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Integrated Annual Report 2013

originthe emergence of an existence

Performance Highlights for the Past Five Years

2009

2009

2009

2009

2009

2009

2009

6.0

5.0

4.0

3.0

2.0

1.0

-

250

200

150

100

50

-

45,00040,00035,00030,00025,00020,00015,00010,0005,000

-

700

600

500

400

300

200

100

-

5045403530252015105-

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

-

45.0040.0035.0030.0025.0020.0015.0010.005.00

-

2010

2010

2010

2010

2010

2010

2010

2011

2011

2011

2011

2011

2011

2011

2012

2012

2012

2012

2012

2012

2012

2013

2013

2013

2013

2013

2013

2013

Revenue (R’billion)

Profit after taxation (R’mllions)

Sectors flown

EBITDA (R’millions)

Profit per passenger (Rands)

Passengers carried

Fuel burn (litres) per 1,000 available seat kilometres

Integrated Annual Report 2013 1


Contents

2 Report Profile

4 Who We Are and What We Do

7 Group Value-added Statement

8 Chairman and CEO’s Report

12 Core Values

13 Group Objectives

14 Strategic Intent

16 Internal Control and Risk Management

20 Sustainable Development Report

45 Corporate Governance

54 Audit Committee Report

57 Remuneration Report

60 Social and Ethics Committee Report

61 Report of the Directors

67 Statement of Responsibility by the Board of Directors

68 Certificate of the Company Secretary

69 Independent Auditor’s Report

70 Statements of Financial Position

71 Statements of Comprehensive Income

72 Statements of Changes in Equity

73 Statements of Cash Flow

74 Segmental Report

75 Accounting Policies

85 Notes to the Annual Financial Statements

118 Notice of Annual General Meeting

129 Share Price Performance

130 Shareholder Analysis

Form of Proxy for Annual General Meeting


2 Integrated Annual Report 2013

Report Profile

Scope, Boundary and Reporting CycleThis Integrated Annual Report (“Report”) of the Comair Group (“the Group”)

presents the economic, social and environmental sustainability of the Group’s

airline and non-airline businesses in respect of its operations in South Africa

only, as well as presenting the financial results of the Group for the annual

financial year 1 July 2012 to 30 June 2013. While 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

material 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 in this Report.

The Report will be sent to shareholders who are recorded as such in the

Group’s Securities Register on 20 September 2013 and is available on

the Group’s website at www.comair.co.za. Printed copies are available on

request from the Group Secretary. This, the Group’s third Integrated Annual

Report, and the prior period’s Integrated Annual Report which covered

the period 1 July 2011 to 30 June 2012, was published on 28 September

2012 and 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 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, the content of this

Report 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 attempts to explain its efforts to reduce

its impact on the environment and the societies in which it operates.

This Report was prepared in accordance with International Financial

Reporting Standards, the Financial Reporting Guides 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 of the Global Reporting Initiative (“GRI”),

and undertaken in accordance with G3.1.

The Group has applied the majority of the principles contained in the

King Code of Governance for South Africa 2009 (“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 the

Group’s website www.comair. co. za. A summary report is also attached to

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 the Group’s

core values. The nature of the Group’s business implies a close relationship

with its stakeholders who include but are not limited to, those customers

who purchase the Group products and services and to whom the Group

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 its

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, the

Group would not be able to deliver its products and services in a safe,

secure or reliable way. Of the stakeholder group’s identified below, and as

part of the Group’s regular business activities, certain stakeholder groups

are considered to be more significant in determining the Group’s ability to

operate and generate value.



* Considered to be significant stakeholder groups

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 Group’s

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 16 to 19 of this Report.

Significant Events During the Reporting PeriodNo significant changes regarding the Group’s size, structure or ownership

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 AssuranceThe Group’s Financial Statements on pages 70 to 117 were audited by the

Group’s independent external auditors, Grant Thornton (Jhb) Inc. (“GT”),

which merged with PKF (Jhb) Inc., in accordance with International Standards

of Auditing. The report of the external auditors is included on page 69.

Independent “limited assurance” was also obtained from Grant Thornton

(Jhb) Inc. in terms of ISAE 3000 on whether this Report (inclusive of

the supplemental GRI Content Index Table on the Group’s website

www. comair. co.za), is in alignment with the AA1000APS (2008) principals

(inclusivity, materiality and responsiveness) as well as to assess whether the

Group’s self-declaration of a C application level is fairly stated in all material

respects, in accordance with the GRI G3.1 Guidelines. Their Assurance

Statement can be obtained from the Group Secretary or be accessed via

the Group’s website www.comair.co.za.

Contact Us We welcome the opinions and suggestions of all our stakeholders. All

opinions, suggestions and questions must please be directed to the Group

Secretary, Derek Borer. Please find our contact details included on the

inside back cover of this Report.

Communities Customers*

Media

Investors*

Industry associations*

Government and regulatory bodies*

Suppliers*

Employees and trade unions*

COMAIRLIMITED



Who We Are and What We Do

The Group is a South African company listed on the Johannesburg Stock

Exchange since 1998, offering scheduled and non-schedule airline services

within South Africa, sub-Saharan Africa and the Indian Ocean Islands as

it main business.

The Group has operated successfully in South Africa since 1946 and is

one of the only known airlines to have achieved operating profits for 68

consecutive years and to have 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, the latter under

licence from British Airways Plc. During the period under review the

Group operated 40,757 sectors (one way flights) and carried 5,050,873

passengers, an improvement over the 40,153 sectors flown and 4,795,733

passengers carried 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 the

Group 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 world-leading

technology to deliver travel and holiday packages both locally

and internationally to consumers and the retail travel trade.

Through acquisitions, expansion and partnerships, the Group has

established what it believes to be the country’s largest and broadest

digital travel distribution network. The brands under the Group’s

travel and holiday package banner include kulula holidays, Holiday

Tours, GoTravel24, MTBeds and African Dream Holidays. The

Group continues to form partnerships with industry leaders as part

of its objective to continuously expand and grow this business.

• In 2009 the Group launched its SLOW Lounges in association

with First National Bank, 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 from the fast pace of travel and modern life, and have

won numerous awards for their creative excellence.

• The Group launched its own catering unit in 2012 under the Food

Directions brand and provides onboard 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 its own pilots, the Group’s Training Centre

(“CTC”) offers flight simulator training for the full range of Boeing

737 aircraft, as well as a variety of pilot and cabin crew ground

training. In conjunction with Avion de Transport Regional (“ATR”),

it also offers simulator training for pilots of ATR turboprop

aircraft. The CTC has a client base of airlines from various African

countries, as well as the likes of Argentina, China and India.British Airways (Plc)British Airways (operated by Comair)kulula.comkulula.com and British Airways (operated by Comair)

London and the world

LivingstoneHarare

MaputoMauritius

Durban

East LondonPort Elizabeth

GeorgeCape Town

Johannesburg

Windhoek

Victoria Falls

OR Tambo and Lanseria(kulula.com)



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.

The Group currently employs 1,912 employees over its various operating platforms (1,853 in the prior reporting period).



Who We Are and What We Do (continued)

1 Kulula Air (Pty) Limited: Holds the liquor licences in respect of certain of the Group’s Lounges and looks after various service agreements relating to the Lounges

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

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

4 Amber Capital (Pty) Limited: This company was set up as part of a financing transaction for certain aircraft and is in the process of being deregistered

5 Holiday Tours (Pty) Limited: An outbound tour operating company offering holiday packages to destinations outside of South Africa

6 Online World Travel 24 (Pty) Limited: A full service online travel agency providing travel services online

7 Imperial Air Cargo (Pty) Limited: A cargo and freight company providing cargo and freight services in South Africa

8 Protea Hotel ORT (Pty) Limited: Property owning company which owns the building that constitutes Protea OR Tambo Hotel

9 Commuter Handling Services (Pty) Limited: Provides ramp handling services in South Africa to various airlines

10 Comair Mozambique Limitada: The Company is currently dormant

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

12 Comair Catering (Pty) Limited: The Company is currently dormant

Apart from Comair Mozambique Limitada, which is registered in

Mozambique, and Churchill Finance Services 23 Limited, which is registered

in Mauritius, all the other subsidiaries and entities of the Group 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. In addition, they

are exposed to immaterial risks and pose no threat to the completeness

principle.

100%(1) Kulula Air (Proprietary) Limited trading as

SLOW in the City

100%(3) Aconcagua 32 Properties

(Proprietary) Limited

100%(2) Alooca Properties (Proprietary) Limited

25%(8) Protea Hotel ORT (Proprietary) Limited

100%(4) Amber Capital (Proprietary) Limited

100%(5) Holiday Tours (Proprietary) Limited

40%(9) Commuter Handling Services

(Proprietary) Limited

49%(10) Comair Mozambique Limitada

49%(6) Online World Travel 24 (Proprietary) Limited

100%(11) Churchill Finance Services 23 Limited

30%(7) Imperial Air Cargo (Proprietary) Limited

100%(12) Comair Catering (Proprietary) Limited

Organisation Structure

COMAIRLIMITED



Group Value-added Statementfor the year ended 30 June 2013

2013R‘000

%2012R‘000

%

Wealth createdGroup revenue 5,386,581 4,162,938

Cost of materials and services (4,112,260) (3,392,452)

Value added 1,274,321 771,213

Interest income 20,217 8,200

Total value added 1,294,538 779,413

Wealth distributed 825,430 618,067

Community investment 660 0 727 0

EmployeesSalaries, wages and related benefits 671,936 52 596,456 77

Providers of capitalInterest on loans 61,641 5 19,433 2

Dividends paid to shareholders 24,215 2 - 0

GovernmentTaxation expense 66,978 5 1,451 0

Wealth retained 469,108 161,346

469,108 36 161,346 21

Accumulated profits 469,108 161,346

1,294,538 100 779,413 100



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 we

know today, which operates scheduled airline services in South Africa,

sub-Saharan Africa and the Indian Ocean Islands using 26 aircraft made

up of B737-800s, B737-400s and B737-300s. During the period under

review, the Group operated 40,757 sectors, carrying 5,050,873 passengers

and employing 1,912 employees in South Africa.

Since our listing in 1998, we have seen our Group revenue increase from

R513 million for the year ended 30 June 1998 to R5.3 billion for the year

under review, equating to a compounded annual growth rate of 17%.

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 the Group continues 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 on our customer service,

control costs and increase 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 (“IT”) 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 in line with internationally accepted airline

service standards and practices.

Strategic Priorities During the period under review, we focused 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 our safe, secure and reliable airline service;

• Constantly delivering on our promise to customers;

• Implementing a 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 our employees.

We have delivered against these priorities during the period under review.

Performance against Objectives

Financial PerformanceThe global aviation industry has shown some improvement in profitability

since 2011, with most of the plans to deal with a consistently high oil price

now delivering results. Most markets have shown contraction in capacity

along with downscaling of airline operations, increased ticket prices and a

move towards separate charges for services such as baggage, seat selection

and call centre assistance. Upgrading to more efficient aircraft remains

a prerogative in the industry, but is generally constrained by long lead

times for aircraft deliveries, and the weak balance sheets of many airlines.

In the period under review, our Group has seen a significant turnaround

in profitability from the previous reporting period, and the realisation of

our plans implemented at the end of 2011, to deal with sustained higher

operating costs. The first phase involved a freeze on all non-critical costs,

as well as a headcount and salary freeze to January 2012. In the second

phase we implemented the new enterprise system platform from Sabre

Chairman and CEO’s Report



solutions, with the cut-over of inventory in June 2012, and took delivery of

four new Boeing 737-800 aircraft towards the end of the 2012 calendar

year. We are currently working on the third phase, which is to optimise

the use of the new Sabre platform and implement the remaining modules.

While some of the cost cutting from the first phase was not sustainable, there

also emerged improved practices which will provide ongoing benefit. The new

Sabre platform has delivered substantial improvements in revenue integrity,

inventory management and optimised ticket pricing, as well as improved crew

and airport staff productivity. We see further opportunities for better customer

service and revenue growth from the ongoing enhancements to the systems.

The new generation Boeing 737-800 aircraft have delivered to expectation,

with a significant reduction in the fuel burn per seat relative to the 737-400

aircraft that they replaced. At 189 seats they also have greater revenue

generating potential, and require less maintenance down-time.

The above initiatives, amongst many others, delivered a turnaround in

earnings per share from 1.6 cents in the previous reporting period, to

47 cents for the period under review. Turnover increased by 29%, mostly

as result of increased ticket prices in response to exchange rate related

cost inflation, as well as improved inventory management as mentioned

above. The exit of the last remaining privately owned competitor airline

helped to restore seat occupancy to prior year levels. Despite improved

earnings, our net profit per passenger remains low at R45, relative to the

substantial capital investment required in the airline business.

During the period under review, the escalation of the dollar oil price since

2011 was exacerbated by the rapid devaluation of the rand against the

dollar, affecting the rand fuel price as well as various hard-currency based

maintenance, lease and distribution system costs. The fuel efficiency of

the new 737-800 aircraft, as well as the termination of some dollar-based

leases on aircraft that they replaced, helped marginally to reduce exposure

to the currency and fuel price.

Cash generation remained strong and resulted in a cash balance of

R778 million at year end.

kulula started services on the East London route in March 2013, providing

much needed cost-efficient flights to this important Eastern Cape destination,

and we commenced flights from Johannesburg to Maputo on the British

Airways brand in May 2013. The Group’s affiliated businesses, in flight

training, travel product distribution and airport lounges continued to perform

well and in line with the prior reporting period. Our catering operation,

which was launched in March 2012, has been very successful in delivering

substantial cost savings while improving our control over menu flexibility

and quality.

Customer ExperienceService levels, as measured by onboard and call centre surveys, remained

strong, with the new, in-house catering units raising the score for in-flight

food to a new high. On-time departures achieved our 85% target on

both brands. On the kulula brand, on-time performance has improved

significantly since the introduction of our new fleet of B737-800 aircraft

during the financial year.

InvestmentDuring the period under review we made substantial investments towards

the acquisition of a new fleet of Boeing 737-800 aircraft with a total cost

of R1.5 billion. The first new Boeing arrived in July 2012, and a further

three were delivered in October, November and December 2012 to join

the five 737-800s currently on lease. Four more are on order for delivery

in 2015 and 2016. By December 2012 the entire kulula fleet had been

upgraded to 737-800s, where the high seating capacity, lower operating

cost and extended potential daily utilisation were extremely productive. A

programme is also under way to replace and, where necessary, refurbish

the interiors of the British Airways fleet, and the first Boeing 737-800 was

introduced into this fleet in October of the new financial year.

Market Environment

PartnershipsWe still see partnerships as 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 grown and now includes local, regional

and international flights, holiday packages as well as car rental for Vitality

members. We have extended our First National Bank/Rand Merchant Bank

relationship with further investment in SLOW Lounges, both in the international

terminal at ORT and in Sandton. Europcar is one of our strongest partners,

and together we are the largest on-line seller of car rental in South Africa.

BrandsOur brands continue to perform well in the market. kulula is the market

leader in affordable, easily accessible air travel and continues to grow

in the cost conscious business and leisure market. kulula has become

one of South Africa’s iconic consumer brands. It is South Africa’s largest

on-line retailer by annual sales value. Our 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 new catering product, have all helped grow

the appeal of this brand. In the recent Sunday Times brand survey, the



Chairman and CEO’s Report (continued)

British Airways and kulula brands came first and second respectively in

the Domestic Business Airlines Category. 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 ClaimAs 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.

During the period under review, we lodged a third complaint against SAA

with the Competition Commission, once again in respect of SAA’s anti-

competitive travel agent incentive scheme, which complaint is currently

under investigation by the Competition Commission. It is our view that

SAA has once again implemented travel agent incentive schemes which

are by nature in contravention of the earlier Competition Tribunal order.

State Funding of SAAThe Group’s entry onto the main South African routes, and its ongoing

sustainability, relied on the commitments made by government in various

policies and legislations 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 unlevel 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 our delivery on our obligations

to our customers, employees and shareholders.

During the period under review, the Group found it necessary to challenge,

by way of an action before the South African High Courts, the R5 billion

State guarantee provided by government to South African Airways. This

challenge is on the basis that such funding is contrary to the government’s

domestic aviation policy, the Constitution, the Public Finances 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

Group will be able to amicably settle the matter with government and find

a solution whereby SAA is held accountable to operate in a commercially

responsible manner in the domestic market.

Affiliate BusinessesOur affiliates’ businesses performed well over the period and we continued to

look for aligned business opportunities. While these businesses constitute a

small percentage of our turnover, they are making an increasing contribution

to our profits. Specifically, our on-line travel business, lounges and flight

training business performed well during the year.

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

ensure that we identify and manage our risks effectively. More information

can be found in our Internal Control and Risk Report on pages 16 to 19

of this Report.

SustainabilityWe are committed to managing our business in a sustainable way. This

means considering not only the Group’s financial performance, but also

its social, environmental and economic impacts. Included in this Report is

our Sustainable Development Report which provides our shareholders and

investors 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

our impact on the environment and the societies in which we operate.

PeopleWe continue to attract the best talent in the business and continually

invest in their well being and development. Due to the tough economic

circumstances, we decided to freeze salaries to January 2013, and our

staff again demonstrated their commitment by giving their best under

these conditions. Our team was further challenged by the development,

testing and training for the cut over to our new enterprise wide Sabre

IT platform, and performed exceptionally well in delivering a seamless

system change.

We are very fortunate to have an extremely 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 in support of

our commitment to training and skills development. Further details 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. Further details are set out in our Sustainable Development Report.

EnvironmentWe 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 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.

TransformationThe Group continued to progress with its transformation programme, as

seen in the most recently issued BBBEE certificate where the score has

improved from a level 6 to a level 5 contributor. We also recently received a

clean audit report from the Department of Labour regarding our Employment

Equity plan and the implementation thereof. 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 specialised aviation skills. Further details are set out

in the Sustainable Development Report.

Looking AheadWe remain cautious regarding the strength of the domestic market,

particularly in light of the relatively weak GDP growth forecasts. The

monthly domestic passenger numbers remain 5% down on last year, and

have yet to recover to the volumes seen in 2008. The recent demise of

two local competitors did great damage to the reputation of the industry,

with customers, suppliers and bankers alike. State infrastructure suppliers

wrote off over R250 million in debt, with private sector suppliers incurring

losses of over R100 million and the credit card acquiring banks taking the

brunt of the passenger ticket liability. The challenge to industry profitability

is highlighted by the fact that in the domestic industry the average ticket

price has only increased by 14% since 2001, while operating costs have

increased by 163% and the consumer inflation index by 98%.

Although the aviation industry continues to face obstacles, we remain

confident that the recent capital investments have elevated the Group to a

new level of efficiency. The 2014 year will be the first full year of operation

for the new B737-800s, and we look forward to the delivery of the next

four aircraft in late 2015 as well as potential further aircraft orders for

delivery post 2018.

While the foundation of our Sabre platform is now implemented, we have

plans for the realisation of further value from the optimisation of the systems

and for the implementation of additional enhancements. Our on-line travel

distribution capability and inventory also continues to grow and reveal new

opportunities with the advancement of this technology.

Externally there remains some unwarranted expectation of imminent and

significant growth of air travel within Africa. We are still of the opinion that

there are substantial challenges to overcome before Africa achieves the

economies of scale that will adequately address the risks of operating in

many parts of the continent. We will therefore remain pragmatic in our

assessment of opportunities for expansion into Africa.

We will continue to focus on the behaviour of the state owned airlines where

it impacts on the prospects of the Group, and expect to spend some time in

the courts in order to enforce their compliance with legislation and policy. It

would be remiss of our duties to all of our stakeholders if we did not do so.

Despite the challenges of the industry, our much improved infrastructure

and continued focus on customer service bode well for good results in

the year ahead.

Appreciation Our sincere appreciation goes to every person within the Group who

contributed to the ongoing success of the Group during the year under

review, which includes our Directors, management and employees. A

special thanks goes 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.


existencethe fact or state of living or having objective reality

Core Values

The Group and its employees support the following core values:

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

• 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 customer’s 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 to:

• 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; and• Base appointments and promotions on competence and

performance.

Team Approach We:

• Promote positive team behaviour;• Ensure the participation of all role players in problem solving;• Set common goals; 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 and customer services.• We will always look to make investments that will provide

incremental growth based on sound investment principles.

Commitment to Quality • We will strive to be trusted by all our stakeholders.• We will always ensure that we provide a safe, secure and reliable

service.• We will always strive to improve customer satisfaction levels.

Managing Risk• We will continue to ensure that our risks are meticulously managed.• We will adopt a proactive approach to ensure compliance with

regulatory and legislative change.

Leading as a Responsible Corporate Citizen• We are committed to managing our business in a sustainable way

and upholding high standards of ethics and corporate governance practices.

Provide Growth and Development Opportunities for Employees• We strive to maintain a corporate culture that provides a good

working environment, training and skills development that assists us to attract and retain a talented workforce.

• 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.

Group Objectives



Strategic Intent

The ‘Group’s Cycle of Success’ is an indication of the Group’s strategic intent

and covers its purpose, business model, vision as well as action pillars.

The Group’s purpose, ‘We Lift You Up’, serves as a guiding force and sets

the tone in which the business exists to serve. It creates a work culture

that promotes productivity and teamwork.

The Group is committed to upliftment in every sense and to creating a

positive impact in the world.

The Group’s mantra is:

• We lift ourselves up,

• To lift each other up,

• To lift our customers up,

• To lift society up,

• To lift nations up,

• To lift the world up.

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



This business model is not unique to the Group or the airline industry. The

challenge, however, lies in making sure that the Group achieves the ’cycle’

for sustainability and growth. It means that with the right equipment and

people, we can deliver a fantastic travel experience to our customers. If

our customers are happy, they will keep coming back and when they keep

coming back our investors will continue to invest in us. This will allow the

Group to be more resilient to change and together we can move forward

in a sustainable way.

Our 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 for choosing

current and future courses of action.

The four action pillars support and guide the Group in following the business

model in the right direction.

Innovation The Group has a professional approach to

everything it does or presents. It is committed to

offering world class products and services in the

most efficient way. The Group aims to stay up

to date with current trends and can relate and

communicate to the general public, customers,

investors 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 and employees.

Integrity Safety and security underpins everything the

Group does. It represents poise and reassurance

and is trusted by the public, customers, investors

and employees.

Passion for service The Group is committed to operational efficiency

and value. It understands and anticipates the

needs of customers, investors and employees.

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).



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 51 and 52 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 the Group’s 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. 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, i.e. as either

almost certain to occur, likely to occur, possibility of occurring, unlikely

to occur, and categorises each risk as high, medium or low, detailing the

impact of the risk, the consequence of same and the mitigating factors

put in place. A 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. The Group’s Risk Committee met four (4)

times during the period under review.

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 those 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 institutions’ 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 FluctuationsThe 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 FluctuationsAs 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

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.

Safety of Passengers and EmployeesA multitude of processes and structures is 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.


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, Singapore Aerospace, 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.



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 as well as ongoing improvements in the Group product offering

in order to mitigate this risk. The Group allocates substantial resources to

safety, security, onboard product and new aircraft.



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. Various

state owned suppliers to the aviation industry have implemented tariff

increases for users that are significantly greater than the rate of inflation

and threaten to constrict the size of the market for air travel. There is also

talk of government imposing carbon taxes on airline tickets. Furthermore,

the Consumer Protection Act has, to a limited degree, impacted on airline

commercial practices, which possibly could lead to an increase in ticket

prices. As such increases in ticket prices do not benefit the airline and the

consequential constraint on demand will negatively impact industry revenue.


Sustainable Development Report and the 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.

The Group therefore undertakes risk assessments before embarking on

new routes in Africa and internationally, and 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.


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. The Group 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.



Internal Control and Risk Management (continued)

Competition The market in which the Group operates is highly competitive which 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.


