and evaluate the effectiveness and performance of the external
auditors as well as the scope, adequacy and costs of audits to be
performed and report there-on to the Board and to the shareholders;
• Evaluate and approve the external auditors’ plans, findings and
reports;
• Receive and deal appropriately with any concerns or complaints,
whether received internally or externally, dealing with the Group’s
accounting practices and internal audits, the Financial Statements,
internal financial controls or related matters;
• Monitor and evaluate the performance of the Financial Director;
• Identify and evaluate exposure to financial risks;
• Evaluate the effectiveness of the internal auditing function, including its
activities, scope and adequacy and receive and approve the Internal
Audit Plan, internal audit reports and material changes to same;
• Evaluate procedures and systems including, but not limited to, internal
controls, disclosure controls and the internal audit function;
Integrated Annual Report 2014
47
• Consider legal matters which could financially affect the Group; and
• Recommend principles for the use of external auditors for non-audit
services and ensure that the fees for such services do not become
so significant as to call into question their independence.
The Committee’s report describing how it discharges its statutory duties
and the additional duties assigned to it by the Board is included in this
Integrated Annual Report on pages 52 to 54.
Risk Management Committee
The role of the Risk Management Committee is to review the risks facing
the Group’s business and to ensure compliance with all required legislation,
regulations and codes affecting the business. The members of this Committee,
who also serve as members of the Audit Committee, are independent
Non-executive Directors. The Committee meets at least three (3) times
per year. The Chairman of the Board, CEO, Financial Director, CAE and
external auditors (where appropriate) attend Risk Management meetings by
invitation. The Committee held four (4) meetings during the reporting period.
Composition of Committee and Attendance
Membership Attendance
Chairman Dr PJ Welgemoed 3/4
Members Mr KI Mampeule 4/4
Ms WD Stander 2/4
Mr GJ Halliday 3/4
Mr HR Brody (Appointed to the Committee on 9 June 2014)
0/0
The main responsibilities of the Risk Management Committee are,
amongst others, to:
• Oversee the development and annual review of a Risk Management
Policy and Plan for recommendation to the Board for approval;
• Monitor implementation of the Risk Management Policy and the Plan;
• Make recommendations to the Board concerning the levels of
tolerance and appetite and ensure that risks are managed within
the levels of tolerance and appetite as approved by the Board;
• Ensure that the Risk Management Plan is widely disseminated
throughout the Group and integrated in the day-to-day activities of
the Group;
• Ensure that risk management assessments are performed on a
continuous basis;
• Ensure that frameworks and methodologies are implemented to
increase the possibility of anticipating unpredictable risks;
• Ensure that management considers and implements appropriate
risk responses;
• Liaise closely with the Audit Committee to exchange information
relevant to risks;
• Review reports concerning risk management that are to be included
in the Integrated Annual Report to ensure that such reporting is timely,
comprehensive and relevant; and
• Evaluate procedures and systems introduced including, without
limitation, the Company’s information technology systems.
For more information regarding the Group’s risk management and the
material issues facing the Group that have been identified as a result of
the Group’s risk management procedures, refer to the Internal Control
and Risk Management Report.
Nominations Committee
The members of this Committee are all Non-executive Directors who act
independently.
This Committee, together with the Remuneration Committee, considers
the issue of succession planning at Board and Executive Management
level. The CEO, in consultation with the Board Chairperson, Remuneration
and Nominations Committees, is responsible for ensuring that adequate
succession plans are in place.
The Committee met once during the financial year under review. The
composition of the Committee and attendance at meetings are set out below:
Composition of Committee and Attendance
Membership Attendance
Chairman Mr P van Hoven 1/1
Members Mr JM Kahn 1/1
Mr KI Mampeule 1/1
Mr MD Moritz 1/1
Amongst others, the main responsibilities of the Nomination Committee
are to:
• Make recommendations on the appointment of new Executive and
Non-executive Directors;
• Make recommendations on the composition of the Board generally
and the balance between Executive and Non-executive Directors;
• Review plans for succession and ensure their adequacy, for the
Chairperson, the CEO and Executive Directors;
• Review the Board structure, size and composition and make
recommendations with regard to any adjustments deemed necessary;
and
• Ensure that Board appointment policies and procedures are formal
and transparent and a matter for the Board as a whole, and that
such appointment policies and procedures are reviewed and updated
when necessary.
48
Corporate Governance (continued)
Remuneration Committee
The members of this Committee are all independent Non-executive
Directors. The CEO attends meetings by invitation only and is not entitled
to vote. The CEO does not participate in discussions regarding his own
remuneration. The Committee met twice during the financial year under
review. The composition of the Committee and attendance at meetings
is set out below.
Composition of Committee and Attendance
Membership Attendance
Chairman Mr JM Kahn 1/2
Members Mr RC Sacks 1/2
Mr P van Hoven 2/2
Ms WD Stander 1/2
The remuneration policy and the execution thereof is the responsibility of
the Remuneration Committee.
The fees for Non-executive Directors and the remuneration packages of
Executive Directors for the financial year under review are disclosed in the
Remuneration Report on page 63 of this Report. As recommended by
King III, the Group’s remuneration policy was approved by shareholders
of the Group at its last Annual General Meeting, held on 30 October 2013,
by way of a non-binding advisory vote.
Amongst other things, the main responsibilities of the Remuneration
Committee are to:
• Determine the Group’s general policy on remuneration as well as
specific policies in respect of Executive Directors’ and Executive
Managers’ remuneration;
• Review and determine remuneration packages for Executive Directors
and Executive Management including, but not limited to, basic salary,
annual bonuses, benefits, performance-based incentives and Share
Incentive Scheme awards;
• Annually appraise the performance of the CEO;
• Annually review the general level of remuneration for Directors of the
Board as well as its committees and recommend proposals in this
respect for approval by shareholders at general meetings; and
• Make recommendations in respect of awards from the Comair Share
Incentive Scheme.
Social and Ethics Committee
The role and responsibilities of the Committee are codified in a mandate
from the Board (terms of reference), which is reviewed annually. The
members of this Committee consist of independent Non-executive
Directors, Executive Directors and Senior Executives of the Group who
are suitably experienced. The Chairman of the Board, Financial Director,
CAE, representatives from other assurance providers, professional advisors
and Board members are entitled to attend Committee meetings. The
Committee met four times during the year under review. The composition
of the Committee and attendance at meetings are set out below:
Composition of Committee and Attendance
Membership Attendance
Chairman: MD Moritz 4/4
Members: ER Venter 4/4
DH Borer 4/4
KI Mampeule 3/4
KV Gorringe 4/4
EA Liebetrau 4/4
WD Stander (Appointed to the Committee on 9 June 2014)
0/0
The responsibilities of the Social and Ethics Committee are, amongst
others, to:
• Assist the Board in ensuring that the Group is compliant with all
legislation and other requirements relating to social and economic
development and remains a good corporate citizen by monitoring
the sustainable development performance of the Group; and
• Perform the statutory functions of a Social and Ethics Committee in
terms of the Companies Act and other functions delegated to it by
the Board.
The Committee’s report describing how it discharged its statutory duties
is included in the Integrated Report on page 58.
Discharge of Responsibilities
The Board is of the view that the committees have discharged their
responsibilities for the financial year under review in compliance with their
terms of reference.
Internal Control
Internal Control Systems
The Board has responsibility for ensuring that the Group implements
and monitors the effectiveness of its systems of internal control. The
identification of risk and the implementation and monitoring of adequate
systems of internal control to manage both financial and operational
risk are delegated to the CAE, who in turn makes recommendations to
Executive Management as well as to the Audit Committee.
Integrated Annual Report 2014
49
While all internal control systems do have inherent shortcomings, the
Group’s internal control system is designed to provide reasonable assurance
as to the reliability of financial information and in particular the Financial
Statements, as well as to safeguard, verify and maintain accountability of
its assets and to detect fraud and potential liability, while complying with
applicable laws and regulations.
The Group’s external auditors consider the internal control systems of the
Group as part of their audit, and advise on deficiencies when identified.
Internal Audit
The internal audit function is an independent appraisal mechanism which
evaluates the effectiveness of the applicable operational activities, the
attendant business risks and the systems of internal controls, so as to
bring material deficiencies, instances of non-compliance and development
needs to the attention of the Audit Committee, external auditors and
operational management for resolution. The CAE co-ordinates with the
external auditors so as to ensure proper coverage and minimise duplication
of effort. Internal audit plans are tabled at the Audit Committee meetings
and follow-up audits are concluded in areas where weakness is identified.
The Internal Audit Plan, approved by the Audit Committee, is based on risk
assessments which are of a continuous nature, so as to identify not only
existing and residual risk, but also emerging risks and issues highlighted
by the Committee and senior Executive Management.
External Audit
The independence of the external auditors is recognised. The Audit
Committee meets with external auditors to review the scope for the external
audit, and any other audit matters that may arise. The external auditors
attend Audit and Risk Committee Meetings and have unrestricted access
to the Chairmen of the Committees. The Audit Committee is responsible
for nominating the Company’s external auditors and determining the
terms of engagement.
Investor Relations
The Board is committed to keeping shareholders and the investor community
informed of developments in the Group’s business. For further information
in this regard, please refer to the Sustainable Development Report.
Summary King III Checklist
Principle Principle description
Applied/ partially applied/
not appliedIoDSA GAI
score
Explanation/compensating
practices Not applied commentary
Principle 2.1 The Board acts as the focal point for and custodian of corporate governance
Applied AAA
Principle 2.2 The Board appreciates that the strategy, risk, performance and sustainability are inseparable
Applied AAA
Principle 2.3 The Board provides effective leadership based on ethical foundation
Applied AAA
Principle 2.4 The Board ensures that the company is, and is seen to be, a responsible corporate citizen
Applied AAA
Principle 2.5 The Board ensures that the company ethics are managed effectively
Applied AAA
Principle 2.6 CHAPTER 3: Audit Committees Applied AAA
Principle 2.7 CHAPTER 4: The governance of risk Applied AA
Principle 2.8 CHAPTER 5: The governance of information technology
Applied AAA
Principle 2.9 CHAPTER 6: Compliance with laws, rules, codes and standards
Applied AAA
Principle 2.10 CHAPTER 7: Internal audit Applied AAA
Principle 2.11 CHAPTER 8: Governing stakeholder relationships
Applied AA
Principle 2.12 CHAPTER 9: Integrated reporting and disclosure
Applied AAA
50
Corporate Governance (continued)
Principle Principle description
Applied/ partially applied/
not appliedIoDSA GAI
score
Explanation/compensating
practices Not applied commentary
Principle 2.13 CHAPTER 7 and 9: The Board reports on the effectiveness of the company’s internal controls
Applied AAA
Principle 2.14 The Board and its Directors act in the best interests of the company
Applied AAA
Principle 2.15 The Board will/has consider/ed business rescue proceedings or other turnaround mechanisms as soon as the company has been/may be financially distressed as defined in the Companies Act (Act No. 71 of 2008)
Applied AAA
Principle 2.16 The Board has elected a Chairman of the Board who is an independent Non-executive Director. The CEO of the company does not also fulfil the role of Chairman of the Board
Applied AAA
Principle 2.17 The Board has appointed the Chief Executive Officer and has established a framework for the delegation of authority
Applied AAA
Principle 2.18 The Board comprises a balance of power, with a majority of Non-executive Directors. The majority of Non-executive Directors are independent
Applied AA
Principle 2.19 Directors are appointed through a formal process
Applied AA
Principle 2.20 The induction of and ongoing training, as well as the development of Directors are conducted through a formal process
Partially not applied
BB Although no induction and ongoing training programmes exist, Comair takes note of training received by Directors outside of the company and Directors receive informal advice and professional mentoring from the senior and more experienced Directors as well as relevant information included in the Directors’ Manual from time to time.
Principle 2.21 The Board is assisted by a competent, suitably qualified and experienced Company Secretary
Applied AAA
Principle 2.22 The evaluation of the Board, its committees and individual Directors is performed every year
Applied AA
Principle 2.23 The Board delegates certain functions to well-structured committees without abdicating from its own responsibilities
Applied AAA
Principle 2.24 A governance framework has been agreed upon between the Group and its subsidiary Boards
Applied AAA
Integrated Annual Report 2014
51
Principle Principle description
Applied/ partially applied/
not appliedIoDSA GAI
score
Explanation/compensating
practices Not applied commentary
Principle 2.25 The company remunerates its Directors and Executives fairly
Applied AAA
Principle 2.26 The company has disclosed the remuneration of each individual Director and prescribed officer
Applied AAA
Principle 2.27 The shareholders have approved the company’s remuneration policy
Applied AAA
52
Audit Committee Report
This report is presented by the Group’s Audit Committee (“the Committee”) approved by the Board and the shareholders in respect of the financial
year ended 30 June 2014. It is prepared in accordance with the recommendations of King III and the requirements of the Companies Act (Act No. 71
of 2008) as amended, and describes how the Committee has discharged its statutory duties in terms of the Companies Act and the additional duties
assigned to it by the Board in respect of the financial year ended 30 June 2014.
Audit Committee Mandate
The Committee has adopted a formal mandate setting out its responsibilities and functioning that has been approved by the Board of Directors (Board)
and will be reviewed annually. The Committee has conducted its affairs in compliance with this mandate and is satisfied that it has fulfilled all its statutory
duties and duties assigned to it by the Board during the financial year under review, as further detailed below.
Composition and Meetings
The Committee consists of five (5) independent Non-executive Directors and meets at least three (3) times per annum.
The Chairman of the Board, CEO, Financial Director, Chief Audit Executive (CAE) and external auditors attend Committee meetings by invitation.
During the period under review the Committee held three (3) meetings.
Committee Members’ Name Date of
Appointment QualificationsNo. of Meetings held during year Attendance
Dr PJ Welgemoed 28/03/1996 BCom (Hons), MCom, DCom 3 2/3
Mr KI Mampeule 05/09/2005 BA, MSc, MBA 3 3/3
Ms WD Stander 15/09/2008 BA (Hons), MBA 3 2/3
Mr GJ Halliday 06/06/2013 BA (Hons), MBA 3 3/3
Mr HR Brody 09/06/2014 BAcc (Hons) 3 0/0
Abridged curricula vitae of the Committee members appear on pages 117 to 119 of this Integrated Annual Report.
The Board re-appointed the Committee members and appointed a new member, which appointments are subject to shareholders re-electing the
Committee members at its Annual General Meeting to be held on 5 November 2014.
Role and Function of the Committee
The roles and functions of the Committee, including its statutory duties, are set out in the Corporate Governance Report to be found on pages 46
and 47 of this Integrated Annual Report.
The Committee is satisfied that it has fulfilled all its statutory duties, including those prescribed by the Companies Act, and duties assigned to it by the
Board during the financial year under review. In addition, the Committee did not receive or deal with any concerns related to matters listed in section 94(7)
(g)(i)–(iv) of the Companies Act.
External Audit
The Committee has, during the period under review, nominated external auditors, Grant Thornton (Jhb) Inc. (Grant Thornton), approved its fee and
determined its terms of engagement. The appointment will be presented to shareholders of the Group at the Annual General Meeting for approval.
The Committee has further satisfied itself that Grant Thornton is accredited and appears on the JSE list of Accredited Auditors and that the designated
auditor is not disqualified from acting as such. The Committee has further satisfied itself that the external auditors, Grant Thornton, are independent of
the Group as contemplated in sections 90(2)(b), (c) and 94(8) of the Companies Act.
There is a formal policy that governs the process whereby the external auditors are considered for non-audit related services. The Committee approved
the terms of the policy for the provision of non-audit services by the external auditors and approved the nature and extent of non-audit services that the
Integrated Annual Report 2014
53
external auditors may provide. During the period under review, the external auditors did provide non-audit services to the Group, namely in the form of
tax advice and assurance on selected information in this Integrated Annual Report. The use of the external auditors for such services was pre-approved
by the Committee.
Internal Financial Controls
The Committee is responsible for assessing the Group’s systems of internal financial controls and has considered reports from the internal and external
auditors and has satisfied itself about the adequacy and effectiveness of the Group’s system of internal financial controls.
Expertise and Experience of the Financial Director and Finance Function
The Committee recommended that Ms Kirsten King, a registered Chartered Accountant, be appointed as the Group’s Financial Director, which
recommendation was approved by the Board. The Committee is of the view that Ms King has substantial knowledge of the airline industry, having served
as the Group Revenue Accountant since 2011. The Committee performed a review of the Financial Director and the finance function and the Committee
is satisfied with the expertise and experience of the Financial Director and the appropriateness of the finance function.
Internal Audit
Internal audit forms an integral part of the Group’s Risk Management Process and system of internal controls. The Committee is satisfied with the
independence, quality and scope of the internal audit function. Mr Sean Percival Miller was appointed as Chief Audit Executive (CAE). The CAE has
developed a sound working relationship with the Committee in that he:
• Provides an objective set of eyes and ears across the Group;
• Provides assurance and awareness on risks and controls specific to the Group and the industry in which he is involved;
• Has positioned himself as a trusted strategic adviser to the Committee;
• Confirms to the Committee at least once a year the independence of the internal audit function; and
• Communicates regularly with the Committee Chairman.
Further details of the Group’s internal audit function are contained in the Corporate Governance Report. The Committee has considered and recommended
the Internal Audit Charter for approval by the Board. The CAE’s annual audit plan was approved by the Committee.
Risk Management
The Board has assigned oversight of the Group’s risk management function to the Risk Management Committee. The members of the Audit Committee
are also members of the Risk Management Committee. The Committee fulfils an oversight role regarding financial reporting risks, internal financial controls
and fraud risk as it relates to financial reporting and safety and security issues. Further details of the Group’s risk management function can be found
in the Corporate Governance Report and the Internal Control and Risk Management Report.
The Committee is satisfied that the system as well as the process of risk management is effective.
Financial Statements
The Committee has reviewed the Financial Statements of the Group and is satisfied that they comply with International Financial Reporting Standards.
Compliance
The Committee is responsible for reviewing any major breach of relevant legal, regulatory and other responsibilities. The Committee is satisfied that there
has been no material non-compliance with laws and regulations, apart from the following:
During November 2013, the Group issued an incorrect SENS announcement indicating that certain Directors had purchased shares as opposed to having
sold same. The announcement was corrected as soon as the mistake came to the Group’s attention. As a result of the incorrect SENS announcement,
the Group received a fine of R70,000 from the Financial Services Board (FSB) and a private censure from the JSE. The Group, on the recommendation
of the Audit Committee, has enhanced its internal policies and procedures for approving and releasing SENS announcements.
54
Audit Committee Report (continued)
Going Concern
The Committee, based on an assessment received from Executive Management, is of the view that the Group will be a going concern for the foreseeable
future.
Duties Assigned by the Board
The Committee fulfils an oversight role regarding the Group’s Integrated Annual Report and the reporting process including the systems of internal
financial controls. It is responsible for ensuring that the internal audit function is independent and has the necessary resources, standing and authority
to enable it to effectively discharge its duties. The Committee also oversees co-operation between the internal and external auditors, and serves as a
link between the Board and their functions.
Whistle Blowing
The Committee is satisfied that all instances of whistle blowing have been appropriately dealt with during the period under review.
Sustainability Reporting
The Committee recommended to the Board the appointment of Grant Thornton, an external independent assurance provider, to perform an assurance
engagement with the purpose of expressing a limited assurance opinion in terms of ISAE 3000 on whether selected key performance indicators and
specific disclosures as contained in the Integrated Annual Report have been fairly stated and meet reasonable reporting expectations. The assurance
statement can be accessed via the Company’s website www.comair.co.za.
The Committee has considered the Group’s sustainability information as disclosed in the Integrated Annual Report and has assessed its consistency
with operational and other information known to Committee members, and for consistency with the Annual Financial Statements. The Committee is
satisfied that the sustainability information is reliable and consistent with the financial results.
Recommendation of this Integrated Annual Report for Approval by the Board
The Committee recommended this Integrated Annual Report for approval by the Board on 8 September 2014.
The Committee is satisfied that it has complied with all its legal, regulatory and other responsibilities during the period under review.
Dr PJ Welgemoed
Chairman: Comair Limited Audit Committee
8 September 2014
Integrated Annual Report 2014
55
Remuneration Report
The Group has a dedicated Board Committee that, inter alia, determines the governance of remuneration matters, Group remuneration philosophy,
remuneration of Executive Directors and other Senior Managers, as well as the compensation of Non-executive Directors, which is ultimately approved
by the shareholders.
Detail on the mandate, composition and attendance of meetings held by the Remuneration and Nominations Committees are set out in the Corporate
Governance Report.
Remuneration Approach
The Group’s remuneration approach aims to ensure that it remunerates its Directors and Senior Managers in a manner that supports the achievement
of the strategic objectives of the Group, while attracting and retaining scarce skills and rewarding high levels of performance. The remuneration offered
by the Group needs to be competitive in order to attract, retain and incentivise high calibre staff.
The remuneration philosophy is based on the following principles:
• Affordability;
• Internal fairness; and
• External fairness.
The remuneration approach, which guides the level of salaries of all Directors and Senior Management, is aimed at:
• Ensuring that no discrimination occurs;
• Recognising exceptional and value adding performance;
• Encouraging team performance and participation;
• Promoting cost-effectiveness and efficiency; and
• Achieving the strategic objectives of the Group.
In order to balance external equity with affordability and to ensure that market-related salaries are offered to staff, the Group participates in several salary
surveys and uses that information for benchmarking purposes.
Remuneration Structures
Management remuneration structures comprise fixed and variable components as follows:
• Fixed Pay: base salary and benefits; and
• Variable Pay: short-term merit bonus and a long-term Executive Incentive Scheme based on Group profits before tax and the Group’s share price
performance (payable every three years).
These structures are detailed below:
Fixed Pay
Base salary
Market data is used to benchmark individual salary levels for Directors and Senior Managers. This information, combined with the individual’s performance
assessment, is the key consideration for the annual salary reviews.
Retirement benefits
The Group offers membership to a defined contribution pension fund to all permanent employees in South Africa. This fund is part of an umbrella
arrangement known as Evergreen Superfund and is administered by Old Mutual.
56
Remuneration Report (continued)
Other benefits
This includes benefits such as medical aid, risk benefit insurance (i.e. death and disability) to permanent employees in South Africa, and leave.
Pilots
Pilots are currently guaranteed a 13th cheque.
Variable Pay
Short-term incentives
Executive Directors and Senior Managers participate in a short-term, cash based management incentive scheme. Payment in terms of the short-term
incentive scheme is dependent upon achievement against key performance criterion, namely profit after tax and subject to three (3) components:
• Achievement by the qualifying employee of key performance indicators (40%);
• Group profit performance (40%); and
• 20% of the bonus is payable at the discretion of the Board.
