His Majesty Sultan Qaboos bin Said - Oman Air behalf of the Board of Directors of Oman Air, it gives...

His Majesty Sultan Qaboos bin Said

As the Sultanate of Oman makes rapid strides forward in all spheres such as tourism, Oman Air has taken off on an ambitious growth strategy in our endeavour ‘To Become The Best’. It will see us expand our existing international network even further, increase the strength of our fleet, fly even more passengers to more destinations than ever before.

As a result, thousands of guests will have the opportunity to experienceOman Air’s award-winning services and the welcoming Omani hospitality.

As the national carrier, we will continue to strive harder to be the first choice airline and keep the Sultanate’s flag flying higher, as we continue our journey of excellence.

To Become The Best

Annual Report 2015 Annual Report 20154 5

ContentsOur Board of Directors …………………………………………………………. 08

Chairman’s Statement …………………………………………………………… 10

Chief Executive Officer’s Statement ………………………………………….... 14

Our Core Team…………………..……………………........................................ 18

Management Discussion and Analysis…………………..…………............… 40

Auditor’s Report on Corporate Governance…………………..……..............… 46

Corporate Governance Report…………………..…………………………........ 47

Auditor’s Report on Financial Statements…………………..……….............…. 52

Statement of Financial Position…………………..………………………........... 54

Statement of Comprehensive Income…………………..……………............… 55

Statement of Changes in Equity……….…………………..………….........…… 56

Statement of Cash Flows………………….…………………..……………….... 57

Notes to the Financial Statements………………….………………............…… 58


Our Board of Directors(Sitting from left to right)

H.E. Maitha bint Saif bin Majid Al MahruqiDeputy Chairman - Undersecretary of the Ministry of Tourism

H.E. Darwish bin Ismail bin Ali Al BulushiChairman of the Board - Minister Responsible for Financial Affairs

Major General Sulaiman bin Mohamed Al HarthyDirector - Assistant Inspector General of Police and Customsfor Administrative and Financial Affairs

H.E. Mohsin bin Khamis bin Ghulam Al BalushiDirector - Advisor of the Ministry of Commerce & Industry

(Standing from left to right)

Sheikh/Nasser bin Sulaiman bin Hamed Al HarthyDirector General of Investments, Ministry of Finance

Dr. Mohamed bin Ali bin Mohamed Al BarwaniDirector - Chairman, MB Holding

Eng. Ahmed bin Said bin Salim Al RawahiAdvisor to H.E. The Minister of Transport & Communicationsfor Civil Aviation Affairs

Mr. Vasudevan ThulasidasDirector - Aviation Expert (Advisor to the Board)


On behalf of the Board of Directors of Oman Air, it gives me great pleasure to welcome you to the 34th Annual General Meeting and to present to you the Annual Report for the financial year ending 31st December 2015.

The ambitious programme of expansion upon which Oman Air first embarked in the fourth quarter of 2014 is now well underway. Guided by a development plan which was endorsed by the Board of Directors in 2013, the programme has accelerated and has, overall, delivered very positive results.

Central to Oman Air’s expansion has been the continued increase in the size of our fleet and, over the last 12 months, we have seen the arrival of nine outstanding new aircraft. These have included Oman Air’s first two Boeing 787-8 Dreamliners. Widely regarded as the most innovative airliners in a generation, the Dreamliners have provided a welcome enhancement to our long haul fleet. They have underlined the reputation for quality, comfort and reliability that was established by our Airbus A330s and were warmly welcomed by customers following their introduction to our Frankfurt route in October 2015.

Our short and medium haul fleet has also been boosted by the arrival of additional new Boeing 737s. The adaptability of these aircraft, their ability to operate effectively within a broad range of climatic conditions and the onboard comfort that they offer have seen these rugged aircraft become the backbone of Oman Air’s fleet.

As our fleet grows in size, the onboard comfort that it offers is benefitting from a range of improvements. The new aircraft offer the very latest seats in every class, together with state-of-the-art IFE technology. Our older aircraft are steadily being retrofitted with interior products that match those on the new aircraft, ensuring a consistent passenger experience throughout.

Such fleet expansion has enabled Oman Air to increase the size of our network, and in 2015 we were pleased to launch new services to Singapore, Goa and Dhaka. We were also able to offer more frequencies on a number of our established routes and all 11 of our Indian routes are now served by daily or double-daily flights. Additionally, Oman Air has also increased its weekly frequencies throughout its European destinations as follows: Frankfurt from 6 to 7, Munich and Milan from 4 to 7, Zurich and Paris from 4 to 5. Furthermore, we have worked hard, with our partners at Muscat International Airport, to improve connections and customers are now enjoying reduced waiting times and greater convenience.

Oman Air’s capacity has, therefore, increased significantly over the last year. Available seat kilometres (ASKs) have increased by approximately 35 per cent to over 20.5 billion, whilst flight movements increased by more than 6,000 to nearly 48,000, compared with 2014. The number of round trips Oman Air offered in 2015 rose to well over 28,000 from the previous year’s 23,563.

Chairman’s Statement


I am pleased to inform you that, as a result of this enhanced capacity, Oman Air has experienced a major increase in the number of passengers we carried in 2015. More than 6.3 million customers flew with Oman Air in 2015, compared with just over 5.1 million in 2014. This growth is a major achievement which illustrates that our strategic planning is broadly producing the desired results.

I am also pleased to report that positive progress is being elsewhere within our company. The amount of cargo that Oman Air handled in 2015 increased from less than 125,000 tonnes to approaching 140,000 tonnes and our catering operation prepared nearly 900,000 more meals in 2015 than in 2014. Furthermore, extensive work continues to improve the efficiency and effectiveness of every area of our business.

Challenges remain, however. For example, net yield with respect to revenue per kilometre (RPK) fell by a little over 14 per cent across our network. Whilst this reflects the need for highly competitive price setting within the airline sector, together with our rapid growth in capacity, the situation is already stabilising. With continued work in this area, yields will in time exceed their previous level.