Sustainable Development Report and the Corporate Governance 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 it interacts with, the Airports Company

of South Africa and other regulatory and industry bodies. Notwithstanding

same, 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.



Technical Innovation Technology forms an integral part of the Group’s business. While the Group’s

British Airways brand is, to a large extent, dependent on developments

implemented by British Airways Plc, the Group’s 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

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

community constantly reviewing processes and developing new products.

Nevertheless, the Group is always faced with managing the risk presented

by new technology, new developments by its competitors or the speed of

development.



Information Systems Security and Availability RiskThe Group is dependent on information technology (“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 IT department has worked closely with its service

providers to ensure that a better than 99% (ninety-nine percent) up time

was achieved on the Group’s networks and customer facing systems.


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.


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 the Group has recognition agreements in place

and enters into substantive negotiations annually. The Group further has

a strike action policy in place.





Key Supplier Risk The Group is dependent on suppliers for some principal business processes.

The failure of a key supplier to deliver contractual obligations may cause

significant disruption to operations. A close relationship is maintained

with key supporters in order to ensure awareness of any potential supply

chain disruption. The Group further continually monitors its key suppliers.



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 and the possible implementation of 3D Secure in

respect of credit card fraud; strict controls and authorisation frameworks

for use of Travel Bank; internal write off accounts in respect of systems

fraud; strict controls over access and transfer rights; regular password

changes in respect of bank accounts; and daily bank reconciliations, with

immediate investigation of discrepancies in respect of cash fraud. The Risk

Management Committee and, where appropriate, the Audit Committee,

considers any incidents of fraud and corruption. As a result of recent

fraud experienced, the Group has appointed Grant Thornton to conduct

an independent third party review of fraud relating to the sale of tickets.


the Corporate Governance Report and Annual Financial Statements in

this Report.

State Funding of South African Airways (SAA) During the period under review, the Group launched a legal challenge

in the High Courts of South Africa against the government’s R5 billion

guarantee provided to SAA on the basis that such action was contrary to

the 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. No court date has yet been set for the

hearing of this matter, and the Group sincerely hopes that it will be able to

amicably settle the matter with government without the need for litigation.


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 (“BBBEE”) programme that addressed

the inequality of the past and regularly reviews its BBBEE strategy, so as

to ensure that the Group remains an integral part of the political, social

and economic community in South Africa. In addition, the International

Air Services Licensing Council and the Domestic Air Services Licensing

Council review the BBBEE score of companies applying for licences in

deciding on who to grant such licences to.


Sustainable Development Report.

Skills Shortages The training, employment and retention of skilled staff, with particular

reference to pilots, remains a major challenge, particularly 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 sign 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.



Environmental Impacts, Industry Emissions and Waste ManagementThe aviation industry is extremely vulnerable to climate change response

policies, especially where these involve the pricing of carbon emissions.

The progress made at the International Civil Aviation Organisation (“ICAO”)

General Assembly in October 2010, where 190 member sates agreed to

the aspirations of achieving carbon neutral growth from 2020, together with

the global airline industry vision for a sector-wide approach of enabling

carbon neutral growth by 2020 and a huge reduction in emissions by 2050

places enormous pressure on the Group to abide by and be an industry

leader in this area. The Group support these aspirations, as well as the

implementation of a framework for reducing aviation emissions based on

carbon trading that is applied equally to all airlines and all industries as a

whole. In response to these pressures the Group has embarked on a number

of initiatives to reduce its environmental impact, including the introduction

of more fuel-efficient and quieter aircraft, as well as continuously measuring

and monitoring its emissions and waste management.




inventionthe achievement of a unique function or a radical breakthrough

Sustainable Development Report

IntroductionThe 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 our sustainability efforts we maintain our business integrity, maintain

and improve the confidence, trust and respect of our stakeholders and

increase our 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 we develop a truly sustainable industry.

The Group’s track record on delivering growth and creating long-term value

is testament to our 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 unless we offer

a safe, secure, reliable and quality product; value our employees by

following fair labour practices and offer fair remuneration, training and

development opportunities; respect the communities in which we operate

and contribute to the wellbeing of society; and care for and manage our

impact on the environment.

It is evident from our profile that we operate in a highly regulated environment.

We manage the risks effectively as reported in our Corporate Governance

and Internal Control and Risk Management Reports and despite the many

challenges faced by the airline industry, we are confident that we are

involved in a growing and sustainable business, delivering value to all our

stakeholders in the short, medium and long term.

The Group received the following external recognitions and achievements

during the period under review.

British Airways:• The Sunday Times Top Brands Awards – First in the Business to

Business category;

• The Sunday Times Top Brands Awards – Second in the Business

to Consumer category; and

• ACSA Feather Awards for Best Domestic Full Service Airline at

Cape Town and King Shaka International Airports.

kulula.com – Local Awards:• Bronze Eagles for “kulula’s 4th wife” print;

• Creative Circle Ad – 3rd place of the Month Award for Radio for

“kulula man go ad”;

• Silver PRISM award for “kulula’s ridiculously posh Boeing launch”;

and

• The Sunday Times Top Brands Award – second place in the

Business category.

International Awards:• Simplifying Awards for Social Media Excellence – second place in

the “Best use of Social Media to Drive Customer Service” category.

Loerie Awards:The Loerie Awards are presented each year in recognition of and to reward

and foster creative excellence in all areas of brand communication. In this

category the Group was awarded the following in respect of its SLOW in

the City brand”:

• Gold award for interior design;

• Silver award for the brand identity; and

• Silver award for the best media campaign.

Route Network We are a South African Group operating scheduled and non-scheduled

airline services as our main business under both our kulula and British

Airways brands (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 operates flights into sub-Saharan

Africa and the Indian Ocean Islands and the Group advertises its flights on

both its kulula and British Airways brands for sale through global distribution

systems, the majority of its revenue is earned in South African Rands 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 40,767 flights (one-way sectors) using bigger aircraft and carried

5,050,873 customers. In the prior reporting period the Group operated

40,153 flights and carried 4,795,733 customers. A diagram reflecting all

the destinations to which the Group’s two brands provided scheduled air

services during the period under review is set out below.



British Airways Route Network

kulula.com Route Network

Management Approach The Group Sustainable Development Manager is Mr Derek Borer, the

Group Company Secretary, who, as part of the Group’s 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 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 impacting 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.

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 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 and SLOW, 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 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 this media. The social media platforms used by it are

mainly Twitter, Facebook and YouTube.

While there have been no incidents of material non-compliance with any

applicable regulations or legislation concerning marketing communication,

the Group was, during the period under review, 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 has taken the decision on appeal

to the Final Appeal Committee of the Advertising Standards Authority,

which is being defended by the Group. The appeal will be heard on

26 September 2013.

No requests for information were received in terms of the South African

Promotion of Access to Information Act.

As part of its ongoing operations, the Group frequently engages with various

stakeholder groups. The Group defines stakeholders as “anyone who

affects or is affected by the Group”, and in deciding on which stakeholder

groups to concentrate its engagement efforts, the Group considered the

London and the world

LivingstoneHarare

MaputoMauritius

Durban

Port ElizabethCape Town

Johannesburg

Windhoek

Victoria Falls

Durban

East LondonGeorgeCape Town

Johannesburg (Lanseria) Johannesburg (OR Tambo)



significance of the various stakeholder groups in the achievement of the

Group’s strategic objectives. Only those significant stakeholder groups that

could fundamentally impact the ability of the Group to achieve its strategic

objectives were engaged.

Customers Providing a safe, secure, reliable and quality experience on both of the

Group’s airlines brands as well as in its travel related business is core to

the Group’s business and it therefore strives to be the airline of choice

for all travellers within its operating environment. The Group continually

measures customer satisfaction through various surveys to identify areas

for improvement in order to ensure it provides a quality service. No issues

of a material or significant nature were raised by customers during the

period under review.

The Group does monthly research on its brands, subject to that which is

detailed later in this Report, to determine its performance and identify areas

that need improvement. The result of the research undertaken is shared

amongst relevant staff members, where concerns raised are addressed.

Please refer to the section in the Sustainable Development Report under

Customer Experience for more information on the research tools used and

the overall performance of each of the Group’s brands.

To enhance the quality of its service the Group provides access to its SLOW

Lounges, 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 to qualifying customers (i.e. Gold

and Silver Executive Club Members, business class customers, the Group’s

VIP guests and RMB qualifying clients). In addition, the Group participates

in and runs two loyalty programmes/ initiatives known as the British Airways

Executive Club and the kulula credit card as follows.

British Airways Executive ClubThe 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 on British

Airways, a partner airline or on one of the oneworld® alliance partners. The

number of Avios points which 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

and credit card providers, even when they are not flying. In addition to

Avios points, members also earn Tier Points. Tier Points allow members

to move from Blue to Bronze, to Silver and finally Gold Executive Club

status, enabling them 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 cardThe kulula credit card is a Visa credit card which is issued, owned, financed

and administered by First Rand 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 flights sold via the kulula website. kulula moolah is a virtual

currency with one kulula moolah equalling R1.

MagazinesThe Group, in addition, prints two onboard magazines, namely, High Life

South Africa for its British Airways brand, and khuluma for its kulula brand,

which magazines cover a number of subjects including pertinent information

relating to the Group and its business. 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 and for khuluma, 21,000 per month. The magazines

are made available onboard the aircraft and High Life South Africa 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, onboard announcements

and advertising campaigns (including radio, TV, outdoor, print and on-line)

as well as social media channels such as Facebook, Twitter and Youtube.

Employees and Trade Unions The Group’s business is also about the people it employs, and gaining the

trust and respect of its employees is vital to its success. Paying attention to

and responding to employee needs through effective communication and

sound labour relations is important in being considered as an employer of

choice among existing and prospective employees, and vital to maintaining a

contented and loyal workforce. Employees are treated with respect, receive

competitive remuneration and are involved in the day-to-day running of

the business. All employees 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. The My Comair intranet 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;

Sustainable Development Report (continued)



• Direct e-mails to employees;

• Bi-weekly 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 of changes in policies and

procedures; and

• Interactions with employees through various workplace forums and

the Employment Equity Forum.

The Company, in addition, has the following programmes in place for all

employees:

• Think Vision. This is the Group’s formula for success and was

formulated in consultation with employees to identify values and

behaviours that are beneficial to the Group and to eliminate those

values and behaviours which are detrimental;

• Catalyst Awards. This is a programme that encourages employees

to implement the Think Vision philosophy and to inspire other

employees to do the same;

• 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 the Report;

• Tip Offs Anonymous. This is an anonymous whistle blowing facility

to enable employees to report any suspicious activities.

Currently approximately 50% (946 of the 1,912 employees in South

Africa) are members of trade unions compared with 54% (1,003 of 1,853

employees) during the previous reporting period. The Group strives to

maintain good working relationships with the trade unions, where it has

recognition agreements in place and enters into substantive negotiations

annually. These negotiations mainly focus on salary increases and

improvements to employment conditions. Current union membership is

as follows:

2013 2012

Solidarity 188 194

United Association of South Africa (“UASA”) 89 28

South African Aviation and Allied Workers Union (“SAAAWU”)

517 603

Comair Pilots Association (which is affiliated to the Airline Pilots Association of South Africa)

152 178

There was no strike action during the period under review. However,

unionised airport staff who belong to SAAAWU did refer a wage negotiation

dispute to the CCMA. The Group and the Union were fortunately able

to resolve the dispute with the parties having entered into a three-year

salary agreement. SAAAWU also referred a dispute to the CCMA regarding

bonuses, which dispute was withdrawn by SAAAWU. The Group, in

addition, reached a three year salary agreement with both the pilots’ and

the cabin crew unions.

Other than the above-mentioned, no other material or significant issues

were raised by employees or trade unions during the period under review.

Human RightsThe United Nations Global Impact is an international initiative that addresses

human rights, labour, environmental and corruption issues through a

commitment to ten principals 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 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.

• Make sure that they are 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

Organisation’s employment age requirements.

• 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


• Businesses should support a precautionary approach to environmental challenges

This will be the third 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 report.

• Encourage the development and diffusion of environmental 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 fleet of 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 up 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.

It further relies on its suppliers to deliver products and services in line with

its own standards. Other criteria also play an important role in selecting

suppliers, such as compliance with international and local quality standards,

price, stability of the organisation support network and technical capacity

and the BBBEE 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.

British Airways Plc The Group entered into a Licence Agreement with British Airways Plc (“BA”)

in and 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 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 17 years

and has, in the Group’s view, been highly beneficial to both BA and the

Group. No issues of a material or significant nature were raised by BA

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 in line with internationally accepted airline

service standards and practices.




Government Financial AssistanceThe Group received no financial assistance from government nor did it

make any contribution towards any political party.

Government, Regulatory and Industry BodiesThe airline industry is subject to extensive government and regulatory

oversight relating, amongst other things, to safety, security, licensing traffic

rights and consumer protection. The Group regularly communicates and

interacts with the following governmental, regulatory and industry bodies,

and no material or significant issues were raised by these bodies during

the period under review:

Government and Regulatory Bodies

• Department of Transport The Department of Transport (“DoT”) is responsible for providing

secretarial support to the two licensing councils and the Airports

Company of South Africa (“ACSA”) and 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 de-regulated

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.

However to ensure stability and legality in the domestic airline

industry, the Group has made various written representations

to the Minister of Transport and the two licensing councils with

respect to the legal requirement that 75% of the ownership in

South African airlines must be held by South African residents.

This issue came about as a result of an exemption application by

Fastjet Plc to purchase 100% of the shareholding in the insolvent

1Time Airlines. Fastjet Plc later decided to abandon its plans to

purchase 1Time and also withdrew the exemption applications

to the Minister. Subsequent to the period under review, Safair

Operations (Pty) Ltd (“Safair”) applied for a scheduled air service

licence to operate scheduled services in South Africa. The Group

objected to Safair’s application on the basis that 75% of the

shareholding in Safair is not held by South African residents. The

Air Services Licensing Council dismissed the Group’s objection.

The Group has referred the Air Services Licensing Council’s

decision to the High Courts of South Africa for review. The Group

has continued to participate in the Airlines Association of South

Africa (“AASA”) initiative to alert the DoT and other government

departments to concerns about the implementation of the Cape

Town Convention and Aircraft Equipment Protocol into South

African (“SA”) Law which impacts on the ability of South African

Airlines to obtain discounted aircraft financing rates. Under the

auspices of AASA, various meetings were held with senior officials

from the DoT and other government departments to discuss the

issue and agree on a remedy for the problem. The DoT is now

leading an inter-departmental committee which is evaluating the

measures needed to correct the implementation difficulties with

the Cape Town Convention.

• 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 was successful in obtaining an international

licence to operate 1,376 seats per week on the route between

Johannesburg and Maputo, Mozambique. An application to the

IASC in July 2012 to operate an additional three frequencies per

week on the route Johannesburg – Harare was unsuccessful, but a

subsequent application in April 2013 for rights on the same route

was granted. The Group also relinquished capacity to operate

on the routes, Johannesburg – Dar Es Salaam, Johannesburg –

Gaborone, Johannesburg – Walvis Bay and Johannesburg – Kigali,

which route rights had not been utilised for a period of more than

one year. The Group maintains an excellent working relationship

with this Council.

• Air Services Licensing Council Domestic air services within the Republic have been de-regulated

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. As the

Group has held and maintained a Class I and Class II Air Service

Licence 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. During the period

under review, the Group submitted one amendment application to




the Council to change the particulars of its Air Safety Officer. This

amendment application is still awaiting the approval of the ASLC.

It also made representations to the Council against an amendment

application by Fastjet Plc to purchase 100% of the shareholding

in the insolvent airline, 1Time Airlines, and subsequent to the

reporting period, objected to the Scheduled Air Services Licence

applied for by Safair Operations (Pty) Ltd.

• 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 co-coordinating the factory

inspection and registration of the new B737-800 aircraft by the

Authority so that the delivery schedule and introduction into

operation of the new aircraft could be achieved. Throughout this

process, the Group and the SACAA worked well together. Group

management continues to maintain a positive and good working

relationship with the Authority.

• Airports Company of South Africa Most large airports in South Africa are owned and operated by the

Airports Company of South Africa (“ACSA”). At an operational level,

the Group interacts with ACSA on a continuous basis and maintains

a fulltime representative in the ACSA Airport Management Centre

at OR Tambo International Airport. The Group, together with the

Airlines Association of South Africa (“AASA”) also engages ACSA

on the important issues of airport user charges and the standard of

service provided by ACSA to airport users. 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 indentifying and mitigating runway

hazards. The Group, in the prior reporting period, raised a concern

regarding a 70% increase in ACSA passenger service charge which

was implemented on 1 October 2011 and which increase affected

the Group’s operating costs and reduced passenger demand for air

services. 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 had 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 Consumer Tribunal. The Group, via AASA, 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 of 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 participation in the AASA initiative to brief government

on certain deficiencies in South Africa’s implementation of the



Cape Town Convention and Aircraft Equipment Protocol. A series of

individual meetings were held with the Departments of Transport,

Public Enterprises, Trade and Industry, Justice, International

Relations and Co-operation as well as the SACAA to brief them on

the problems with the Cape Town Convention. Thereafter, a joint

industry/government workshop on this issue was hosted by AASA

in April 2013, which resulted in the government departments

setting up a committee under the leadership of the DoT to review

the corrective measures needed to properly implement the Cape

Town Convention into SA Law. The findings of this committee are

due shortly.

• The International Air Transport Association The International Air Transport Association (“IATA”) is responsible

for promoting 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 IOSA airline safety audit scheme. The Group maintains its

membership of IATA, participates in the clearing house and

undergoes a bi-annual IOSA safety audit.

InvestorsThe 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 endeavors 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 Report, at which shareholders have the opportunity to

put questions to the Board.

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,

endeavors, 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 38 of

this 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 objective is to position the Group in the media as a trusted player in the

airline industry – a ‘champion’ of the people; to position its management

as leaders on industry issues; to educate the media about its business

and how the industry operates; as well as to 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 at being 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 Air Transport Association

Operational Safety Audit (“IOSA”) Registration and has been audited and

has passed all previous audits. The next bi-annual IOSA audit is due in




February 2014. The Group 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 also been audited

by external airlines interested in making use of our simulator training

facility and we accordingly have 21 airlines 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

are screened together with their carry-on baggage, prior to entering the

secure area of the airport; all baggage and cargo placed in the hold of the

aircraft is screened; and no aircraft departs unless the customer and his/

her baggage is onboard the aircraft subject to certain SACAA exemptions.

The key safety and quality of service priorities applied by the Group are

detailed below.

• Implementation of the IATA Operational Safety Audit (“IOSA”) The 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 discipline of the IOSA audit structure, namely, flight,

ground, cabin maintenance, security and dispatch. The Group

has participated in the IOSA programme since 2006 and has

successfully undergone a total of four 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 inflight 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 EquipmentAs mentioned above, the Group’s goal is to provide a safe, secure, reliable

and quality service to its customers and the Group strives to procure the

best and latest equipment and technology affordable to it in providing

such services.

Maintenance of its 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 also

ensures compliance with directives issued by the manufacturers of the

equipment. Its buildings, plant and other equipment are also 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 equipment, plant and buildings:

• Continuous investments in maintaining the safety and reliability of

its Aircraft. The Group subcontracts the maintenance of its aircraft

and engines to South African Airways Technical (Pty) Ltd, Israeli

Aircraft Industries and Singapore Aerospace.

• Since the successful implementation of a business-wise 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 during the period under

review. 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.

• A substantial investment towards the acquisition of a new fleet

of Boeing 737-800 new generation aircraft, which, in addition

to having delivered substantial fuel savings compared to the



B737-400 fleet, also has a greater revenue generating potential

with its bigger seating capacity and requires less maintenance

downtime. The Group took delivery of four new Boeing 737-800

aircraft during the period under review and will be taking delivery

of a further four new Boeing 737-800 aircraft during the 2015 and

2016 calendar years. In addition to the foregoing, the Group is

also currently looking to purchase/lease a further two second-hand

B737-800 aircraft during the 2013/14 financial year.

Customer Experience In providing a safe, secure, reliable and quality service the Group continuously

undertakes to seek the best and most reliable tools to measure customer

satisfaction levels in respect of both its British Airways and kulula.com

brands. This information/research aids in identifying areas of improvement

and in ensuring the delivery of a quality service to customers.

British AirwaysThe Group conducts monthly onboard research amongst randomly selected

customers with the assistance of a research company called Catalyst. The

research methodology is in line with the global brand’s research methodology

known as Global Performance Measurements (“GPMs”). The overall

customer satisfaction performance of the British Airways brand during the

period under review is reflected in the table below.

British Airways overall performance July 2012–June 2013

Overall satisfaction with British Airways

Value for money

Likelihood to travel with British Airways again

Likelihood of recommendation

Check-in process

Lounges

Departure process

Cabin environment

Meal/refreshments

Cabin crew

75%

63%

76%

73%

74%

78%

84%

61%

60%

81%

kulula.comPreviously kulula used a system called Attentive Customer Experience

(“ACE”). The ACE system was put in place with the assistance of a research

company called Ransys and was in line with GPMs. The ACE system was

a proactive live feedback solution, where randomly selected customers

were contacted via telephone and prompted with questions specific to

their unique customer experience. Upon further investigation, kulula

decided to replace the Ransys customer experience management tool with

the inQuba system. The inQuba system collects data using email based

surveys to customers and at any given time up to 2,000 surveys can be

dispatched. The rate of return on these surveys is expected to be 10%

which will result in a much higher response then we previously experienced

as well as resulting in real time feedback and maintaining the integrity of

the Group’s data. The areas of the business being surveyed are Overall

Loyalty, Booking Experience, Flight Experience and Delays. The first batch

of surveys went out on 8 July 2013 after several months spent on getting

everything in place. As this new tool has only recently been launched we

are still gathering and collecting the data and, as the data collected will

provide a better indication of kulula’s brand performance, statistics on the

previous system have not been reported on.

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 (“BBBEE”) programme that addresses the inequality of the

past through a dedicated and ongoing process and regularly reviews its

BBBEE strategy with the aim of effecting improvement across all seven pillars

of the BBBEE scorecard, as detailed later in this report. The Group is also

required to provide both the International Air Services Council and the Air

Services Licensing Council with its verification certificate and employment

equity plan when making application for licences or amendments to same.

The Group’s verification audit for the financial year 2011/12 and 2012/13

was conducted by an organisation called BEESCORE. The comparison of

the results of both audits is contained in the table below:



Elements Indication WeightingScore 2013

Score 2012

Ownership Black ownership 20 14.88 18.79

Management control

Black top management

10 2.63 2.42

Employment equity

Black managers15 2.39 1.90

Skills development

Black training spend

15 3.66 7.20

Preferential procurement

Procurement spend

20 12.42 12.16

Enterprise development

Investment in black-owned enterprises

15 15 0

Socio-economic development

Socio-economic contribution

5 4.44 5

Total Points 100 55.42 47.74

The assessment indicates that the Group achieved a total of 55.42 in 2013

compared to a total of 47.74 in 2012. The BBBEE recognition level for

the Group increased from Level 6 to Level 5, indicating an improvement

due to the Group’s focus on several elements of the BBBEE 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 Black

Empowerment Consortium known as Thelo Aviation Consortium (Proprietary)

Limited (“Thelo Aviation Consortium”) led by Thelo Aviation Investments

(Proprietary) Limited (“Thelo Aviation Investments”). In addition to the

above-mentioned BEE transaction, Thelo Aviation Investments, the biggest

shareholder in the Thelo Aviation Consortium, purchased an additional

6,172,550 shares in the Group for cash from various shareholders. This

resulted in Thelo Aviation Investments and the Thelo Aviation Consortium,

together, holding in aggregate 16.1% of the Group’s issued share capital

post the BEE transaction in 2007. Thelo Aviation Investment did, however,

during the previous financial year, sell some of the shares it purchased,

but as a result of the sale still holds an aggregate 16.1% of the Group’s

issued share capital post the BEE transaction.