The payment of any short-term incentive to Executive Directors and Senior Managers is subject to Board approval.
Employees who do not participate in the short-term incentive scheme would be entitled to a 13th cheque, or a portion thereof, based on personal
performance and company affordability and a discretionary amount based on the Group’s performance. This does not apply to Pilots, who are guaranteed
a 13th cheque.
Long-term Executive Incentive Scheme
Executive Directors and designated Senior Managers who were in the employ of the Group on or prior to 31 December 2012 and are still in the employ
of the Group as at 30 September 2015 participate in the long-term Executive Incentive Scheme (“the Scheme”).
The purpose of the Scheme is to retain talent as well as to reward participants of the Scheme based on the Group’s performance. The Scheme comprises
two components as follows:
Profit linked component (35%) In terms of this component, 7% of the aggregated headline profits before tax (excluding profits from damages awards and profits from new business
ventures that are not managed by the participants), made by the Group during the 2013, 2014 and 2015 financial years in excess of R250 million, but
capped to a maximum of R17.5 million, would be allocated to participants in the Scheme in proportion to their basic salary versus the combined basic
salary of the participants in the Scheme.
Share price linked component (65%) This component is based on the trade weighted average share price of the Group for the six months to 30 June 2015, with the bonus payable to
participants being the difference between the Group share price as determined on 30 June 2015 and a share price of R1.50c, but capped to a maximum
of R32.5 million.
Executive Directors’ Remuneration
Remuneration of Executive Directors is compared to the market for comparable roles in companies of similar size.
The annual bonus payable to Executive Directors in terms of the short-term management incentive scheme is limited to 100% of their annual base salary.
Executive Directors have standard service contracts with no fixed duration, no restraint and with a one-month notice period. This is currently under review.
Details of the remuneration of individual Executive and Non-executive Directors are set out in the Report of the Directors on pages 63 and 64.
Integrated Annual Report 2014
57
Non-executive Directors’ Remuneration
Non-executive Directors do not receive any benefits or share options from the Group apart from Directors’ fees, which fees were approved by shareholders
at the Group’s Annual General Meeting on 30 October 2013. The Non-executive Directors’ fees for the year ended 30 June 2014 are included in the
joint remuneration payable to the Group’s Non-executive Directors, as indicated in Special Resolution Number 1 in the Notice of Annual General Meeting
to be held on 5 November 2014.
The Directors’ fees per meeting, for the financial years ended 30 June 2013 and 30 June 2014, as well as the proposed fee per meeting for the financial
year ending 30 June 2015, are set out in the table below. Members of the Committees are also remunerated for their participation as members of the
various Committees.
Directors’ Fees
Meeting
Annual fee for the year ended
30 June 2013R
Annual fee for the year ended
30 June 2014R
Annual fee for the year ended
30 June 2015R
Chairperson: Board 1,000,000 1,200,000 1,280,000
Vice-Chairperson: Board 250,000 350,000 374,500
Member: Board 120,000 150,000 160,500
Fee per meeting for the year ended
30 June 2013R
Fee per meeting for the year ended
30 June 2014R
Proposed fee per meeting for the year ended
30 June 2015R
Chairperson: Audit Committee 10,000 13,000 13,910
Member: Audit Committee 5,000 6,500 6,955
Chairperson: Risk Committee 10,000 13,000 13,910
Member: Risk Committee 5,000 6,500 6,955
Chairperson: Nominations Committee 10,000 13,000 13,910
Member: Nominations Committee 5,000 6,500 6,955
Chairperson: Social and Ethics Committee 10,000 13,000 13,910
Member: Social and Ethics Committee 5,000, 6,500 6,955
Chairperson: Remuneration Committee 10,000 13,000 13,910
Member: Remuneration Committee 5,000 6,500 6,955
Chairperson: Pension fund 10,000 13,000 13,910
58
Social and Ethics Committee Report
The Social and Ethics Committee (the Committee) assists the Board in
ensuring that the Group is and remains a good and responsible corporate
citizen by monitoring the Group’s sustainable development performance,
and performing the statutory functions required of a social and ethics
committee in terms of the Companies Act as well as the additional
functions assigned to it by the Board. The responsibilities and functioning
of the Committee are governed by a formal mandate approved by, and
subject to annual review by, the Board. The Committee is satisfied that
it has fulfilled all its statutory duties and the duties assigned to it by the
Board during the period under review.
The composition and number of meetings held or to be held by the
Committee is set out in the Group’s Corporate Governance Report in
this Integrated Annual Report on page 48.
The Committee is responsible for developing and reviewing the Group’s
policies with regard to social and economic development and good
corporate citizenship; and reporting on the Group’s sustainable development
performance and for making recommendations to the Board and/or
Management on matters within its mandate.
The Committee performs a monitoring role with respect to the sustainable
development performance of the Group relating, amongst others, to:
• Environmental, Health and Public Safety, which includes Occupational
Health and Safety;
• Broad-based Black Economic Empowerment and Employment
Equity;
• Labour relations and working conditions;
• Consumer relationships (advertising, public relations and compliance
with consumer protection laws);
• Training and skills development for the Group’s employees;
• Management of the Group’s environmental impacts;
• Ethics and compliance; and
• Corporate social investment.
The Committee is satisfied with the Group’s performance in each of
the areas listed above and as further reported on in the Sustainable
Development section of this Report.
The Committee’s monitoring role also includes the monitoring of relevant
legislation, other legal requirements or prevailing codes of good practice,
specifically with regard to matters relating to social and economic
development, good corporate citizenship, the environment, health and
public safety as well as labour and employment.
The Committee is further responsible for annually reviewing, in conjunction
with Executive Management, the Group’s material sustainability issues
and for reviewing and approving the sustainability content included in the
Integrated Annual Report.
During the period under review, the following reports relating to the
Committee’s functions were produced by Management and reviewed
by the Committee:
• The Group’s standing with respect to consumer relations and
compliance with consumer protection laws;
• The Group’s compliance with applicable advertising and marketing
laws;
• The Group’s record of sponsorship, donations and charitable giving;
and
• The new B-BBEE codes.
Each of the above-mentioned reports was analysed in-depth and in one
case, namely in the area of donations and charitable giving, Management
was requested to identify one particular charitable cause, with whom an
ongoing relationship could be created. This resulted in the Group concluding
an arrangement with the Red Cross Children’s Hospital in Cape Town in
terms of which the Group is providing free travel for patients to the hospital
as well as a donation of R500,000 to assist with the construction of new
accommodation for family members visiting or staying over with patients.
The relationship with the Red Cross Children’s Hospital is expected to
continue into the future. All the reports were subsequently approved by
the Board, upon recommendation by the Committee. The Committee is
satisfied with the Group’s standing in the areas reviewed and that the
current level of combined assurance provides the necessary independent
assurance over the quality and reliability of the information presented.
The Committee, through one of its members, is required to report on
matters within its mandate to the Group’s shareholders at the Group’s
Annual General Meeting. Shareholders will be referred to this Report,
read together with the Sustainable Development Report, at the Group’s
Annual General Meeting on 5 November 2014.
Mr MD Moritz
Chairman: Social and Ethics Committee
8 September 2014
Integrated Annual Report 2014
59
Report of the Directors
The Directors take pleasure in presenting their report, which forms part of the Annual Financial Statements of the Group for the year ended 30 June 2014.
Nature of Business
The main business of the Group is the provision of domestic and regional air services in the Southern African and Indian Ocean Islands market, trading
under the names of kulula. com and British Airways. In addition to the foregoing, the Group provides other travel-related services, undertakes third party
simulator training and operates airline lounges and currently provides airline catering for its own services.
General Review of Main Activities
The Group currently operates a fleet of twenty-six (26) aircraft flying to the destinations set out on pages 4 and 19 of this Report. The Directors have
performed the solvency and liquidity test required by the new Companies Act, the outcome of which is that the Group is a ‘going concern’ with adequate
resources to continue operating for the foreseeable future.
Financial Results
Full details of the financial results are set out on pages 68 to 108 of this Integrated Annual Report.
Dividends
Notice is hereby given that a gross cash dividend of 13.0000 cents per ordinary share has been declared payable to shareholders. The dividend has
been declared out of income reserves.
The dividend will be subject to a local dividend tax rate of 15% or 1.9500 cents per ordinary share, resulting in a net dividend of 11.0500 cents per ordinary
share, unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of the applicable double tax agreement. No
STC credits were available to be utilised as part of this declaration. The Company’s tax reference number is 9281/874/1/0 and the number of ordinary
shares in issue at the date of this declaration is 440,263,099.
In accordance with the provisions of Strate, the electronic settlement and custody system used by the JSE Limited, the relevant dates for the dividend
are as follows:
Event Date
Last day to trade (cum dividend) Friday, 10 October 2014
Shares commence trading (ex dividend) Monday, 13 October 2014
Record date (date shareholders recorded in books) Friday, 17 October 2014
Payment date Monday, 20 October 2014
Share certificates may not be dematerialised or rematerialised between Monday, 13 October 2014 and Friday, 17 October 2014, both days inclusive.
Share Capital
The authorised share capital of the Group remained unchanged during the reporting period under review.
Share Buy-back
During the period under review, the Group repurchased 48,913,372 ordinary shares, being approximately 10% of its ordinary share capital, in accordance
with a general authority to repurchase shares approved by shareholders at the Group’s Annual General Meeting held on 30 October 2013. The shares
were repurchased during November and December 2013, as announced on SENS, as follows:
(a) At the beginning of November 2013, the Group repurchased 29,858,467 ordinary shares at an average price of R2.99 per ordinary share;
(b) In and during November and December 2013 the Group repurchased 19,054,905 ordinary shares at an average price of R3.24 per ordinary share; and
(c) All shares repurchased were delisted and reverted to authorised but unissued ordinary shares.
60
Report of the Directors (continued)
Issued Share Capital
Following a share buy-back, implemented in November and December 2013, as mentioned above, the Group’s issued share capital has reduced from
489,176,471 ordinary shares of 1 cent each to 440,263,099 ordinary shares of 1 cent each.
Subsidiaries and Associates
Details of the Group’s subsidiaries and associates are recorded in Notes 4 and 5 of this Integrated Annual Report on pages 84 to 89.
Subsequent Events
The Directors are not aware of any matter or circumstance arising since the end of the period under review that would significantly affect or have a
material impact on the financial position of the Group.
Directors’ Interest in Share Capital
The following Directors of the Group held direct and indirect interests in the issued share capital of the Group at 30 June 2014 as set out below.
2014 2013
DirectorDirect
BeneficialIndirect
BeneficialHeld by
AssociatesTotal
Shares %Direct
BeneficialIndirect
BeneficialHeld by
AssociatesTotal
Shares %
MD Moritz - 50,000,000 9,462 50,009,462 11.35 - 50,000,000 9,462 50,009,462 10.23
P van Hoven 204,647 - - 204,647 0.05 204,647 - - 204,647 0.04
ER Venter 1,531,883 - - 1,531,883 0.35 1,531,883 - - 1,531,883 0.31
MN Louw 111,732 - - 111,732 0.03 36,732 - - 36,732 0.01
PJ Welgemoed 118,788 - - 118,788 0.03 118,788 - - 118,788 0.02
KI Mampeule** - - - - 0.0 - - - - 0.0
RS Ntuli** - - - - 0.0 - 5,772,615 - 5,772,615 1.18
DH Borer* 188,000 - - 188,000 0.04 188,000 - - 188,000 0.04
AK Gupta*** - - - - 0.0 - 22,794,439 - 22,794,439 4.66
TOTAL 2,155,050 50,000,000 9,462 52,164,512 11.85 2,080,050 78,567,054 9,462 80,656,566 16.49
* Alternate Director
** Excludes 74,117,647 “A” shares issued to the Thelo Consortium, of which both Mr RS Ntuli and Mr KI Mampeule are members, but not forming part of the Group’s listed share capital, in terms of the Company’s Black Economic Empowerment transaction. Refer to Circular to Ordinary Shareholders issued on 23 August 2006 for further information relating to the Black Economic Empowerment transaction.
*** Refers to shares owned by Oakbay Investments (Pty) Ltd, of which Mr Gupta has a 30% direct shareholding and a 10% indirect shareholding.
There have been no changes in the Directors’ interests in share capital between 30 June 2014 and the date of posting of this Report.
Special Resolutions
Since its last Integrated Annual Report, the Group passed four (4) special resolutions at its Annual General Meeting held on 30 October 2013, namely:
• A special resolution for approval of Non-executive Directors’ remuneration for 2012/13;
• A special resolution for the approval of Non-executive Directors’ remuneration for 2013/14;
• A special resolution giving the Group a general authority to re-purchase its shares; and
• A special resolution as contemplated in section 45(3)(a)(ii) of the Companies Act, i.e. a general authority to provide financial assistance to related
and interrelated companies or corporations.
Other than the aforegoing, no other special resolutions were passed.
As required in terms of section 8.63(i) of the JSE Listings Requirements, no special resolutions were passed by the Group’s subsidiaries relating to
Integrated Annual Report 2014
61
borrowing powers, the object clause contained in the Memorandum of Incorporation or other material matters that affect the Group and the subsidiaries
for the period under review.
Board of Directors, Company Secretary and Board Meeting Attendance
The names, ages, qualifications, nationality, business addresses, attendance at Board Meetings and occupations of the Directors and the Group Company
Secretary who served during the period under review, are set out below.
Name, Age, QualificationGender and RaceM = MaleF = FemaleW = WhiteB = Black, Coloured or Indian Nationality Business Address
Attendance – four (4) Board Meetings Held during Period under Review Occupation
Pieter van Hoven Age : 70 (M) (W)
South African 1 Marignane Drive, Bonaero Park,Kempton Park 1619
4 of 4 Independent Non-executiveChairman
Martin Darryl Moritz Age: 69 (M) (W)(BCom, LLB)
South African 1 Marignane Drive, Bonaero Park,Kempton Park, 1619
4 of 4 Non-executive Joint Deputy Chairman
Rodney Cyril SacksAge: 64 (M) (W)HDip Law, HDip Tax
South African 550 Monica Circle, Suite 201,Corona, CA 92880, U.S.A
1 of 4 Independent Non-executive Director
Dr Peter Johannes WelgemoedAge: 71 (M) (W)BCom (Hons), MCom, DCom
South African 1 Marignane Drive, Bonaero Park,Kempton Park, 1619
3 of 4 Independent Non-executive Director
Jacob Meyer KahnAge: 75 (M) (W)BA (Law); MBA (UP); DCom (hc); SOE
South African Retired Chairman of SABMiller Plc, 4 East Road, Morningside, 2057
2 of 4 Independent Non-executive Director
Martin Nicolaas LouwAge: 59 (M) (W) BMil
South African 1 Marignane Drive, Bonaero Park, Kempton Park, 1619
4 of 4 Director Operations
Erik Rudolf Venter Age: 44 (M) (W)BCom, CA(SA)
South African 1 Marignane Drive, Bonaero Park,Kempton Park, 1619
4 of 4 Chief Executive Officer
Khutso Ignatius MampeuleAge: 49 (M) (B)BA, MSc, MBA
South African C/o Lefa Group Holdings (Pty) Ltd, Mulberry Hill Office Park, Broadacres Ave, Dainfern, 2191
4 of 4 Independent Non-executive Director
Ronald Sibongiseni NtuliAge: 44 (M) (B)LLB (Edinburgh University)
South African Thelo Group,(Pty) Ltd, Ground Floor, Block 9, St.Andrews Inanda Greens Business Park, 54 Wierda Road West, Wierda Valley, 2196
4 of 4 Non-executive Joint Deputy Chairman
Wrenelle Doreen Stander Age: 48 (F) (B)BA (Hons), MBA
South African 272 Kent Avenue, Randburg, 2194 3 of 4 Independent Non-executive Director
Atul Kumar Gupta1
Age: 46 (M) (B)BSc
South African 89 Gazelle Avenue, Corporate Park South, Old Pretoria Main Road, Midrand, 1682
0 of 1 Independent Non-executive Director
Ranil Yasas Sri-Chandana2
Age: 41 (M) (B)BCompt (Hons), MCom, CA(SA), CFA, HDip Company Law
South African 1 Marignane Drive, Bonaero Park,Kempton Park, 1619
2 of 2 Finance Director
62
Report of the Directors (continued)
Name, Age, QualificationGender and RaceM = MaleF = FemaleW = WhiteB = Black, Coloured or Indian Nationality Business Address
Attendance – four (4) Board Meetings Held during Period under Review Occupation
Gavin James HallidayAge: 50 (M) (W)BA (Hons) Economics, MBA (Lancaster University)
British British Airways Plc, Waterside (HAA2), Harmondsworth,Middlesex UB7 OGB, UK
4 of 4 Independent Non-executive Director
Hubert Rene Brody3
Age: 50 (M) (W)BAcc (Hons)
South African 79 Boeing Road East, Bedfordview, Gauteng, 2007
2 of 2 Independent Non-executive Director
Kirsten Emily King4
Age: 36 (F) (W)BCom (Hons) Accounting (CTA Equivalent), CA(SA)
South African 1 Marignane Drive, Bonaero Park, Kempton Park, 1619
0 of 0 Financial Director
Derek Henry BorerAge: 52 (M) (W)BCom, LLB
South African 1 Marignane Drive, Bonaero Park,Kempton Park, 1619
4 of 4 Alternate Director to Martin Nicolaas Louw and Rodney Cyril Sacks, and Group Company Secretary
Notes1 Atul Kumar Gupta resigned as an independent Non-executive Director of the Board on 12 November 2013. 2 Ranil Yasas Sri-Chandana, who emigrated to Australia, resigned as the Group’s Financial Director on 15 January 2014. 3 Hubert Rene Brody was appointed as an independent Non-executive Director on 1 January 2014.4 Kirsten Emily King was appointed as Financial Director on 9 June 2014.
Share Incentive Scheme
Executive Directors participate in a Share Incentive Scheme with no allocations made or options exercised during the financial year.
No share options were issued to employees through the Share Incentive Scheme during the year and 4,992,531 options remained available for issue
at year-end. There were share options exercised by employees prior to year-end, with the transfers effected post year-end.
Integrated Annual Report 2014
63
Directors’ Remuneration 2014
Name
For Services
as Directors
R’000
Related Committee
WorkR’000
Package1 R’000
Performance-related2
R’000PensionR’000
Group Life and Disability
R’000MedicalR’000
Share-based
Payments as per IFRSR’000
Total 2014R’000
Executives
Mr ER Venter - - 2,525 3,500 342 67 38 ,- 6,472
Mr MN Louw - - 1,858 1,872 235 46 35 - 4,046
Mr RY Sri Chandana - - 988 - 90 17 20 - 1,115
Mr DH Borer - - 1,430 1,423 174 34 38 - 3,099
Ms KE King - - 50 158 7 3 3 - 221
Sub-total - - 6,851 6,953 848 167 134 - 14,953
Non-executives
Mr MD Moritz 350 59 - - - - - - 409
Mr RS Ntuli 350 - - - - - - - 350
Dr PJ Welgemoed 150 65 - - - - - - 215
Mr JM Kahn 150 20 - - - - - - 170
Mr KI Mampeule 150 72 - - - - - - 222
Mr P van Hoven 1,200 39 - - - - - - 1,239
Ms WD Stander - - - - - - - - -
Mr HR Brody 75 - - - - - - - 75
Sub-total 2,425 255 - - - - - - 2,680
Share-based payment - - - - - - - 17,416 17,416
Total 2,425 255 6,851 6,953 848 167 134 17,416 35,049
Notes:1 ‘Package’ includes the following regular payments made in respect of the financial year while actively employed: cash salary, S&T allowances and vehicle allowances.2 ‘Performance related’ refers to the incentive rewards in respect of the financial year ended 30 June 2014.3 Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares.
Further details regarding the Company’s remuneration policies are set out in the Remuneration Report on pages 55 to 57 of this Integrated Annual Report.
64
Report of the Directors (continued)
Directors’ Remuneration 2013
Name
For Services
as Directors
R’000
Related Committee
WorkR’000
Package1 R’000
Performance-related2
R’000PensionR’000
Group Life and Disability
R’000MedicalR’000
Share-based
Payments as per IFRSR’000
Total 2013R’000
Executives
Mr ER Venter - - 2,381 3,000 307 60 35 - 5,783
Mr MN Louw - - 1,717 1,693 215 42 32 - 3,699
Mr RY Sri Chandana - - 1,330 1,341 142 28 31 - 2,872
Mr DH Borer - - 1,314 1,332 159 31 37 - 2,873
Sub-total - - 6,742 7,366 823 161 135 - 15,227
Non-executives
Mr MD Moritz 250 45 - - - - - - 295
Mr RS Ntuli 250 - - - - - - - 250
Dr PJ Welgemoed 120 70 - - - - - - 190
Mr JM Kahn 120 10 - - - - - - 130
Mr KI Mampeule 120 45 - - - - - - 165
Mr P van Hoven 1,000 60 - - - - - - 1,060
Ms WD Stander 120 30 - - - - - - 150
Sub-total 1,980 260 - - - - - - 2,240
Share-based payment - - - - - - - 4,250 4,250
Total 1,980 260 6,742 7,366 823 161 135 4,250 21,717
Notes:1 ‘Package’ includes the following regular payments made in respect of the financial year while actively employed: Cash salary, S&T allowances and vehicle allowances.2 ‘Performance related’ refers to the incentive rewards in respect of the financial year ended 30 June 2012.3 Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares.
Integrated Annual Report 2014
65
Statement of Responsibility by the Board of Directors
The Directors are responsible for the preparation, integrity and fair presentation of the Annual Financial Statements and other financial information
included in this report.
The Annual Financial Statements, presented on pages 68 to 108 have been prepared in accordance with International Financial Reports Standards (IFRS)
and the requirements of the Companies Act (Act No. 71 of 2008), and include amounts based on judgements and estimates made by Management.
The going-concern basis has been adopted in preparing the Annual Financial Statements. The Directors have no reason to believe that the Company
or the Group will not be going concerns in the foreseeable future, based on forecasts and available cash resources. The Annual Financial Statements
support the viability of the Company and the Group.
The Annual Financial Statements have been audited by the independent accounting firm, Grant Thornton (Jhb) Inc., which was given unrestricted access
to all financial records and related data, including minutes of all meetings of shareholders, the Board of Directors and Committees of the Board. The
Directors believe that all representations made to the independent auditors during the audit were valid and appropriate.
