I need someone that is very good at Principles of accounting and finance to answer the attached questions. It is not a one-day job therefore if you do not have the time, please don't attempt it. The attachment named (questions) is where you will find the questions while the other attachment named (SAA Annual Financial Statements 2016) is supporting document for answering question two. Thank you. I am willing to add more tutor credit if necessary.

ACCOUNTING You have been appointed as an accountant at Betty Financial Services. On your first day as the new accounted your boss has already given you two tasks to be performed. The following task has been assigned and explained to you: Task 1 You have been instructed to prepare financial statements for a client. You are required to prepare the 1. Statement of Comprehensive Income for the year ended 31 December 2016 2. Statement of Financial Position as at 31 December 2016 3. Statement of Changes in Equity for the year ended 31 December 2016 You have been given the Pre-Adjusted Trail Balance as well as some additional information that you need to take in to account when preparing the financial statements. The client has also requested that you show exactly how you have determined your final balances that will be disclosed in the financial statements. (TIP: Make use of the Worksheet Tool) The client's business is called Peter Pan Costumes (Pty) Ltd. The business buy and sell costumes to customers and also rents out costumes to customers. Peter Pan is the owner and he started the business on the 1st of January 2016. The business buy and sells party costumes as well as renting costumes to customers. Peter took out a mortgage loan from Avias Bank to buy the building from which the business operates. He also bought a delivery truck to deliver costumes to clients and some costumes that will be used for hiring. The business and will repay the loan over 5 years. Page 1 of 5 Peter Pan Costumes (Pty) Ltd Pre-Adjusted Trail Balance For the year ended 31 December 2010 Trail Balance Account title Dr Building Delivery Truck Costumes Cr 106 000 49 000 75 000 Cash Accounts Receivable Accounts Payable Inventory - Costumes 14 500 23 600 10400 6 500 Unearned Costume revenue Mortgage Payable Capital ; Peter Pan Drawing; Peter Pan 5000 100 000 120 000 34100 Costume revenue - Costume Hire Costume Revenue - Costume Sales Cost of Sales Salaries Cleaning Accounting fees Insurance Interest expense Marketing 75 000 20 000 8000 2800 3000 1800 1250 2100 2750 330 400 330 400 Additional information: 1. The assets of the business are depreciated as follows: a. Buildings - 10 year; straight line method (was bought 1 January 2016 b. Delivery Truck - 5 years; straight line method (was bought 1 June 2016) c. Costumes - 2 years; straight line method (1 February 2016) No depreciation was accounted for by the business. Page 2 of 5 2. On the 1st of October 2016 the business received cash in advance for R5000 for costumes sold but the income was not earned yet. The costumes were only delivered to the client on the 28th of December 2016. No adjustment has been made at year end. 3. Interest paid on the mortgage bond was not yet paid at the end of the year. Interest is calculated at 15% per year. 4. The business made a pre-payment for insurance of R1 250. This was to cover the insurance for the period 1 September 2016 - 31 August 2017. No correction was done at the end of the year. 5. On the 31st of December 2016, one of the customers, brought back costumes to the value of R1700 that were damaged beyond repair. The costumes were originally sold on credit to the customer. The cost value was R800. (Marks 40 ) Page 3 of 5 Task 2 You have been requested to analyse the annual financial statements for SAA for the 2015/2016 financial year. Your boss has required that you analyse the current and prior year financial information and conclude, based on the ratios that you have learnt during your first year of studies, on the performance of the company. Your analysis should include the following: Brief background of the company (2 marks) Recent developments (post year-end) (2 marks) Liquidity ratios (include those you feel are relevant) (4 marks) Solvency ratios (include those you feel are relevant) (4 marks) Profitability ratios (include those you feel are relevant) (3 marks) Conclusion (4) Overall layout, structure and neatness of analyses (1) (20 marks) Pointers to Note for Task 2: - Show all calculations (for each ratio you feel is relevant etc). Marks will not be awarded unless the calculations are shown The annual financial statements of SAA is attached as the other document called SAA Annua statements 2016. Only base the ratios on the \"Group\" column - You can ignore the following accounts in the financial statements: - Investment in subsidiaries - Available for sale assets - Deferred tax asset and liability - Amounts receivable from subsidiaries - Non-current pre-payments - Retirement benefit asset - Derivatives asset and liabilities - Non-current assets classified as held-for-sale and asset disposal groups - Subordinated loan guaranteed by government - Retirement benefit obligation - Other short term liabilities - Provisions - Deferred Revenue on ticket sales - Other comprehensive income items (all items below profit for the period in the statement of comprehensive income Page 4 of 5 Pointers to Assignment: - Show all calculations. Marks will not be awarded unless the calculations are shown The assignment should be typed out on Microsoft word Indicate page numbers Only produce the answer, need not reproduce the question Page 5 of 5 INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 03 Organisational Overview Key metrics for 2015/2016 Performance Overview Leadership 4 27 15 Board of Directors 16 SAA Commercial 28 32 Awards 5 Executive Committee 18 SAA Operations 3-Year Financial Highlights 6 Message from the Chair 22 SAA Voyager 36 SAA's Mandate, Vision, Mission and Values 7 CEO Report 24 SAA Cargo 38 How we achieve shareholder value 8 Our Business Activities 9 Subsidiaries SAA Technical 40 Mango 42 10 South African Travel Centre (SATC) 43 Group value-added statement 10 AirChefs 44 Strategic Objectives 11 SAA at a Glance 12 Operating context About this report This integrated report reviews SAA's economic, operational, and environmental performance for the year from 1 April 2015 to 31 March 2016. It follows the Company's 2015 integrated report, issued in September 2016, following the delay in signing off the 2014/15 Annual Financial Statements due to the outstanding 'going concern' sign off by the auditors, which was dependent on a government guarantee. The report details SAA's financial statements and provides material information concerning strategy, governance frameworks and performance for the year under review, detailing our progress against strategic objectives. The integrated report is published in line with the King Code on Corporate Governance, the Companies Act, Act no 71 of 2008 the Public Finance Management Act, Act no 1 of 1999 and with reference to the frameworks defined in the International Integrated Reporting Council. Materiality Materiality has been applied in determining the content and disclosure in the report, ensuring the report is both concise and relevant to SAA's shareholder and stakeholder. Material issues are considered to be those that could affect the Company's ability to create value over short, medium and long term, including matters that have significant financial impact and are likely to have a significant impact on the current and projected revenue and profitability of the business. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 Table of Contents 47 63 Our Key Business Enablers Corporate Governance Customer services 48 Corporate Governance Report 64 Human Resources 50 Internal Audit 63 Information Technology Services 53 67 Shareholder and Stakeholder Relations 54 Social, Ethics, Governance and Nominations Committee Report Report of the Audit and Risk Committee 68 Environmental Sustainability 57 Legal, Risk and Compliance 58 Procurement 60 73 Group and Company Annual Financial Statements Statement by the Company Secretary 74 Directors' Report 75 Independent Auditors' Report 92 Group and Company statement of profit or loss and other comprehensive income 94 Group and Company statement of financial position 95 Group and Company statement of changes in equity 96 Group and Company statement of cash flows 98 Notes to the Group and Company annual financial statements 99 Corporate information IBC Statement of responsibility Navigation The Audit and Risk Committee acknowledges its responsibility on behalf of the Board to ensure the integrity of the SAA Integrated Report for 2016. The committee has accordingly reviewed and recommended the report to the Board, who approved the Integrated Report for the financial year ended 31 March 2016. This integrated report is cross-referenced with other sources of information as shown below. More information about SAA and its activities can be found on the Company's website www.flysaa.com D Myeni Chairperson Y Kwinana Chairperson South African Airways SOC Limited\t\u0007South African Airways SOC Limited Audit and Risk Committee SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 1 2 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 ORGANISATIONAL OVERVIEW 03 Organisational Overview Key metrics for 2015/2016 4 Awards 5 3-Year Financial Highlights 6 SAA's Mandate, Vision, Mission and Values 7 How we achieve shareholder value 8 Our business activities 9 Operating context 10 Group value-added statement 10 Strategic Objectives 11 SAA at a Glance 12 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 3 Organisational Overview Organisational Overview Key metrics for 2015/2016 SAA is South Africa's national flag carrier and the continent's most awarded airline. For over 80 years, SAA has been transporting passengers and cargo from South Africa. SAA serves 56 destinations, in partnership with SA Express, SA Airlink and its low cost carrier, Mango, within South Africa and across the continent, and nine intercontinental routes. It is a member of the largest international airline network, Star Alliance. SAA provides related services through the Group and its wholly owned subsidiaries: SAA Technical, Mango, and AirChefs, the catering entity of SAA. 6 920 697 total passengers 77% passenger load factor 28 409 million available seat kilometres 114 000 tonnes of freight 53% cargo load factor 53 578 flights in the year Two new routes launched: Accra to Washington DC and Johannesburg to Abuja, Nigeria New code share agreement with Air China; expanded code share agreements with Air Mauritius and Jet Airways 2,5 million Voyager members 15 000 miles issued every minute and 10 000 miles redeemed simultaneously 10 706 employees R9,2 billion contribution to the country's GDP annually (2013 Oxford Study) R39,5 million annual training spend 4 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 ORGANISATIONAL OVERVIEW Awards Air Cargo News Top three African Cargo Airlines World Travel Awards 2015 Africa's Leading Airline (21 consecutive years) - SAA Nkonki SOC Integrated Reporting Awards Africa's leading in-flight magazine - Sawubona, SAA's in-flight magazine SAA's 2014 Integrated Report was ranked sixth Africa's Leading Low-Cost Airline - Mango Sunday Times Top Brands Awards Skytrax Best Domestic Airline - 1st SAA, 2nd Mango South Africa's Top Low-Cost Airline consumer brand - Mango 4-Star rating (14 consecutive years) - SAA Business Traveller Africa Awards Best Airline in Africa - SAA Best African Airline Award - SAA (9th consecutive year) Best African Regional Short-Haul Airline - SAA Best African Long-Haul Airline - SAA Best Airline Staff in Africa (4 consecutive years) - SAA Best Low-Cost Airline in Africa - Mango Global Traveller Wines on the Wings Airline wine competition Aircraft Technology Engineering and Maintenance Awards Best Line Maintenance Provider for 2015 - SAA Technical Sunday Times Generation Next Survey Awards Best Sparkling Wines International Business Class - 3rd SAA Best Red Wine International Business Class 5th SAA Global Traveller Magazine, GT Tested Reader's survey 'coolest' domestic airline - SAA Best Airline in Africa - SAA (12th consecutive year) South African Tourism Ubuntu Awards in New York City \"Top Producing Airline\" honouring travel providers in North America that excel at promoting travel to South Africa - SAA SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 5 Organisational Overview (continued) 3-Year financial Highlights SAA's Mandate Mandate SAA's mandate is to \"engage in passenger airline and cargo transport services, air charter services and other related services\" in support of the state's desire \"to promote air links with the Republic's main business, trading and tourism markets within the African continent and internationally\" as defined in the SAA Act, Act No 5 of 2007 and reconfirmed in the signed FY16 Shareholder's Compact, drafted by National Treasury in its capacity as the SAA Shareholder Ministry. SAA is required to pursue this mandate in a manner that is financially sustainable, while being compliant with applicable operational regulations and legislation, inclusive of laws and regulations aimed at transformation, skills development and employment equity. 6 SAA's mandate defines the Company's geographic area of focus (\"within the African continent and internationally\"), while prescribing both cargo and passenger offerings along with their related services, as well as the targeting of both the business and leisure segments. SAA's development mandate requires the Company to contribute to the broader socio-economic objectives of South Africa through contribution to GDP, fostering job creation, skills development and an enabler to the tourism industry. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 ORGANISATIONAL OVERVIEW Total income Operating costs Operating profit/ (loss) before interest, tax, depreciation and amortisation Cost compression saving R30 385m R30 034m R351m R1 111m 2015: R30 105m 2014: R30 266m 2015: R32 546m 2014: R30 640m 2015: (R2 441m) 2014: (R374m) 2015: R790m 2014: R435m Vision and Mission Our values Vision Safety Africa's leading world-class airline Adopting a zero-defect philosophy and striving for zero safety incidents through proper training, work practices, risk management and adherence to safety regulations at all times. Mission To deliver commercially sustainable world-class air passenger and aviation services in South Africa, the African continent and our tourism and trading partners Strategic Objectives Valuing its people SAA is committed to their satisfaction, development and well-being by treating them with respect, dignity and fairness. Customer-focused To achieve and maintain commercial sustainability Striving to meet the unique needs of customers (internally and externally) by tailoring each interaction to suit their specific needs. To provide excellent customer service Accountability To achieve consistent, efficient and effective operations Taking responsibility for individual and team actions, decisions and results by establishing clear plans and goals and measuring progress against them. To support South Africa's National Developmental Agenda To foster performance excellence Integrity Practising the highest standards of ethical behaviour in all lines of work and maintaining credibility by ensuring that SAA's actions consistently match its words. Excellence in performance Setting goals beyond the best, reinforcing highquality performance standards and achieving excellence by implementing best practices. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 7 Organisational Overview (continued) ACHIEVE SHAREHOLDER VALUE ACHIEVE AND MAINTAIN FINANCIAL SUSTAINABILITY PROFIT Drive revenue growth Return to Profitability Reduce Costs PROVIDE EXCELLENT CUSTOMER SERVICE CUSTOMER Deliver a consistent and efficient customer experience Improve customer satisfaction and retention Grow market share ACHIEVE CONSISTENT, EFFICIENT & EFFECTIVE OPERATIONS PROCESS QUALITY CONTROL PEOPLE Strengthen governance and compliance Enhance environmental contribution Maintain safe operations Improve risk management Contribute to economic development Improve operational efficiency Optimises asset utilisation Enhance IT infrastructure and support Optimise supplier relationships FOSTER PERFORMANCE EXCELLENCE Improve people productivity Develop and retain talent Create a positive culture & conducive work environment CHECK-IN BRINGING THE WORLD TO AFRICA. TAKING AFRICA TO THE WORLD. 8 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 ORGANISATIONAL OVERVIEW Our Business Activities SAA is a vertically - integrated diversified airline group providing passenger and cargo transport services, supported by operations across the airline value chain. SAA Key enablers Strategic planning Customer services Human resources Information technology services Shareholder and stakeholder relations Environmental sustainability SAA Legal, risk and compliance Procurement Finance Subsidiaries A full-service network carrier with an operational focus on the African continent as well as on inter-continental services, targeting both business and leisure traffic flows Commercial Sales Revenue management Network planning Supported by marketing, ancillary revenue, alliances, Product development Operations Airport operations Flight operations In-flight services Global Operations Control Centre Group Safety Quality Assurance Group Security Services Maintenance Standards Cargo Dedicated to commercial freight Voyager Africa's strongest airline revenuebased loyalty programme SAA Technical Africa's largest aircraft maintenance, repair and overhaul business Mango A low-cost carrier primarily operating in the South African domestic market AirChefs A catering business operating in Johannesburg, Cape Town and Durban SATC A retail travel business with franchises in South Africa and other African states SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 9 Organisational Overview (continued) Snapshot of SAA's markets in 2015/2016 SAA's financial position and performance should be viewed in light of the current market dynamics it is exposed to. This can be both macro-economic indicators and aviation specific variables. Domestic Macro-economic Sluggish economic growth of South African economy Weakening rand Political uncertainty Rising interest rates Aviation Increasing competition from low-cost carriers Oversupply in the market Price sensitivity Regional Macro-economic Aviation Some countries facing intense economic pressure Emergence of low cost carriers (Mozambique, Tanzania, (Nigeria, Angola) Zimbabwe) Lack of available foreign currency in some of our destinations Increasing supply from Middle Eastern carriers Depreciation of currencies Yamoussoukro Decision to be implemented in 2017 Downturn in oil and gas exploration industries International Macro-economic Decline in global commodity demand Weak Brazilian economy Slowdown in Chinese economy Geopolitical concerns due to terror attacks and European migrant crisis Aviation Unintended consequences of immigration regulations Increasing competition from Middle Eastern carriers Group value added statement for the year ended 31 March 2016 R' million 2015/2016 2014/2015 Total income 30 385 30 105 Cost of services (24 212) (26 859) 6 173 3 246 26 26 6 199 3 272 5 822 5 687 2 20 Value added Income from investments Wealth created by operations Distribution of wealth Employees (salaries, wages and other benefits) Government (income tax) Providers of capital (interest) Total wealth distributed Wealth distribution funded through debt Wealth created by operations 971 588 6 795 6 295 (596) (3 023) 6 199 3 272 2 20 Dealings with government Gross contributions to government Company taxes Rates and taxes Customs and excise duties Other government grants Charged against group income Collected on behalf of government 10 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 5 4 32 37 39 61 (9) (7) 30 54 2 875 2 833 ORGANISATIONAL OVERVIEW Strategic Objectives The strategic objectives set out in the Corporate Plan are aimed at achieving and maintaining commercial sustainability over the next three years. In 2015/2016 SAA made steady progress towards achieving its strategic objectives. The table below shows some of SAA's achievements. Strategic objective Achievements 2015/2016 Goals 2017/2018 1.\u0007To support South Africa's National Developmental Agenda Engage with the Shareholder to drive an improved whole of State approach to aviation. 2.\u0007To achieve and maintain commercial sustainability Optimising SAA's revenue potential through network remediation: Network remediation Implemented action plans Closure of loss making routes Temporary reduction in flights to Brazil Opening of new routes Assessment of the international network Improvement in network and inter-connectivity at the existing hub Maintain growth of Mango domestic capacity Further African growth Enhancement of Star Alliance African Growth Strategy Created a team to focus on African growth Strengthened West African presence with Washington DC Accra route and Ghanaian partnerships New route to Abuja Nigeria opened Increased frequencies to some destinations in Sub Saharan Africa Optimised central Africa network Entrench and enhance Africa footprint Introduce intercontinental destinations to maintain SAA's competitive advantage Progressively grow a sustainable regional network Increase attractiveness of SAA's global network Expanding to new regional markets by partnering with local operators Develop underserved markets Cost Compression Achieved a cost saving of R1,1 billion despite devaluation of the rand Head count rationalisation Renegotiated airline leases and engine contracts Focus on identified key areas such as, cost of aircraft Contribution to GDP People employed Localisation/industrialisation Tax contributions Transformation Enterprise development Support tourism industry 3.\u0007To provide excellent Customer Experience Framework monitors customer service customer service landscape Customer relationship management tools implemented to better profile customer needs Enhanced and new projects Voyager changed to revenue based frequent flyer programme Continuously innovate and invigorate product Deeper analysis of customers expectations and aspirations Further improved Voyager offering 4.\u0007To achieve Optimisation of the support services with new consistent, efficient enabling technology systems implemented and effective operations Continued optimisation of the support services that affect every aspect of the Company Develop strategic approach to debt to ensure sustainability Improve governance and leadership structures 5.\u0007To foster performance excellence Introduced performance management Executive performance assessed Succession planning SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 11 Organisational Overview (continued) SAA at a Glance Operational overview NEW YORK 6 continents 25 countries 4 domestic destinations (from Johannesburg) 21 African routes, serving 25 destinations 9 International routes to 7 countries Average of 18 daily flights between Johannesburg and Cape Town 1,330 Star Alliance destinations 6 920 697 passengers 10 706 employees 114 000 tonnes of cargo WASHINGTON DC Fleet SAA fleet 53 (50 SAA; 3 Cargo freighters) 8 A319-100s 12 A320-200s 8 A340-300 9 A340-600s 7 B737-800s PAULO SAO 6 A330-200s 3 B737-Freighters SAA and its subsidiaries operate in highly competitive global markets with the core airline market rapidly liberalising and consolidating resulting in growing levels of competition SAA Group R30 billion total annual revenue 63 aircraft SAA 50, Mango 10, and SAA Cargo 3 12 8 domestic destinations 26 regional destinations 9 international destinations SAA 5, Mango 7, with some markets served by both airlines SAA 25 Mango 1 served by SAA SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 ORGANISATIONAL OVERVIEW LONDON FRANKFURT MUNICH ABU DHABI HONG KONG DAKAR