The decrease in ownership score between the 2012 and 2013 financial

years appears to be as a result of the public sale 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 130 to 132 of this Report.

Management Control The Group’s Black Economic Empowerment 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 four of the Group’s 13 Directors (30,8%), excluding the alternate

Director, are previously disadvantaged persons, as opposed to 28.6% in the

previous financial year. Effectively there has been no change, with the Board

having reduced in size from 14 to 13 Directors, as a result of the resignation

of Mr AK Buchanan, a Non-executive Director. At Executive Management

level (which includes both top management and senior management), two

members (18%) of the 11 member Executive Committee are previously

disadvantaged persons compared to 17% in the prior financial year.

Employment EquityThe Group’s focus on employment equity is in line with its overall

transformation strategy.

The overall race distribution of the Group’s employees in South Africa as

at 30 June 2013, compared to 30 June 2012, is set out below:




At 30 June 2012 At 30 June 2013

White (Female and Male)

760 employees (constituting 41% of the total number of employees)

742 employees (constituting 38% of the total number of employees)

African, Coloured, Indian (designated Female and Male)

1,093 employees (constituting 59% of the total number of employees)

1,170 employees (constituting 62% of the total number of employees)

Reflected below is the summarised employment equity report (“EEA2”) relating to the Group’s profile at 31 July 2012 as required in terms of section 22

of the Employment Equity Act as well as the Group’s workforce profile as at 30 June 2013:

Summarised Employment Equity Report as at 31 July 2012Total number of employees (including employees with disabilities) in each of the occupational levels

Occupational levelMale Female Foreign nationals

TotalA C I W A C I W Male Female

Top management 0 0 0 1 0 0 0 0 0 0 1

Senior management 0 0 2 6 0 0 0 1 0 0 9

Professionally qualified and experienced specialists and mid-management

3 2 2 145 1 3 6 47 0 0 209

Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents

123 74 45 181 330 163 93 312 1 3 1,325

Semi-skilled and discretionary decision-making

48 13 10 18 68 47 34 45 1 0 284

Unskilled and defined decision-making

2 1 0 0 23 2 0 0 1 0 29

Total permanent 176 90 59 351 422 215 133 405 3 3 1,857

Temporary employees 0 0 0 0 0 0 0 0 0 0 0

Grand total 176 90 59 351 422 2,115 133 405 3 3 1,857

(A = African, C = Coloured, I = Indian, W = White)




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



Top management 0 0 0 0 0 0 0 0 0 0 0

Senior management 0 0 0 0 0 0 0 0 0 0 0

Professionally qualified and experienced specialists and mid-management

0 0 0 2 0 0 0 0 0 0 2

Skilled technical and academically qualified workers, junior management, supervisors, foremen and superintendents

0 1 0 1 0 0 1 0 1 0 4

Semi-skilled and discretionary decision-making

1 0 0 0 1 0 0 0 0 0 2

Unskilled and defined decision-making

0 0 0 0 0 0 0 0 0 0 0

Total permanent 1 1 0 3 1 0 1 0 1 0 8

Temporary employees 1 1 0 3 1 0 1 0 1 0 8

Grand total 1 1 0 3 1 0 1 0 1 0 8


Workforce profile as at 30 June 2013



1. Top management 0 0 1 2 0 0 0 0 0 0 3

2. Senior management 0 0 1 6 0 0 0 1 0 0 8

3. Professionally qualified 5 2 2 141 2 3 6 44 0 0 205

4. Skilled technical 125 77 45 185 321 148 90 280 2 2 1,275

5. Semi-skilled 58 14 13 22 109 54 45 49 1 0 365

6. Unskilled 1 1 0 0 22 2 0 0 1 0 27

Not defined 1 0 0 1 10 3 4 8 0 0 27

Total permanent 190 94 62 357 464 210 145 382 4 2 1,910

4. Skilled Technical 0 0 0 0 0 0 0 1 0 0 1

Not defined 0 0 0 0 1 0 0 0 0 0 1

Total non-permanent 0 0 0 0 1 0 0 1 0 0 2

Grand total 190 94 62 357 465 210 145 383 4 2 1,912


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 in senior

management levels and has implemented targeted plans and initiatives for identifying and fast tracking high potential candidates.

• Recruitment and selection. Active steps have been taken to target and appoint suitably qualified persons from the designated groups. The

Group is fully committed to increasing representation amongst, and the diversity of, its workforce. It has an established Employment Equity



Forum with whom it consults at regular intervals on progress toward achieving the EE Plan. Due to the targeted efforts made by the Group during

the year the number of previously disadvantaged employees has increased to 62% compared to 59% 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, especially as the pool of

suitably qualified persons from previously disadvantaged groups is less than 18%, with black persons being just over 10%.

• Job profiling, job evaluation and grading. The Group has completed a major project to profile, evaluate and verify grades for jobs in the

organisation and is able to conduct valid bench marking of positions and remuneration both internally and externally. This has significantly

improved transparency regarding recruitment and the filling of vacancies, as well as 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.

• Entry level barriers and transformational opportunities. In line with industry requirements and affordability the Group will identify and attempt to

eradicate non-regulatory entry level requirements for cabin crew. It is also currently investigating a programme to foster an interest among learners

in mathematics and science as an entry level to flying and technical careers within the airline industry.

• Electronic monitoring. 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 new five-year Employment Equity 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

Budget head-count

Male FemaleForeign

nationalsTotal

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 management2011

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, M = Male, F = Female)

Skills DevelopmentThe Group’s commitment to providing a quality air service means that skills development is a priority. The Group invested approximately R14 million

(compared to R13 million in the prior financial year) or approximately 3% (compared to 3.6% in the prior financial year) of payroll during the period under

review in support of its commitment to training and skills development. The reason for the decrease in the percentage in the Skills Development score

is as a result of the spend being allocated over an increased head count. See the section dealing with the Group’s training and development initiatives

on pages 37 to 38 for more details.



Preferential ProcurementThe 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 of the product, timeous delivery and

availability of supply and, where possible, it 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, support networks, with

particular reference to suppliers of aircraft parts, components and fuels and

the availability of products and services. The BBBEE status of South African

suppliers is also taken into account in selecting South African suppliers.

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 or

specialised airline branded products needs 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 and excluding spend on the leasing

and purchase of aircraft, the Group spent approximately 78% of its total

procurement spend with South African suppliers.

In the period under review, the Group marginally increased its score for

preferential spend from 12.1 to 12.42 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 DevelopmentThe Group scored full points for Enterprise Development this year in

comparison with no points in the prior year. This improvement is due to

the improved recording of transactions.

Socio-economic DevelopmentThe success of the Group’s Corporate Social Investment Strategy and

initiatives is reflected in the fact that it scored 4.44 out of 5 in this category.

The decrease is due to the Group having no Public Private Initiatives in place.

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; and

• Contributions to Smile Foundation, Movember and Casual Day.

Further details on the Group’s Corporate Social Investment Strategies and

Initiatives are dealt with on page 38 of this Report.

Economic ImpactThe Group, like many other companies, has many impacts on its stakeholders

through, amongst others, the creation of wealth; creation of employment

opportunities; remunerating its employees fairly and competitively, 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 this Report.

The Group’s economic impacts are driven by and influenced by the

following factors.

Ability to Offer Access to Affordable FlightsThe airline industry is fraught with many challenges involving, among

others, 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

fare 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, such as, but not limited to:

• Implementing a progressive fleet replacement programme. By

operating more modern and fuel efficient aircraft, a consistent

reduction in the cost of aircraft maintenance as well as the amount

of fuel used per seat has been achieved;

• The Group has also introduced a comprehensive fuel savings

programme with the co-operation of its pilots;

• The weight of an aircraft impacts on fuel burn and the Group

has, through the installation of light weight seats and catering

equipment, substantially reduced aircraft weight;

• Maximum 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;

• The setup of the Group’s own catering department known as ‘Food

Directions’, thereby reducing the cost of onboard 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 as a result of a substantial rise in the

price of fuel and weak exchange rate, as reflected in the Group’s Annual

Financial Statements.

Public-Private InitiativesThe 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, however no PPPs were entered into during the period under review.

For all other factors influencing the Group’s economic impact, and the

Group’s response to these factors, see the Annual Financial Statements

included in this Report.

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. How it ensures that

it achieves these goals is set out below.

The Group’s Employees

Employee Composition and Turnover RateThe success of the Group is dependent on the commitment of its 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

2013 Financial

year

2012 Financial

year

Permanent employees 1,910 1,853

Temporary employees 2 0

Note 1: Of the Group’s total number of permanent employees, it has six (6) foreign

nationals in its employ which has remained unchanged from the 2012 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. This is a reduction of 25%

on 2012 levels when 20 employees were on the Group’s Zimbabwian payroll. The

reduction is due to the Group being obliged to hand over ground handling services at

Harare and Victoria Falls airports to the Zimbabwean government, as a consequence

of which two (2) staff members were provided with alternate positions and a further

three (3) were retrenched.

Workforce composition per gender

2013 Financial

year

2012 Financial

year

Male 707 677

Female 1,205 1,176

Workforce composition per age distribution

2013 Financial

year

2012 Financial

year

Number of employees younger than 30 581 728

Number of employees between 30 and 50 1,178 985

Number of employees older than 50 153 140

While the Group does not maintain data on turnover rate by age group and

gender, its staff attrition rate during the 2012/13 financial year was 9.6%

as opposed to 16.0% in the prior reporting period.

Employee RemunerationThe 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

57 to 59.

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 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, qualification 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 they may 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 risk benefits in the form of death and disability benefits

to permanent employees in South Africa, 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 RelationsThe Group’s aim is to create and maintain sound labour relations, which

support its goal of being the employee of choice in the South African

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 this 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 23 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 4 weeks’ notice and are not

subject to any fixed term or form of restraint. This is under review.

Performance ManagementA performance management process known as “On Track”, is carried out

for all employees in terms of which employees 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, and

aims to contribute 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 get direction, guidance and feedback in order to perform

optimally by identifying ongoing accountabilities and agreeing to specific

task assignments. Ultimately this enables the Group to recognise and reward

high performance by way of performance incentive payouts.

Recruitment and Retention of Skilled StaffThe 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. It acknowledges that its

ability to recruit and retain skilled employees is a critical factor in driving

Group 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. Attempts

have been made to address this challenge through the Cadet Pilot Training

Programme. The Group selected two coloured (one female and one male)

cadets from 367 applications received in June 2013 for its Cadet Training

Programme. The Group, in addition, having regard to the fact that each pilot

that joins the Group has to be trained to fly on the 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 employment equity 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 to all employees, and does not

accept any form of unfair discrimination based on gender, race, nationality or

religion. Its employment policies, including hiring, training, working conditions,

compensation and benefits, promotion, termination and retirement are based

on individual qualifications. It treats its employees 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 relating to BBBEE of this report. During the financial year under

review no incidents of discrimination were observed or reported.

Health and Safety at WorkThe Group pays special attention to health and safety in the work place 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, 33 minor incidents were

reported (as opposed to 41 in the previous reporting period) which injuries

ranged from lifting heavy luggage on behalf of passengers, slipping on wet

floors and burns, to assault by passengers. The Group experienced one

serious injury on duty where a cabin crew member fell out of an aircraft

while trying to close the door at King Shaka International Airport. There

were no fatalities during the period under review.

The Group’s 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 to attending health and

safety committee meetings on a monthly basis. The 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 identify any further

risks and/or trends.

Health and Safety CommitteeThe Group pays due regard to the health and safety of employees and

strives to provide employees, customers and invitees with a clean and safe

working environment, and maintains reporting and notification systems.

Safety incidents and damage are reported though a safety management

system. A formal structure exists to allow safety issues to be addressed within

each department. The Group has an open reporting culture and encourages

the reporting of all incidents. Safety representatives are appointed in each

department and trained in various areas of health and safety. The Group

has a Health and Safety Committee that meets at regular intervals to discuss

pertinent issues. The Group is fully compliant with the Occupational Health

and Safety Act.

Staff WelfareBalancing 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 to call for help in dealing with everyday

situations and more serious concerns and, in this regard, the Group has

set up an onsite clinic, 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, a comprehensive online health portal providing valuable

and interactive resources on a wide range of topics approved by qualified

health professionals. 45% of the staff made contact telephonically with

the ICAS advisors and 20% made use of the counselling services during

the period under review.

The Group’s HIV/AIDS programme forms part of the Precious Cargo Wellness

Programme for all employees and allows all employees 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. The Group

runs HIV awareness workshops which allow employees the opportunity to

learn more about HIV and AIDS.

Training and Skills DevelopmentThe Group’s training programmes are focused on improving its 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 TrainingThe Group makes a significant investment in training, investing approximately

3.0% (compared to 3.6% in the previous financial year) of payroll on training.

The Group has implemented the following training programmes:

• “Take Off”: As part of its succession planning, a leadership

development programme called “Take Off”, has been running

for three consecutive years. The programme is delivered in

conjunction with the Gordon Institute of Business Science (“GIBS”)

which is underwritten by the University of Pretoria. As part of this

programme the Group’s potential future leaders are identified



and undertake courses covering several key areas of business

management in a mini-MBA styled 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 Group initiated

the programme, 11 cadets have obtained their commercial pilot

licences, five of whom are currently employed by the Group, while

some of the others have been employed at smaller airlines to obtain

sufficient flying experience to qualify for employment as a pilot with

the Group.

• Workplace Experiential Learning: During the period under review,

the Group was involved with various tertiary education providers to

provide students in the travel-related disciplines with six months’

workplace experiential training. In this regard, five students from

the Durban University of Technology completed their practical

course at King Shaka International Airport in Durban.

• Skills Development: The Group has contributed R5.7 million

to skills development of the country in the form of the Skills

Levy which is paid to the Department of Labour as compared

to R4.9 million contributed during the prior reporting period. As

part of the Group’s contribution to the community, 15 students

from Reiger Park were provided with the opportunity of gaining

six months’ work experience. Since the Group commenced

this initiative in 2006, it has awarded 135 students from the

Ekurhuleni district with passenger handling certificates. It has,

in addition, employed nine students from the Ekurhuleni district

as cabin attendants, and further offered 11 students permanent

employment.

• A Succession Development Programme (“SDP”) was developed

for middle management (Supervisors) at OR Tambo International

Airport for Ground Staff to develop to the next level of management.

Nine delegates completed the programme which is modelled on

the GIBS “Take off” programme. Extension of the SDP is planned

for middle management at Cape Town International Airport,

King Shaka International Airport and Cabin Services for the next

financial year.

• SABRE training was completed by 1,526 employees within the

airports and Call Centre environments and this was a focus of the

Group’s training for the period under review.

• In addition to the aforementioned, the Group has provided training

and development courses to its 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. Overall, 1,323 employees

underwent these training and development courses during the


• Counselling and study skills training were also provided to 110

matriculants from the William Hills Secondary School in Benoni.

Investing in the CommunityThe Group is a committed corporate citizen and, together with its staff,

endeavours, wherever possible, to improve the lives of fellow South Africans.

It 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 has assisted the Community as follows:

Project GreenThis project was launched in 2007, and its purpose is 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. The Group,

since the inception of the programme, has raised over R1 million from its

customers, which money is handed over to Food and Trees for Africa to

complete the greening process. This year, the Group was unable to collect

donations from customers directly due to its new Sabre Reservation System

not offering this facility, but it continued with its investment in Project Green

and donated R20 thousand to this worthy cause during the period.

Smile FoundationThrough funds raised by kulula’s customers in the amount of R562 thousand,

the Smile Foundation which is dedicated to transforming the lives of children

with facial conditions, was able to send three children for facial surgery. A

fourth child will be operated on soon.

Casual Day The Group sold stickers onboard in support of the Casual Day charity, and

raised approximately R3 thousand.

Movember Movember (the month formerly known as November) is a moustache

growing charity event held annually during November to help raise funds

and awareness for prostrate and testicular cancer. The Group aided this

charity by providing access to kulula’s customers via free exposure in the

onboard magazine khuluma, as well as an additional baggage allowance and

lounge access for customers who grew their moustaches during the month.




Environmental Impact The Group’s ability to operate and create and sustain value is largely driven

by its environmental impact.

The Group 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 that is the

Group’s fundamental duty to its customers and employees. The Group’s

responsibilities also extend to the impact it has on the environment.

This section of the report deals with environmental performance and

reflects the 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 “the Group”

Operational control 100%

Boundary approved Operational control

Reporting period 1 July 2012 to 30 June 2013

Base year 2011

Methodology GHG Protocol Corporate Accounting and Reporting Standard

Number of employees 1,912

Number of sites 16

Square meterage of facilities 19,276 m2

Other KPI: Passengers carried 5,050,873

As mentioned at the outset, this Report deals only with the Group and

its operations in South Africa, including its subsidiaries, but excluding

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 optimal information (Fugitive emissions

from air conditioning equipment is not a Kyoto greenhouse gas).

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 vehicles

Purchased electricity

Water supplyPaper useWaste disposal: paper

b) Stationary fuel combustion in Group owned assets (Generator and LPG fuel use)

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;

• Linking fuel saving initiatives to 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 it works closely with aviation policy makers 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 AssessmentThe Group is committed to ensuring that it complies with 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 associated with climate change,

which risks 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 on 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

vast majority of the Group’s climate impact (approximately 99%) results from

greenhouse gas emissions released through the burning of fossil based jet

fuel in aircraft engines. The international community aims to limit greenhouse

gas 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.

Globally, aviation produces around 700 million tons 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 in no-one’s interest.

It will create unemployment and undermine efforts to reduce poverty.

As it currently stands, tourism sustains one in every 12 jobs globally

and contributes approximately 9% to worldwide gross domestic product.

In addition, 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

not one either, as the 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 of enabling 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 franchisor in respect of the 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 the approach adopted by British Airways Plc 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, the Group’s greenhouse

gas (“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 this and the previous financial year.

GHG Inventory 2012/13

Total GHG emissions by scope


Scope 1 Scope 2 Scope 3 Total

Metric tonnes of CO2e

515,870.54 7,281.89 43.33 523,195.76

% change from Base year

96.5 101 Not reported on in Base year

-

GHG Inventory by Scope: Comair Limited 2012/13 Tonnes C02e

Scope 2: 1%

Scope 1

Scope 2

Scope 3

Scope 3: 0%

Scope 1: 99%

Figure 1: Distribution of total GHG emissions by scope




Emissions intensity


Total GHG emissions 523,195.76

Total emissions per fulltime employee 273.49

Emissions per square metre¹ 0.38

Emissions per passenger²0.1021

(88.17% of 2011 Base year)

(1) Square meterage intensity includes stationary combustion and electricity

consumption only.

(2) Passenger emissions intensity includes aviation fuel combustion only.

The total GHG inventory of the Group for the 2013 financial year was

523,195.76 metric tonnes of CO2e made up as follows:

Direct Emissions (Scope 1) Emissions by source

Emission sourceUnit of

measureEmission

factorConsumption

Tonnes of CO2e

Mobile fuel consumption: aircraft

litre Various 202,846,266 515,589.19

Mobile fuel consumption: vehicles

litre Various 81,620 208.27

Stationary combustion: generator fuel use and LPG fuel use

litre Various 47,356 73.08

Total Scope 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 source

Unit of measure

Emission factor

ConsumptionTonnes of

CO2e

Aviation fuel litre Various 202,846,266 515,589.19

Petrol litre Various 26,928 62.22

Diesel litre Various 54,692 146.05

Total score 515,797.46

Detailed breakdown of stationary combustion (generators)

Emission source

Unit of measure

Emission factor

ConsumptionTonnes of

CO2e

Diesel litre Various 2,025 5.41

LPG litre Various 45,331 67.67

Total score 73.08

Energy consumption within the Group 2012/13

Net Calorific Value (“CV”)

GJ/tonne

Gross CVGJ/tonne

Densitykg/m3

Densitylitres/tonne

ConsumptionUnit of

measureConsumption

Unit of measure

GJ

Aviation turbine fuel

43.90 46.20 798.72 1,252.00 162,018 tonne 162,018 tonne 7,485,221.62

Diesel 42.90 45.70 837.52 1,194.00 56,717 litre 47.50 tonne 2,170.83

LPG 46.00 49.30 508.18 1,967.80 45,331 litre 23.04 tonne 1,135.69

Petrol 44.70 47.10 734.21 1,362.00 26,928 litre 19.77 tonne 931.21



Energy consumption outside the Group 2012/13

Activity Fuel UnitVolumekg CO2e

Tonneskg CO2e

Consumption Total CO2e

WTT – liquid fuels

Aviation turbine fueltonne 656.3 162,018 106,332.27

litre 0.5242

Diesel (100% mineral diesel)tonne 677.8

litre 0.5677 56,717 32.20

WTT – gaseous fuels

Petrol (100% mineral petrol)tonne 630.3

litre 0.4628 26,928 12.46

LPGtonne

litre 0.187 45,331 8.48

Total 106,385.41

Indirect Emissions (Scope 2)


measureEmission

factorConsumption

Tonnes of CO2e

Purchased electricity kWh 1.00 7,281,891 7,281.89

Total Scope 2 7,281.89

Scope 3 Emissions


measureEmission

factorConsumption

Tonnes of CO2e

Water supply (purchased municipal water)

Million litre

344 52.97 18.22

Paper tonne 954.51 26.20 25.00

Waste tonne 21.00 5.19 0.11

Total Scope 3 43.33

Optional Information

Breakdown of fugitive emissions from airconditioning equipment:


measureConsumption

Tonnes of CO2e

Refrigerant emissions: R22 kg 19.69 35.64


Total GHG emissions by scope

GHG Inventory 2012

Scope 1 Scope 2 Scope 3 Total


507,223.01 6,060.82 53.06 513,336.89

The total GHG Inventory of the Group for the 2012 financial year was

513,336.89 metric tonnes of CO2e made up as follows:

Direct Emissions (Scope 1) Emissions by source


measureConsumption

Tonnes of CO2e

Mobile fuel consumption litre 198,759,727 507,206.25

Stationary fuel combustion

litre 8,970 16,76

Total 507,223.01

The direct emissions reflected above are broken down as follows:

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


measureEmission factor2 Consumption

Tonnes of CO2e

Aviation fuel litre 2.55 kg 198,681,977 507,016,54

Diesel litre 2.68 kg 26,938.1 72,11

Petrol litre 2.31 kg 50,811.3 117.60

Detailed breakdown of stationary fuel combustion (generator, gas)


measureEmission

factorConsumption

Tonnes of CO2e

Diesel litre 2.68 kg 2,635 7,05

LPG litre 1.53 kg 6,335 9,71




Indirect Emissions (Scope 2)


measureEmission

factorConsumption

Tonnes of CO2e

Purchased electricity

kWh 0.99 kg 6,122,039.8 6,060.82

Scope 3 EmissionsBreakdown of paper usage


measureConsumption

Tonnes of CO2e

Copy kg 14,969 41,92

Breakdown of water supply


measureEmission

factorConsumption

Tonnes of CO2e

Water supply (purchased municipal water)

Million litre

344 kg 32.37 11.14

In comparing our GHG Inventory for 2013 with that of 2012, it must be

noted that:

1. The major reason for the increase in Scope 1 emissions is due to the

following factors:

1.1 The Group increased the number of flights operated to 40,757

flights in the 2013 financial year compared to 40,153 in the

2012 financial year. From the base year in 2011 there has been

a significant improvement.

1.2 The increase in the stationary fuel combustion was due to

the Group opening its own catering department and having

purchased a number of vehicles, both petrol and diesel, to

support this operation.

2. The major reason for the increase in the Scope 2 emissions during

the period under review can be attributed to the Group having

increased the number of sites from which it operates, from 14 to 16

and therefore increasing the square meterage of its facilities from

14,525 m² in the 2012 financial year to 19,276 m² in the 2013

financial year and thereby increasing the electricity consumption.

