Comair 2019 Integrated Annual Repo - Comair Airways Limited

INTEGRATED ANNUAL REPORTAirlinesHospitalityTourismTrainingTechnology

Comair Limited: 2019 Integrated Annual ReportImportant notice toforeign Shareholders andprospective investorsForeign Shareholders and prospectiveinvestors in Comair Limited (“Comair”)should note that the airline industryin South Africa is subject to extensivegovernment and regulatory oversightrelating to, amongst other things,restrictions on foreign ownership. Sections16(4)(c) and 19(a) of the Air ServicesLicensing Act, No. 115 of 1990, (“Act”)requires that a minimum of 75% of thevoting rights in a licensee must be heldby residents of South Africa (“ForeignOwnership Restriction”). In order toensure that Comair (as a licenced airservices operator in South Africa), remainscompliant with the foreign ownershiprestriction, Comair has adopted a variablevoting share structure in terms of whichthe voting rights attached to each ordinaryshare held by foreign Shareholders willbe decreased proportionately if (i) thenumber of ordinary shares held by foreignShareholders on the record date of anyShareholders’ meeting exceeds 24.99%,or (ii) the total number of votes cast byor on behalf of foreign Shareholders atsuch a meeting exceeds 24.99% such thatthe voting rights of foreign Shareholdersdo not, in aggregate, exceed 24.99%.Foreign Shareholders and prospectiveinvestors are referred to the Comair’sMemorandum of Incorporation (“MOI”)and website (www.comair.co.za) forfurther details. If foreign Shareholders orprospective investors are in any doubt asto what action to take they should seekadvice from their broker, attorney or otherprofessional adviser.

Table of ContentAbout this Report002Performance Highlights/Group Value Added Statement003Our Group004Chairman’s Report012Joint CEOs’ Report013Our Purpose, Strategic Intent and Stakeholders018Our Operations and Customers023Interaction with Government, Regulatory and Industry Bodies033Interaction with Investors, Suppliers and Media037Company Employees and Broad-Based Black Economic Empowerment038Investing in the Community051Environmental Report055Corporate Governance Report065Audit and Risk Committee Report078Remuneration Report081Social, Ethics and Transformation Report085Internal Control and Risk Management086Report of the Directors092Certificate of the Company Secretary099Independent Auditor’s Report100Statements of Financial Position104Statements of Profit or Loss106Statements of Comprehensive Income107Statements of Changes in Equity108Statements of Cash Flows109Accounting Policies110Notes to the Financial Statements119Notice of Annual General Meeting165Directors Standing for Election or Re‑election178Share Price Performance181Shareholder Analysis182

Comair Limited: 2019 Integrated Annual ReportAbout this ReportScope, Boundary and Reporting CycleThis Integrated Annual Report (“this Report”) of the Comair Group(“the Group”) presents the economic, social, governance andenvironmental performance of the Group’s airline and non-airlinebusinesses in respect of its operations in South Africa only, as well asthe financial results of the Group for the financial year 1 July 2018to 30 June 2019. While the performance of the Group’s associatesand joint venture are discussed in this Report, the Report focusesmore on the performance of the Group’s subsidiaries, since theircontribution to its performance is more significant. This Report doesnot extend to or cover the performance of the Group’s suppliers in itssupply chain, nor its outsourced operations such as, but not limited to,its fleet maintenance or its leased facilities. These limitations are notconsidered material enough to impair the completeness of this Report.The Report will be sent to Shareholders, who are recorded assuch in the Group’s Securities Register on 20 September 2019,and is available on the Group’s website at www.comair.co.za.Printed copies are available on request from the Group CompanySecretary. This is the Group’s ninth Integrated Annual Report. Theprevious Integrated Annual Report, which covered the period 1 July2017 to 30 June 2018, was published on 28 September 2018and is also available on the Group’s website.Reporting PrinciplesThe content of this Report is driven by those issues that have thegreatest potential to affect the Group’s ability to operate. Weconsider a broad range of external and internal factors, includingthe outcome of various Stakeholder engagement processes thatdrive the Group’s integrated reporting process, when decidingwhich issues are the most important to address. While this Reportattempts to highlight the significant issues raised and the outcomesof these various engagement processes, as well as the risksidentified during our risk assessment process, the content of thisReport predominantly focuses on the information deemed relevant tothe Group’s Shareholders and potential investors.The information included in this Report aims to provide Shareholdersand investors with a good understanding of the significanteconomic, social, governance and environmental risks andopportunities the Group faces in the short- and medium-term, as wellas with the Group’s response, in order to ensure its ability to createand sustain value for its Shareholders and investors in the long-term.In addition, the Group attempts to explain its efforts to reduce itsimpact on the environment and the societies in which it operates.002This Report was prepared in accordance with InternationalFinancial Reporting Standards; the Financial Reporting Guidesissued by the Accounting Practices Committee; the ListingsRequirements of the JSE; the requirements of the Companies Act(No. 71 of 2008) as amended; and the requirements of theKing IV Report on Corporate Governance 2016 (“King IV”). It isalso guided by the International Integrated Reporting Council’sIntegrated Reporting Framework. The Group’s reporting onsustainable development is guided by the Sustainability ReportingGuidelines of the Global Reporting Initiative (“GRI G4”).External Audit and AssuranceThe Group’s Annual Financial Statements on pages 104 to 164were audited by its independent external auditor, BDO SouthAfrica Inc. (“BDO”), in accordance with International Standards ofAuditing. Their report is included on pages 100 to 103.BDO Advisory Service Proprietary Limited has provided limitedassurance over selected key performance indicators and specificdisclosures as set out in this Report. Based on their work performed,nothing has come to their attention that causes them to believethat the selected key performance indicators or specific disclosuresin the 2019 Integrated Annual Report for the year ended30 June 2019 has not been prepared, in all material aspects, inaccordance with the selected reporting criteria.For a better understanding of the scope of BDO’s assuranceprocess, reference should be made to BDO’s Assurance Statement,which can be obtained from the Group Company Secretary, oraccessed via the Group’s website, www.comair.co.za.Board ApprovalThe Board is ultimately responsible for the authenticity of thisReport. Together with the appropriate Management and Committeesupport, the Board reviewed and analysed the informationdisclosed, and is satisfied with the content of this Report. ThisReport was approved by the Audit and Risk Committee and dulyauthorised by the Board on 16 September 2019.Contact UsWe welcome opinions, suggestions and questions from all ourStakeholders. Please direct these to the Group Company Secretary,Derek Borer. Our contact details are included on the inside backcover of this Report.