Oman Air does not, of course, operate in isolation and global economic changes can have a significant impact on our work. Significant among the changes witnessed in 2015 was the major drop in oil prices. This has affected Oman Air in two very different ways.

The fall in oil prices has been mirrored by a fall in aviation fuel prices. Accordingly, Oman Air has paid lower prices for our fuel, enabling us to reduce the company’s losses. This, together with the major increase in the number of passengers carried, the amount of cargo handled and the continued development of ancillary revenues, has put Oman Air on a positive financial footing in 2015. It gives me great satisfaction to announce that Oman Air’s revenues for the last financial year increased to OMR 465.971 million – a 14.1 per cent increase on 2014’s figures and a higher level than at any previous time in our history. In parallel, we have been able to reduce our losses for the second year in a row and by the end of 2015 they stood at OMR 86.333 million. This is a 21.2 per cent reduction compared with 2014.

There is, however, a darker side to the fall in oil prices, namely the impact on the economy of the Sultanate of Oman. Oman’s oil resources provide a vital income stream for the country and the fall in prices continues to have a significant effect on our exchequer. As the proud national airline of our country, we are determined to make the greatest possible contribution to Oman’s prosperity. I am therefore pleased to say that the level of support provided to Oman Air by the Government was reduced in 2015 to OMR 54 million. Furthermore, our increased revenues, continued expansion and lower financial loss have meant that we are able to request a further reduction in the level of financial support for the coming year. Oman Air remains on track to achieve its stated aim of reaching an operational break-even point by the end of 2017.

I am also pleased to say that Oman Air’s contribution to the Sultanate of Oman extends beyond the purely financial. We are committed to reflecting the rich culture and time-honoured heritage of Oman both at home and overseas and we play an instrumental role in promoting the Sultanate as a warmly hospitable destination for both business and leisure travellers. Furthermore, as one of the country’s largest employers, we continue to make an important investment in enhancing the skills, experience and capacity of Oman’s workforce. In 2015, we expanded our programme of recruiting Omani pilots, participated in a range of educational initiatives which aim to develop the Omani business leaders of the future and supported the growth of the Sultanate’s SME (small and medium sized enterprise) sector. Furthermore, in accordance with the decree issued by His Majesty Sultan Qaboos bin Said, we have reaffirmed Oman Air’s commitment to Omanisation. While we value our diverse and international workforce, we are also proud that by the end of 2015, 62.67 per cent of our employees are Omani citizens. As Oman Air continues to expand, we will do all in our power to increase this figure over the coming years.

The year 2015 was the first full year in which Oman Air’s Chief Executive Officer, Paul Gregorowitsch, has helmed the company. Having made an impressive start in the second half of 2014, Paul has continued to lead Oman Air with vigour, vision and clarity. His experience, expertise and organisational ability are transforming Oman Air, in terms of both its operational activity and its business culture. As a result, we are becoming a leaner, fitter and more effective company well-prepared for sustainable success. On behalf of the Board of Directors of Oman Air, I would like to thank him for his invaluable contribution.

I would also like to take this opportunity to thank my esteemed colleagues on the Board of Directors, the Executive Committee and the Audit Committee. They have provided essential support and advice to the management of Oman Air, helping to continue and expand Oman Air’s year-on-year success.

Finally, I would like to thank His Majesty Sultan Qaboos bin Said and his Government for their invaluable advice, timely encouragement and wise guidance. My colleagues on the Board and within Oman Air’s management join me in expressing our gratitude to His Majesty for his vision, his kind benevolence and his support.

Darwish bin Ismail bin Ali Al Bulushi Chairman, Oman Air


2015 was my first full year as the Chief Executive of Oman Air and it has been one of intensive activity on all fronts.

The year has been both challenging and rewarding. However, due to the hard work and commitment of each of the company’s 6,733 members of staff, Oman Air has been able to make significant progress on its journey ‘To Become the Best’. My gratitude goes to all for their invaluable contributions.

Guided by the vision of His Majesty Sultan Qaboos bin Said, the trust and confidence of our respected Board, and the leadership of our Chairman, Oman Air is spreading its wings further than ever before.

The highest quality of air travel has been provided for 6,365,780 guests during 2015 – an increase of more than 1.3 million guests compared with the previous year. The number of available seat kilometres increased in 2015 to 20,597 billion and the number of flight movements operated grew to nearly 48,000.

Such increases in Oman Air’s passenger services have only been possible as a result of the airline’s continued, ambitious fleet and network expansion programme. This was first launched in the fourth quarter of 2013, at which point the fleet strength stood at 30 aircraft. In 2015 alone, Oman Air has taken receipt of nine new aircraft and the airline remains on course to operate 70 aircraft by 2020.

Of the aircraft delivered in 2015, one was an Airbus 330-300, two were Boeing 737-800s, four were Boeing 737-900ERs and two were Boeing 787-8 Dreamliners. Each is a superb aircraft in its own right, but Oman Air’s first two Dreamliners are worthy of special note. They offer extraordinary levels of style and comfort for long haul passengers. Furthermore, their unique technology and innovative engineering have ensured that the aircraft has fast become an icon of 21st Century air travel. It was a proud moment for all at Oman Air when we saw our first Dreamliner take off for Salalah, before entering scheduled services to Frankfurt in October.

Chief Executive Officer’s Statement


The growing fleet has enabled the launch of some important new routes in 2015. On 29th March a new service was unveiled to the world-renowned leisure destination of Goa – the company’s 11th destination in India. Three days later Oman Air’s first flight to Singapore took off, signifying the start of a much-anticipated daily service. And on 26th October, a new service – Oman Air’s second to Bangladesh - was opened to Dhaka.

Frequencies on a number of established routes have also been increased. All Oman Air’s Indian destinations are now served by daily or double-daily services, following a very positive response from the Indian Government to the company’s proposals. A fifth weekly service to Paris has also been launched and work to introduce a second daily service to Heathrow will come to fruition in 2016.