3. The major reason for the improvement in the Scope 3 emissions is

as a result of the Group having made substantial use of borehole

water during the period under review.

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 nine (9)

Boeing 737-800 new generation aircraft, 10 Boeing 737-400

aircraft and seven (7) Boeing 737-300 aircraft. 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 four (4) new Boeing

737-800 aircraft during the period under review, 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 use

approximately 6% less fuel per seat than the older 737-800 aircraft

and 24% less fuel per seat relative to the 737-400 aircraft;

• Approximately three years ago, implemented a programme to

reduce weight onboard the aircraft by implementing a paperless

cockpit, reducing the amount of potable water carried onboard

the aircraft and reducing the weight of the aircraft galleys and thus

reducing the fuel used onboard the aircraft;

• In conjunction with Air Traffic Control, and 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 Airports Company

of South Africa, 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 of older aircraft, ensuring that all 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;

• Initiated investigations into 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 already resulted in a further reduction in fuel

consumption across the fleet. The Boeing 737-800 aircraft have

also reduced the Group’s fuel burn per passenger as they have the

capacity to carry 21 more passengers and burn 200 ℓ per hour less

fuel than the Boeing 737-400 aircraft.

Waste Management and RecyclingWhile the Group had previously implemented a programme to recycle paper,

this is the first year in which it has been able to measure the tonnage of

paper recycled, which measurement is included in the 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.

ComplianceTo 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 Relating to the Environmental Impact Section of this Report

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. generator, vehicles, etc.

Emissions The release of greenhouse gases into the atmosphere.

Emission factor Conversion factor to translate activity data, e.g. tonnes of fuel consumed, into emission data.

GHG Greenhouse gases. Under the GHG Protocol standard, six gases are accounted for, namely carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, per fluorocarbons and sulphur hexafluoride.

GHG Inventory A listing of the GHG emissions and sources that are attributable to the Group.

GHG Protocol GHG Protocol Corporate Accounting and Reporting Standard.

Indirect emissions Emissions that are a consequence of the operations of the Group, but occur at sources owned or controlled by another company.

Operational boundary

The boundary to establish the operations and sources of emissions included in the GHG Inventory.

Organisational boundary

The boundary to establish business units or entities of an organisation included in the GHG Inventory. An equity or control approach can be taken.

Reporting period The period of time, typically a calendar or financial year, which the report covers.

Scope 1 emission Direct emission from Group-owned or controlled equipment, vehicles or aircraft.

Scope 2 emission Indirect emission from the consumption of purchased electricity.

Scope 3 emission Indirect emission from other activities associated with the activities of the Group, e.g. commuter travel, business air travel and paper or water consumption.



IntroductionThe Group is subject to the Listings Requirements of the JSE Limited

(“JSE”) as well as the requirements of the Companies Act, (No. 71 of

2008) as amended (“Companies Act”). The Group supports the governance

principles and guidelines contained in the King Code on governance for

South Africa 2009 and the King Report on governance for South Africa

2009 (“King III”) and is comfortable that effective controls have been put

in place and complied with.

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.

Statement of ComplianceIn terms of the JSE Listings Requirements the Group is required to report

in respect of King III for its financial year end 30 June 2013.

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 check list is included at

the end of this Corporate Governance Report. The full King III Application

Register appears on the Group website at www.comair.co.za.

Code of EthicsThe 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.

CorruptionThe 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.

The Risk Management Committee and, where appropriate, the Audit

Committee, considers any incidents of fraud and corruption. Any material

incidents of fraud or corruption are reported to the Risk Management

Committee and, 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 started experiencing increased credit card fraud levels

in 2010 and as a result implemented a software programme known

as Cybersource Fraud Detection, which resulted in credit card

fraud reducing significantly. With the implementation of Sabre,

the call to the Cybersource system occurred after the booking

was confirmed, whereas previously it had taken place prior to

booking confirmation. As a result of this change, the Group again

experienced an upsurge in respect of credit card fraud and charge-

back from the banks. While the Group was able to cancel many of

the fraudulent credit card bookings, there were still passengers who

were able to fly and, even where the bookings were cancelled, the

banks regarded these transactions as charge-backs, resulting in

the Group breaching the charge-back thresholds set by both Visa

and Mastercard. As a result, the Group was fined approximately

R300 thousand between February and March 2013. The Group,

together with a team from Sabre, managed to implement a fix

Corporate Governance



on the Sabre system, which fix went live on 5 May 2013. The

call to the Cybersource system now takes place prior to booking

confirmation, which has resulted in a significant reduction in credit

card fraud. It will, however, take a few months before the Group

sees a significant drop in charge-backs.

The surge in credit card fraud activity was also associated with

a surge in credit card fraud activity nationwide. In response,

the Payments Association of South Africa is seeking to make

mandatory, additional anti-fraud mechanisms such as 3D Secure.

The Group is working with the Payment Association of South Africa

to see how these mechanisms can be implemented in a way that

overcomes certain technical and logistical challenges relating to 3D

Secure.

• 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 substantial credits

were 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 whereby cheap flights on both kulula and British

Airways were being advertised through Facebook. Four people

were arrested in connection with this fraud and were due to appear

in court in August 2013. The Group has implemented a number of

corrective measures to prevent this kind of fraud from recurring.

As a result of the fraud experienced, and in addition to the number of

corrective measures implemented to avoid such fraud from recurring, the

Group has appointed ORCA (Jhb) Inc. to conduct an independent third

party review of internal controls relating to the sale of tickets.

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 financial year in

question.

Compliance Compliance with all relevant laws, regulations or codes is integral to the

Group’s risk management approach. Other than the R300 thousand in

fines imposed by Visa and Mastercard in respect of credit card charge

backs, there has been no significant non-compliance by, nor fines, nor

non-monetary sanctions or prosecutions against the Group during the


Customer Privacy There have been no complaints regarding breach of customer privacy or

loss of customer data against the Group during the year.

Financial Reporting and Going ConcernThe 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.

Board of Directors

Composition of the Board The Group has a unitary Board structure. The composition of the Board

is set out on pages 63 and 64. 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 2013, the Board comprised seven independent

Non-executive Directors, three Non-executive Directors and four Executive

Directors (including the alternate Directors) as required in the listing

requirements of the JSE.

The Board is considered to be appropriately skilled with regard to its

responsibilities and the activities of the Group and is involved in all material

business decisions enabling it 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 SecuritiesThe 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

Corporate Governance (continued)



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 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 InterestAll Board members and the Group 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.

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. 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. 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 of major capital expenditure and significant acquisitions

and disposals;

• Monitoring non-financial aspects pertaining to the business of the

Group;

• Monitoring of 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, Directors have unrestricted access

to timely financial and other information, records and documents 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 senior Executive Management enabling it to

explore specific issues and developments in greater depth.

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 may be called when certain important matters arise.

Details of attendance at Board meetings are provided on pages 63 and

64 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.

ChairmanThe 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,

focussed 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’s Executive Management Committee meets on a bi-monthly

basis or more regularly if required, to consider, inter alia, investment

opportunities, operational and financial matters and other aspects of

strategic importance to the Group. Executive Managers have specific

roles and responsibilities with specific reference to their authority levels.

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’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;

• Providing counsel and guidance to the Board on their individual

and collective powers and duties;

• 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 is a Director of the Group, 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 conducted an annual evaluation and is

satisfied that no conflict exists and that the Group Company Secretary

has the requisite competence, knowledge and experience to carry out the

duties of a secretary of a public company.

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 name and qualifications of the Group Company Secretary appear on

page 64 of this Report.

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 the Board 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 the 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 Chairman of each committee, other than the Social and Ethics

Committee, which has a Non-executive Director as its Chairman, is an

independent Non-executive Director and is 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 CommitteeThe 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,

bar one member who is a Non-Executive Director who acts independently but

meets all the requirements of Section 94 of the Companies Act. All members

are financially literate and all possess substantial business and financial

expertise. 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, internal auditor and

external auditors attend the Audit Committee Meetings by invitation. The

Committee held four (4) meetings during the reporting period.

Composition of Committee and Attendance

Membership Attendance

Chairman Dr PJ Welgemoed 4/4

Members Mr KI Mampeule 3/4

Ms WD Stander 3/4

Mr AK Buchanan (Resigned from the Audit Committee on 27 November 2012)

1/2

Mr GJ Halliday (Appointed to the Audit Committee on 5 June 2013)

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;

• 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

Report on pages 54 to 56.

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, with the exception of one member

who is a Non-executive Director and acts independently. The Committee

meets at least three (3) times per year. The Chairman of the Board, CEO,




Financial Director, internal auditor and external auditors (where appropriate)

attend Risk Management meetings by invitation. The Committee held three

(3) meetings during the reporting period.



Chairman Dr PJ Welgemoed 3/3

Members Mr KI Mampeule 2/3

Ms WD Stander 2/3

Mr AK Buchanan (Resigned from the Committee on 27 November 2012)

1/2

Mr GJ Halliday (Appointed to the Committee on 5 June 2013)

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 into 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 reporting concerning risk management that is 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 Group’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 CommitteeThe members of this Committee are all Non-executive Directors who act

independently.

This Committee, as well as 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 an adequate

succession plan is in place.

The Committee met once during the year under review. The composition

of the Committee and attendance at meetings are set out below:



Chairman Mr P van Hoven 1/1

Members Mr JM Kahn 0/1

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.

Remuneration CommitteeThe 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 three times during the year under review. The composition

of the Committee and attendance at meetings are set out below.



Chairman Mr JM Kahn 1/3

Members Mr RC Sacks 1/3

Mr AK Buchanan (Resigned as a member of the Committee on 27 November 2012)

1/2

Mr P van Hoven 3/3

Ms WD Stander (Appointed to the Committee on 5 June 2013)

0/0

The remuneration policy and the execution thereof is the responsibility of

the Remunerations Committee.

The fees for Non-executive Directors and the remuneration packages of

Executive Directors for the financial year under review are disclosed in the

Report of the Directors on page 65 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 1 November 2012,

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, internal

auditors, 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 is set out below:



Chairman Mr MD Moritz 4/4

Members Mr ER Venter 4/4

Mr DH Borer 4/4

Mr KI Mampeule 3/4

Mr KV Gorringe 4/4

Ms EA Liebetrau 4/4

The main 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 this Report on page 60.

Discharge of ResponsibilitiesThe 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 SystemsThe 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 internal auditor or CAE, who in turn makes recommendations to

Executive Management as well as to the Audit Committee.

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

for 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 of deficiencies when identified.

Internal AuditThe 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 and Risk Management committees, external

auditors and operational management for resolution. The internal auditor

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 AuditThe independence of the external auditors is recognised. The Audit

Committee meets with external auditors to review the scope of 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 Chairman of the Committee. The Audit Committee is responsible

for nominating the Group’s external auditors and determining its terms of

engagement.

Summary King III Checklist

Principle Principle DescriptionApplied/Partially Applied/ Not Applied

IoDSA 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 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 Group is and is seen to be a responsible corporate citizen

Applied AAA

Principle 2.5 The Board ensures that the Group 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

Principle 2.13 CHAPTER 7 & 9: The Board reports on the effectiveness of the Group’s internal controls

Applied AAA



Principle Principle DescriptionApplied/Partially Applied/ Not Applied

IoDSA GAI Score

Explanation/Compensating Practices

Not Applied Commentary

Principle 2.14 The Board and its Directors act in the best interests of the Group

Applied AAA

Principle 2.15 The Board will/has consider/ed business rescue proceedings or other turnaround mechanisms as soon as the Group has been/may be financially distressed as defined in the Companies 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 Group 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 is independent

Applied AA

Principle 2.19 Directors are appointed through a formal process Partially applied C There is currently no formal process that specifies the appointment requirements for Directors.

Principle 2.20 The induction of and ongoing training, as well as the development of Directors are conducted through a formal process

Partially applied BB Although no induction and ongoing training programmes exist, Directors receive informal advice and professional mentoring from the senior and more experienced Directors as well as relevant information included in the Director’s 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

Partially applied B Every year, the evaluation of the Board and its committees is done informally.

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

Principle 2.25 The Group remunerates its Directors and executives fairly

Applied AAA

Principle 2.26 The Group has disclosed the remuneration of each individual Director and prescribed officer

Applied AAA

Principle 2.27 The shareholders have approved the Group’s remuneration policy

Applied AAA



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 2013. It is prepared in accordance with the recommendations of King III and the requirements of the Companies 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 2013.

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 period under review as further detailed below.

Composition and MeetingsThe Committee consists of three (3) Independent Non-executive Directors and one Non-executive Director who acts independently but meets the independent

requirements of the Companies Act, and meets at least three (3) times per annum.

The Chairman of the Board, CEO, Financial Director, internal auditor and external auditor attend Committee meetings by invitation.

During the year the Committee held three (4) meetings.

Committee Members

NameDate of

AppointmentQualifications

No. of Meetings held during year

Attendance

Dr PJ Welgemoed 28/03/1996 BCom (Hons), MCom, DCom 4 4/4

Mr KI Mampeule 05/09/2005 BA, MSc, MBA 4 3/4

Ms WD Stander 15/09/2008 BA (Hons), MBA 4 3/4

Mr AK Buchanan (Resigned as a member of the Committee on 27 November 2012 as a result of his resignation as a member of the Board)

30/11/2009 MA, LLB 4 1/2

Mr GJ Halliday (Appointed as a member of the Committee on 6 June 2013)

06/06/2013 BA (Hons), MBA 4 0/0

Abridged curricula vitae of the Committee members appear on pages 127 to 128 of this Report.

The Board re-appointed the Committee members, which appointments are subject to shareholders re-electing the Committee members at its Annual

General Meeting to be held on 30 October 2013.

Role and Function of the Committee The roles and functions of the Committee, including its statutory duties, are set out in the Corporate Governance Report on page 49 of this 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 period under review. In addition, the Committee did not receive or deal with any concerns related to matters listed in s94(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. (“GT”), which merged with PKF (Jhb) Inc.,

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 GT 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, GT, 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

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 Report and they have been appointed to do a fraud risk analysis on the sale of the Group’s airline

tickets. 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 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 system of internal financial controls.

Expertise and Experience of the Financial Director and Finance Function The Committee performed a review of the Financial Director and 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 advisor 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 internal auditor’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 they relate 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.



Audit Committee Report (continued)

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.

Going ConcernThe 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

control. 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 GT, an external independent assurance provider, to perform an assurance engagement

with the purpose of expressing a limited assurance opinion in terms of ISAE 3000 on whether selected information contained in this Report – inclusive

of the supplemental GRI Content Index Table on the Group’s website is in alignment with the AA1000 APS (2008) principals (inclusivity, materiality and

responsiveness), as well as to access whether the Group’s self declaration of a C application level is fairly stated in all material aspects, in accordance with

the GRI G3.1 Guidelines. The Assurance Statement can be accessed via the Group’s website www.comair.co.za.

The Committee has considered the Group’s sustainability information as disclosed in this Report and the supplemental GRI Content Index Table on the

Group’s website and has assessed its consistency with operational and other information known to Committee Members, and for consistency with the

Annual Financial Statements. The Committee is satisfied that the sustainability information is reliable and consistent with the financial results.

Recommendation of the Integrated Annual Report for Approval by the Board The Committee recommended this Report for approval by the Board on 9 September 2013.

The Committee is satisfied that it has complied with all its legal, regulatory and other responsibilities during the period under review.

Dr PJ WelgemoedChairman: Comair Limited Audit Committee9 September 2013



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 ApproachThe Group’s remuneration policy provides full details of the remuneration approach for Directors, senior managers and Non-executive Directors.

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, that furthermore guides the level of salaries of all Directors and senior management, is aimed at:

• Ensuring that no discrimination occurs;

• Recognising exceptional and value adding performance;

• Encouraging team performance and participation; and

• Promoting cost-effectiveness and efficiency.

In order to balance external equity with affordability and to ensure that market-related salaries are offered to staff, the Group participates in several salary

surveys and uses that information for benchmarking purposes.

Remuneration StructuresManagement remuneration structures comprise of fixed and variable components:

• Fixed pay: base salary and benefits; and

• Variable pay: short term merit bonus based on personal performance (40%), Group performance (40%) and Board discretion (20%) and a

long-term executive incentive scheme based on Group profits before tax and the Group’s share price performance (payable every three years).

Base SalaryMarket data is used to benchmark individual salary levels for Directors and senior managers. This information, combined with the individual’s performance

assessment, comprises the key consideration for annual salary reviews.

Retirement BenefitsThe 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.



Remuneration Report (continued)

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

Variable Pay

Executive Directors and senior managers participate in management incentive schemes.

Short-term Incentives

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

Payment of short-term incentive bonuses to employees is based on 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.

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

• Pilot group – Guaranteed 13th cheque; and

• Rest of staff – Proportion of a 13th cheque based on personal performance and Group affordability and a discretionary amount based on the

Group’s performance.

Long-term Incentive Scheme (“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 purpose of the Scheme is to retain talent as well as to reward participants in the Scheme based on the Group’s performance and comprises of two

components as follows:

• Profit linked component (35%) In terms of this component of the Scheme, 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 (6) 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’ RemunerationRemuneration 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 65 to 66.

Non-executive Directors’ RemunerationNon-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 1 November 2012. The Non-executive Directors’ fees for the year ended 30 June 2013 are included in the

joint remuneration payable to the Group’s Non-executive Directors, as included in Special Resolution Number 1 in the Notice of Annual General Meeting

to be held on 30 October 2013.

The Directors’ fees per meeting, for the financial years ended 30 June 2012 and 30 June 2013, as well as the proposed fee per meeting for the financial

year ending 30 June 2014, are set out in the table below. Commencing from the 2013 financial year, members of the committees are also remunerated

for their participation as members of the various committees.

Directors’ fees

MeetingAnnual fee for the year ended 30 June 2012

R

Annual fee for the year ended 30 June 2013

R

Annual fee for the year ended 30 June 2014

R

Chairperson: Board 370,000 1,000,000 1,200,000

Vice-chairperson: Board 250,000 250,000 350,000

Member: Board 120,000 120,000 150,000

Fee per meeting for the year ended

30 June 2012R

Fee per meeting for the year ended

30 June 2013R

Proposed fee per meeting for the year ended

30 June 2014R

Chairperson: Audit Committee 10,000 10,000 13,000

Member: Audit Committee - 5,000 6,500

Chairperson: Risk Committee 10,000 10,000 13,000

Member: Risk Committee - 5,000 6,500

Chairperson: Nominations Committee 10,000 10,000 13,000

Member: Nominations Committee - 5,000 6,500

Chairperson: Social and Ethics Committee - 10,000 13,000

Member: Social and Ethics Committee - 5,000 6,500

Chairperson: Remuneration Committee 10,000 10,000 13,000

Member: Remuneration Committee - 5,000 6,500

Chairperson: Pension Fund 10,000 10,000 13,000


applicationthe action of applying knowledge and theory into operation

Social and Ethics Committee Report

The Board established the Group’s Social and Ethics Committee (“the Committee”) in November 2011. This report is presented by the Committee to describe how it has discharged its statutory duties in terms of the Companies Act (No. 71 of 2008) (“the Companies Act”).

The composition and number of meetings held or to be held by the Committee is set out in the Corporate Governance Report in this Report on page 51.

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

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

The Committee’s monitoring role also includes the monitoring of relevant legislation, other legal requirements or prevailing codes of good practice specifically with regard to matters relating to social and economic development, good corporate citizenship, the environment, health and public safety as well as labour and employment.

The Committee is further responsible for annually reviewing, in conjunction with Executive Management, the Group’s material sustainability issues. The Committee must also review and approve the sustainability content included in this Report.

During the past financial year, the following reports relating to the Committee’s functions were produced by Management and reviewed by the Committee:

• Labour and Employment Relationships and Educational Development Report;• Occupational Health and Safety Report; and• Flight Safety Report.

Each of the abovementioned reports was analysed in depth and in one case, namely in the area of Black Enterprise Development, management was required to present an action plan on how to improve the Group’s performance. All the reports were subsequently also approved by the Board, upon the recommendation of the Committee. The Committee is satisfied with the Group’s standing in the areas reviewed and that the current level of combined assurance provides the necessary independent assurance over the quality and reliability of the information presented.

The Committee is also required to report, through one of its members, to the Group’s shareholders on the matters within its mandate at the Group’s Annual General Meeting. Shareholders will be referred to this Report read with the Sustainable Development Report, at the Group’s Annual General Meeting on 30 October 2013.

MD MoritzChairman: Social and Ethics Committee9 September 2013


Integrated Annual Report 2013applicationReport 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 2013.

Nature of BusinessThe main business of the Group is the provision of domestic and regional air services in the Southern African market, trading under the names of British

Airways and kulula. In addition to the foregoing, the Group provides other travel related services, undertakes third party simulator training and operates

airline lounges.

General Review of Main ActivitiesThe Group currently operates a fleet of twenty six aircraft flying to the destinations as set out on pages 4 and 21 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 ResultsFull details of the financial results are set out on pages 70 to 117 of this Report for the year ended 30 June 2013.

DividendsNotice is hereby given that a gross cash dividend of 10 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 1,5 cents per ordinary share, resulting in a net dividend of 8,5 cents per ordinary share,

unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of the applicable double tax agreement. No STC credits

were available to be utilised as part of this declaration. The Company’s tax reference number is 9281/87/47/1/0 and the number of ordinary shares in

issue at the date of this declaration was 489,176,471.

In accordance with the provisions of Strate, the electronic settlement and custody system used by the JSE Limited, the relevant dates relating to the

dividend are as follows:

Event Date

Last day to trade (cum dividend) Friday, 11 October 2013

Shares commence trading (ex dividend) Monday, 14 October 2013

Record date (date shareholders recorded in books) Friday, 18 October 2013

Payment Date Monday,21 October 2013

Share certificates may not be dematerialised or rematerialised between Monday, 14 October 2013 and Friday, 18 October 2013, both days inclusive.

Share CapitalThe authorised share capital of the Group remained unchanged during the period under review.

AuditorsThe auditors of the Group, PKF (Jhb) Inc. merged with Grant Thornton during the year and the name has changed to Grant Thornton (Jhb) Inc.



Report of the Directors (continued)

Subsidiaries and AssociatesDetails of the Group’s subsidiaries and associates are recorded in Notes 4 and 5 of this Report on pages 88 to 92.

Subsequent EventsThe 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 CapitalThe following Directors of the Group held direct and indirect interests in the issued share capital of the Group at 30 June 2013 as set out below.

2013 2012

DirectorDirect

BeneficialIndirect

BeneficialHeld by

AssociatesTotal

Shares%

Direct Beneficial

Indirect Beneficial

Held by Associates

Total Shares

%

MD Moritz - 50,000,000 9,462 50,009,462 10.23 - 49,623,607 9,462 49,633,069 10.15

P van Hoven 204,647 - - 204,647 0.04 204,647 - - 204,647 0.04

ER Venter 1,531,883 - - 1,531,883 0.31 1,106,983 - - 1,106,983 0.23

MN Louw 36,732 - - 36,732 0.01 1,000 - - 1,000 0.0

PJ Welgemoed 118,788 - - 118,788 0.02 118,788 - - 118,788 0.02

KI Mampeule** - - - - 0.0 - - - - 0.0

RS Ntuli** - 5,772,615 - 5,772,615 1.18 - 5,772,615 - 5,772,615 1.18

DH Borer* 188,000 - - 188,000 0.04 188,000 - - 188,000 0.04

AK Gupta *** - 22,794,439 - 22,794,439 4.66 - 22,800,000 - 22,800,000 4.66

TOTAL 2,080,050 78,567,054 9,462 80,656,566 16.49 1,619,418 78,196,222 9,462 79,825,102 16.32

* 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 AK Gupta has a 30% direct shareholding and a 10% indirect shareholding.