The Annual Financial Statements, which appear on pages 68 to 108, were approved by the Board of Directors on 8 September 2014 and signed on
its behalf.
Mr ER Venter Mr P van Hoven
CEO Chairman
8 September 2014 8 September 2014
66
Certificate of Company Secretary
In terms of section 88(2)(e) of the Companies Act (Act No. 71 of 2008), as amended (“the Act”), I certify that the Company has lodged all returns and
notices as required by the Act and that all such returns are true, correct and up to date.
Mr DH Borer
Company Secretary
8 September 2014
Integrated Annual Report 2014
67
We have audited the consolidated and separate financial statements of
Comair Limited set out on pages 68 to 108, which comprise the statements
of financial position as at 30 June 2014, and the statements of comprehensive
income, statements of changes in equity and statements of cash flows for
the year then ended, and the notes, comprising a summary of significant
accounting policies and other explanatory information.
Directors’ Responsibility for the Financial Statements
The company’s directors are responsible for the preparation and fair
presentation of these consolidated and separate financial statements
in accordance with International Financial Reporting Standards and the
requirements of the Companies Act of South Africa and for such internal
control as the directors determine is necessary to enable the preparation of
consolidated and separate financial statements that are free from material
misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated and
separate financial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the consolidated
and separate financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgement, including the assessment of
the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated and separate financial statements present
fairly, in all material respects, the consolidated and separate financial
position of Comair Limited as at 30 June 2014, and its consolidated and
separate financial performance and consolidated and separate cash flows
for the year then ended in accordance with International Financial Reporting
Standards, and the requirements of the Companies Act of South Africa.
Other Reports Required by the Companies Act
As part of our audit of the consolidated and separate financial statements
for the year ended 30 June 2014, we have read the Directors’ Report, Audit
Committee’s Report and Company Secretary’s Certificate for the purpose
of identifying whether there are material inconsistencies between these
reports and the audited consolidated and separate financial statements.
These reports are the responsibility of the respective preparers. Based
on reading these reports we have not identified material inconsistencies
between these reports and the audited consolidated and separate financial
statements. However, we have not audited these reports and accordingly
do not express an opinion on these reports.
Grant Thornton (Jhb) Inc.
Registration No.: 1994/001166/21
Chartered Accountants (SA)
Registered Auditors
B Frey
Director
Chartered Accountant (SA)
Registered Auditor
8 September 2014
42 Wierda Road West
Wierda Valley
2196
Independent Auditor’s Report
68
Group Company
Notes
2014 2013 2014 2013
R’000 R’000 R’000 R’000
AssetsNon-current assets 2,586,419 2,361,275 2,550,595 2,334,480
Property, plant and equipment 1 2,545,033 2,314,082 2,493,813 2,262,467
Intangible assets 2 31,106 41,475 31,106 41,475
Loan to share incentive trust 3 - - 3,814 5,337
Investments in and loans to subsidiaries 4 - - 21,862 25,201
Investments in and loans to associates 5 6,612 2,050 - -
Goodwill 6 3,668 3,668 - -
Current assets 1,436,929 1,244,581 1,441,986 1,242,770
Inventory 7 7,608 7,086 7,608 7,086
Trade and other receivables 8 523,226 420,656 508,056 399,133
Investments in and loans to subsidiaries 4 - - 31,353 31,513
Investments in and loans to associates 5 7,852 7,852 7,852 7,852
Taxation 30,540 30,942 28,999 30,558
Cash and cash equivalents 9 867,703 778,045 858,118 766,628
4,023,348 3,605,856 3,992,581 3,577,250
Equity and LiabilitiesCapital and reserves 1,067,970 1,021,200 1,057,595 1,014,103
Share capital 10 5,094 5,578 5,144 5,633
Share premium - 123,631 - 123,742
Non-distributable reserves 27,424 23,996 27,424 23,996
Accumulated profits 1,035,452 867,995 1,025,027 860,732
Non-current liabilities 1,372,427 1,273,713 1,373,964 1,274,695
Interest-bearing liabilities 11 1,183,072 1,133,767 1,183,072 1,133,767
Deferred taxation 12 167,689 135,696 169,226 136,678
Share-based payments 13 21,666 4,250 21,666 4,250
Current liabilities 1,582,951 1,310,943 1,561,022 1,288,452
Trade and other payables 13 1,346,562 1,058,510 1,324,633 1,036,019
Provisions 14 99,719 116,212 99,719 116,212
Interest-bearing liabilities 11 136,670 136,221 136,670 136,221
4,023,348 3,605,856 3,992,581 3,577,250
Net asset value per share (cents) 245.3 211.1
Statements of Financial Positionas at 30 June 2014
Integrated Annual Report 2014
69
Group Company
Notes
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Revenue 16 6,282,219 5,386,581 6,224,285 5,366,240
Operating expenses (5,577,457) (4,765,356) (5,517,795) (4,742,297)
Operating profit before depreciation, impairment and profit on sale of assets 704,762 621,225 706,490 623,943
Depreciation (290,747) (241,582) (290,140) (239,709)
Reversal of impairment (impairment) 5.2 & 17 2,235 (6,817) - (17,559)
Profit on sale of assets 524 984 524 984
Profit from operations 17 416,774 373,810 416,874 367,659
Interest income 32,149 20,217 31,515 19,856
Interest expense 18 (77,340) (61,641) (77,317) (61,445)
Share of profit (loss) of associates 5 2,327 (1,725) - -
Profit before taxation 373,910 330,661 371,072 326,070
Taxation 19 (109,059) (103,135) (108,864) (101,066)
Total comprehensive income for the year attributable to equity holders of the parent 264,851 227,526 262,208 225,004
Earnings per share (cents) 20 58.4 47.0
Diluted earnings per share (cents) 20 56.1 47.0
Statements of Comprehensive Incomefor the year ended 30 June 2014
70
Share Capital
Share Premium
Share-based Payment Reserve
Accumulated Profit Total
R’000 R’000 R’000 R’000 R’000
Group
Balance at 1 July 2012 5,578 123,631 20,568 664,684 814,461
BEE share-based payments - - 3,428 - 3,428
Total comprehensive income for the year - - - 227,526 227,526
Dividend paid - - - (24,215) (24,215)
Movement for the year - - 3,428 203,311 206,739
Balance at 30 June 2013 5,578 123,631 23,996 867,995 1,021,200
BEE share-based payments - - 3,428 - 3,428
Total comprehensive income for the year - - - 264,851 264,851
Dividend paid - - - (70,295) (70,295)
Repurchase of shares (489) (123,631) - (27,093) (151,213)
Shares sold by Share Trust 5 - - (6) (1)
Movement for the year (484) (123,631) 3,428 167,457 46,770
Balance at 30 June 2014 5,094 - 27,424 1,035,452 1,067,970
Company
Balance at 1 July 2012 5,633 123,742 20,568 660,187 810,130
BEE share-based payments - - 3,428 - 3,428
Total comprehensive income for the year - - - 225,004 225,004
Dividend paid - - - (24,459) (24,459)
Movement for the year - - 3,428 200,545 203,973
Balance at 30 June 2013 5,633 123,742 23,996 860,732 1,014,103
BEE share-based payments - - 3,428 - 3,428
Total comprehensive income for the year - - - 262,208 262,208
Dividend paid - - - (70,931) (70,931)
Repurchase of shares (489) (123,742) - (26,982) (151,213)
Movement for the year (489) (123,742) 3,428 164,295 43,492
Balance at 30 June 2014 5,144 - 27,424 1,025,027 1,057,595
Statements of Changes in Equityfor the year ended 30 June 2014
Integrated Annual Report 2014
71
Group Company
Notes
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Cash generated from operating activities 966,483 830,694 963,715 826,189
Cash receipts from customers 6,281,836 5,395,124 6,217,549 5,377,551
Cash paid to suppliers (5,193,498) (4,440,476) (5,133,275) (4,430,503)
Cash generated by operations 21 1,088,338 954,648 1,084,274 947,048
Interest paid 18 (77,340) (61,641) (77,317) (61,445)
Interest received 32,149 20,217 31,515 19,856
Taxation paid 22 (76,664) (82,530) (74,757) (79,270)
Cash utilised in investing activities (610,842) (104,441) (605,606) (105,242)
Additions to property, plant and equipment (611,366) (105,096) (611,152) (105,151)
Additions to intangible assets - (329) - (329)
Proceeds on disposal of property, plant and equipment 524 984 524 984
Decrease in loan to share incentive trust - - 1,523 242
Decrease (increase) in subsidiaries loans 4 - - 3,499 (988)
Cash utilised in financing activities (265,983) (194,303) (266,619) (194,547)
Repurchase of share capital (151,214) - (151,214) -
Dividend paid (70,295) (24,215) (70,931) (24,459)
Raising of interest bearing liabilities 174,675 - 174,675 -
Repayment of interest-bearing liabilities (219,149) (170,088) (219,149) (170,088)
Net increase in cash and cash equivalents 89,658 531,950 91,490 526,400
Cash and cash equivalents at the beginning of the year 778,045 246,095 766,628 240,228
Cash and cash equivalents at the end of the year 867,703 778,045 858,118 766,628
Statements of Cash Flowfor the year ended 30 June 2014
72
Segmental Reportfor the year ended 30 June 2014
Airline Non-airline Total
R’000 R’000 R’000
30 June 2014Revenue 6,109,143 173,076 6,282,219
Operating profit before depreciation, impairment and profit on sale of assets 681,552 23,210 704,762
Profit on sale of assets 524 - 524
Reversal of impairment 2,235 - 2,235
Depreciation (285,734) (5,013) (290,747)
Profit from operations 398,577 18,197 416,774
Segmental assets and liabilities
Segmental assets 3,875,108 148,240 4,023,348
Segmental interest-bearing liabilities (1,284,833) (34,909) (1,319,742)
Other segmental liabilities (1,540,481) (95,155) (1,635,636)
Segmental net asset value 1,049,794 18,176 1,067,970
Segmental capital additions (excluding borrowing costs capitalised) during the year 510,381 668 511,049
30 June 2013Revenue 5,232,260 154,321 5,386,581
Operating profit before depreciation, impairment and profit on sale of assets 596,907 24,318 621,225
Profit on sale of assets 984 - 984
Impairment (6,817) - (6,817)
Depreciation (236,342) (5,240) (241,582)
Profit from operations 354,732 19,078 373,810
Segmental assets and liabilities
Segmental assets 3,421,093 184,763 3,605,856
Segmental interest-bearing liabilities (1,226,379) (43,609) (1,269,988)
Other segmental liabilities (1,251,316) (63,352) (1,314,668)
Segmental net asset value 943,398 77,802 1,021,200
Segmental capital additions (excluding borrowing costs capitalised) during the year 1,093,702 432 1,094,134
Comair predominately operates within South Africa and as a result no Geographic Segmental Report is presented. Revenue earned from flights, other
than in South Africa, is not considered to be significant and is generated from assets in control of the South African operation.
Inter-segmental revenue is not material and has therefore not been presented.
Integrated Annual Report 2014
73
Principal Accounting Policies
The Annual Financial Statements are presented in South African Rand
as it is the currency of the economic environment in which the Group
operates.
The Annual Financial Statements are prepared in accordance with
International Financial Reporting Standards (IFRS) as well as the SAICA
Financial Reporting Guides as issued by the Accounting Practices
Committee in terms of the Listings Requirements of the JSE Limited
and the Companies Act of South Africa 2008. The Annual Financial
Statements have been prepared on the historical cost basis, except
for the measurement of certain financial instruments at fair value, and
incorporate the principal accounting policies and measurement bases
listed below.
Except for the adoption of the new and revised accounting standards
the principal accounting policies of the Group are consistent with those
applied in the audited consolidated Financial Statements for the year
ended 30 June 2013.
Adoption of Standards and Interpretations Effective in 2014
The following new standards were adopted during the finacial year under
review, however none had significant financial impacts for the Group:
IFRS 10 ‘Consolidated Financial Statements’ (IFRS 10)
IFRS 10 supersedes IAS 27 ‘Consolidated and Separate Financial
Statements’ (IAS 27) and SIC 12 ‘Consolidation-Special Purpose Entities’.
IFRS 10 revises the definition of control and provides extensive new
guidance on its application. These new requirements have the potential
to affect which of the Group’s investees are considered to be subsidiaries
and therefore to change the scope of consolidation. The requirements
on consolidation procedures, accounting for changes in non-controlling
interests and accounting for loss of control of a subsidiary are unchanged.
Management has reviewed its control assessments in accordance with
IFRS 10 and has concluded that there is no effect on the classification (as
subsidiaries or otherwise) of any of the Group’s investees held during the
period or comparative periods covered by these financial statements.
IFRS 12 ‘Disclosure of Interests in Other Entities’ (IFRS 12)
IFRS 12 integrates and makes consistent the disclosure requirements
for various types of investments, including unconsolidated structured
entities. It introduces new disclosure requirements about the risks to
which an entity is exposed from its involvement with structured entities.
Management has reviewed the impact of the following new and revised
standards effective for annual periods beginning on or after 1 January 2013
and is of the view that the adoption of these standards and interpretations
has no material impact on the financial statements of the Group:
• IFRS 11 ‘Joint Arrangements’ (IFRS 11)
• IFRS 13 ‘Fair Value Measurement’ (IFRS 13)
• Consequential amendments to IAS 27 ‘Separate Financial Statements’
(IAS 27) and IAS 28 ‘Investments in Associates and Joint Ventures’
(IAS 28)
• Amendments to IAS 19 ‘Employee Benefits’ (IAS 19)
A full list of standards that will become effective in the next financial year
are disclosed in Note 28.
Basis of consolidation
The Group financial statements consolidate those of the parent company and
all of its subsidiaries as of 30 June 2014. The parent controls a subsidiary
if it is exposed, or has rights, to variable returns from its involvement with
the subsidiary and has the ability to affect those returns through its power
over the subsidiary. All subsidiaries have a reporting date of 30 June.
All transactions and balances between Group companies are eliminated
on consolidation, including unrealised gains and losses on transactions
between Group companies. Where unrealised losses on intra-group
asset sales are reversed on consolidation, the underlying asset is also
tested for impairment from a Group perspective. Amounts reported in the
financial statements of subsidiaries have been adjusted where necessary
to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired
or disposed of during the year are recognised from the effective date of
acquisition, or up to the effective date of disposal, as applicable.
Non-controlling interests, presented as part of equity, represent the
portion of a IFRS 10.B94 subsidiary’s profit or loss and net assets that
is not held by the Group. The Group attributes total comprehensive
income or loss of subsidiaries between the owners of the parent and the
non-controlling interests based on their respective ownership interests.
Business Combinations
The Group applies the acquisition method in accounting for business
combinations. The consideration transferred by the Group to obtain
control of a subsidiary is calculated as the sum of the acquisition-date
fair values of assets transferred, liabilities incurred and the equity interests
issued by the Group, which includes the fair value of any asset or liability
arising from a contingent consideration arrangement. Acquisition costs
are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed
in a business combination regardless of whether they have been previously
recognised in the acquiree’s financial statements prior to the acquisition.
Accounting Policies
74
Accounting Policies (continued)
Assets acquired and liabilities assumed are generally measured at their
acquisition-date fair values.
Goodwill is stated after separate recognition of identifiable intangible
assets. It is calculated as the excess of the sum of:
a) fair value of consideration transferred;
b) the recognised amount of any non-controlling interest in the acquiree;
and
c) acquisition-date fair value of any existing equity interest in the acquiree,
over the acquisition-date fair values of identifiable net assets.
If the fair values of identifiable net assets exceed the sum calculated
above, the excess amount (i.e. gain on a bargain purchase) is recognised
in profit or loss immediately.
Subsidiaries
Subsidiaries are companies and entities of which the Company has the
ability to control the financial and operating activities so as to obtain
benefit from their activities. Investment in subsidiaries are carried at
cost less any impairment losses in the Company’s stand-alone Financial
Statements.
The cost of an investment in a subsidiary is the aggregate of:
• The fair value, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the Company.
An adjustment to the cost of a business combination contingent on future
events is included in the profit or loss of the combination if the adjustment
is probable and can be measured reliably.
The cost includes an estimate of contingent consideration payable at fair
value at acquisition date.
The Group Share Incentive Trust is included in the consolidated Financial
Statements as a subsidiary.
Investments in Associates
Associates are those entities over which the Group is able to exert significant
influence but which are not subsidiaries.
Investments in associates are accounted for using the equity method.
Any goodwill or fair value adjustment attributable to the Group’s share in
the associate is not recognised separately and is included in the amount
recognised as investment.
The carrying amount of the investment in associates is increased or
decreased to recognise the Group’s share of the profit or loss and other
comprehensive income of the associate, adjusted where necessary to
ensure consistency with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its
associates are eliminated to the extent of the Group’s interest in those
entities. Where unrealised losses are eliminated, the underlying asset is
also tested for impairment.
The Group’s share of movements in the associate’s other comprehensive
income is recognised in other comprehensive income. The Group’s share
of the aggregate loss in any associate is limited to its net investment in the
associate, unless the Group has incurred an obligation or made payments
on the associate’s behalf. The Group’s share of inter-company gains is
eliminated on consolidation, whilst the Group’s share of inter-company
losses is only eliminated if the transaction does not provide evidence of
impairment of the asset transferred. Investments in associates are disclosed
as the initial investment plus the aggregate of loans made to the associate
plus the Group’s aggregate share of post-acquisition equity. Investments
in associates are accounted for at cost less any impairment losses in the
Company’s stand-alone Financial Statements.
Property, Plant and Equipment
Freehold property, aircraft and related equipment, vehicles, furniture,
computers and flight simulator equipment are depreciated systematically
on the straight-line basis, which is estimated to depreciate the assets to
their anticipated residual values through a component approach over their
planned useful lives. Land is not depreciated.
Property, plant and equipment are stated at cost less accumulated
depreciation and impairment.
Cost includes expenditure that is directly attributable to the acquisition of
the asset. Subsequent costs are included in the asset’s carrying value or
recognised as a separate asset as appropriate, only when it is probable that
future economic benefits associated with the specific asset will flow to the
Group and costs can be measured reliably. The carrying values are assessed
at each reporting date and only written down if there are impairments in
value. The useful life, depreciation method and residual values are assessed
at the end of each reporting period and revised if necessary.
Depreciation Rates for Property Plant and Equipment
Property and buildings 2%
Motor vehicles 20%
Furniture and equipment 7%
Computer equipment 20% to 50%
Second-hand flight simulator equipment 20%
New simulator equipment 7%
Leasehold improvements Life of the lease agreement
Integrated Annual Report 2014
75
Aircraft
Aircraft are initially recognised at spot rate at date of purchase. The
carrying values of aircraft are assessed annually for impairment. Aircraft
modifications are capitalised only to the extent that they materially improve
the value of the aircraft from which further future economic benefits are
expected to flow. Maintenance and repairs which neither materially or
appreciably prolong their useful lives are charged against income. C and
D Checks are capitalised and expensed over their useful lives. The gain
or loss on disposal of an asset is determined as the difference between
the sales proceeds and the carrying amount of the asset and recognised
in the Statements of Comprehensive Income. The aircraft residual values
are between 0 and 10%.
Depreciation Rates for Aircraft
Aircraft and related equipment 4 to 20%
C Checks 18 months
D Checks 72 months
Intangible Assets
An intangible asset is recognised when:
• It is probable that the expected future economic benefits that are
attributable to the asset will flow to the entity; and
• The cost of the asset can be measured reliably.
Intangible assets are initially recognised at cost.
An intangible asset arising from development (or from the development
phase of an internal project) is recognised when:
• It is technically feasible to complete the asset so that it will be available
for use or sale;
• There is an intention to complete and use or sell it;
• There is an ability to use or sell it;
• It will generate probable future economic benefits;
• There are available technical, financial and other resources to complete
the development and to use or sell the asset; and
• The expenditure attributable to the asset during its development can
be measured reliably.
Intangible assets are carried at cost, being fair value at the date of revaluation
less any subsequent accumulated amortisation and any subsequent
accumulated impairment losses.
An intangible asset is regarded as having an indefinite useful life when,
based on all relevant factors, there is no foreseeable limit to the period over
which the asset is expected to generate net cash inflows. Amortisation is
not provided for these intangible assets, but they are tested for impairment
annually and whenever there is an indication that the asset may be impaired.
For all other intangible assets amortisation is provided on a straight-line
basis over their useful life.
The amortisation period and the amortisation method for intangible assets
are reviewed at every period end.
Reassessing the useful life of an intangible asset with a finite useful life
after it was classified as indefinite is an indicator that the asset may be
impaired. As a result, the asset is tested for impairment and the remaining
carrying amount is amortised over its useful life.
Internally generated brands, mastheads, publishing titles, customer lists
and items similar in substance are not recognised as intangible assets.
Amortisation is provided to write down the intangible assets, on a straight-
line basis, to their residual values as follows:
• Internally generated intangible assets: research and development
expenditure.
Costs associated with developing and maintaining computer software
programs are recognised as expenses when incurred. Costs that are
directly associated with the development of identifiable and unique
software products controlled by the Group and that will probably generate
economic benefits exceeding costs beyond one year, are recognised
as intangible assets. Costs include the software development employee
costs and an appropriate portion of relevant overheads. Amortisation
is charged on a straight-line basis over their estimated useful lives of
five years. Software is carried at cost less accumulated amortisation
and impairment.
Pre-delivery Payments
Aircraft pre-delivery payments and security deposits are capitalised to
property, plant and equipment once all conditions precedent cruical to
the legal agreements are met and construction of the aircraft has begun.
Prior to being capitalised to property, plant and equipment, aircraft pre-
delivery payments and security deposits are accounted for as deposits
in other receivables. Aircraft pre-delivery payments and security deposits
are not depreciated. Upon delivery of the relevant aircraft, the pre-delivery
payments are transferred to the cost of the aircraft.
Goodwill
Goodwill represents the excess of the cost of an acquisition of a business
over the fair value of the Group’s share of the net identifiable assets of
the acquired subsidiary at the date of acquisition. Goodwill is tested
at reporting date for impairment and carried at cost less accumulated
impairment losses. Impairment losses on goodwill are not reversed. Gains
and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold.
76
Accounting Policies (continued)
Finance Leases and Instalment Sale Agreements – Lessee
Leases, whereby the lessor provides finance to the Group and where the
Group assumes substantially all the benefits and risks of ownership, are
classified as finance leases.