Significant growth has also been reported in other areas of the business. Notable amongst these was the increase in cargo tonnage handled by Oman Air. The cargo operation has also benefitted from a Joint Venture that Oman Air agreed in April 2015 with Luxembourg-based full freighter specialist Cargolux.

Such expansion, together with the effects of the company’s intensive ‘Shape and Size’ efficiency programme, have had a healthy impact on Oman Air’s financial performance in 2015. Over the last year, the business has increased its total revenues by 14.1 per cent to OMR 465.971 million. The losses that have been made in 2015, largely the legacy of major investment in new aircraft, have been reduced by 21.2 per cent to OMR 86.333 million. As a result, the company has been able to request a significantly lower level of financial support from the Government of Oman for the forthcoming year.

Oman Air therefore remains on course to achieve an operational break-even point by the year end 2017, in line with the company’s agreed plan. At that time, the airline will be in a strong position to make an even greater contribution to the economic and social growth of our nation.

However, the rewards of expansion have not only been financial. Building on Oman Air’s record for winning international awards for the quality of our products and services, the company has been pleased to accept a number of prestigious accolades in 2015. These include ‘Best Airline Staff Service in the Middle East’ at the World Airline Awards, and ‘World’s Leading Airline Economy Class 2015’ and ‘World’s Leading Airport Lounge – Business Class 2015’ at the World Travel Awards. In addition, Oman Air won ‘Best Business Class Airline – Middle East’ at

the Business Destinations Travel Awards, four categories at the Oman Airports Management Company Second Annual Awards, and Corporate Social Responsibility Initiative of the Year at the Aviation Business Awards.

Finally, please allow me to express my highest appreciation and gratitude to all our valued customers for the confidence they have placed in Oman Air, and for their loyalty to the airline. By continuing to choose Oman Air, they will ensure that our company achieves its key aspirations: ‘To Become the Best’ and remain the ‘Airline of First Choice’.

Paul Gregorowitsch Chief Executive Officer


Our Core Team(Sitting from left to right) Japeen Shah – Chief Financial Officer

Abdulrahman Al Busaidy – Chief Operating Officer

Paul Gregorowitsch – Chief Executive Officer

Salim bin Mohammed Al Kindy – Chief Technical Officer

Captain Ali bin Hassan Sulaiman – Chief Officer Flight Operations

(Standing from left to right)

Eng. Abdulaziz bin Saud Al Raisi – Chief Officer Management Affairs

Sheikh Ahmed bin Himyar Al Nabhani – Chief Officer Support Services

Andrew Walsh – Chief Officer Service Delivery

Dr. Rashid bin Mohammed Al Ghailani – Chief Officer Human Resources

Mohammed bin Mubarak Al Shikely – General Marketing Manager


Oman Air’s contribution to the GDP of Oman

by

Well supported by Oman Air’s well-connected network, tourists visit the Sultanate of Oman to explore what our beautiful nation has to offer. From discovering the rich arts and crafts in the souqs of Oman to experiencing the cultural heritage and partaking in outdoor adventures like scuba diving, snorkelling and rock climbing, Oman delights the heart and senses.

By 2022, Oman Air’s overall contribution to the nation’s GDP is forecast to rise to OMR 1.1 billion. Meanwhile, the overall contribution of the travel and tourism sector to the GDP in Oman is expected to grow to OMR 1,762.2 million (5.8% of the GDP) in 2015 fromOMR 1,697.5 million (5.7% of the GDP) in 2014.

Tourism grows leaps and bounds

Om

ani R

ials

(In

Mill

ions

)

1100

1000

900

800

700

600

500

400

300

200

02011Year 2014 2022

420

1100

333


As tourism grows, job opportunities increases in all related industries patronised by tourists. It is slated to get better by 11.0% in 2015 to 49,500 jobs (2.9% of total employment) from 44,500 jobs in 2014 (2.8% of total employment). Oman Air plays a significant part in both directly and indirectly taking the employment opportunities to a higher level and bringing out the best in people.

opportunitiesBetter employment Employment Opportunities

Em

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37000

44500

4950050000

45000

40000

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300002013Year 2014 2015


Investment in Travel and Tourism

As seen in many countries and cities, developing the infrastructure is extremely important for developing tourism and brings in long-term rewards.

In Oman, the investments were slated to rise by 10.3% toOMR 294.5 million in 2015 from OMR 267.0 million in 2014. New infrastructure investments increase, particularly around the expansion of the Muscat International Airport designed to handle 12 million passengers. Several mega tourism projects such as the Duqm frontier town and Ras Al Hadd development are taking shape.

This would change the course of tourism for the betterin the country.

the best rewardsInvestments bring out

Om

ani R

ials

(In

Mill

ions

) 267

294.5300

200

1002014Year 2015


According to the United Nations World Tourism Organisation (UNWTO) Travel Barometer, Oman is ranked among the top 17 of the world’s fastest growing tourism destinations, being the only GCC and Arab country to be listed. The number of tourist arrivals more than doubled in 2015 to around2.6 million from 891,000 tourist arrivals in 2005.

The increasing visitor spends on hotel stay, travelling, shopping and dining, benefits the national economy. Tourist spends were slated to grow by 6.0% in 2015 from OMR 743.8 million in 2014.

Oman Air is constantly expanding its network from over 45 international destinations, to bring in more people to experience all that Oman has to offer.

get even betterVisitor exports Visitor Exports

710.05

743.8

788.4800

780

760

740

720

700

680

660

640Year 2013

Om

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ials

(In

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2014 2015


With the growth in tourism, passenger arrivals at Muscat International Airport stood at 5,212,769 while it was 498,810 at Salalah International Airport in 2015.

To cope with the rising demand, Oman has been witnessing rapid expansion works at the Muscat International Airport which is slated to be completed by the end of 2016.The opening of the Salalah International Airport in June brought special joy as an Oman Air flight touched down, followed by the Boeing 787-8 Dreamliner in October.