There has been a change in the Directors’ interests in share capital from 30 June 2013 to the date of posting of this Report in that Mr MN Louw purchased

an additional 75,000 Group shares on 10 September 2013, taking his total shareholding to 111,732.

Special ResolutionsSince its last annual report, the Group passed 6 (six) special resolutions at its Annual General Meeting held on 1 November 2012, namely:

• A special resolution for approval of Non-executive Directors’ remuneration for 2011/12;

• A special resolution for the approval of Non-executive Directors’ remuneration for 2012/13;

• A special resolution giving the Group a general authority to re-purchase its shares;

• 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;

• A special resolution cancelling the Group authorised but not issued one billion “N” shares of R0.001 each; and

• A special resolution in terms of which the Group’s Memorandum and Articles of Association were abrogated in favour of a Memorandum of

Incorporation as required by the Companies Act.


Integrated Annual Report 2013application

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

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 AttendanceThe 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. Since certain Independent Non-executive Directors have served for a period

longer than nine years, the Directors’ independence or character and judgement was assessed. This independence was not considered to be affected or

impaired by the duration of service.

Name, Age, Gender (M = Male, F = Female), Race (W = White, B = Black, Coloured or Indian), Qualification

Nationality Business Address

Four (4) Board Meetings held during the year:Attendance

Occupation

Pieter van HovenAge: 69 (M) (W)

South African 1 Marignane Drive,Bonaero Park,Kempton Park, 1619

4/4 Independent Non-executiveChairman

Martin Darryl MoritzAge: 68 (M) (W)BCom; LLB


4/4 Non-executive Joint Deputy Chairman

Ronald Sibongiseni Ntuli Age: 43 (M) (B)LLB

South African Thelo Group (Pty) Ltd, Ground Floor, Block 9, St. Andrews Inanda Greens Business Park, 54 Wierda Road West, Wierda Valley, 2196

4/4 Non-executive Joint Deputy Chairman

Rodney Cyril SacksAge: 63 (M) (W)HDip. Law; HDip. Tax

South African 550 Monica Circle, Suite 201, Corona, CA 92880, USA

2/4 Independent Non-executive Director

Dr Peter Johannes Welgemoed Age: 70 (M) (W)BCom (Hons); MCom; DCom



Jacob Meyer KahnAge: 74 (M) (W)BA (Law); MBA; DCom (hc); SOE

South African Retired Chairman of SABMiller Plc, 4 East Road, Morningside, 2057


Khutso Ignatius MampeuleAge: 48 (M) (B)BA; MSc; MBA

South African C/o Lefa Group Holdings (Pty) Ltd, Mulberry Hill Office Park, Broadacres Ave, Dainfern, 2191


Wrenelle Doreen Stander Age: 47 (F) (B)BA (Hons); MBA

South African 272 Kent Avenue, Randburg, 2194





Name, Age, Gender (M = Male, F = Female), Race (W = White, B = Black, Coloured or Indian), Qualification

Nationality Business Address

Four (4) Board Meetings held during the year:Attendance

Occupation

Atul Kumar Gupta Age: 45 (M) (B)BSc

South African 89 Gazelle Avenue, Corporate Park South, Old Pretoria Main Road, Midrand, 1682


Alan Kerr Buchanan1

Age: 55 (M) (W)MA; LLB

British British Airways Plc,Waterside (HBA3),Harmondsworth,Middlesex UB7 OGB, U.K

2/2 Non-executive Director

Gavin James Halliday Age: 49 (M) (W)BA (Hons Economics); MBA

British British Airways Plc,Waterside (HAA2),Harmondsworth, Middlesex UB7 OGB, UK

4/4 Non-executive Director

Erik Rudolf Venter Age: 42 (M) (W)BCom; CA(SA)


4/4 CEO

Ranil Yasas Sri-ChandanaAge: 40 (M) (B)BCompt (Hons); MCom; CA(SA); CFA; HDip. Co.Law


4/4 Finance Director

Martin Nicolaas LouwAge: 58 (M) (W) BMil

South African 1 Marignane Drive,Bonaero Park, Kempton Park, 1619

4/4 Director Operations

Derek Henry Borer2

Age: 51 (M) (W)BCom; LLB


4/4 Alternate Director to Martin Nicolaas Louw, Rodney Cyril Sacks and Company Secretary

Notes

1 Mr Alan Kerr Buchanan, a Non-executive Director, having left the employ of British Airways, resigned as a Non-executive Director of the Board on 27 November 2012.

2 Mr Derek Henry Borer was appointed as an alternate Director to Rodney Cyril Sacks, an independent Non-executive Director, on 17 October 2012.

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

No share options were issued to employees through the share incentive scheme during the year and 5,525,864 options remain 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 2013application

Directors’ Remuneration 2013

NameFor

services as Directors

Related committee

workPackage1 Performance

related2 PensionGroup

life and disability

MedicalTotal 2013

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

Executives

Mr ER Venter - - 2,381 3,000 307 60 35 5,783

Mr RY Sri Chandana - - 1,330 1,341 142 28 31 2,872

Mr MN Louw - - 1,717 1,693 215 42 32 3,699

Mr DH Borer - - 1,314 1,332 159 31 37 2,873

- - 6,742 7,366 823 161 135 15,227

Non-executives

Mr P van Hoven 1,000 60 - - - - - 1,060

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

Ms WD Stander 120 30 - - - - - 150

1,980 260 - - - - - 2,240

1,980 260 6,742 7,366 823 161 135 17,467

Share-based payments 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.

Further details regarding the Group’s remuneration policies are set out in the Remuneration Report, which can be found on pages 57 to 59 of this Report.



Directors’ Remuneration 2012

NameFor

services as Directors

Related committee

workPackage1 Performance

related2 PensionGroup

life and disability

MedicalTotal 2012

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

Executives

Mr ER Venter - - 2,064 1,020 292 57 31 3,464

Mr GS Novick4 - - 6,622 - 146 28 18 6,814

Mr RY Sri Chandana - - 1,269 618 133 26 26 2,072

Mr MN Louw - - 1,606 780 208 40 29 2,663

Mr DH Borer - - 1,232 600 153 30 34 2,049

- - 12,793 3,018 932 181 138 17,062

Non-executives

Mr P van Hoven 370 30 - - - - - 400

Mr D Novick 292 - - - - - - 292

Mr MD Moritz 250 10 - - - - - 260

Mr RS Ntuli 250 - - - - - - 250

Dr PJ Welgemoed 120 70 - - - - - 190

Mr JM Kahn 120 10 - - - - - 130

Mr KI Mampeule 120 - - - - - - 120

Ms WD Stander 120 - - - - - - 120

1,642 120 - - - - - 1,762

1,642 120 12,793 3,018 932 181 138 18,824

Notes

1 “Package” includes the following regular payments made in respect of the financial year while actively employed: Cash salary, S&T allowances and vehicle allowances.

2 Performance related” refers to the incentive rewards in respect of the financial year ended 30 June 2012.

3 Remuneration receivable by the Directors will not vary as a result of any proposed issue for cash or repurchase of shares.

4 GS Novick resigned as an Executive Director and Joint CEO on 31 December 2011. His package was made up as follows:

Normal benefits up to termination R1,082,000.00

Accumulated leave pay R 160,000.00

Severance pay R4,180,000.00

Restraint of Trade payment (12 months from 31 December 2012) R1,200,000.00

Total Package R6,622,000.00



Integrated Annual Report 2013applicationStatement of Responsibility by the Board of Directors

The Directors are responsible for the preparation, integrity and fair presentation of the Financial Statements and other financial information included in

this report.

The Financial Statements, presented on pages 70 to 117, have been prepared in accordance with International Financial Reporting 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 Financial Statements. The Directors have no reason to believe that the Company or the Group

will not be going-concerns in the foreseeable future, based on forecasts and available cash resources. The Financial Statements support the viability of

the Company and the Group.

The Financial Statements have been audited by the independent accounting firm, Grant Thornton (Jhb) Inc., which was given unrestricted access to all

financial records and related data, including minutes of all meetings of shareholders, the Board of Directors and Committees of the Board. The Directors

believe that all representations made to the independent auditors during the audit were valid and appropriate.

The Financial Statements, which appear on pages 70 to 117, were approved by the Board of Directors on 9 September 2013 and signed on its behalf.

ER Venter P van HovenCEO Chairman

9 September 2013 9 September 2013


explorationapplying what we know and have to innovate and learn

Certificate of the Company Secretary

In terms of section 88(2)(e) of the Companies Act (Act No. 71 of 2008), as amended (“Companies Act”), I certify that the Company has lodged all returns

and notices as required by the Act and that all such returns are true, correct and up to date.

DH BorerCompany Secretary

9 September 2013



applying what we know and have to innovate and learn

We have audited the consolidated and separate Financial Statements of

Comair Limited, which comprise the statements of financial position as at

30 June 2013, and the statements of comprehensive income, statements

of changes in equity and statements of cash flows for the year then ended,

and the notes, comprising a summary of significant accounting policies and

other explanatory information as set out on pages 70 to 117.

Directors’ Responsibility for the Consolidated Financial StatementsThe Company’s Directors are responsible for the preparation and fair

presentation of these consolidated and separate Financial Statements

in accordance with International Financial Reporting Standards, and the

requirements of the Companies Act of South Africa, and for such internal

control as the Directors determine is necessary to enable the preparation of

consolidated and separate Financial Statements that are free from material

misstatements, whether due to fraud or error.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated and

separate Financial Statements based on our audit. We conducted our audit

in accordance with International Standards on Auditing. Those standards

require that we comply with ethical requirements and plan and perform

the audit to obtain reasonable assurance whether the consolidated and

separate Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about

the amounts and disclosures in the Financial Statements. The procedures

selected depend on the auditors’ judgment, including the assessment of

the risks of material misstatement of the Financial Statements, whether due

to fraud or error. In making those risk assessments, the auditors consider

internal control relevant to the entity’s preparation and fair presentation

of the Financial Statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity’s internal control. An audit also

includes evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by Directors, as well as

evaluating the overall presentation of the Financial Statements.

We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

OpinionIn 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 2013, 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 ActAs part of our audit of the consolidated and separate Financial Statements for

the year ended 30 June 2013, we have read the Directors’ Report, the Audit

Committee’s Report and the Company Secretary’s Certificate for the purpose

of identifying whether there are material inconsistencies between these

reports and the audited consolidated and separate Financial Statements.

These reports are the responsibility of the respective 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. Chartered Accountants (SA)

Registered Auditors

Per: B Frey09 September 2013

42 Wierda Road West

Wierda Valley

2196

Independent Auditor’s Report



Statements of Financial Positionas at 30 June 2013

Group Company

Notes2013 2012 2013 2012

R’000 R’000 R’000 R’000

AssetsNon-current assets 2,361,275 1,496,409 2,334,480 1,475,384

Property, plant and equipment 1 2,314,082 1,432,509 2,262,467 1,379,021

Intangible assets 2 41,475 51,515 41,475 51,515

Loan to share incentive trust 3 - - 5,337 5,579

Investments in and loans to subsidiaries 4 - - 25,201 23,710

Investments in and loans to associates 5 2,050 8,717 - 15,559

Goodwill 6 3,668 3,668 - -

Current assets 1,244,581 709,358 1,242,770 716,848

Inventory 7 7,086 11,389 7,086 11,389

Trade and other receivables 8 420,656 429,199 399,133 410,444

Investments in and loans to subsidiaries 4 - - 31,513 32,016

Investments in and loans to associates 5 7,852 7,727 7,852 7,852

Taxation 30,942 14,948 30,558 14,919

Cash and cash equivalents 9 778,045 246,095 766,628 240,228

3,605,856 2,205,767 3,577,250 2,192,232

Equity and LiabilitiesCapital and reserves 1,021,200 814,461 1,014,103 810,130

Share capital 10 5,578 5,578 5,633 5,633

Share premium 123,631 123,631 123,742 123,742

Non-distributable reserves 23,996 20,568 23,996 20,568

Accumulated profits 867,995 664,684 860,732 660,187

Non-current liabilities 1,273,713 184,946 1,274,695 185,148

Interest-bearing liabilities 11 1,133,767 85,907 1,133,767 85,907

Deferred taxation 12 135,696 99,039 136,678 99,241

Share-based payments 13 4,250 - 4,250 -

Current liabilities 1,310,943 1,206,360 1,288,452 1,196,954

Trade and other payables 13 1,058,510 788,729 1,036,019 779,323

Provisions 14 116,212 73,094 116,212 73,094

Interest-bearing liabilities 11 136,221 344,537 136,221 344,537

3,605,856 2,205,767 3,577,250 2,192,232

Net asset value per share (cents) 211.1 168.4




Statements of Comprehensive Incomefor the year ended 30 June 2013

Group Company

Notes2013 2012 2013 2012

R’000 R’000 R’000 R’000

Revenue 16 5,386,581 4,162,938 5,366,240 4,136,449

Operating expenses (4,765,356) (3,974,163) (4,742,297) (3,950,231)

Operating profit before depreciation, impairment and profit (loss) on sale of assets 621,225 188,775 623,943 186,218

Depreciation (241,582) (153,270) (239,709) (152,989)

Impairments (6,817) (4,049) (17,559) (4,049)

Profit (loss) on sale of assets 984 (10,669) 984 (10,669)

Profit from operations 17 373,810 20,787 367,659 18,511

Interest income 20,217 8,200 19,856 7,914

Interest expense 18 (61,641) (19,433) (61,445) (19,433)

Share of (loss) profit of associates 5 (1,725) 1,329 - -

Profit before taxation 330,661 10,883 326,070 6,992

Taxation 19 (103,135) (3,202) (101,066) (1,527)

Profit for the year 227,526 7,681 225,004 5,465

Other comprehensive incomeRealised profit due to change in fair value of cash flow hedge net of taxation - 395 - 395

Total comprehensive income for the year attributable to equity holders of the parent 227,526 8,076 225,004 5,860

Earnings per share (cents) 20 47.0 1.6

Diluted earnings per share (cents) 20 47.0 1.6



Statements of Changes in Equityfor the year ended 30 June 2013

ShareCapital

Share Premium

Share-basedPayment Reserve

Hedging Reserve

AccumulatedProfit

Total

R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

Group

Balance at 1 July 2011 5,562 123,599 17,140 (395) 654,615 800,521

BEE share-based payments - - 3,428 - - 3,428

Total comprehensive income for the year - - - 395 7,681 8,076

Shares sold by Share Trust 16 32 - - 2,388 2,436

Movement for the year 16 32 3,428 395 10,069 13,940

Balance at 30 June 2012 5,578 123,631 20,568 - 664,684 814,461


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

Company

Balance at 1 July 2011 5,633 123,742 17,140 (395) 654,722 800,842


Total comprehensive income for the year - - - 395 5,465 5,860

Movement for the year - - 3,428 395 5,465 9,288

Balance at 30 June 2012 5,633 123,742 20,568 - 660,187 810,130


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




Statements of Cash Flowfor the year ended 30 June 2013

Group Company

Notes2013 2012 2013 2012

R’000 R’000 R’000 R’000

Cash generated from operating activities 830,694 273,226 826,189 278,560

Cash receipts from customers 5,395,124 4,204,413 5,377,551 4,194,630

Cash paid to suppliers (4,440,476) (3,914,983) (4,430,503) (3,901,913)

Cash generated by operations 21 954,648 289,430 947,048 292,717

Interest paid (61,641) (19,433) (61,445) (19,433)

Interest received 20,217 8,200 19,856 7,914

Taxation paid 22 (82,530) (4,971) (79,270) (2,638)

Cash utilised in investing activities (104,441) (134,388) (105,242) (135,330)

Additions to property, plant and equipment (105,096) (145,099) (105,151) (142,626)

Additions to intangible assets (329) (42,744) (329) (42,744)

Proceeds on disposal of property, plant and equipment

984 7,020 984 6,419

Decrease in loan to share incentive trust - - 242 2,175

Increase in subsidiaries loans - - (988) (4,989)

Decrease in associates loans - 46,435 - 46,435

Cash utilised in financing activities (194,303) (126,774) (194,547) (129,210)

Shares sold by Share Trust - 2,436 - -

Dividend paid (24,215) - (24,459) -

Repayment of interest-bearing liabilities (170,088) (129,210) (170,088) (129,210)

Net increase in cash and cash equivalents 531,950 12,064 526,400 14,020

Cash and cash equivalents at the beginning of the year 246,095 234,031 240,228 226,208

Cash and cash equivalents at the end of the year 778,045 246,095 766,628 240,228



Segmental Reportfor the year ended 30 June 2013

Airline Non-airline Total

R‘000 R‘000 R‘000

30 June 2013

Revenue 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 liabilitiesSegmental 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

30 June 2012Revenue 4,076,004 86,934 4,162,938

Operating profit before depreciation, impairment and loss on sale of assets 169,705 19,070 188,775 Loss on sale of asset (10,669) - (10,669)Impairment (4,049) - (4,049)Depreciation (148,030) (5,240) (153,270)

Profit before interest, dividend and taxation 6,957 13,830 20,787

Segmental assets and liabilitiesSegmental assets 2,039,582 166,185 2,205,767 Segmental interest-bearing liabilities (378,072) (52,372) (430,444)Other segmental liabilities (917,178) (43,684) (960,862)

Segmental net asset value 744,332 70,129 814,461 Segmental capital additions (excluding borrowing costs capitalised) during the year 305,131 3,046 308,177

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 the control of the South African operation.

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




Accounting Policies

Principal Accounting PoliciesThe 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 principle accounting

policies 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 2012.

Adoption of Standards and Interpretations Effective in 2013The following new standards were adopted during the finacial year under

review, however none had significant financial impacts for the Group.

IAS 1: New requirements to group together items within OCI that

may be reclassified to the profit or loss section of the income

statement in order to facilitate the assessment of their impact on

the overall performance of an entity. (1 July 2012)

IAS 12: Rebuttable presumption introduced that an investment property

will be recovered in its entirety through sale. (1 January 2012)

A full list of standards that will become effective in the next financial year

are disclosed in note 28.

Principles of ConsolidationThe consolidated Annual Financial Statements incorporate the Annual

Financial Statements of the Company and all entities, including special

purpose entities, which are controlled by the Company.

Control exists when the Company has the power to govern the financial and

operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries are included in the consolidated Annual Financial

Statements from the effective date of acquisition to the effective date of

disposal.

All intra-group transactions, balances, income and expenses are eliminated

in full on consolidation.

Business CombinationsThe Group accounts for business combinations using the acquisition

method of accounting. The cost of the business combination is measured

as the aggregate of the fair values of assets given, liabilities incurred or

assumed and equity instruments issued. Costs directly attributable to the

business combination are expensed as incurred, except the costs to issue

debt which are amortised as part of the effective interest and costs to issue

equity which are included in equity.

Contingent consideration is included in the cost of the combination at fair value

as at the date of acquisition. Subsequent changes to the assets, liabilities or

equity which arise as a result of the contingent consideration are not affected

against goodwill, unless there are valid measurement period adjustments.

The acquiree’s identifiable assets, liabilities and contingent liabilities which

meet the recognition conditions of IFRS 3 Business Combinations are

recognised at their fair values at acquisition date, except for non-current

assets (or disposal group) that are classified as held-for-sale in accordance

with IFRS 5 Non-current Assets Held-for-Sale and discontinued operations,

which are recognised at fair value less costs to sell.

Contingent liabilities are only included in the identifiable assets and liabilities

of the acquiree where there is a present obligation at acquisition date.

On acquisition, the Group assesses the classification of the acquiree’s

assets and liabilities and reclassifies them where the classification is

inappropriate for Group purposes. This excludes lease agreements and

insurance contracts, whose classification remains as per their inception date.

Non-controlling interest arising from a business combination is measured

either at their share of the fair value of the assets and liabilities of the

acquiree or at fair value. The treatment is not an accounting policy choice

but is selected for each individual business combination, and disclosed

in the note for business combinations.

In cases where the Group held a non-controlling shareholding in the

acquiree prior to obtaining control, that interest is measured to fair value

as at acquisition date. The measurement to fair value is included in profit

or loss for the year. Where the existing shareholding was classified as an

available-for-sale financial asset, the cumulative fair value adjustments

recognised previously to other comprehensive income and accumulated

in equity are recognised in profit or loss as a reclassification adjustment.



Accounting Policies (continued)

Goodwill is determined as the consideration paid, plus the fair value of any

shareholding held prior to obtaining control, plus non-controlling interest

acquired and less the fair value of the identifiable assets and liabilities of

the acquiree.

SubsidiariesSubsidiaries are companies and entities over which the Company has the

ability to control the financial and operating activities so as to obtain benefit

from their activities. Investments 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.

Associate CompaniesAssociate companies are those entities which are not subsidiaries or

joint ventures, in which the Group has the ability to exercise a significant

influence and holds a long-term equity interest.

Associate companies are accounted for on the equity method. Equity

accounted income which is included in the carrying value of the investment

represents the Group’s proportionate share of the associate companies

post-acquisition reserves after accounting for dividends payable by those

associates. Any difference between the cost of acquisition and the Group’s

share of identifiable net assets is classified as goodwill and included in the

cost of the investment. The carrying value is net of 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, while 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.

Joint VenturesA joint venture is an entity over which the Group has joint control. Joint

control is the contractually agreed sharing of control over an entity, and

exists only when the strategic financial and operating decisions relating to

the activity require the unanimous consent of the parties sharing control.

The Group has elected to recognise its interest in jointly controlled entities

using the equity method. Under the equity method, interests in jointly

controlled entities are carried in the Consolidated Statement of Financial

Position at cost adjusted for post acquisition changes in the Group’s share

of net assets of the jointly controlled entity, less any impairment losses.

The Group’s share of movements in the joint venture’s other comprehensive

income is recognised in other comprehensive income. The Group’s share of

the aggregate loss in any joint venture is limited to its net investment in the

joint venture 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, while 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 joint ventures are

accounted for at cost less any impairment losses in the Company’s stand

alone Financial Statements.

Property, Plant and EquipmentFreehold property, aircraft and related equipment, vehicles, furniture,

computers and flight simulator equipment are depreciated on a systematic

basis on the straight-line method, which is estimated to depreciate the

assets to their anticipated residual values on 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 assets. Subsequent costs are included

in the assets 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 equipmentProperty and buildings 2%

Motor vehicles 20%

Furniture and equipment 10%

Computer equipment 20% to 50%

Second hand flight simulator equipment 20%

New simulator equipment 7%

Leasehold improvements Life of the lease agreement

AircraftAircraft 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 aircraftAircraft and related equipment 4 to 20%

C Checks 18 months

D Checks 72 months

Intangible AssetsAn 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.

• The expenditure attributable to the asset during its development

can be measured reliably.

Intangible assets are carried at cost, 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 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 ExpenditureCosts associated with developing and maintaining computer software

programmes 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 PaymentsAircraft pre-delivery payments and security deposits are capitalised to

property, plant and equipment once all conditions precedent 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.

GoodwillGoodwill 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.

Finance Leases and Instalment Sale Agreements – LesseeLeases, 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 – LesseeLeases 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 RecognitionThe 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 DeterminationThe 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 analysis, and option

pricing models making maximum use of market inputs and relying as little

as possible on entity-specific inputs.

DerecognitionFinancial 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 amount paid for it are included in profit or loss.

Loans to (from) Group CompaniesThese 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 ReceivablesTrade 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 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 PayablesTrade 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 EquivalentsCash 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 LiabilitiesInterest-bearing liabilities are initially measured at fair value less transaction

costs, and are subsequently measured at amortised cost, which includes

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.

Preference shares, which are mandatorily redeemable on a specific date,

are classified as liabilities.

The dividends on these preference shares are recognised in the Statement

of Other Comprehensive Income as interest expense.

Other financial liabilities are measured initially at fair value less transaction

costs and subsequently at amortised cost, using the effective interest rate

method.

