AnnuAl RepoRt 2010/2011pmg-assets.s3-website-eu-west-1.amazonaws.com/130430annrep.pdf · thE SpiritS Surround uS Megha, meaning “cloud” in classical Hindi, is also the name used

A n n u A l R e p o R t 2 0 1 0 / 2 0 1 1

the nAming of Clouds In 1802, an English Quaker and pharma-

cist, Luke Howard published his Essay

on the Modification of Clouds.

In it he coined names for the four main

clouds: cirrus (a curl), stratus, (a layer);

cumulus (a heap); and nimbus, (of rain).

More than two hundred years later,

we still use these terms today.

1

01 About SA ExprESS – WE Fly For you

02 ChAirpErSon’S rEport

03 CEo’S rEport

04 lEAdErShip

05 SuStAinAbility

•SustainabilityReport

06 CorporAtE GovErnAnCE rEport •ShareholdersCompact

07 FinAnCiAl StAtEmEntS

pG 3

pG 9

pG 11

pG 15

pG 25

pG 40

pG 54

ContEntS

a

thE SpiritS Surround uS

Megha, meaning “cloud” in classical

Hindi, is also the name used to

address elephants in prayer.

Both Hindus and Buddhists

believe cumulus clouds are the

spiritual cousins of elephants.

01About SA ExprESS

3

01

visionSA Express’ vision is to be the most successful

regional airline.

missionTo provide the best customer service whilst

optimising profits.

valuesSAfETy firST

Rigorousadherencetonationalandinternational

standardsofsafetytoensureairtravelthat is

bothsafe,aswellascomfortable.

SErvicE BEforE SElf

Meeting–andexceeding–customerandemployee

expectationsthroughcaringandhighstandards

ofserviceexcellence.Bothinternalandexternal

communication need to be in line with service

deliveryintotaltransparency.

PASSion

Workisdeliveredwithenthusiasmandadesire

for excellent performance and action. Passion

appliestolivelyoreagerinterestinoradmiration

for “The Express Way”. Success is rewarded,

recognisedandcelebratedinafunandexciting

mannerasanorminoureverydayinteraction.

PErforMAncE DrivEn

Implementation of a well-defined strategy, and

clearly articulated corporate and individual

objectives to meet continuous performance

targets and sustain the organisation’s growth

intothefuture.

SElf DEvEloPMEnT

Pro-activelearninganddevelopmenttargetedto

meet thechallengingdemandsofour jobsand

holisticindividualgrowth,aswellastopromote

businessperformance.

AccounTABiliTy AnD inTEgriTy

The viability of our business hinges on taking

ownership of both responsibility and follow-

through, with an unquestionable commitment

to only the highest ethical and professional

standards.

4

ThepurposeofSAExpressistoprovideastrong

feedernetworktointernationalcarriers.Theairline

is also committed to stimulating and developing

newsecondaryentrypointsintotheSADCregion.

Inthelastfinancialyear,SAExpresscontinuedto

focusonthefollowingcriticalareasofitsbusiness:

IncreasingRevenue:Theairlinecontinuallystrives

to increaserevenueby implementinganumber

ofkeyinitiatives.Duringthe2010/11financialyear,

SAExpressfocusedonconsolidatingitsdomestic

marketsandexpandingwithintheregion.

Regional Expansion: SA Express’ launch of

CongoExpress,aDRC-baseddomesticcarrier,

formedpartofitsvisiontoexpandtheairline’s

regional footprint. However, this initiative had

to be closed down due to challenges faced

in the venture and the barriers to operate

successfullywithintheDRC.Toachieveitsgoal

ofbeingregionalcarrierofchoice,SAExpress

alsoincreaseditsfleettostimulateandservice

thrivingsecondarymarkets.

Improving Operating Efficiencies: Improving

operationalefficiencies inthebusinessremains

the key focus. The objective is to create a

cultureof“gettingitrightthefirsttimearound”in

order tosavecosts, timeandenergy,amongst

all employees. This, coupled with the airline’s

customer-centricorientation,willensuresuccess

formanyyearstocome.

01 About SA ExprESS (continued)

Strategic overview

5

Key performance indicators

Revenue gRowth 4.4%

IncRease In passengeRs caRRIed

1.01%

Fleet27

load FactoR64%

Revenue peR avaIlable seat / km

1.04c

cost peR avaIlable seat / km

0.87

on tIme peRFoRmance (15mIn)

85%

geaRIng RatIo1.46 tImes

6

01 About SA ExprESS (continued)

SA Express route network

TrAvEl rouTES

Johannesburg|Bloemfontein|CapeTown|Durban|EastLondon|Gaborone|George|Hoedspruit

Kimberley|Kruger–Mpumalanga|Lubumbashi|Maputo|Nelspruit|PortElizabeth|RichardsBay

WalvisBay|Windhoek

NAMIBIA

BOTSWANA

DRC

MOZAMBIQUE

Lubumbashi

Hoedspruit

Nelspruit

Maputo

Richards Bay

Durban

East London

Port ElizabethGeorge

Walvis Bay

Windhoek

Gaborone

Cape Town

Johannesburg

Bloemfontein

Kimberley

7

cAnADAir rEgionAl JET 200 BEr

Manufacturer:Bombardier

Maximumcruisingspeed:

474knots/545mph/879kmph

Engine:2GeneralElectricCF34-3B1

Range:1662miles/3080km

Maximumaltitude:41000ft/12496km

Seatingcapacity:50passengers

Crew:Twopilots,twocabincrew

Wingspan:69ft7in/21.21m

Overalllength:87ft10in/26.77m

Overallheight:20ft5in/6.22m

Maximumtake-offweight:51000lb/23134kg

Minimumrunwaylength:6295ft/1919m

cAnADAir rEgionAl JET 700




Engine:2GeneralElectricCF34-8C5B










DE HAvillAnD DASH 8 SEriES 300 TurBoProP




Engine:2Pratt&WitneyPW123E





Wingspan:90ft/27.4m





DE HAvillAnD DASH 8 SEriES Q400 TurBoProP




Engine:2Pratt&WitneyCanadaPW150A










SA Express FleetSAExpress’fleetof27aircraftismanufacturedbyBombardierAerospace.Thesemodern,newgeneration

aircraftaredesignedtoefficientlyservicetheregionalmarket:thefuelefficient70-seaterCRJ700,the

74-seaterQ400whichisknowntobethequietestturbopropcabininthesky,the50-seaterCRJ200and

alsothe50-seaterDash8300aircraft.

8

02ChAirpErSon’S rEport

Good omEnS

A common iranian blessing,

“Dayem semakum ghaim”

translates as “your sky is

always filled with clouds”.

9

At the time of publishing the 2010/11 Annual

Reportand theAnnualFinancialStatements,

theSAExpressboard,leadershipandmanagement

wereconfidentofthefinancialperformanceand

sustainabilityoftheairline.Subsequenttothis,it

emergedthattherehadbeenirregularaccounting

practices which, it has been discovered, date

backbeyondthe2010/11financials.

AforensicauditwascommissionedbytheBoard

followingallegationsofaccountingirregularities

reported through the company’s Ethics Hot

Line last September. SizweNtsaluba Gobodo

was appointed to carry out the investigation,

and staff and management cooperated fully

withtheinvestigators.

This was a difficult period for all as the staff,

management and the Board were all operating

undermediascrutinyandnegativemediacoverage

duringthistime,whichdecreasedstaffmorale.

Theforensicauditreport,completedinDecember

2011,confirmedthattherehadbeennofraudulent

transactions but many accounting errors

arisingfrom lackofcompetenceanddeviations

from accounting policies. As a result of the

findings, the Board resolved to withdraw and

reconstructthe2011AnnualFinancialStatements.

Furthermore, it initiated internal disciplinary

procedures, resulting in warning letters being

issuedtoimplicatedmembersofmanagement.

The Board believes that there has been no

attempttodefraudthecompanyasthe issues,

which have been thoroughly investigated,

aroseasaresultoferrorsmadeinaccounting

entriesoveraperiodoftime.Togetherwiththe

leadership,wehaveputinplaceaprogrammeto

improveallinternalcontrolstoensurethatthese

accountingirregularitiesdonotariseagain.

Upon thorough investigation, other errorswere

found relating toprevious financialperiodsand

thissubsequentlydelayedthereconstructionof

the2011AnnualFinancialStatements.Insummary,

these resulted in the restating of the 2010/11

financials with the following changes: aircraft

values,rotableandconsumablevalues,theitems

listedintheforensicreportandotherareas.

This has had a knock on effect on the 2011/12

financials and adjustments have been made to

the treatment of maintenance costs, and the

valuationofaircraft, rotablesandconsumables.

Whilethiswasatryingtimefortheorganisation

asawhole,invaluablelessonshavebeenlearnt

andtheopportunitytakentoredesignaccounting

policies and processes, to train and upskill

accountingstaffandtoensuresucherrorswill

notrecur.

AcknowlEDgEMEnT

Iwouldliketoacknowledgetheintegrityandhard

work of the Board, the SA Express leadership

teamand all of our staff, for undertakingsuch

a rigorous process of restating the 2010/11

financials; your perseverance and commitment

isapplauded.

SA Express appreciates the unwavering

commitmentoftheshareholdertoallStateOwned

Companies. The rigorous leadership of Minister

Gigabahasenabledtheairlinetofulfilitsambitions

tobecomeasustainableregionalairline.

MyBoardcolleaguesfacedayearofsignificant

challenges;youwerereliableanddeterminedin

thefaceofformidableobstacles.

The SA Express leadership and management

teams,ledcapablybyInatiNtshanga,experienced

anincrediblejourneyandwehavebeentested

relentlessly.

Toourcustomers,whochosetoflySAExpress,

weallknowthatweflybecauseofyouandwe

thankyou.

ItmustbenotedthatduetothefactthattheBoard

memberswere,saveforDr.Ssamula,rotatedat

theAGMon13August2012andduetothefactthat

finalisationoftheAnnualFinancialStatementsfor

the year ending 31 March 2012 were mandated

to the newly appointed Board members, the

operational informationcontained in this Annual

ReportisreportedonbythepreviousBoardand

theAnnualFinancialStatementsarereportedon

by the newly appointed Board members. Both

theBoardofDirectorsandmanagementofSouth

African Express Airways are satisfied with this

arrangement which is consistent with all legal

requirementsanddoesnotexposethecompany

toanyrisks.

02

l.g Boyle

10

03CEo’S rEport

SpEEdinG throuGh thE hEAvEnS

Cloudsmovewiththewindand

whenpartofathunderstorm,can

travelatuptofortymilesanhour.

11

Withoutadoubt,2011wasanintricateyearfor

theairline,onewhichbroughtwithitmany

challenges. Turbulence is endemic to flying and

isalsoaneternalattributeoftheairlineindustry.

As part of an ever-changing world economy,

thereweremanyindustryandinternalchallenges

wewere facedwithduring the financialyear.SA

Expresswasnotimmunetothese,andtherefore

hadtomakesomestrategicdecisionstoreshape

thebusiness.

AspertheChairperson’sreport,aforensicaudit

wascommissionedafteraccountingerrorswere

found in the Annual Financial Statements and

thereportthereofconcludedthatnofraudulent

activities were identified. The audit report did

howeverrevealweaknesses in internalfinancial

controlsand that resulted in thewithdrawalof

theAnnualFinancialStatements.

SA Express has subsequently reviewed its

existingfinancialcontrolsandaccountingpolicies,

improved on the internal controls to prohibit

re-occurrence of errors, embarked on training

programstoupskillstaffandreviewedsystem

functionality.Allprocesseshavebeenreviewed

and aligned to ensure that these weaknesses

areeliminatedandoversightisimproved.

ItwasatryingtimeforallemployeesandIwould

like to thank everyone for the patience and

support theydisplayed to thepeoplewhohad

todealdirectlywiththeauditorsasweidentified

theareasofweakness.Weareconfidentthatour

interventionswillcontributetoaworldclassand

bestpracticeorganisation.

Without ranking the impact or the importance,

all these challenges pushed the team to be

innovativeanddrove,notonlytheexecutiveteam,

butthecompanytobepro-activeinrecognizing

change and adapting to ensure sustainable

growthforthefuture.

• The symptoms of the recovery from the

recession posed a national challenge in the

behaviorpatternsofourcustomerand,asa

businesslikeallothers,costcuttinginitiatives

werehighon the listofpriorities. Increased

fuel prices and other regulated costs also

posedachallengeandasthefleetwasageing,

reliabilityremainedaconcern.

• SA Express had two incidents in Kimberley

andWindhoekduring theyear,bothhandled

superblybyallinvolved,especiallythepilots:

howevertherecoveryoftheaircraftprovedto

bemorechallengingduetoextendedwaiting

periodsforspares.

• The excitement of the launch of Congo

Express as the expansion venture into the

DRCwasshort-lived,asmarketconditionsand

the escalating cost structure of operations

made it impossible tomaintain thisbusiness

intheDRC.Thedecisiontowithdrawhasnot

been an easy one but a crucial decision to

ensurethesustainabilityofSAExpress.Even

inthenearfuturewewillmakeourcorporate

decisionswith the necessary prudence and

foresight as well as retain our focus on

03

12

03 CEo’S rEport (continued)

sustainablevaluecreationforallstakeholders.

Thismethodologywillensurethatweidentify

risksintimeandtaketherequiredaction.The

contraryisalsotruethatthiswillallowusto

recognize opportunity at an early stage, do

thenecessaryanalysisandriskprofilesaswe

capitaliseonthem.

When reflecting on the past year, one cannot

file the boarding pass of this journey without

acknowledgingthehistoricaleventswitnessedas

abusinessandasambassadorsofthecountry.

SAExpresswasawardedthecontracttocarry

allthe32teamsduringthe2010FIFAWorldCup

and, with a lot of preparation, managed to fly

theflaghigh.Asdemandingas theywere,with

a lotofchangesto theschedule,wemanaged

to transport themsuccessfully, just aswe did

duringtheConfederationsCuptheyearbefore.

Aspart of ourFACTbusinessmodel, basedon

frequency,availability,competitiverateandtime,

weknowhowvaluablereliabilityandsafetyisto

ourcustomers.SAExpresshasforthesecond

timeintheairline’shistoryreceivedthereliability

awardfromBombardier.SAExpressachievedthe

highestoveralldispatchreliabilityfortheMiddle

EastandAfricaregion.

Withthefleetrenewaltenderfinalized,SAExpress

isproudtobeofferingourcustomersnotonlya

competitiveproduct,butalsoamoreeconomical

productinthenearfuture.Thefleetofthefuture

still requires amixed fleet of Turbo props and

Jets. The products of choice were identified

as Bombardier Q400 and the Embraer E-jets.

SAExpresswillbe receivingsevenQ400Turbo

props as part of the new generation modern

aircraftfleet,duringthenextfinancialyear,which

willincreaseourgaugefromprimarily50seater

aircraftto70seaters.

The Turbo prop aircraft has many advantages,

such as reduced carbon emissions (more

friendlytoourenvironment),reducednoisewith

Q Technology (Q stands for Quite), outstanding

passenger comfort and with comparable flight

speeds to Jet aircraft. We believe that our

customerswillbemorethansatisfiedtoassociate

withtheseaircraft.

Despitethedeclineindemandforaviationtravel,

SAXhasseena4.4%growthinturnoveroverthe

past12months.Ithasexperiencedacumulative

growth of 46.5% over the past five years. The

graphbelowdepictstherevenuegeneratedover

thepastfiveyearsto2011:

The company, not withstanding this excellent

growth in revenue, has experienced significant

costpressuresfromfactorssuchasfuel,airport

chargesandmaintenancecostswhicharedollar

denominated, thus suffering the impact of the

fluctuation in the exchange rate against the

USdollar. Following are someof the significant

increasesincostsoverthepastfiveyears:

- Fuel expenditure is R399.5 million, 24.3% of

revenueandis39%abovethefuelexpenditure

incurredin2007;

- Ground support and passenger handling is

R78.4 million and is 198% above the costs

incurredin2007;and

- Navigation,landingandparkingisR165.3million

andis102%higherthanthecostsincurredin

2007.

The above increases in costs, against the

relativelymarginal increase inrevenuerequired

the company to provide greater wisdom and

stewardshipoveritslimitedresources.

rEvEnuE (r’m)

1 424

1 644

2007 2008 2009 2010 2011

1 8001 6001 400

1 200

1 000

800

600

400

200

-

1 122

1 327

1 575

13

Notwithstanding thenet lossafter taxof R201

millionreported,onasustainableearningslevel,

theprofitisR54.77million.Thefuelcosts,ground

support,passengerhandling,navigation, landing

and parking costs have had a significant and

negative impact on the business. Despite this,

thebusiness,isstillabletomeetitsshortterm

obligations as evidenced by the net current

assetpositionandwiththerobuststrategythe

positionwillimprovefurther.

It is tothisendthatthemodelof thebusiness

hasbeenreceivingsignificantattentiontoensure

thatthebusinessisnotonlylookedafterforthe

next day, but that it thrives into the future to

ensuretheachievementofthenoblegoalsofthe

shareholderasarticulatedintheNewGrowthPath.

For the 2012 financial year, SA Express will be

focusedonaphasedstrategicapproach.Phase

onewill be focusedon remedial actionswhilst

phasetwowillstrivetoconsolidateandembed

business cost/efficiency improvement initiatives

aspartofthecoreofourbusiness.Thisapproach

will ensure that the airline stimulates new

markets and keeps its operations sustainable

posttherecessionperiod,whilstnavigatingthe

turbulence.

As we check-in for the flight ahead, we know

wearegoingtobefacedwithheadwindsand

turbulenceon thehorizon,suchas fuelprices

putting pressure on profitability, the need to

improve our on-time-performance and other

factors.Todeliveronourvisiontobethebest

regionalairline,weknowthatwehavetheloyalty

andcommitmentof,notonlyourcustomers,but

alsoourworkforceof1026employees.

AsWeFlyforyou,wethankyoufor joiningus

onboardthisjourney.

Sustainable earnings comparison

inati ntshanga

2011 2010

original

financial

statements

rm

restated

financials

rm

original

financial

statements

rm

restated

financials

rm

netprofit/(loss)beforetax 51 -201 349 109

ProfitonsaleofAssets 0,1

ImpairmentonCongoExpress 35 39,6 -6

ImpairmentonAssets 61,2 86,3

ReclassificationAdjustment 0 -163 -47

FairValueAdjustments 1,9 -1,4 0,3

ChangeinEstimates 0 156,4 -50 61,0

Priorperiodover/underaccruals

14 -14

PriorperiodErrors 7,3 - -7,3 -31,8

netprofit/(loss)beforetax 109,2 54,77 109 177,6

a

hiGh in thE SKy

noctilucent clouds are the highest

clouds, forming at over 80km up —

much higher than ordinary clouds,

which typically rest at most about

16km above the earth.

04lEAdErShip

Sub-Committees

Audit & risk human resources & remuneration

Safety, health & Environmental

Company Secretary

boArd oF dirECtorS

15

inATi nTSHAngA

Chief Executive Officer

InatiNtshanga,aHarvardEconomicsgraduate,wasappointed

ChiefExecutiveOfficeronthe1stofSeptember2010.Previously,

hisportfolioincludedthedevelopmentofSAExpress’strategy

andbusinessdevelopment,includingdrivingexpansionintonew

routes.Overthelast10years,Inatihasheldvariousrolesinthe

airlineindustry,particularlyatSAAwhereheworkedinvarious

departments,includingVoyager,AirportOperations,Technical,

RegionalGeneralManagerfortheAmericasandExecutiveManager

ofStrategyandPlanning.

PriortojoiningSAA,Inatiwaspartofaconsultingfirmthatwas

taskedtoworkinvariousareasincludingCargo,Technical

andCustomerService.InatialsoholdsaGIBSGlobalExecutive

DevelopmentProgrammequalification,servesontheBoardofthe

Hoedspruitairportandisintenselyinvolvedinthedevelopmentof

theaviationindustryintheregion.

boArd oF dirECtorS

liliAn BoylE

chairperson of the Board of Directors (non-executive chair)

LilianBoyleisaconsummatebusinesswomanwithextensive

experienceinthetravelandtourismindustry.AformerChief

ExecutiveoftheBidTravelGroupofcompanies,sheguidedthe

acquisitionandnewbusinessstrategies,regionalexpansion,global

alliances,relationshipmanagementofkeyclientsandsuppliersand

aperformancedrivencultureofintegrityandentrepreneurship.She

holdsaMasterofArts(Economics)degreefromGlasgowUniversity

andaMasterofBusinessAdministrationfromtheUniversityofthe

Witwatersrand.

04

16

EzrA BunyEnyEzi

EzraBunyenyeziisaprominentRwandanbusinessmanandawell-

knowncorporatepersonalityinEast,CentralandSouthernAfrica.For

over40years,hehasenjoyedawiderangeofbusinessexposure,

atmanagementandBoardlevel,invarioussectors,includingbanking,

microfinance,insurance,realestate,telecoms,power,IT,logisticsand

communication.Heishighlyrespectedforhispeoplemanagement

skills–andaveryenergeticmemberofseveralBoards.Ezraholds

aDiplomainMassCommunicationaswellasaDiplomainInternational

TravelandConsulting.

cHriS cHriSToDoulou

ChrisChristodoulou,anexpertonairlineliabilityandregulatory

issues,isthefounderofChristodoulou&MavrikisInc,whereheis

currentlyamanagingpartner.AnattorneyintheHighCourtofSouth

AfricaandsolicitoroftheSupremeCourtofEnglandandWales,his

experienceonairlineissuesincludeaviationinsurance,bilateral

airservicesagreements,competitionandderegulation,aircraft

acquisitions,aircraftfinanceandsecurity,internationalmergersand

acquisitions,jointventureagreementsandmanyotherspecialities.

ChrisisamemberoftheLawSocietyofSouthAfrica,aFellowofthe

InstituteofDirectors(SouthAfrica)andhasactedasanInternational

AirTransportationAssociation(IATA)TrainingFacilitator.

04 lEAdErShip (continued)

non-Executive directors

BonAng MoHAlE

BonangMohaleisCountryChairmanandVicePresident:SOPAFSouth

ShellSouthAfricaEnergy(Pty)Limited.Anaccomplishedbusinessman,

recipientofnumerousawardsandamotivationalspeaker,Bonang

hasheldvariousexecutivepositionswithpharmaceuticalgiant

Novartis,Otis,theworld’sbiggestandoldestelevatorcompany,

aswellasSouthAfricanAirways,SanlamandDrake&Skull.After

spendingfouryearsatWitsMedicalSchool,Bonangacquiredhis

businessandmanagementexperienceinthepharmaceuticalindustry

whereheprogressedthroughvariouspositions,includingproduct

managementandnewbusinessdevelopment.

17

glEnn van HEErDEn

GlennvanHeerdenhashadanoutstandingcareerinthecarrental,

vehicleleasingandtourismindustry.AsafoundermemberofAvis

SouthernAfricaLTD,heworkedforthegroupinvariouscapacities

for38years,includingthepositionofChiefExecutiveOfficerand

laterasNon-ExecutiveChairman.Glenn,aqualifiedprivatepilot,led

theexpansionofAvisSouthernAfrica,tobecomethelargestrental

andleasingcompanyintheregion,throughoutthe14nationSouthern

AfricanDevelopmentCommunity(SADC)andAvisGrouplistedonthe

JSEin1997.GlennisashareholderofSouthernAfricanSafarisand

theThornybushCollection(Pty)LTD.HewasaNon-ExecutiveDirector

ofBarloworldMotorsandAutomation.GlennholdsaPMDfromHarvard

UniversityandisatrusteeoftheWWFSouthAfrica.

BriDgET SSAMulA

BridgetSsamulaiscurrentlyemployedasaseniorlectureranda

researcherintheCivilEngineeringDepartmentattheUniversityof

Pretoria.Shehasbeeninvolvedinairtransportprojectsatboth

researchandindustrylevelinareasrangingfrompolicy,strategy,

planningandoperationswithaspecificfocusonAfricanaviation

issues.BridgetholdsaPhDinTransportationEngineeringfromthe

UniversityofPretoria,inwhichshespecialisedinthefieldofaviation.

SheiscurrentlyfinalisingherMBAinAviationManagementfromEmbry

RiddleAeronauticalUniversity,USA.