Striving harder to become the best, our Cargo Division launched their freighter services in association with Cargolux, one of the largest all-cargo airlines in Europe with a global network, registering a growth of 35% in tonnage.

passenger and cargo handling

Excelling in


We pay meticulous attention to every detail, right from on-time performance, spaciousness of our wide-bodied aircraft, comfortable business class seats to excellent cuisine and unmatched customer services - your satisfaction is our best reward. Indeed, our achievements drive us to work even harder to become the best.

global recognitionWinning

• ‘World’s Leading Airline Economy Class 2015’ and Oman Air’s lounge at the Muscat International Airport was also named ‘World’s Leading Airport Lounge – Business Class 2015’ at the World Travel Awards 2015

• ‘Middle East’s Leading Airline - Business Class’ and ‘Middle East’s Leading Airline – Economy Class’ at the World Travel Awards 2015

• ‘Best Airline Staff Service Middle East’ at the World Airline Awards

• Corporate Social Responsibility Initiative of the Year at the 9th Aviation Business Awards 2015

• Best Business Class Airline 2015 – Middle East at the Business Destinations Travel Awards

• Oman Air’s Business Class Seats awarded Chicago Athenaeum Museum’s ‘Good Design Award’

• Best Airline Operating to and from Chittagong by Bangladesh’s Bureau of Manpower, Employment and Training Centre

• Best International Airline 2015 at the North India Travel Awards

• Oman Air’s Inflight Magazine ‘Wings of Oman’ received ‘Best In-flight Magazine’ award at the World Marketing Congress, Mumbai, India 2015

• Oman Air’s Website omanair.com acclaimed as one of ‘The Best Airline Website Designs’, by leading international design magazine Onextrapixel

• 2nd place for being the ‘Best Arabian Airline’ at the ITB 2015 Go Asia Award

• One of the top five airlines by number of passengers carried at Muscat International Airport and one of the top three airlines at Salalah International Airport - Oman Airports Management Company Second Annual Awards 2015


Oman is gradually ascending several notches higher as a must visit place on the tourists list. Tourists from all over the world would like to experience first-hand the potpourri of delights that Oman has to offer from pristine beaches, majestic forts, natural springs, unending sand dunes and so much more.

Our footprints now span over 45 international destinations, connecting people, business and opportunities all over the world. We added new destinations of Singapore, Goa and Dhaka, offering our customers even more choice within our continually expanding network. On the domestic front, Oman Air continues its daily return flights from Muscat to Salalah, Khasab and Sohar.

even furtherSpreading our wings


AIRBUS A330-300 BOEING 737-900AIRBUS A330-200 BOEING 737-800 BOEING 737-700 EMBRAER 175

BOEING 787-8 DREAMLINER

The addition of two Boeing 787-8 Dreamliners is a dream come true for our passengers. It features Oman Air’s newly designed, spacious and comfortable Business Class and Economy Class cabins, which ensure a relaxing and enjoyable flight. In addition, it offers the latest inflight entertainment technology, inflight connectivity with WiFi and Mobile Phone services, delicious inflight dining and, of course, our world-renowned Omani hospitality. Our fleet strength now rises to 40 aircraft in 2015. We are all set to reach even greater heights of around 57 aircraft by the year 2018 and 70 by 2020.

in the skiesComfort


In keeping with the vision of His Majesty Sultan Qaboos bin Said, we continuously invest in local talent. Our drive to recruit Omani pilots is bearing fruit. 21 Omanis joined the Cadet Training Programme to be part of our journey to become the best. Following successful completion of their training, each new pilot will become an invaluable asset of the airline. They therefore represent an investment not just for Oman Air but for the future of Oman. Meanwhile, we have achieved 62.67% Omanisation during 2015.

in local talentBringing out the best


We strive to make a difference to society by supporting people with special needs, as well as encouraging small and medium-sized enterprises (SMEs). Our environment-friendly initiatives go down to our Boeing B787-8 Dreamliners that reduce fuel and noise levels on long haul flights. Moreover, we promote sporting activities from football and sailing to rally driving and golf and aim to keep the Sultanate’s flag flying high.

*Details provided are from published sources.

to the societyCommitment


Review of Financial Performance Key Performance Indicators

28,270Round trips

6.4 millionPassengers flown

71.4%Seat factor

20.6 billionASK or Capacity, measured asseat kilometers flown

14.7 billionRPK or Utilisation, measured aspassenger kilometers flown

13.0 hours per dayAircraft utilisation

47,823 flights Handled at Muscat International Airport

10.3 millionPassengers handled at Muscat International Airport

7.5 millionMeals catered to flights at Muscat International Airport

Management Discussion and Analysis

Financial and Sector Performance

Our net loss for the year 2015 was RO 86.333 million, compared to a net loss of RO 109.579 million in the year 2015, a decrease of RO 23.246 million (-21%).

RevenueRevenue increased by RO 57.571 million or 14.1% over the previous year.

Revenue Composition in 2015 compared to 2014 is as follows:

Management Discussion and Analysis

287,

541

347,

042

381,7

09

408,

400

(66,

451)

(96,

598)

(84,

249)

(100

,715

)

(96,

380)

(86,

333)

NET PROFIT / (LOSS)RO'000s

RO'000sOPERATING PROFIT / (LOSS)

REVENUERO'000s

(109

,860

)

(97,

467)

(113

,345

)

(109

,579

)

0

20000

40000

60000

80000

100000

120000

20152011 2012 2013 2014

0

20000

40000

60000

80000

100000

120000

2015 2011 2012 2013 2014

465,

971

0 50000

100000 200000 250000 300000 350000 400000 500000

2015 2011 2012 2013 2014

287,

541

347,

042

381,7

09

408,

400

(66,

451)

(96,

598)

(84,

249)

(100

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)

(96,

380)

(86,

333)



REVENUERO'000s

(109

,860

)

(97,

467)

(113

,345

)

(109

,579

)

0

20000

40000

60000

80000

100000

120000

20152011 2012 2013 2014

0

20000

40000

60000

80000

100000

120000

2015 2011 2012 2013 2014

465,

971

0 50000

100000 200000 250000 300000 350000 400000 500000

2015 2011 2012 2013 2014

287,

541

347,

042

381,7

09

408,

400

(66,

451)