The amount capitalised at inception of the lease is the lower of the fair
value of the leased asset and the present value of the minimum lease
payments. The discount rate used in calculating the present value of
the minimum lease payments is the interest rate implicit in the lease or
the Group’s incremental borrowing rate if rate implicit in the lease is not
practicable to determine. The capital element of future obligations under
leases is included as a liability in the Statement of Financial Position. Each
lease payment is allocated between the liability and finance charges so
as to achieve a constant rate on the finance balance outstanding. The
interest element of the instalments is charged against income over the
lease period.
Operating Leases – Lessee
Leases of assets to the Group under which all risks and rewards of ownership
are effectively retained by the lessor, are classified as operating leases.
Payments made under operating leases are charged against income on
a straight-line basis over the period of the lease. A straight-line asset/
liability is raised for the difference between the leased payment and the
lease expense.
Financial Instruments
Initial Recognition
The Group classifies financial instruments, or their component parts, on initial
recognition as a financial asset, a financial liability or an equity instrument
in accordance with the substance of the contractual arrangement.
Financial assets and financial liabilities are recognised on the Group’s
Statement of Financial Position when the Group becomes party to the
contractual provisions of the instrument.
Fair Value Determination
The fair values of quoted investments are based on current bid prices. If
the market for a financial asset is not active (and for unlisted securities),
the Group establishes fair value by using valuation techniques. These
include the use of recent arm’s length transactions, reference to other
instruments that are substantially the same, discounted cash flow analyses,
and option pricing models making maximum use of market inputs and
relying as little as possible on entity-specific inputs.
Derecognition
Financial assets (or a portion thereof) are derecognised when the Group
realises the rights to the benefits specified in the contract, the rights expire,
or the Group surrenders or otherwise loses control of the contractual rights
that comprise the financial asset. In derecognition, the difference between
the carrying amount of the financial asset and proceeds receivable and
any prior adjustment to reflect fair value that had been reported in other
comprehensive income are included in profit or loss. Financial liabilities (or
a portion thereof) are derecognised when the obligation specified in the
contract is discharged, cancelled or expires. On derecognition, the difference
between the carrying amount of the financial liability, including related
unamortised costs and the amount paid for it, are included in profit or loss.
Loans to (from) Group Companies
These include loans to subsidiaries, associates, share incentive trust
(accounted for as a subsidiary) and joint ventures and are recognised
initially at fair value plus direct transaction costs. Subsequently, these loans
are measured at amortised cost using the effective interest rate method,
less any impairment loss recognised to reflect irrecoverable amounts.
On loans receivable an impairment loss is recognised in profit or loss
when there is objective evidence that it is impaired. The impairment is
measured as the difference between the instrument’s carrying amount
and the present value of estimated future cash flows discounted at the
effective interest rate computed at initial recognition. Impairment losses
are reversed in subsequent periods when an increase in the instrument’s
recoverable amount can be related objectively to an event occurring after
the impairment was recognised, subject to the restriction that the carrying
amount of the instrument at the date the impairment is reversed shall not
exceed what the amortised cost would have been had the impairment
not been recognised. Loans to (from) Group companies are classified as
loans and receivables (financial liabilities at amortised cost).
Trade and Other Receivables
Trade receivables are measured at initial recognition at fair value plus
transaction costs, and are subsequently measured at amortised cost
using the effective interest rate method. Appropriate allowances for
estimated irrecoverable amounts are recognised in profit or loss when
there is objective evidence that the asset is impaired. The allowance
recognised is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows discounted
at the effective interest rate computed at initial recognition.
The carrying amount of the asset is reduced through the use of an
allowance account, and the amount of the loss is recognised in the
Statement of Comprehensive Income within operating expenses. When
a trade receivable is uncollectable, it is written off against the allowance
Integrated Annual Report 2014
77
account for trade receivables. Subsequent recoveries of amounts previously
written off are credited against operating expenses in the Statement of
Comprehensive Income.
Trade and other receivables are classified as loans and receivables.
Trade and Other Payables
Trade payables are initially measured at fair value less transaction costs,
and are subsequently measured at amortised cost, using the effective
interest rate method.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits,
and other short-term, highly liquid investments that are readily convertible
to a known amount of cash, and are subject to an insignificant risk of
changes in value. These are initially recognised at fair value including
transaction costs and subsequently measured at amortised cost using
the effective interest rate method. These instruments are classified as
loans and receivables.
Interest-bearing Liabilities
Interest-bearing liabilities are initially measured at fair value less transaction
cost, and are subsequently measured at amortised cost, which include
all interest-bearing liabilities, using the effective interest rate method.
Any difference between the proceeds (net of transaction costs) and the
settlement or redemption of borrowings is recognised over the term of
the borrowings in accordance with the Group’s accounting policy for
borrowing costs.
The dividends on these preference shares are recognised in the Statement
of Comprehensive Income as an interest expense.
Other financial liabilities are measured initially at fair value less transaction
cost and subsequently at amortised cost using the effective interest rate
method.
Derivatives
Derivative financial instruments, which are not designated as hedging
instruments, consist of foreign exchange contracts and are initially
measured at fair value on the contract date, and are re-measured to
fair value at subsequent reporting dates. Derivatives embedded in other
financial instruments or other non-financial host contracts are treated as
separate derivatives when their risks and characteristics are not closely
related to those of the host contract and the host contract is not carried
at fair value with unrealised gains or losses reported in profit or loss.
Changes in the fair value of derivative financial instruments are recognised
in profit or loss as they arise. Derivatives are classified as financial assets
or financial liabilities at fair value through profit or loss.
Hedge Accounting
The Group designates certain derivatives as either:
• Hedges of the fair value of recognised assets or liabilities or a firm
commitment (fair value hedge);
• Hedges of a particular risk associated with a recognised asset or
liability or a highly probable forecast transaction (cash flow hedge); or
• Hedges of a net investment in a foreign operation (net investment
hedge).
The Group documents, at the inception of the transaction, the relationship
between hedging instruments and hedged items, as well as its risk
management objectives and strategy for undertaking various hedging
transactions. The Group also documents its assessment, both at hedge
inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in
fair values or cash flows of hedged items.
The full fair value of a hedging derivative is classified as a non-current
asset or liability when the remaining maturity of the hedged item is more
than 12 months and as a current asset or liability when the remaining
maturity of the hedged item is less than 12 months.
Cash Flow Hedge
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion
is recognised immediately in the Statement of Comprehensive Income
within profit or loss.
The amount of gains/losses in other comprehensive income is reclassified
to profit or loss in the period when the hedged item affects profit or loss.
However, when the forecast transaction that is hedged results in the
recognition of a non-financial asset (for example, inventory or fixed assets)
the gains and losses previously deferred in the Statement of Comprehensive
Income are transferred from other comprehensive income and included
in the initial measurement of the cost of the asset. The deferred amounts
are ultimately recognised in cost of goods sold in case of inventory or in
depreciation in case of fixed assets.
If a legally enforceable right exists to set off recognised amounts of financial
assets and liabilities and there is an intention to settle net, the relevant
financial assets and liabilities are offset.
Where the impact of discounting is not considered to be material, financial
instruments carried at amortised costs are not discounted due to the fact
that their carrying values approximate amortised cost.
78
Accounting Policies (continued)
Inventory
Inventory is stated at the lower of cost and net realisable values. Cost is
determined on the first-in-first-out basis. Net realisable value is the estimated
selling price in the ordinary course of business less the estimated cost
of completion and the estimated cost necessary to make the sale. The
cost of inventories comprises all cost of purchase, cost of conversion and
other costs incurred in bringing the inventories to their present location
and condition.
Share Capital
An equity instrument is any contract that evidences a residual interest in
the assets of an entity after deducting all of its liabilities. Ordinary shares
are classified as equity. If the Group re-acquires its own equity instruments,
the consideration paid, including any directly attributable incremental costs
(net of income taxes) on those instruments is deducted from equity. No
gain or loss is recognised in profit or loss on the purchase, sale, issue or
cancellation of the Group’s own equity instruments. Consideration paid
or received shall be recognised directly in equity.
Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
Share-based Payment Transactions
Cash Settled
Options are granted to certain employees in the Group. The fair value of
the amount payable to the employee is recognised as an expense with a
corresponding increase in liabilities. The fair value is initially measured at
grant date using the Black-Scholes Model and expensed over the period
during which the employee becomes unconditionally entitled to payment.
Management assesses the number of options that will ultimately vest
based on non-market vesting conditions at each reporting period until
vesting, but the assessment of the fair value of the option against the
market performance of the share price, is done at each reporting period
end up to and including settlement date.
Share options that expire or are forfeited are reversed against the liability
raised with an adjustment to profit or loss. The fair value of the instruments
granted is measured against market performance of the share price. The
liability is measured at each reporting date and at settlement date, with all
movements in fair value being recognised in profit or loss.
Where options are issued that provide the holder the choice of settlement
(equity or cash) these are accounted for as a compound financial instrument.
First the fair value of the debt component is determined and then the
difference between the value of the compound instrument and the fair
value of the debt component is recognised as the equity component.
Equity Settled
Convertible 'A' class shares and options were issued in terms of a Black
Economic Empowerment Deal. The fair value of the equity instrument is
measured at grant date using the Black-Scholes Model and recognised as
an expense with corresponding increase in equity over the vesting period of
the share-based payment. Management reassesses the number of options
expected to ultimately vest based on non-market vesting conditions. The
impact of the revision to the original estimates, if any, is recognised in the
Statement of Comprehensive Income, with a corresponding adjustment
to equity. Proceeds received net of any directly attributable transaction
costs are credited to share capital and share premium when the options
are exercised. Subsequent to vesting, management no longer makes any
adjustments to the cost of the share-based payments recognised. Options
that expire or are forfeited, are removed from equity with a corresponding
adjustment to the Statement of Comprehensive Income.
Provisions
The amount of a provision is the present value of the expenditure
expected to be required to settle the obligation. Where some or all of the
expenditure required to settle a provision is expected to be reimbursed
by another party, the reimbursement shall be recognised when, and
only when, it is virtually certain that reimbursement will be received if
the entity settles the obligation. The reimbursement shall be treated as
a separate asset. The amount recognised for the reimbursement shall
not exceed the amount of the provision. Provisions are not recognised
for future operating losses.
If an entity has a contract that is onerous, the present obligation under
the contract shall be recognised and measured as a provision. The rate
applied to present value the expenditure is the pre-tax market related rate
adjusted for the risks associated with the obligation.
Provisions were raised and management determined an estimate based
on the information available. Additional disclosure of these estimates of
provisions are included in the provisions note.
Revenue Recognition
Revenue comprises all airline-related and non-airline revenue earned.
Revenue arising from the provision of transportation services to passengers
is recognised on an accrual basis in the period in which the services
are rendered and the passenger has flown. Unflown ticket revenue is
recognised as a liability until such time as the passenger has flown.
Revenue is measured at the fair value of consideration received and is
exclusive of VAT, discounts received and returns.
Revenue from sale of goods is recognised when risks and rewards transfer
and excludes value added tax.
Integrated Annual Report 2014
79
Non-airline revenue relates to services relating to the hiring of simulator
equipment, commission from airport lounges and the sale of holiday
packages.
International Loyalty Programme revenue is income received from BA
Executive Club members using the Group’s services, and is recognised
on the accrual basis in profit or loss.
Interest is recognised on the accrual basis, in profit or loss, using the
effective interest rate method. Dividends are recognised in profit or loss
when the Group’s right to receive payment has been established.
Taxation
Current tax and deferred taxes are recognised as income or an expense
and included in profit or loss for the period, except to the extent that the
tax arises from:
• A transaction or event which is recognised, in the same or a different
period, directly in other comprehensive income; or
• A business combination.
Current tax and deferred taxes are charged or credited directly to other
comprehensive income if the tax relates to items that are credited or
charged in the same or a different period, to other comprehensive income.
Current tax is calculated at rates (tax laws) enacted or substantively
enacted at reporting period end in accordance with the South African
Income Tax Act (Act No. 58 of 1962).
Deferred Taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the Financial
Statements and the corresponding tax basis used in the computation
of taxable profit, and is accounted for using the comprehensive liability
method. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it
is probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary differences arise from goodwill (or negative
goodwill) or from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction affecting neither the tax profit
or losses, nor the accounting profit or losses.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in
joint ventures, except where the Group is able to control the reversal of
the temporary differences and it is probable that the temporary difference
will not reverse in the foreseeable future. The carrying amount of deferred
tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available
to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates expected
to apply to the period when the asset is realised or the liability is settled,
based on the tax rates (and tax laws) enacted or substantively enacted
by the reporting date.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset are capitalised during the period of time
that is necessary to complete and prepare the asset for its intended use
or sale. Other borrowing costs are expensed in the period in which they
are incurred and reported in finance costs (see Note 18).
Foreign Currency
Foreign currency transactions are recorded at the exchange rate ruling
on the transaction dates. Monetary assets and liabilities denominated
in foreign currencies are translated at rates of exchange ruling at the
reporting date. Profits or losses arising on translation of foreign currency
transactions are included in profit or loss.
Non-monetary assets and liabilities are translated at the prevailing rate
at the date of acquisition. Exchange differences on non-monetary assets
classified as available for sale financial instruments are recognised as part
of the fair value movement in other comprehensive income. All foreign
exchange movements are recognised in profit or loss, unless they relate to
non-monetary assets classified as available for sale financial instruments
where that movement is then recognised in equity, or they form part of
the borrowing costs capitalised to qualifying assets.
Short-term Employee Benefits
The cost of short-term employee benefits (those payable within 12 months
after the service is rendered, such as paid vacation leave and bonuses),
are recognised in the period in which the service is rendered and are not
discounted. The expected cost of compensated absences is recognised as
an expense as the employees render services that increase their entitlement
or, in the case of non-accumulating absences, when the absence occurs.
The expected cost of profit sharing and bonus payments is recognised
as an expense when there is a legal or constructive obligation to make
such payments as a result of past performance.
Retirement and Medical Funds
Current contributions to the Group’s defined contribution retirement fund are
based on current salary and are recognised when they fall due. The Group
has no further payment obligations once the payments have been made.
80
Accounting Policies (continued)
Impairment
The Group assesses, at the end of each reporting period, whether there is
any indication that an asset may be impaired. If any such indication exists,
the Group estimates the recoverable amount of the asset.
Irrespective of whether there is any indication of impairment, the Group also:
• Tests goodwill acquired in a business combination for impairment
annually; and
• Tests intangible assets for impairment annually.
If there is any indication that an asset may be impaired, the recoverable
amount is estimated for the individual asset. If it is not possible to estimate
the recoverable amount of the individual asset, the recoverable amount
of the cash-generating unit to which the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is the higher
of its fair value less costs to sell and its value in use. If the recoverable
amount of an asset is less than its carrying amount, the carrying amount
of the asset is reduced to its recoverable amount. That reduction is an
impairment loss.
An impairment loss of assets carried at cost less any accumulated
depreciation or amortisation is recognised immediately in profit or loss.
Goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the cash-generating units, or groups of cash-generating
units, that are expected to benefit from the synergies of the combination.
An impairment loss is recognised for cash-generating units if the recoverable
amount of the unit is less than the carrying amount of the unit. The
impairment loss is allocated to reduce the carrying amount of the assets
of the unit in the following order:
• First, to reduce the carrying amount of any goodwill allocated to the
cash-generating unit; and
• Then, to the other assets of the unit, pro rata on the basis of the
carrying amount of each asset in the unit.
The Group assesses, at each reporting date, whether there is any indication
that an impairment loss recognised in prior periods for assets other than
goodwill may no longer exist or may have decreased. If any such indication
exists, the recoverable amounts of those assets are estimated.
The increased carrying amount of an asset other than goodwill attributable
to a reversal of an impairment loss does not exceed the carrying amount
that would have been determined had no impairment loss been recognised
for the asset in prior periods.
A reversal of an impairment loss of assets carried at cost less accumulated
depreciation or amortisation other than goodwill is recognised immediately
in profit or loss.
Accounting Estimates and Judgements
Sources of Estimation Uncertainty
In preparing the Annual Financial Statements, management is required to
make estimates and assumptions that affect the amounts represented in
the Annual Financial Statements and related disclosures. Use of available
information and the application of judgement is inherent in the formation
of estimates. Actual results in the future could differ from these estimates
which may be material to the Annual Financial Statements. Significant
judgements include:
Asset Lives and Residual Values
Property, plant and equipment are depreciated over their useful lives taking
into account residual values, where appropriate. The actual lives of the
assets and residual values are assessed at each reporting date and may
vary depending on a number of factors. In re-assessing asset lives, factors
such as technological innovation, product lifecycles and maintenance
programmes are taken into account. Residual value assessments consider
issues such as future market conditions, the remaining life of the asset
and projected disposal values.
Impairment
Future cash flows expected to be generated by the asset are projected,
taking into account market conditions and the expected useful lives of
the assets. The present value of these cash flows, determined using an
appropriate discount rate, is compared to the current asset value and, if
lower, the assets are impaired to the present value.
Loans and other receivables
The Group assesses its trade and other receivables for impairment at the
end of each reporting period. In determining whether an impairment loss
should be recorded in profit or loss, the Group makes judgements as to
whether there is observable data indicating a measurable decrease in the
estimated future cash flows from a financial asset.
Fair value estimation
The fair value of financial instruments that are not traded in an active
market is determined by using valuation techniques. The Group uses a
variety of methods and makes assumptions that are based on market
conditions existing at the end of each reporting period. Quoted market
prices or dealer quotes for similar instruments are used for long-term debt.
Other techniques, such as estimated discounted cash flows, are used to
determine fair value for the remaining financial instruments. The fair value
Integrated Annual Report 2014
81
of forward foreign exchange contracts is determined using quoted forward
exchange rates at the end of the reporting period.
The carrying value less impairment provision of trade and other receivables
is assumed to approximate their fair values as the instrument is short-term
in nature. The fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at the current
market interest rate that is available to the Group for similar financial
instruments.
Critical Judgements in Applying the Entity’s Accounting Policies
Judgements made by management are continually evaluated and are
based on historical experience and the expectation of future events that
are believed to be reasonable under the circumstances.
Borrowing Costs
Pre-delivery payment assets are regarded as qualifying assets for the
purpose of the capitalisation of borrowing costs. Exchange differences
arising from foreign currency borrowings, to the extent that they are
regarded as an adjustment to interest costs, are capitalised as part of
borrowing costs as these expenses are considered part of the cost of
borrowing in foreign currency.
Taxation
Judgement is required in determining the provision for income taxes
due to the complexity of legislation. There are many transactions and
calculations for which the ultimate taxation determination is uncertain
during the ordinary course of business. The Group recognises liabilities for
anticipated taxation audit issues based on estimates of whether additional
taxes will be due. Where the final taxation outcome of these matters is
different from the amounts that were initially recorded, such differences
will impact the income taxation and deferred taxation provisions in the
period in which such determination is made.
Recovery of Deferred Tax Assets
The Group recognises the net future taxation benefit related to deferred
income taxation assets to the extent that it is probable that the deductible
temporary differences will reverse in the foreseeable future. Assessing
the recoverability of deferred income taxation assets requires the Group
to make significant estimates related to expectations of future taxable
income. Estimates of future taxable income are based on forecast cash
flows from operations and the application of existing taxation laws in
each jurisdiction. To the extent that future cash flows and taxable income
differ significantly from estimates, the ability of the Group to realise the
net deferred taxation assets recorded at the end of the reporting period
could be impacted.
Management has applied a probability analysis to determine future taxable
income against which calculated tax losses will be utilised.
Segmental Information
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker (Financial Director).
The chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the segments, has been identified
as the Chief Executive Officer. Segments are presented in terms of IFRS.
At year end, the Group was organised into two main operating segments:
1. Airline; and
2. Non-airline, which comprises the travel business, property investments,
simulator business and Slow in the City.
82
Notes to the Annual Financial Statementsfor the year ended 30 June 2014
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
1. Property, Plant and Equipment
Property and buildings
Cost 92,811 92,716 41,786 41,691
Accumulated depreciation (7,473) (6,724) (7,473) (6,724)
Carrying value 85,338 85,992 34,313 34,967
Leasehold improvements
Cost 63,266 52,930 63,266 52,930
Accumulated depreciation (33,961) (23,076) (33,961) (23,076)
Carrying value 29,305 29,854 29,305 29,854
Aircraft and flight simulator equipment
Cost 3,319,371 3,040,961 3,319,371 3,040,961
Accumulated impairment (30,559) (30,559) (30,559) (30,559)
Accumulated depreciation (1,105,393) (855,473) (1,105,393) (855,473)
Carrying value 2,183,419 2,154,929 2,183,419 2,154,929
Vehicles, furniture and equipment and computer equipment
Cost 84,308 80,567 84,096 79,606
Accumulated depreciation (67,668) (61,828) (67,651) (61,457)
Carrying value 16,640 18,739 16,445 18,149
Pre-delivery payments 230,331 24,568 230,331 24,568
Total property, plant and equipment and pre-delivery payments 2,545,033 2,314,082 2,493,813 2,262,467
Reconciliation of Carrying Value
Property and buildings
Carrying value at the beginning of the year 85,992 101,528 34,967 48,960
Additions 95 73 95 73
Transfer to leasehold improvements - (13,756) - (13,756)
Depreciation (749) (1,853) (749) (310)
Carrying value at the end of the year 85,338 85,992 34,313 34,967
Leasehold improvements
Carrying value at the beginning of the year 29,854 27,036 29,854 27,036
Additions 10,336 359 10,336 359
Transfer from property and buildings - 13,756 - 13,756
Depreciation (10,885) (11,297) (10,885) (11,297)
Carrying value at the end of the year 29,305 29,854 29,305 29,854
Integrated Annual Report 2014
83
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Aircraft and flight simulator equipment
Carrying value at the beginning of the year 2,154,929 856,595 2,154,929 856,595
Additions 290,359 1,091,944 290,359 1,091,944
Transfer from pre-delivery payments - 414,289 - 414,289
Depreciation (261,869) (207,899) (261,869) (207,899)
Carrying value at the end of the year 2,183,419 2,154,929 2,183,419 2,154,929
Vehicles, furniture, equipment and computer equipment
Carrying value at the beginning of the year 18,739 27,473 18,149 26,553
Additions 4,776 1,429 4,564 1,429
Depreciation (6,875) (10,163) (6,268) (9,833)
Carrying value at the end of the year 16,640 18,739 16,445 18,149
Pre-delivery payments
Carrying value at beginning of the year 24,568 419,877 24,568 419,877
Payments made 205,483 - 205,483 -
Capitalised as part of aircraft - (414,289) - (414,289)
Borrowing costs capitalised 280 18,980 280 18,980
Interest capitalised 1,490 3,438 1,490 3,438
Foreign exchange (gains) losses capitalised (1,210) 15,542 (1,210) 15,542
Carrying value at the end of year 230,331 24,568 230,331 24,568
Total property, plant and equipment 2,545,033 2,314,082 2,493,813 2,262,467
Property and buildings owned consist of Erf 1092 and 1096 Bonaero Park extension 2, Erf 931, Bonaero Park extension 1, Erf 700, Rhodesfield Township,
and Erven 674, 684, 685, 687, 688, 689, 690, 695 and Erf 1040, Rhodesfield Township. Valuations of the properties are performed every three years,
and based on this the estimated Directors’ value of these properties is approximately R129 million (2013: R129 million).