MATSoTSo vuSo

MatsotsoVusoCA(SA)isManagingDirectorofNyamezela

BusinessAdvisoryServices,afirmthatspecialisesincorporate

finance,managementconsultingandassuranceservices.Other

businessesthatMatsotsohasestablishedincludeNyamezela

ConsultingEngineers,acompanyprovidingprojectmanagement,

electrical,civil,chemicalandarchitecturalservices;Nyamezela

Properties,aconstructionandpropertymanagementcompanyand

NyamezelaInvestments,acompanythattargetsvariousinvestment

opportunitiesinmining,energy,telecommunicationsandtourism.

Matsotsohasextensiveexperienceinassurance,projectfinance

andfinancialrestructuring.

18

lESiBAnA lEDwABA

LesibanaLedwabawasHeadofFinance:2010FIFAWorldCup™Projectat

Coca-ColaSouthAfrica.Hewasresponsibleforthefullfinancialfunction

andriskmanagementonthe2010FIFAWorldCup™Project.Subsequent

totheendofthe2010FIFAWorldCup™,Lesibanamovedintobusiness

operationswherehecurrentlyheadsupfinanceforWaveside(Pty)Ltd,

a100%ownedsubsidiaryofCoca-ColaAfrica.PriortojoiningCoca-Cola

SouthAfrica,heheldthepositionofFinancialDirectoratRenniesTravel,

wherehewasamemberoftheBoardwithresponsibilityforthefull

financefunction,reportingtotheCEOandtotheBoard.Lesibanaalsohas

experienceinInternalAudit,havingworkedastheChiefInternalAuditorfor

RenniesBank.

Mr.Ledwabahasservedon:

•TheAuditandRiskCommitteefortheDepartmentofScience&Technology

•TheBoardsofRenniesTravelinMalawi,Namibia,ZimbabweandTravelwise

•inBotswana

LesibanaholdsaB.ComdegreefromVistaUniversity,aCertificatein

TaxfromUnisaandanMBAfromWitsBusinessSchool.Hewasalsoa

participantontheProfessionalDevelopmentProgramme–asixmonthwork

andstudyprogrammeundertakeninNewYork.

04 lEAdErShip (non-Executive directors continued)

vulinDlElA cuBA

VulindlelaCubaistheFounder,ChairmanandPresidentofNGN

Telecoms,acompanythatprovidesvalueaddedservicesthrough

telecommunicationsnetworkstoitscorporateclientsinSouthAfrica

andinternationally.Vulindlelaboastsararedepthofknowledgeand

experienceofmanagementconsulting,operationsmanagementand

leadership,andofmergersandacquisitions.

BeforecreatingNGNTelecomsinApril2001,Vulindlelaheldthe

followingpositions:FounderandFormerChairman,DeputyChairman

andCEOofSafikaHoldings,FounderandHeadofOctagon,the

businessconsultingandtrainingorganisation.Vulindelahasalso

servedasanExecutiveConsultantatMonitorandRenaissance.

HeholdsaBSc(LandSurveying)fromtheUniversityofFortHare,a

BSc(InformationSystems)fromtheUniversityofSouthAfricaandan

MBAfromtheLondonBusinessSchool.

19

ExECutivE tEAm

DAvE AllAnBy

general Manager: operations & cargo

CaptainDaveAllanby,aqualifiedpilot,isresponsibleforthedailyairline

operations.Hisportfolioincludesairportoperations,flightdeckandcabincrew

andtheOperationalControlCentre.

PriortojoiningSAExpress,CaptainAllanbyspenteightyearsastheChiefPilot

ofGencorAviationandpriortothatDavewasatSouthAfricanAirwaysfornine

years.AtSAExpress,Dave’spreviousrolesincludedAuditCaptain,ChiefPilot

andExecutiveManager:FlightOperations.

HeiscurrentlytheChairpersonoftheTenderCommittee,PrincipalOfficerofthe

PensionandProvidentFundandLeadNegotiatorinannualunionsalaryreviews.

inATi nTSHAngA

Chief Executive Officer

(pleaseseeBoardprofiles)

General manager: Customer Services & marketing Chief Financial officer

General manager: operations & Cargo

General manager: technical maintenance & Engineering

General manager: Strategy & revenue management

General manager: human Capital

General manager: risk & Compliance

General manager: Africa Expansion

Company Secretary Chief information officer

ChiEF ExECutivE oFFiCEr

20

wESlEy HErMAnuS

general Manager: Human capital

WesleyHermanusisinhisfourthyearofheadinguptheHumanCapitalBusiness

UnitatSAExpressandwasinstrumentalintransformingthisareafroman

administrativefunctiontoastrategicbusinesspartner.

PriortojoiningSAExpress,WesleywasatSouthAfricanAirwaysfor10years,

whereheworkedintheFlightOperationsenvironmentbeforemovingtoHR.Here,

heheldvariousmanagerialpositionssuchasQualityManager,SeniorManager:Skills

Development,aswellasHeadofIndustryTravel.WesleythenjoinedDiscovery

HoldingsastheDivisionalManager:LearningManagement,for3years.

WesleyholdsaHumanResourceDevelopmentqualificationfromtheUniversityof

JohannesburgandaMastersdegreeinBusinessAdministration.

JEnEAn grEEn

Chief Information Officer

JeneanGreenisresponsiblefordeliveringvalueinITprocessesandstructures

toensureSAExpressperformsseamlessly.Jeneanhas29yearsofexperience

inITandhasvastexperienceinmanufacturing,construction,retail,government

andairlineorganisations.

JeneanjoinedSouthAfricanAirwaysin2000tomanagevarioussystemmigration

projectsandin2004shewasselectedbySouthAfricanAirwaystomanagethe

implementationofamajorsystemforSAExpressTechnical.Duringthedelivery

ofthisprojectJeneanwasapproachedbySAExpresstojointhemintheroleof

SeniorProjectManagerIT,beforebeingappointedtohercurrentposition.

04 lEAdErShip (Executive team continued)

21

zuki JAnTJiES

general Manager: customer Service and Marketing

ZukiJantjiesprovidesleadershiptotheAirportsOperations,Productand

Catering,Sales,DirectChannels,GroupSales&ReservationsandMarketing

teams.

ZukiwaspreviouslytheExecutiveManagerforAirportOperationsandOCC,

wheresheledtheteamtoensurethetimelydepartureandarrivalof

passengersatairportsandco-ordinatingthemovementofallaircraft.Before

herappointmenttoExecutiveManagerforOperationsandOCC,Zukiheaded

theSAExpress’MarketingDepartment,whichconsistedofbrandmarketing,

communication,publicrelationsandproductbeforeshewaspromotedtoher

currentposition.

BeforejoiningSAExpress,ZukispentfouryearsatNampakinhumanresources,

businessdevelopmentandbrandmanagement.ShethenjoinedSouthAfrican

AirwayswhereshespentsixyearsatVoyagerresponsibleforairlineandnon-

airlinepartnerships.ZukiholdsanHonoursDegreeinBusinessStudiesanda

HigherNationalDiplomainBusiness&FinancefromNottinghamTrentUniversity

intheUnitedKingdom.

ArSon MAlolA-PHiri

general Manager: Africa Expansion

ArsonMalola-PhiriisresponsibleforformulatingtheRegionalExpansionstrategy

androllout.Arsonhasvastexperienceintheairlineandfinancialservices

industries,havingworkedforSouthAfricanAirways,BarclaysAfrica,Standard

BankandNedbank,invariousseniormanagementandexecutiveroles.

DuringhistenureatSAA,ArsonwasresponsiblefortherolloutoftheAfrica

regiongrowthstrategy.ArsonholdsanMSc(InternationalFinance)from

UniversityofStirling(UK),aswellasaBComandDiplomainBusinessStudies.

22

ESTE wElMAn

Acting cfo

EsteWelmanisaqualifiedCharteredAccountantandholdsanM.CominNational

andInternationalTaxfromNorthWestUniversity.EstejoinedSAExpressasthe

ManagerofTaxandReportingin2007,previouslyfromtheAuditindustry.During

thisperiodshewasleadingthefinancedepartment,andfulfilledtheroleof

ActingCFO.

rAMon vAHED

general Manager: Technical Maintenance and Engineering

RamonVahedleadsthehighlyskilledteamresponsibleformaintainingand

supportingSAExpress’fleetof27regionalaircraft.Heisfocusedonbuilding

brandequityfortheairlinebyensuringthatfleetperformsinlinewith

internationalbestpractice.Heisaninternationallytrainedandleveraged

industryspecialistwithvastknowledgeandexperienceintheareasofaircraft

maintenanceorganisationleadership,aswellasfleetdevelopment.

Duringhis17yeartenureintheaviationindustry,Ramonhasqualifiedasa

fullycertifiedaircraftmaintenanceengineerandhassuccessfullyperformed

inseveralsenioraircraftmaintenanceandengineeringmanagementpositions.

RamonhasworkedasSeniorManager,basedatAirbusinToulouse,France

whereheassistedSouthAfricanAirwaysinitslargesteveracquisitionof26

Airbusaircraft.

UnderhisdirectleadershipSAExpresshasattainedfourinternationalawards

forperformanceandreliability.HeholdsaPostGraduatediplomainManagement

PracticefromtheUniversityofCapeTown.

PETEr MASHABA

general Manager: risk and compliance

PeterMashabaisresponsibleforthesafetyoftheairlinethroughcompliance

withtheCivilAviationAuthority(CAA)regulationsandinternationalstandards

setbyInternationalAirTransportAssociation(IATA).Heisalsoresponsiblefor

strategicriskmanagement.

His17yearsofexperienceintheaviationindustryincludesworkingatthe

SouthAfricanCivilAviationAuthority(SACAA),overseeingthesafetyof

commercialaircraftoperatorsandcertificationofnewairlines.Peterwasalso

responsibleforpreparingSouthAfricaforstatecivilaviationsafetyaudits

conductedbytheInternationalCivilAviationOrganisation(ICAO)andFederal

AviationAdministration(FAA)in2007and2008.

PeterholdsaMastersDegreeinAviationSafetyandAircraftAirworthinessfrom

ENACandENSICAUniversityinFrance.

04 lEAdErShip (Executive team continued)

23

a

WordS out oF Air

The clouds left behind by jet aircrafts

are called contrails – and they form

when humid air from the craft’s

exhaust mixes with air of lower

pressure and temperature. These

snail trails in the sky can be used to

form words and pictures, conveying

messages to the world below.

05SuStAinAbility

25

05

Asindicated in theCEO’s report,SAExpress

iscommittedtobecomingacompanydriven

anddirectedthroughtheprinciplesofsustainable

developmentandcompliance.

Through the measurement of our carbon

footprint, the introduction of new technology,

adoption of specific operatingmethods aswell

as other efficiency improvement actions, we

are taking our rightful placewithin the aviation

industryregionallyandinternationallyinreducing

ourimpactontheenvironment.

Identifying and controlling the undesirable

impacts that our operations may have on

the health and wellbeing of employees,

contractors and other stakeholders is central

to our sustainability strategy. Annually, we

implement medical surveillance and industrial

hygieneprogrammes toensure thesuccessful

identificationandmanagementofpotentialhealth

risksandimplementationofremedialstrategies.

Our sustainability framework is designed to

address strategy, financial issues, customer

service,humanrelations,aswellasgovernance

and stakeholder relations, focussing on the

key issues of price and revenue optimisation,

improvedcapacity,costcontrol–aswellasthe

ability to respond quickly to changes affecting

our industry. This framework should enable

SA Express to meet the expectations of the

shareholderaswellasotherstakeholdersinthe

areasof:

• Co-operationandconsolidation (e.g.strategic

alliancesandcodesharingschemes);

• Newroutedevelopment;

• Safety,HealthandEnvironment;

• Skillsdevelopment;

• BBBEE targets as agreed in theBEECharter

forTransport;

• The New Growth Path (Employment creation

and improved competitiveness of the South

Africaneconomy);and

• CorporateSocialInvestment.

26

05 SuStAinAbility (continued)

Sadly and coincidentally, in line with the

InternationalAirTransportAssociation(IATA)’s2011

projections for the airline industry, SA Express

recorded a considerable loss for the year

comparedtothepreviousyear.Thisrealityhas

forcedmanagementnotonlytoimproveonour

sustainabilityperformance,butalsototurnitinto

acentralpartofourproductofferingandidentity.

Inthisregard,oureffortsarefocussedonlong-

term sustainable performance by gearing our

strategiesandmanagementactions toharness

themarket’s potential for sustainable products

and services, whilst reducing and avoiding

sustainabilitycostsandrisks.

Theoverallpassengerloadfactorincreasedto63%

fromthepreviousyearwhiletheaircraftutilisation

wentdownto6.2hoursfromthepreviousyear’s

7hoursasaresultoffleettransitions.

The number of employees increased to 1026

from thepreviousyear’s 931,withexpenditure

on training increasing by 24% from R26.50

Million to R32.91 Million. Of the total workforce,

57%employeeswereblackagainsttheprevious

year’s60%with38%femaleagainsttheprevious

year’s40%.Thepercentageofblackemployees

inmanagementdroppedto51%fromtheprevious

year’s 60% while the percentage of female

employees in management increased to 36%

fromthepreviousyear’s31%.Employmentequity

remainsapriorityandconcernforSAExpressto

addressaswemovetowardssustainabilitywith

specificfocusonscarceskill.

Management has put in place processes to

monitor SA Express’ environmental impact

going forward, startingwith themeasuring and

monitoringof theenergyandwaterconsumed,

waste generated, paper usage as well as the

determination of the airline’s carbon footprint.

OnlyScope 1and2emissionswillbequantified

during 2011/12 financial year while systems are

being put in place for the collation of data to

facilitatethecalculationofScope3emissions.

As we move into the 2011/12 financial year,

SAExpress’strategicfocusis:

• improvedcustomerservice;

• networkgrowth(pursuitofbothdomesticand

regionalopportunities);

• humancapitaldevelopment;and

• increased productivity (people, systems

and processes as well as performance

management).

These goals will enable us to consolidate

our presence in the domestic market, build a

sustainable cargo business, improve our direct

channelsof revenue, implementour intra-Africa

hub strategy, develop and retain our human

capitalaswellasimproveonservicedelivery.

Key Sustainability Challenges SA Express faces the following sustainability

challenges:

1. Pressure on Profitability

SA Express’ profitability is under increasing

pressurefromtheunpredictableglobaloilprices,

as well as legislated tariffs from, for example,

ACSA,ATNSandCAA.

2. increased competition

SA Express has had to adapt to the changing

industrycompetitor landscapeof a fragmented

domesticmarket thatmay result in a declining

market share, due to intensified rivalry over

passengernumbers.

3. reliability

It is imperative to achieve the On-Time-

Performancetargetof91%,aswellastheairline’s

scheduled maintenance plans. Reliability has

alsobeenaffectedbythedelayedarrivalofthe

new fleet making it difficult to recover on the

performanceindicator.

27

Reliabilityisfurtheraggravatedbythetechnical

serviceabilityofSAExpress’ageingfleet,growth

challengesrelatingtothecompany’sexpansion,

operational departmental issues and staff

compliment,aswellasflightcrewshortage.

4. Delay of the fleet renewal

Theimpactofthedelayistwofold,onthemanner

highlightedaboveaswellas:

• Failuretorealisethecashflowbudgetedfor

fromaircraftdisposals;

• Delaysintheimplementationofaddedcapacity

onroutes;

• Delaysinroutenetworkdevelopment;

• Inability to implement future fleet plan as

funding plan on the delayed fleet was on

operatingleases;and

• PossiblenegativeeffectonSAExpress’credit

ratingwithpossible impairmentof the future

fundingplan.

5. consumer Protection Act

The introduction of the Consumer Protection

Act has presented considerable challenges

to the airline industry in general. With the full

implicationsof theActnotyetdecoded to the

sector, management are faced with having to

make assumptions, some of which could be

over-or-under exaggerated. It would therefore

be beneficial to have clarity on these matters

soonerratherthanlater.

6. Human resources

InadditiontoBBBEEandotheremploymentequity

issues,theattractionandretentionofappropriate

skills presented a formidable challenge to

management. Crystallization of SA Express’

mandate with regards to the New Growth Plan

objectivesalsoposedconsiderablechallenge.

7. cargo

The development of capacity and capability to

handlecargopresentedconsiderablechallenges

fromahumancapital,aswellasequipmentand

logisticsperspective.

8. climate change

Climate change risks and associated

environmental concerns, continued to be an

issue, more so given the IATA requirement for

a1,5%reductioninemissionsperannumagainst

the2005benchmark,zeroincreaseinemissions

by2020anda50% reductionby2050.Building

internalcapacitytoensurecomplianceassoon

as possible was a challenge that persisted

duringtheyear.

9. Sustainable customer relations

Operationalchallengesduetotechnicalproblems

affectedSAExpress’abilitytomakeavailablethe

required capacity, at the required frequency,

therebystrainingcustomerrelations,inparticular

withsomecorporateclients.

28

developments in 2010/111. financial Sustainability

From a financial and economic perspective

revenuewas4.4%higherthanthepreviousyear

withnetoperatingcostsconsiderablyupat26.9%

withanoperatingprofitmarginof-8.2%.Whilethe

overdraftusagehasincreasedbyoverR6.9million

comparedtothepreviousyear’susage,thebank

balance has increased by over R14 million from

thepreviousyear’sbalance.Thevalueaddedto

employeesaswellastotheprovidersoffinance

wasalsohigherduringtheyearunderreview,with

thevalueaddedtoGovernmentandthebusiness

beinglowerinaccordancewiththelossmade.

SA Express’ liquidity position (current assets:

currentliabilities)hasimprovedby23.7%compared

tothepreviousyearandcurrentlystandsat1.46

timeswhilethesolvencyratio(totalassets:total

liabilities) declined to 1.69 times, comparedwith

2.39timesthepreviousyear.

Themainstrategicdriver,withreferencetofunding

istoensurethatSAExpressremainsfocussed

ontheoptimalgearingratioof 1:1.Thecompany

isable tomaintainanearperfectgearing ratio

giventhereductionincostrelatedtoownership

ofaircraft.Alowerleveragedbalancesheetwith

strong cash resources enables SA Express to

respondveryquicklytocyclicaleconomicgrowth

aswellasconsumerdemand.

ThecompanyenteredintoaR200Millionrevolving

credit facility during the year for purposes of

fundingcapitalexpenditureinsupportofthefleet.

The loan is over a five year term. Future debt

profileswillbedrivenbythecompany’sefficiency

ratiostoensurethatallfundingventuresremain

affordablewiththeairlineabletooperateatthe

lowestcostofownershiptothebottomline.

2. Health and Safety

SA Express seeks to create amindset and an

environmentwherepeoplebelieveitispossible

to work injury free, regardless of where they

are in theregion,whatrole theyperform,or in

which operation they work. Although significant

progress has beenmade in understanding the

health and safety risks associated with our

industry and implementing mitigating measures,

ourperformanceisstillnotwherewewouldlikeit

tobe.Managementfocusduringthecomingyear

isaimedatstrengtheningthecapacitywithinthe

HealthandSafetyunit.

InordertoimprovethecapacitySAExpresswill,

during the next financial year introduce health

andsafetyleadershipinterventionsthatinclude:

• Identifyingcriticalandhighlyvisible

behaviourstobedemonstratedbyExecutive

managementsoastosetthetoneforhealth

andsafetycommitmentbyall;

• Implementingaleadershipvisibility

programmewhereleadersgototheshop

floorandengageemployeesonhealthand

safetymatters;

• Incorporatinghealthandsafetyinto

performanceappraisalsandholding

managersaccountableforhealthandsafety

performanceintheirareas;and

• Trainingleadersinhealthandsafety

legislationandcompanystandards.

In line with sound corporate governance

principles, a safety, health & environment (SHE)

committee reviews operational performance in

safety, health and environment and provides

strategicguidancetoimproveperformance.

Therewerenofatalitiesduringtheyearwhilethe

totalincidents/accidentsrecordedwerelowerat

eight(8)againstthepreviousyear’seleven(11).


29

3. regional operations

Efforts continued throughout the year aimed

at seamlessly withdrawing from SA Express’

relationshipwithBizAfrikaintheCongoExpress

venture.Whileourrelationshipandexperienceat

CongoExpresswasunsuccessful,management

gainedconsiderableexperienceinhandlingjoint

venture mandates or relationships within the

African Continent. This experience will prove

invaluableaswecontinuetopursueourvision

ofbeingthemostsuccessfulregionalairline,and

attempting to fulfil our aspiration of developing

“Express” franchise airlines in Africa and the

implementationoftheintra-AfricaHubstrategy.

TheaboveexperienceplacesSAExpressinpole

position for taking advantage of the region’s

growing passenger and cargo numbers, driven

by strong regional economic and transport

demandgrowth,onthebackofincreasedforeign

directinvestmentandrapidlygrowingtradelinks

with Asia. This opportunity should however be

seen in the context of increased/intensifying

competitionfromEuropeancarriersenteringthe

African domestic and regional markets for the

lucrativebusinesstrafficinAfrica.

4. Human capital

The cornerstone of sustainability is our

employees’ capacity and capability, hence our

aim to be the Employer of Choice within the

regionalairlineindustry.

Weaimtomakeouremploymentvalueproposition

equal to the best performing employers in the

industrybyfocusingonissuesthatenableour

humancapitaltoachievethestrategicobjectives

ofourairlineby:

• attractingcompetentandfittingemployees

• retainingemployees

• supportingemployeeperformance

• traininganddevelopingemployees

• communicatingwithemployees

Building an Employer of choice Brand

The SA Express Human Capital landscape

changed in the past 4 years from a reactive,

administrativeroletoamoreproactive,strategic

focus to ensure that SA Express is positioned

as an Employer of Choice. This is a critical

differentiatortocombattheprevailingscarceand

criticalskillsdemandsintheTechnicalandPilot

employeegroups,amongstothers. Inthebattle

fortalentintheemploymentmarketsuccessis

increasingly being determined by reputational

factors.Prospectiveemployeechoicesaremade

on the capability of the prospective employer

to: meet the expectations of its current and

aspirant workforce with regard to individual

growthopportunities,createastrongsenseof

belonging and engagement and sustain it, and

recogniseandrewardarevalued.

Thecontinuedfocusonretentionofacompetent

workforce and growth of our people is at the

heartofSAExpress’HumanCapitalstrategy.

Employee relations

The2010/2011financialyearwasverystablefrom

anemployeerelationsperspective.Thiswasdue

tothefactthat2-yearsalaryagreementswere

30

concluded with all recognised unions during

the2009/2010financialyear inorder toprovide

stability and labour peace during the critical

Soccer World Cup period. SA Express spent

8% of its total personnel cost on training and

developmentforthecurrentfinancialyear.

leadership Development

SAExpressfocusedonincreasingitsleadership

benchstrength,withacontinuationofitsleadership

pipelineprogramme/s.Thissawtheintroduction

of a Management Development Programme (MDP),

inconjunctionwiththeUniversityofStellenbosch

(USB)andaSupervisorySkillsProgramme(SSP);the

SSP is focusedonpreparingemployees to take

upjuniormanagementpositionsinthenearfuture.

ThirtyFour(34)MiddleManagersweredeveloped,

ofwhich50%wereblackand38% female.Forty

three (43) individuals attended the SSP. These

continuous development programmes will

ensure a competent supply of managers for

theorganisation,whilsttransformingthiscritical

occupationallevel.

functional Training

For2010/2011financialyearSAExpressremained

oneoftheonlySouthAfricanAirlinesthatrana

MACH1,anabinitio,CadetPilotProgramme.

TheCadetProgramme,gearedtowardsPreviously

Disadvantaged Individuals, is instrumental in the

transformation of the Pilot Occupational Group,

which remains one of the biggest challenges

to ensuring that occupational imbalances are

redressed.

Of the twelvecadets thatwereenrolled in the

pastyear,three(3)havealreadyacquiredtheir

CommercialLicenses.Theywillbeembarkingon

thenextphaseoftheirtrainingthatwillfacilitate

themacquiringflyinghours,andbeingappointed

aspilotsforSAExpress.

Twentysix(26)newApprenticeswereenrolled

during this period. An intake of ten (10)

ApprenticesisplannedforJuly2011andafurther

intakeatthebeginningof2012.Thisprogramme

isgearedatproducingblacktechniciansforthe

AviationIndustry.

organisational Development and wellbeing

SA Express celebrated employee excellence

with its annual recognition event when over

26employeeswererecognizedbytheirpeers,

managers and customers for exceptional

performance displayed in line with our

CorporateValues,throughoutthefinancialyear.

Thevaluesareusedascategorieswithinwhich

employees can display individual performance

thatissynonymouswiththevaluedescriptors.