We fly by the passion of our purposePerformanceHighlights/GroupValue Added StatementStrategic/Group objective IndicatorCreating Shareholder value Net profit (after tax)Total turnover/Group revenueOperating expensesDividends paid to ShareholdersInterest on loansCurrent taxationCommitment to qualityOn time performanceManaging riskLeading as a responsiblecorporate citizenProvide growth anddevelopment opportunitiesfor staffOperational effectivenessInvestment in assets (property, plant and equipment)Number of significant safety incidentsNumber of consecutive unqualified audits by IOSACarbon inventory – all scopes – footprint per employee(tonnes of CO2 emissions)% of carbon emissions relating to scope 1% of carbon emissions relating to scope 2% of carbon emissions relating to scope 3No. of legislative/regulatory breachesTotal staff costNumber of South African employeesOverall Employment Equity (“EE”) representation% Staff members belonging to a union% Spend of training or training investment (% of salaryspend)Employee turnover rate% Female representationQuantity of fuel consumed per passenger/fuel burn perpassenger (kg per passenger)Number of passengers carriedAircraft and flight simulator spendNumber of owned aircraftNumber of leased aircraftElectricity consumed (kWh)Actual 2016/17 Actual 2017/18 Actual 2018/19296 970 000325 611 000896 809 0006 063 737 0006 536 540 0007 125 642 0004 999 789 0005 412 752 0006 263 975 00083 776 00088 528 000102 506 000250 377 000248 938 000256 774 0004 269 0008 902 0006 687 000BA:85%BA: 85%BA: 79%kulula: 85%kulula: 84%kulula: 78%965 821 000907 872 0001 115 327 000012677331.5182%1%16%01 001 889 0002 1051 47942%314.3283%1%16%01 132 838 0002 2061 51647%301.6283%1%16%01 189 525 0002 1931 0.935 545 2141 083 201 0001975 283 79529.195 801 191712 919 0001885 028 48027.005 981 8031 288 297 0001694 967 065003

Comair Limited: 2019 Integrated Annual ReportOUR GROUPWho We Are and What We DoComair Limited (“The Group”) is a South African company, listed on the JohannesburgStock Exchange (the “JSE”). The Group has operated successfully in this country since1946 and is the only known airline to have achieved operating profits for 73 consecutiveyears. It has a safety record that is internationally recognised and has level 2 BroadBased Black Economic Empowerment (“B-BBEE”) recognition. The Group has beencertified independently by the Top Employers Institute as one of the Top EmployersSouth Africa 2019.This proudly South African Group is comprised of five business units:AirlinesThe Group offers scheduled and non-scheduled airline services within South Africa,sub‑Saharan Africa and the Indian Ocean Islands, as its main business. The Groupoperates under its low-fare airline brand, kulula.com, as well as under the British Airwayslivery, as part of a licence agreement with British Airways PLC.kulula.com is the market leader in affordable, easily accessible air travel and continuesto grow in the cost-conscious business and leisure markets. It has become one of SouthAfrica’s iconic consumer brands, while British Airways continues to grow in the corporateand public sectors, as well as in the inbound tourist markets.The Group’s route network, covered during the period under review, is set out on page 24of this Report.HospitalityThe Group launched its own catering service in 2012 through a company known asComair Catering Proprietary Limited, trading under the Food Directions Brand. Originallylaunched to cater to the airline brands, Food Directions now also provides a range ofhealth and other food products to various South African retailers.Food Directions provides on-board catering and retail services to the Group’s kulula. comand British Airways branded flights, giving it control and flexibility in terms of cost andproduct offering. It also provides all catering and procurement to the Group’s SLOW004