The net book value of property, plant and equipment held under instalment sale and finance lease agreements are disclosed in Note 11.
Pre-delivery payments are payments made to the Boeing Company for the remaining four (4) of eight (8) new Boeing 737-800 aircraft which arrived
in South Africa from July 2012. The finance for the aircraft was partly through a rights issue during the 2010 financial year and a further loan through
Investec Limited which is disclosed in Note 11. Future capital commitments relating to the Boeing 737-800s are disclosed in Note 27. Borrowing costs
capitalised to the pre-delivery payments were incurred at a rate of 3.7% on a US Dollar-based facility concluded in 2012.
84
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
2. Intangible Assets
Computer software
Cost 51,844 51,844 51,844 51,844
Accumulated amortisation (20,738) (10,369) (20,738) (10,369)
Carrying value 31,106 41,475 31,106 41,475
Reconciliation of Carrying Value
Computer software
Carrying value at the beginning of the year 41,475 51,515 41,475 51,515
Additions - 329 - 329
Amortisation (10,369) (10,369) (10,369) (10,369)
Carrying value at the end of the year 31,106 41,475 31,106 41,475
The intangible asset relates to the implementation of SABRE Airline Solutions, which was fully operational in the 2012 financial year. The remaining period of amortisation is three years.
3. Loan to Share Incentive Trust
This loan relates to the Comair Share Incentive Trust's acquisition of 21 million ordinary shares at 72 cents per share in June 1998. The term of the loan is unspecified and it bears no interest.
At year end the Trust held 4,992,531 shares representing 1.1% of shares in issue (prior year: 5,525,864 shares representing 1.1%) at a closing price of 448c (prior year: 265c).
- - 3,814 5,337
4. Investments in and Loans to Subsidiaries
Non-current portion
4.1 Aconcagua 32 Investments (Proprietary) Limited1 ordinary share of R1 at cost (100% shareholding)
Investment at cost - - 16,732 16,732
Loan receivable - - 2,527 5,866
The company is the owner of Erf 700, Rhodesfield Township. This is the only asset in its books, valued at R22 million. There are no material liabilities in this company. The share in the company was acquired during May 2008. The loan is interest free and not repayable in the next 12 months.
Integrated Annual Report 2014
85
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
4.2 Holiday Tours (Proprietary) Limited1 million shares of 1 cent each at cost (100% shareholding)
The Group acquired 65% of the issued share capital in the 2011 financial year. In December 2011, the remaining 35% shareholding was acquired at a cost of R35,000. The company is a tour operating company offering holiday packages.
Investment at cost - - 2,593 2,593
4.3 Churchill Finance Services 23 Limited2 shares of US$1 at cost (100% shareholding)
Comair Limited acquired 100% of the shares in Churchill Finance Services 23 Limited during February 2011 for R10,000.
The company is currently being liquidated.
Investment at cost - - 10 10
Total non-current portion - - 21,862 25,201
Current portion
4.4 Alooca Technologies (Proprietary) Limited100 ordinary shares of R1 at cost (100% shareholding)
Loan receivable - - 27,517 28,212
The company acquired Erven 674, 684, 685, 687, 688, 689, 690, 695 and 1040 in Rhodesfield Township with funding from Comair Limited. The properties at cost are valued at R30.8 million (2013: R30.8 million).
The loan is unsecured, has no fixed repayment terms and is interest free.
4.5 Amber (Proprietary) Limited1 ordinary share of R1 at cost (100% shareholding)
The company is currently being liquidated.
86
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
4.6 Kulula Air (Proprietary) Limited100 ordinary shares of R1 at cost (100% shareholding)
This company operates a business lounge situated opposite the Gautrain Station in Sandton. The lounge commenced operations in August 2011.
Assets were transferred to the building during the prior year as leasehold improvements as reflected in Note 1.
Loan receivable - - 3,823 3,290
The loan is unsecured, has no fixed repayment terms and is interest free.
4.7 Comair Catering (Proprietary) Limited100 ordinary shares of R1 at cost (100% shareholding)
This dormant company has a bank account which has been funded by Comair Limited.
Loan receivable - - 13 11
The loan is unsecured, has no fixed repayment terms and is interest free.
Total current portion - - 31,353 31,513
Total investment in subsidiaries - - 53,215 56,714
Maximum amount exposed to credit risk 33,880 37,368
5. Investment in and Loans to Associates
Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interests in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
The following table lists the associates in the Group.
Ownership %Commuter Handling Services (Proprietary) Limited held by Comair Limited 40% 40% 40% 40% Imperial Air Cargo (Proprietary) Limited held by Comair Limited 30% 30% 30% 30% Protea Hotel ORT (Proprietary) Limited held by Aconcagua 32 (Proprietary) Limited 25% 25% 25% 25% Comair Mozambique Limitada held by Comair Limited 49% 49% 49% 49% Online World Travel 24 (Proprietary) Limited held by Comair Limited 49% 49% 49% 49%
4. Investments in and Loans to Subsidiaries (continued)
Integrated Annual Report 2014
87
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Carrying Value
Commuter Handling Services (Proprietary) Limited 10,104 8,623 7,852 7,852
Imperial Air Cargo (Proprietary) Limited - - - -
Protea Hotel ORT (Proprietary) Limited 4,360 1,279 - -
Comair Mozambique Limitada - - - -
Online World Travel 24 (Proprietary) Limited - - - -
The summarised financial information in respect of the Group's associates are set out below.
5.1 Commuter Handling Services (Proprietary) Limited
Statement of Comprehensive Income
Revenue 203,236 192,820
Total comprehensive income 3,703 2,240
Statement of Financial Position
Assets
Property plant and equipment 4,687 6,903
Deferred tax 4,554 6,907
Net current assets 8,642 213
17,883 14,023
Equity and liabilities
Capital and reserves (1,908) (5,611)
Borrowings 19,791 19,634
17,883 14,023
Reconciliation to carrying amounts:
Loan to associate 7,852 7,852 7,852 7,852
Group share of retained income (763) (2,244)
Goodwill 3,015 3,015
Total carrying value 10,104 8,623
Opening net assets (5,611) (7,851)
Comprehensive income 3,703 2,240
Closing net assets (1,908) (5,611)
Commuter Handling Servies (Proprietary) Limited provides passenger handling services to airlines at ACSA-based airports and is incorporated in South Africa and has a June year-end.
88
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
5.2 Imperial Air Cargo (Proprietary) Limited
Statement of Comprehensive Income
Revenue 167,826 181,993
Total comprehensive income 7,450 13,000
Statement of Financial Position
Assets
Property, plant and equipment 813 1,257
Deferred tax 2,909 126
Net current assets 26,278 17,663
30,000 19,046
Equity and liabilities
Capital and reserves (43,257) (50,707)
Equity loan 35,537 36,305
Borrowings 37,720 33,448
30,000 19,046
Reconciliation to carrying amounts:
Loan to associate 15,559 15,559 15,559 15,559
Loan impairment (2,582) (4,817) (15,559) (15,559)
Group share of accumulated loss (12,977) (10,742)
Total carrying value - -
Opening net assets (50,707) (63,707)
Comprehensive income 7,450 13,000
Closing net assets (43,257) (50,707)
Imperial Air Cargo (Proprietary) Limited has a June year-end.This associate is a company in the air freight industry.
5. Investment in and Loans to Associates (continued)
Integrated Annual Report 2014
89
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
5.3 Protea Hotel ORT (Proprietary) Limited
Statement of Comprehensive Income
Revenue 22,251 22,151
Total comprehensive income 12,324 10,608
Statement of Financial Position
Assets
Property, plant and equipment 112,437 117,953
Net current assets 8,205 13,082
120,642 131,035
Equity and liabilities
Capital and reserves 17,439 5,115
Deferred tax 7,703 4,513
Borrowings 95,500 121,407
120,642 131,035
Reconciliation to carrying amounts:
Group share of retained income 4,360 1,279
Total carrying value 4,360 1,279
Opening net assets 5,115 (5,493)
Comprehensive income 12,324 10,608
Closing net assets 17,439 5,115
Protea Hotel ORT (Proprietary) Limited has a June year-end.This associate is a branded Protea Hotel.
Non-current portion 6,612 2,050 - -
Current portion 7,852 7,852 7,852 7,852
Total investment and maximum credit risk exposure 14,464 9,902 7,852 7,852
The maximum credit exposure for the Company and Group amount to R23,411,000 (2013: R23,411,000). In the current year an amount of R2,582,000 (2013: R4,817,000) in the Group and R15,559,000 (2013: R15,559,000) in the Company was provided against the loan. The balance of the loans receivable is considered to be recoverable and not past due.
90
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
6. GoodwillGross amount 3,668 3,668
Carrying value 3,668 3,668
The recoverable amount of goodwill has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. A growth rate of 7% and a pre-tax discount rate of 25% was used. As a result of the acquisition of Holiday Tours (Proprietary) Limited, the Group’s footprint in Africa has been enhanced and the synergies that the Group will add has resulted in the recognition of goodwill. No impairment has occurred in the current financial year. The goodwill relates to the travel business that is part of the non-airline business.
7. InventoryCatering equipment and consumables 7,608 7,086 7,608 7,086
7,608 7,086 7,608 7,086
8. Trade and Other ReceivablesTrade receivables 351,750 347,933 336,580 326,410
Impairment allowance (1,096) (3,030) (1,096) (3,030)
350,654 344,903 335,484 323,380
Deposits 140,716 35,827 140,716 35,827
Other receivables 31,856 39,926 31,856 39,926
523,226 420,656 508,056 399,133
Maximum exposure to credit risk 350,654 372,077 335,061 350,554
The standard credit period is 30 days from statement. The average age of the receivables is 31 days. Only customers with whom the Group has a long-standing relationship have access to credit. New customers are rare as the Group prefers selling air tickets for cash rather than on credit.
Included in the Group’s trade receivables balance are debtors with a carrying value of R4.0 million (prior year: R6.4 million) which are past due at the reporting date for which the Group has not provided an impairment as the amounts are still considered recoverable.
Ageing of past due but not impaired trade receivables
120 days - 2,403 2,994 2,403 2,994
120 days + 1,640 3,425 1,640 3,425
4,043 6,419 4,043 6,419
Integrated Annual Report 2014
91
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Ageing of impairment trade receivables
120 days - - - - -
120 days + 1,096 3,030 1,096 3,030
1,096 3,030 1,096 3,030
Reconciliation of impairment allowance
Opening balance 3,030 - 3,030 -
Provision impairment raised - 3,030 - 3,030
Reversal during the period (1,934) - (1,934) -
1,096 3,030 1,096 3,030
9. Cash Encumbered
The Group has pledged cash totalling R20 million (prior year: R20 million)
in respect of aircraft lease obligations.
10. Share CapitalAuthorised:
1,000,000,000 ordinary shares of 1 cent each 10,000 10,000 10,000 10,000
75,000,000 A Class shares of 1 cent each 750 750 750 750
10,000,000 'N' ordinary shares of 1 cent each 100 100 100 100
1,000,000 preference shares of 1 cent each 10 10 10 10
10,860 10,860 10,860 10,860
Issued:
489,176,471 ordinary shares of 1 cent each 4,892 4,892 4,892 4,892
Repurchase of 10% of share capital (48,913,372 ordinary shares of 1 cent each) (489) - (489) -
74,117,647 'A' Class shares of 1 cent each 741 741 741 741
Adjustment in respect of consolidation of Share Trust 4,992,531 (2013: 5,525,864) (50) (55) - -
5,094 5,578 5,144 5,633
At a general meeting of the Group held on 14 September 2006, shareholders approved by way of various special resolutions the creation, specific issue
and re-purchase of the 'A' shares, as well as the dividend and voting policy relating to those shares. The 'A' shares will be converted to equity if the
hurdle rate is achieved. The hurdle rate is set out as per the circular issued on the 23 August 2006. Refer to Note 17 below. The 'A' shares shall vote as
a single class at all meetings of shareholders of the Group, save for resolutions of the Group relating to the rights and privileges of the 'A' shares such
that the holders of the 'A' shares shall not be entitled to vote or approve any resolution that would otherwise have been passed or not by the required
majority of votes, collectively, of the holders of the ordinary shares and the 'A' shares (other than resolutions relating to the rights and privileges of the 'A'
shares). The 'A' shares will not be listed on the JSE and will not be taken into account for the purposes of categorisation transactions under the JSE
Listings Requirements. The 'A' shares will not be listed on any security exchange, but are convertible into ordinary shares on a ‘one-for-one’ basis and
are not entitled to dividends and voting rights.
92
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
11. Interest-bearing Liabilities
Rand Merchant BankAircraft instalment sale agreements
Instalment sale agreement payable in 40 quarterly instalments with the final payment due on 12 October 2022. Interest is charged at a variable rate – currently 7.1% (prior year: 6.4%). The current instalment is R13 million. 276,232 308,445 276,232 308,445
Less: Finance raising fees (12,224) (13,675) (12,224) (13,675)
One aircraft mortgage serves as collateral covering security with a net book value of R333 million (prior year: R348 million).
Instalment sale agreement payable in 40 quarterly instalments with the final payment due on 12 October 2022. Interest is charged at a variable rate – currently 7.1% (prior year: 6.4%). The current instalment is R13 million. 276,193 308,391 276,193 308,391
Less: Finance raising fees (12,114) (13,568) (12,114) (13,568)
One aircraft mortgage serves as collateral covering security with a net book value of R329 million (prior year: R342 million).
Instalment sale agreement payable in 41 quarterly instalments with the final payment due on 12 July 2022. RMB has entered into a selldown agreement with Nedbank for this loan. Interest is charged at a variable rate – currently 7.1% (prior year: 6.4%). The current instalment is R12 million. 254,909 285,588 254,909 285,588
Less: Finance raising fees (11,278) (12,659) (11,278) (12,659)
One aircraft mortgage serves as collateral covering security with a net book value of R303 million (prior year: R317 million).
Simulator loan
Instalment sale agreement payable in 30 quarterly instalments with the final payment due on 8 June 2018. Interest is charged at a variable rate – currently 9.6% (prior year 9.0%). The current instalment is R3.1 million. A Boeing 737-800 simulator serves as collateral covering security with a net book value: R50 million (prior year: R54 million). 34,909 43,609 34,909 43,609
Private Export Funding CorporationAn US Dollar-based aircraft instalment sale agreement payable in 40 quarterly instalments with the final payment due on 15 November 2022. Interest is charged at a fixed rate of 2.275%. The current instalment is US$1 million. 331,452 352,976 331,452 352,976
Less: Finance raising fees (12,438) (13,916) (12,438) (13,916)
One aircraft mortgage serves as collateral covering security with a net book value of R338 million (prior year: R354 million).
Integrated Annual Report 2014
93
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Investec Limited
Mortgage finance agreement
This loan is payable in 28 quarterly instalments with the final payment due on 30 September 2019. Erf 700, Rhodesfield Township, has been pledged as collateral for this mortgage finance agreement. A mortgage bond of R25.9 million has been registered against this property. Interest is charged at a variable rate – currently 9.5% (prior year: 8.9%). The current instalment is R1.3 million. 19,425 23,142 19,425 23,142
Working capital loan
This loan is unsecured and is payable in 20 quarterly instalments with the final payment due on 30 September 2013. Interest was charged at a variable rate of 7.6%. The current instalment is R1.7 million. This agreement was settled in full on 30 September 2013. - 1,655 - 1,655
Working capital loan
This loan forms part of a facility granted by the bank. Cross-colatarisation of properties serves as security for this loan. There are no repayment terms and interest is charged quarterly at a variable rate – currently 9.3%. 120,463 - 120,463 -
Boeing 737-800
A facility for pre-delivery payments required for four new 737-800 aircraft on order. Cross-colatarisation of other Investec loans stand as security for this loan. The facility is repayable on delivery of the relevant aircraft. The facility is in US Dollar and earns a variable interest rate payable quarterly – currently 4.0%. The aircraft will be delivered between August 2015 and November 2016. 54,213 - 54,213 -
Sub-total 1,319,742 1,269,988 1,319,742 1,269,988
Less: current portion (136,670) (136,221) (136,670) (136,221)
Non-current portion 1,183,072 1,133,767 1,183,072 1,133,767
Total value of interest bearing liabilities 1,319,742 1,269,988 1,319,742 1,269,988
Finance charges 279,114 326,546 279,114 326,546
Total interest-bearing liability commitments 1,598,856 1,596,534 1,598,856 1,596,534
Total commitments for year one 201,527 205,043 201,527 205,043
Total commitments for year two to five 867,027 740,447 867,027 740,447
Total commitments after year five 530,302 651,044 530,302 651,044
Allocation of present valued amounts 1,319,742 1,269,988 1,319,742 1,269,988
Capital commitments for year one 136,670 136,221 136,670 136,221
Capital commitments for year two to five 689,623 513,505 689,623 513,505
Capital commitments after year five 493,449 620,262 493,449 620,262
94
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
12. Deferred Taxation
On temporary differences arising from:Property, plant and equipment 269,507 217,629 269,507 217,629 Staff obligations and accruals (63,390) (60,029) (63,390) (60,029)Unflown ticket liability (48,060) (33,315) (48,060) (33,315)Prepayments 9,632 11,411 11,169 12,393
167,689 135,696 169,226 136,678
Deferred taxation reconciliationOpening balance 135,696 99,039 136,678 99,241 Deferred taxation – current 31,993 36,657 32,548 37,437 Closing balance 167,689 135,696 169,226 136,678
There are no unrecognised deferred taxation assets or losses.
13. Trade and Other PayablesTrade payables 1,039,856 802,754 1,017,927 780,263 Cash-settled, share-based payment - - - -Share options granted to employees 21,666 4,250 21,666 4,250 Recognised as long-term portion (21,666) (4,250) (21,666) (4,250)Unflown ticket liability 270,391 217,729 270,391 217,729 Other 36,315 38,027 36,315 38,027
1,346,562 1,058,510 1,324,633 1,036,019
Trade creditor terms vary, depending on the agreements. An average of 30 days from statement is fair. Average days outstanding is 37 days.
Cash-settled, share-based payment – share options are granted to certain employees in the Group. The fair value of the amount payable to the employee is recognised as an expense with a corresponding increase in liabilities. This is a long-term liability and will be paid in the future.
Unflown ticket liability is all monies received from passengers prior to reporting period and relating to flights not yet flown.
14. ProvisionsLeave pay provision 48,128 43,994 48,128 43,994 Opening balance 43,994 41,952 43,994 41,952 - Raised 15,305 13,025 15,305 13,025 - Utilised (11,171) (10,983) (11,171) (10,983)
Bonus provision 51,591 72,218 51,591 72,218 Opening balance 72,218 31,142 72,218 31,142 - Raised 68,258 85,943 68,258 85,943 - Utilised (88,885) (44,867) (88,885) (44,867)
99,719 116,212 99,719 116,212
In terms of Comair’s policy, employees are entitled to accumulate vested leave benefits not taken within a leave cycle. Leave days have been capped,
depending on the level of employment of the employees.
Integrated Annual Report 2014
95
The bonus scheme consists of performance bonuses which are dependent on the achievement of financial and non-financial targets. Bonuses are
payable annually in December for all staff other than Executives. Executive bonuses are paid in July.
15. Financial Risk Management and Financial Instruments
The Group finances its operations through a mixture of accumulated profits, current borrowings and non-current borrowings. The Group also enters into
Forward Exchange Contracts to manage the currency risks of its operations. The main risks arising in the normal course of business from the Group’s
financial instruments are currency, interest rate, credit and liquidity risk. This note presents information on the Group’s exposure to these risks. The Board
of Directors is responsible for risk management activities in the Group. The carrying values equate to the fair values of each financial instrument.
The carrying value of short-term financial instruments approximate fair value due to their short-term nature, and all interest-bearing financial liabilities
carried at amortised cost bear interest at market-related rates. Hence the carrying values of these financial instruments equate to their fair values.
Identification of Financial Instruments
Fair value
At fair value through
profit (loss) Loans and
Receivables
Financial liabilities
at amortised cost
Non-financial instruments Total
R’000 R’000 R’000 R’000 R’000 R’000
2014AssetsNon-current assetsProperty, plant and equipment - - - - 2,545,033 2,545,033 Intangible assets - - - - 31,106 31,106 Investments in associates - - - - 6,612 6,612 Goodwill - - - - 3,668 3,668
Current assetsInventories - - - - 7,608 7,608 Trade and other receivables 350,654 - 350,654 - 172,572 523,226 Investments in and loans to associates 7,852 - 7,852 - - 7,852 Taxation - - - - 30,540 30,540 Cash and cash equivalents 867,703 - 867,703 - - 867,703 Total assets 1,226,209 - 1,226,209 - 2,797,139 4,023,348
Equity and LiabilitiesCapital and reservesShare capital - - - - 5,094 5,094 Non-distributable reserves - - - - 27,424 27,424 Accumulated profit - - - - 1,035,452 1,035,452
Non-current liabilitiesInterest-bearing liabilities 1,183,072 - - 1,183,072 - 1,183,072 Deferred taxation - - - - 167,689 167,689 Share-based payments - - - - 21,666 21,666
Current liabilitiesTrade and other payables 1,076,171 - - 1,076,171 270,391 1,346,562 Provisions - - - - 99,719 99,719 Interest-bearing liabilities 136,670 - - 136,670 - 136,670 Total liabilities 2,395,913 - - 2,395,913 1,627,435 4,023,348
96
Notes to the Annual Financial Statements (continued)
Fair value
At fair value through
profit (loss) Loans and
Receivables
Financial liabilities
at amortised cost
Non-financial instruments Total
R’000 R’000 R’000 R’000 R’000 R’000
2013
Assets
Non-current assets
Property, plant and equipment - - - - 2,314,082 2,314,082
Intangible assets - - - - 41,475 41,475
Investments in and loans to associates - - - - 2,050 2,050
Goodwill - - - - 3,668 3,668
Current assets
Inventories - - - - 7,086 7,086
Trade and other receivables 372,077 - 372,077 - 48,579 420,656
Investments in associates 7,852 - 7,852 - - 7,852
Taxation - - - - 30,942 30,942
Cash and cash equivalents 778,045 - 778,045 - - 778,045
Total assets 1,157,974 - 1,157,974 - 2,447,882 3,605,856
Equity and Liabilities
Capital and reserves
Share capital - - - - 5,578 5,578
Share premium - - - - 123,631 123,631
Non-distributable reserves - - - - 23,996 23,996
Accumulated profit - - - - 867,995 867,995
Non-current liabilities
Interest-bearing liabilities 1,133,767 - - 1,133,767 - 1,133,767
Deferred taxation - - - - 135,696 135,696
Share-based payments - - - - 4,250 4,250
Current liabilities
Trade and other payables 840,781 - - 840,781 217,729 1,058,510
Provisions - - - - 116,212 116,212
Interest-bearing liabilities 136,221 - - 136,221 - 136,221
Total liabilities 2,110,769 - - 2,110,769 1,495,087 3,605,856
Financial assets are substantially the same for the Group and the Company, however loans to subsidiaries amount to R37.3 million (2013: R37.3 million)
and are classified as loans and receivables.