ABUJA LAGOS ABIDJAN ACCRA COTONOU DOUALA LIBREVILLE POINTE-NOIRE BRAZZAVILLE KINSHASA ENTEBBE NAIROBI DAR ES SALAAM LUANDA NDOLA LUSAKA LIVINGSTONE VICTORIA FALLS LILONGWE BLANTYRE HARARE MAURITIUS WINDHOEK JOHANNESBURG MAPUTO DURBAN CAPE TOWN PERTH EAST LONDON PORT ELIZABETH 114 000 tonnes of cargo 10 706 staff employed carried annually by SAA cargo 8,43 percent of the company's revenue 33 percent of staff are represented in Labour groups at SAA and 25 percent at SAA Technical 11 million meals 2,5 million 9,9 million prepared annually by AirChefs Voyager members passengers carried annually SAA 6,9 million Mango 3,0 million SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 13 14 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 LEADERSHIP 15 Leadership Board of Directors 16 Executive Committee 18 Message from the Chair 22 CEO Report 24 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 15 Leadership Board of Directors DUDUZILE MYENI (52) Chairperson Secondary Teachers' Diploma (Commerce), Advanced Business Management Diploma, Institutions Leadership and Management Development Certificate Ms Myeni was appointed to the Board of SAA in September 2009 and to the Board of AirChefs in April 2010. She is the current President of AfricaWater Association (AfWA), Chairperson of South African Association of Water Utilities (SAAWU), Mhlathuze Water Board and the Executive Chairperson of the Jacob G Zuma Foundation. A seasoned businesswoman, an entrepreneur and a philanthropist, she was the founder and CEO of Skills Dynamics, consulting for various blue-chip companies such as BHP Billiton, RBM and others. She has previously served on the Board of Absa Bank, was a board member of Trade and Investment KwaZulu-Natal, a South African trade and inward investment promotion agency and was a Deputy President of the Zululand Chamber of Commerce and Industry. In 2001 she was nominated by Investec Private Bank and Sunday Tribune for a Woman Entrepreneur award, and was a winner of the SABC 3/Shoprite Checkers Woman of the Year Award in the Education Category. She was also the first woman to win the prestigious South African Philanthropist Award in 2007. In 2009, she was nominated as Businesswoman of the Year by the South African Chamber of Commerce (SACCI). She is one of the founding members and a stalwart of the Black Business Council. Ms Myeni has been an honorary member of Lattice (USA) since 2007 and is a current member of the Institute. YAKHE KWINANA (51) Non-executive Director CA(SA), BCompt (Hons) (Unisa), BCom (Hons) University of Transkei, Diploma in Banking, Institute of Banking, Higher Diploma in Computer Auditing (Wits University) Appointed to the Board in December 2009, Ms Kwinana is Chairperson of SAA's Audit and Risk Committee and was Chairperson of SAA's Finance, Financial Risk and Investment Committee prior to its merger with the Audit Committee in early 2011, as well as a Director of SAA Technical. She is a finance and auditing specialist and previously served on the boards of the Air Services Licensing Council, the Debt Collectors' Council and the South African State Information Technology Agency (SITA) as Chairperson of the Audit and Risk Committee. She is currently Managing Director of Kwinana & Associates. DR JOHN TAMBI (60) Non-executive Director PhD Transportation Planning & Engineering (Polytechnic Institute of New York University), Specialisation: the planning and design of airports and other transport facilities, MSc Transportation Planning and Engineering (Polytechnic Institute of New York University), MBA (Master of Business Administration) (Embry-Riddle Aeronautical University); MAS (Master of Aeronautical Science) (Embry-Riddle Aeronautical University), BSc Aerospace Technology (Indiana State University), CPL/IR: Commercial Pilot's Licence, Instrument and Multi-Engine Ratings, (Oxford Air Training School) Fellow of the African Scientific Institute (ASI). 16 Duduzile Myeni, Yakhe Kwinana Dr Tambi is a transport infrastructure expert with more than 30 years of project management, planning, engineering, training, policy development, and economic analysis experience, with specialisation in air, road, sea and rail transport modes. He is currently the Senior Advisor on Transport Infrastructure for the NEPAD Planning and Coordinating Agency, responsible for regional and continental transport programmes and projects, as well as the Coordinator of the Presidential Infrastructure Champion Initiative. He has served in senior and executive positions in the management of airports, ports, rail and transportation facilities, including the Port Authority of New York and New Jersey, and in major international consulting firms. He has also served as an independent consultant to national governments, the United Nations and international lending institutions. Dr Tambi was the Chairman and Transport Expert for the United Nations Monitoring Group for Somalia and the UN Panel of Experts for Somalia respectively (United Nations Security Council Resolutions: 1519, 1558 and 1474). He is a registered aviation and transportation expert with the African Development Bank, the International Civil Aviation Organisation, the United Nations Economic Commission for Africa, and the United Nations headquarters in New York. He also has operational experience as an airline pilot and has acted as a consultant to several airlines. He has over 30 professional publications on the aviation and transport infrastructure sectors and is a key resource person in the African aviation field. ANTHONY DIXON (69) Non-executive Director CA(SA), CTA. (University of Natal), Executive Development Programme (Wits Business School) Mr Dixon has extensive work experience spanning almost five decades in key positions such as CEO, CFO and Business Development manager of companies such as Coopers and Lybrand (CEO - KZN), Megacor Holdings (CEO), Guardian National Insurance Company Limited (Group Financial Director), Santam (Head: Business Development) and Alacrity SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 LEADERSHIP Dr John Tambi, Anthony Dixon, Musa Zwane, Wolf Meyer, Phumeza Nhantsi, Financial Services Limited. He joined the Institute of Directors as Executive Director from 2003 to 2008 and besides being a non-executive director of SAA, is currently also a nonexecutive director of the Board of Consolidated Infrastructure Group (CIG), Santova Limited and The Pivotal Fund Limited. He has previously held directorships in a number of blue chip companies. Mr Dixon was a member of the King Committee on Corporate Governance (2003 to 2013) and has fulfilled a number of other professional functions. Officer at the Land and Agricultural Development Bank of South Africa and part of the team responsible for the successful turnaround of the Land Bank. He previously served as Chief Financial Officer of private equity company Brait SA for five years and, prior to that, held senior financial positions in several financial institutions. He has a strong financial background and extensive local and international listing experience. His career began in 1987 when he commenced his articles with Ernst & Young. Resigned 30 October 2015 Resigned 16 November 2015 MUSA ZWANE (53) Acting CEO PHUMEZA NHANTSI (37) Interim Chief Financial Officer Qualifications: MBA (University of Pretoria), MAP (Wits University), MSc (Industrial Chemistry) (Shippensburgh University, USA) BCom (Financial Accounting), Post-Graduate Diploma in Management Accounting, BComm Honours (Natal), CA(SA), RA Mr Zwane was appointed as Acting CEO of the SAA Group in November 2015. Previously he was CEO of SAA Technical (SAAT) as from November 2010. Prior to that, he spent 14 years at Sasol, having joined in 1996 and most recently holding the position of Managing Director of Sasol Gas and serving on various boards within the Sasol Group. He also held a range of other posts in the Group, among them, General Manager: Heating Fuels at Sasol Oil (2001) and General Manager: Sales and Marketing at Sasol Gas (2005). He was a member