ANNUAL REPORT 2012 We fly for you

1. ANNUAL REPORT 2012We fly for you

2. Flight Plan Objective of Presentation • This presentation is intended to table the Annual Report of 2012 to the Portfolio Committee for their approval and to submit it for approval to Parliament • Leadership • Sustainability • Corporate Governance • Financial Performance • Performance against Set Objectives

3. Overview of the Year

4. Leadership Board of Directors Company Secretary Audit and Risk Committee Human Resources and Remuneration Committee Safety, Health and Environmental Committee Social and Ethics Committee Executive Committee Chief Executive Officer Chief Financial Officer Human Capital Customer Services and Marketing Africa Expansion Technical Maintenance Strategy and Revenue Management Operations and Cargo Chief Information Officer Risk and Compliance

5. SA Express Network 19 Domestic Routes 7 Regional Routes 6 New Routes Planned

6. Key Sustainability Challenges 2012 FY • Pressure on profitability – costs (fuel, legislated tariffs) • Economic downturn – reduced passengers • Internal control – improved • Consumer Protection Act – the industry codes • Human Resources – cost • Cargo – not enough capacity • Climate change – fuel burn • Customer relations – delays

7. Passenger Revenue • Passenger Revenue Budget has been met for the first time in 5 years and passengers carried exceeded the number carried in 2009 (previous highest)

8. On Time Performance • Reliability has improved with OTPincreasing by 3% • SAX has been rewarded for the second year with the Bombardier Reliability Award for Africa

9. Skills Development 2011/12 Training - in line with NGP • Pilots 28 Trained • Apprenticeship – 33 Trained • Learnerships: Experiential Learners – 11 Trained , ACCA – 10 Trained • Development programmes: MDP – 33 Trained , SSP – 80 Trained • SA Express had 1 090 • employees as at yearend • The demographics are • 59% black and 41% white, • 36% is female and 64% male • Scarce skills (pilots and technicians) • remain a challenge

10. Governance • Internal Control weaknesses are being addressed especially within the finance department, and the Risk department will be monitoring the compliance with frequent audits • The company is committed to maintaining high standards of corporate governance and acknowledges that good governance is integral to a successful enterprise and critical towards business integrity, it therefore has instituted and maintains: • Separation of powers and responsibilities; • That this ensures appropriate balance between the Board and Management; • Independence; Fairness; • Accountability to the shareholder with regards to governance and KPIs; and • Ultimate responsibility

11. Shareholder’s Compact 2012 FY

12. Page 12 Portfolio Committee Presentation – October 2012 4 • Financial Overview and Synopsis

13. Financials: Income Statement

14. Financials: Balance Sheet

15. Financials: Cashflow

16. Financials: Major Costs • The increase in Employee cost is due to the Pilots agreements with the escalation rates higher than inflation rate and Pilots account for 45% on the Employee costs. • The increase in Aircraft Leases is due to the sale of older aircraft replaced with leased options. • The increase in Service Orders and Heavy Maintenance is due to additional maintenance work required on older aircraft in the fleet. • The increase in Navigation and Flight services is due to the change form smaller aircraft to larger aircraft and an increase in the rates.

17. SAX Audit Opinion – Disclaimed and Audit Findings

18. Financials: Liquidity and Solvency Position Current Ratio - indicates that the company is able to meet its Short term obligation even though they have increased, with the acid ratio indicating that the company will only be able to meet a certain portion of the obligations. Debt/ Equity Ratio - The company has a high D/E ratio as a direct result of the reported loss of R313m when compared to prior year’s results. Debt Ratio - The high debt ratio has lowered the company’s ability to attract investment, the company is working to towards the reduction of such to ensure more favourable borrowing terms. Equity Ratio - When compared to prior year, the lower recorded equity ratio is due to the substantial loss recorded in 2012 of R313m when compared to that of R186m in 2011.