(96,

598)

(84,

249)

(100

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)

(96,

380)

(86,

333)



REVENUERO'000s

(109

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)

(97,

467)

(113

,345

)

(109

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)

0

20000

40000

60000

80000

100000

120000

20152011 2012 2013 2014

0

20000

40000

60000

80000

100000

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2015 2011 2012 2013 2014

465,

971

0 50000

100000 200000 250000 300000 350000 400000 500000

2015 2011 2012 2013 2014

REVENUE COMPOSITION

A Scheduled Services – International 399.2 347.6B Scheduled Services – Domestic 23.5 22.1C Air Charter 13.2 13.0D Handling Fees – Engineering 5.0 3.8E Handling Fees – Others 17.6 14.3F Catering 3.6 3.8G Hotel & Other Revenue 3.9 3.8

2015 ROMillions

2014 ROMillions

F-1%

A-85%

B-5%

C-3%D-1%

E-4%G-1%

2015

F-1%

A-85%

B-5%

C-3%D-1%

E-4%G-1%

2014


Scheduled ServicesScheduled services revenue rose from RO 369.7 million in 2014 to RO 422.7 million in 2015,up RO 53.0 million or 14.3%. During the year, Oman Air commenced operations to Goa, Singapore and Dhaka. Available Seat Capacity (ASK) increased by 35.2%. Utilization (RPK) increased by 29.7%, lower than increase in capacity resulting decline in average Seat Factor from 74.4% in 2014 to 71.4% in 2015. Average passenger yield decreased by 14.6%. Despite increasing competition from the major players, Oman Air has successfully established its presence on most of its routes. This has been achieved with continued focus on product, high frequencies, on-time performance, quick turnarounds, convenient flight timings, good connectivity and high standards of customer service both on the ground and in the air.

Air Charter ServicesAir charter services comprising of jet aircraft operations dedicated to Petroleum Development of Oman and Embraer aircraft operations dedicated to Occidental, Duqm and Sohar recorded revenue of RO 13.215 million in 2015.

Handling FeesHandling revenue from airlines other than Oman Air for the year was RO 17.610 million compared toRO 14.346 million in last year, an increase of RO 3.264 million or (+23%). This was mainly due to:

ss Airlines, other than Oman Air, increased their operations from 18,078 to 19,830 flights, (+10%)ss Wide body flight movement, other than Oman Air, increased from 3,134 to 3,754 flights, (+20%)

and narrow body flight movement increased from 14,944 to 16,076 flights, (+8%)

Management Discussion and Analysis Management Discussion and Analysis

15,2

33

47,8

23

138,

972

10,3

19

34,5

55

97,7

06

37,18

8

111,6

92

40,8

41

119,

785

41,4

50

124,

010

6,48

0

7,54

7

8,31

1

8,72

0

2015 2011 2012 2013 2014

PASSENGERSNo. of Passengers '000s

Flights Handled at Muscat International Airport

Passengers Handled at Muscat International Airport '000s

Cargo Tonnage Handled - Tonnes

2015 2011 2012 2013 2014

6,36

6

3,79

6

4,43

0

4,99

5

5,05

2

OPERATING METRICS

20,5

97

14,7

08

0

3000

8000

11000

17000

21000

20152011 2012 2013 2014

ASK (Millions) RPK (Millions) Seat Factor (%)

0%

25%

50%

75%

100% 71.4%

11,6

35

13,3

51

14,9

60

8,45

7

10,2

86

11,3

30

11,3

36

72.7% 77.0% 75.7% 74.4%

15,2

33

47,8

23

138,

972

10,3

19

34,5

55

97,7

06

37,18

8

111,6

92

40,8

41

119,

785

41,4

50

124,

010

6,48

0

7,54

7

8,31

1

8,72

0

2015 2011 2012 2013 2014

PASSENGERSNo. of Passengers '000s

Flights Handled at Muscat International Airport

Passengers Handled at Muscat International Airport '000s

Cargo Tonnage Handled - Tonnes

2015 2011 2012 2013 2014

6,36

6

3,79

6

4,43

0

4,99

5

5,05

2

OPERATING METRICS

20,5

97

14,7

08

0

3000

8000

11000

17000

21000

20152011 2012 2013 2014

ASK (Millions) RPK (Millions) Seat Factor (%)

0%

25%

50%

75%

100% 71.4%

11,6

35

13,3

51

14,9

60

8,45

7

10,2

86

11,3

30

11,3

36

72.7% 77.0% 75.7% 74.4%

Catering

Catering revenue from airlines other than Oman Air for the year was RO 3.615 million, decrease of RO 192,000 or (-5%) over the previous year’s revenue of RO 3.807 million.

Rooms, Food and Beverage Revenue

Revenue for the year was RO 3.268 million, an increase of RO 0.271 million or 9% over the previous year’s revenue of RO 2.997 million, owing to higher internal occupancy by Oman Air.

7,54

3

2015

5,07

7

6,03

8

6,45

6

6,65

0

2011 2012 2013 2014

Meals upli�ed at Muscat International AirportNo. of Meals '000s

Note: Above includes, meal upli�ed for Oman Air

64,6

05

43,0

28

64,7

82

43,7

39

64,6

05

54,10

7

64,6

05

53,16

3

64,6

05

47,3

87

66.6% 67.5% 83.8% 82.3% 73.3%

0

10000

20000

30000

40000

50000

60000

70000

2011 2012 2013 2014 2015

Total Available Rooms

Total Occupied Rooms Occupancy Ratio (%)

0%

25%

50%

75%

100%

7,54

3

2015

5,07

7

6,03

8

6,45

6

6,65

0

2011 2012 2013 2014

Meals upli�ed at Muscat International AirportNo. of Meals '000s

Note: Above includes, meal upli�ed for Oman Air

64,6

05

43,0

28

64,7

82

43,7

39

64,6

05

54,10

7

64,6

05

53,16

3

64,6

05

47,3

87

66.6% 67.5% 83.8% 82.3% 73.3%

0

10000

20000

30000

40000

50000

60000

70000

2011 2012 2013 2014 2015

Total Available Rooms

Total Occupied Rooms Occupancy Ratio (%)

0%

25%

50%

75%

100%


Expenditure

Net Expenditure increased by 5% from RO 504.780 million to RO 532.422 million.