DerivativesDerivative 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 AccountingThe 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 HedgeThe 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 the case of inventory or

in depreciation in the 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.

InventoryInventory 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 costs of

completion and the estimated costs necessary to make the sale. The cost of

inventories comprises all costs of purchase, costs of conversion and other costs

incurred in bringing the inventories to their present location and condition.

Share CapitalAn 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 SettledOptions 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 with a 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 SettledConvertible “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

on the Statements 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 Statements of Comprehensive

Income.

ProvisionsThe 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 ascertain the present value of 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 note 14 – Provisions.

Revenue RecognitionRevenue 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 risk

and rewards transfer and exclude value added tax.

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.

TaxationCurrent 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, directly 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 taxationDeferred 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 that are

expected to apply to the period when the asset is realised or the liability

is settled, based on tax rates (and tax laws) that have been enacted or

substantively enacted by the reporting date.

Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction

or production of a qualifying asset (currently the pre-delivery payments on

the aircraft) are capitalised as part of the cost of that asset until such time

as the asset is ready for its intended use. The amount of borrowing costs

eligible for capitalisation is determined as follows:

• Actual borrowing costs on funds specifically borrowed for the

purpose of obtaining a qualifying asset less any temporary

investment of those borrowings; and

• Weighted average of the borrowing costs applicable to the Group

on funds generally borrowed for the purpose of obtaining a

qualifying asset. The borrowing costs capitalised do not exceed the

total borrowing costs incurred. The borrowing costs include interest

calculated using the effective interest rate method and exchange

differences arising from foreign currency borrowing to the extent

that they are regarded as an adjustment to interest costs.

The capitalisation of borrowing costs commences when:

• Expenditures for the asset have occurred;

• Borrowing costs have been incurred; and

• Activities that are necessary to prepare the asset for its intended

use or sale are in progress.

Capitalisation is suspended during extended periods in which active

development is interrupted.

Capitalisation ceases when substantially all the activities necessary to

prepare the qualifying asset for its intended use or sale are complete.

All other borrowing costs are recognised as an expense in the period in

which they are incurred.

Foreign CurrencyForeign 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 on

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 forex 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 BenefitsThe 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 FundsCurrent 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.

ImpairmentThe 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.

• 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 UncertaintyIn 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 valuesProperty, 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 life cycles 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.

ImpairmentFuture 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 present value.

Loans and other receivablesThe 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 estimationThe 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

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 PoliciesJudgements 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 costsPre-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.

TaxationJudgement 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 assetsThe 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 informationOperating segments are reported in a manner consistent with the internal

reporting provided to the chief operating decision-maker. 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 presented are in tems of IFRS.

At year end the Group was organised in two main operating segments:

1. Airline

2. Non-airline which comprises the travel business, property

investments, simulator business and SLOW in the City




Notes to the Annual Financial Statementsfor the year ended 30 June 2013

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

1. Property, Plant and Equipment

Property and buildings

Cost 92,716 107,942 41,691 55,374

Accumulated depreciation (6,724) (6,414) (6,724) (6,414)

Carrying value 85,992 101,528 34,967 48,960

Leasehold improvementsCost 52,930 38,814 52,930 38,814


Carrying value 29,854 27,036 29,854 27,036

Aircraft and flight simulator equipmentCost 3,040,961 1,506,738 3,040,961 1,506,738

Accumulated impairment (30,559) (30,559) (30,559) (30,559)


Carrying value 2,154,929 856,595 2,154,929 856,595

Vehicles, furniture and equipment and computer equipmentCost 80,567 79,628 79,606 78,337


Carrying value 18,739 27,473 18,149 26,553

Pre-delivery payments 24,568 419,877 24,568 419,877

Total property, plant and equipment and pre-delivery payments 2,314,082 1,432,509 2,262,467 1,379,021

Reconciliation of Carrying Value

Property and buildingsCarrying value at the beginning of the year 101,528 107,312 48,960 56,288

Additions 73 15,763 73 14,219

Transfer to leasehold improvements (13,756) (20,128) (13,756) (20,128)

Depreciation (1,853) (1,419) (310) (1,419)

Carrying value at the end of the year 85,992 101,528 34,967 48,960



Notes to the Annual Financial Statements (continued)

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

Leasehold improvementsCarrying value at the beginning of the year 27,036 - 27,036 -

Additions 359 13,780 359 13,780

Transfer from property and buildings 13,756 20,128 13,756 20,128

Depreciation (11,297) (6,872) (11,297) (6,872)


Aircraft and flight simulator equipmentCarrying value at the beginning of the year 856,595 916,604 856,595 916,604

Additions 1,091,944 95,173 1,091,944 95,173

Transfer from pre-delivery payments 414,289 - 414,289 -

Disposals - (17,086) - (17,086)

Impairment - (4,049) - (4,049)

Depreciation (207,899) (134,047) (207,899) (134,047)

Carrying value at the end of the year 2,154,929 856,595 2,154,929 856,595

Vehicles, furniture and equipment and computer equipment

Carrying value at the beginning of the year 27,473 35,120 26,553 34,276

Additions 1,429 12,629 1,429 11,699

Transfer to intangible assets - (8,771) - (8,771)

Disposals - (573) - -

Depreciation (10,163) (10,932) (9,833) (10,651)


Pre-delivery paymentsCarrying value at beginning of the year 419,877 256,321 419,877 256,321

Payments made - 128,088 - 128,088

Capitalised as part of aircraft (414,289) - (414,289) -

Borrowing costs capitalised 18,980 35,468 18,980 35,468

Interest capitalised 3,438 7,754 3,438 7,754

Foreign exchange losses capitalised 15,542 27,714 15,542 27,714

Carrying value at the end of year 24,568 419,877 24,568 419,877

Total property, plant and equipment 2,314,082 1,432,509 2,262,467 1,379,021

1. Property, Plant and Equipment (continued)




Property and buildings owned consist of Erf 1092 and 1096 Bonaero Park Extension 2, Erf 931 Bonaero Park Extension 1, Erf 700 Rhodesfield Township

and Erven 674, 684, 685, 687, 688, 689, 690, 695 and Erf 1040 Rhodesfield Township. Valuations of the properties are performed every three years and

based on this the Directors’ estimated value of these properties is approximately R129 million (2012: 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 eight 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$ based facility in 2012.

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

2. Intangible Assets

Computer softwareCost 51,844 51,515 51,844 51,515

Accumulated amortisation (10,369) - (10,369) -

Carrying value 41,475 51,515 41,475 51,515

Reconciliation of Carrying Value

Computer software

Carrying value at the beginning of the year 51,515 - 51,515 -

Additions 329 42,744 329 42,744

Transfer from property, plant and equipment - 8,771 - 8,771

Amortisation (10,369) - (10,369) -


The intangible asset relates to the implementation of SABRE Airline Solutions which was fully operational in the prior period.




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

3. Loan to Share Incentive Trust

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

At year end the Trust held 5,525,864 shares representing 1.1% of shares in issue (prior year: 5,525,864 shares representing 1.1%) at a closing price of 265c (prior year: 133c).

- - 5,337 5,579

4. Investments in and Loans to Subsidiaries

Non-current portion

4.1 Aconcagua 32 Investments (Pty) Ltd1 ordinary share of R1 at cost (100% shareholding)

Investment at cost - - 16,732 16,732

Loan receivable - - 5,866 4,375

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

4.2 Holiday Tours (Pty) Ltd1 million shares of 1 cent each at cost (100% shareholding)

The Group acquired 65% of the issued share capital in the 2011 financial year. In December 2011 the remaining 35% shareholding was acquired at a cost of R35,000. The company is an outbound tour operating company offering holiday packages to destinations outside of South Africa.

Investment at cost - - 2,593 2,593




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

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.

Investment at cost - - 10 10

Total non-current portion - - 25,201 23,710

Current portion

4.4 Alooca Properties (Pty) Ltd100 ordinary shares of R1 at cost (100% shareholding)


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

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

4.5 Amber Capital (Pty) Ltd1 ordinary share of R1 at cost (100% shareholding)

The Company is currently being liquidated.

4.6 Kulula Air (Pty) Ltd100 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.






Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

4.7 Comair Catering (Pty) Ltd100 ordinary shares of R1 at cost (100% shareholding)

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

Loan receivable - - 11 -


Total current portion - - 31,513 32,016

Total investment in subsidiaries - - 56,714 55,726

Maximum amount exposed to credit risk 37,368 36,391

5. Investment in and Loans to Associates

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

Carrying value of the investment

Shareholder's loan 7,852 7,852 7,852 7,852

The loan is unsecured. No interest was charged for the year and there are no fixed terms of repayment (2012: prime).

Cumulative post-acquisition equity

Prior year (125) (1,064) - -

Current year 896 939 - -

This associate provides passenger handling services to airlines at ACSA-based airports and made an after tax profit of R2.2 million (2012: profit of R2.3 million). The company is incorporated in South Africa and has a June year end.

4. Investments in and Loans to Subsidiaries (continued)




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

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

Carrying value of the investment

Shareholder's loan 15,559 15,559 15,559 15,559

Loan impairment (4,817) - (15,559) -


Prior year (6,842) (7,232) - -

Current year (3,900) 390 - -

This associate is an air freight company and made an after tax loss of R13 million (2012: profit of R1.3 million). The company is incorporated in South Africa and has a June year end.

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

5.3 Protea Hotel ORT (Pty) Ltd Comair Limited has a 25% shareholding in Protea Hotel ORT (Pty) Ltd, a company in the hotel industry. The company is incorporated in South Africa and has a June year end.

A branded Protea Hotel was built on Erf 700 Rhodesfield Township.Comair Limited has no capital commitments in relation to this project.


Current year 1,279 - - -

9,902 16,444 7,852 23,411

Non-current portion 2,050 8,717 - 15,559

Current portion 7,852 7,727 7,852 7,852

Total investment 9,902 16,444 7,852 23,411

The maximum credit exposure for the Company and Group amount to R23,411,000 (2012: R23,411,000). In the current year and amount was provided

against a loan amounting to R4,817,000 in the Group and R15,559,000 in the Company. The balance of the loans receivable is considered to be recoverable

and not past due.




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

Summarised financial information of associates (aggregated)

Statement of Comprehensive Income

Revenue 396,964 392,318

Operating profit 5,727 14,703

Net finance charges (5,003) (5,067)

Profit before taxation 724 9,636

Taxation (6,037) (2,713)

(Loss) profit for the year (5,313) 6,923

Statement of Financial Position

Assets

Property plant and equipment 126,113 127,031

Deferred tax 2,520 8,430

Net current assets 30,958 42,995

159,591 178,456

Equity and liabilities

Capital and reserves (37,071) (31,747)

Borrowings 196,662 210,203

159,591 178,456

5. Investment in and Loans to Associates (continued)




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

6. GoodwillGross amount 3,668 -

Addition through business combinations - 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 (Pty) Ltd the Group’s footprint in Africa has been enhanced and the synergies that the Group will add has resulted in the recognition of goodwill. The envisaged enhancement should occur in the next two years as the project is still in its infancy. 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. InventoryAircraft spares - 10,064 - 10,064

Catering equipment and consumables 7,086 6,046 7,086 6,046

Write down of aircraft spares to net realisable value - (4,721) - (4,721)

7,086 11,389 7,086 11,389




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

8. Trade and Other ReceivablesTrade receivables 347,933 331,887 326,410 313,132

Impairment allowance (3,030) (3,030) (3,030) (3,030)

344,903 328,857 323,380 310,102

Deposits 35,827 42,300 35,827 42,300

Other receivables 39,926 58,042 39,926 58,042

420,656 429,199 399,133 410,444

Maximum exposure to credit risk 372,077 368,123 350,554 349,368

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 R6.4 million (prior year: R7.2 million) which were past due at the reporting date for which the Group did not provide an impairment as the amounts were still considered recoverable.

Ageing of past due but not impaired trade receivables

120 Days - 2,994 4,251 2,994 4,251

120 Days + 3,425 2,930 3,425 2,930

6,419 7,181 6,419 7,181

Ageing of impairment trade receivables

120 Days - - - - -

120 Days + 3,030 3,030 3,030 3,030

3,030 3,030 3,030 3,030

Reconciliation of impairment allowance

Opening balance 3,030 - 3,030 -

Provision impairment raised - 3,030 - 3,030

3,030 3,030 3,030 3,030

Financial instruments classified as other receivables amount to R11,647,000 (2012: R36,236,000). These receivables are not considered to be past due

nor impaired. The credit quality of these receivables is considered to be good.




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

9. Cash EncumberedThe Group has pledged cash totalling R20 million (prior year: R20 million) in respect of aircraft lease obligations.

10. Share Capital

Authorised:

1,000,000,000 Ordinary shares of 1 cent each 10,000 10,000 10,000 10,000

75,000,000 "A" Class shares of 1 cent each 750 750 750 750

10,000,000 "N" ordinary shares of 1 cent each 100 100 100 100

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

10,860 10,860 10,860 10,860

Issued:

489,176,471 Ordinary shares of 1 cent each 4,892 4,892 4,892 4,892

74,117,647 "A" Class shares of 1 cent each 741 741 741 741

Adjustment in respect of consolidation of share trust 5,525,864 (2012: 5,525,864) (55) (55) - -

5,578 5,578 5,633 5,633

At a general meeting of the Group held on 14 September 2006, shareholders approved by way of various special resolutions the creation, specific issue and re-purchase of the “A” shares, as well as the dividend and voting policy relating to those shares. The “A” shares will be converted to equity if the hurdle rate is achieved. The hurdle rate is set out as per the circular issued on 23 August 2006. Refer to note 17 below. The “A” shares shall vote as a single class at all meetings of shareholders of the Group save for resolutions of the Group relating to the rights and privileges of the “A” shares such that the holders of the “A” shares shall not be entitled to vote or approve any resolution that would otherwise have been passed or not by the required majority of votes, collectively, of the holders of the ordinary shares and the “A” shares (other than resolutions relating to the rights and privileges of the “A” shares.) The “A” shares will not be listed on the JSE and will not be taken into account for the purposes of categorisation transactions under the JSE Listings Requirements. The “A” shares will not be listed on any security exchange but are convertible into ordinary shares on a ‘one-for-one’ basis and are not entitled to dividends and voting rights.



Group Company

2013 2012 2013 2012

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 6.4%. The current instalment is R13 million. 308,445 - 308,445 -

Less: Finance raising fees (13,675) - (13,675) -

One aircraft mortgage serves as collateral covering security (net book value 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 6.4%. The current instalment is R13 million. 308,391 - 308,391 -



Instalment sale agreement payable in 41 quarterly instalments with the final payment due on 12 July 2022. RMB has entered into a sell down agreement with Nedbank for this loan. Interest is charged at a variable rate – currently 6.4%. The current instalment is R12 million. 285,588 - 285,588 -



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 9.0%. The current instalment is R3.1 million. A Boeing 737-800 simulator serves as collateral covering security (net book value R54.0 million, prior year R58.3 million). 43,609 52,372 43,609 52,372

Private Export Funding CorporationA US$ based aircraft instalment sale agreement payable in 40 quarterly instalments with the final payment due on 15 November 2022. Interest is charged at a fixed rate of 2.35% The current instalment is US$1 million. 352,976 - 352,976 -







Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

Investec LimitedMortgage finance agreements

This mortgage finance agreement is payable in 28 quarterly instalments with the final payment due on 30 September 2019. Erf 700 Rhodesfield Township has been pledged as collateral for this mortgage finance agreement. A mortgage bond of R25.9 million has been registered against this property. Interest is charged at a variable rate – currently 8.9%. The current instalment is R1.4 million. 23,142 - 23,142 -

This mortgage finance agreement is payable in 20 quarterly instalments with the last instalment due on 25 June 2014. Comair properties, save for Erf 700 Rhodesfield Township, have been pledged as collateral for this loan. A notarial bond of R80 million has been registered against these properties. This loan was settled in full a year early on 25 June 2013 and the notarial bond is currently being cancelled. Interest was charged at 8.9% - 34,409 - 34,409

Working capital loan

This loan is unsecured and is payable in 20 quarterly instalments with the final payment due on 30 September 2013. Interest is charged at a variable rate – currently 7.6%. The current instalment is R1.7 million. 1,655 7,990 1,655 7,990

Aircraft instalment sale agreements

Instalment sale agreement payable in 20 quarterly instalments with the final instalment due on 20 December 2012. Interest was charged at 7.6% and the last instalment was R5.2 million. - 10,188 - 10,188

One aircraft mortgage served as collateral covering security (net book value prior year R69 million).

Instalment sale agreement payable in 20 quarterly instalments with the final instalment due on 5 June 2013. Interest was charged at 7.6% and the last instalment was R5.6 milion. - 21,782 - 21,782

Two aircraft mortgages served as collateral covering security (net book value prior year R167 million).

Boeing 737-800

A facility for pre-delivery payments required for four new 737-800 aircraft on order. Cross collaterisation of other Investec loans stand as security for this loan. The facility is repayable on delivery of the relevant aircraft. The facility is in US$ and earns a variable interest rate payable quarterly – currently 3.8%. The aircraft were delivered between July 2012 and December 2012 and the facility was settled in December 2012. - 263,757 - 263,757




11. Interest-bearing Liabilities (continued)

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

NedbankAircraft refinance agreement payable in 20 quarterly instalments with the final payment due on 31 December 2014. This agreement was settled in full on 30 April 2013. - 38,500 - 38,500

One aircraft mortgage served as collateral covering security (net book value prior year R96 million). The mortgage bond is currently being cancelled. Interest was charged at 8.8%.

WesbankAn instalment sale facility of R5 million was entered into with Wesbank for the purchase of new vehicles for the Catering Division. Currently seven light delivery vehicles have been purchased. The facility was settled in April 2013. Interest was payable at prime -1% - 1,446 - 1,446

Sub-total 1,269,988 430,444 1,269,988 430,444

Less current portion (136,221) (344,537) (136,221) (344,537)

Non-current portion 1,133,767 85,907 1,133,767 85,907

Total value of interest-bearing liabilities 1,269,988 430,444 1,269,988 430,444

Finance charges 326,546 25,584 326,546 25,584

Total interest-bearing liability commitments 1,596,534 456,028 1,596,534 456,028

Total commitments for year one 205,043 354,961 205,043 354,961

Total commitments for years two to five 740,447 91,877 740,447 91,877

Total commitments after year five 651,044 9,190 651,044 9,190

Allocation of present valued amounts 1,269,988 430,444 1,269,988 430,444

Capital commitments for year one 136,221 344,537 136,221 344,537

Capital commitments for years two to five 513,505 77,228 513,505 77,228

Capital commitments after year five 620,262 8,679 620,262 8,679




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

12. Deferred Taxation

On temporary differences arising from:

Property, plant and equipment 217,629 154,501 217,629 154,501

Staff obligations and accruals (60,029) (56,409) (60,029) (56,409)

Unflown ticket liability (33,315) (6,685) (33,315) (6,685)

Prepayments 11,411 15,549 12,393 14,966

Assessed loss - (7,917) - (7,132)

135,696 99,039 136,678 99,241

Deferred tax reconciliation

Opening balance 99,039 97,258 99,241 97,715

Deferred tax – current 36,657 1,781 37,437 1,526

Closing balance 135,696 99,039 136,678 99,241

There are no unrecognised deferred tax assets on losses.

13. Trade and Other PayablesTrade payables 802,754 648,435 780,263 639,029

Cash settled share-based payment - 35 - 35

Share options granted to employees 4,250 35 4,250 35

Recognised as long-term portion (4,250) - (4,250) -

Unflown ticket liability 217,729 122,629 217,729 122,629

Other 38,027 17,630 38,027 17,630

1,058,510 788,729 1,036,019 779,323

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.




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

14. ProvisionsLeave pay provision 43,994 41,952 43,994 41,952

Opening balance 41,952 48,806 41,952 48,806

- Raised 13,025 6,000 13,025 6,000

- Utilised (10,983) (12,854) (10,983) (12,854)

Bonus provision 72,218 31,142 72,218 31,142

Opening balance 31,142 27,597 31,142 27,597

- Raised 85,943 35,567 85,943 35,567

- Utilised (44,867) (32,022) (44,867) (32,022)

116,212 73,094 116,212 73,094

In terms of Comair’s policy, employees are entitled to accumulate vested leave benefits not taken within a leave cycle. Leave days have been capped

depending on the level of employment of the employees.

The bonus scheme consists of performance bonuses which are dependent on the achievement of financial and non-financial targets. Bonuses are payable

annually in December for all staff other than Executives. Executive bonuses are paid in July.

15. Financial Risk Management and Financial InstrumentsThe 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 risk and liquidity risk. This note presents information on the Group’s exposure to these risks. The

Board of Directors is responsible for risk management activities in the Group. The carrying values equate to the fair values of each financial instrument.

The carrying value of short-term financial instruments approximate fair value due to their short-term natures, 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

2013AssetsNon-current assetsProperty, plant and equipment - - - - 2,314,082 2,314,082 Intangible assets - - - - 41,475 41,475 Investments in associates - - - - 2,050 2,050 Goodwill - - - - 3,668 3,668

Current assetsInventories - - - - 7,086 7,086 Trade and other receivables 372,077 - 372,077 48,579 420,656 Investments in and loans to 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 LiabilitiesCapital and reservesShare 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 liabilitiesInterest-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 liabilitiesTrade 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




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

2012AssetsNon-current assetsProperty, plant and equipment - - - - 1,432,509 1,432,509 Intangible assets - - - - 51,515 51,515 Investments in and loans to associates 8,717 8,717 - - 8,717 Goodwill - - - - 3,668 3,668

Current assetsInventories - - - - 11,389 11,389 Trade and other receivables 368,123 - 368,123 - 61,076 429,199 Investments in associates 7,727 - 7,727 - 7,727 Taxation - - - - 14,948 14,948 Cash and cash equivalents 246,095 - 246,095 - 246,095 Total assets 630,662 - 630,662 - 1,575,105 2,205,767

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

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

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

Financial assets are substantially the same for the Group and the Company, however, loans to subsidiaries amount to R37.3 million (2012: R36.4 million)

and are classified as loans and receivables. Financial liabilities are substantially the same for the Group and the Company.

Interest Rate RiskThe 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)




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 RiskCredit risk relates to 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 RiskThe liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by monitoring

forecast cash flows and ensuring that adequate cash resources and unutilised borrowing facilities are maintained. The credit quality and ageing of past

due but not impaired trade receivables are presented in note 8.

Maturity profile of financial liabilities at 30 June 2013

Carrying amount

Contractual cash flows

Within 1 year

2 to 5 years

More than 5 years

No fixed terms

Group R‘000 R‘000 R‘000 R‘000 R‘000 R‘000

2013Secured 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

2012Secured non-current borrowings 85,907 101,067 - 91,877 9,190 -

Secured short-term borrowings 344,537 354,961 354,961 - - -

Trade and other payables 666,100 666,100 666,100 - - -

Total financial liabilities – Group and Company 1,096,544 1,122,128 1,021,061 91,877 9,190 -

Total financial assets – Group 630,662 630,662 614,218 - - 16,444

Foreign Currency RiskThe Group undertakes certain transactions denominated in foreign currencies which therefore have exposure to exchange rate variations. The Group may enter into forward exchange contracts to manage exchange rate exposure. Where appropriate, open positions are maintained. The Group does not speculate in derivative instruments and all foreign exchange contracts are supported by underlying transactions.

Approximately 50% of operating costs are incurred and approximately 12% of revenue is earned in foreign currency. The following uncovered foreign currency

amounts are included in the Financial Statements at year end: net short-term liabilities of US$4,294,324 (2012: US$32,930,864) and GBP1,027,964

(2012: GBP950,188) and net short-term receivables of GBP5,820,456 (2012: GBP3,543,383).

The Group as part of its financing activities enters into foreign denominated interest-bearing loans. The foreign exchange rate exposure is monitored by

management in conjunction with the interest rate exposure which would have been incurred had a Rand denominated loan been taken out.