Inadditiontothesecategories,theCEOawarded

anoveralltopperformerandspecialawardsto

recognizespecificareasofexcellence.Thebest

team award was scooped up by the Richards

BayStation.

SA Express also promoted employee wellbeing

through an integrated Employee Assistance

Programme, HIV/Aids employee support and the

communicationandmanagementofprofessional

servicesforthebenefitofemployees.

Employment Profile

The SA Express headcount was 1026 staff

members as at 31 March 2011. The overall

employment profile reflects very positively

against national and industry benchmarks. It

shows a positive demographic profile change

of3% from thepreviousyear. Thedemographic

comparison of 43% white and 57% black, with

a gender profile of 38% female and 62% male

is indicative of good Employment Equity and

Affirmative Action practices. Gender equity will,

however,requireattentionoverthenextyearto

achievethecompany’sEEtargets.Thepiecharts

overleafshowthecurrentSAExpressemployee

profile.(Seefig1and2onpage34)


31

32

Pilot transformation still remains a concern for

the company and the industry at large. The

SA Express Cadet Programme is designed to

addressthe imminentpilotshortageandequity

challenges.

2011/12 Human capital Strategy

The Human Capital strategy for 2011 will focus

on striking a balance between the business

objectives to attract and retain the right mix

of talented staff, whilst fulfilling its role as a

StateOwnedEntity, toprovideopportunitiesfor

the large number of unemployed individuals in

the country. The following strategic objectives

havebeencommittedtoinlinewiththebroader

businessgoals:

• Enhance the Performance Management

processesacrossalllevels;

• ManageaneffectiveLearningandDevelopment

provision to improve skills within the

organisationandtheAviationsub-sector;

• Enhance the Human Capital Planning,

RecruitmentandSelectionprocesstoattract

talentedindividualstothecompany;

• EnhanceEmployeeRelationsacrossalllevels;

• Reviewtheremunerationstrategy;

• Implementanintegratedtalentandsuccession

strategy;

• Implement an integrated Broad-Based Black

EconomicEmployment(BBBEE)strategy;

• Improveproductivity;and

• Implement New Growth Path targets as

contractedwiththeshareholder.

5. BBBEE and Transformation

SAExpressisfullycommittedtoandfollowsthe

provisions of the Broad-Based Black Economic

EmpowermentAct53of2003andtheprinciples

embodiedintheCodesofGoodPracticeonBBBEE,

by institutingapolicy for theupliftmentof the

historicallydisadvantagedinSouthAfrica.Weaim

tocontributemeaningfullytothesocio-economic

transformationofoursocietythroughtheblack

economic empowerment process, and thus

sustainfuturestability,growthandprofitability.

AsattheendofthereportingperiodSAExpress’

BBBEEratingfor2010/11wasstillunderindependent

verification. During 2009/10 we were on BBBEE

level7rating.AreviewoftheSAExpress’current

empowerment criteria was conducted during

the year and the key areas for improvement

were identified as targeted procurement, skills

developmentandemploymentequity.Whilethere

ismuchtobedonetoensurethatourexpectations

andtherequirementsoftheBEECharterforthe

Transport Sector are met and that we maintain

ourcommitmenttomeritocracyasthebasisfor

appointmentandreward,itshouldbecategorically

stated that BBBEE and transformation remain

prioritychallengesfortheairline.

Skills shortage and the impact of increased

transformationpressurehavecreatedchallenges

totheretentionofexperiencedblackexecutives,

technicians,otherspecialistsandprofessionals.

However SA Express continues to lead the

industry in its transformation achievements, as

can be measured by its early achievement of

industry benchmarked targets. A continuous

thrusttoadvancethetransformationagenda in


GEndEr proFilEEmploymEnt proFilE

fig 1White 43%

Non-white 57%

Male 62%

Female 38%

White 43%

Non-white 57%

Male 62%

Female 38%fig 2

33

line with the national EE objectives permeates

throughcriticalandstrategiccompanyobjectives.

TheHumanCapitalstrategyfocusesonincreasing

theacquisitionofEEtalent,aswellasinculcating

a transformed culture within the organisation.

HumanCapitalwillcontinuetofocuson:

• Apprenticeshipdevelopmentwithanemphasis

ongenderequality;

• Launching various Learnerships across all

levels with a primary focus on designated

groups;

• The Cadet Pilot Programmes, as the flagship

programme;

• Identifying and placing people living with

disability(bothinternallyandexternally);and

• Recruiting and selecting against specific

targets.

An analysis of SA Express’ employment equity

profileindicatesthatmoreworkisrequiredifthe

airline istomakegreaterprogress inachieving

its longtermtargets.Aholisticapproachaimed

atbothsupplysideinitiatives(growingthepool,

diversifying the source and attracting better

calibre staff than the competition) and demand

side activities (retention plans, accelerated

developmentandreconsideringjobdesigns)will

beutilisedacrosstheboardwithintheairlineto

ensurethatitattracts,developsandretainsthe

talentitrequirestomeetitstransformationand

growthobjectives.

SA Express’ investment in formal employee

traininganddevelopmentduring2010/11increased

by 24% to R32.91 Million from R26.50 Million the

previousyear.

6. Environment

ThemajorenvironmentalrisksimpactingSAExpress’

operationsarepresentedinthetablebelow:

Environmental risk Applicability/group segment

Oil/FuelSpillage Technicalenvironments

Noisepollution All

Airpollution Operations

Wastemanagement All

Hazardousmaterialhandling OperationsandTechnical

ClimateChange All

Inthiscontext,SAExpressplanstodevelopan

environmental framework that calls for explicit

measures of environmental performance,

including the following indicators againstwhich

risksandopportunitieswouldbeassessedand

managedfor:

• resource efficiency and reduction of SA

Express’carbonfootprint

• emissionsreduction,minimizationofspillages,

andwastemanagement

The frameworkwill aim toenableoperations to

betterunderstandandidentifyhazardsandrisks

andtheirpotentialeffects,andthepreventative

measures required to achieve the SA Express’

environmentalobjectives.

34

category risks and opportunities

regulatory 1.Fuel/taxesandregulations

2.Carbontaxes

3.Generalenvironmentalregulations

Physical 1.Changesinprecipitationpatterns

2.Changesinfrequencyofextremeweatherevents

3.Inducedchangesinhuman,naturalandculturalresources

reputational 1.Litigationexposures,insurancecostsandunforeseenenvironmentalremediation

expensesresultingfromtheincreasingnumberandscopeofregulatoryrequirements

financial 1.Increasedoperationalcosts:carbontaxandfuellevieswillincreaseoperationalcosts

Market 1.Tradeandmarketrisksoftransformationtoalowercarbonindustry

2.Demandoflowercarbonemissionssolutionsfromclients

others 1.Changesintheavailabilityandcostsofgoodsandservices


7. community Development

Wearecommittedtosupportingthecommunities

within which we operate. The commitment is

demonstrated through our corporate social

investment programme which supports early

childhood development and the development

ofyouthaffectedandinfectedbyHIV/AIDSand

impactedbypoverty.

Through the SA Express Cares Initiative care

is provided for children and the young who

representthefutureofourairlineandnation.

Annually, SA Express employees contribute

towardsthisinitiativewiththeairlinematching

theemployees’contribution.A totalofR71,500

wasdistributedduringtheyeartosixdeserving

children’shomesaroundthecountryagainsta

totalofR49,600thepreviousyear.Thecurrent

year’s recipients were Leratong Creche,

Tembisa Children’s Home, Phomolong HIV/AIDS

Children’sHome,WalvisBayCommunityCentre,

IkhayalethuChildren’sHome(RichardsBay)and

KidsHaven(Benoni).

Anewapproachmaybe required toSAExpress’

commitments, deliverables and mandate with

respecttotheShareholderCompactinlightofthe

NewGrowthPath,forthecompanytobeabletogive

morefocustoemploymentcreationandenterprise

development,inlinewiththenationalgoals.

8. Ethics

SA Express acknowledges that leadership is

responsible for creating the foundation for an

ethical culturewithin anorganisation. A company

buildsanethicalcultureusingformalandinformal

ways. Formal means include compiling an ethics

riskandopportunityprofile,developingastatement

ofbusinessprinciples(commonlyreferredtoasa

code of ethics) and integrating ethical standards

into its business activities and reporting on and

disclosingthecompany’sethicsperformance.

A code of ethics is in place at SA Express to

promoteandencouragetheethicalbehaviourofall

itsemployeesandrepresentativesirrespectiveof

gradeorstation.Thecodeisdesigned:

SAExpresshasidentifiedthefollowingaskeyclimatechangerisksandopportunities:

35

• To guide the behaviour of all persons

appointed to act in one way or another on

behalfofSAExpresswhenondutyorduring

thecourseofdutyandwhenactingonbehalf

of/orrepresentingtheairline.

• Toprovideaframeworkforidentifyingconduct

that isethicalandacceptableforemployees

andrepresentativesofSAExpress.

• Toensurethatallstakeholdersareawareof

thebasicvaluescherishedbySAExpress.

• ToensureaccountabilitywithinSAExpressfor

fundamentalethicalvaluesandvaluesystems.

SAExpressensurescompliancewithallitslegal

andregulatoryrequirementsthroughapplication

of its governance policies and procedures.

Directors are bound by a Board-mandated

Code of Conductwhich contains standards of

acceptedbehaviour.

9. Stakeholder Engagement

SA Express communicates constantly with

its stakeholders and engages with them in

a constructive and transparent manner. Key

stakeholdersarethegroupsorindividualsthat

impactorareimpactedbyouroperations,withan

interestinwhatwedoortheabilitytoinfluence

our activities. During the period under review

the following groups of stakeholders were

consulted;theshareholder,Board,management,

employees,majorsuppliers,majorcustomersas

wellastheregulators.

Mutual trust and understanding with our

stakeholders is imperativeandweusedirected

means of communication for each stakeholder

group. We engage through our operations;

where for example, stakeholder queries may

relate to impacts on local employment and

procurement, and through our corporate office

on matters relating to the broader airline

industry issues, including Broad-Based Black

Economic Empowerment (BBBEE), human capital

development,riskmanagement,health,safetyand

environmental(HSE)managementandassurance.

As part of our stakeholder mapping and

prioritisation, we will review and develop

appropriate mechanisms and processes to

constructively engage with our stakeholders.

In this regard a workshop facilitated by KPMG

washeldduringtheyearwhich identifiedsome

industryriskstoasustainableSAExpress.After

astakeholderconsultationprocessonthesame

and other sustainability issues a strategy and

policy for the management of relations with

stakeholderswillbeformulated.

Further,SAExpresswillduringthecourseofthe

nextfinancialyearassessitsprocessforreviewing

materialissuesandengagekeystakeholdersto

commentonrisksandopportunitiesthatmaybe

associatedwiththeairline’ssocial,environmental

andethicalbehaviour.

10. customer relations

It is one of SA Express’ stated aspirations to

exceedcustomerserviceexpectations in living

our value of service before self. Our value

propositionofincreasedfrequencyofflightsand

availabilityofseatsatthedesiredtimecanonly

cometolifegivenoverallcustomersatisfaction,

asustainedinvestmentandongoingrelationship

withourclientsaswellasappropriateattitudes

andbehaviours.

Thefollowingspecificinitiativeswereundertakento

enhanceSAExpresscustomer/clientrelationships:

• identificationofcustomer/clientneeds

• stafftrainingprogrammes

• strategicalliances/codesharing

• marketengagement

• innovationandeducation

• focusonquality,costandperformancedelivery

36


Measures are in place tomonitor customer/client satisfaction. These include questionnaires and regular

customersurveys,withkeyaccountandprojectmanagersmaintainingregularcontactwithcustomers/clients.

Sustainability performanceThisisbasicallyayear-on-yearcomparisonofSAExpress’performanceonappropriatelyselectedindicators.

Themovementcolumndepictseitheranimprovementordecreaseinperformanceasappropriate.

Performance Dimension Performance Movement

2010/11 2009/10

financial and Economic

Revenue(Rands) 1,643,572,292 1,574,554,135 Up

Netoperatingexpenses(Rands) 1,878,847,916 1,480,932,006 Up

OperatingProfitMargin -8,6% 8.1% Down

Yearendnetcash(Rands) 74,845,499 67,764,631 Up

Valueaddedtoemployees(Rands) 415,849,375 393,730,832 Up

Valueaddedtoprovidersoffinance(Rands) 11,596,469 6,231,190 Up

ValueaddedtoGovernment(Rands) 13,736,726 27,752,043 Down

ValueaddedtotheBusiness(Rands) -186,967,693 81,032,570 Down

Cargoasa%ofrevenue 0.77% 0.83% Down

Aircraftutilisation(Averagehoursperday) 6.2 7 Down

OTP15minrule(%) 85% 87% Down

Passengerstransported 1,399,893 1,385,829 Up

PassengerRevenue(Rands) 1,338,579,968 1,244,897,622 Up

AverageRevenueperPassenger(Rands) 956.20

898.31 Up

Passengerloadfactor 63% 61% Up

SociAl

Safety

Fatalities 0 0 Constant

Numberofincidents/accidents 8 11 Down

oHSAS 18001 iMPlEMEnTATion Inprogress Planned WIP

Health

Employeesmedicallysurveyed 305 298 Up

Noiseinducedhearingloss 0 0 Constant

Employees

TotalEmployees 1026 931 Up

Expenditureonemployeetraining(Rands) 32,909,943 26,496,848 Up

%Blackemployeesattendingleadershipdevelopmentprogramme.

95% 36% Up

37

Performance Dimension Performance Movement

2010/11 2009/10

%Femaleemployeesattendingleadershipdevelopmentprogramme.

50% 21% Up

Transformation and BBBEE

BBBEERating 7unaudited 7

%Blackemployees 57% 60% Down

%Femaleemployees 38% 40% Down

%Blackemployeesinmanagement 51% 60% Down

%Femaleemployeesinmanagement 36% 31% Up

community

CorporateSocialresponsibilityexpenditure(Rands) 71,500 49,600 Up

EnvironMEnTAl

Energyused(LitresAviationFuel) 81,579,015 74,782,700 UP

CARBONFOOTPRINT(SCOPE1AND2)TONSCO2E 208,717.6 188,304 UP

ISO14001IMPLEMENTATION INPROGRESS PLANNED WIP

38

05 SuStAinAbilityGri indEx – bASEd on Gri G3-GuidElinES

GRIReferenceandDescription

1. viSion AnD STrATEgy

Chairmanstatement

ChiefExecutiveOfficer’sreporttostakeholders 2. orgAniSATionAl ProfilE

2.1 Nameoforganisation

2.2Primarybrands,productsandservices

2.3Operationalstructureoftheorganisation

2.4Headofficeoftheorganisation

2.5Countriesinwhichoperationsarelocated

2.6Ownershipstructureandlegalstatus

2.7Marketsserved

2.8Scaleofthereportingorganisation

2.9Significantchangesintheorganisationalandownershipstructure

3. rEPorT PArAMETErS

Reportprofile

3.1 Reportingperiod

3.2Dateofmostrecentreport

3.3Reportingcycle

3.4Contactpointforquestionsregardingthereport

Reportscopeandboundary

3.5Processfordefiningreportcontent(includingpriorities)

3.6Boundaryofthereport

3.7Limitationsonthescopeofthereport

3.8Basisforreportingonjointventures,subsidiariesetc

3.9Datameasurementtechniquesandbasesofcalculations

3.10Explanationofanyre-statementofinformationprovidedinearlierreports

3.11Significantchangesinthescope,boundary,ormeasurementmethods

3.12GRIcontentindex:Tabularoverviewwithpagenumbers

3.13Assurance—externalassuranceofstatements

4. govErnAncE, coMMiTMEnTS, AnD EngAgEMEnT

CorporateGovernance

4.1Governancestructureoftheorganisation

4.2IndependenceoftheChairman

4.3IndependenceoftheBoard

4.4ShareholderandemployeerecommendationstotheBoard

4.5LinkagebetweenExecutiveDirectorsandSeniorExecutivescompensation andtheorganisation’sperformance

4.6Processestoavoidconflictsofinterest

4.7ProcessfordeterminingthequalificationsandexpertiseofBoardmembers

Pg9

Pg10-13

Pg3

Pg4-7

Pg15-22

Pg92

Pg6

Pg92

Pg6

Pg6-7

Pg15,43

Pg58

Pg58

Pg58

Pg92

Pg1

Pg1

Pg64

Pg9

Pg50-51

Pg53-56

Pg38-46

Pg39

Pg39

Pg38

Pg46

Pg40

39

4.8Missionstatement,codesofconductandcorporatevalues

4.9Boardproceduresforoverseeingtheorganisation’srisksandopportunities regardingsustainability

4.10ProcessesforevaluatingBoardperformance

4.12Externallydevelopedeconomic,environmental,andsocialcharters, principles,orinitiativestowhichtheorganisationsubscribesorendorses

4.13 Memberships

Stakeholderengagement

4.14Listofincludedstakeholdergroups

4.15Identificationandselectionofstakeholders

4.16Approachestostakeholderengagement

4.17Considerationofstakeholders’interests

5. MAnAgEMEnT APProAcH AnD PErforMAncE inDicATorS

EconomicPerformanceIndicators

EC1 Economicperformance

EC2 Financialimplicationsduetoclimatechange

EC3 Coverageoftheorganisation’sdefinedbenefitplanobligations

EC6–EC7Marketpresence

EC8–EC9Indirecteconomicimpacts

EnvironmentPerformanceIndicators

EN1–EN15Materials,Energy,WaterandBiodiversity

EN16–EN25Emissions,effluentsandwaste

EN26–EN27Productsandservices

EN28 Compliancewithlegalregulations

EN29 Transport

LabourPracticesandDecentWorkPerformanceIndicators

LA1–LA2 Employment

LA4 Labour/managementrelations

LA6–LA8 Occupationalhealthandsafety

LA10–LA12 Trainingandeducation

LA13 Diversityandequalopportunity

HumanRightsPerformanceIndicators

HR2 Procurementpractices

HR4 Non-discrimination

HR5 Freedomofassociationandcollectivebargaining

HR6 Childlabour

HR7 Forcedandcompulsorylabour

SocietyPerformanceIndicators

SO1 Community

SO2–SO4 Corruption

S07 Anti-competitivebehaviour

S08 Compliance

Pg3

Pg42-45

Pg38

Pg26,27,32,38

Pg35

Pg35

Pg35

Pg35

Pg60-61

Pg6

Pg33-34,37

Pg37

Pg33,48

Pg40-42

Pg37

Pg29-33

Pg29-30

Pg28

Pg30

Pg32-33

Pg32-33

Pg32

Pg29-30

Pg34

Pg34

Pg34

Pg40-42

40

06CorporAtE GovErnAnCE rEport

“The air up there in the clouds

is very pure and fine, bracing

and delicious. And why

shouldn’t it be?--it is the same

the angels breathe.”

41

inTroDucTion

SA Express strives towards fully complying

withandapplyingtheprinciplesoftheKing

IIIandtheProtocolsonCorporateGovernance.

inTErAcTion BETwEEn THE BoArD AnD THE

SHArEHolDEr

TheBoardinteractsregularlywiththeshareholder

through the Chairperson of the Board. The

Chairperson is the point of contact regarding

interactionwiththeshareholderandParliament.

By invitation, theChairpersonandCEOattended

various parliamentary sessions to update

the Portfolio Committee on Public Enterprises

on a number of strategic issues involving the

company. In addition to regular interaction

between the Chairperson and the Minister of

PublicEnterprises, theBoard interactswith the

shareholderthroughtheAnnualGeneralMeeting.

Asapublicentity,thecompanyissubjectedto

theprovisionsofthePublicFinanceManagement

Act, 1999 (Act No. 1 of 1999) (PFMA). The PFMA

requirestheCompany,toconcludeaShareholder

Compact with the Shareholder Representative.

The Shareholder Compact contains shareholder

expectations in the form of predetermined

objectives and key performance indicators and

ensures alignment between the Board and the

ShareholderRepresentative.Progressinrespect

of the performance indicators is continuously

reviewed by the Board and is reported to the

ShareholderRepresentativequarterly.Inaddition,

thisinformationisauditedannuallyandreported

intheannualfinancialstatementsoftheCompany.

THE BoArD of DirEcTorS

TheSAExpressBoardiscommittedtomaintaining

high standards of corporate governance. The

Board acknowledges that good governance is

integral to a successful enterprise and critical

towards business integrity. This principle is

informedbySAExpress’corevaluesofbusiness

integrity and accountability. The Board also

ultimatelytakesoverallresponsibilityofdirecting

thestrategicobjectivesofthebusiness.

composition

TheBoardcomprisesamajorityofNon-Executive

Directors.OfthetenDirectors,onlyoneExecutive

isaDirector,allofwhomservedthroughoutthe

year. The Chairperson of the Board is a Non-

ExecutiveDirector.TheroleoftheChairpersonis

separatefromthatoftheChiefExecutiveOfficer.

The Board believes that separation of powers

andresponsibilitiesensuresappropriatebalance

ofauthoritybetweentheBoardandmanagement.

Thecurrent Directorsof thecompany,aswell

astheresignationsandretirements,areincluded

inparagraph9of the Directors’ Report to the

annualfinancialstatements.

role and function of the Board

TheBoardisaccountabletotheshareholderfor

determining strategy and the overall business

ofthecompany.AformalShareholdersCompact

determiningstrategicobjectivesofthecompany

was concluded between the Board and its

shareholderfortheyearunderreview.TheBoard

has theultimateresponsibility for thestrategic

managementandperformanceofthecompany.

The Board has a formal, documented charter,

whichstates that theDirectorsofSAExpress

retainoverallresponsibilityandaccountabilityfor

thecompany, itsstrategicdirectionandannual

businessplanandbudget.

The Chief Executive Officer’s day-to-day

managementofthebusinessisbasedonclear

and precise delegation of authority for the

implementationoftheBoardstrategy.

TheDirectorsareapprisedoftheoperationsof

the business throughout the year via regular

CEO’s reports at Board sessions and regular

electronicupdates.

The Directors had access to the advice and

servicesoftheCompanySecretary.Unrestricted

accesstoallcompanyinformation,recordsand

documentswas also given to the Directors on

request.Inaddition,theDirectorswereentitled

to independent professional advice at the

company’sexpense.

06

42

06 CorporAtE GovErnAnCE rEport (continued)

TheBoard’sroleandresponsibilitiesareincluded

in the Board charter and are reviewed on an

annualbasisbyanindependentthirdparty.

Board Meetings

The Board met regularly and meetings were

scheduled in advance in accordance with

the Board calendar which set out matters

for discussion at each meeting. The Board

meetings focus on strategic issues and the

overallperformanceofthecompany.Directors

are entitled to propose additional matters for

discussion by the Board. Resolutions of the

Boardwere takenbywayof Directors’written

resolutions in terms of the provisions of the

Articlesof Association,wherenecessary. Some

oftheseweredistributedthroughRoundRobins,

as provided for in the Articles of Association.

SuchmattersweredeliberatedbytheBoardprior

to circulation of the respective Round Robins

including arranging management interviews.

Resolutionsweresupportedbya full business

caseand/ormotivation.Duringthesaidprocess,

theDirectorswereaffordedtimetoapplytheir

mindstothematterathand,priortoapprovalof

the circulated Resolution. Management ensured

that the Board is provided with all relevant

information and facts to enable them to make

appropriateandinformeddecisions.

MinutesofthemeetingswerekeptintheMinute

Books for therelevantyearandaccess to the

said minutes was given to both Internal and

ExternalAuditorsforauditing.

The following reflects the number of meetings

and attendance of the Directors for the year

underreview:

register of Meetings

name03/05/10

Board16/08/10

AgM16/09/10

Board11/11/10 Board

16/02/11 Board

MsLBoyle Present Present Present Present Present

MrBMohale Present Present Present Apologies Apologies

MsBSsamula Present Present Present Present Present

MrEBunyenyezi Present Apologies Present Present Present

MrGVanHeerden Present Present Present Present Present

MsMVuso Present Present Present Present Present

MrCChristodoulou Present Present Present Present Present

MrNMadalane Present Apologies Retired Retired Retired

MrSNicolaou Present Present Retired Retired Retired

MsSMzimela Present Resigned Resigned Resigned Resigned

MrVCubaNotyet

appointedNotyet

appointedPresent Apologies Present

MrLLedwabaNotyet

appointedNotyet

appointedPresent Present Present

MrINtshangaNotyet

appointedNotyet

appointedPresent Present Present

MrSZulu Present Present Present Present Resigned

43

inTErAcTion BETwEEn THE BoArD AnD

MAnAgEMEnT

Executive management was given access to

interactwiththeBoardviavariouspresentations

atBoardmeetings.Non-ExecutiveDirectorshave

accesstoexecutivemanagementandmaymeet

without Executive Directors. Suchmeetings are

facilitated through the office of the Company

Secretary.