Financial liabilities are substantially the same for the Group and the Company.
Interest Rate Risk
The Group is exposed to interest rate risk as it borrows and places funds. This risk is managed by managing the Group’s exposures on long-term loans
and placing surplus funds in investments that yield a market-linked return.
15. Financial Risk Management and Financial Instruments (continued)
Integrated Annual Report 2014
97
Management reviews the interest rate risk on an ongoing basis. Where new loans are entered into, management compares interest rates offered by
various institutions and where considered more favourable, may enter into loans in foreign currency. The interest rate risk is viewed in conjunction with
the foreign exchange risk.
The Group, as part of its financing activities, enters into foreign denominated interest-bearing loans. The foreign exchange rate exposure is monitored
by management in conjunction with the interest rate exposure which would have been incurred had a Rand-denominated loan been taken out. Refer
to sensitivity analysis below.
Credit Risk
Credit risk relates to the potential of non-recovery of bank and call deposits and loans and trade receivables. At the reporting date, the Group did not
consider there to be any significant concentration of credit risk which has not been adequately provided for.
Liquidity Risk
The liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by monitoring
forecast cash flows and ensuring that adequate cash resources and unutilised borrowing facilities are maintained.
Maturity profile of financial liabilities at 30 June 2014
Carrying amount
Contractual cash flows
Within one year
Two to five years
More than five years
No fixed terms
Group R’000 R’000 R’000 R’000 R’000 R’000
2014
Secured non-current borrowings 1,183,072 1,397,329 - 867,027 530,302 -
Secured short-term borrowings 136,670 201,527 201,527 - - -
Trade and other payables 1,076,171 1,076,171 1,076,171 - - -
Total financial liabilities – Group and Company 2,395,913 2,675,027 1,277,698 867,027 530,302 -
Total financial assets – Group 1,232,821 1,232,821 1,218,357 - - 14,464
2013
Secured non-current borrowings 1,133,767 1,391,491 - 740,447 651,044 -
Secured short-term borrowings 136,221 205,043 205,043 - - -
Trade and other payables 840,781 840,781 840,781 - - -
Total financial liabilities – Group and Company 2,110,769 2,437,315 1,045,824 740,447 651,044 -
Total financial assets – Group 1,147,527 1,147,527 1,137,625 - - 9,902
Foreign Currency Risk
The Group undertakes certain transactions denominated in foreign currency, which therefore have exposure to exchange rate variations. The Group
may enter into forward exchange contracts to manage exchange rate exposure. Where appropriate, open positions are maintained. The Group does
not speculate in derivative instruments and all foreign exchange contracts are supported by underlying transactions.
Approximately 48% of operating costs are incurred and approximately 30% of revenue is based in foreign currency. The following uncovered foreign
currency amounts are included in the Financial Statements at year end: net short-term liabilities of US$6,774,987 (2013: US$4,294,324) and GBP1,480,062
(2013: GBP1,027,964) and net short term receivables of GBP3,993,836 (2013: GBP5,820,456).
The Group, as part of its financing activities, enters into foreign denominated interest-bearing loans. The foreign exchange rate exposure is monitored
by management in conjunction with the interest rate exposure which would have been incurred had a Rand-denominated loan been taken out.
98
Notes to the Annual Financial Statements (continued)
Sensitivity Analysis
The sensitivity analysis below calculates the impact of movements in the foreign exchange rates in which the Group transacts as well as in interest rates
on the Group’s profits. The analysis is based on closing balances at year end.
Foreign exchange risk profit (loss) should the Rand exchange rate
change by 5%
Interest rate riskprofit (loss) should the interest rate
change by 2%
Group Carrying
value
Amount exposed to
risk Rand
appreciation Rand
depreciation
Amount exposed to
risk Rate
increase Rate
decrease
2014
Financial asset R'000
Cash and cash equivalents 867,703 285,754 (14,288) 14,288 867,703 17,354 (17,354)
Trade and other receivables 350,654 70,148 (3,507) 3,507
Impact of financial assets on:
- profit before tax - - (17,795) 17,795 - 17,354 (17,354)
- profit after tax - - (12,812) 12,812 - 12,495 (12,495)
Financial liabilities R'000
Interest-bearing liabilities 1,319,742 331,452 - - 1,319,742 (26,395) 26,395
Trade and other payables 1,076,171 323,062 16,153 (16,153) - - -
Impact of financial liabilities on:
- profit before tax - - 16,153 (16,153) - (26,395) 26,395
- profit after tax - - 11,630 (11,630) - (19,004) 19,004
Overall impact on profit after taxation - - (1,182) 1,182 - (6,509) 6,509
Interest and related foreign currency amounts incurred on account of aircraft and other qualifying assets under construction are capitalised and added
to the asset concerned and therefore do not affect profit or loss.
The movements are recognised in other comprehensive income until such time as the other qualifying asset is complete and the aircraft has been
delivered and recognised, in which case these amounts are no longer recognised and are expensed in profit or loss when incurred. The effect of a 5%
movement in foreign exchange would be Rnil (2013: Rnil) and of a 2% interest rate adjustment would be Rnil (2013: Rnil).
The effect of the movement in the interest rate was only calculated for the estimated period that the loan will be outstanding.
15. Financial Risk Management and Financial Instruments (continued)
Integrated Annual Report 2014
99
Foreign exchange risk profit (loss) should the Rand exchange rate
change by 5%
Interest rate riskprofit (loss) should the interest rate
change by 2%
Group Carrying
value
Amount exposed to
risk Rand
appreciation Rand
depreciation
Amount exposed to
risk Rate
increase Rate
decrease
2013
Financial asset R'000
Cash and cash equivalents 778,045 222,605 (11,130) 11,130 778,045 15,561 (15,561)
Trade and other receivables 372,077 9,075 (454) 454
Impact of financial assets on:
- profit before tax - - (11,584) 11,584 - 15,561 (15,561)
- profit after tax - - (8,340) 8,340 - 11,204 (11,204)
Financial liabilities R'000
Interest-bearing liabilities 1,269,988 352,976 - - 1,269,988 (25,400) 25,400
Trade and other payables 840,781 234,994 11,750 (11,750) - - -
Impact of financial liabilities on:
- profit before tax - - 11,750 (11,750) - (25,400) 25,400
- profit after tax - - 8,460 (8,460) - (18,288) 18,288
Overall impact on profit after taxation - - 119 (119) - (7,084) 7,084
Capital Risk Management
The Group’s objectives when managing capital is to safeguard the entity’s ability to continue as a going concern.
The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in the light of changes
in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust
the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.
The Group monitors capital on the basis of the debt-to-adjusted-capital ratio. This ratio is calculated as net debt divided by adjusted capital. Net debt
is calculated as total interest-bearing debt (as shown in the Statement of Financial Position) less cash and cash equivalents. Adjusted capital comprises
all components of equity (i.e. ordinary shares, share premium, accumulated profits and other reserves).
The debt-to-adjusted capital ratios at 30 June 2014 and 2013 were as follows:
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Total liabilities, excluding deferred taxation 2,787,689 2,448,960 2,765,760 2,426,469
Less: Cash and cash equivalents (867,703) (778,045) (858,118) (766,628)
Net debt 1,919,986 1,670,915 1,907,642 1,659,841
Adjusted equity 1,067,970 1,021,200 1,057,595 1,014,103
Adjusted-capital ratio 1.80:1 1.64:1 1.80:1 1.64:1
100
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
16. Revenue 6,282,219 5,386,581 6,224,285 5,366,240
Flight revenue 5,722,816 5,115,761 5,722,816 5,115,761
Service-based 136,769 122,571 126,715 112,394
Commission-based 413,190 141,640 365,310 131,476
Other 9,444 6,609 9,444 6,609
17. Profit from OperationsOperating expenses are stated after incorporating the following items:
Audit fees 670 656 670 656
Managerial, technical, administrative and secretarial services 55,583 21,435 55,583 21,435
Directors' emoluments (included in total staff costs) 35,049 21,717 35,049 21,717
- for services as Directors and related committee work 2,680 2,240 2,680 2,240
- for managerial and other services 13,804 14,108 13,804 14,108
- retirement and medical benefits 1,149 1,119 1,149 1,119
- share-based payments 17,416 4,250 17,416 4,250
Only Directors are considered key management
A comprehensive breakdown per Director is included in the Directors' Report on pages 63 and 64.
Rentals under operating leases 218,615 309,324 221,091 309,324
- property rentals 20,171 18,855 22,647 18,855
- aircraft rentals 193,644 286,142 193,644 286,142
- equipment and vehicle rentals 4,800 4,327 4,800 4,327
Total staff costs 738,003 671,936 734,904 671,936
Employment costs 693,728 633,715 690,629 633,715
Contributions to defined contribution funds 44,275 38,221 44,275 38,221
Number of employees 2,026 1,950
Profit (loss) on exchange differences 34,350 (12,199) 34,350 (12,199)
Impairments (2,235) 6,817 - 17,559
Loan to associate (2,235) 4,817 - 15,559
Trading loan in subsidiary - 2,000 - 2,000
Integrated Annual Report 2014
101
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Equity-settled Share-based Payment (BEE Transaction) 3,428 3,428 3,428 3,428
This amount relates to the BEE transaction concluded in 2007 and is
being equity accounted for (in terms of IFRS 2) using the Black-Scholes
Option Valuation Model. The principal assumptions in applying the
value of the options were as follows:
a. Volatility of 50%;
b. Eight years to date of exercise;
c. Dividend yield of 5%;
d. Risk-free rate of 9.15%; and
e. Strike price of R3.03.
Cash-settled, Share-based Payments 17,416 4,250 17,416 4,250
This amount relates to the long-term incentive scheme concluded in
2013 and is being cash accounted for (in terms of IFRS 2) using the
Black-Scholes Option Valuation Model. The principal assumptions in
applying the value of the options were as follows:
a. Total vesting period is 36 months;
b. Only holders in the employment of the Group after the vesting
period will be entitled to receive a cash payout. For the purposes
of the calculation it was estimated that all employees will remain
in the employment of the Group;
c. Strike price is R1.50;
d. Risk-free rate is 5.22%; and
e. Dividend yield was 2%.
18. Interest ExpenseTotal interest paid 78,830 65,079 78,807 64,883
Bank interest 77,340 61,641 77,317 61,445
Interest capitalised to pre-delivery payments 1,490 3,438 1,490 3,438
Less: amount capitalised as borrowing costs (see Note 1) (1,490) (3,438) (1,490) (3,438)
Net interest 77,340 61,641 77,317 61,445
102
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
19. TaxationNormal taxation – current 77,066 66,478 76,316 63,629
Deferred taxation – current 31,993 36,657 32,548 37,437
109,059 103,135 108,864 101,066
Reconciliation of taxation rate % % % %
South African normal taxation rate (28.0) (28.0) (28.0) (28.0)
Taxation effect of:
Exempt income 0.1 0.1 0.1 0.1
Assessed losses utilised 0.1 0.1 0.1 0.1
Disallowable expenditure (1.4) (3.3) (1.4) (3.1)
Effective taxation rate (29.2) (31.1) (29.2) (30.9)
20. Earnings per ShareEarnings attributable to ordinary shareholders 264,851 227,526
Less: IAS 16 (profit) on disposal of property, plant and equipment (524) (984)
Less: IAS 36 (reversal of impairment) impairment to loans to associates (2,235) 4,817
Add: taxation effect of profit on disposal 147 276
Headline earnings attributable to ordinary shareholders 262,239 231,635
Weighted ordinary shares in issue ('000) 453,856 483,650
Ordinary shares in issue 440,263 489,176
Adjustment in respect of share buy-back 18,586 -
Adjustment in respect of consolidation of Share Trust (4,993) (5,526)
Adjustment for dilutive effect of share options in issue 483 527
Adjustment for dilutive effect of BEE transaction 17,512 -
Diluted weighted ordinary shares in issue ('000) 471,851 484,177
Earnings per share (cents) 58.4 47.0
Headline earnings per share (cents) 57.8 47.9
Diluted earnings per share (cents) 56.1 47.0
Diluted headline earnings per share (cents) 55.6 47.8
Dividends per share paid (cents) 15.0 5.0
Integrated Annual Report 2014
103
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
21. Cash Generated by OperationsProfit before taxation 373,910 330,661 371,072 326,070
(Reversal of impairment) impairment (2,235) 6,817 - 17,559
Depreciation 290,747 241,582 290,140 239,708
Equity-settled BEE transaction 3,428 3,428 3,428 3,428
Cash-settled share-based payments 17,416 4,250 17,416 4,250
Share of (profit) loss from associates (2,327) 1,725 - -
Interest expense 77,340 61,641 77,317 61,445
Interest received (32,149) (20,217) (31,515) (19,856)
Profit on disposal of assets (524) (984) (524) (984)
Cash from operations before working capital changes 725,606 628,903 727,334 631,620
Movement in working capital 362,732 325,745 356,940 315,428
- Inventory movement (522) 4,303 (522) 4,303
- Accounts receivable movement 4,995 8,543 (5,161) 11,311
- Accounts payable movement 358,259 312,899 362,623 299,814
1,088,338 954,648 1,084,274 947,048
22. Taxation Paid Taxation owing at beginning of year 30,942 14,948 30,558 14,919
Taxation charge for the year (77,066) (66,536) (76,316) (63,631)
Taxation receivable at end of the year (30,540) (30,942) (28,999) (30,558)
Taxation paid (76,664) (82,530) (74,757) (79,270)
23. Retirement Benefits
Post-retirement Benefits
The Group contributes to the Evergreen Pension Fund, which is governed by the Pension Funds Act (Act No. 24 of 1956). The fund covers the majority
of its employees and is a defined contribution scheme. Contributions paid by Group companies are charged against income as incurred.
104
Notes to the Annual Financial Statements (continued)
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
24. Operating Lease Commitments
Commitments for year one
Aircraft 188,567 169,759 188,567 169,759
188,567 169,759 188,567 169,759
Commitments for year two to five
Aircraft 555,464 540,914 555,464 540,914
555,464 540,914 555,464 540,914
Commitments after year five
Aircraft 116,847 174,472 116,847 174,472
116,847 174,472 116,847 174,472
Total operating lease commitments 860,878 885,145 860,878 885,145
Leasing Arrangements – Aircraft
Generally medium-term (five-year) leasing agreements on aircraft.
Currently the Group has two aircraft on South African Rand payment terms, which are repayable at R850,000 each per month, and one aircraft at
R1 million, all of which have been straight lined. The Group has entered into a further two aircraft leases on South African Rand payment terms of
R610,500 per month. There are two aircraft leases at market-related US Dollar amounts which have no escalation clauses in the agreements and which
are repayable at US$135,000 each per month. There are a further three aircraft lease agreements at market-related US Dollar amounts which have no
escalation clauses in the agreement which are repayable at US$160,000 each per month. Comair has entered into two aircraft lease agreements at rates
of US$210,000 each per month, which have no escalation clauses in them. Further leases have been entered into at rates of US$228,000 per month,
US$220,000 per month and US$255,000 per month. These leases are included in the operating lease commitments outlined above.
25. Borrowing powers
There are no restrictions on the Group’s borrowing powers.
26. Share Incentive Trust
Staff Share Incentive Scheme (Excluding BEE Equity-settled, Share-based Payment)
In terms of the Staff Share Incentive Scheme, shares are offered on an option or outright sale basis. Options vest over a period of one to five years.
All options must be taken up by way of purchase by no later than ten years after the date of grant. The exercise price of the option is not less than the
market value of the ordinary shares on the date preceding the day of grant and the option is exercisable provided the participant has remained in the
Group’s employ until the option vests. In the case of retirement/death/retrenchment, all options immediately vest. Options must be converted into shares.
In the event of retirement/death/retrenchment of a participant, options may be taken up and converted into cash within 12 months of such an event.
The Directors of the Group have the discretion to extend this by a further 12 months. In the case of the resignation of a participant, options which have
vested may be exercised within 30 days after date of resignation. Options which have not vested will be forfeited.
Integrated Annual Report 2014
105
The Staff Share Incentive Scheme is allowed to hold a total of 7.5% (36.7 million shares) of issued share capital in Comair Limited. Currently the scheme
holds 1.1% (prior year: 1.1%) of issued share capital. The maximum number of options to be held by any participant in the scheme shall not exceed
1% (4.2 million shares) of the ordinary shares then in issue. The share option liability as per IFRS 2 at year end was Rnil (prior year: Rnil) based on the
closing share price of R4.48 (prior year: R2.65).
The following table illustrates the number and weighted average exercise prices of share options held by eligible participants, including Directors:
2014 2014 2013 2013
Number of share options
Weighted average
exercise price
R Number of
share options
Weighted average
exercise price
R
Balance at beginning of period 1,274,667 1.55 1,274,667 1.55
Options exercised (533,333) 1.65 - -
Balance at end of period 741,334 1.55 1,274,667 1.55
Share options extended and accepted during the year were done at the ruling market price on the date preceding the extension date.
The options outstanding at 30 June 2014 become unconditional between the following dates:
Subscription price
R
2014 2013
Number of share options
Number of share options
1 September 2004 and 1 September 2007 0.80 33,334 66,667
5 December 2005 and 5 December 2010 1.70 133,000 233,000
5 June 2006 and 5 June 2011 1.57 575,000 975,000
Total 741,334 1,274,667
Should the participant resign from the Group before options fully vest, the unvested portion will be forfeited.
27. Group and Company Capital Commitments and Contingencies
Comair has made pre-delivery payments of R152 million prior to year end towards the delivery of four Boeing 737-800 aircraft in late 2015 and early
2016. The Group has a remaining commitment to Boeing for R1.5 billion at year end (prior year: R1.7 billion), the funding of which will be finalised closer
to the time of delivery. Pre-delivery payment finance has been arranged through Investec Bank.
Comair has also made deposits of R102 million towards the purchase of eight Boeing 737-8 MAX aircraft for delivery from 2019 to 2021. Pre-delivery
payments on these aircraft will commence in 2017. At year end the Group has a remaining commitment to Boeing for R4.6 billion (prior year: Nil), payable
from 2017 to 2021, the funding of which will be finalised closer to the time of delivery.
Comair has entered into two sales agreements with Qantas to purchase two Boeing 737-400 aircraft which will be delivered during the 2015 financial
year. The total purchase price for the two aircraft, payment for which will be made in cash, is R44 million.
106
Notes to the Annual Financial Statements (continued)
Group
2014 2013
R’000 R’000
Financial year 2014 - 197,413
Financial year 2015 315,652 261,756
Financial year 2016 982,063 945,579
Financial year 2017 336,797 324,285
1,634,512 1,729,033
The Group has signed a subordination agreement with Imperial Air Cargo (Pty) Ltd (per Note 5), which would represent a contingent liability in the
amount of R13 million. (2013: R10.7 million)
28. New Accounting Pronouncements
Standards in issue at the date of authorisation of the financial statements that have not been early adopted.
Standard Details of amendmentAnnual periods beginning on or after
IFRS 2: Share-based Payments Annual Improvements 2010–2012 Cycle: amendments added the definitions of performance conditions and service conditions and amended the definitions of vesting conditions and market conditions.
1 July 2014
IFRS 3: Business Combinations
Annual Improvements 2010–2012 Cycle: amendments to the measurement requirements for all contingent consideration assets and liabilities including those accounted for under IFRS 9.
1 July 2014
Annual Improvements 2011–2013 Cycle: amendments to the scope paragraph for the formation of a joint arrangement.
1 July 2014
IFRS 8: Operating Segments Annual Improvements 2010–2012 Cycle: amendments to some disclosure requirements regarding the judgements made by management in applying the aggregation criteria, as well as those to certain reconciliations.
1 July 2014
IFRS 9: Financial Instruments New standard that forms the first part of a three part project to replace IAS 39 Financial Instruments: Recognition and Measurement.
1 January 2015
The IASB aims to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ (IAS 39) in its entirety with IFRS 9. To date, the chapters dealing with recognition, classification, measurement, de-recognition of financial assets and liabilities and hedge accounting have been issued. Chapters dealing with impairment methodology are still being developed. Further, in November 2011, the IASB tentatively decided to consider making limited modifications to IFRS 9's financial asset classification model to address application issues.
1 January 2018
IFRS 10 Consolidated Financial Statements
IFRS 10 exception to the principle that all subsidiaries must be consolidated. Entities meeting the definition of ‘Investment Entities’ must be accounted for at fair value under IFRS 9, Financial Instruments, or IAS 39, Financial Instruments: Recognition and Measurement.
1 January 2014
IFRS 11: Joint Arrangements Amendments to provide guidance on the accounting for the acquisition of an interest in a joint operation in which the activity of the joint operation constitutes a business.
1 January 2016
IFRS 12: Disclosure of Interests in Other Entities
New disclosures required for Investment Entities (as defined in IFRS 10). 1 January 2014
27. Group and Company Capital Commitments and Contingencies (continued)
Integrated Annual Report 2014
107
Standard Details of amendmentAnnual periods beginning on or after
IFRS 13: Fair Value Measurement
Annual Improvements 2010–2012 Cycle: amendments to clarify the measurement requirements for those short-term receivables and payables.
1 January 2013
Annual Improvements 2011–2013 Cycle: amendments to clarify that the portfolio exception applies to all contracts within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9.
1 July 2014
IFRS 15: Revenue from Contracts with Customers
New guidance on recognition of revenue that requires recognition of revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.