Sensitivity AnalysisThe sensitivity analysis below calculates the impact of movements in the foreign exchange rates in which the Group transacts as well as in interest rates

on the Group profits. The analysis is based on closing balances at year end.

Foreign exchange risk 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

Interest and related foreign currency amounts, made on account of aircraft and other qualifying assets under construction are capitalised, and added

to the asset concerned and therefore do not affect 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 (2012: R13,188,000) and of a 2% interest rate

adjustment would be Rnil (2012: R2,649,000).

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





Group

Foreign exchange risk Profit (loss) should the Rand exchange rate

change by 5%

Interest rate riskProfit (loss) should the interest rate

change by 2%

Carrying value

Amount exposed to

risk

Rand appreciation

Rand depreciation

Amount exposed to

risk

Rate increase

Rate decrease

2012

Financial asset R'000

Cash and cash equivalents 246,097 135,167 (6,758) 6,758 246,097 4,922 (4,922)

Trade and other receivables 368,123 245,636 (12,282) 12,282 - - -

Impact of financial assets on:

- profit before tax - - (19,040) 19,040 - 4,922 (4,922)

- profit after tax - - (13,709) 13,709 - 3,544 (3,544)

Financial liabilities R'000

Interest-bearing liabilities 430,444 263,757 - - 430,444 (3,334) 3,334

Trade and other payables 666,100 292,163 14,608 (14,608) - - -

Impact of financial liabilities on:

- profit before tax - - 14,608 (14,608) - (3,334) 3,334

- profit after tax - - 10,518 (10,518) - (2,400) 2,400

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

Capital Risk ManagementThe Group’s objective when managing capital is to safeguard the entity’s ability to continue as a going concern.

The Group sets the amount of capital in proportion to risk. The Group manages the capital structure and makes adjustments to it in 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 ÷ 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 2013 and 2012 were as follows:

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

Total liabilities excluding deferred tax 2,448,960 1,292,267 2,426,469 1,282,861

Less: Cash and cash equivalents (778,045) (246,095) (766,628) (240,228)

Net debt 1,670,915 1,046,172 1,659,841 1,042,633

Adjusted equity 1,021,200 814,461 1,014,103 810,130

Adjusted capital ratio 1.64:1 1.28:1 1.64:1 1.28:1

16. Revenue 5,386,581 4,162,938 5,366,240 4,136,449

Flight revenue 5,115,761 4,013,200 5,115,761 4,013,200

Service-based 122,571 96,322 112,394 89,217

Commission-based 141,640 48,650 131,476 29,417

Other 6,609 4,766 6,609 4,615

17. Profit from OperationsOperating expenses are stated after incorporating the following items:

Audit fees 656 700 656 700

Managerial, technical, administrative and secretarial services 21,435 18,081 21,435 18,081

Directors' emoluments (included in total staff costs) 17,467 18,824 17,467 18,824

- for services as Directors and related committee work 2,240 1,762 2,240 1,762

- for managerial and other services 9,858 15,811 9,858 15,811

- retirement and medical benefits 1,119 1,251 1,119 1,251

- share-based payments 4,250 - 4,250 -

Only Directors are considered key management.

A comprehensive breakdown per Director is included in the Directors’ Report on pages 65 and 66.





Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

Rentals under operating leases 309,324 331,135 309,324 331,135

- property rentals 18,855 16,371 18,855 16,371

- aircraft rentals 286,142 312,824 286,142 312,824

- equipment and vehicle rentals 4,327 1,940 4,327 1,940

Total staff costs 671,936 596,456 671,936 596,456

Employment costs 633,715 559,983 633,715 559,983

Contributions to defined contribution funds 38,221 36,473 38,221 36,473

Number of employees 1,927 1,873

(Loss) profit on exchange differences (12,199) 15,881 (12,199) 15,881

Impairments 6,817 4,049 17,559 4,049

Aircraft - 4,049 - 4,049

Loan to associate 4,817 - 15,559 -

Trading loan in subsidiary 2,000 - 2,000 -

Equity Settled Share-based Payment (BEE Transaction)This amount relates to the BEE transaction concluded in 2007 and is being

equity accounted for (in terms of IFRS 2) using the Black Scholes option

valuation model. The principle assumptions in applying the value of the

options were as follows:

a. Volatility of 50%

b. Eight years to date of exercise

c. Dividend yield of 5%

d. Risk free rate of 9.15%

e. Strike price of R3.03

3,428 3,428 3,428 3,428



Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

Cash Settled Share-based PaymentThis 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 principle 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 pay out. 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 was 5.22%

e. Dividend yield was 2%

4,250 - 4,250 -

18. Interest ExpenseTotal interest paid 65,079 27,187 64,883 27,187

Bank interest 61,641 19,433 61,445 19,433

Interest capitalised to pre-delivery payments 3,438 7,754 3,438 7,754

Less: amount capitalised as borrowing costs (See note 1) (3,438) (7,754) (3,438) (7,754)

Net interest 61,641 19,433 61,445 19,433

19. TaxationNormal tax – current 66,478 1,451 63,629 -

Deferred tax – current 36,657 1,751 37,437 1,527

103,135 3,202 101,066 1,527

Reconciliation of taxation rate % % % %

South African normal tax rate (28.0) (28.0) (28.0) (28.0)

Taxation effect of:

Exempt income 0.1 0.1 0.1 0.1

Assessed loss utilised 0.1 - 0.1 -

Disallowable expenditure (3.3) (1.5) (3.1) 5.9

Effective taxation rate (31.1) (29.4) (30.9) (22.0)


17. Profit from Operations (continued)




Group

2013 2012

R’000 R’000

20. Earnings per ShareEarnings attributable to ordinary shareholders 227,526 7,681

Add: IAS 16 (profit) loss on disposal of property, plant and equipment (984) 10,669

Add: IAS 16 impairment to assets - 4,049

Add: IAS 36 Impairment to loans to associates 4,817 -

Less: tax effect of (profit) loss on disposal 276 (2,987)

Less: tax effect of impairment to assets - (1,134)

Headline earnings attributable to ordinary shareholders 231,635 18,278

Weighted ordinary shares in issue ('000) 483,650 483,028

Weighted ordinary shares in issue 489,176 489,176

Adjustment in respect of consolidation of Share Trust (5,526) (6,148)

Adjustment for dilutive effect of share options in issue 527 27

Diluted weighted ordinary shares in issue ('000) 484,177 483,055

Earnings per share (cents) 47.0 1.6

Headline earnings per share (cents) 47.9 3.8

Diluted earnings per share (cents) 47.0 1.6

Diluted headline earnings per share (cents) 47.8 3.8



Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

21. Cash Generated by OperationsProfit before taxation 330,661 10,883 326,070 6,992

Impairment 6,817 4,049 17,559 4,049

Depreciation 241,582 153,270 239,708 152,989

Equity settled BEE transaction 3,428 3,428 3,428 3,428

Cash settled share-based payments 4,250 - 4,250 -

Share of loss (profit) from associates 1,725 (1,329) - -

Interest expense 61,641 19,433 61,445 19,433

Interest received (20,217) (8,200) (19,856) (7,914)

(Profit) loss on disposal of assets (984) 10,669 (984) 10,669

Cash from operations before working capital changes 628,903 192,203 631,620 189,646

Movement in working capital 325,745 97,227 315,428 103,071

Inventory movement 4,303 (4,475) 4,303 (4,475)

- Accounts receivable movement 8,543 41,475 11,311 58,181

- Accounts payable movement 312,899 60,227 299,814 49,365

954,648 289,430 947,048 292,717

22. Taxation Paid Taxation owing at beginning of year 14,948 11,428 14,919 12,281

Taxation charge for the year (66,536) (1,451) (63,631) -

Taxation (receivable) at end of the year (30,942) (14,948) (30,558) (14,919)

Taxation (paid) (82,530) (4,971) (79,270) (2,638)

23. Retirement Benefits

Post-retirement BenefitsThe 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.





Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

24. Operating Lease Commitments

Commitments for year one

Aircraft 169,759 188,823 169,759 188,823

169,759 188,823 169,759 188,823

Commitments for years two to five

Aircraft 540,914 362,093 540,914 362,093

540,914 362,093 540,914 362,093

Commitments after year five

Aircraft 174,472 186,374 174,472 186,374

174,472 186,374 174,472 186,374

Total operating lease commitments 885,145 737,290 885,145 737,290

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

Currently the Group has two aircraft on ZAR 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 ZAR payment terms of R610,500 per month. There are two aircraft

leases at market-related US$ amounts which have no escalation clauses in the agreements and are repayable at US$135,000 each per month. There are a

further three aircraft lease agreements at market-related US$ amounts which have no escalation clauses in the agreement and are repayable at US$160,000

each per month. Comair has entered into two aircraft lease agreements at rates of US$210,000 each per month which have no escalation clauses in them.

A further lease has been entered into at a rate of US$228,000 per month. A further lease has been entered into at a rate of US$220,000 per month. A

further lease has been entered into at a rate of US$255,000 per month. These leases are included in the operating lease commitments outlined above.

25. Borrowing PowersThere 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 1 to 5 years (previously

this was 1 to 3 years). All options must be taken up by way of purchase by no later than 10 years after the date of grant. The exercise price of the option

is not less than the market value of the ordinary shares on the date preceding the day of grant and the option is exercisable provided the participant has

remained in the Group’s employ until the option vests. In the case of retirement/death/retrenchment, all options immediately vest. Options can be converted

into shares or cash or a combination of both, depending on the participant’s choice.

In the event of retirement/death/retrenchment of a participant, options may be taken up and converted into cash within 12 months of such an event. The

Directors of the Group have the discretion to extend this by a further 12 months. In the case of the resignation of a participant, options which have vested

may be exercised within 30 days after date of resignation. Options which have not vested will be forfeited.

The 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%

(4.9 million shares) of the ordinary shares then in issue. The share option liability as per IFRS 2 at year end was Rnil (prior year R35,000) based on the

closing share price of R2.65 (prior year: R1.33).

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

2013 2013 2012 2012

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 2,840,667 1.67

Options exercised - - (1,566,000) 1.61

Balance at end of period 1,274,667 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 2013 become unconditional between the following dates:

Subscription price R

2013 Number of

share options

2012 Number of

share options

1 September 2004 and 1 September 2007 0.80 66,667 66,667

5 December 2005 and 5 December 2010 1.70 233,000 233,000

5 June 2006 and 5 June 2011 1.57 975,000 975,000

Total 1,274,667 1 274,667

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




Share options granted to Directors are as follows:

2013 Number of

share options

2012 Number of

share options

Balance at beginning of period - 1,566,000

Options exercised - (1,566,000)

- -

27. Group and Company Capital Commitments and ContingenciesDuring 2010 the Company placed an order for eight 737-800s from the Boeing Company. The capital commitments will be settled as outlined below:

Group

2013 2012

R’000 R’000

Financial Year 2013 - 947,954

Financial Year 2014 197,413 218,750

Financial Year 2015 261,756 159,456

Financial Year 2016 945,579 1,016,398

Financial Year 2017 324,285 -

1,729,033 2,342,558

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 R10.7 million (2012: R6.8 million).




28. New Accounting PronouncementsAt the date of authorisation of these Financial Statements, various standards are in issue which are not yet effective. This includes the following standards

which are applicable to the business of the Group and may have impact on future Financial Statements.

Standard Details of AmendmentAnnual periods beginning on or after

IFRS 1: First-time Adoption of International Financial Reporting Standards

• Standard amended to remove the fixed date of 1 January 2004 relating to the retrospective application of the derecognition requirements of IAS 39, and relief for first-time adopters from calculating day 1 gains on transactions that occurred before the date of adoption.

• Amendments add an exception to the retrospective application of IFRSs to require that first-time adopters apply the requirements in IFRS 9 Financial Instruments and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance prospectively to government loans existing at the date of transition to IFRSs.

• Annual Improvements 2009–2011 Cycle amendments clarify the options available to users when repeated application of IFRS 1 is required and to add relevant disclosure requirements.

• Annual Improvements 2009–2011 Cycle amendments to borrowing costs.

01 January 2013

01 January 2013

01 January 2013

01 January 2013

IFRS 7: Financial Instruments: Disclosures

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

01 January 2013

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.

01 January 2015

IFRS 10: Consolidated Financial Statements

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

• Amendments to the transition guidance of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, thus limiting the requirements to provide adjusted comparative information.

• 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.

01 January 2013

01 January 2013

01 January 2014




Standard Details of AmendmentAnnual periods beginning on or after

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


01 January 2013

01 January 2013

IFRS 12: Disclosure of Interests in Other Entities

• New and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off-balance-sheet vehicles.


• New disclosures required for Investment Entities (as defined in IFRS 10).

01 January 2013

01 January 2013

01 January 2014

IFRS 13: Fair Value Measurement • New guidance on fair value measurement and disclosure requirements. 01 January 2013

IAS 1: Presentation of Financial Statements

• Annual Improvements 2009–2011 Cycle: Amendments clarifying the requirements for comparative information including minimum and additional comparative information required.

01 January 2013

IAS 16 Property, Plant and Equipment

• Annual Improvements 2009–2011 Cycle: Amendments to the recognition and classification of servicing equipment.

01 January 2013

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

01 January 2013

IAS 27: Consolidated and separate Financial Statements

• Consequential amendments resulting from the issue of IFRS 10, 11 and 12. • 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.

01 January 201301 January 2014

IAS 28: Investments in Associates • Consequential amendments resulting from the issue of IFRS 10, 11 and 12. 01 January 2013

IAS 32: Financial Instruments: Presentation

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

• Annual Improvements 2009–2011 Cycle: Amendments to clarify the tax effect of distribution to holders of equity instruments.

01 January 2013

01 January 2013

IAS 34: Interim Financial Reporting

• Annual Improvements 2009–2011 Cycle: Amendments to improve the disclosures for interim financial reporting and segment information for total assets and liabilities

01 January 2013

IAS 36: Impairment of Assets • The amendment to 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.

01 January 2014




28. New Accounting Pronouncements (continued)

InterpretationsAnnual periods beginning on or after

IFRIC Interpretation 21: Levies 1 January 2014

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

29. Related Parties

Subsidiaries Inspect note 4 for investments in subsidiaries

Associates Inspect note 5 for investments in associates

Share Incentive Trust Inspect note 2 for the details

Directors Inspect Directors’ remuneration on pages 65 and 66 and Special Resolution Number 2 on page 121

Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

Related Party Balances

Loan accounts – Owing (to) by related parties

Alooca Properties (Pty) Ltd - - 28,212 28,374

Aconcagua 32 Investments (Pty) Ltd - - 5,866 4,375

Kulula Air (Pty) Ltd - - 3,290 3,282

Commuter Handling Services (Pty) Ltd 7,852 7,852 7,852 7,852

Imperial Air Cargo (Pty) Ltd 15,559 15,559 15,559 15,559

Comair Share Incentive Trust - - 5,337 5,579

Amounts included in trade receivable (trade payable) regarding related partiesCommuter Handling Services (Pty) Ltd - - - -

Imperial Air Cargo (Pty) Ltd 71 1,208 71 1,208

Kulula Air (Pty) Ltd 1,769 522 1,769 522




Group Company

2013 2012 2013 2012

R’000 R’000 R’000 R’000

Related Party Transactions

Interest received from related parties

Commuter Handling Services (Pty) Ltd - (549) - (549)

Rent paid to related parties

Aconcagua 32 Investments (Pty) Ltd - - 1,374 1,249

Alooca Properties (Pty) Ltd - - 878 799

Service recovery

Kulula Air (Pty) Ltd - - 2,400 2,400

30. Subsequent EventsThe 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.


greatnessthe next great step in the evolution of world-class aviation

Notice of Annual General Meeting

A member of the Company entitled to attend and vote at the below-mentioned Annual General Meeting (“AGM”) is entitled to appoint a proxy or proxies

to attend, speak and vote in his/ her stead. A proxy need not be a member of the Company. Meeting attendees will be required to provide reasonably

satisfactory identification before being allowed to participate in or vote at the AGM. Forms of identification 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 LimitedRegistration number 1967/006783/06Incorporated in the Republic of South AfricaISIN Code: ZAE000029823 Share Code: COM(“Comair” or “the Company” or “the Group”)

Notice is hereby given in terms of section 62(1) of the Companies Act (No. 71 of 2008), as amended (“the Companies Act”) that the AGM of shareholders

of the Company will be held at the SLOW in the City Lounge (Radisson Blu Gautrain Hotel), corner Rivonia and West Streets (opposite Gautrain Hotel),

Sandton, 2196, on Wednesday 30 October 2013 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 20 September 2013, 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 ParticipationShareholders or their proxies are also able to attend, but not participate and vote at the Annual General Meeting by way of a teleconference call. Should

you want to make use of this facility, please contact Derek Borer by e-mail at [email protected] by no later than 12h00 on 28 October 2013.

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 1RESOLVED THAT the audited Annual Financial Statements, together with the report of the Board of Directors of the Company (the “Board”), the auditors’

report and the report by the Audit Committee of the Company and the Group for the year ended 30 June 2013, be and are hereby received and adopted.

Reason and effect of Ordinary Resolution Number 1The reason for and effect of Ordinary Resolution Number 1 is to adopt the complete audited Annual Financial Statements of the Company, including the

report of the Board, the auditors’ report and the report by the Audit Committee of the Company and the Group for the year ended 30 June 2013.



2. Re-appointment of External Auditors

Ordinary Resolution Number 2RESOLVED THAT the re-appointment of PKF (Jhb) Inc., now known as Grant Thornton (Jhb) Inc. (“GT”), as nominated by the Company’s Audit Committee

as independent external auditors of the Company, be and is hereby approved until the conclusion of the next AGM. It is noted that Mr Ben Frey is the

individual registered auditor who will undertake the audit for the financial year ending 30 June 2014.

Reason and effect of Ordinary Resolution Number 2The reason for and effect of Ordinary Resolution Number 2 is to re-appoint PKF (Jhb) Inc., now known as Grant Thornton (Jhb) Inc. (“GT”), as the auditors

of the Company to hold office until the conclusion of the next AGM. The Company’s Audit Committee has recommended, and the Board has endorsed,

the above re-appointment.

3. Re-election of Directors

Ordinary Resolution Number 3.1RESOLVED THAT Mr Jacob Meyer Kahn, 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 3.2RESOLVED THAT Mr Ronald Sibongiseni Ntuli, 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 3.3RESOLVED THAT Mr Khutso Ignatius Mampeule, who retires in terms of the Company’s MOI and who, being eligible for re-election, offers himself for

re-election, be hereby re-elected as a Director of the Company.

Ordinary Resolution Number 3.4RESOLVED THAT Mr Ranil Yasas Sri-Chandana, 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 3.5RESOLVED THAT Mr Martin Nicolaas Louw, who retires in terms of the Company’s MOI and who, being eligible, offers himself for re-election, be hereby

re-elected as a Director of the Company.

Reasons and effect of Ordinary Resolution Numbers 3.1 to 3.5The reasons for and effect of Ordinary Resolutions Number 3.1 to 3.5 is to re-elect, by way of separate resolutions, Mr Jacob Meyer Kahn, Mr Ronald

Sibongiseni Ntuli, Mr Khutso Ignatius Mampeule, Mr Ranil Yasas Sri-Chandana and Mr Martin Nicolaas Louw as Directors of the Company.

In terms of article 24.1 of the Company’s MOI, one third of the Company’s Directors are required to retire at every AGM. These Directors may offer themselves

for re-election. The Board recommends to the shareholders the re-election of the Directors mentioned above. A brief CV of each of these Directors appears

on pages 126 to 127 of this Report of which this notice forms part.

4. Election of Members of the Audit Committee

Ordinary Resolution Number 4.1RESOLVED THAT Dr PJ Welgemoed, who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s

Audit Committee for the financial year ending 30 June 2014.



Ordinary Resolution Number 4.2RESOLVED THAT, subject to the re-election of Mr KI Mampeule as a Director of the Company pursuant to Ordinary Resolution Number 3.3, Mr KI Mampeule,

who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s Audit Committee for the financial year

ending 30 June 2014.

Ordinary Resolution Number 4.3RESOLVED THAT Ms WD Stander, who is an independent Non-executive Director of the Company, be hereby elected as a member of the Company’s

Audit Committee for the financial year ending 30 June 2014.

Ordinary Resolution Number 4.4RESOLVED THAT Mr GJ Halliday, a Non-executive Director of the Company who meets the independence requirements of the Companies Act, be hereby

elected as a member of the Company’s Audit Committee for the financial year ending 30 June 2014.

Reason and effect of Ordinary Resolution Numbers 4.1 to 4.4 The reasons for and effect of Ordinary Resolutions Number 4.1 to 4.4 is to elect, by way of separate resolutions, Dr PJ Welgemoed, Mr KI Mampeule,

Ms WD Stander and Mr GJ Halliday as members of the Audit Committee of the Company.

A brief CV of each of the Directors mentioned above is included on pages 127 to 128 of this Report of which this notice forms part. As is evident from the

CVs of those Directors, each of the proposed members of the Audit Committee has the required qualifications and/or experience to fulfil his/her duties.

5. Non-binding Endorsement of Company Remuneration Policy

The Company’s Remuneration Policy, as described in the Remuneration Report on pages 57 to 59 of this Report of which this notice forms part, is hereby

endorsed by way of a non-binding advisory vote, as recommended in the King Code of Governance for South Africa 2009, commonly referred to as King III.

Reason and effect of non-binding endorsement The reason for and effect of the above non-binding endorsement is to endorse the Company’s Remuneration Policy on the basis of a non-binding advisory vote.

Special Resolutions

6. Approval of Non-executive Directors’ Remuneration 2012/13

Special Resolution Number 1RESOLVED THAT the joint remuneration of the Non-executive Directors for their services as Directors of the Company in the amount of R2,240,000 (two

million two hundred and forty thousand Rand) for the financial year ended 30 June 2013 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 2013. The fees payable to Non-executive Directors are based on a fixed annual

retainer. The Chairperson and members of every sub-committee, however, is paid an additional fee for each sub-committee meeting chaired and/or attended

up until the end of the 2013 financial year. No fees are payable to Mr Gupta, Mr Sacks, Mr Buchanan and Mr Halliday. Mr Van Hoven, in addition to

being the Chairperson of the Board and Nominations Sub-committee, is also the Chairman of Comair Pension Fund and as such 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 on 1 November 2012.

The fees payable to each Director and further details on the basis of calculation of remuneration are respectively included in the annual finance statements

on pages 70 to 117, and in the Remunerations Report on pages 57 to 59 of this Report of which this notice forms part.

Notice of Annual General Meeting (continued)



7. Approval of Non-executive Directors’ Remuneration – 2013/14

Special Resolution Number 2RESOLVED THAT the following fees be approved as the basis for calculating the remuneration of the Non-executive Directors for their services as Directors

of the Company for the financial year ended 30 June 2014:

30 June 2013 30 June 2014

Chairman of the Board R1,000,000.00 R1,200,000.00

Vice-chairman (2) R250,000.00 R350,000.00

Non-executive Directors (5) R120,000.00 R150,000.00

Chairperson of each sub-committee, per sub-committee meeting held R10,000.00 R13,000.00

Members of each sub-committee, per sub-committee meeting held R5,000.00 R6,500.00

Chairperson of Pension Fund Board R10,000.00 R13,000.00

Reason and effect of Special Resolution Number 2 The reason for and 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 2014. The fees payable to Non-executive Directors are

based on a fixed annual retainer. The Chairperson and members of each sub-committee, however, will be paid an additional fee for each sub-committee

meeting held, irrespective of attendance at the sub-committee meeting or not. No fees are payable to Mr Gupta, Mr Sacks, Mr Buchanan and Mr Halliday.

Mr Van Hoven, in addition to being Chairperson of the Board and the Nominations Committee, is also the 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 remuneration are included in the Remuneration

Report on pages 57 to 59 of this Report of which this notice forms part.