DiScloSurE of inTErEST

TheCompanySecretaryisobligedtoensurethat

thecompanydoesnotenterintoanycontracts

withanyofthebusinessinterestsoftheDirectors

without such information being considered by

theBoardtoestablishthenatureandextentof

theconflictofinterest.AllDirectorsdisclosetheir

interestinothercompanieseitherintheformof

sharesheld,Directorshiporbusinessdealings.

No interest in contracts whether directly or

indirectlywithSAExpresswereregisteredduring

theyearunderreview.

lEgAl AnD rEgulATory coMPliAncE univErSE

The Board is responsible for the legal and

regulatorycomplianceofthecompany.TheBoard

of SA Express duly recognized that a readily

identifiable strategic risk is related to the level

and acceptability of compliancewith legislative

and regulatory requirements. Consequently, SA

Expressadoptedalegalcomplianceprogramme

which is not only committed to identifying

legislationandregulationsSAExpressisobliged

tocomplywith,butalsomonitoringthelevelof

compliancewithinalloperationalenvironmentsof

SAExpress.Thisprogrammeisanintegralpartof

theRiskManagementandComplianceFramework.

SA Express’ Legal and Regulatory Compliance

universe is centered on, amongst others, the

followingkeylegislation:

THE PuBlic finAncE MAnAgEMEnT AcT, 1999

The Accounting Authority of a public entity is

entrusted with the responsibility of ensuring

maintenanceofeffective,efficientandtransparent

systems of financial and risk management and

internal control. Of utmost relevance to SA

ExpressaretherequirementsofSection51(1)(iii)

with regard tomaintenance of a fair, equitable,

transparent, competitive and cost effective

procurementsystem;andpreventionofirregular

expenditure, fruitlessandwastefulexpenditure,

losses resulting from criminal misconduct and

expenditure not complyingwith the operational

policiesofthepublicentity.

SA Express did not encounter instances of

reportable matters in this regard for the year

under review. However, SA Express continues

withitseffortstoimproveontheminoridentified

gapswith a view to claiming full compliance in

thesuccessiveyears.

THE coMPAniES AcT, 2008

This Act set out in Sections 75, the duties of

Directors to disclose interests in contracts

and associated conduct after disclosure of

such interests and the keeping of Minutes of

Directors and Managers meetings. SA Express’

Directors’ duties in relation to these matters

were comprehensively fulfilled as is more fully

detailedabove.

THE AviATion AcT, 1962

Training of cabin, cockpit and technical

maintenancecrew,andprocessesrelatingtoan

airline’sTechnicalMaintenanceandRepairfacilities

operations are governed by the provisions of

thisAct.TheSouthAfricanCivilAviationAuthority

(SACAA) accredited Training facilities utilised by

SA Express for training of its crew have been

endorsed as being compliant with the relevant

SACAAregulations.AlthoughtherewereTechnical

44

Maintenance related incidents which occurred

duringtheyearunderreview,mostofthesewere

linkedtoSAExpress’ageingfleet(currentlyunder

replacement)andthusSAExpress’Airworthiness

Maintenance Organisation License was never at

risksincetheseincidentswereallwellmanaged

underthesupervisionoftheSACAA.

DoMESTic Air SErvicES AcT, 1993 &

inTErnATionAl Air SErvicES AcT, 1990

It is a requirement of this Act that an airline

continuallydemonstrate its financial andsafety

fitness for purposes of ensuring continued

retention of the Operating License. SA Express

repeatedly passed this test on the many

occasionsthatitappearedbeforetheDomestic

andInternationalLicensingCouncilsestablished

intermsoftheseActs.

TheCouncilhashoweverobservedthat,asaState

OwnedEntity,SAExpressneedstopayfocused

attention to compliance with the provisions of

theTransportSectorBBBEECharterand takea

leadinthisregard.Tothisend,SAExpresswas

advised to align its operational objectives with

those set out in the said Charter. SA Express

heeded this call and substantive work and

progresshasbeendoneinthisregardunderthe

guidanceofadedicatedmemberoftheCouncil.

In addition, SA Express is in compliance with

theCouncils’requirementfortheprovisionofa

guarantee (to provide cover for reimbursement

to passengers) in the event of the airline’s

permanent inability to fulfill its contracted

responsibilitytoalreadyticketedpassengers.

coMPETiTion AcT, 1999

One of the primary objectives of this law is

prohibition of conduct which has the effect of

substantiallypreventingorlesseningcompetition

in the market and consequently, to stimulate

growthinbusinessopportunitiesandemployment.

SAExpresshastakensuccessfulstridestodate

in ensuring that its Agreements with service

providers, partners, associates and allies are

structuredinamannerthatentrenchesavoidance

of anti-competitive practices whilst encouraging

competitioninthemarket.Tothisend,SAExpress

didnothaveanyencounterswiththeCompetition

Commission/Tribunalonaspectsrelatingtoalleged

contraventionofthislaw.

occuPATionAl HEAlTH AnD SAfETy AcT, 1993 &

nATionAl EnvironMEnTAl MAnAgEMEnT AcT, 2007

Detailed compliance levels of SA Express

pertaining to these pieces of legislation are

morefullysetoutintheSustainabilityReporting

SectionofthisReport.

conSuMEr ProTEcTion AcT, 2008

ThisActseekstoestablishaframeworkforafair,

accessible,efficient,sustainableandresponsible

consumer market; reduce the disadvantages

of accessing goods and services when the

consumer is a person in a weaker bargaining

positione.g.lowincomepersonsorcommunities,

ruralcommunities,thedisabled, illiterate,elderly

oryoungandtopromotefairbusinesspractices.

Inpreparationfor the implementationof thisAct

whichwasearmarked tochange thewaySouth

African businesses are conducted in so far as

it relates to consumers, SA Express conducted

workshops aimed at educating key personnel

abouttheprovisionsoftheincomingAct.Further,

SAExpress,inconjunctionwithotherairlinesunder

theumbrellaoftheAirlinesAssociationofSouthern

Africa (AASA)madesubmission to theMinisterof

theDepartmentofTrade&Industrypertainingto

the suitability of some of the provisions of the

Actwhenappliedtotheairline industryandthe

proposalofdevisinganairline IndustryCode to

dealwithsomeofthecumbersomeprovisionsin

afairandequitablemanner.

SA Express has realigned a major part of its


45

operationalactivitieswiththecoreprovisionsof

theConsumerAct.Therequirement for timeous

provision of services, timeous communication

of inability to render contracted services and

provision of alternatives is being reinculcated

to all members of staff. It is SA Express’ view

that the introduction of this Act is assisting in

theenhancementofSAExpress’servicedelivery

standardstoaconsiderableextent.

BoArD coMMiTTEES

In linewith the requirements of the King III and

Protocol on Corporate Governance, the Audit

and Risk, Human Capital and Safety, Health and

EnvironmentCommittees,dulyassistedtheBoard

indischargingitsdutiesandresponsibilities.The

various Committees continued throughout the

year toactandperform functionsdelegated to

theminaccordancewithcleartermsofreference.

These Committees met independently of the

Board and were all chaired by Non-Executive

Directors.Themajorityofthemembersofthese

committeesareNon-ExecutiveDirectors.Inorder

tofunctionoptimallythemeetingswereattended

by Executive management and professionals

who were qualified to assist the committees in

performingtheirresponsibilities.TheseCommittees

werealsoassistedbytheCompanySecretaryin

theperformanceoftheirduties.

46

Audit and risk committee

Comprising: MsMatsotsoVuso(Chairperson)

MrChrisChristodoulou(Non-Executive)

MrNdodaMadalane(Non-Executive)(Retired16August)

MrLesibanaLedwaba(Non-Executive)(Appointed16August2010atAGM)

Human resources and remuneration committee

Comprising: MrBonangMohale(Chairperson)

MsBridgetSsamula(Non-Executive)

MrStavrosNicolaou(Non-Executive)(Retired16August2010)

MrEzraBunyenyezi(Non-Executive)

MrVuliCuba(Non-Executive)(Appointed16AugustatAGM)

Safety, Health and Environmental committee

Comprising: MrChrisChristodoulou(Chairperson)

MrGlennVanHeerden(Non-Executive)

MsBridgetSsamula(Non-Executive)

AuDiT AnD riSk coMMiTTEE

The Audit and Risk Committee comprises three

Non-Executive Directors and one Executive

Director, all of whom possess the necessary

degreeoffinancialknowledge,skill,insightandare

abletoundertaketherequisitereviewoffinancial

reports and statements in compliancewith the

Companies Act, International Financial Reporting

Standards,aswellasotherapplicablelegislative

requirementsandaccountingstandards–aswell

as to assist the Board with financial reporting,

riskmanagement,integrityoffinancialstatements

including internal controls, accounting policies,

financial performance and compliance with the

Public Finance Management Act, International

Financial Reporting Standards and all other

applicable legislation in respect of financial

matters. Infulfilling itsoversightresponsibilities,

the committee regularly reviewed management

accountsandfinancialstatements.Thisincluded

adiscussiononthequalityandacceptabilityof

the accounting principles, the reasonableness

of significant judgments and the adequacy of

disclosuresinthefinancialstatements.

Withtheassistanceofthecompany’sexternal

auditors (Nkonki Inc), which is responsible for

expressinganopinionon the fairpresentation

of the financial statements in accordancewith


47

the International Financial Reporting Standards,

the Committee reviewed the audited Financial

Statements of the company and the quality

and acceptability of the accounting principles.

Followinga reviewof theFinancialStatements

fortheyearended31March2011,theCommittee

is pleased to report that the Annual Financial

Statements comply in all material respects

with the requirements of the Companies Act,

61 of 1973, as amended, the Public Financial

ManagementAct,1of1999andtheInternational

FinancialReportingStandards.

TheAuditCommitteethereforerecommendedto

the Board the approval of the Annual Financial

Statements.

Further,withtheassistanceoftheindependent

InternalAuditteam,theCommitteeispleasedto

reportthatthefollowingreviewswereconducted

byKPMG:

• Human Resources review: the overall

conclusionwasthatthecontrolsintheHuman

Resourcesareclassifiedas“Acceptable”;

• Corporate Governance Review: the overall

conclusion was that from a high level

review the SA Express Board fully supports

the principles of good governance and

substantiallyandprogressivelycomplieswith

theprinciplesincorporatedintheKingCodeIII;

• SAPbasisreview:theoverallconclusionbased

ontheresultsoftheproceduresperformedis

thatthecontrolsintheSAPbasisrevieware

classifiedas“Acceptable”;

• Financial Discipline: the overall conclusion

based on the results of the procedure

performed is that the controls in the areas

reviewedintheFinancefunctionareclassified

as“Good”.

TheCommittee isalsopleased tohighlight that

KPMG reported that it had unrestricted access

torelevantcompanyactivities,records,property

andpersonnel.Further,thatnosuchrestriction

was imposedbyanyemployeeormanagement

ofSAExpress. TheCommitteealso reviewedat

each and every meeting the top strategic risk

issues facing the company including amongst

others, the impact of the global recession on

the company and employees financial distress,

demand constraints, foreign currency volatility

andunstablecrudeoilprices,crossborderrisk

andcostincrementsbymonopolisticsuppliers.

Although the SA Express Board is ultimately

responsibleforallriskmanagementactivities,the

oversightresponsibilitylieswiththeAudit&Risk

Committee.IntermsoftheTreasuryPolicy,there

isarequirementforestablishmentofaFinancial

Risk Sub-Committee which reports to the Audit

&RiskCommitteeviathemanagement(Executive

Committee). This Committee was established in

line with the delegated authority to executive

managementbytheBoardasapprovedinterms

ofSection66(6)ofthePublicFinanceManagement

ActbytheMinisterofFinance.

48

The Audit Committee reported that it had

adoptedappropriateformal termsofreference

as its Audit Committee Charter, had regulated

its affairs in compliance with the Charter, and

had attempted to discharge its responsibility

ascontainedintheCharter. Inexecutionofits

duties,theCommitteehas:

• Quarterly reviewed business and other risk

andtheimpactofsuchonthecompany;

• Received reports from management on

prevention of fraud and unethical conduct.

Nosignificantmatterwasreportedthrougha

WhistleblowerHotlinemanagedbyKPMG;

• Reviewed reports from both the Internal

Auditors and External Auditors regarding the

efficacy of the company’s internal control

systems;

• Approvedtheyearlyinternalauditplanforthe

yearunderreview;

• ReviewedandapprovedtheExternalAuditors

PlanningMemorandum;

• Considered and reviewed quarterly

managementaccounts;

• Reviewed the annual report and financial

statementsfortheyearunderreviewtoensure

thattheypresentabalancedunderstandable

assessmentoftheposition,performanceand

prospectsofthecompany;

• Reviewed the adequacy, reliability and

accuracyofthefinancialinformationprovided

bymanagement;

• Reviewed and recommended to the Board

for approval the company’s budget for the

FinancialYearending2011/12.

Further, the Committee is pleased to report

thatwhere anyweaknesseswere identified by

the internalandexternalauditors inrespectof

internal controls, management took corrective

measures to reduce or eliminate the risk. The

Committee is therefore of the opinion, based

on the information from Management, Internal

AuditorsandExternalAuditors, that the internal

controlsofthecompanyhaveoperatedefficiently

andeffectively.

HuMAn rESourcES AnD rEMunErATion coMMiTTEE

The Committee comprises four Non-Executive

Directors and one Executive Director. The

Committeeoperatedwithcleartermsofreference

and is responsible for the overall competitive

remunerationpoliciesanddeterminesonbehalf

of theBoard, the remunerationof Directors. It

further determines the terms and conditions

of employment of the Executive Directors.

In determining the remuneration policies,

comparative industry surveys are provided by

the company’s Human Resources Department

toenabletheCommitteetotakeheedofissues

such as market norms, skills retention and

performance of the company. Insofar as the

Thefollowingmeetingswereheldduringtheyearunderreview:

name 23 April 10 14 oct 10 9 nov 10 10 feb 11

MatsotsoVuso(Chairperson) Present Present Present Present

ChrisChristodoulou Present Present Present Present

NdodaMadalane Present Retired Retired Retired

SizaMzimela Present Resigned Resigned Resigned


49

Directorsareconcerned, theCommitteeapplies

theSOE’sRemunerationGuidelinesdevelopedby

theDepartmentofPublicEnterprises.

The Remuneration Philosophy of SA Express is

to attract, develop and retain key individuals

and reinforcesuperiorperformance inorder to

maximiseprofitability.Thecompany’sremuneration

policiesarealignedtothestrategicobjectivesof

the business. The Committee believes that the

company’s incentiveschemelinkedtocompany

and individual employee performance plays a

pivotalroleinretentionofstaff.Duringtheyear

underreviewtheCommitteeformallyadoptedthe

termsandobjectivesoftheShareholdersCompact

astheformalKeyPerformance Indicators (KPI’s)

for the Chief Executive Officer. The Committee

believestheCEOisbestplacedasthedelegated

member of the Board to execute the Board’s

strategic KPI’s as agreedwith the shareholder.

ExecutiveDirectorsdonothaveafixedtermof

service. AllNon-ExecutiveDirectorsaresubject

toretirementbyrotationandre-electionbythe

shareholder at least once every three years

in accordance with the Protocol on Corporate

Governance. Despite these, the shareholder is

entitled to appoint Directors at every Annual

General Meeting. The term of service of the

currentBoardexpiresonthe31September2013.

The Committee met four times during the year

underreview.

name 03 May 10 16 Sep 10 11 nov 09 16 feb 11

MrBMohale(Chairperson) Apologies Present Apologies Apologies

MsBSsamula Present Present Present Present

MrEBunyenyezi Present Present Present Present

MrVCuba Notyetappointed Apologies Apologies Present

MrSNicolaou Apologies Retired Retired Retired

MsSMzimela Present Resigned Resigned Resigned

The Committee discussed all aspects of

remuneration of employees – including that of

Executives. The remunerationof employees is,

as far as possible, aligned to and influenced

by the interests of the shareholder, market

indicators, performance of the company and

employees’ overall contribution towards the

growthofthecompany.

Non-Executive Director’s remuneration was not

approved by the shareholder at the Annual

General Meeting on 16 August 2010, as the SOE

GuidelineswereunderreviewbytheMinister.

rEMunErATion of ExEcuTivE DirEcTorS AnD

MAnAgEMEnT

The remuneration of the Executive Director

consistsofanannualguaranteedpackage,plus

performanceandretentionbasedincentives.

Basic salaries of Executive Directors are set

at competitive market rates in terms of the

SOE’s Remuneration Guidelines and are subject

to annual review. The performance of the CEO

is assessed at the end of the financial year.

Thereviewisbasedontheperformanceofthe

companyintermsoftheShareholdersCompact.

Thefulldetailsareprovidedinatablebelowin

thisreport.

50

name Salary

Post retirement

Benefit Funds contributions

other contributions

Total 2011

INtshanga–CEO 1602682.10 168609.85 82099.24 1853391.19

DBAllanby 1322602.47 171440.40 92325.96 1586368.83

AMalola-Phiri 1341496.83 102990.96 109672.56 1554160.35

JLGreen 1322496.63 64174.80 32558.52 1419229.95

RLVahed 1214226.45 124460.16 69783.48 1408470.09

JGSimelane 1272674.22 62277.84 67455.48 1402407.54

WPHermanus 1112857.59 116814.48 90836.76 1320508.83

SSZulu* 1039102.70 111287.84 62883.54 1213274.08

JJantjies 1062569.78 53516.80 63306.96 1179393.54

PBMashaba 903669.39 69529.60 49286.56 1022485.55

*SettlementofLegalFeesNotIncluded

Terminated06/12/2010

Terminated 31/03/2010

Terminated 31/07/2009

nameShort-Term

incentivelong-Term incentive

Total 2011

SPMzimela 1886266.85 0.00 1886266.85

SSZulu 871237.09 786504.00 1657741.09

AMalola-Phiri 584686.32 547858.08 1132544.40

INtshanga 511008.25 500029.20 1011037.45

JLGreen 575418.50 398227.16 973645.66

DBAllanby 599403.40 351338.62 950742.02

RLVahed 580898.68 363258.02 944156.70

JGSimelane 399860.82 347322.29 747183.11

WPHermanus 456764.86 238078.67 694843.53

JJantjies 340030.38 255988.25 596018.63

PBMashaba 330768.13 154836.00 485604.13

HAStrobele 132150.56 0.00 132150.56


51

non-ExEcuTivE DirEcTorS’ rEMunErATion

Non-ExecutiveDirectorsreceivedretainerfeesfortheirservicesasDirectorsandforservingonBoard

sub-committeesinaccordancewiththeSOE’sRemunerationGuidelines.

name Jul-10 oct-10 Dec-10 Mar-11 Total

BonangMohale 53,980.49 53,980.49 53,980.49 53,980.49 215,921.96

BridgetSsamula 47,649.12 59,543.86 59,543.86 59,543.86 226,280.07

ChrisChristodoulou 70,871.29 70,871.29 70,871.29 70,871.29 283,485.16

EzraBunyenyezi 47,649.12 47,649.12 47,649.12 47,649.12 190,596.36

GlennVanHeerden 47,649.12 47,649.12 47,649.12 47,649.12 190,596.36

LesibanaLedwaba Notyetappointed 52,686.03 52,686.03 52,686.03 158,058.09

LilianBoyle 167,360.11 167,360.11 167,360.11 167,360.11 669,440.44

MatsotsoVuso 62,455.29 62,455.29 62,455.29 62,455.29 249,821.16

NdodaMadalane 52,665.74 Resigned Resigned Resigned 52,665.74

StavrosNicolaou 47,649.12 Resigned Resigned Resigned 47,649.12

VuliCuba Notyetappointed 47,649.12 47,649.12 47,649.12 142,947.36

SAfETy, HEAlTH AnD EnvironMEnT coMMiTTEE

The Committee is comprised of two Non-

ExecutiveDirectorsandoneExecutiveDirector.

The Executive manager responsible for Safety,

HealthandEnvironmentattendedallthemeetings

oftheCommittee.TheCommitteeoperatedwithin

itsdelegatedtermsofreferenceandreportedall

activitiestotheBoardateverymeeting.

TheCommittee ispleased to report thatduring

theyearunderreview,SAExpresssuccessfully

concludedtheSouthAfricanCivilAviation(SACAA)

andIOSAaudits.TheCommitteeisfurtherpleased

to report that audits were conducted by the

internalSAExpress teamatvariousairports to

ensure compliance with recognised standards.

SAExpresscontinuedtoinvestigateandevaluate

theapplicationofvariousin-housecarbonoffset

programmessuchas:

• ReducingAPUutilisationduringwinter;

• ImposingandinsistingthatSAExpressservice

providersuseenvironmentallyfriendlyproducts;

• Taxiing-off aircraft with one engine post

landing and monitoring flight deck crew fuel

utilisation;and

• Installation of screening machines in

LubumbashiAirport.

The overall key responsibilities of the committee

are to:

• Ensurethatissuespertainingtosafety,health

and environment are aligned to the overall

business strategy of the company and are

gearedtowardscompliancewithinternational

normsandpractices;

52

ATTEnDAncE

TheCommitteemetfourtimesduringtheyearunderreview.

names 05 May 10 10 Sept 10 05 nov 10 16 feb 2011

ChrisChristodoulou(Chairperson) Present Present Present Present

GlennVanHeerden Present Present Present Present

BridgetSsamula Notyetappointed Present Present Present

SizaMzimela Apologies Present Present Resigned

• Consider and approve the corporate safety,

healthandenvironmentalstrategyandpolicies;

• Monitor compliance with such strategy and

policies;

• Considerandapprovemajorsafety,healthand

environmentalprojects;

• Ensure that itsmembersare informedabout

thesignificant impactonthecompany inthe

safety,healthandenvironmentalfieldandhow

thesearemanaged(processandactivities);

• Review the structure, adequacy and

effectiveness of the safety, health and

environment committee within the Company

includingreviewofanytermsofreferencefor

thesame;

• Review the scope of and results of any

safety, health andenvironment audit and the

effectivenessofthecompany’ssafety,health

and environment policies and procedures

and such audit’s cost effectiveness and the

independenceandobjectivityoftheauditbody;

• Consider the major findings of internal and

external investigations and management’s

responsetheretoand,wherenecessarymake

recommendations to theBoard in respectof

thesame;and

• Dealwithanyothermattersformallydelegated

bytheBoardtotheCommitteefromtimetotime.

Shareholders compact review full year

kPiunit of

measurecompact Actual

Target achieved yes / no

Profitability

EBIT Percentage 16% (9%) No

ReturnonAssets Percentage 16,60% (16%) No

FreeCashtoATL Percentage 74% 43% No

Turnover Rb 2.079 1.737 No

NetProfit(Loss)aftertax Rm 238 -187 No

financial value creation

PassengerLoadfactor Percentage 67% 63% No

AverageFare Rands 904 1028 Yes

RASK cents 1,18 1,04 No

Shareholders compact


53

SouthAfricanExpressAirways(Pty)Ltd

AnnuAl finAnciAl STATEMEnTS

Fortheyearended31March2011

The company Secretary resigned during the year under review and as such the Board states that:

Weherebyconfirmthatintermsofsection268G(d)oftheCompaniesAct,61of1973,tothebestofour

knowledgeandbelief,SAExpresshaslodgedwiththeRegistrarofCompaniesallsuchreturnsforthe

yearended31March2011.

l.g Boyle

ChairpersononbehalfoftheBoardofDirectors

Johannesburg

ItmustbenotedthatduetothefactthattheBoardmemberswere,saveforDr.Ssamula,rotatedatthe

AGMon13August2012andduetothefactthatfinalisationoftheAnnualFinancialStatementsfortheyear

ending31March2012weremandatedtothenewlyappointedBoardmembers,theoperationalinformation

containedinthisAnnualReportisreportedonbythepreviousBoardandtheAnnualFinancialStatements

arereportedonbythenewlyappointedBoardmembers.BoththeBoardofDirectorsandmanagement

ofSouthAfricanExpressAirwaysaresatisfiedwiththisarrangementwhichisconsistentwithalllegal

requirementsanddoesnotexposethecompanytoanyrisks.

kPiunit of

measurecompact Actual

Target achieved yes / no

Shareholders compact (continued)

CASK cents 0,99 0,87 Yes

RASK(ExcludingFuelLevy) cents 0,69 0,87 Yes

CASK(ExcludingFuel) cents 0,74 0,61 Yes

Cargoasa%ofOperatingIncome Percentage 1,5% 0,70% No

fleet

DailyblockHoursperAircraft(weekdays) Hours 7,0 6,2 No

On-timeperformance(within 15minofscheduleddeparturetime)

Percentage 91% 85% No

Human capital

TrainingSpend Percentage 1% 1,8% Yes

Totalstaffperaircraft Ratio 41,38 38,00 Yes

Turnoverperemployee Ratio R2m R1.7m No

Technical

DispatchReliability Percentage 97% 97,0% Yes

UnscheduleDowntime Percentage85%of

scheduledDT

nottracked

No

comment

TheoverallperformanceonthestatedKPI’shavenotbeensatisfactory,withonly7/18KPI’sachieved.Thoughtheeconomicoperatingconditionsoftheairlinewereextremeatmost,themajorityoftheperformanceindicatorsareinterdependentespeciallyinthefinancialelement.Thusnonachievementofonewillleadtothenonachievementofanother.Thecompanyhasplacedadditionalfocusonachievementoftheshareholderscompactandthenegotiationofagreedmeasureswhichwillimprovetheoverallperformance.

a

07FinAnCiAl StAtEmEntSFor yEAr EndEd 31 mArCh 2011

A Cloud oF AnothEr Colour

Any planet or moon with an

atmosphere has clouds but

not all are composed of water

and ice like on Earth - for

instance Saturn has some

clouds composed of droplets

of pure liquid methane.