1 January 2017
IAS 16: Property, Plant and Equipment
Annual Improvements 2010–2012 Cycle: amendments to the revaluation method – proportionate restatement of accumulated depreciation.
1 July 2014
Amendments to prohibit the use of a revenue-based depreciation method for property, plant and equipment, as well as guidance in the application of the diminishing balance method for property, plant and equipment.
1 January 2016
IAS 24: Related Party Disclosures
Clarification of the definition of a related party. 1 July 2014
IAS 27: Consolidated and separate financial statements
Requirement to account for interests in Investment Entities' at fair value under IFRS 9, Financial Instruments, or IAS 39, Financial Instruments: Recognition and Measurement, in the separate financial statements of a parent.
1 January 2014
IAS 36: Impairment of Assets The amendment of IAS 36 clarifies the required disclosures of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.
1 January 2014
IAS 38: Intangible Assets Annual Improvements 2010–2012 Cycle: Amendments to the revaluation method - proportionate restatement of accumulated depreciation.
1 July 2014
Amendments present a rebuttable presumption that a revenue-based amortisation method for intangible assets is inappropriate except in two limited circumstances, as well as provide guidance in the application of the diminishing balance method for intangible assets.
1 January 2016
IAS 40: Investment Properties Annual Improvements 2011–2013 Cycle: amendments to clarify the interrelationship between IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property.
1 July 2014
InterpretationsAnnual periods beginning on or after
IFRIC Interpretation 21: Levies 1 January 2014
Management anticipates that all of the above standards and interpretations will be adopted in the Group’s financial statements in the effective period
and that the adoption of these standards and interpretations will have no material impact on the financial statements of the Group in the period of initial
application.
108
Notes to the Annual Financial Statements (continued)
29. Related Parties
Subsidiaries View Note 4 for investments in subsidiaries.
Associates View Note 5 for investments in associates.
Share Incentive Trust Inspect Note 3 for the details.
Directors Inspect Directors’ emoluments on pages 63 and 64 and in Note 16.
Group Company
2014 2013 2014 2013
R’000 R’000 R’000 R’000
Related Party Balances
Loan accounts – owing (to) by related parties
Alooca Technologies (Proprietary) Limited - - 27,517 28,212
Aconcagua 32 Investments (Proprietary) Limited - - 2,527 5,866
Kulula Air (Proprietary) Limited - - 3,823 3,290
Commuter Handling Services (Proprietary) Limited 7,852 7,852 7,852 7,852
Imperial Air Cargo (Proprietary) Limited 15,559 15,559 15,559 15,559
Comair Share Incentive Trust - - 3,814 5,337
Amounts included in trade receivables (trade payables) regarding related parties
Imperial Air Cargo (Proprietary) Limited - 71 - 71
Kulula Air (Proprietary) Limited 3,802 1,769 3,802 1,769
Related Party Transactions
Rent paid to related parties
Aconcagua 32 Investments (Proprietary) Limited - - 1,510 1,374
Alooca (Proprietary) Limited - - 966 878
Service recovery
Kulula Air (Proprietary) Limited - - 2,400 2,400
30. Subsequent Events
The Directors are not aware of any matter or circumstances arising since the end of the period under review that would significantly affect or have a
material impact on the financial position of the Group or Company.
Integrated Annual Report 2014
109
A member of the Company entitled to attend and vote at the below-mentioned Annual General Meeting (AGM) is entitled to appoint a proxy or proxies
to attend, speak and vote in his/her stead. A proxy need not be a member of the Company. Meeting attendees will be required to provide reasonably
satisfactory identification before being allowed to participate in or vote at the AGM. Forms of identification that will be accepted include original and valid
South African identity documents, driver’s licences and passports.
This document is important and requires your immediate attention.
Comair Limited
Registration number 1967/006783/06
Incorporated in the Republic of South Africa
ISIN Code: ZAE000029823 Share Code: COM
(“Comair” or “the Company” or “the Group”)
Notice is hereby given in terms of section 62(1) of the Companies Act (Act No. 71 of 2008), as amended (the Companies Act) that the AGM of shareholders
of the Company will be held at the Comair Operation Building, corner Whirlwind and Fortress streets, Rhodesfield, 1619, on 5 November 2014 at 13h00
to consider, and if deemed fit, to pass the ordinary and special resolutions set out below.
This Notice has been sent to shareholders of the Company who were recorded as such in the Company’s security register on 19 September 2014,
being the notice record date set by the Board of the Company in terms of the Companies Act, determining which shareholders are entitled to receive
Notice of the Annual General Meeting.
Electronic Participation
Shareholders or their proxies are able to attend, but not participate and vote at the Annual General Meeting by way of a teleconference call. Should you
wish to make use of this facility, please contact Derek Borer at e-mail: [email protected], by no later than 12h00 on Monday, 3 November 2014.
Shareholders will:
• Be required to provide reasonably satisfactory identification; and
• Be billed separately by their own telephone service providers for their telephone call to participate in the meeting.
The Notice of meeting includes the attached Proxy Form.
Ordinary Resolutions
1. Consideration of Annual Financial Statements
Ordinary Resolution Number 1
RESOLVED THAT the Audited Annual Financial Statements, together with the report of the Board of Directors of the Company (Board), the Auditors’
Report and the Report by the Audit Committee of the Company and the Group for the year ended 30 June 2014, be and are hereby received and adopted.
Reason and effect of Ordinary Resolution Number 1The reason for and the effect of Ordinary Resolution Number 1 is to adopt the complete audited Annual Financial Statements of the Company and
Group, including the Report of the Directors, the Auditors’ Report and the Report by the Audit Committee of the Company and the Group for the year
ended 30 June 2014.
Notice of Annual General Meeting
110
Notice of Annual General Meeting (continued)
2. Re-appointment of External Auditors
Ordinary Resolution Number 2
RESOLVED THAT the re-appointment of Grant Thornton (Jhb) Inc. (Grant Thornton), as nominated by the Company’s Audit Committee as independent
external auditors of the Company, be and is hereby approved until the conclusion of the next AGM.
Reason and effect of Ordinary Resolution Number 2The reason for and the effect of Ordinary Resolution Number 2 is to re-appoint Grant Thornton as the auditors of the Company to hold office until the
conclusion of the next AGM. The Company’s Audit Committee has recommended, and the Board has endorsed, the above re-appointment.
3. Re-election of Directors
Directors Retiring by Rotation
Ordinary Resolution Number 3.1
RESOLVED THAT Mr Rodney Cyril Sacks, who retires in terms of the Company’s Memorandum of Incorporation (MOI) and who, being eligible, offers
himself for re-election, be hereby re-elected as a Director of the Company.
Ordinary Resolution Number 3.2
RESOLVED THAT Mr Gavin James Halliday, who retires in terms of the Company’s MOI and who, being eligible, offers himself for re-election, be hereby
re-elected as a Director of the Company.
Ordinary Resolutions Number 3.3
RESOLVED THAT Ms Wrenelle Doreen Stander, who retires in terms of the Company’s MOI and who, being eligible, offers herself for re-election, be
hereby re-elected as a Director of the Company.
Directors Appointed During the Year
Ordinary Resolutions Number 3.4
RESOLVED THAT Mr Hubert Rene Brody, who was appointed by the Board as an independent Non-executive Director with effect from 1 January 2014,
and who retires in terms of the Company’s MOI and who, being eligible, offers himself for re-election, be hereby re-elected as a Director of the Company.
Ordinary Resolution Number 3.5
RESOLVED THAT Ms Kirsten Emily King, who was appointed by the Board as the Financial Director with effect from 9 June 2014, and who retires in
terms of the Company’s MOI and who, being eligible, offers herself for re-election, be hereby re-elected as a Director of the Company.
Reasons and effect of Ordinary Resolutions Numbers 3.1 to 3.5The reason for and the effect of Ordinary Resolutions Number 3.1 to 3.5 is to re-elect, by way of separate resolutions, Mr Rodney Cyril Sacks, Mr Gavin
James Halliday, Ms Wrenelle Doreen Stander, Mr Hubert Rene Brody and Ms Kirsten Emily King as Directors of the Company.
In terms of Article 41 of the Company’s MOI, one third of the Company’s Directors are required to retire at every AGM. These Directors may offer
themselves for re-election. In terms of Article 40 of the Company’s MOI, a person appointed to fill a vacancy or appointed as an additional Director shall
retire at the AGM but may offer himself/herself for re-election. The Board recommends to the shareholders the re-election of the Directors mentioned
above. A brief CV of each of these Directors appears on pages 117 and 118 of the Integrated Annual Report of which this Notice forms part.
Integrated Annual Report 2014
111
4. Election of Members of Audit Committee
Ordinary Resolution Number 4.1
RESOLVED THAT Dr Peter Johannes Welgemoed, who is an independent Non-executive Director of the Company, be hereby elected as a member
of the Company’s Audit Committee for the financial year ending 30 June 2015.
Ordinary Resolution Number 4.2
RESOLVED THAT Mr Khutso Ignatius Mampeule, who is an independent Non-executive Director of the Company, be hereby elected as a member of
the Company’s Audit Committee for the financial year ending 30 June 2015.
Ordinary Resolution Number 4.3
RESOLVED THAT, subject to the re-election of Ms Wrenelle Doreen Stander as a Director of the Company pursuant to ordinary resolution number 3.3,
Ms Wrenelle Doreen Stander, who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s Audit
Committee for the financial year ending 30 June 2015.
Ordinary Resolution Number 4.4
RESOLVED THAT, subject to the re-election of Mr Gavin James Halliday as a Director of the Company pursuant to ordinary resolution number 3.2,
Mr Gavin James Halliday, who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s Audit
Committee for the financial year ending 30 June 2015.
Ordinary Resolution No. 4.5
RESOLVED THAT, subject to the re-election of Mr Hubert Rene Brody as a Director of the Company pursuant to Ordinary Resolution Number 3.4,
Mr Hubert Rene Brody, who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s Audit
Committee for the financial year ending 30 June 2015.
Reason and effect of Ordinary Resolutions Numbers 4.1 to 4.5The reason for and the effect of Ordinary Resolutions Number 4.1 to 4.5 is to elect, by way of separate resolutions, Dr Peter Johannes Welgemoed,
Mr Khutso Ignatius Mampeule, Ms Wrenelle Doreen Stander, Mr Gavin James Halliday and Mr Hubert Rene Brody as members of the Audit Committee
of the Company.
A brief CV of each of the Directors mentioned above is included on pages 117 to 119 of the Integrated Annual Report of which this Notice forms part. As
is evident from these CVs, each of the proposed members of the Audit Committee has the required qualifications and/or experience to fulfil his/her duties.
5. Non-binding Endorsement of Company Remuneration Policy
The Company’s Remuneration Policy, as described in the Remuneration Report on pages 55 to 57 of the Integrated Annual Report, of which this Notice
forms part, is hereby endorsed by way of a non-binding advisory vote, as recommended in the King Code of Governance Principles and King Report
on Governance, commonly referred to as King III.
Reason and effect of non-binding endorsement The reason for and the effect of the above non-binding endorsement is to endorse the Company’s Remuneration Policy on the basis of a non-binding
advisory vote.
112
Notice of Annual General Meeting (continued)
Special Resolutions
6. Approval of Non-executive Directors Remuneration – 2013/14
Special Resolution Number 1
RESOLVED THAT the joint remuneration of the Non-executive Directors for their services as Directors of the Company in the amount of R2,680,000
(two million, six hundred and eighty thousand Rand) for the financial year ended 30 June 2014 be and is hereby approved.
Reason and effect of Special Resolution Number 1The reason for and the effect of Special Resolution Number 1 is to approve the remuneration payable by the Company to its Non-executive Directors
for their services as Directors of the Company for the period ended 30 June 2014. The fees payable to Non-executive Directors are based on a fixed
annual retainer. The Chairperson and members of every Sub-committee, however, are paid an additional fee for each Sub-committee meeting chaired
and/or attended up until the end of the 2014 financial year. No fees are payable to Mr Sacks, Mr Halliday and Ms Stander. Mr van Hoven, in addition
to being the Chairperson of the Board and Nominations Sub-committee, is also Chairman of the Comair Pension Fund and as such gets paid a fee for
each Pension Fund Trustee meeting attended, which fees were approved by the Company’s shareholders at the Annual General Meeting of 30 October
2013. The fees payable to each Director and further details on the basis of calculation of the remuneration are respectively included in the Annual Financial
Statements on pages 68 to 108, and in the Remunerations Report on pages 55 to 57 of the Integrated Annual Report of which this Notice forms part.
7. Approval of Non-executive Directors Remuneration – 2014/15
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 2015:
30 June 2014 30 June 2015
Chairman of the Board R1,200,000 R1,284,000
Vice-chairman (2) R350,000 R374,500
Non-executive Directors (5) R150,000 R160,500
Chairperson of each Sub-committee per Sub-committee meeting held R13,000 R13,910
Members of each Sub-committee, per Sub-committee meeting held R6,500 R6,955
Chairperson of Pension Fund Board R13,000 R13,910
Reason and effect of Special Resolution Number 2 The reason for and the effect of Special Resolution Number 2 is to approve the basis for calculating the remuneration payable by the Company to
its Non-executive Directors for their services as Directors of the Company for the period ending 30 June 2015. The fees payable to Non-executive
Directors are based on a fixed annual retainer. The Chairperson and members of each Sub-committee, however, will be paid an additional fee for each
Sub-committee meeting held, subject to attendance at the Sub-committee meeting. No fees are payable to Mr Sacks, Mr Halliday and Ms Stander.
Mr van Hoven, in addition to being Chairperson of the Board and the Nominations Sub-committee, is also Chairman of the Comair Pension Fund and
as such gets paid a fee for each Pension Fund Trustee meeting held. Further details on the basis of calculation of the remuneration are included in the
Remuneration Report on pages 55 to 57 of the Integrated Annual Report of which this Notice forms part.
8. General Authority to Repurchase Shares
Special Resolution Number 3
RESOLVED THAT the Board of Directors of the Company is hereby authorised, by way of a renewable general authority, to approve the purchase of its
own ordinary shares by the Company, or to approve the purchase of ordinary shares in the Company by any subsidiary of the Company, provided that:
Integrated Annual Report 2014
113
8.1.1 the Company or the relevant subsidiary is authorised thereto by its MOI;
8.1.2 the general repurchase by the Company and/or any subsidiary of the Company of ordinary shares in the aggregate in any one financial
year shall not exceed 10% (ten percent) of the Company issued ordinary share capital as at the beginning of the financial year, provided
that the acquisition of shares as treasury shares by a subsidiary of the Company shall not be effected to the extent that in aggregate more
than 10% (ten percent) of the number of issued shares in the Company are held by or for the benefit of all the subsidiaries of the Company
taken together;
8.1.3 at any point in time, the Company may only appoint one agent to effect any repurchases on the Company’s behalf;
8.1.4 the repurchase of securities being effected through the order book operated by the JSE trading system and done without any prior
understanding or arrangement between the Company and the counter party (reported trades are prohibited);
8.1.5 this general authority shall only be valid until the date of the next AGM or for fifteen (15) months from the date of passing of this Special
Resolution Number 3, whichever is the shorter;
8.1.6 in determining the price at which the Company’s ordinary shares are acquired by the Company or any subsidiary in terms of this general
authority, the maximum premium at which such ordinary shares may be acquired will be 10% (ten percent) of the weighted average of
the market price at which such ordinary shares are traded on the JSE, as determined over the five (5) trading days immediately preceding
the date of the repurchase of such ordinary shares by the Company. The JSE should be consulted for a ruling if the Company’s securities
have not traded in such five (5) business day period;
8.1.7 the Company or its subsidiary may not repurchase securities during a prohibited period as defined in the JSE Listings Requirements
unless they have in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period
are fixed (not subject to any variation) and full details of the programme have been disclosed in an announcement over SENS prior to the
commencement of the prohibited period; and
8.1.8 when the Company or any subsidiary has cumulatively repurchased 3% (three percent) of the initial number of the relevant class of securities,
and for each 3% (three percent) in aggregate of the initial number of that class acquired thereafter, an announcement will be made.
8.2 In terms of the general authority given under this special resolution, any repurchase of ordinary shares shall be subject to:
8.2.1 any applicable exchange control regulations and approval at that point in time;
8.2.2 the Companies Act;
8.2.3 the JSE Listings Requirements and any other applicable stock exchange rules, as may be amended from time to time;
8.2.4 the sanction of any other relevant authority whose approval is required in law; and
8.2.5 a resolution by the Board and/or the relevant subsidiary of the Company confirming that the Board of the Company and/or of such relevant
subsidiary has authorised the repurchase, that the Company and/or the relevant subsidiary has satisfied the solvency and liquidity tests
contemplated in the Companies Act, and that since the test was done there have been no material changes to the financial position of
the Group.
The Board is of the opinion that this authority should be in place should it become appropriate to undertake a share repurchase in the future. After having
considered the effect of any repurchases of ordinary shares pursuant to this general authority, the Board, in terms of the Companies Act and the JSE
Listings Requirements, confirms and undertakes that it will not implement the proposed authority to repurchase the shares unless it is of the opinion that:
• the Company and the Group will be in a position to repay its debt in the ordinary course of business for the next twelve (12) months after the date
of the general repurchase;
• the assets of the Company and the Group, fairly valued in accordance with International Financial Reporting Standards, will be in excess of the
liabilities of the Company and the Group for the next twelve (12) months after the date of the general repurchase;
• the share capital and reserves of the Company and the Group will be adequate for the next twelve (12) months after the date of the general
repurchase;
• available working capital will be adequate to continue the operations of the Company and the Group for the next twelve (12) months after the date
of the general repurchase; and
• the Company may not enter the market to proceed with the repurchase until the Company’s sponsor, Rand Merchant Bank (A division of FirstRand
Bank Limited), has confirmed the adequacy of the Company and the Group’s working capital in writing to the JSE.
114
Notice of Annual General Meeting (continued)
Reason and effect of Special Resolution Number 3The reason for and the effect of Special Resolution Number 3 is to authorise the Company or any of its subsidiaries, by way of a general authority, to
repurchase its issued shares on such terms, conditions and such amounts determined from time to time by the Board subject to the limitations set
out above. Please refer to the additional disclosure of information contained in this Notice, which disclosure is required in terms of the JSE Listings
Requirements.
Other disclosure in terms of the JSE Listings Requirements Section 11.26Further to Special Resolution Number 3, the JSE Listings Requirements require the following disclosure, some of which is elsewhere in the Integrated
Annual Report of which this Notice forms part:
Directors and management – pages 61 and 62;
Major shareholders of the Company – page 122;
Directors’ interests in securities – page 60; and
Share capital of the Company – note 10 on page 91.
Litigation statement In terms of section 11.26 of the JSE Listings Requirements, the Directors, whose names appear on pages 61 and 62 of the Integrated Annual Report
of which this Notice forms part, are not aware of any legal or arbitration proceedings, including proceedings that are pending or threatened, that may
have or have had in the recent past, being at least the previous twelve (12) months, a material effect on the Group’s financial position.
Directors’ responsibility statement The Directors, whose names appear on pages 61 and 62 of the Integrated Annual Report, collectively and individually accept full responsibility for the
accuracy of the information pertaining to this resolution and certify that to the best of their knowledge and belief there are no facts that have been omitted
which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this resolution
contains all information required by law and the JSE Listings Requirements.
No material change Other than the facts and developments reported on in the Integrated Annual Report, there have been no material changes in the financial or trading
position of the Company and its subsidiaries since the date of signature of the Audit Report and the date of this Notice.
Statement of Board’s intention The Board has no specific intention to effect the provisions of Special Resolution Number 3 but will, however, continually review this position having
regard to prevailing circumstances and market conditions, in considering whether to effect the provisions of Special Resolution Number 3.
9. General Authority to Provide Financial Assistance to Related and Inter-related Companies or Corporations
Special Resolution Number 4
RESOLVED THAT the Board is hereby authorised in terms of section 45(3)(a)(ii) of the Companies Act, as a general approval (which approval will be
in place for a period of 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:
Integrated Annual Report 2014
115
9.1 it will not adopt a resolution to authorise such financial assistance unless the Directors are satisfied that:
9.1.1 immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test as contemplated in the
Companies Act; and
9.1.2 the terms under which the financial assistance is proposed to be given are fair and reasonable to the Company; and
9.2 written notice of such resolution by the Board shall be given to all shareholders of the Company and any trade union representing the employees:
9.2.1 within ten (10) days after the Board has adopted the resolution, if the total financial assistance contemplated in that resolution, together
with any previous such resolutions during the financial year, exceeds zero comma one percent (0.1%) of the Company’s net worth at the
time of the resolution; and
9.2.2 within thirty (30) days of the end of the financial year, in any other case.
Reason and effect of Special Resolution Number 4The reason for and the effect of Special Resolution Number 4 is to provide a general authority to the Board to grant direct or indirect financial assistance
to any company or corporation forming part of the Company’s Group of Companies, including in the form of loans or the guaranteeing of their debts.
The Board provided such inter-group financial assistance to subsidiaries as disclosed in the Annual Financial Statements in note 4 on pages 84 to 86
of the Integrated Annual Report of which this Notice forms part.
Ordinary Resolution
10. Authorisation for Company Secretary or any Director to Sign Necessary Documents to Give Effect to Resolutions
Ordinary Resolution Number 5
RESOLVED THAT the Company Secretary or any Director be and is hereby authorised on behalf of the Company to sign all documents as may be
necessary in order to give effect to the Special and Ordinary Resolutions set out above.
Other Business
11. To Transact any Other Business that may be Transacted at Annual General Meetings
Approvals Required for Resolutions
Ordinary Resolutions Numbers 1 to 5 contained in this Notice of AGM require the approval by more than fifty percent (50%) of the votes exercised on
the resolutions by shareholders present or represented by proxy at the AGM, and further subject to the provisions of the Companies Act, the MOI of
the Company and the JSE Listings Requirements.
Special Resolutions Numbers 1 to 4 contained in this Notice of AGM require approval by at least seventy five percent (75%) of the votes exercised on
the resolutions by shareholders present or represented by proxy at the AGM and further subject to the provisions of the Companies Act, the MOI of the
Company and the JSE Listings Requirements.
Record Date
The record date on which shareholders of the Company must be registered as such in the Company’s Securities Register, which date was set by the
Board of the Company in determining which shareholders are entitled to attend and vote at the AGM, is Friday, 31 October 2014. Accordingly the last
day to trade in order to be eligible to attend and vote at the meeting is Friday, 24 October 2014.