8. General Authority to Repurchase Shares

Special Resolution Number 3RESOLVED THAT the Board of Directors of the Company is hereby authorised, by way of a renewable general authority, to approve the purchase of its

own ordinary shares by the Company, or to approve the purchase of ordinary shares in the Company by any subsidiary of the Company, provided that:

8.1.1 The Company or the relevant subsidiary is authorised thereto by its MOI;

8.1.2 The general repurchase by the Company and/or any subsidiary of the Company of ordinary shares in the aggregate in any one financial year

shall not exceed 10% (ten percent) of the Company’s issued ordinary share capital as at the beginning of the financial year, provided that

the acquisition of shares as treasury shares by a subsidiary of the Company shall not be effected to the extent that in aggregate more than

10% (ten percent) of the number of issued shares in the Company are held by or for the benefit of all the subsidiaries of the Company taken

together;

8.1.3 At any point in time, the Company may only appoint one agent to effect any repurchases on the Company’s behalf;

8.1.4 The repurchase of securities being effected through the order book operated by the JSE trading system and done without any prior understanding

or arrangement between the Company and the counterparty (reported trades are prohibited);

8.1.5 This general authority shall only be valid until the date of the next AGM or for 15 (fifteen) months from the date of passing of this Special

Resolution Number 3, whichever is the shorter;

8.1.6 In determining the price at which the Company’s ordinary shares are acquired by the Company or any subsidiary in terms of this general

authority, the maximum premium at which such ordinary shares may be acquired will be 10% (ten 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) day business day period;

8.1.7 The Company or its subsidiary may not repurchase securities during a prohibited period as defined in the JSE Listings Requirements, unless

they have in place a repurchase programme where the dates and quantities of securities to be traded during the relevant period are fixed (not

subject to any variation) and full details of the programme have been disclosed 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 acquisition 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 by 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 12 (twelve) months after the date

of the general repurchase;

• The assets of the Company and the Group, fairly valued in accordance with International Financial Reporting Standards, will be in excess of the

liabilities of the Company and the Group for the next 12 (twelve) months after the date of the general repurchase;

• The share capital and reserves of the Company and the Group will be adequate for the next 12 (twelve) 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 12 (twelve) months after the date

of the general repurchase; and

• The Company may not enter the market to proceed with the repurchase until the Company’s sponsor, Rand Merchant Bank (a division of

FirstRand Bank Limited), has confirmed the adequacy of the Company and the Group’s working capital in writing to the JSE.

Reason and effect of Special Resolution Number 3The reason for and effect of Special Resolution Number 3 is to authorise the Company or any of its subsidiaries, by way of a general authority, to acquire

its own issued shares and/or its subsidiary Company on such terms, conditions and such amounts determined from time to time by the Board subject to

the limitations 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.

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

Special Resolution Number 4RESOLVED THAT the Board is hereby authorised in terms of section 45(3)(a)(ii) of the Companies Act, as a general approval (which approval will be in

place for a period of two (2) years from the date of adoption of this Special Resolution Number 4), to authorise the Company to provide any direct or indirect




financial assistance (“financial assistance” will herein have the meaning attributed to such term in section 45(1) of the Companies Act), that the Board

may deem fit to any related or inter-related company or corporation of the Company (“related and inter-related” will herein have the meaning attributed to

these terms in section 2 of the Companies Act), on the terms and conditions and for the amounts that the Board may determine.

The main purpose for this authority is to grant the Board the authority to provide inter-group loans and other financial assistance for the purpose of funding

the activities of the Group. The Board undertakes that:

9.1 It will not adopt a resolution to authorise such financial assistance unless the Directors are satisfied that:

9.1.1 Immediately after providing the financial assistance, the Company would satisfy the solvency and liquidity test as contemplated in the

Companies Act; and

9.1.2 The terms under which the financial assistance is proposed to be given are fair and reasonable to the Company; and

9.2 Written notice of such resolution by the Board shall be given to all shareholders of the Company and any trade union representing the employees:

9.2.1 Within 10 (ten) days after the Board adopted the resolution, if the total financial assistance contemplated in that resolution, together with

any previous such resolutions during the financial year, exceeds 0.1% (zero comma one percent) of the Company’s net worth at the time

of the resolution; and

9.2.2 Within 30 (thirty) days of the end of the financial year, in any other case.

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 88 to 90 of this

Report of which this notice forms part.

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

of which this notice forms part:

Directors and management – pages 63 and 64

Major shareholders of the Company – page 131

Directors’ interests in securities – page 62

Share capital of the Company – note 10 on page 95

Litigation statement In terms of section 11.26 of the JSE Listings Requirements, the Directors, whose names are given on pages 63 and 64 of this Report of which this notice

forms part, is 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 12 (twelve) months, a material effect on the Group’s financial position.

Directors’ responsibility statement The Directors, whose names are given on pages 63 and 64 of this Report, collectively and individually accept full responsibility for the accuracy of the

information pertaining to this resolution and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would

make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this resolution contains all

information required by law and the JSE Listings Requirements.



No material change Other than the facts and developments reported on in this 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.

Ordinary Resolution

10. Authorisation for Company Secretary or any Director to Sign Necessary Documents to Give Effect to Resolutions

Ordinary Resolution Number 5RESOLVED 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 ResolutionsOrdinary Resolutions Numbers 1 to 5 contained in this Notice of AGM require the approval by more than 50% (fifty percent) of the votes exercised on

the resolutions by shareholders present or represented by proxy at the AGM, and further subject to the provisions of the Companies Act, the MOI of the

Company and the JSE Listings Requirements.

Special Resolutions Number 1 to 4 contained in this Notice of AGM require the approval by at least 75% (seventy-five percent) of the votes exercised on

the resolutions by shareholders present or represented by proxy at the AGM and further subject to the provisions of the Companies Act, the MOI of the

Company and the JSE Listings Requirements.

Record Date The record date on which shareholders of the Company must be registered as such in the Company’s securities register, which date was set by the Board

of the Company in determining which shareholders are entitled to attend and vote at the AGM, is Friday, 25 October 2013. Accordingly the last day to

trade in order to be eligible to attend and vote at the meeting is Friday, 18 October 2013.

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, 30 October 2013, at 13h00. 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 Annual General Meeting. Any

forms of proxy not received by this time must be handed to the Chairperson of the meeting immediately prior to the meeting.

On a show of hands, every shareholder of the Company present in person or represented by proxy shall have one vote only. On a poll, every shareholder

of the Company shall have one vote for every share held in the Company by such shareholder.

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

• Holding ordinary shares of the Company in certificated form; or

• Are recorded on the electronic sub-register in “own name” dematerialised form.

Shareholders who have dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker and wish to attend the AGM,

must instruct their CSDP or broker to provide them with a Letter of Representation, or they must provide the CSDP or broker with their voting instructions

in terms of the relevant custody agreement/mandate entered into between them and the CSDP or broker.

Equity securities held by a share trust or scheme will not have their votes at annual general meetings taken into account for the purposes of resolutions

proposed in terms of the JSE Listings Requirements.

Note that holders of unlisted securities and treasury shares are not entitled to vote at the AGM.

Proof of Identification Required The Companies Act requires that any person who wishes to attend or participate in a shareholders meeting, must present reasonably satisfactory identification

at the meeting. Any shareholder or proxy who intends to attend or participate at the Annual General Meeting must be able to present reasonably satisfactory

identification at the meeting for such shareholder or proxy to attend and participate at the meeting. A green bar-coded identification document issued by

the South African Department of Home Affairs, a driver’s licence or a valid passport will be accepted as sufficient identification.

By order of the Board

Derek H BorerCompany Secretary

Date: 9 September 2013

Place: Bonaero Park



Directors Standing for Election or Re-election

1. JM Kahn (Board) (Age: 72)(BA (Law); MBA (UP); DCom (hc); SOE)

Meyer joined the South African Breweries Group in 1966 and occupied executive positions in a number of the Group’s former retail interests before being

appointed to the Board of South African Breweries Limited (“SAB”) in 1981. He was appointed Group Managing Director of SAB in 1983 and Executive

Chairman in 1990. In 1997, he was seconded full-time to the South African Police Service as its Chief Executive, serving for two and a half years. In 1999

he was appointed chairman of the Company on its London listing. Amongst other awards, he holds an honorary doctorate in commerce from the University

of Pretoria and was awarded the South African Police Star for Outstanding Service (“SOE”) in 2000. He retired as Chairman of SAB Miller in July 2012.

2. RS Ntuli (Board)(Age: 43)(LLB)

Ronnie is founder and Chairman of Thelo Group (“Thelo”), an independent investment company with interests in the aviation, financial services and

transportation infrastructure sectors.

Ronnie is also:

• A member on the Board of the African Export-Import Bank (“AFRIEXIMBANK”). Headquartered in Cairo, Egypt, the bank was established by African

Governments, African private and institutional investors, as well as non-African financial institutions and private investors for purposes of financing,

promoting and expanding intra-African and extra-African trade. AFRIEXIMBANK has the status of an international multilateral organisation;

• A member of the Honorary International Investor Council (“HIIC”) for the President of the Federal Republic of Nigeria. The HIIC is a body of

leading international business persons that advises the President and members of the Federal Government of Nigeria;

• A member of the Pan-African Private Sector Trade Policy Committee (“PAFTRAC”) which along with African Ministers of Trade and Industry is

responsible for developing Africa’s trade policy issues and position at the World Trade Organization (“WTO”);

• Immediate former Chairman of the National Empowerment Fund (“NEF”): a multi-billion Rand development finance agency established by the

Government of South Africa to promote and drive Black Economic Empowerment (“BEE”) and the transformation of the South African economy;

• Deputy Chairman of Comair Limited, a JSE-listed company with investments in the aviation and travel sectors and which operates airlines such as

British Airways and kulula; and

• Senior Independent Director on the Board of JSE-listed Allied Technologies Limited (“Altech”). Altech is a leading multi-billion Rand high

technology group that operates in the telecommunications, multimedia and information technology (“TMT”) environment.

Preceding his role at Thelo, Ronnie founded Andisa Capital, in partnership with one of Africa’s largest banking groups. Andisa is an independent and

diversified financial services group with interests in private equity, stock broking, capital markets, corporate finance and treasury solutions, for which he

was the founding Chief Executive.

Ronnie is former President of the Johannesburg Chamber of Commerce and Industry and holds a LLB from Edinburgh University.




3. KI Mampeule (Board and Audit Committee) (Age: 48) (BA; MSc; MBA)

Khutso Mampeule is the Executive Chairman of Lefa Group Holdings, an investment holding and consulting company he established in 2003. He has overall

responsibility for the development and implementation of the Group’s strategy and business model. In addition, Khutso is a Director of JSE-listed Niveus

Investments Limited, Senwes Limited, Phetogo Investments (Pty) Ltd, and Withmore Investments (Pty) Ltd, an empowerment consortium he represents

on the KWV Holdings Limited Board, where is he is also the Chairman of the Social and Ethics Committee. He is also a Director of the Institute of Directors

(“IoD, SA”) and a few other privately held companies. Until 21 May 2007, Khutso was the Group CEO of the South African Post Office, where he made

extensive headlines for taking firm positions against poor governance and corrupt practices at the institution. Prior to starting Lefa Group Holdings, Khutso

was the CEO of Old Mutual Employee Benefits, where he had the overall responsibility of the business with approximately R70 billion of assets under his

management. Before joining Old Mutual, he spent seven years in various senior executive positions at Transnet where he was responsible for rail operations,

including rail/port integration, and the turnaround of 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 the Regional Chairman of the Young

Presidents Organisation (“YPO, Africa”). He holds BA, MSc and MBA degrees.

4. RY Sri-Chandana (Board)(Age: 40)

(BCompt Hons; MCom; CA(SA); CFA; HDip.Co.Law)After qualifying as a Chartered Accountant in 1996, Yasas worked in the corporate finance department of Deutsche Bank as well as the equity research

department of JP Morgan before moving into financial management at FirstRand in 2003. Since then, Yasas has held a number of senior financial management

roles at FleetAfrica, a subsidiary of Super Group, and Fuelogic, an associate of Imperial Holdings, before joining Comair as Executive Manager Finance in

February 2009. In September 2009, Yasas was made Finance Director of Comair, with overall responsibility for the strategy and functioning of the finance

function within Comair. Yasas is also a Non-executive Director of Commuter Handling Services, an associate of Comair. In addition to being a Chartered

Accountant Yasas holds a BCompt (Cum Laude), BCompt Honours, MCom, Higher Diploma in Company Law and is a charter holder of the Chartered

Financial Analyst Institute.

5. MN Louw (Board) (Age: 58)(BMil)

Martin started his career with the SA Air Force (“SAAF”) in January 1973 as a pupil pilot. He spent 22 years in the SAAF as a fighter pilot, flight instructor,

staff officer and project officer for airborne weapons systems, rising to the rank of Lieutenant Colonel. In 1994 he resigned from the SAAF and joined Kentron

as International Marketer and later IST as Project Manager. He joined Comair as a first officer in 1996 and has since served as Chief Training Captain

and Fleet Captain on B727, before becoming an Executive Manager and currently Director: Operations. Martin still flies actively as a captain on the B737.

6. PJ Welgemoed (Audit Committee) (Age: 70)(BCom (Hons); MCom; DCom)

In 1971 Peter obtained a Doctorate in Transport Economics at the Rand Afrikaans University. In 1974, he was appointed Professor and Chairman of the

Department of Transportation Economics and Director of the Research Centre for Physical Distribution and Transportation Studies at Rand Afrikaans

University. Thereafter he served on various boards of directors of companies involved in transportation and banking. In September 1989 he was appointed

Deputy Minister of Mineral and Energy Affairs and Public Enterprises. In 1990 he was appointed as a Member of Cabinet, with the portfolio of Minister of



Transport, and in 1992 as Minister of Transport and of Post and Telecommunication. In 1998 he was appointed as the Executive Chairman of the Board

of Market Power (SA) in South America. He controlled the daily operations of the Group in Chile, Argentina and Uruguay from the Head Office in Santiago.

At present is he is involved in private business through directorships and consultancy.

7. WD Stander (Audit Committee)(Age: 47)(BA (Hons); MBA)

Wrenelle Stander joined Sasol Limited in 2008 and was appointed as the Managing Director of Sasol Gas in October 2010. She serves on a number of Sasol

subsidiary boards, including Sasol Gas, Sasol Synfuels International and Sasol Group Services. In addition, she serves as an employer representative on

the Sasolmed Board of Trustees. Before joining Sasol, Wrenelle served in various capacities within the South African civil aviation industry where she also

served as the Chief Executive Officer of the Air Traffic and Navigation Services Company (“ATNS”). Prior to joining the aviation industry Wrenelle served

in senior positions in the South African energy NGO sector. She holds a BA (Hons) degree from UCT, as well as an MBA from Oxford Brookes University

in the United Kingdom.

8. GJ Halliday (Audit Committee) (Age: 47)

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




Share Price Performance

2013 2012

c c

Market price (cents per share)

Closing (30 June) 265c 133c

High 305c 257c

Low 110c 130c

Closing price/earnings ratio 5.6 83.1

Number of shares in issue

At year-end (millions) 489 489

Weighted average (millions) 489 489

Volume of shares traded (millions) 38 48

Volume of shares traded to number in issue 7.8% 10.0%



Shareholder Analysis

Shareholder Spread

BandsNo. of

shareholdings% No. of shares %

1–1,000 shares 1,767 60.49 526,732 0.11

1,001–10,000 shares 736 25.20 2,652,866 0.53

10,001–100,000 shares 253 8.66 8,485,396 1.73

100,001–1,000,000 shares 118 4.04 35,873,933 7.35

1,000,001 shares and over 47 1.61 441,637,544 90.28

2,921 100,00 489,176,471 100.00

Distribution of Shareholders

Type of shareholderNo. of

shareholdings% No. of shares %

Banks and brokers 12 0.41 12,030,263 2.46

Medical schemes 7 0.24 1,574,361 0.32

Close corporations 22 0.75 188,485 0.04

Empowerment funds 1 0.03 5,772,615 1.18

Endowment funds 6 0.21 1,160,753 0.24

Individuals 2,554 87.44 15,361,773 3.14

Insurance companies 12 0.41 1,193,022 0.24

Investment companies 8 0.27 4,247,311 0.87

Mutual funds 61 2.09 149,761,831 30.62

Nominees and trusts 94 3.22 6,722,238 1.37

Other corporations 18 0.62 320,694 0.07

Retirement funds 85 2.91 29,108,857 5.95

Private (Pty) companies 40 1.37 256,208,404 52.37

Share trust 1 0.03 5,525,864 1.13

2,921 100.00 489,176,471 100.00



Beneficial Shareholders Holding 3% or MoreThe following shareholders hold more than 3% of the issued share capital of the Company:

No. of shares % shareholding

* BB Investment Company (Pty) Ltd 126,320,151 25.82

** Allan Gray 74,495,759 15.23

Britair Holdings Limited 53,966,623 11.03

Innercreek Investments (Pty) Ltd 50,000,000 10.22

Oakbay Investments (Pty) Ltd 22,794,439 4.66

*** Investment Solutions 19,510,302 3.99

**** Oasis 17,643,212 3.61

Total 364,730,486 74.56

* BB Investment Company (Pty) Ltd Bidcorp Group Provident Fund and Pension Fund collectively hold 1,268,492 shares (0.26%), which are independently managed and which are not disclosed in the

number above.

** Allan Gray

Allan Gray Balanced Fund 24,454,211 (5.00%)

Allan Gray Equity Fund 24,442,611 (5.00%)

Allan Gray Domestic Equity Portfolio 18,061,800 (3.69%)

Allen Gray Global Absolute Portfolio 2,722,003 (0.56%)

Allan Gray Life Hedged Domestic Equity Portfolio 2,459,462 (0.50%)

Allan Gray Domestic Absolute Portfolio 2,175,672 (0.45%)

Allan Gray Relative Domestic Equity Portfolio 180,000 (0.03%)

74,495,759 15.23%

*** Investment Solutions

Investment Solutions Funds 12,113,931 (2.48%)

Investment Solutions Classic Balanced 2,766,740 (0.57%)

Investment Solutions Balanced 1,938,000 (0.40%)

Investment Solutions Real Return Focus Fund 1,055,549 (0.22%)

Investment Solutions Incubator Pure Equity 1,005,170 (0.21%)

Investment Solutions Aggressive Value Equity 308,692 (0.06%)

Investment Solutions Relative Product 175,501 (0.04%)

Investment Solutions Preservation Provident Fund 68,400 (0.01%)

Investment Solutions Institutional Equity 51,166 (0.00%)

Investment Solutions Specialist 27,153 (0.00%)

19,510,302 3.99%

**** Oasis

Oasis Crescent Equity Fund 16,001,819 (3.27%)

Oasis General Equity Fund 1,641,393 (0.34%)

17,643,212 3.61%



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, in addition, purchased 1.5% of the Company’s issued share capital at the time from certain

shareholders for cash. Refer to the Circular to Ordinary Shareholders issued on 23 August 2006 for further information relating to the BEE transaction.

Fund Managers Holding 3% or More The following fund managers hold 3% or more of the issued share capital of the Company:

No. of shares % Shareholding

Allan Gray Asset Management 108,312,841 22.14

Oasis Asset Management 23,163,815 4.74

Coronation Fund Managers 18,810,441 3.85

Total 150,287,097 30.73

Public/Non-public Shareholder Spread (Including Resident and Non-resident Shareholding)

Shareholder type and number of shares

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) 80,656,566 16.49 80,656,566 16.49

Strategic holdings (more than 10%)

BB Investment Co. (Pty) Ltd (1) 126,320,151 25.82 126,320,151 25.82

Britair Holdings Limited (1) 53,966,623 11.03 53,966,623 11.03

Share trusts

Comair Share Incentive Trust (1) 5,525,864 1.13 5,525,864 1.13

Public shareholders

Resident (2,882) 210,289,917 42.99 210,289,917 42.99

Non-resident (27) 12,417,350 2.54 12,417,350 2.54

422,792,498 86.43 66,383,973 13.57 489,176,471 100.00

Shareholder Analysis (continued)

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

The form of proxy is only to be completed by those shareholders who are:• Holding ordinary shares of the Company in certificated form; or• Are recorded on the electronic sub-register in own name dematerialised form.

Shareholders who have dematerialised their shares through a Central Securities Depository Participant (“CSDP”) or broker and wish to attend the 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, 30 October 2013 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 auditors3 To re-elect the following Directors:3.1 JM Kahn 3.2 RS Ntuli 3.3 KI Mampeule 3.4 RY Sri-Chandana3.5 MN Louw4 To elect the following Directors to the Audit Committee:4.1 PJ Welgemoed4.2 KI Mampeule4.3 WD Stander4.4 GJ Halliday5 Non-binding endorsement

Non-binding endorsement of Company’s remuneration policySpecial Resolutions 1 to 4

6 Approval of Non-executive Directors' remuneration 2012/13 7 Approval of Non-executive Directors' remuneration 2013/14 8 General authority to repurchase shares9 General authority to provide financial assistance to related and inter-related companies and corporations

Ordinary 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 __________________________ 2013

Signature/sassisted 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

Form of Proxy for Annual General Meeting

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, 30 October 2013 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 Chairman of the

meeting immediately prior to the meeting.

4. The Chairman of the Annual General Meeting may accept or reject any form of proxy which is completed and/or received other than in

accordance with these notes and instructions, provided that the Chairman is satisfied as to the manner in which the shareholder wishes to vote.

5. Documentary evidence establishing the authority of a person signing this form of proxy in a representative or other legal capacity such as

a power of attorney or other written authority must be attached to this form, unless previously recorded by the Transfer Secretaries of the

Company or waived by the Chairman of the Annual General Meeting.

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

(a) Under a power of attorney; or

(b) On behalf of a Company,

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

48 hours before the holding of the Annual General Meeting.

7. An instrument of proxy shall be valid for any adjournment or postponement of the Annual General Meeting, unless the contrary is stated therein,

but shall not be used at the resumption of an adjourned Annual General Meeting if it could not have been used at the Annual General Meeting

from which it was adjourned for any reason other than that it was not lodged timeously for the meeting from which the adjournment took place.

8. A vote cast, or act done in accordance with the terms of a form of proxy, shall be deemed to be valid notwithstanding:

(a) The previous death, insanity or any other legal disability of the person appointing the proxy; or

(b) The revocation of the proxy; or

(c) The transfer of a share in respect of which the proxy was given,

unless notice as to any of the above-mentioned matters shall have been received by the Company care of its Transfer Secretaries as set

out in note 3, or by the Chairman of the Annual General Meeting if not held at the principal place of business of the Company, before the

commencement or resumption (if adjourned) of the Annual General Meeting at which the vote was cast or the act was done or before the poll

on which the vote was cast.

9. A minor must be assisted by his/her parent or guardian, unless the relevant documents establishing her/her legal capacity are produced or have

been registered by the Company’s Transfer Secretaries.

10. Where shares are held jointly, all joint holders are required to sign the form of proxy.

11. Any alteration or correction made to this form of proxy must be initialled by the signatory/ies.

Notes to the Form of Proxy

Administration

Registered office

1 Marignane Drive Bonaero ParkKempton Park1619

Principal place of business

1 Marignane DriveBonaero ParkKempton Park1619

Group Company Secretary

DH Borer1 Marignane Drive Bonaero ParkKempton Park1619

E-mail: [email protected]

Transfer secretaries

Computershare Investor Services (Proprietary) LimitedGround floor70 Marshall StreetJohannesburg2001(PO Box 61051, Marshalltown, 2107)

Comair Limited Integrated Annual Report 2013

Incorporated in the Republic of South AfricaRegistration number: 1967/006783/06.

Share code: COM. ISIN code: ZAE000029823.(“Comair” or “the Company” or “the Group”)