55

07 indEpEndEnt AuditorS rEportTo THE SHArEHolDErS of SouTH AfricAn

ExPrESS (Soc) liMiTED

We have audited the Amended Financial

StatementsforSouthAfricanExpress(SOC)

Limitedsetoutonpages5to38,whichcomprise

thestatementoffinancialpositionasat31March

2011 and the statements of comprehensive

income,changesinequityandcashflowsforthe

year then ended, and the notes, comprising a

summary of significant accounting policies and

otherexplanatory information. This independent

auditreportreplacesthepreviouslyissuedaudit

reportonthe28thofJuly2011,whichrelatesto

thepreviouslywithdrawnfinancialstatementson

the25thofNovember2011.

MAnAgEMEnT’S rESPonSiBiliTy for THE

finAnciAl STATEMEnTS

Managementisresponsibleforthepreparationand

fairpresentationofthesefinancialstatementsin

accordancewithInternationalFinancialReporting

Standards and the manner required by the

CompaniesActofSouthAfrica.Thisresponsibility

includes:designing,implementingandmaintaining

internalcontrol relevant to thepreparationand

fair presentation of financial statements that

are free from material misstatement, whether

due to fraud or error; selecting and applying

appropriate accounting policies; and making

accountingestimatesthatarereasonableinthe

circumstances.

AuDiTor’S rESPonSiBiliTy

Our responsibility is to express an opinion on

thesefinancialstatementsbasedonouraudit.

We conducted our audit in accordance with

International Standards on Auditing. Those

standards require that we comply with ethical

requirementsandplanandperformtheauditto

obtainreasonableassurancewhetherthefinancial

statementsarefreefrommaterialmisstatement.

An audit involves performing procedures to

obtain audit evidence about the amounts and

disclosures in the financial statements. The

procedures selected depend on the auditor’s

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 auditor

considersinternalcontrolrelevanttotheentity’s

preparationandfairpresentationofthefinancial

statementsinordertodesignauditprocedures

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

andthereasonablenessofaccountingestimates

madebymanagement,aswellasevaluatingthe

overallpresentationofthefinancialstatements.

Because of the matter discussed in the Basis

forDisclaimerofOpinionparagraph,however,we

werenotabletoobtainsufficientappropriateaudit

evidencetoprovideabasisforanauditopinion.

BASiS for DiSclAiMEr of oPinion

TheNon-ExecutiveDirectorsofSAExpress(SOC)

Ltd have approved thewritten representations

that they have fulfilled their responsibilities for

the preparation and fair presentation of the

Annual Financial Statements, and in respect of

thecompleteness,validityandaccuracyof the

adjustments that resulted in these amended

financialstatementsfortheyearended31March

2011,but theExecutiveDirector (ChiefExecutive

Officer) has abstained from approving such

writtenrepresentations.

Anumberofsignificantadjustmentsmadetothe

financialstatementswerenotsubstantiatedwith

sufficientandappropriateauditevidence.These

includethefollowing:

• The total unrecognised losses since the

inception of Congo Express amount to R19

091307.Wewereunable toobtainsufficient

and appropriate evidence to confirm the

completenessandvaluationofthisamount.

• Aircraft.Wewere unable to obtain sufficient


existence,completenessandvaluationofthis

adjustmentthatweconsiderednecessaryfor

thepurposesofouraudit.Theeffectofthis

adjustment on the financial statements is a

reductionof retainedearningsandproperty,

plantandequipmentbyR394714709.

56

07 FinAnCiAl StAtEmEntS (continued)

• Rotables.Wewereunabletoobtainsufficient


existence,completenessandvaluationofthis

adjustmentthatweconsiderednecessaryfor

thepurposesofouraudit.Theeffectofthis

adjustment on the financial statements is a

reductionof retainedearningsandproperty,

plantandequipmentbyR255312849.

• Consumables. We were unable to obtain

sufficientandappropriateevidencetoconfirm

theexistence,completenessandvaluationof

thisadjustmentthatweconsiderednecessary

for thepurposesofouraudit. Theeffectof

thisadjustmentonthefinancialstatementsis

areductiononretainedearningsandinventory

byR10661844.

• Sundry Debtors. We were unable to obtain





this adjustment on the financial statements

is a reduction on the retained earnings and

accountsreceivablebyR18057217.

• PassengerTaxation.Wewereunabletoobtain

sufficient and appropriate evidence to confirm

the existence, completeness and valuation of


forthepurposesofouraudit.Theeffectofthis

adjustmentonthefinancialstatementsisare-

duction on the retained earnings by R24 244

301.

• NeutralityAdvance.Wewereunabletoobtain





thisadjustmentonthefinancialstatementsis

areductionontheretainedearningsandan

increaseinliabilitiesbyR22830246.

• Note34tothefinancialstatementsrefersto

thefollowingpriorperiodadjustments:

o SAPsystemerrors—R25603552.

o Non-reversal of provision for dispute

settlement—R12500000.

o Taxeffectstilltobeallocated—(R12212689).

We were unable to obtain sufficient and

appropriate evidence to confirm the existence,

completenessandvaluationoftheseadjustments

thatweconsiderednecessaryforthepurposes

ofouraudit.Theeffectoftheseadjustmentson

thefinancialstatementsisareductionofretained

earningsbyR25890863.

• Taxation Effect of Adjustments – We were

unable to obtain sufficient and appropriate

evidence to confirm the existence,

completenessandvaluationofthisadjustment

that we considered necessary for the

purposes of our audit. The effect of this

adjustmenton the financial statements isan

increaseinretainedearningsbyR201856374.

• We were not provided with a detailed final

forensic report and have therefore been

unable to determine whether the detailed

findings would have had any impact on the

amendedannualfinancialstatements.

DiSclAiMEr of oPinion

Because of the significance of the matters

described intheBasisforDisclaimerofOpinion

paragraph, we have not been able to obtain

sufficient appropriate audit evidence to provide

abasisforanauditopinion.Accordinglywedo

notexpressanopinionontheamendedfinancial

statements for South AfricanExpress (SOC) Ltd

fortheyearended31March2011.

EMPHASiS of MATTEr

Wedrawyourattentiontothefinancialstatements

whichindicatethatthecompanyincurredanet

lossofR187millionfortheyearended31March

2011 and, the company’s cash flow indicates a

negativecashgenerationfromoperationsofR145

million for the year then ended. The unaudited

financial statements for the year ended 31

March 2012 indicate the company incurred a

netlossofR78millionand,thecompany’scash

flow indicates a negative cash generation from

operations of R188 million for the year then

ended. Thecompany isalso inbreachofmost

ofitsdebtcovenants.Thesefacts,alongwithno

documented commitment from the shareholder

tofinanciallysupportthecompany,indicatesthe

existence of a material uncertainty which may

castsignificantdoubtaboutthecompany’sability

tocontinueasagoingconcern.

We draw attention to Note 8 of the directors’

report which indicates that previously issued

57

financialstatementsfortheyearended31March

2011,dated27July2011,havebeenrevisedand

re-issued.

WedrawyourattentiontoNote34oftheamended

annualfinancialstatementswhichprovidesalist

of the adjustments processed by management

for 2009, 2010 and2011. Theseamountsdonot

reconciletotheadjustmentsscheduleprovided

totheauditorsbymanagement.

Wedrawyourattentiontoanumberofdepartures

from the requirementsof InternationalFinancial

ReportingStandards.

• The following adjustments have been

incorrectly classified as prior period errors

instead of being classified as change in

accounting estimates in terms of IAS 8 -

Accounting Policies, Changes in Accounting

EstimatesandErrors:

o LeavePayAccrual;

o Fuel;

o UnutilisedTicketLiability;and

o TrainingBonds.

The effect of the above on the financial

statements is tooverstateprofitbeforetax for

thecurrentyearbyR90607440.

• No disclosure in respect IAS 8 - Accounting

Policies,ChangesinAccountingEstimatesand

Errors: which requires an entity to disclose

when ithasnotappliedanewIFRSthathas

beenissuedbutisnotyeteffective,theentity

shalldisclose:

o thisfact;and

o knownorreasonablyestimableinformation

relevanttoassessingthepossible impact

that application of the new IFRSwill have

on theentity’s financial statements in the

periodofinitialapplication.

• NodisclosureinrespectofFAS1-Presentation

of Financial Statements, thatwhen an entity

changesthepresentationorclassificationof

items in its financial statements, the entity

shall reclassify comparative amounts unless

reclassification is impracticable. When the

entity reclassifies comparative amounts, the

entityshalldisclose:

o thenatureofthereclassification;

o theamountofeachitemorclassofitems

thatisreclassified;and

o thereasonforthereclassification.

Wedrawyourattention to theabsenceof the

noteintheamendedannualfinancialstatements

fortheyearended31March2011thatextensively

discussesthereasonsfortheamendmentofthe

previouslyissuedfinancialstatementsandtothe

earlierreportprovidedbytheauditors.

This negatively impacted our ability to comply

with InternationalStandardonAuditing(ISA)560,

“SubsequentEvents”whichobligatestheauditor

to include in the amended auditor’s report an

Emphasis of Matter paragraph or Other Matter

paragraph referring to a note to the financial

statements that more extensively discusses

thereasonfortheamendmentofthepreviously

issued financial statements and to the earlier

reportprovidedbytheauditor.

rEPorT on oTHEr lEgAl AnD rEgulATory

rEQuirEMEnTS

Inaccordancewithourresponsibilitiesinterms

ofsections44and45oftheAuditingProfession

Act26of2005,wereportthatwehaveidentified

certain unlawful acts or omissions committed

by persons responsible for the management

of South African Express (SOC) Limited, which

constitute reportable irregularities in terms of

the Auditing Profession Act, and have reported

such matters to the Independent Regulatory

BoardforAuditors.

rEPorTABlE irrEgulAriTy 1 (AS rEPorTED To

THE irBA on 23 novEMBEr 2011)

In accordance with International Standard on

Auditing (ISA) 580, “Written Representations”

auditorscanobtainwrittenrepresentationswith

respect to specific amounts and disclosures

in the financial statements. In this context we

requested the management of South African

Express (Pty) Limited provide uswith awritten

representation as to the classification of an

amountinthestatementoffinancialposition.This

representationwas provided to us and formed

58


part of the evidence in support of our opinion

asrecordedinourauditor’sreportfortheyear

ended 31 March 2011. This letter representation

lettercontainedthewordswhichweresignedon

behalfofthecompanybyanExecutiveDirector:

“We confirm to the best of our knowledge

and belief having made such enquiries as we

considered necessary for the purposes of

informingourselves.”Inmakingenquiriesinterms

of International Standard on Auditing (ISA) 560,

“Subsequent Events” P 14 we discovered that

therewasreasonablecausetobelievethatthe

written representationsmade tous in termsof

thespecificrepresentationletterweremisleading.

Webelieved thatmanagementdidnotexercise

the required degree of care and skill that is

requiredofmanagementwhenconducting their

duties on behalf of the company. The reason

forthisbeliefwasthatmanagementdidnot,for

the purposes of making such a statement as

mentionedabove,makesufficientandappropriate

enquiries that would enable management to

makesuchawrittenrepresentation.Webelieved

by making such a written representation

management were in contravention of Section

76 (3) of the Companies Act 71 of 2008 which

states: “a Director of a company, when acting

inthatcapacity,mustexercisethepowersand

perform the functions of Director in good faith

andforaproperpurpose; inthebestinterests

ofthecompany;andwiththedegreeofcare,skill

anddiligencethatmayreasonablybeexpected

ofapersoncarryingoutthesamefunctionsin

relationtothecompanyasthosecarriedoutby

thatDirector;andhavingthegeneralknowledge,

skillandexperienceofthatDirector”.

rEPorTABlE irrEgulAriTy 2 (AS rEPorTED To

THE irBA on 16 APril 2012)

Regulation25 (2)of theCompaniesRegulations,

2011statesthatacompanymustkeepaccounting

records in an official language of the Republic,

asnecessarytoprovideanadequateinformation

base sufficient to enable the company to

satisfy all reporting requirements applicable to

it and provide for the compilation of financial

statements,andtheproperconductofanaudit,

or independent review, of its annual financial

statements, as applicable for the particular

company.We as the auditors of South African

Express(Pty)Limitedhavereasontobelievethat

South African Express (Pty) Limited was not in

compliance with the above regulations and as

a result the Directors of SAX are in breach of

theirfiduciaryduties.Thesedutiesaresetoutin

Section76(3)oftheCompaniesAct,2008which

states:aDirectorofacompany,whenactingin

that capacity, must exercise the powers and

perform the functions of Director in good faith

andforaproperpurpose; inthebestinterests

ofthecompany;andwiththerequireddegreeof

care,skillanddiligence.

Theannualfinancialstatementsfortheyearended

31March2011(approvedandissued28July2011)

werewithdrawnon25November2011inresponse

toareportableirregularityreportedtoIRBAdated

23November2011.TodatetheDirectorshavenot

presentedanyamendedfinancialstatementsfor

audit.Wehadonnumerousoccasionsrequested

management to provide us with these financial

statements,buttonoavail.Thiswasamaterial

breachoftheDirectors’fiduciarydutiesasit is

their statutory duty to prepare annual financial

statements andpresent them for audit. Bynot

preparingfinancialstatementsforustoauditby

the Directors there was reasonable cause to

believe that SouthAfricanExpress (Pty) Limited

was in contraventionof Regulation25 (2). As a

resultweareunabletoconductourlegalduties

andobligations.

NkonkiInc.

MiteshPatel

RegisteredAuditor

Wednesday,8August2012

3SimbaRoadSunninghill2157

59

The Directors are required in terms of the

CompaniesActofSouthAfrica,ThePublicFinance

Management Act, Treasury Regulations, and

ProtocolonCorporateGovernance in thePublic

Sector (2002),tomaintainadequateaccounting

records and are responsible for the content

andintegrityoftheAnnualFinancialStatements

and related financial information included in

this report. It is the Directors’ responsibility to

ensure that the Annual Financial Statements

fairlypresentthestateofaffairsofthecompany

as at the end of the financial year and the

results of its operations and cash flows for

the period then ended, in conformity with the

Companies Act, Public Finance Management Act,

InternationalFinancialReportingStandards(IFRS)

andothermandatedlegislationorguidelinesfor

stateownedentities. Theexternal auditors are

engagedtoexpressanindependentopinionon

theAnnualFinancialStatements.

The Annual Financial Statements are prepared

in accordance with the Companies Act, Public

Finance Management Act, International Financial

Reporting Standards (IFRS) and other mandated

legislationorguidelinesforstateownedentities

and are based upon appropriate accounting

policies consistently applied and supported by

reasonableandprudentjudgmentsandestimates.

The Directors acknowledge that they are

ultimatelyresponsibleforthesystemofinternal

financialcontrolestablishedbythecompanyand

place considerable importance on maintaining

a strong control environment. To enable the

Directors to meet these responsibilities, the

Boardsetsstandardsforinternalcontrolaimed

atreducingtheriskoffraudanderrororlossin

acosteffectivemanner.Thestandardsinclude

theproperdelegationofresponsibilitieswithina

clearlydefinedframework,effectiveaccounting

proceduresandadequatesegregationofduties

to ensure an acceptable level of risk. These

controlsaremonitoredthroughoutthecompany

and all employees are required to maintain

the highest ethical standards in ensuring the

company’sbusiness isconducted inamanner

that in all reasonable circumstances is above

reproach.Thefocusofriskmanagementinthe

companyisonidentifying,assessing,managing

andmonitoringallknownformsofriskacrossthe

company.While operating risk cannot be fully

eliminated,thecompanyendeavourstominimise

it by ensuring that appropriate infrastructure,

controls, systems and ethical behaviour are

applied and managed within predetermined

proceduresandconstraints.

After the approval of the AFS in August 2011,

the Directors resolved towithdraw the AFS on

25 November 2011, following a forensic audit,

commissionedbytheDirectors,intoissuesraised

throughtheethicshotline.TheAFSfortheyear

ended31March2011andthecomparativeyears

havebeenreconstructed,takingintoaccountall

adjustmentsarisingfrommatterswhichcameto

theattentionofmanagementandDirectors.

The Directors are of the opinion, based on

the information and explanations given by

managementthatthesystemofinternalcontrol

providesreasonableassurancethatthefinancial

records may be relied on for the preparation

of the Annual Financial Statements. However,

any system of internal financial control can

provide only reasonable, and not absolute,

assurance against material misstatement or

loss. As a result of protracted disputes with

the external auditors on the correct treatment

ofpastaccountingerrors,theDirectorsengaged

technical accounting expertise as additional

assurance a) to review accounting policies in

linewithIFRSandinternalcompliancewiththose

policiesandb)toconfirmtheamendmentstothe

AFSwereafairreflectionofthefinancialposition

ofthecompanyasat31March2011.Theopinions

receivedconcurredwithmanagement’streatment

oftheadjustments.

The external auditors are responsible for

independently reviewing and reporting on the

company’s Annual Financial Statements. The

auditorsarestill inprocesswith theaudit and

theirreportwillbeincorporatedonpages53to

56oncecomplete.

TheAnnualFinancialStatementssetoutonPages

60to91,whichhavebeenpreparedonthegoing

concernbasis,wereapprovedbytheBoardon

25July,2012andweresignedonitsbehalfby:

M.J. vuso | chairperson: Audit and risk committee25 July 2012

directors’ responsibilities and Approval

l.g. Boyle | chairperson: Board25 July 2012

60

dirECtorS’ rEport The Directors submit their report for the year

endedMarch31,2011.

1. rEviEw of AcTiviTiES

Main business and operations

Thecompanyisengagedinaviationandoperates

principallyintheSouthernAfricanRegionandthe

Africancontinent.

Theoperatingresultsandstateofaffairsofthe

companyarefullysetoutintheattachedannual

financial statements and do not in our opinion

requireanyfurthercomment.

2. going concErn

The annual financial statements have been

prepared on the basis of accounting policies

applicable to a going concern. This basis

presumesthatfundswillbeavailabletofinance

future operations and that the realisation of

assets and settlement of liabilities, contingent

obligations and commitments will occur in the

ordinarycourseofbusiness.

3. EvEnTS AfTEr THE rEPorTing PErioD

SA Express entered into lease agreements

between August and October 2011 for nine (9)

Q400aircraft. Theseaircraftcame intoservice

duringthefourthquarterof2011.

Seven(7)Dash8300oftheaircraftinthefleet

weresoldandafurthertwo(2)areplannedtobe

soldduringJune2012.

4. DirEcTorS’ inTErEST in conTrAcTS

ToourknowledgenoneoftheDirectorshadany

interest in contracts entered into during the

period under review. Directors and employees

declarationof interest is a standing itemat all

meetingsoftheBoardanditscommittees.

5. non-currEnT ASSETS HElD for SAlE

The company’s Board of Directors passed a

resolution to dispose of the company’s ageing

fleet during a meeting held in November 2010.

An application in compliance with the Public

FinanceManagementAct (PFMA)section54was

lodged with the Minister of Public Enterprise

and notification was also submitted to National

Treasury in compliance with section 54 of the

PFMA.AnapprovalwasgrantedbytheMinisterof

DepartmentofPublicEnterpriseduringMay2011.

Theassetsheldforsale(AircraftsandRotables)

ceaseddepreciatingimmediatelyaftertheBoard

resolution.

Four(4)ofthethirteen(13)ownedaircraft,were

subsequentlyreclassifiedasPPEduetothefact

thatsuitablebuyerswerenotfound.

6. Borrowing liMiTATionS

IntermsoftheMemorandumofIncorporationof

thecompany,theDirectorsmayexerciseallthe

powers of the company to borrow money, as

theyconsiderappropriate,withinthemandateof

thePublicFinanceManagementActof1999.

7. DiviDEnDS

Nodividendswerepaidorproposed.

8. wiTHDrAwAl

Subsequent to the issuingandapprovalof the

originalAnnualFinancialStatementsbytheBoard

on 27 July 2011, they were withdrawn due to

variousmaterialerrorsidentified.Theerrorsand

changes have been effected and disclosed in

therevisedAnnualFinancialStatements.

9. DirEcTorS

TheDirectorsofthecompanyduringtheyearand

uptothedateofissueofthisreportareasfollows:


61

Name Changes

L.G.Boyle

I.Ntshanga AppointedSeptember01,2010

S.P.Mzimela ResignedApril30,2010

E.Bunyenyezi

V.Cuba AppointedSeptember01,2010

C.Christodoulou

L.Ledwaba AppointedSeptember01,2010

N.A.Madalane ResignedAugust30,2010

B.F.Mohale

S.Nicolaou ResignedAugust30,2010

B.Ssamula

M.J.Vuso

G.VanHeerden

S.S.Zulu ResignedDecember06,2010

10. coMPAny SEcrETAry

G.N. Mothema resigned as secretary of the

company effective November 11, 2010. Morestat

Corporate Services (Pty) Ltd was appointed,

effective this date and resigned on April 30,

2011.SubsequentlyE.Isenschmidwasappointed

effectiveMay01,2011.

11. SHArEHolDEr

There has been no changes in ownership and

theshareholderremainstheGovernmentofthe

Republic of South Africa, represented by the

DepartmentofPublicEnterprises.

12. DiSconTinuED inTErEST in ASSociATE coMPAny

Details | Countryof incorporation ifnottheRSA

CongoExpressSprl| DemocraticRepublicofthe

Congo

During a Boardmeeting held in November 2010,

the Board passed a resolution to dispose of

the company’s shareholding in Congo Express

Sprl.AnapplicationwaslodgedwiththeMinister

ofPublicEnterprise foranapproval tosell the

company’s shareholding in Congo Express

Sprl and notification to the National Treasury

in compliance with section 54 of the PFMA. In

principleapprovalforthesaleoftheshareswas

madebytheMinisterduringMay2011.

13. DEBT iMPAirED

Congo Express Sprl has been incurring losses

since inception and experiencing cash flow

challenges.AsaresultCongoExpressSprlhas

beenunabletopayitsdebtsasandwhenthey

becamedue.Thecashshortageswerefundedby

SAExpresswhichresultedinamaterialamount

beingowedtoSAExpress.AtMarch31,2011Congo

ExpressSprlwereunable to repay theamount

owingtoSAExpressandtheBoardofDirectors

feltitwasprudenttoimpairtheentireamountof

loanandtradedebtorowedbyCongoExpress

Sprl. The amount impaired was R39 million. The

company reserve its right to pursue any legal

proceedingstorecoverthedebt.

14. AuDiTorS

Nkonki Incorporated were the auditors for the

yearunderreview.

15. PuBlic finAncE MAnAgEMEnT AcT (PfMA)

APPlicATionS

Section54(2)forfleetrenewal,acquisitionofthe

newfleetanddisposalofthecurrentageingfleet.

Section 54 for the disposal of the company’s

shareholding interest in Congo Express and a

futherresolutiontowithdrawfromtheinvestment.

Section54(2)foranapplicationwithregardsto

theDurbanRegionalexpansion.