116
Notice of Annual General Meeting (continued)
Proxy and Voting Procedures
A shareholder entitled to attend and vote at the AGM is entitled to appoint a proxy or proxies to attend, speak and vote in his/her stead. A proxy need
not be a shareholder of the Company. For the convenience of registered shareholders of the Company, a Form of Proxy is enclosed herewith.
Shareholders are requested to lodge their Forms of Proxy with, or to post same to the Company’s Transfer Secretaries, Computershare Investor Services
(Pty) Limited, PO Box 61051, Marshalltown, 2107, to be received not later than 48 hours (excluding Saturdays, Sundays and public holidays) before the
time appointed for the holding of the AGM, being Wednesday, 5 November 2014. Nevertheless, Forms of Proxy may be lodged at any time prior to the
commencement of voting on the resolutions at the AGM.
Any shareholder who completes and lodges a Form of Proxy will nevertheless be entitled to attend and vote in person at the AGM. Any Form of Proxy
not received by this time must be handed to the chairperson of the meeting immediately prior to the meeting.
On a show of hands, every shareholder of the Company present in person or represented by proxy shall have one vote only. On a poll, every shareholder
of the Company shall have one vote for every share held in the Company by such shareholder.
The attached Form of Proxy is only to be completed by those shareholders who are:
• Holding ordinary shares of the Company in certificated form; or
• Recorded on the electronic sub-register in ‘own name’ dematerialised form.
Shareholders who have dematerialised their shares through a Central Securities Depository Participant (CSDP) or broker, and wish to attend the AGM,
must instruct their CSDP or broker to provide them with a Letter of Representation, or they must provide the CSDP or broker with their voting instructions
in terms of the relevant custody agreement/mandate entered into between them and the CSDP or broker.
Equity securities held by a Share Trust or Scheme will not have their votes at the AGM taken into account for the purposes resolutions proposed in
terms of the JSE Listings Requirements.
Note that holders of unlisted securities and treasury shares are not entitled to vote at the AGM.
Proof of Identification Required
The Companies Act requires that any person who wishes to attend or participate in a shareholders meeting, must present reasonably satisfactory
identification at the meeting. Any shareholder or proxy who intends to attend or participate at the Annual General Meeting must be able to present
reasonably satisfactory identification at the meeting for such shareholder or proxy to attend and participate at the meeting. A green bar-coded identification
document issued by the South African Department of Home Affairs, a driver’s licence or a valid passport will be accepted as sufficient identification.
By order of the Board
Mr Derek H Borer
Company Secretary
8 September 2014
Bonaero Park
Integrated Annual Report 2014
117
Directors Standing for Election or Re-election
1. RC Sacks (Board)
(Age: 64)
HDip Law, HDip Tax
Rodney was born and grew up in South Africa. He graduated from the University of the Witwatersrand in Johannesburg with post-graduate higher
diplomas in law and tax law. Rodney was one of the youngest attorneys to be made a partner at Werksmans, one of the largest corporate law firm in
South Africa. He was a senior partner when he emigrated to California with his family in August 1989 after spending nearly 20 years with Werksmans.
In 1990 a consortium headed up by Rodney and his partner, Hilton Schlosberg, acquired control of a publicly traded company which was ultimately
merged into and became known as Hansen Beverage Company. Hansen Beverage Company (now known as Monster Beverage Corporation) acquired
the Hansen’s Natural Soda and Apple Juice business in 1992 for a purchase consideration of some $14.5 million. At that time sales were $17.5 million
and the business had 12 employees.
Rodney has been Chairman and Chief Executive Officer of the company since 1990. In 2002 Hansen Beverage Company launched the well-known
Monster Energy drink line which has risen to become the best-selling energy drink in the United States and is now sold internationally in more than 114
countries. Under Rodney’s stewardship Monster Beverage Corporation’s sales have grown to in excess of $2.5 billion and the company today employs
more than 2,000 people.
2. GJ Halliday (Board and Audit Committee)
(Age: 50)
BA (Hons) Economics, Geography MBA (Lancaster University)
Gavin joined British Airways Plc (BA) in 1986, working in customer service, operational research and marketing, before joining sales as part of the
airline’s Global Sales team, where he was involved in the airline’s launch of e-ticket in 1995. He has managed sales teams in Miami; UK; Latin America;
and Asia & the Pacific region in 2006, where he was responsible for all sales activity, before joining Europe. At present he is Area General Manager for
Europe and Africa.
3. WD Stander (Board and Audit Committee)
(Age: 48)
BA (Hons) MBA
Prior to her appointment as Senior Vice President Public and Regulatory Affairs at Sasol on 1 July 2014, Wrenelle served as Managing Director of Sasol
Gas for almost four years. There she successfully managed the transition of natural gas prices to a new regulatory dispensation. This change process
spanned three years and involved 314 customers, NERSA and Sasol Gas.
Wrenelle has also served as a Director on a number of subsidiary Boards, including Sasol Gas, Sasol Synfuels International and Sasol Group Services.
She currently serves as Chairperson of the Sasol Social and Community Trust, as well as the Sasol Siyakha Trust. She also served as an Executive
Committee member of Sasol Synfuels International (SSI).
Before joining Sasol, Wrenelle held various positions within the South African civil aviation industry, including the positions of Deputy CEO of the SACAA
and Managing Director of the Air Traffic and Navigation Services Company (ATNS). At ATNS, she continued to promote the commercialisation of aviation
service provision and successfully oversaw the implementation of an African-wide air navigation communication service on a user pays basis.
In 2005, Wrenelle was elected to the Executive Committee of the Commercial Air Navigation Service Organisation (CANSO), an international body
responsible for promoting and protecting the interests of commercial air navigation service providers, where she worked on a variety of projects intended
to improve global air navigation infrastructure and customer service.
118
Notice of Annual General Meeting (continued)
Wrenelle started her career in the minerals and energy NGO sector where, amongst others, she was involved in positioning the Minerals and Energy
Policy Centre (MEPC) to be less dependent on donor funding, established the Minerals and Energy Training Institute (MEETI), and was a contributor to
the Energy Policy White Paper.
Wrenelle holds a BA (Hons) degree from the University of Cape Town, as well as an MBA from Oxford Brookes University in the United Kingdom. She
has a 21-year-old daughter, Emma, who is a student at the University of Cape Town.
4. HR Brody (Board and Audit Committee)
Age: 50
CA(SA)
Hubert was, until recently, the Chief Executive of Imperial Holdings, the South Africa-based diversified mobility group with annual turnover of R100 billion
and assets of over R40 billion. At Imperial he chaired various group companies, notably the Regent Group, Imperial Bank, Imperial Logistics International
and Associated Motor Holdings.
Hubert is a Chartered Accountant. He studied at the University of Stellenbosch and qualified as a CA in 1989. He previously worked in the Property,
IT and banking industries, and before being transferred to Imperial Holdings in 2003, he was the Chief Financial Officer of Imperial Bank. At Imperial he
also held the position of Group Treasurer for a number of years. He led the Group in devising its current strategy of global expansion across the logistics
industry and supervised significant M&A activity during his tenure as CEO.
Hubert serves as Non-executive Director on the boards of Imperial Holdings, Woolworths and Mix Telematix.
5. KE King (Board)
(Age: 36)
BCom (Hons) Accounting (CTA Equivalent)
CA(SA)
After qualifying as a Chartered Accountant in 2008, Kirsten worked as an audit manager for PKF (Jhb) Inc (now Grant Thornton), before joining Comair
Limited in 2011. She was involved in the launch of the Sabre platform and implemented the Sabre Revenue Accounting system, establishing an end to
end revenue accounting function at Comair. She held the position of acting Finance Executive in 2014 and was appointed Financial Director in June 2014.
6. PJ Welgemoed (Audit Committee)
(Age: 71)
BCom (Hons), MCom, DCom
In 1971 Peter was awarded his Doctorate in Transport Economics at Rand Afrikaans University. In 1974, he was appointed Professor and Chairman
of the Department of Transportation Economics and Director of the Research Centre for Physical Distribution and Transportation Studies at Rand
Afrikaans University. Thereafter he served on various Boards of Directors of companies involved in transportation and banking. In September 1989 he
was appointed Deputy Minister of Mineral and Energy Affairs and Public Enterprises. In 1990 he served as a Member of Cabinet, with the portfolio of
Minister of Transport and in 1992 as Minister of Transport and of Post and Telecommunication. In 1998 Peter was appointed to the position of Executive
Chairman of the Board of Market Power (SA) in South America. He controlled the daily operations of the Group in Chile, Argentina and Uruguay from
the Head Office in Santiago. At present is he is involved in private business through directorships and consultancy.
Integrated Annual Report 2014
119
7. KI Mampeule (Audit Committee)
(Age: 49)
(BA, MSc, MBA)
Khutso Mampeule is the Executive Chairman of Lefa Group Holdings, an investment holding and consulting company which he established in 2003. He
has overall responsibility for the development and implementation of the group’s strategy and business model. In addition, Khutso is a Director of JSE-
Listed Niveus Investments Limited (where he is Chairman of the Audit and Risk Committee), Truworths International Limited and Withmore Investments
(Pty) Ltd., an empowerment consortium he represents on the KWV Holdings Limited Board. He is also a Director of the Institute of Directors (IoD, SA)
and a number of other privately held companies. Until May 2007, Khutso was Group CEO of the South African Post Office, where he made extensive
headlines for taking firm positions against poor governance and corrupt practices at the institution. Prior to starting Lefa Group Holdings, Khutso was
CEO of Old Mutual Employee Benefits. Before that, he spent seven years in various senior executive positions at Transnet where he was responsible for
rail operations, including rail/port integration, and the turnaround of the iron-ore export business within Spoornet (OREX). His last position at Transnet
was as the CEO of its subsidiary, South African Express Airways. Khutso is a trustee of the World Wide Fund for Nature (WWF, SA), and Regional
Chairman of the Young Presidents Organisation (YPO, Africa). He holds BA, MSc and MBA degrees.
120
Share Price Performance
2014 2013
c c
Market price (cents per share)
Closing (30 June) 448 265
High 500 305
Low 250 110
Closing price/earnings ratio 7.7 5.6
Number of shares in issue
At year end (millions) 440 489
Weighted average (millions) 453 489
Volume of shares traded (millions) 116 38
Volume of shares traded to number in issue at year end 26.4% 7.80%
Integrated Annual Report 2014
121
Shareholder Spread
BandsNo. of
shareholdings % No. of shares %
1–1,000 shares 1,879 59.03 572,606 0.13
1,001–10,000 shares 852 26.77 3,253,000 0.74
10,001–100,000 shares 277 8.70 9,324,765 2.12
100,001–1,000,000 shares 132 4.15 40,063,654 9.10
1,000,001 Shares and over 43 1.35 387,049,074 87.91
Total 3,183 100.00 440,263,099 100.00
Distribution of Shareholders
Type of shareholderNo. of
shareholdings % No. of shares %
Banks and brokers 13 0.41 17,204,220 3.91
Medical schemes 2 0.06 973,397 0.22
Close corporations 28 0.88 506,544 0.12
Endowment funds 11 0.35 1,753,974 0.40
Individuals 2,802 88.03 17,420,218 3.96
Insurance companies 11 0.35 1,908,221 0.43
Investment companies 8 0.25 4,056,106 0.92
Mutual funds 58 1.82 115,581,409 26.25
Nominees and trusts 99 3.11 8,996,407 2.04
Other corporations 18 0.57 162,269 0.04
Retirement funds 90 2.83 32,590,208 7.40
Private (Pty) companies 42 1.31 234,117,595 53.18
Share trust 1 0.03 4,992,531 1.13
Total 3,183 100.00 440,263,099 100.00
Shareholder Analysis
122
Shareholder Analysis (continued)
Beneficial Shareholders Holding of 3% or More
Type of shareholderNo. of shares
% shareholding
BB Investment Company (Pty) Ltd 126,320,151 28.69
Allan Gray* 64,842,669 14.73
Britair Holdings Limited 53,966,623 12.26
Innercreek Investments (Pty) Limited 50,000,000 11.35
Investment Solutions** 11,638,721 2.64
Barclays Private Bank and Trust Limited*** 9,000,000 2.04
Total 315,768,164 71.72
* Allan Gray
Allan Gray Balanced Fund 22,009,211 (5.00%)
Allan Gray Equity Fund 22,007,721 (5.00%)
Allan Gray Domestic Equity Portfolio 14,318,600 (3.25%)
Allen Gray Global Absolute Portfolio 2,722,003 (0.62%)
Allan Gray Life Hedged Domestic Equity Portfolio 2,459,462 (0.56%)
Allan Gray Domestic Absolute Portfolio 1,145,672 (0.26%)
Allan Gray Relative Domestic Equity Portfolio 180,000 (0.04%)
64,842,669 14.73%
** Investment Solutions
Investment Solutions Funds 5,548,241 (1.26%)
Investment Solutions Classic Balanced 2,766,740 (0.63%)
Investment Solutions Balanced 1,938,000 (0.44%)
Investment Solutions Incubator Pure Equity 1,032,284 (0.23%)
Investment Solutions Aggressive Value Equity 222,238 (0.05%)
Investment Solutions Preservation Provident Fund 68,400 (0.02%)
Investment Solutions Institutional Equity 62,818 (0.01%)
11,638,721 (2.64%)
*** Barclays Private Bank & Trust Limited
Barclays Private Bank and Trust Limited 9,000,000 (2.04%)
The Company concluded a Black Economic Empowerment (BEE) transaction during the 2007 financial year, pursuant to which shares equivalent to 15%
of the Company’s post transaction share capital were issued to a BEE consortium known as Thelo Aviation Consortium (Pty) Ltd, led by Thelo Aviation
Investments (Pty) Ltd. Thelo Aviation Investments (Pty) Ltd had, in addition, purchased 1.5% of the Company’s issued share capital at the time from
certain shareholders for cash which they sold in the financial year under review. Refer to the Circular to Ordinary Shareholders issued on 23 August 2006
for further information relating to the BEE transaction.
Fund Managers Holding 3% or More
The following Fund managers hold 3% or more of the issued share capital of the Company:
Type of shareholderNo. of shares
% shareholding
Allan Gray Asset Management 105,637,662 23.99
Investec Asset Management 10,106,578 2.30
Barclays Private Bank Trust Ltd 9,000,000 2.04
Centaur Asset Management 8,492,244 1.93
Total 133,236,484 30.26
Integrated Annual Report 2014
123
Public/Non-public Shareholder Spread (Including Resident and Non-resident Shareholding)
Type of shareholder
Number of shareholders in South Africa
Number of shareholders other than in South Africa Total shareholders
No. of shares % No. of shares % No. of shares %
Non-public shareholders
Directors and Associates (9) 52,164,512 11.85 52,164,512 11.85
Strategic holdings (more than 10%)
BB Investment Co. (Pty) Ltd (1) 126,320,151 28.69 126,320,151 28.69
Britair Holdings Limited (1) 53,966,623 12.26 53,966,623 12.26
Share trusts
Comair Share Incentive Trust (1) 4,992,531 1.13 4,992,531 1.13
Public shareholders
Resident (3,137) 177,800,149 40.39 177,800,149 40.39
Non-resident (34) 25,019,133 5.68 25,019,133 5.68
361,277,343 82.06 78,985,756 17.94 440,263,099 100.00
124
Administration
Registered Office
1 Marignane Drive
Bonaero Park
Kempton Park
1619
Principal Place of Business
1 Marignane Drive
Bonaero Park
Kempton Park
1619
Group Company Secretary
DH Borer
1 Marignane Drive
Bonaero Park
Kempton Park
1619
E-mail: [email protected]
Transfer Secretaries
Computershare Investor Services (Proprietary) Limited
Ground floor
70 Marshall Street
Johannesburg
2001
(PO Box 61051, Marshalltown, 2107)
Form of Proxy for Annual General MeetingComair LimitedRegistration number 1967/006783/06Incorporated in the Republic of South AfricaISIN Code: ZAE000029823 Share Code: COM(Comair or the Company)
The form of proxy is only to be completed by those shareholders who are:
• holding ordinary shares of the Company in certificated form; or• recorded on the electronic sub-register in ‘own name’ dematerialised form.
Shareholders who have dematerialised their shares through a Central Securities Depository Participant (CSDP) or broker and wish to attend the Annual General Meeting, must instruct their CSDP or broker to provide them with a Letter of Representation, or they must provide the CSDP or broker with their voting instructions in terms of the relevant custody agreement/mandate entered into between them and the CSDP or broker.
Shareholders are requested to lodge their Forms of Proxy or to post same to the Company’s Transfer Secretaries to be received not later than 48 hours (excluding Saturdays, Sundays and public holidays) before the time appointed for the holding of the Annual General Meeting, being Wednesday, 5 November 2014 at 13h00. Nevertheless, Forms of Proxy may be lodged at any time prior to the commencement of voting on the resolutions at the Annual General Meeting. Any shareholder who completes and lodges a Form of Proxy will nevertheless be entitled to attend and vote in person at the Annual General Meeting.
I/We (BLOCK LETTERS)
of (address)
Telephone: (Work) (area code) Telephone: (Home) (area code)
being a holder of certificated shares and ‘own-name’ dematerialised shares of the Company and entitled to votes hereby appoint (see Note 1):
(Please print)
1. or failing him/her
2. or failing him/her
3. the Chairman of the Annual General Meeting
as my/our proxy to vote for me/us at the Annual General Meeting which will be held for the purpose of considering, and, if deemed fit, passing, with or without modifications, the resolutions to be proposed thereat and at each adjournment or postponement thereof, and to vote for/or against the resolutions and/or abstain from voting in respect of the shares in the issued share capital of the Company registered in my/our name/s (see note 2) as follows:
Number of votesFor Against Abstain
Ordinary Resolutions 1 to 41 Consideration of the Annual Financial Statements2 Re-appointment of external auditors.3 To re-elect the following Directors:
Directors retiring by rotation:3.1 RC Sacks3.2 GJ Halliday 3.3 WD Stander
Directors appointed during the year3.4 HR Brody3.5 KE King4 To elect the following Directors to the Audit Committee4.1 PJ Welgemoed4.2 KI Mampeule4.3 WD Stander4.4 GJ Halliday4.5 HR Brody5. Non-binding Endorsement
Non-binding Endorsement of Company’s Remuneration PolicySpecial Resolutions 1 to 46. Approval of Non-executive Directors’ Remuneration 2013/14 7. Approval of Non-executive Directors’ Remuneration 2014/15 8 General Authority to repurchase shares9. General Authority to provide financial assistance to related and inter-related companies and corporationsOrdinary Resolution No. 510. Authorisation for Company Secretary or any other Director to sign necessary documents to give effect to
resolutions
and generally to act as my/our proxy at the said Annual General Meeting.(Please indicate with an ‘X’ whichever is applicable. If no direction is given, the proxy holder will be entitled to vote or abstain from voting as the proxy holder deems fit.)
Signed at on this day of 2014
Signature/s assisted by me (where applicable)Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder/s of the Company) to attend, speak and vote in place of that shareholder at the Annual General Meeting.
Please read the notes on the reverse side hereof
Notes to the Form of Proxy
1. A certificated shareholder or ‘own-name’ dematerialised shareholder may insert the names of two alternative proxies of the shareholder’s choice in the space provided, with or without deleting ‘the Chairman of the Annual General Meeting’. The person whose name appears first on the Form of Proxy and whose name has not been deleted will be entitled and authorised to act as proxy to the exclusion of those whose names follow.
2. A shareholder’s instructions to the proxy must be indicated by the insertion of an ‘X’ in the appropriate box provided. Failure to comply herewith will be deemed to authorise the proxy to vote or to abstain from voting at the Annual General Meeting as he/she deems fit in respect of all the shareholder’s votes exercisable thereat. Where the proxy is the Chairman, such failure shall be deemed to authorise the Chairman to vote in favour of the resolutions to be considered at the Annual General Meeting in respect of all the shareholder’s votes exercisable thereat.
3. The completion and lodging of this form will not preclude the relevant shareholders from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such shareholder wish to do so. Forms of proxy should be lodged with or posted to the Company’s Transfer Secretaries to be received not later than 48 hours before the Annual General Meeting, being Wednesday, 5 November 2014 at 13h00. Nevertheless, Forms of Proxy may be lodged at any time prior to the commencement of voting on the resolutions at the Annual General Meeting. Any Forms of Proxy not received by this time must be handed to the chairperson of the meeting immediately prior to the meeting.
4. The Chairman of the Annual General Meeting may accept or reject any Form of Proxy which is completed and/or received other than in accordance with these notes and instructions, provided that the Chairman is satisfied as to the manner in which the shareholder wishes to vote.
5. Documentary evidence establishing the authority of a person signing this Form of Proxy in a representative or other legal capacity such as a power of attorney or other written authority must be attached to this form unless previously recorded by the Transfer Secretaries of the Company or waived by the Chairman of the Annual General Meeting.
6. The Chairman shall be entitled to decline to accept the authority of a person signing the proxy form:
(a) under a power of attorney; and/or(b) on behalf of a Company
if that person’s power of attorney or authority is not deposited with the Transfer Secretaries of the Company as set out in Note 3 at least 48 hours before the holding of the Annual General Meeting.
7. An instrument of proxy shall be valid for any adjournment or postponement of the Annual General Meeting, unless the contrary is stated therein, but shall not be used at the resumption of an adjourned Annual General Meeting if it could not have been used at the Annual General Meeting from which it was adjourned for any reason other than that it was not lodged timeously for the meeting from which the adjournment took place.
8. A vote cast or act done in accordance with the terms of a Form of Proxy shall be deemed to be valid notwithstanding:
(a) the previous death, insanity or any other legal disability of the person appointing the proxy; or(b) the revocation of the proxy; or(c) the transfer of a share in respect of which the proxy was given,
unless notice as to any of the above-mentioned matters shall have been received by the Company care of its Transfer Secretaries as set out in Note 3 or by the Chairman of the Annual General Meeting if not held at the principal place of business of the Company, before the commencement or resumption (if adjourned) of the Annual General Meeting at which the vote was cast or the act was done or before the poll on which the vote was cast.
9. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered by the Company’s Transfer Secretaries.
10. Where shares are held jointly, all joint holders are required to sign the Form of Proxy.
11. Any alteration or correction made to this Form of Proxy must be initialled by the signatory/ies.
Integrated Annual Report 2014
K-11
836 [
www.
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an.co
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Integrated Annual Report 2014
Incorporated in the Republic of South AfricaRegistration number: 1967/006783/06.
Share code: COM. ISIN code: ZAE000029823.(“Comair” or “the Company” or “the Group”)