Our Fuel cost decreased by RO 38.8 million or 24% mainly due to decrease in Fuel Price. The average network fuel price was 1.74 USD/USG compared to 2.90 USD/USG in the previous year, down (-40%).

Maintenance costs and other aircraft operating expenses comprising of handling, landing, navigation, crew layover and simulator cost increased due to the increase in operations in comparison with the previous year.

Passenger related cost increased by RO 6.0 million or 15% compared to 26% increase in passenger traffic in 2015, due to increase in passenger meal cost, reservation cost and passenger service cost.

Our employee cost increased by RO 16.3 million or 14% compared to last year mainly due to increase in staff strength. The Company’s manpower increased from 6,322 in 2014 to 6,778 in 2015, up 7%. During the year, the increase in manpower was restricted to critical operational requirements to support the increase in operations and to positions that would add value in terms of enhanced customer service, productivity and profitability.

Depreciation increased by RO 8.8 million or 30% compared to last year, due to increase in fleet strength.

Impairment cost comprising of impairment of goodwill paid for acquisition of Hotel Golden Tulip, Seeb.

Concession Fee

The Company pays a concession fee to Oman Airport Management Company, the airport operator at Muscat and Salalah airports. The Company pays concession fee on its ground handling, cargo handling and catering revenue. The impact of the concession fee in 2015 was RO 1.733 million as against RO 1.290 million in 2014.

384,

139

431,2

91

482,

424

504,

780

2011 2012 2013 2014

EXPENDITURERO '000s

532,

422

2015

A-7%

B-23%

2015 2014

C-12%

D-9%E-9%

F-7%

G-1%

H-25%

I-7%

COMPOSITION OF EXPENDITURE

Expenditure composition in 2015 compared to 2014 is as follows:

A Operating lease rentals on aircra� 36.0 29.1B Fuel cost 122.8 161.6C Other aircra� operating expenses 64.2 52.6D Maintenance cost 45.7 38.0E Passenger related cost 46.8 40.8

2015 ROMillion

2014 ROMillion

F Depreciation 38.5 29.7G Catering materials consumed 5.8 6.1H Employee cost 131.2 114.9I Others (Including insurance and impairment of goodwill) 41.4 32.0

2015 ROMillion

2014 ROMillion

A-6%

B-32%

C-10%D-8%

E-8%

F-6%

G-1%

H-23%

I-6%

Management Discussion and Analysis Management Discussion and Analysis

Financial Position

Non-current assets decreased from RO 650.263 million in December 2014 to RO 633.292 millionin December 2015 mainly on account of sale and lease back of five B737, during the year. Apart from this,the increase is on account of security deposit paid in respect of aircraft taken on operating lease.

During the year, the Government of Oman contributed RO 54 million, reaffirming their support.

Non-current liabilities increased by RO 104.955 million as at 31 December 2015, compared to 2014 mainly on account of long term loans availed for purchase of two B787 aircraft in Q4 2015. Current liabilities decreased by RO 85.764 million as at 31 December 2015, primarily attributable to reclassification of pre-delivery payments of aircraft payable within one year.

Current assets increased by RO 3.794 million as at 31 December 2015, as it includes two ATR aircraft classified as held for sale based on Board resolution.

Internal ControlsThe Company has an adequate internal control system commensurate with its size and the nature of its business. The Internal Audit department continues to maintain its focus on internal controls in all critical activities. Further, Statutory audit, State audit and the Audit Committee augment review of internal controls within the Company. During 2015, no material lapse or weakness in controls has been identified.

The People of Oman AirWith its development as an airline of stature internationally, Oman Air has also become an employer of choice, offering premium employment and career development opportunities to a wide cross section of people.

In keeping with the national initiative that seeks to enhance job opportunities for Omani nationals, the airline prioritizes job offers to Omani nationals possessing the requisite skills.

The Company staff strength at 31 December 2015 was 6,778 employees. Oman Air achieved an Omanisation ratio of 62.67%, without compromise on the quality of service provided to customers. This is a significant achievement considering the fact that the airline requires staff with multi-linguistic skills to serve a wide spectrum of customers across the network.

Career Development Path programmes have been successfully implemented across key functions and responsibilities in all departments, and staffs are undergoing external and internal programmes to improve their skill sets.

5,37

5

5,56

2

5,83

1

6,32

2

2011 2012 2013 2014

65% 66% 64% 59%

6,77

8

0

1000

2000

3000

4000

5000

6000

7000

2015

MANPOWER STRENGTH AND OMANISATION RATIO

* As per Ministry of Manpower

0%

20%

40%

60%

80% 62.67%*


In accordance with the Capital Market Authority (“CMA”) circular # 11/2002 dated 3 June 2002, we are pleased to present the fourteenth Corporate Governance Report of Oman Air (SAOC) (“the Company”) for the year ended 31 December 2015.

Corporate Governance is mandatory for all the public companies listed in Muscat Securities Market (MSM). The Company is a closed Omani joint stock company (SAOC) and therefore is not required to comply with CMA circular stated above. However, the Board is adopting this circular as a best corporate governance practice to ensure high levels of transparency and accountability in its conduct of business.

The Auditors have performed the procedures prescribed in the Capital Market Authority Circular No. 16/2003 dated 29 December 2003 with respect to the Corporate Governance Report of the Company and its application of the Corporate Governance practices in accordance with the CMA Code of Corporate Governance issued under Circular No. 11/2002 dated 3 June 2002, and its amendments.

Company’s Philosophy

The Company has and will continue to uphold the highest standards of corporate governance. The Company’s focus has been on best business practices that are ethical and fair while achieving ultimate objective of enhancing long term shareholder value. Appropriate systems and procedures are continuously developed to evaluate and monitor the Company’s processes and performance to ensure they meet high standards of corporate governance.