of the executive team at Sasol Synthetic Fuels. Before joining Sasol, Mr Zwane was Chemical Services Manager with Eskom and a Senior Research Scientist with AECI. He is also a director of iGas (CEF Group of companies), ROMPCO and Airlink. Ms Nhantsi was appointed as SAA's Interim Chief Financial Officer in November 2015. She is a Director at SizweNtsalubaGobodo, the fifth-largest accounting firm in Southern Africa and the largest black-owned and managed firm. She was temporarily seconded from SizweNtsalubaGobodo to SAA. WOLF MEYER (55) Chief Financial Officer BPL (University of the Free State), BCompt (Hons) (Unisa), CA(SA) Mr Meyer was appointed Chief Financial Officer of the SAA Group in June 2011. Prior to that, he was Chief Financial Ms Nhantsi has extensive experience in the financial services arena, and specifically, one of her key clients at the firm, is Denel SOC Ltd, which is where she gathered institutional knowledge in the aviation space. She has more than 10 years' experience in the aviation industry. She is a member of the Policy Committee (Board equivalent) and a member of the Remuneration Committee at her firm. She has also been nominated by their CEO to a Gender Affairs position for the firm. She is the lead engagement partner of Denel SOC Ltd and within the Denel group, she is responsible for the signing of the following entities: Denel Group (Denel SOC Ltd), Denel Aviation, Denel Aero structures, and Denel Land Systems. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 17 Leadership (continued) Executive Committee RUTH KIBUUKA (53) Company Secretary BA (Hons) (Economics and Social Administration) (Makerere University, Uganda), CIS Diploma Fellow of the Chartered Secretaries Southern Africa institute (CSSA), Fellow of the Chartered Institute of Business Management Ms Kibuuka provides company secretarial services to the Board of Directors and committees of the Board of SAA, the boards of SAA's subsidiaries (excluding Mango), as well as the SAA Executive and other governance forums. Ms Kibuuka has 30 years' experience that straddles both accounting and corporate governance in both the public and private sectors. She joined SAA in February 2009 from Export Credit Insurance Corporate of South Africa, where she held positions of Company Secretary and Financial Controller. Ms Kibuuka started her career at the then Ciskei Peoples Development Bank, where she held various positions including that of Company Secretary. She has held amongst others the position of Group Accountant at Fedics Group Services. ZUKISA RAMASIA (53) General Manager: Operations THULI MPSHE (56) General Manager: Human Resources Senior Secondary Teachers Diploma (Walter Sisulu University);BA (English and Psychology (Vista University), Honours in Human Resources Development (RAU), IATA Diploma in Airline Operations, Leadership Development Programme (GIBS) BCom (Unisa), Post-graduate Certificate in Business Management (Warwick University), Board Leadership Programme (GIBS), Executive Women's Development Programme (GIBS), International Licentiate Diploma (Institute of Bankers in South Africa), Associate Banking Diploma (Institute of Bankers in South Africa) Ms Ramasia has had an illustrious career of more than 24 years in airline operations in roles such as Cabin Crew Daily Operations Manager, Senior Manager of Crew Movement and Global Operations Control Centre Head. Her skill lies in ensuring operational efficiency through effective planning for on-time departures and arrivals during normal and irregular operations, identifying bottlenecks and providing optimum solutions. Since 2014, Ms Ramasia has been responsible for SAA's overall global operations portfolio, which comprises SAA's flight and cabin operations, airport operations, ground handling, lounges, on-board logistics and inventory, aviation safety and security, as well as SAA's Global Operations Control Centre. She currently serves on the Board of Directors of Aviation Coordination Services (ACS). 18 Ruth Kibuuka, Zukisa Ramasia Ms Mpshe started her career in banking and worked at two of the three top banks in South Africa. Between 2001 and 2003, she was Executive Manager: Human Resources at SAA Cargo and Executive Manager: Human Resources for SAA's operations department. From 2003 to 2010, she was Executive Director: Human Resources at Makro, part of Massmart Holdings, and then rejoined SAA in September 2010 in her current role. She served as a council member of the University of Zululand for seven years and Chairperson of the Board for Kids Haven, a home for street children in Benoni, for seven years. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 LEADERSHIP Thuli Mpshe, Ursula Fikelepi, Lusanda Jiya URSULA FIKELEPI (43) General Manager Legal, Risk and Compliance LUSANDA JIYA (50) General Manager Shareholder and Stakeholder Relations BA (Rhodes University), LLB (University of Cape Town), Fulbright Scholar, LLM in Intellectual Property Law (University of New Hampshire), MBA (GIBS), fellow of the CyrusVance Fellowship of the Bar Association of New York BA, HDE (Rhodes), BEd, MA (KZN), MBA (GIBS Pretoria) An admitted attorney, Ms Fikelepi completed her articles with Webber Wentzel, remaining at the firm until appointed a Senior Associate. She spent time as a visiting lawyer at Sullivan & Cromwell LLP and Goldman Sachs & Co in New York City where she worked on corporate finance transactions, mergers and acquisitions and intellectual property law contracts. In 2005 Ms Fikelepi joined the Department of Public Enterprises as Director: Corporate Finance Legal Advisor, in which role, among other responsibilities, she advised on various corporate finance transactions, including the unbundling of non-core SOC assets, and the ultimate establishment of SAA and Infraco as stand-alone SOCs. After her promotion to Deputy Director-General: Legal, Governance and Risk, she led and participated in the governance and oversight of SOC Boards. Prior to her present position at SAA, she joined Absa Bank in 2011 as Chief Operations Officer: Group Legal, where she focused on establishing, and implementing governance processes, legal management information, legal financial management, legal risk management, legal strategy and operations for Absa Legal. Ms Fikelepi has held board membership both in the public and private sector. Ms Jiya leads the Stakeholder Relations, Communication, Transformation, Environmental Affairs, and Corporate Social Investment functions at SAA. An experienced stakeholder relations and communication professional, she joined the SAA Group in October 2014, bringing 24 years working experience at senior management and executive level in stakeholder relationship management, marketing and communication, business development, public relations, fundraising and project management, in both the public and private sectors. Her work experience cuts across a number of industries, namely utilities (water and sanitation), low income housing finance, energy (petroleum and electricity), IT, public relations and education. Ms Jiya is also a Director of SchoolNet South Africa. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 19 Leadership (continued) NICO BEZUIDENHOUT (39) Chief Executive Officer Mango Airlines Mr Bezuidenhout joined Mango as one of the architects of its business case 12 months before the airline took to the skies. Appointed as CEO in 2006, he launched the airline into an unstable market, weathered the impact of the global financial crisis two years into its operation and achieved profitability in the majority of its completed full fiscals with an aggregate balance sheet over time indicating continued cash positivity and profitability. Mr Bezuidenhout led the creation and transformation of South Africa's youngest airline into one of the market's most wellloved airline brands. Recognised as a subject matter expert, Mr Bezuidenhout regularly speaks at conferences and seminars around the world, while continually driving innovation at home. Under his leadership Mango not only achieved profitability in record time, but also doubled its fleet and route network, grew market share, and established the most extensive distribution and payment method acceptance system in the industry with Mango continuing to occupy pole position in reputation, transformation and active social participation. Prior to his engagement at Mango, Mr Bezuidenhout launched SAA's first e-commerce platform following a successful career in the music industry, first as tour financial manager for Big Concerts and later as founding member and Chief Operating Officer of ticketing business Ticketweb. PHINDA NCALA (54) Chief Information Officer BSc (Management Information Systems) (Bridgewater State University, Massachusetts USA) Mr Kemp started his career at Transnet, working for the Spoornet and Autonet divisions. He subsequently joined SAA where he has filled various roles in the Human Resources and Operations fields over a period of 23 years. As an HR practitioner he has worked in general HR management and employee relations. In operations he has been responsible for cabin crew operations, operations training and in-flight services. He has been with AirChefs for the past two and a half years. Mr Ncala was appointed Chief Information Officer of SAA in December 2013. Prior to that, he spent three years as CIO at Neotel (2010), where he was a member of the executive team. Before joining Neotel, he worked at the MTN Group, which he joined through one of the operations at its start-up phase, remaining with the company as it grew into a well-established and profitable business. Beginning with the company in Swaziland, he worked at various operations in Africa as CIO, serving as a member of the executive team and on a number of committees. In 2005, Mr Ncala was seconded to MTN Uganda as CIO for a period of six years. Prior to 1998, he worked for various banks at management level within their information technology divisions. TLELI MAKHETHA (56) General Manager: Cargo ARSON MALOLA-PHIRI (54) Acting Chief Executive Officer: SAAT BCom (Unisa), LLB (Wits), Advanced Executive Programme (Unisa), Wolfson Programme (Cambridge) MSc (Finance), BCom (Accounting), Diploma in Business Studies An admitted attorney, Mr Makhetha was appointed GM of SAA Cargo in December 2010. He was previously with SAA Cargo as Executive Manager: Networks and Alliances and later Executive Vice President from 2001 to 2004. Prior to that, he has at various times served as Legal Advisor at JCI, Executive Manager: Fuel (Coal) Procurement at Eskom, Executive Director at Safair and Divisional Secretary (Aviation Division) at Imperial Holdings. Before re-joining SAA, he consulted to a number of organisations as a business coach. He has previously served on IATA's Cargo Committee for four years until 2014. Mr Malola-Phiri was appointed Acting CEO at SAAT in November 2015. He was previously with SA Express Airways as General Manager: Commercial and later General Manager: Regional Expansion. Prior to that, he served in various senior and executive roles at Standard Bank: Corporate & Investment Banking and Barclays Africa. MARTIN KEMP (47) Acting ceo AirChefs BCom (Unisa) 20 Nico Bezuidenhout, Martin Kemp SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 LEADERSHIP Tleli Makhetha, Phinda Ncala, Arson Malola-Phiri, Josua du Plessis, Aaron Munetsi JOSUA DU PLESSIS (42) Acting Chief Strategic Officer BSc (PUCHE), Hon. BSc (PUCHE), MCom (RAU) Mr Du Plessis has more than 20 years' experience in the aviation industry with a career spanning multiple areas that include Airline IT Systems, Airline Operations, Crew Scheduling, Global Operations, MRO and Group Strategy at South African Airways and Swiss Air. The last few years he has been managing multiple strategic projects including a Cost Compression programme for the Group. He is also the Head of the Project Management Office, which is monitoring the implementation of the Long-Term Turnaround Strategy. He is currently the Chair of the IATA Airline Cost Management Group. AARON MUNETSI (55) Acting General Manager: Commercial Diploma Airline Management (IATA), Executive Development Programme (University of Zimbabwe), Diploma Marketing Management (Damelin Management College), Strategic Management (WITS Graduate School of Management), LDP (Gordon Institute of Business Studies) Mr Munetsi was appointed as Acting General Manager Commercial in December 2015. For the previous five years he held the position of Regional General Manager - Africa and Middle East. He is responsible for all the Commercial activities that generate revenue for the airline. Aspects such as Sales, Revenue Management, Pricing, Distribution, Marketing, Network Planning, Alliances and Ecommerce form part of his portfolio. Over the more than 15 years he has been with the company he has held various positions in the Africa and Middle East region. He is known in the industry for his role in developing SAA's African footprint and operations on the continent. Mr Munetsi's aviation career spans more than 30 years. He is passionate about the development and growth of African aviation in general and SAA in particular. Mr Munetsi rose through the ranks, starting with sales and marketing roles in South Africa before he ventured abroad where he worked with Sharaf Travel in Dubai, who is SAA's GSA in the UAE. He then relocated to Nigeria where he served as SAA's Country Manager for four years. During that time, he motivated for the establishment of the Dakar route. He also negotiated and secured buy-in for the first ever commercial agreement between African airlines, which enabled SAA and Nigeria Airways to cooperate on the Lagos to New York route, a venture that proved very successful. Demand for his experience and knowledge of the continent saw Mr Munetsi take senior positions, such as Executive Manager for East Africa and West Africa, where he coordinated the growth and expansion of SAA's footprint in countries such as Ethiopia, Uganda, Tanzania and Kenya. In 2008 he took up the challenge of Regional Manager for North, West and Central Africa, where he managed the commencement of services to Gabon and Cameroon. He further proposed and led the negotiation for the introduction of intra-African operations, such as Libreville to Douala and the Accra to Abidjan route. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 21 Message from the Chair The Board and management of SAA are committed to building a solid foundation for SAA's future success and short- to medium-term stability. Every year we revalidate the Long-Term Turnaround Strategy (LTTS) and update our strategic plan to navigate the political, economic, and social environment in which we operate. Many of the challenges SAA faced in the 2015/2016 financial year, and going forward, are similar to those in 2013, when the LTTS was launched. However, there have also been considerable changes in our operating context. Volatility in the exchange rate, the drop in fuel price and an intensifying competitive landscape, are the most significant impacts on our environment. During the past three years implementation progress was achieved in many areas of the LTTS, but some of the major interventions required did not materialise including an equity injection and resolution on the State Aviation Holding Company. SAA still continued to experience changes in management with three acting CEOs and changes also occurring with the CFO, CSO, GM: Commercial, CPO. However, SAA was able to continue with the implementation of the LTTS and kept the momentum on the critical items as defined in the Corporate Plan. SAA continues to deliver excellent products and service, as is corroborated by the numerous awards the Group received during the year. Retention of SAA's 4-Star ranking for the 14th consecutive year demonstrates that the airline's place in the global aviation world is secure. SAA is an innovator and continues to invest in the latest technology to enhance passengers' experience. A number of new products and services were introduced during the year. Cost compression Cost Compression remained a key focus area and delivered pleasing results. Despite challenges in some areas of the business we reached our target with R1,1 billion saved. The two areas that contributed most to savings - negotiations of the extension of aircraft leases at lower rates and the renegotiations of engine contracts, both saving costs that will extend over three years. SAA will continue to optimise efficiencies throughout every aspect of the Company. Instilling a cost-conscious culture is essential as it is the most effective means of ensuring sustainable bottom-line results. The cost compression programme continues to focus on the cost of fleet, the cost of people, the cost of aircraft MRO as well as the cost of our capital structure. 