Refer to note 32 of the annual financial

statementsformoredetailsrelatingtotheabove

applications.

62

Statement of Financial positionfigures in rand note(s) restated 2011 restated 2010 restated 2009

ASSETS

non-current Assets

Property,plantandequipment 4 145,343,073 509,560,629 433,414,883

Intangibleassets 5 8,756,651 9,082,309 3,196,616

InvestmentinCongoExpressSprl 7 - 3,659,491 -

Otherfinancialassets 8 64,642,240 60,069,770 55,000,000

Deferredtax 9 - - 14,015,318

218,741,964 582,372,199 505,626,817

current Assets

Inventories 10 75,491,661 60,850,071 77,882,304

Otherfinancialassets 8 - - 9,981,469

Currenttaxreceivable 92,481,987 56,588,547 -

Tradeandotherreceivables 11 419,896,801 341,686,610 366,273,732

Cashandcashequivalents 12 88,341,561 74,318,801 79,651,811

676,212,010 533,444,029 533,789,316

Non-Currentassetsheldforsale 33 241,696,475 - -

Total Assets 1,136,650,449 1,115,816,228 1,039,416,133

EQuiTy AnD liABiliTiES

EQuiTy

Sharecapital 13 501,837,518 501,837,518 56,837,518

Shareholderconvertibleloan 14 356,954,972 356,954,972 801,954,972

Retainedearnings (396,265,973) (209,298,280) (258,441,126)

462,526,517 649,494,210 600,351,364

liABiliTiES

non-current liabilities

Longtermborrowings 15 200,000,000 - 28,675,563

Deferredtax 9 - 13,736,726 -

200,000,000 13,736,726 28,675,563

current liabilities

Currentportionofthelongtermborrowings 15 - 27,679,089 39,323,923

Tradeandotherpayables 17 283,360,955 241,085,118 303,282,791

Neutralityadvance 16 177,266,915 177,266,915 67,782,492

Bankoverdraft 12 13,496,062 6,554,170 -

474,123,932 452,585,292 410,389,206

Total liabilities 674,123,932 466,322,018 439,064,769

Total Equity and liabilities 1,136,650,449 1,115,816,228 1,039,416,133


63

Statement of Comprehensive income figures in rand note(s) restated 2011 restated 2010

CONTINUINGOPERATIONS

Revenue 18 1,643,572,292 1,574,554,135

Otherincome 93,459,715 34,621,140

Operatingexpenses (1,878,847,916) (1,480,932,006)

Operating (loss) profit 19 (141,815,909) 128,243,269

Investmentincome 20 12,593,293 16,280,034

Reclassificationadjustment - 46,788,931

Foreignexchangedifferences 1,371,201 8,347,633

ImpairmentofPPE 32 (61,238,415) (84,644,064)

Financecosts (11,596,469) (6,231,190)

(Loss) profit before taxation (200,686,299) 108,784,613

Taxation 21 13,736,726 (27,752,043)

(Loss) profit from continuing operations (186,949,573) 81,032,570

DiSconTinuED oPErATionS

Lossfromdiscontinuedoperation (18,120) -

(Loss) profit for the year (186,967,693) 81,032,570

Total comprehensive (loss) income (186,967,693) 81,032,570

nET ProfiT ATTriBuTABlE To SHArEHolDEr

(Loss)profitfortheyearfromcontinuingoperations (186,949,573) 81,032,570

Lossfortheyearfromdiscontinuingoperation (18,120) -

Profit for the year attributable to shareholder (186,967,693) 81,032,570

64

Statement of Changes in Equity


figures in rand Share capital

Share premium

Total share capital

Share- holder

convertible loan

retained earnings

Totalequity

Balance at April 01, 2009 102 56,837,416 56,837,518 801,954,972 84,597,771 943,390,261

Adjustments

Priorperioderror - - - - (343,038,897) (343,038,897)

Balance at April 01, 2009 as restated

102 56,837,416 56,837,518 801,954,972 (258,441,126) 600,351,364

Changesinequityfortheyear

Totalcomprehensiveincomefortheyear

- - - - 81,032,570 81,032,570

Convertiblebond–equitycomponent

350 444,999,650 445,000,000 (445,000,000) - -

Priorperioderror - - - - (31,889,724) (31,889,724)

Totalchanges 350 444,999,650 445,000,000 (445,000,000) 49,142,846 49,142,846

Balance at April 01, 2010 452 501,837,066 501,837,518 356,954,972 (209,298,280) 649,494,210

Changesinequityfortheyear

Totalcomprehensivelossfortheyear

- - - - (186,967,693) (186,967,693)

Totalchanges - - - - (186,967,693) (186,967,693)

Balance at March 31, 2011 452 501,837,066 501,837,518 356,954,972 (396,265,973) 462,526,517

Note(s) 13 13 13 14 34

65

Statement of Cash Flows figures in rand note(s) restated 2011 restated 2010

cASH flowS froM oPErATing AcTiviTiES

Cashreceiptsfromcustomers 1,557,647,282 1,526,757,475

Cashpaidtosuppliersandemployees (1,668,439,650) (1,384,938,477)

Cashusedinoperations 24 (110,792,368) 141,818,998

Investmentincome 12,593,293 16,280,034

Financecosts (11,596,469) (6,231,190)

Taxpaid 25 (35,893,440) (56,588,547)

net cash (used in)/generated from operating activities (145,688,984) 95,279,295

cASH flowS froM invESTing AcTiviTiES

Purchaseofproperty,plantandequipment 4 (19,012,990) (166,566,473)

Saleofproperty,plantandequipment 4 - 17,243

Purchaseofotherintangibleassets 5 (538,070) (6,121,780)

Loansadvancedtoassociate - (3,659,491)

net cash used in investing activities (19,551,060) (176,330,501)

cASH flowS froM finAncing AcTiviTiES

Proceedsfromlongtermborrowings 172,320,912 -

Repaymentoflongtermborrowings - (40,320,397)

Proceedsfromneutralityadvance - 109,484,423

Net cash from financing activities 172,320,912 69,164,026

Total cash movement for the year 7,080,868 (11,887,180)

Cashandcashequivalentsatbeginningofperiod 67,764,631 79,651,811

cash and cash equivalents at the end of the period 12 74,845,499 67,764,631

66

Accounting policies 1. Presentation of Annual financial Statements

The company’s financial statements have been

prepared in accordance with all applicable

InternationalFinancialReportingStandards(IFRS),

and Interpretations issued by the International

Accounting Standards Board (IASB), the

requirementsoftheSouthAfricanCompaniesAct

andPublicFinanceManagementAct.Asummary

of significant accounting policies is set out in

note1.Themeasurementbasisusedinpreparing

thefinancialstatementsishistoricalcost,except

forinvestmentsintradingsecuritiesandavailable

for sale financial assets, which are stated at

fairvalue,andnon-currentassetsanddisposal

groups held for sale, which are stated at the

loweroftheircarryingamountandfairvalueless

coststosell.

These accounting policies are consistent with

thepreviousperiod.

In terms of Treasury Regulation 28.1.6, the

company is required to present its annual

financial statements in terms of International

Financial Reporting Standards (IFRS), however

theAccountantGeneralhas issuedanapproval

forpublicentitieslistedinSchedule2ofPublic

FinanceManagementActinlinewithsection79of

PFMAtopresenttheannualfinancialstatements

usingIFRS.

1.1 Property, plant and equipment

The cost of an item of property, plant and

equipmentisrecognisedasanassetwhen:

• itisprobablethatfutureeconomicbenefits

associatedwiththeitemwillflowtothe

company;and

• thecostoftheitemcanbemeasured

reliably.

Property,plantandequipmentisinitiallymeasured

atcost.

Cost include direct costs incurred initially to

acquireorconstructan itemofproperty,plant

andequipment,capitalisedborrowingcostsand

costsincurredsubsequentlytoaddortoreplace

part of it. If a replacement cost is recognised

in the carrying amount of an item of property,

plantandequipment,thecarryingamountofthe

replacedpartisderecognised.

Theinitialestimateofthecostsofdismantlingand

removingtheitemandrestoringthesiteonwhich

itislocatedisalsoincludedinthecostofproperty,

plantandequipment,wheretheentityisobligated

toincursuchexpenditure,andwheretheobligation

arisesasaresultofacquiringtheasset.

Major spare parts, which are expected to be

usedformorethanoneyear,arerecognisedas

property,plantandequipment.

Subsequent to initial recognition, major spare

partsaredepreciatedovertheirestimateduseful

livesonthesamebasisasotherproperty,plant

andequipmentitems.

Subsequent costs incurred to maintain major

sparepartsareassessed todetermine if they

qualifyforcapitalisationorwhethertheyshould

beexpensedasrepairsandmaintenancewhen

theyareincurred.

Majorinspectionandoverhaulcosts,whicharea

conditionofcontinuinguseofanitemofproperty,

plantandequipment,ofwhichitisprobablethat

futureeconomicbenefitsareexpectedtoflowto

the entity and related costs can bemeasured

reliably,arecapitalisedaspartofproperty,plant

andequipment.

Anyremainingmajorinspectionoroverhaulcosts

fromthepreviousinspectionarederecognised.

Major inspection and overhaul costs are

depreciated from the date of initial recognition

untilthenextmaintenanceevent.


67

Coststhatdonotqualifyasmajorinspectionand

overhaulcostsareexpensedasincurred.

Property, plant and equipment is carried at

cost less accumulated depreciation and any

impairmentlosses.

Property,plantandequipmentaredepreciatedon

thestraightlinebasisovertheirexpecteduseful

livestotheirestimatedresidualvalue.

Theuseful livesof itemsofproperty,plantand

equipmenthavebeenassessedasfollows:

Asset class Useful life

Plant and machinery 5 years

Furniture and fixtures 3 years

Motor vehicles 5 years

IT equipment 3 years

Leasehold improvements 20 years

Property, plant and equipment

• Airframes 20 years

• Interior seats 8 years

• Engines 20 years

• Engine overhauls 5 years

• Rotables 5 years

• C-Checks 2 years

The residual value, useful life and depreciation

methodofeachassetarereviewedattheendof

eachreportingperiodandadjustedifappropriate.

If expectations differ from previous estimates,

the change is accounted for as a change in

accountingestimate.

When parts of property, plant and equipment

havedifferentuseful lives, theyareaccounted

forasseparateitems(majorcomponents).

Each part of an item of property, plant and

equipmentwithacostthatissignificantinrelation

to the total cost of the item is depreciated

separately.

The depreciation charge for each period is

recognisedinprofitorlossunlessitisincluded

inthecarryingamountofanotherasset.

Thegainorlossarisingfromderecognitionofan

itemofproperty,plantandequipmentisincluded

inprofitorlosswhentheitemisderecognised.

The gain or loss arising from derecognition of

an item of property, plant and equipment is

determined as the difference between the net

disposal proceeds, if any, and the carrying

amountoftheitem.

1.2 Maintenance reserves

Maintenance reserves are payments made to

certain lessors in terms of the aircraft lease

contracts.Thelessorsarecontractuallyobligated

to reimburse the entity for the qualifying

maintenanceexpenditure incurred on aircraft if

theaircrafthasamaintenancereservescredit.

Unutilisedmaintenancereservesattheexpiryof

the leasetermarenotrefundable.Maintenance

reserves are recognised as an asset. The

recoverabilityofthereserveassetisassessed

againsttheentity’sabilitytoclaimagainstfuture

maintenanceevents.

The reimbursement amounts claimed from

lessor inrespectofqualifyingmaintenanceare

transferredtotradeandotherreceivablesuntil

actuallyreceived.

Maintenancecostsclaimedfromthelessorare

onlyrecognisedasassetsiftheworkhasbeen

performedand itappearsreasonablethat the

amounts claimed are recoverable in terms of

the aircraft maintenance contract and based

on the available balance in the maintenance

reserveaccount.

The costs incurred tomaintain the aircraft are

capitalisedorexpensedbasedonthecriteriafor

subsequentcostsundertheproperty,plantand

equipment accounting policy. Capitalised costs

aredepreciatedovertheirestimatedusefullives.

1.3 Maintenance plans (including power by the

hour agreements)

Paymentsmadetoaserviceproviderunderfull

maintenanceprograms(FMP’s)arerecognisedas

anexpensewhenincurred.

68

1.4 right of use of spare parts

Costs incurred relating to the right of use by

SAExpressforcomponentpool,whichallowsit

accesstoserviceablecomponentsandaccess

tothehomebasedstockinordertofulfilitsshort

termrequirementsandreachtechnicaldispatch

reliabilityareexpensedasincurred.

1.5 intangible assets

Anintangibleassetisrecognisedwhen:

• itisprobablethattheexpectedfuture

economicbenefitsthatareattributabletothe

assetwillflowtotheentity;and

• thecostoftheassetcanbemeasured

reliably.

Intangibleassetsareinitiallyrecognisedatcost.

Anintangibleassetarisingfromthedevelopment

phaseofaninternalprojectisrecognisedwhen:

• itistechnicallyfeasibletocompletetheasset

sothatitwillbeavailableforuseorsale.

• thereisanintentiontocompleteanduseor

sellit.

• thereisanabilitytouseorsellit.

• itwillgenerateprobablefutureeconomic

benefits.

• thereareavailabletechnical,financial

andotherresourcestocompletethe

developmentandtouseorselltheasset.

• theexpenditureattributabletotheasset

duringitsdevelopmentcanbemeasured

reliably.

The expenditure capitalised includes the cost

of materials, direct labour, overhead costs

that are directly attributable to preparing the

asset for its intendeduse, andanycapitalised

borrowingcosts.Otherdevelopmentexpenditure

isrecognisedinprofitandlossasincurred.

Intangible assets are carried at cost less

accumulated amortisation and any impairment

losses.

The amortisation period and the amortisation

methodforintangibleassetsarereviewedevery

periodendandanychangesareaccountedfor

asachangeinestimates.

Whentheusefullifeofanintangibleassetthat

wasoriginallyassessedtohavebeindefiniteis

reassessedtohaveafiniteusefullife,thisisan

indicator that the assetmay be impaired. As a

result,theassetistestedforimpairmentandthe

remainingcarryingamountisamortisedoverits

usefullife.

Internally generated brands, mastheads,

publishingtitles,customerlistsanditemssimilar

in substance are not recognised as intangible

assets and the related cost is expensed as

incurred.

Subsequent expenditure is capitalised only

when it increasesthefutureeconomicbenefits

embodiedinthespecificassettowhichitrelates.

Amortisation is provided to write down the

intangible assets, on a straight line basis from

thedatethattheyareavailableforuse,totheir

residualvaluesasfollows:

Asset class useful life

Trademarks - Design cost 5 years

computer software, internally generated

3 years

1.6 investments in associates

An investment in an associate is accounted

for using the equity method and is initially

recognisedatcost.Thecostofthe investment

includestransactioncosts.

Subsequentto initial recognition, the initialcost

of the investment inassociate isadjustedwith

postacquisitionprofitsorlosses,fromthedate

that significant influence commences until the

datethatsignificantinfluenceceases.

Whenthecompany’sshareoflossesexceedsits

interestintheassociate,thecarryingamountof

thatinterest,includinganylongterminvestments,

isreducedtozero,andtherecognitionoffurther

lossesisdiscontinuedexcepttotheextentthat

the company has an obligation or has made

paymentsonbehalfoftheinvestee.


69


70

1.7 financial instruments

Trade and other receivables

Trade receivables and other receivables are

measured at initial recognition at fair value plus

direct transaction costs, if any. Subsequent to

initialrecognition,tradeandotherreceivablesare

accountedforatamortisedcostlessimpairment.

Appropriateallowancesforestimatedirrecoverable

amountsarerecognisedinprofitorlosswhenthere

is objective evidence that the asset is impaired.

Significant financial difficulties of the debtor,

probabilitythatthedebtorwillenterbankruptcyor

financialreorganisation,anddefaultordelinquency

in payments (more than 30 days overdue) are

consideredindicatorsthatthetradereceivableis

impaired. The allowance recognised is measured

as the difference between the asset’s carrying

amountandthepresentvalueofestimatedfuture

cash flows discounted at the effective interest

ratecomputedatinitialrecognition.

The carrying amount of the asset is reduced

throughtheuseofanallowanceaccount,andthe

amountofthelossisrecognisedintheincome

statement within operating expenses. When a

trade receivable is unrecoverable, it is written

off against the allowance account for trade

receivables.Subsequentrecoveriesofamounts

previously written off are credited against

operatingexpensesintheincomestatement.

Trade and other receivables are classified as

loansandreceivables.

Trade and other payables

Tradepayablesareinitiallymeasuredatfairvalue,

and are subsequently measured at amortised

cost,usingtheeffectiveinterestratemethod.

cash and cash equivalents

Cash and cash equivalents comprise cash on

hand and demand deposits, and other short

term highly liquid investments that are readily

convertibletoaknownamountofcashandare

subject to an insignificant risk of changes in

value.Theseareinitiallyrecognisedatfairvalue.

Bank overdraft and borrowings

Bank overdrafts and borrowings are initially

measured at fair value, and are subsequently

measuredatamortisedcost,usingtheeffective

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 company’s accounting

policyforborrowingcosts.

1.8 Tax

current tax assets and liabilities

Currenttaxforcurrentandpriorperiodsis,to

theextentunpaid,recognisedasaliability.Ifthe

amount already paid in respect of current and

priorperiodsexceedstheamountdueforthose

periods,theexcessisrecognisedasanasset.

Current tax liabilities (assets) for the current

and prior periods aremeasured at the amount

expectedtobepaidto(recoveredfrom)thetax

authorities,usingthetaxrates(andtaxlaws)that

havebeenenactedorsubstantivelyenactedby

thebalancesheetdate.

Deferred tax assets and liabilities

A deferred tax liability is recognised for all

taxable temporary differences, except to the

extentthatthedeferredtaxliabilityarisesfrom

theinitialrecognitionofanassetorliabilityina

transaction,whichatthetimeofthetransaction,

affects neither accounting profit nor taxable

profit(taxloss).

A deferred tax asset is recognised for all

deductible temporarydifferences to theextent

that it is probable that taxable profit will be

availableagainstwhichthedeductibletemporary

differencecanbeutilised.Adeferredtaxasset

isnotrecognisedwhenitarisesfromtheinitial

recognitionofanassetorliabilityinatransaction

at the time of the transaction, affects neither

accountingprofitnortaxableprofit(taxloss).


71

Adeferredtaxassetisrecognisedforthecarry

forward of unused tax losses to the extent

that it is probable that future taxable profits

will be available against which the unused tax

lossescanbeutilised.Deferredtaxassetsare

reviewedateachreportingdateandarereduced

to theextent that it isno longerprobablethat

therelatedtaxbenefitwillberealised.

Deferredtaxassetsandliabilitiesaremeasured

atthetaxratesthatareexpectedtoapplytothe

periodwhentheassetisrealisedortheliability

issettled,basedontaxrates(andtaxlaws)that

havebeenenactedorsubstantivelyenactedby

theendofthereportingperiod.

Tax expenses

Current and deferred taxes are recognised as

incomeoranexpenseand included inprofitor

lossfortheperiod,excepttotheextentthatthe

taxarisesfrom:

• atransactionoreventwhichisrecognised,

inthesameoradifferentperiod,inother

comprehensiveincomeordirectlyinequity,or

• abusinesscombination.

Current taxanddeferred taxesare recognised

orcrediteddirectly toequity if the tax relates

to items thatare recognised, in thesameora

differentperiod,directlyinequity.

1.9 leases

A lease is classified as a finance lease if it

transferssubstantiallyalltherisksandrewards

incidental to ownership. A lease is classified

as an operating lease if it does not transfer

substantiallyalltherisksandrewardsincidental

toownership.

operating leases – lessee

Operatingleasepaymentsarerecognisedasan

expenseonastraightlinebasisoverthelease

term.Leaseincentivesreceivedarerecognised

as an integral part of the total expense, over

thetermofthelease.Thedifferencebetween

the amounts recognised as an expense and

thecontractualpaymentsarerecognisedasan

operating leaseassetor liability. The liability is

notdiscounted.

Contingentleasepaymentsareaccountedforas

anexpensewhenthepaymentsareconfirmed.

1.10 inventories

Inventories consist of consumable spares in

stockholdingtosupportTechnicalMaintenance.

Inventories aremeasured at the lower of cost

and net realisable value. Net realisable value

is the estimated selling price in the ordinary

courseofbusinesslesstheestimatedcostsof

completionandsellingexpenses.

The cost of inventories of items that are not

ordinarilyinterchangeableandgoodsorservices

produced and segregated for specific projects

is assigned using specific identification of the

individualcosts.

The cost of inventories is assigned using the

weightedaveragecost formula. Thesamecost

formulaisusedforallinventorieshavingasimilar

natureandusetotheentity.

1.11 non-current assets held for sale

Noncurrentassetsordisposalgroupscomprising

assets and liabilities are classified as held for

sale if their carrying amountwill be recovered

principallythroughasaletransactionratherthan

throughcontinuinguse.Assetsoracomponent

of a disposal group classified as such are

measuredusingtheapplicable IFRS immediately

beforeclassification.Oncereclassified,theassets

(ordisposalgroup)aremeasuredatthelowerof

theircarryingamountfairvaluelesscoststosell

atthedatewhenit is initiallyclassifiedasheld

forsale.

A non-current asset is not depreciated or

amortisedonce it isclassifiedasheld forsale,

orwhileit ispartofadisposalgroupclassified

asheldforsale. Inaddition,equityaccounting

of equity accounted investees ceases once

classifiedasheldforsale.

72

Anyimpairmentlossonadisposalgroupisfirst

allocatedtogoodwill,andthentotheremaining

assetsandliabilitiesonapro-ratabasis,except

thatnolossisallocatedtoinventories,financial

assets,deferred taxassets,employeebenefits,

which continue to bemeasured in accordance

withtheapplicableIFRSs.

Impairment losses on initial classification as

heldforsaleassetsarerecognisedintheprofit

and loss. Gains and losses on subsequent

measurement are included in theprofit or loss

fortheperiod.

1.12 impairment of assets

The company assesses at each end of the

reportingperiodwhetherthereisanyindication

that an asset may be impaired. If any such

indication exists, the company estimates the

recoverableamountoftheasset.

Irrespectiveofwhetherthereisanyindicationof

impairment,thecompanyalso:

• testsintangibleassetswithanindefinite

usefullifeorintangibleassetsnotyet

availableforuseforimpairmentannually

bycomparingitscarryingamountwithits

recoverableamount.Thisimpairmenttestis

performedduringtheannualperiodandat

thesametimeeveryperiod.

• testsgoodwillacquiredinabusiness

combinationforimpairmentannually.

If there is any indication that an assetmay be

impaired,therecoverableamountisestimatedfor

theindividualasset.Ifitisnotpossibletoestimate

the recoverable amount of the individual asset,

the recoverable amount of the cashgenerating

unittowhichtheassetbelongsisdetermined.

Therecoverableamountofanassetoracash

generatingunitisthehigherofitsfairvalueless

coststosellanditsvalueinuse.

Inassessingvalue inuse, theestimatedfuture

cashflowsarediscountedtotheirpresentvalue

usingapre-taxdiscountratethatreflectscurrent

marketassessmentsoftimevalueofmoneyand

risksspecifictotheassetorCGU.

If the recoverableamountofanassetorcash

generatingunitislessthanitscarryingamount,

the carrying amount of the asset or CGU is

reducedtoitsrecoverableamount.Thatreduction

isanimpairmentloss.

Animpairmentlossofassetscarriedatcostless

any accumulated depreciation or amortisation

is recognised immediately in profit or loss.

ImpairmentlossesrecognisedinrespectofCGUs

areallocatedfirsttoreducegoodwill(ifany),and

tootherassets intheCGUonapro-ratabasis.

AnyimpairmentlossofarevaluedassetorCGU

istreatedasarevaluationdecrease,

• first,toreducethecarryingamountofany

goodwillallocatedtothecashgeneratingunit

and

• then,totheotherassetsoftheunit,prorata

onthebasisofthecarryingamountofeach

assetintheunit.

A reversal of an impairment loss of assets

carriedatcostlessaccumulateddepreciationor

amortisation other than goodwill is recognised

immediately inprofitor loss.Anyreversalofan

impairmentlossofarevaluedassetistreatedas

arevaluationincrease.

Animpairmentlossisreversediftherehasbeen

a change in the estimates used to determine

therecoverableamountonlytotheextentthat

the assets’ carrying amount does not exceed

the carrying amount that would have been

determined,netofdepreciationoramortisation,if

noimpairmentlosshadbeenrecognised.