Board of Directors

The Company’s Board comprises of eight Non-Executive and Non-Independent Directors. Seven Directors are appointed by the cabinet of ministers; six of them, including the Chairman represent the Government’s shareholding and one businessman to represent the private sector. The Government Nominees are Ministers, Undersecretaries and Directors in the Government undertakings. The eighth member has been appointed by the Board as a member and advisor to the Board with relevant airline industry background.

Functions of the Board

The Board appoints all members of the Executive Management (Chief Executive Officer and his direct reports) and decides their remuneration. The Board approves business plans and financial policies of the Company. The Board reviews policies and regulations governing company activities and specifies authorities and responsibilities of key management members. The Board reviews the Company’s long term and yearly financial plans and key objectives. The Company’s performance is reported to the Board on monthly basis and the same is reviewed and discussed in the Board meetings.

The Board appoints sub-committees including audit committee and evaluates their functions and performance. The Disclosure policy of the Company, which is in line with the Code of Corporate Governance, has been approved by the Board and implemented. The Board reviews the risk management strategy implemented by the Management to ensure that the major risks faced by the Company are adequately mitigated and the processes are in place to maintain Integrity of the financial statements, compliance with law and internal control systems. The Board approves the quarterly, half yearly and annual financial statements. The Board reports to the shareholders, through the annual report, about the going concern status of the Company, with supporting assumptions.

Corporate Governance Report


Remuneration - Top Fourteen Executives

Total(RO Per Annum)

Salary 1,447,739.828

Allowances 358,124.90

PASI/ESB 71,176.34

Total 1,877,041.068

Note: Top fourteen executives include CEO and Chief Officers.

Executive Committee

At present the Executive Committee carries out specific functions delegated by the Board of Directors. These functions include, review of budget proposals, review of management proposals concerning new routes, fleet rationalization and new ventures.

Objective of the Executive Committee is to conduct an in-depth review of specific issues before the same are approved by the Board.

During 2015 the Executive Committee members consisted of four Non-Executive and Non-Independent Directors and one member is appointed by the Board of Directors as a member and advisor with relevant airline industry background. Six meetings were held during 2015.

Audit Committee

During 2015 the Audit Committee members consisted of three Non-Executive and Non-Independent Directors. Four meetings were held during 2015 to discuss issues concerning Internal Control, Internal Audit plans and Internal / External Audit reports, quarterly financial statements and other related issues.

Audit and Internal Control

The Audit Committee has reviewed, on behalf of the Board, the effectiveness of the internal controls by meeting the internal auditor, reviewing the internal audit reports and recommendations, meeting the external auditor, reviewing the audit findings and the external audit management letter. The Audit Committee and the Board are pleased to inform the shareholders that reasonable internal control / systems are in place and that there are no significant concerns.

Means of Communication with the Shareholders and Investors

The complete quarterly results are also mailed to any shareholder upon written request, and are also available for inspection at the Company’s registered office. The Company produces comprehensive annual report for its shareholders. Audited annual financial statements with the Chairman’s report are sent by mail to each shareholder.

At the same time the Company gives press releases from time to time for all strategic issues, such as opening of new routes, change in fleet, financing agreements, etc. The Company also has its own website where airline related information is available.


Process of Nomination of the Directors

Seven members including Chairman of the Board are appointed by the Government and one member is appointed by the Board of Directors as a member and advisor with relevant airline industry background.

Entity Represented by Non-Independent Directors

There are six Non-Executive and Non-Independent Directors representing the Government of Sultanate of Oman’s Shareholding in the Company and one director representing the private sector.

Board Meeting Number and Dates

Board Meeting No. Board Meeting Date1 18/01/2015

2 08/02/2015

3 08/03/2015

4 29/04/2015

5 21/06/2015

6 09/09/2015

7 29/09/2015

8 11/11/2015

9 20/12/2015

There have been no material related party transactions between the Company and its directors. Specific related party transactions are disclosed to the shareholders at the ordinary general meeting.

Remuneration Matters

All directors including Chairman are Non-Executive and do not draw any fixed salary from the Company except one director who has been appointed as a member and advisor to the Board with relevant industry background, who is paid retainer fees as per terms of contract.

The total remuneration paid to the Board of Directors as sitting fees for financial year 2015 was RO 29,500 for Board meetings, RO 6,000 for Executive Committee meetings and RO 3,500 for Audit Committee meetings.

Each employee of the Company draws salary based on ‘job group’ assigned to his job. Job groups are assigned to different jobs based on the duties, responsibilities, skills and experience relevant to such jobs.



Acknowledgement by the Board of Directors

The Board of Directors acknowledges:

• Thatthefinancialstatementspreparedbythemanagementareinaccordancewiththeapplicablestandardsand rules applicable in the Sultanate of Oman.

• ThereviewoftheefficiencyandadequacyofinternalcontrolsystemoftheCompanyandcompliancewithinternal rules and regulations.

• ThattherearenomaterialthingsthataffectthecontinuationoftheCompanyanditsabilitytocontinueits operations during the next financial year.

Darwish bin Ismail bin Ali Al BulushiChairman, Oman Air


Market Price Data

Due to change in the status of the Company from General Omani Joint Stock Company (SAOG) to Closed Omani Joint Stock Company (SAOC), Oman Air shares are traded in the parallel third market ofMuscat Securities Market effective May 2007. Hence, market price data is not available.

Distribution of Shareholding

The major shareholders of the Company are as follows, with the Government of Sultanate of Oman being the major shareholder.

Major Shareholders

Name of the shareholder No. of Shares held Shareholding %

The Government of Sultanate of Oman 683,663,285 99.92773

Specific Areas of Non-compliance with the Provisions of Corporate Governance

There are no specific areas of non-compliance, except individual cases which are currently handled by the competent authorities.

Professional Profile of the Statutory Auditor

About Deloitte:Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

Deloitte provides audit, consulting, financial advisory, risk management, tax and related services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 220,000 professionals are committed to making an impact that matters.