22 The headcount rationalisation process was concluded in the year under review. A total of 336 people across SAA and SAAT, took voluntary severance packages. The process was successfully finalised without any employees being retrenched. The remediation of the route network and fleet plan gained traction. We took delivery of 10 A320s and will take delivery of new A330-300 aircraft. The rationalisation of two international routes, being Mumbai and Beijing had a positive impact on the airline's performance for the year. An extensive study of the current plan identified a wide range of improvement opportunities that will significantly curb losses and position the airline for future growth. The new routes added during the year are proving successful. In addition, SAA's reach continued to grow through the establishment of partnerships and code sharing. Aviation is a vital catalyst for Africa's economic growth and social advancement as it connects countries, markets and facilitates trade, connecting Africa to global supply chains. Optimising SAA's African network and improving interconnectivity on the continent are imperative to secure the airline's position as the leading African airline. We want to improve intra-African connectivity and see the continent contribute more to global aviation than the current 3 percent. SAA connects South Africa to its major trade and tourism partners and, in doing so, supports 34 000 jobs in our country, as well as contributing R9,2 billion, or approximately 0,3 percent to the country's GDP every year, based on the 2013 Oxford Study. The launch of the Accra Washington DC route and the agreement with Africa World Airlines, substantially strengthened SAA's presence in West Africa. Voyager's partnership with Ecobank to launch the first co-branded credit card in Ghana, will further increase our presence in West Africa. Transformation Despite the high barriers to entry in the aviation industry, SAA is committed to developing and supporting inclusive supplier sourcing and procurement. As national carrier we intend to lead transformation in South African aviation supplier development. In partnership with the Department of Trade and Industry (DTI) the airline will source potential suppliers and provide training and development. We are confident that the successful implementation of the new three-year SAA Supplier Development Programme will increase supply of consumables sourced from empowered enterprises by 50 percent by the end of 2018. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 LEADERSHIP The Board and management of SAA are committed to building a solid foundation for SAA's future success and short- to medium-term stability. Environmental responsibility We are very proud to be a frontrunner in the aviation industry in environmental sustainability. SAA is one of only two global carriers to have received Stage 2 recognition for the IATA Environmental Assessment Programme. SAA was also accepted as a member of the Swiss-based Roundtable on Sustainable Biomaterials. Our biofuels project, Project Solaris, which transforms tobacco oil to jet fuel, has since received the Roundtable on Sustainable Biomaterials certification, certified for environmental and social sustainability. This certification ensures that future fuels contribute to reductions in CO2 and are environmentally sustainable and contribute social and economic benefits to our rural economy where it is needed most. I would like to thank all our employees for their commitment, hard work and for remaining resolute in what was a difficult year at times. The support from all our stakeholders, the Board members and particularly from our Shareholder is much appreciated. D Myeni Chairperson South African Airways SOC Limited 18 September 2016 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 23 Leadership (continued) CEO Report The 2015/2016 year, started with a clear path ahead: the implementation of the 90-Day Action Plan, a roadmap designed to return SAA to relative stability and set the stage for full implementation of the LTTS. The 90-Day Action Plan comprised six pillars, including to immediately address the liquidity of the business, resolution of future funding, a full review of its high level governance framework, correction of governance defects, the reorganisation and optimisation of assets and the implementation of an effective communication plan. In response to the changing macroeconomic environment, SAA has developed a three-year Corporate Plan to support the achievement of its strategic objectives. This represents the practical implementation of the LTTS. The Corporate Plan projects a profit of R954 million at an EBITDA level to be achieved in year 2017/2018. The Corporate Plan is designed to build strategic awareness and create strategic alignment across the airline. The plan takes into account the key factors within the current operating environment, while providing focus and clarity on how SAA will achieve the five strategic objectives defined in the LTTS, in the next three years. These strategic objectives are set out on page 11 and our efforts in working to achieve them are described throughout the report. SAA's position of relative stability at year-end speaks to the success of the 90-Day Action Plan. Achieving stability will allow us to concentrate on building on our commercial activities going forward. Financial performance The performance for the year is pleasing in that despite the volatility of the rand, the airline posted an actual loss of R1,5 billion, not far off the budgeted R1,4 billion, compared to R5,6 billion in the previous year. This achievement irrespective of the unexpected currency volatility demonstrates the robustness of the budget and reflects its integrity. The tremendous pressure that the income statement has been under was somewhat relieved. Overall, results benefited from the decline in fuel price, lower impairment costs and foreign exchange gains. However, the dramatic depreciation of the rand countered gains from the drop in oil price. With a significant cost base in hard currency, the negative impact of the rand's weakness outweighs gains. The ZAR/USD exchange rate declined by 23 percent compared to the average in the previous year. This has a significant impact, with 57 percent of the Group's operating costs denominated in foreign currencies. The currency is not expected to recover to previous levels in the near-term. We will be investigating initiatives to ease the Group's exposure and increase revenue in hard currency. The drop in the oil price has also intensified difficulties in repatriation of money from some of the oil-rich African countries in which we operate. IATA is playing an active a role in addressing the issue and SAA has nominated a member of the 24 finance department to be elected to the IATA Treasury Group, which is dealing with the issue. SAA has also made satisfying inroads by engaging directly with the governments in these countries. A related issue, although not one with a material impact as yet, is fuel shortages at some destinations on the African continent. The Cost Compression Programme entered its fourth year. SAA achieved the targeted R1,1 billion cost saving bringing the accumulative result of R3,3 billion for the four years. SAA relies