1.13 Share capital and reserves

An equity instrument is any contract that

evidencesaresidualinterestintheassetsofan

entityafterdeductingallofitsliabilities.

Ordinary shares are classified as equity.

Incremental costs directly attributable to the


73

issue of ordinary shares are recognised as a

deductionfromequity,netofanytaxeffects.

Shareholders’ loans are classified as equity if

theyareredeemable in the formofconversion

to equity instruments or redeemable at the

company’soption.

Shareholders’ loansareclassifiedasa financial

liabilityiftheyareredeemableonaspecificdate

orattheoptionoftheshareholder.

1.14 Provisions and contingencies

Provisionsarerecognisedwhen:

• thecompanyhasapresentlegalor

constructiveobligationasaresultofapast

event;

• itisprobablethatanoutflowofresources

embodyingeconomicbenefitswillberequired

tosettletheobligation;and

• areliableestimatecanbemadeofthe

obligation.

Theamountofaprovisionisthepresentvalueof

thecashflowsexpectedtoberequiredtosettle

theobligation.Theunwindingofthediscountis

recognisedasfinancecost.

Provisionsarenotrecognisedforfutureoperating

costsorlosses.

Ifanentityhasacontract that isonerous, the

present obligation under the contract shall be

recognised and measured as a provision. A

contract is regarded as onerous when the

expectedbenefitstobederivedbythecompany

fromacontractarelowerthantheunavoidable

costofmeetingitsobligations.Theprovisionis

measuredat thepresentvalueof the lowerof

the expected cost of terminating the contract

andtheexpectednetcostofcontinuingwithit.

Before aprovision isestablished, thecompany

recognises any impairment loss on the assets

associatedwiththecontract.

1.15 revenue

Revenue is measured at the fair value of the

consideration received or receivable and

represents the amounts receivable for goods

andservicesprovided in thenormal courseof

business, net of trade discounts and volume

rebates,andvalueaddedtax.Revenueconsists

ofpassengerairlinerevenue,cargo, thirdparty

maintenancefromtechnicalservices,andrelease

ofunutilisedairtickets.

Revenue fromservices rendered is recognised

in profit or loss in proportion to the stage of

completion of the transaction at the reporting

date,beingtotheextentthatthecompanyhas

deliveredtherelatedservice.

Airticketsthatremainunutilisedaftera6months

periodarereleasedtorevenue.Theestimateis

basedonhistoricalstatisticsanddatathattakes

intoaccountthetermsandconditionsforvarious

ticketstypes.

1.16 finance costs

Finance costs comprise interest expense on

borrowings and unwinding of the discount on

provisions.

Borrowingcoststhataredirectlyattributableto

theacquisition,constructionorproductionofa

qualifyingassetarerecognisedinprofitorloss

using the effective interest method. All other

borrowingcostsarerecognisedasanexpense

intheperiodinwhichtheyareincurred.

1.17 Translation of foreign currencies

foreign currency transactions

A foreign currency transaction is recorded, on

initial recognition in Rands, by applying to the

foreigncurrencyamountthespotexchangerate

betweenthefunctionalcurrencyandtheforeign

currencyatthedateofthetransaction.

74

07 FinAnCiAl StAtEmEntS

1.17 Translation of foreign currencies (cont.)

Attheendofthereportingperiod:

• foreigncurrencymonetaryitemsare

translatedusingtheclosingrate;

• non-monetaryitemsthataremeasuredin

termsofhistoricalcostinaforeigncurrency

aretranslatedusingtheexchangerateatthe

dateofthetransaction;and

• non-monetaryitemsthataremeasuredatfair

valueinaforeigncurrencyaretranslated

usingtheexchangeratesatthedatewhen

thefairvaluewasdetermined.

Exchangedifferencesarisingonthesettlement

of monetary items or on translating monetary

itemsatratesdifferentfromthoseatwhichthey

weretranslatedon initialrecognitionduringthe

periodorinpreviousannualfinancialstatements

arerecognisedinprofitorlossintheperiodin

whichtheyarise.

Cashflowsarisingfromtransactionsinaforeign

currencyarerecorded inRandsbyapplyingto

theforeigncurrencyamounttheexchangerate

between theRandand the foreigncurrencyat

thedateofthecashflow.

1.18 financial guarantee contracts

Financialguaranteesareinitiallymeasuredatfair

value. Financial guarantees are subsequently

measured at the higher of the amount

determinedinaccordancewithIAS37:Provisions,

Contingent Liabilities and Contingent Assets

and the amount initially recognised less, when

appropriate, cumulative amortisation recognised

in accordance with IAS 18: Revenue. Financial

guaranteecontractsarederecognisedwhenSA

Express’contractualobligationsaredischarged

orcancelledorexpire.

2. APPlicATion of nEw AnD rEviSED inTErnA-

TionAl finAnciAl rEPorTing STAnDArDS (ifrS)


preparedinaccordancewithCompaniesAct,Public

Finance Management Act, International Financial

Reporting Standards (IFRS) and other mandated

legislationorguidelinesforstateownedentities

onabasisconsistentwiththeprioryearexcept

fortheadoptionofthefollowingneworrevised

standards.

3. nEw STAnDArDS AnD inTErPrETATionS

3.1 Standards and interpretations not yet

effective

The Directors have reviewed all standards and

interpretationsissuedbutnotyeteffectiveatthe

authorisationofthefinancialstatementsandhave

concludedthattheabovestandardswillhavean

impactontheentitiesfuturefinancialstatements.

Thecompanyhaschosennottoearlyadoptthe

following standards and interpretations, which

havebeenpublishedandaremandatoryforthe

company’s accounting periods beginning on or

afterApril01,2011orlaterperiods:

Amendment to iAS 1 Presentation of financial

Statements

The amendment to IAS 1will be adopted by SA

ExpressAirwaysforthefirsttimeforitsfinancial

reportingperiodending31March2014.

Thecompanywillpresent those itemsofother

comprehensive incomethatmaybereclassified

to profit or loss in the future separately from

thosethatwouldneverbereclassifiedtoprofit

orloss.Therelatedtaxeffectsforthetwosub

categorieswillbeshownseparately.

This is a change in presentation andwill have

notes to the Annual Financial Statements

75

noimpactontherecognitionormeasurementof

itemsinthefinancialstatements.

This amendment will be applied retrospectively

andthecomparativeinformationwillberestated.

iAS 24 (revised) related Party Disclosures

IAS24 (revised)will beadoptedbySAExpress

forthefirsttime in itsfinancialreportingperiod

ending31March2012.Thestandardwillbeapplied

retrospectively.

IAS 24 (revised) addresses the disclosure

requirements of related parties, with the main

changes relating to the definition of a related

party and the disclosure requirement by

governmentrelatedentities.

The change in the definition of a related party

may result in a number of new related party

relationshipsbeingidentified.

SA Express will have to provide the following

disclosures; name of the government and

nature of the relationship, nature and amount

ofeachindividuallysignificanttransactionanda

qualitativeorquantitativeindicationoftheextent

ofothertransactionthatarecollectively,butnot

individuallysignificant.

Amendments to IAS 19 Employee Benefits:

Defined benefit plans

TheamendmentstoIAS19willbeadoptedbySA

ExpressAirwaysforthefirsttimeforitsfinancial

reportingperiodending31March2014.

In terms of the amendments, the following key

changeswillhaveanimpactonthecompany:

• Actuarial gains and losses are recognised

immediately in other comprehensive income.

The corridor method and the recognition of

actuarialgainsandlossesinprofitorlossis

nolongerpermitted.

• Pastservicecostsaswellasgainsandlosses

oncurtailments/settlementsarerecognisedin

profitorloss.

• Expectedreturnsonplanassetsarecalculated

based on the rates used to discount the

definedbenefitobligation.

• The definitions of short term andother long

termemployeebenefitshavebeen amended

andthedistinctionbetweenthetwodepends

onwhentheentityexpectsthebenefittobe

settled.

SAExpressAirwayswillnotbeimpactedbythe

amendmentsrelatingtodefinedbenefitsplan.

Management will classify employee benefits

between short term and long term benefits

depending on their expectations regarding the

paymentstoemployees.

ifrS 9 (2009) financial instruments

IFRS 9 will be adopted by SA Express Airways

forthefirsttimeforitsfinancialreportingperiod


retrospectively,subjecttotransitionalprovisions.

IFRS 9 addresses the initial measurement and

classificationoffinancialassetsandwillreplace

therelevantsectionsofIAS39.

Under IFRS 9 there are two options in respect

of classification of financial assets, namely,

financialassetsmeasuredatamortisedcostor

at fair value. Financial assets aremeasured at

amortisedcostwhen thebusinessmodel is to

holdassetsinordertocollectcontractualcash

flowsandwhentheygiverisetocashflowsthat

are solely payments of principal and interest

on the principal outstanding. All other financial

assets are measured at fair value. Embedded

derivativesarenolongerseparatedfromhybrid

contractsthathaveafinancialassethost.

IFRS 9 (2009) may change the classification of

financialassetsfromamortisedcostmeasurement

tofairvaluedependingonthecharacteristicsof

therelevantreceivable.

76

07 FinAnCiAl StAtEmEntS (notes to the Annual Financial Statements continued)

3. nEw STAnDArDS AnD inTErPrETATionS (cont.)

ifrS 9 (2010) financial instruments

IFRS 9 (2010) will be adopted by SA Express

Airwaysforthefirsttimeforitsfinancialreporting

period ending 31 March 2016. The standard will

beappliedretrospectively,subjecttotransitional

provisions.

IFRS 9 (2010) addresses the measurement and

classificationoffinancialliabilitiesandwillreplace

therelevantsectionsofIAS39.

Under IFRS 9 (2010), the classification and

measurement requirementsof financial liabilities

are the same as per IAS 39, except for the

followingtwoaspects:

• fairvaluechangesforfinancialliabilities(other

thanfinancialguaranteesandloancommitments)

designatedatfairvaluethroughprofitorloss,

thatareattributabletothechangesinthecredit

risk of the liabilitywill bepresented inother

comprehensive income (OCI). The remaining

amountofthefairvaluechangeisrecognised

in profit or loss. However, if this requirement

createsorenlargesanaccountingmismatchin

profitorloss,thenthewholefairvaluechange

ispresentedonprofitorloss.Thedetermination

astowhethersuchpresentationwouldcreate

or enlarge an accounting mismatch is made

on initial recognitionand isnotsubsequently

reassessed.

• UnderIFRS9(2010)derivativeliabilitiesthatare

linkedtoandmustbesettledbydeliveryofan

unquotedequity instrumentwhosefairvalue

cannotbereliablymeasured,aremeasuredat

fairvalue.

IFRS 9 (2010) incorporates, the guidance in IAS

39 dealing with fair value measurement and

accounting for derivatives embedded in a host

contractthatisnotafinancialasset,aswellas

the requirements of IFRIC 9 Reassessment of

EmbeddedDerivatives.

IFRS 9 (2010) is not expected to change the

manner in which the current financial liabilities

areaccountedandmeasured.

ifrS 12 Disclosure of interest in other Entities

IFRS 12will be adopted by SA Express Airways


ending31March2014.

IFRS 12 combines, in a single standard, the

disclosure requirements for subsidiaries,

associates and joint arrangements, as well as

unconsolidatedstructuredentities.

The required disclosures aim to provide

informationtoenableusertoevaluate:

• The nature of, and risks associatedwith, an

entity’sinterestsinotherentities,and

• Theeffectsofthoseinterestsontheentity’s

financial position, financial performance and

cashflows.

Theadoptionofthenewstandardmayincrease

thelevelofdisclosureprovidedfortheentity’s

interests in any existing structured entities or

associates.

ifrS 13 fair value Measurement

IFRS 13will be adopted by SA Express Airways



prospectively and comparatives will not be

restated.

IFRS 13 introducesasinglesourceofguidance

onfairvaluemeasurementforbothfinancialand

nonfinancialassetsandliabilitiesbydefiningfair

value,establishingaframeworkformeasuringfair

valueandsettingoutdisclosuresrequirements

forfairvaluemeasurements.Thekeyprinciples

inIFRS13areasfollows:

• Fairvalueisanexitprice;

• Measurement considers characteristics of

the asset or liability and not entity specific

characteristics;

• Measurement assumes a transaction in the

entity’s principle (or most advantageous)

marketbetweenmarketparticipants;

77

4. ProPErTy, PlAnT AnD EQuiPMEnT

figures in rand restated 2011 restated 2010

cost Accumulated depreciation

and impairment

loss

carrying value

cost Accumulated depreciation

and impairment

loss

carrying value

Leaseholdproperty –Aircraft

16,404,770 (11,731,152) 4,673,618 12,547,511 (7,148,106) 5,399,405

Plantandmachinery 25,908,372 (22,946,753) 2,961,619 25,417,238 (20,315,701) 5,101,537

Motorvehicles 3,932,881 (2,985,609) 947,272 3,303,402 (2,813,896) 489,506

Rotables - - - 167,058,532 (5,012,857) 162,045,675

Leaseholdimprovements 672,172 (514,100) 158,072 672,172 (434,974) 237,198

Aircraft 373,408,627 (236,806,672) 136,601,955 1,357,365,371 (1,031,298,283) 326,067,088

Containers 5,650 (5,113) 537 5,650 (5,022) 628

CapitalWorkinProgress - - - 10,219,592 - 10,219,592

Total 420,332,472 (274,989,399) 145,343,073 1,576,589,468 (1,067,028,839) 509,560,629

reconciliation of property, plant and equipment – 2011

opening balance

Additions Classified as held for sale

Transfers, other

changes

Depreciation impairment loss

Total

Leaseholdimprovements–Aircraft

5,399,405 - - 3,857,258 (4,583,045) - 4,673,618

Plantandmachinery 5,101,537 2,400 - 488,734 (2,631,052) - 2,961,619

Motorvehicles 489,506 - - 629,479 (171,713) - 947,272

Rotables 162,045,675 - (131,344,422) 5,365,159 (36,066,412) - -

Leaseholdimprovements 237,198 - - - (79,126) - 158,072

Aircraft 326,067,088 - (110,352,053) 18,286,403 (36,764,216) (60,635,267) 136,601,955

Containers 628 - - - (91) - 537

CapitalWorkinProgress 10,219,592 19,010,590 - (28,627,033) - (603,149) -

509,560,629 19,012,990 (241,696,475) - (80,295,655) (61,238,416) 145,343,073

• Priceisnotadjustedfortransactioncosts;

• Measurement maximises the use of relevant

observable inputs andminimises the use of

unobservableinputs;and

• Thethreelevelfairvaluehierarchyisextended

toallfairvaluemeasurements.

IFRS 13 may have an impact on SA Express to

theextent that fair value isused to recognise

financial instruments initially and provision of

financial instrument disclosures and any other

situation where fair value is used to measure

theamountsincludedinthefinancialstatements.

improvements to ifrSs 2010

Management will assess the impact of each

improvementpriortoadoption.

78


4. ProPErTy, PlAnT AnD EQuiPMEnT (cont.)

reconciliation of property, plant and equipment – 2010

opening balance

Additions Disposals opening balance

of inven-tory

reclassi-fied

Transfers revalua-tion ad-

justment

Deprecia-tion

impairment loss

Total

Leaseholdimprovements–Aircraft

3,732,298 - - - 6,143,474 - (4,476,367) - 5,399,405

Plantandmachinery

7,631,234 - (18,062) - 1,594,849 - (4,106,484) - 5,101,537

Motorvehicles 651,004 - (37,359) - - - (124,139) - 489,506

Rotables - - - - 120,269,601 46,788,931 (5,012,857) - 162,045,675

Inventoryreclassifiedasrotables

- 100,157,792 - 20,111,809 (120,269,601) - - - -

Leaseholdimprovements

316,324 - - - - - (79,126) - 237,198

Aircraft 383,618,054 - - - 73,381,662 - (59,517,972) (71,414,656) 326,067,088

Containers 719 - - - - - (91) - 628

Capitalworkinprogress

37,465,250 66,408,681 - - (81,119,985) - - (12,534,354) 10,219,592

433,414,883 166,566,473 (55,421) 20,111,809 - 46,788,931 (73,317,036) (83,949,010) 509,560,629

5. inTAngiBlE ASSETS

figures in rand restated 2011 restated 2010

cost Accumu-lated am-ortisation

carrying value

cost Accumu-lated amor-

tisation

carrying value

Computerpackages 2,281,375 (844,814) 1,436,561 1,981,911 (151,086) 1,830,825

Computerpackagesunderdevelopment 6,725,090 - 6,725,090 6,486,484 - 6,486,484

Uniformdesign 850,000 (255,000) 595,000 850,000 (85,000) 765,000

Total 9,856,465 (1,099,814) 8,756,651 9,318,395 (236,086) 9,082,309

Reconciliation of intangible assets - 2011

opening balance Additions Amortisation Total

Computerpackages 1,830,825 299,464 (693,728) 1,436,561

Intangibleassetsunderdevelopment 6,486,484 238,606 - 6,725,090

UniformDesign 765,000 - (170,000) 595,000

9,082,309 538,070 (863,728) 8,756,651

Reconciliation of intangible assets - 2010

opening balance Additions Amortisation Total

Computerpackages - 1,981,912 (151,087) 1,830,825

Intangibleassetsunderdevelopment 3,196,616 3,289,868 - 6,486,484

UniformDesign - 850,000 (85,000) 765,000

3,196,616 6,121,780 (236,087) 9,082,309

79

6. invESTMEnTS in ASSociATES

Nameofcompany % holding 2011 % holding 2010

CongoExpressSprl% 49% 49%

SAExpressacquireda49% investment inCongoExpressSprlat its inceptionduring the2010 financialyear.Congo

ExpressfinancialyearendisDecember31.ThecarryingamountsofAssociatesareshownnetofimpairmentlosses

limitedtothecostofinvestment.

Summary of groups interest in associate

2011 2010

Total assets 231,928 -

Total liabilities 19,323,235 -

revenue 15,547,392 -

loss 19,091,307 -

Associates with different reporting dates

ThereportingdateofCongoExpressSprlisDecember31.Thiswasthereportingdateestablishedwhenthecompany

wasincorporated,andachangeofreportingdateisnotpermitedinDemocraticRepublicofCongo.forthepurposeof

applyingtheequitymethodofaccounting,thefinancialstatementsofCOXfortheyearendedDecember31,2010have

beenused,andappropriateadjustmentshavebeenmadefortheeffectsofsignificanttransactionsbetweenthatdate

andMarch31,2011.

unrecognised share of losses in associate

Thecompany’scostofinvestmentinCongoExpressSprlamountstoR18120andthecompanyhasnoobligationforany

lossesoftheassociate.SAExpressshareofunrecognisedlossessincetheinceptionofCongoExpressSprlamount

toR19,091,307.

7. loAnS To ASSociATE

2011 2010

congo Express Sprl (cox) 3,659,491 3,659,491

3,659,491 3,659,491

impairment of loan (3,659,491) –

– 3,659,491

The loan represents pre-incorporation expenses paid by SA Express on behalf of Congo Express Sprl.

The repayment termswas 24months at an interest rate of prime +5%. Congo Expresswas unable tomake any

repaymenttowardstheloan.Asaresult,SAExpressimpairedtheentireamountduring2011financialyear.

TheBoardof SAExpressAirwayspasseda resolution in November2010 todisposeof theshareholdingof Congo

ExpressSprl.

80


8. oTHEr finAnciAl ASSETS

figures in rand 2011 2010

HElD To MATuriTy

StandardBankInvestment Thisinvestmentisheldforafixedtermof5years,atarevolvingfixedrateofJIBAR+.99basispoints.

64,642,240 60,069,770

non-currEnT ASSETS

Heldtomaturity 64,642,240 60,069,770

Thecompanyhasnotreclassifiedanyfinancialassetsfromcostoramortisedcosttofairvalue,orfrom

fairvaluetocostoramortisedcostduringthecurrentorprioryear.

Thishasbeencededasapre-conditiontotheunbundlingtransaction.

9. DEfErrED TAx

reconciliation of deferred tax (liability)/asset

Atthebeginningoftheyear (13,736,726) 14,015,318

Temporarydifferences 13,736,726 (27,752,044)

(13,736,726)

unrecognised deferred tax asset

Duetolossesthatarecurrentlybeingincurrednodeferredtaxassethasbeenrecognised.

10. invEnToriES

Inventories 86,153,505 60,850,071

86,153,505 60,850,071

Inventories(writedown) (10,661,844) -

75,491,661 60,850,071

11. TrADE AnD oTHEr rEcEivABlES

Employeecostsinadvance 5,044,168 6,803,144 8,982,899

Deposits 12,924,532 21,250,202 29,383,518

Prepayments 60,072,143 35,530,597 13,120,905

Tradereceivables 310,206,158 250,426,537 278,347,168

ValueAddedTax 31,649,800 27,676,130 36,439,242

419,896,801 341,686,610 366,273,732

Trade and other receivables past due but not impaired

Thereceivablesdisclosedaboveincludeamountsthatarepastdueattheendofthereportingperiodforwhichthecompanyhasnotrecognisedanimpairmentallowancebecausetherehasnotbeenasignificantchangeincreditquality,theamountsarestillconsideredrecoverable.

Theageingofamountspastduebutnotimpairedisasfollows:

1monthpastdue 2,745,307 -

3monthspastdue 5,041,826 2,170,034

Trade and other receivables impaired

Noimpairmentallowancewasmadein2011withregardstobaddebts.AnamountofR1,271,171wasprovidedforin2010.

81

13. SHArE cAPiTAl

Authorised

1000OrdinarysharesofRleach 1,000 1,000

reconciliation of the number of shares issued:

Reportedatthebeginningofthefinancialyear 452 102

Subscriptionofshares—ordinaryshares - 350

452 452

issued

452OrdinarySharesofR1each 452 452

Sharepremium 501,837,066 501,837,066

501,837,518 501,837,518

14. SHArEHolDEr convErTiBlE loAn

Capitalreservescompriseinstrumentssuchasshareholdersloans(DepartmentofPublicEnterprises),where

thecompanyhasnocontractualobligationtodelivercashoranotherfinancialassettotheshareholderand

theinstrumentwillormaybesettledintheissuer’sownequityinstruments,ifevercalledupon.

Shareholder’s loan 356,954,972 356,954,972

15. long-TErM BorrowingS

Held at amortised cost

NedbankLtd - 27,679,089

Thisloanrepresentsaconditionalsaleagreement

repayableinquarterlyinstalmentsatanaverageof

R14mandbearinginterestatanaveragerateof13.55%

perannum.

NedbankLtd 200,000,000 -

Thisloanrepresentsarevolvingcreditfacility

repayablein5yearstimeatrateof8.65%.The

interestonloanispayablequarterly.

200,000,000 27,679,089

non-current liabilities

Atamortisedcost 200,000,000 -

current liabilities

Atamortisedcost 200,000,000 27,679,089

12. cASH AnD cASH EQuivAlEnTS

Cashandcashequivalentsconsistof:


Cashonhand 60635 70639

Short-term 88280326 74248163

88 341 961 74 318 802

Bank overdraft 13 496 062 6 554 170

Currentassets 88341961 74318802

Currentliabilities 13496062 6554170

82

16. nEuTrAliTy ADvAncE/uTl ADvAncE

Thedeterminationof thepre-payment toSAExpressAirwaysareadjustedquarterly toprovidecash

neutralitytobothSouthAfricanAirwaysandSAExpressAirwaystocompensatethecompanyfortheloss

ofinterestcausedbythe45daysdelayinreceivingrevenue.

SouthAfricanAirwayscanrequestrepaymentofthisbalancependingunfairconditions.Ifthisisthecase,

therepaymentswillberequiredtobein12equalinstallments.Basedonthisinformationtheneutrality

advancehasbeenreclassifiedtocurrentliabilities.