19. ANNUAL REPORT 2013We fly for you

20. Operational Performance Overview 2013 FY

21. Leadership Board of Directors Company Secretary Audit and Risk Committee Human Resources and Remuneration Committee Safety, Health and Environmental Committee Social and Ethics Committee Executive Committee Chief Executive Officer Chief Financial Officer Flight Operations Human Capital PMO • Reduced Executive Structure Technical Maintenance Commercial Ground Operations Risk & Compliance

22. Key Sustainability Challenges • Pressure on profitability – costs (fuel, legislated tariffs) • Economic downturn – reduced passengers • Internal control – improved • Human Resources – Employment costs (Pilots ) • Customer relations – delays • Aircraft– Aged Fleet/ Aircraft Maintenance Costs

23. Shareholder’s Compact 2013 FY

24. Human Capital – SA Express The headcount at the end of March 2013 stood at 1,126 and the figures below shows the demographic split; indicative of the rapid transformation. Challenges are still existent in leveling the gender inequalities in our demographics.

25. Page 25 Portfolio Committee Presentation – October 2013 4 • Financial Overview and Synopsis

26. Overall Performance – Income Statement

27. Overall Performance – Income Statement cont… Revenue • Turnover - for the year to date has increased by 14% compared to prior period and due to a 13% increase in average fare, which has impacted passenger revenue with a positive variance of R 141 million. • Growth & Demand - The passenger revenue growth in both domestic and regional routes indicates that there is still demand to grow further.

28. Overall Performance – Major Operating Expenses • The increase in Normal Time is due to the filling of key positions within the organisation and the change in rates for employees. • The increase in Aircraft Leases is due to the smoothing and is used to the effect of levelling out payments made over the contract period. • The increase in Service Orders is due to additional maintenance work required on older aircraft in the fleet

29. Overall Performance – Balance Sheet

30. Financial Position – Liquidity and Solvency Ratios

31. Cash Flow Statement

32. Changes in Accounting policies and Estimates • Correction of 2011 AFS Reconstruction - The correction affected the aircraft line; increasing the total asset balance. The correction of prior period errors amounted to R66.48m in turn, increasing the depreciation expense by a further R46.04m and lowering the profit on sale of assets by R20.44m (Negative impact of R66.48m in Income Statement) • Change in accounting policy (Retrospective) – The change affected FMPs; asset and liability were created to comply with IFRS which resulted in an effective increase of R12.05m on the FMPs expenses. (Positive impact of R12.05m in Income Statements) • Change in accounting estimate (Prospective) – The change affected the aircraft line with residual values set at 13%, resulting in lower depreciation being realised. (Positive impact of R2.2m in Income Statements) • Correction of Commitments in Line with IFRS treatment (Prospective) – The operating leases of the aircraft were correctly treated on straight line basis. (Negative impact of R41.58m Income Statements) • Recognition of the Deferred Tax Asset – Based on the current operating capabilities the company has projected to improve its profitability in future based on the current strategy and funding plan. It is therefore probable that future profits will be used against Assessed Tax losses. (Positive impact of R158m in Income Statements)

33. Annual Report - Audit Opinion Analysis

34. Balance Sheet Optimisation and Future Funding Plan • The Company has targeted 134% Gearing Ratio based on the Funding plan • The current available on Balance Sheet Funding Options are as follows: • Revolving facility of R100 million to be secured by end of October 2013 against the current Government Guarantee and funding maintenance requirements • Restructure of existing liabilities by clears unfair covenants • Tax Assessment refundable from SARS of about R100 million • Standard Bank investment maturing in 2015 of R75 million • Option to Sale and leaseback of unencumbered SA Express 4 aircraft for amount of R65 million • Dismantle owned aircraft and use the components as Inventory • Funding of optimal inventory levels • Also Company is in process on getting alternative funding by; • Obtaining the credit rating • Reviewing alternative funding options like commercial papers issuance

35. SAX 20:20 Strategy The strategy aims to assess, review and define a new business model that will improve the sustainability of the organisation into the next 20 years. It analyses every aspect of the business; identifies strengths, weaknesses, opportunities and threats in each area; and clearly defines short-, medium- and long-term actions for the next 10 years.

36. Update on Ministerial Directives In progress / Ongoing Completed

37. Way Forward – Board Plans 2013/14 FY

38. Thank you