heavily on guarantees from the government as the Company is undercapitalised. While SAA is appreciative of the government's guarantees, the unintended consequence is that when the interest rate goes up this will have considerable impact on the balance sheet. In the year under review, R861 million was paid in interest. SAA is looking at initiatives to reduce interest and for now we continue to focus on improving revenue. Number one priority Safety is of paramount importance in the aviation industry. Our safety record is recognised as among the best in the world, and is the best in Africa. We continually strive to maintain our standards focusing on quality assurance and other measures that contribute to the safe flying of our fleet. Taking cognisance of what has happened around the world in the last few years, we continue to hone our focus on the safety of our passengers and products. SAA also recognises the importance of cyber security and is cooperating with the necessary security agencies in South Africa and internationally. Recognition of excellence SAA is recognised globally not only for its proud safety record but also for its quality customer service, and the airline received a number of awards during the year under review. Awards demonstrate that the airline can rightfully stand its ground as one of the leading airlines in the world, despite the challenges it faces. Awards also engender a sense of pride in the airline from customers and airline employees alike. The long list of awards, which SAA wins annually, spans a spectrum of disciplines, from Best Airline in Africa, for on-board catering to service delivery. The airline has retained its 4-Star ranking for 14 years in a row, and was awarded Best Airline in Africa for 14 consecutive years at the Skytrax Awards. Feedback from SAA's customers also ensured that SAA walked away with the award for Best Airline Staff in Africa for the fourth time. Mango, SAA's low-cost carrier, received the award for Best Low-Cost Airline in Africa. Subsidiary SAA Technical won the prestigious title as the Best Line Maintenance Provider for 2015 at the annual Aircraft Technology Engineering and Maintenance Awards. SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 LEADERSHIP Our safety record is recognised as among the best in the world, and is the best in Africa. Looking ahead In the year ahead we are expecting five new aircraft that are more fuel-efficient. We remain committed to improving our global reach either with our own aircraft or through partners such as Star Alliance. We believe that there is the potential to expand our network and will consider new routes as opportunities arise. Thank you I would like to thank our employees for their commitment to ensuring that over this difficult year our customers continued to receive the best products and services and that the airline continued to meet demand. SAA remains a multi award winning airline and an innovative company. Our achievements this year are testament to all that our employees bring to the Company. M Zwane Acting CEO South African Airways SOC Limited 18 September 2016 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 25 26 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 PERFORMANCE OVERVIEW 27 Performance Overview SAA Commercial 28 SAA Operations 32 SAA Voyager 36 SAA Cargo 38 Subsidiaries SAA Technical 40 Mango 42 AirChefs 44 SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 27 Performance Overview Performance against the shareholder compact Each year, in consultation with the shareholder, SAA agrees on its performance objectives, measures and indicators, as well as annual targets, in line with the Public Finance Management Act, 1999. SAA Commercial 2015/2016 Highlights Revenue increased Passenger numbers just short of last year Improved yield Reduced costs Created ancillary revenue streams New Routes: Accra - Washington, Abuja Increased frequency: Harare, Mauritius Additional Alliance partners Customer service starts with the first interaction with the customer, which is the realm of the sales and marketing departments. Network and scheduling contribute to customer service providing inter-connectivity between network segments and routes that meet customers' needs. The fleet plan needs to take into account modern technology and the consumer product preference. The network plan feeds into the day-to-day operations of the airline and is a key contributor to on-time performance overall. Safety is of paramount importance. Overview of 2015/2016 SAA Commercial is the revenue-generating centre of the Company. The key objectives of the division are the strategic utilisation of SAA's resources to effectively capitalise on the market and actualise the corporate plan. Operationally SAA Commercial achieved important milestones that have bolstered SAA's long-term sustainability. Management is optimistic that the airline has turned a corner and will begin to deliver improved results year-on-year. SAA Commercial operates through three key departments: Sales Revenue Management Network Planning SAA Commercial's performance in the 2015/2016 year was commendable, given the difficult global economic environment. Competition remained fierce with continued pressure on airfares, with no annual increase despite exchange rate fluctuations. SAA operates in a commoditised market in Africa. In 2015/2016 this was exacerbated by excess capacity stemming from the impact on our trading markets following the decline of the commodities market and the decreasing oil price. Domestically, the weak rand took its toll on out-bound traffic. In the first quarter the new visa rules relating to children travelling caused a drop in international travellers to South Africa. Supported by: Marketing Ancillary revenue Alliances - utilising relationship to add revenue Product development Strategic focus Network planning is an integral part of an airline's revenue generation capabilities. It defines the product offering, cost structure and revenue potential. It determines the most efficient use of the fleet, capitalises on partnership agreements and opens new growth markets. SAA Commercial has a central role to play in strengthening SAA's strategic position in Africa to capitalise on the rapid economic growth on the continent. 28 SAA Commercial is a key contributor maintaining the airline's competitive advantage in Africa by continuous optimisation of schedules and introducing intercontinental destinations. Challenges in some of the markets in South America had a significant impact on our performance. The positive effect of network changes and optimisations are evident in SAA's operating performance for the year under review compared to the previous year. This was achieved mostly through the elimination of loss-making routes and an SOUTH AFRICAN AIRWAYS GROUP INTEGRATED ANNUAL REPORT FOR THE YEAR ENDED 2016 PERFORMANCE OVERVIEW increased sales effort. The drop in the oil price provided some relief although it was offset by currency weakness to some extent. During the year SAA celebrated 80 years of flying to Maputo, Mozambique and 20 years of flying between Johannesburg and Dar Es Salaam, Tanzania. Network plan In the 2015/2016 financial year, SAA significantly strengthened its position in West Africa, with the introduction of a flight from Accra, Ghana to Washington DC, USA. A solid network plan is the most important enabler in the aviation industry. This spans destinations, scheduling and equipment. As part of the 90-Day Action Plan SAA reviewed and optimised its Network and Fleet Plan to ensure commercial sustainability. The revised plan is intended to strengthen SAA's competitiveness in a price sensitive market, entrench the airline in fast growing African markets and leverage partnerships to maintain intercontinental service offerings. The recommendations of the new fleet plan include equipping SAA and Mango with appropriate fleet solutions that increase market competitiveness. The new A330 aircraft, which are in production, will provide an effective m