Description

OpeningBalance 177,266,915 177,266,915

17. TrADE AnD oTHEr PAyABlES

Accruedinterest 1,394,130 233,162 3,731,916

Accruedleavepay 13,938,517 14,346,672 9,415,875

Accruedlongtermincentives 8,467,948 8,989,449 13,828,000

Accruedsalariesandwages 7,898,714 55,635,596 32,272,813

Passengerservicecharge 3,717,994 - -

Workmenscompensation 1,720,616 1,286,674 964,050

Tradepayables 246,223,036 160,593,565 243,070,137

283,360,955 241,085,118 303,282,791

18. rEvEnuE

FuelLevy 235,822,740 261,893,163

Passenger 1,338,579,968 1,244,897,622

Cargo 12,792,417 13,004,507

Releaseofunutilisedairtrafficliabilitytorevenue 56,377,167 54,758,843

1,643,572,292 1,574,554,135

19. oPErATing (loSS) ProfiT

Operating (loss)/profit was determined taking into account the items listed below:

• Premises 10,914,001 7,437,195

• Motorvehicles 680,094 318,691

• Equipment 5,886,934 5,436,325

• Aircraft 135,095,654 129,087,184

152,576,683 142,279,395

Amortisationonintangibleassets 863,729 236,086

Depreciationonproperty,plantandequipment 80,295,659 73,316,837

Employeecosts 382,939,432 367,233,984

ImpairmentofshareholdersloaninCOX 3,659,491 -

ImpairmentofCOXtradereceivables 35,910,649 -

ImpairmentofPPE 61,238,415 84,644,064

20. invESTMEnT incoME

interest revenue

Bank 12,593,293 16,280,034


83

21. TAxATion


Major components of the tax income

current

Localincometax—Currentperiod - 80,815,045

Deferred

Deferredtax—Currentyear (13,736,726) (53,063,002)

Deferredtax—Prioryearunderprovision - -

(13,736,726) (53,063,002)

(13,736,726) 27,752,043

reconciliation of the tax expense

Reconciliationbetweenapplicabletaxrateandeffectivetaxrate.

Applicabletaxrate 28.00% 28.00%

Non-deductibleexpenses (4.00)% -%

Deferredtaxassetnotraised (19.00)% -%

Other -% (9.00)%

5.00% 19.00%

22. AuDiTorS’ rEMunErATion

Externalauditors 1,933,494 2,227,851

Internalauditors 706,320 744,959

2,639,814 2,972,810

23. oPErATing lEASE coMMiTMEnTS

Operatingleaserequirementsforthebusinessrelatestotheleasesfromaircraftlessors.Theseleases

aredollardenominatedandwereconvertedusingyearendrateofR7.31:1USD.,

Details of commitments

Payablewithin1year 94,983,012 153,829,467

Payablewithin2–5years 100,318,701 367,008,760

Over5years 440,804,822 -

636,106,535 520,838,227

24. cASH uSED in oPErATionS

Lossbeforetaxation (200,686,299) 108,784,613

Adjustments for:

Depreciationandamortisation 81,159,388 73,552,923

ImpairmentofPPE 61,238,415 84,644,064

LossonsaleofPPE - (113,697)

Interestreceived (12,593,293) (16,280,034)

Financecosts 11,596,469 6,231,190

Fairvalueadjustmentsforeignexchange (1,371,201) 8,347,633)

Consumableanddepositwritedown 10,679,367 -

Othernon-cashitems 440,106 (39,285,177)

Reclassificationadjustment - (46,788,931)

changes in working capital:

Inventories (25,303,434) 17,032,233

Tradeandotherreceivables (78,227,723) 24,587,120

Tradeandotherpayables 42,275,837 (62,197,673)

(110,792,368) (56,588,547)

84

25. TAx PAiD


Balanceatthebeginningoftheyear (56,588,547) -

Balanceattheendoftheyear (92,481,987) (56,588,547)

(35,893,440) (56,588,547)

26. conTingEnciES

SAExpress(Proprietary)LimitedhastakenoutthefollowingguaranteeswithFirstNationalBankinordertoprovideassuranceshouldtheydefaultwithregardstocertaintermswithinthecontractssigned:

AirTrafficandNavigationServicesCompanyLimited R9950000

AirportCompanyofSouthAfrica R110822.25

CommissionerforCustomandExcise R275000

RichardBayAirportCompany(Proprietary)Limited R1700516.13

CanadianRegionalAircraftFinanceTransactionNo.1Limited R6164121.60

GECapitalAviationServicesLimited R6762646.80

HorizonAirIndustriesIncorporated R7987215.60

MaerskAviationHolding R3373824

SAExpress(Proprietary)LimitedhastakenoutthefollowingguaranteeswithNedbankLimitedinordertoprovideassuranceshouldtheydefaultwithregardstocertaintermswithinthecontractssigned:

Q400Leasing(Proprietary)Limited R10500000

LufthansaTechnik R1666415.60

27. rElATED PArTiES

related party transactions

Purchases from related parties

StateControledEntities 509,118,964 579,971,468

Sales to related parties

StateControlledEntities 34,872,561 20,460,260

DepartmentsofGovernment 40,800,945 26,453,485

Shareholder - 36,240

compensation to key management - 2011 Short-term employee

benefits

Post-employment

benefits

long-term benefits Total

AllanbyD–GMOperations 2,014,332 171,440 351,339 2,537,111

GreenJ–CIO 1,930,475 64,175 398,227 2,392,877

HermanusWP–GMHumanCapital 1,660,460 116,814 238,079 2,015,353

MalolaPhiriA–GMRegionalExpansion 2,035,856 102,991 547,858 2,686,705

NtshangaI–GMStrategy 1,039,008 57,071 500,029 1,596,108

SimelaneJ–GMCommercial 1,739,990 62,278 347,322 2,149,590

VahedR–GMTechnical 1,864,909 124,460 363,258 2,352,627

JantjiesJ–GMCustomerServicesandMarketing 1,465,907 53,517 255,988 1,775,412

MashabaP–GMRiskandCompliance 1,283,724 69,530 154,836 1,508,090

15,034,661 822,276 3,156,936 19,013,873


85

compensation to key management - 2010 Short-term employee

benefits

Post-employment

benefits

long-term benefits Total

AllanbyD–GMOperations 1,624,643 122,903 326,980 2,074,526

GreenJ–ChiefInformationOfficer 1,564,848 52,760 393,513 2,011,121

HermanusWP–GMHumanCapital 1,210,596 95,725 - 1,306,321

MalolaPhiriA–GMRegionalExpansion 1,871,188 93,581 509,652 2,474,421

NtshangaI–GMStrategy 1,768,685 124,059 415,800 2,308,544

SimelaneJ–GMCommercial 1,408,380 48,399 277,875 1,734,654

VahedR–GMTechnical 1,474,828 106,364 294,553 1,875,745

10,923,168 643,791 2,218,373 13,785,332

28. DirEcTorS’ EMoluMEnTS

Short-term benefits

long-term benefits

Post-employment

benefitsTotal

Executive

2011

INtshanga 1,156,782 500,029 111,538 1,768,349

PSMzimela 1,886,267 - - 1,886,267

SSZulu 1,973,224 786,504 111,288 2,871,016

5,016,273 1,286,533 222,826 6,525,632

2010

SPMzimela 3,959,995 1,357,899 262,836 5,580,730

55Zulu 2,332,846 707,961 157,252 3,198,059

6,292,841 2,065,860 420,088 8,778,789

non-Executive

2011 Emoluments Total

BFMohale 161,881 161,881

BSsamula 214,386 214,386

CChristodoulou 283,484 283,484

EBunyenyezi 190,598 190,598

GVanHeerden 190,598 190,598

LGBoyle 669,440 669,440

NAMadalane 105,331 105,331

SNicolaou 95,298 95,298

VWCuba 95,299 95,299

LJLedwaba 105,333 105,333

VMatsoso 249,823 249,823

2,361,471 2,361,471

2010 Emoluments Total

BFMohale 215,842 215,842

BSsamula 190,596 190,596

CChristodoulou 283,483 283,483

EBunyenyezi 147,823 147,823

GVanHeerden 190,596 190,596

LGBoyle 669,440 669,440

MVuso 249,821 249,821

NAMadalane 210,663 210,663

SNicolaou 190,596 190,596

2,348,860 2,348,860

86


29. riSk MAnAgEMEnT

capital risk management

The company’s objectives when managing

capitalaretosafeguardthecompany’sabilityto

continueasagoingconcerninordertoprovide

returns for shareholder and benefits for other

stakeholders and tomaintain an optimal capital

structuretoreducethecostofcapital.

Thecapitalstructureofthecompanyconsistsof

debt, which includes the borrowings disclosed

in note 7 and 15, cash and cash equivalents

disclosedinnote12,andequityasdisclosedin

thestatementoffinancialposition.

Inordertomaintainoradjustthecapitalstructure,

thecompanymayadjusttheamountofdividends

paidtoshareholder,returncapitaltoshareholder,

issuenewsharesorsellassetstoreducedebt.

Consistent with others in the industry, the

company monitors capital on the basis of the

gearingratio.

Thisratioiscalculatedasnetdebtdividedbytotal

capital.Netdebtiscalculatedastotalborrowings

(including ‘current and non-current borrowings’

asshown inthestatementoffinancialposition)

lesscashandcashequivalents.Totalcapital is

calculatedas‘equity’asshowninthestatement

offinancialpositionplusnetdebt.

Thecompany’sstrategyistomaintainagearing

ratioof1:1.

Therehavebeennochangestowhattheentity

manages as capital, the strategy for capital

maintenance or externally imposed capital

requirementsfromthepreviousyear.

financial risk management

The company’s activities expose it to a variety

offinancialrisks:marketrisk(includingcurrency

risk,commodity risk, interest rate risk and price

risk),creditriskandliquidityrisk.

Thecompany’soverallriskmanagementprogram

focuses on the unpredictability of financial

marketsandseekstominimisepotentialadverse

effectsonthecompany’sfinancialperformance.

Thecompanyusesnaturalhedgesthroughdollar

denominatedrevenuetohedgecertain industry

risk exposures. The airline’s policy is not to

hedgeconsideringthenetexposure. Thenet

exposure is constantly monitored, evaluated

and managed in close co operation with the

company’s operating units. The Board provides

written principles and policies for treasury

management.

liquidity risk

The company’s risk to liquidity is a result of

the funds not being available to cover future

commitments.Thecompanymanagesliquidityrisk

throughanongoingreviewoffuturecommitments

andcreditfacilities.

Cashflowforecastsarepreparedandadequate

utilisedborrowingfacilitiesaremonitored.

Thetablebelowanalysesthecompany’sfinancial

liabilitiesintorelevantmaturitygroupingsbased

on the remaining period at the statement of

financial position to the contractual maturity

date.Theamountsdisclosedinthetablearethe

contractual undiscounted cash flows. Balances

duewithin12monthsequaltheircarryingbalances

astheimpactofdiscountingisnotsignificant.

87

interest rate risk

The company’s interest rate risk arises from

long-term and short-term borrowings. Interest

ratemovementsontheseborrowingsareoffset

toacertainextentbylong-termdeposits.

Thecompanyreviewsitsfundingplanonaregular

basistoensurethatinterestriskareminimised.

credit risk

Credit risk is the risk of financial loss to the

company if a customer or counterparty to a

financialinstrumentfailstomeetitsconstructive

obligations.

Credit risk consists mainly of cash deposits,

cash equivalents, other receivables and trade

receivables. The company only deposits cash

withmajorbankswithhighqualitycreditstanding

andlimitsexposuretoanyonecounterparty.

Duetothereducedequity,SAExpressdoesnot

complywiththeequitycovenantintermsofthe

newleaseagreementsontheQ400s.

DuetothelossSAExpressdoesnotcomplywith

theinterestratecovercovenantintermsofthe

long-termloan.

SAExpresshasengagedwiththecreditorsand

withtheshareholdertomitigatetheserisks.

At March 31, 2011 less than

1 year Between 1

and 2 years Between 2

and 5 years over

5 years

Borrowings - - 200,000,000 -

Tradeandotherpayables 172,861,360 - - -

neutrality advance 177,266,915 - - -

Bank overdraft 13,496,062 - - -

At March 31, 2010 less than

1 year Between 1

and 2 years Between 2

and 5 years over

5 years

Borrowings 27,679,088 - - -

Tradeandotherpayables 138,860,629 - - -

Neutralityadvance 177,266,915 - - -

Bankoverdraft 6,554,170 - - -

88

foreign exchange risk

The company undertakes certain transactions

denominated in foreign currencies which

therefore have exposure to exchange rates

variations. However, the company does not

hedgeforeignexchangefluctuations.

SA Express has both revenue and expenditure

that is foreign currency denominated and this

providesanaturalhedge.Thecurrencyreceived

is kept in a CFC account until required for

paymentorwhentheexchangerateisbeneficial

toconverttorand.

Fuelcostisdollardrivenandthisriskismitigated

bythefactthatthefuellevyisalsolinkedtothe

dollarexchangerate.

fraud risk

FraudrisksareidentifiedthroughtheFraudHotline

and internalcontrolsandassurances, including

the internal audit function. The company also

has an Ethics Hotline Policy and a Compliance

Manual,which,interalia,stipulatethatshouldany

instanceofpossiblefraudcometotheattention

ofmanagementortheDirectors, thematterwill

be investigated and appropriate steps taken in

linewiththepolicy.

Where instances of alleged fraud have been

reportedthroughtheFraudHotline,theDirectors

have taken appropriate action which included

the appointment of an independent forensic

investigation.

30. going concErn


prepared on the basis of accounting policies

applicable to a going concern. This basis

presumesthatfundswillbeavailabletofinance

future operations and that the realisation of

assets and settlement of liabilities, contingent

obligations and commitments will occur in the

ordinarycourseofbusiness.

31. EvEnTS AfTEr THE rEPorTing DATE

TheDirectors arenot awareof any matter or

circumstance that occurred between the end

of the reporting period and the date that the

financialstatementsareauthorisedforissue.



impairment of PPE

IFRS5adjustment (42,913,486) -

Other (18,324,929) (84,644,064)

(61,238,415) (84,644,064)

TheIFRS5adjustmentrelatestothecomparisonofthecarryingamountoftheaircrafttothefairvalue

lesscosttosellpertheAVITASvaluationreportdated13Janaury2011,providingmarketvaluesasof31

March2011.

Theotheradjustmentsrelatestothecorrectionoftheaircraftlineinrespectofpriorperiod

adjustmentsrelatingtomajorsubsequentcostsrecognised,butnotappropriatelyderecognisedin

termsofIAS16.Refertonote33forfurtherdiscussion.

Description

Aircraft 110,352,053 -

Rotables 131,344,422 -

241,696,475 -

32. iMPAirMEnT of PPE

33. non-currEnT ASSETS HElD for SAlE

89

34. Prior PErioD ErrorS

figures in rand 2011 2010 2009

Description

Nonreversalofprovisionfordisputesettlement - - 12,500,000

Taxeffectonprovisionfordisputesettlement - - (3,500,000)

SAPsystemerror - - 25,603,552

TaxeffectonSAPsystemerror - - (7,168,995)

Interestincorrectlyreversed - - 22,142,593

Taxeffectoninterestincorrectlyreversed - - (6,199,926)

Under/overaccruals - - 7,377,470

Taxeffectonunderaccruals - - (2,065,691)

UnderdepreciationandwriteoffsinPPEduetoerrorsinSAP - - 100,462,153

TaxeffectonPPEwriteoffsanddepreciationerror - - (28,129,403)

AccountingadjustmentstoPPE - - 295,347,383

TaxeffectonPPEaccountingadjustment - - (82,697,267)

Exchangeratemovementduetoadjustmenttospotrate - - (564,052)

Taxeffectonexchangeratemovement - - 157,935

VATreversal - 14,130,109 18,356,678

Depositsadjustments - - (2,259,000)

Taxeffectondepositadjustments - - 632,520

Passengerservicecharge - 17,759,615 18,984,688

Unutilisedticketliabilityanddutytravel - - (44,472,751)

Taxeffectonunutilisedticketliabilityanddutytravel - - 12,452,370

Accountingerrordebtor - - 16,400,625

Taxeffectonerrorondebtor - - (4,592,175)

Trainingbonds - - 9,003,998

Taxeffectontrainingbonds - - (2,521,119)

Additionaltaxeffects - - (12,212,689)

- 31,889,724 343,038,897

Asaresultofadisputeduring2007withregards

toUnutilisedTicketsheldbySAA,aprovisionfora

settlementwasraised,howeveruponsettlement

thisprovisionwasnot reversedand theentire

amount was incorrectly accounted for within

sundryincome.Thisresultedtoanoverstatement

ofsundrydebtorsbyR12,500,000in2009financial

statements.

During the Transnet unbundling transaction,

a dispute arose regarding interest payable on

theTransnetoverdraft. Aprovisionalamountof

R22,142,593 was reversed as interest expense

and incorrectly allocated to sundry debtors

insteadoftheTransnetoverdraft.Onsettlementit

wasagreedthatR35,018,406wastobereversed.

This full amountwas reversed against interest

expense and Transnet overdraft. The initial

provisionofR22,142,593wasnotreversedagainst

interest expense and sundry debtors. This is

thecauseofourpriorperioderror adjustment

againstretainedearningsandsundrydebtors.

On November 11, 2010, the Board of Directors

announced a plan to dispose of the fleet and

subsequentPFMAapprovalswereobtained.The

disposal isconsistentwith thecompany’s long

termpolicytoreplaceitsaviationfleetwithmore

technically advanced and updated aircraft. The

companyisactivelyseekingabuyerforitsfleet

and expects to complete the sale as planned.

Thecompanyhasnotrecognisedanyimpairment

lossesinrespectofthefleet,neitherwhenthe

fleetwasreclassifiedasheldforsaleoratthe

endofthereportingperiod.Theassetsheldfor

sale(AircraftsandRotables)ceaseddepreciating

immediatelyaftertheBoardresolution.

Refertonote32forrelateddisclosure.

90


Boththeabovementionederrorswereidentified

during 2011 financial year and subsequent

correctionsweremade.Thecorrectionsresulted

inthetradedebtorsamountofR293,296,340as

previouslyreportedin2009financialstatements

being reduced by R34,642,593 to R258,653,747.

The corrections subsequently adjusted the

following years, as a result the trade debtors

figure of R298,563,407 as previously reported

in 2010 financial statement was reduced to

R263,920,815.

Duringthe2009financialyearanentry,relating

tothe2008financialyear,waspassed intothe

thirteenth period on the General Ledger (SAP)

system post the finalisation of the year end

close,howeverthesystemwasnotrolledover

postthisentrywhichresultedinanerrorwithin

theopeningbalancesonbothretainedearnings

and accruals within the 2010 financial year.

This resulted toanunderstatementofaccrued

disbursements by R25,603,552 in 2009 financial

statements.Uponcorrectingtheerrorduring2011,

theaccrueddisbursementbalanceofR66,216,254

aspreviouslyreportedin2009financialstatements

wasincreasedbyR25,603,552toR91,819,806.The

correction subsequently adjusted the following

financialyears.The2010balanceofR13,552,726as

previouslyreported in2010financialstatements

wasincreasedtoR39,156,277.

Theunder/overaccrualsrelatestofuel,workmens

compensation and leave. The aforementioned

accounts were investigated and corrected as

follows: The fuel was adjusted according to

actual invoice for fuel uplifted; the workmen

compensation over accrual was adjusted

according to returnspaid insubsequentyears

and the amount processed to the income

statement for the payment was corrected by

offsettingitagainstthebalancesheetprovision

andtheleaveaccrualwasadjustedaccordingto

theVIPpayrollsoftwarecalcualtionforleavedue.

Theresultoftheadjustmentwasanetdecrease

inretainedincometotheamountofR7,377,470in

the2009financialstatements.

The write offs and under depreciation in the

PPElinerelatetoLandandbuildings,machinery

andequipmentandaircraft.Theaforementioned

accounts were investigated and corrected as

follows:theusefullivesofcertainPPEitemsper

SAPwerenotinlinewithaccountingpoliciesofSA

ExpressAirwaysandthuscorrectedaccordingly

and ownership of certain assets within land

and buildings could not be verified and thus

were written off. The result of the adjustment

wasanetdecrease in retained incomedue to

depreciation of R100,130,711 and a further net

decreaseinretainedincomeduetowriteoffsof

R331,442inthe2009financialstatements.

TheaccountingadjustmenttoPPErelatestothe

following: Incorrect capitalisation of the flight

maintenance expense; prior period adjustments

relating tomajorsubsequentcosts recognised,

butnotappropriatelyderecognised in termsof

IAS 16 and the capitalisation of rotables to the

aircraft linewhile theywereheldas inventory.

The account was corrected by expensing the

incorrect items capitalised. This resulted in a

net decrease in retained income due to flight

maintenance expenditure of R41,035,036 and

a further net decrease in retained incomedue

to incorrectcapitalisationofR254,312,345 inthe

2009financialstatements.

Theexchangeratemovementrelatestoanerror

in thecurrencyused for revaluationof foreign

transactionsatyearend.Theforeigncreditors,

foreigndebtorsandforeignbankaccountswere

investigatedandcorrectedasfollows:thespot

rate was used to recalculate the unrealised

exchange rate differences for the year. This

resultedinanetincreaseinretainedincomeof

R564,052forthe2009financialstatements.

TheVATreversalrelatestotheincorrectreversal

oftheVATliabilityraisedwiththeactualrevenue

invoices for March 2008, 2009 and 2010. The

VAT account was reconciled and corrected by

reversing the asset incorrectly raised. This

resulted in a decrease to the retained income

of R18,356,678 for 2008 and 2009 financial

statements and a further decrease to retained

incomeofR14,130,109for2010financialstatements.

91

Thedepositadjustmentrelatestothefollowing:

Amountsincorrectlyraisedasdeposits;deposits

incorrectly expensed to the income statement

and foreign deposits not correctly translated

tothespotrateasofyearend.Asaresultof

theaforementionedtheretainedincomeof2009

financialstatementswasadjustedwithR2,259,000.

Thepassengerservicechargeadjustmentrelates

totheincorrectreversalofthepassengerservice

chargesraisedwiththeactualinvoicesforMarch

2008,2009and2010.Theaccountwascorrected

by reversing the incorrect journals processed.

Thisresultedinadecreasetotheretainedincome

ofR18,984,688forthe2009financialstatements

andadecreaseinretainedincomeofR17,759,615

forthe2010financialstatements.

The unutilised ticket liability and duty travel

adjustmentrelatestotheover/underaccrualof

unutilised ticket liability in prior years and the

incorrect expenditure of the duty travel. The

accounts were corrected by expensing the

actualduty travelandbyadjusting theaccrual

for unutilised ticket liability to the actuals

received. The unutilised ticket liability was not

properlyaccruedbefore2009andin2009itwas

notadjustedforthebehaviourpatterncalculated

on the actual revenue received. This resulted

in a net decrease to retained income for the

duty travel of R20,181,444 in the 2009 financial

statementsandanetincreaseinretainedincome

fortheunutilisedticketliabilityofR64,654,195in

the2009financialstatements.

The adjustment in the accounting error relates

to an incorrect calculation performed with

regards to revenue receiveable from South

AfricanAirways.Theerrorwasdiscoveredupon

investigationofthelongoutstandingdebtor.The

error was corrected by reversing the debtor

originally raised. This resulted in a decrease

in retained income of R16,400,625 in the 2009

financialstatements.

The accounting adjustment on the training

bondsrelatestotheincorrectamortisationand

aprovision incorrectlyraised.Theaccountwas

correctedbyreversingtheprovisionraisedand

by recalculating the correct amortisation. This

resultedinanetdecreaseinretainedincomeof

R9,003,998inthe2009financialstatements.

92

counTry of incorPorATion AnD DoMicilE SouthAfrica

nATurE of BuSinESS AnD PrinciPAl AcTiviTiES Aviation

DirEcTorS L.G.Boyle,I.Ntshanga,E.Bunyenyezi,

C.Christodoulou,V.Cuba,L.Ledwaba,B.F.Mohale,

B.Ssamula,G.VanHeerden,M.J.Vuso

rEgiSTErED officE 4thFlooroffices,WestWing,

PierDevelopment,O.RTamboInternationalAirport

1627

BuSinESS ADDrESS 4thFlooroffices,WestWing,

PierDevelopment,O.RTamboInternationalAirport

1627

PoSTAl ADDrESS P.OBox101

O.RTamboInternationalAirport

1627

HolDing coMPAny DepartmentofPublicEnterprisesonbehalfof

theSouthAfricanGovernmentincorporated

inaccordancewiththeCompaniesActofthe

RepublicofSouthAfrica

AuDiTorS NkonkiIncorporated

CharteredAccountants(S.A.)

RegisteredAuditors

coMPAny SEcrETAry MorestatCorporateServices(Pty)Ltd

coMPAny rEgiSTrATion nuMBEr 1990/007412/07

General information

GRI Application Level B

w w w . f l y e x p r e s s . a e r o

Documents

AnnuAl RepoRt 2010/2011pmg-assets.s3-website-eu-west-1.amazonaws.com/130430annrep.pdf · thE SpiritS Surround uS Megha, meaning “cloud” in classical Hindi, is also the name used