About Deloitte & Touche (M.E.)Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is a leading professional services firm established in the Middle East region with uninterrupted presence since 1926.

Deloitte provides audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with more than 3,300 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International Tax Review World Tax Rankings). It has also received numerous awards in the last few years which include best employer in the Middle East, best consulting firm, the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW), as well as the best CSR integrated organization.

The audit fee for the year 2015 is RO 23,500 plus out of pocket expenses.




Statement of Financial Position

at 31 December 2015Notes 31 December

201531 December

20141 January

2014ASSETS RO’000 RO’000 RO’000Non-current assets (Restated) (Restated)

Aircraft, property, plant and equipment 6 604,595 633,372 504,203 Goodwill 7 5,379 6,595 7,842Available for sale investments 8 514 549 583Equity accounted investee 9 1,884 1,917 1,816Long-term receivables 10 20,920 7,830 3,862Total non-current assets 633,292 650,263 518,306Current assetsInventories 11 15,459 16,214 15,311Trade and other receivables 12 67,529 58,370 42,671Term deposits 13 6,500 5,577 4,827Cash and cash equivalent 14 10,549 19,748 12,871

100,037 99,909 75,680Assets classified as held-for-sale 15 3,666 - -

Total current assets 103,703 99,909 75,680

Total assets 736,995 750,172 593,986 EQUITY AND LIABILITIESCapital and reservesShare capital 16 684,158 546,048 471,048Government contribution to equity 17 54,000 138,110 75,000Legal reserve 18 4,137 4,137 4,137Investments revaluation reserve 8 211 246 280Accumulated losses (687,529) (601,196) (491,617)

Total equity 54,977 87,345 58,848Non-current liabilitiesProvision for maintenance of aircraft, engines and rotables 19 18,413 11,309 12,961Borrowings 20 367,694 277,022 266,485Employees’ end of service benefits 22 10,940 9,561 8,332Deferred tax liability 30 28,401 22,601 18,151

Total non-current liabilities 425,448 320,493 305,929Current liabilities Current portion of provision for maintenance of aircraft,

engines and rotables 19 11,217 13,789 9,789Current portion of borrowings 20 103,992 192,632 103,417Trade and other payables 23 140,382 131,359 116,003Government grants 24 979 4,554 -Total current liabilities 256,570 342,334 229,209

Total liabilities 682,018 662,827 535,138

Total equity and liabilities 736,995 750,172 593,986 Net assets per share 25 RO 0.080 RO 0.160 RO 0.125

Chairman Director

The accompanying notes form an integral part of these financial statements.

Statement of Profit or Loss and otherComprehensive Incomefor the year ended 31 December 2015

Notes 2015 2014RO’000 RO’000

(Restated)

Revenue 26 465,971 408,400Expenditure 27 (532,422) (504,780)

Operating loss (66,451) (96,380)Interest and investment income 28 472 375Share of profits from an equity accounted investee 9 1,868 1,826Decrease in fair value of long-term receivables (945) (263)Finance cost (13,744) (9,397)

Loss before concession fee and tax (78,800) (103,839)Concession fee 29 (1,733) (1,290)

Loss before tax (80,533) (105,129)Taxation 30 (5,800) (4,450)

Net loss for the year (86,333) (109,579)Other comprehensive incomeItem that will be classified to profit or lossFair value loss on available for sale investments 8 (35) (34)

Total loss and other comprehensive loss for the year (86,368) (109,613)

Loss per share - basic and diluted 31 (RO 0.126) (RO 0.201)



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Statement of Cash Flows for the year ended 31 December 2015

2015 2014RO’000 RO’000

(Restated)Cash flow from operating activities:Loss before tax (80,533) (105,129)Adjustments for:Impairment of goodwill 1,216 1,247Impairment loss on assets classified as held-for-sale 997 -Increase in fair value of long term receivables 945 263Depreciation on aircraft, property, plant and equipment 38,475 29,718Employees’ end of service benefits charged for the year 2,260 1,730Interest and investment income (472) (375)Share of profit from an equity accounted investee (1,868) (1,826)Finance cost 13,744 9,397Allowance for doubtful debts 271 173Allowance for obsolete and slow moving inventories 93 318(Profit) / loss on sale of aircraft, property, plant and equipment (511) 198

(25,383) (64,286)Working capital changes:

Inventories (617) (1,222) Trade and other receivables (9,430) (15,872) Trade and other payables 9,023 19,587 Provision for maintenance of aircraft, engines and rotables 4,532 2,349

Cash used in operations (21,875) (59,444)Finance charges paid (13,744) (13,628)Employees’ end of service benefits paid (881) (501)

Net cash used in operating activities (36,500) (73,573)

Cash flow from investing activities:Purchase of aircraft, property, plant and equipment (69,972) (159,085)Proceeds from sale of aircraft, property, plant and equipment 57,400 -Increase in term deposits (923) (750)Operating lease (14,034) (4,231)Interest and investment income received 472 375Dividend received from an equity accounted investee 1,901 1,725

Net cash used in investing activities (25,156) (161,966)

Financing activities:Government contribution to equity 54,000 138,110

Net movement in government grants (3,575) 4,554 Net movement in borrowings 2,032 99,752

Net cash flows from financing activities 52,457 242,416

Net change in cash and cash equivalents (9,199) 6,877Cash and cash equivalents at the beginning of the year 19,748 12,871

Cash and cash equivalents at the end of the year (note 14) 10,549 19,748



Notes to the Financial Statementsfor the year ended 31 December 2015

1. General

Oman Air SAOC (“the Company”) is a closed Omani joint stock company registered under the Commercial Companies Law of 1974, as amended.

The Company was formed under Royal Decree 52/81 dated 24 May 1981 and commenced its operations on 1 October 1981. The initial duration of the Company was for a period of 20 years from the date of commercial registration to 31 January 2002. Prior to expiry, the Company’s shareholders passed a resolution in an extraordinary general meeting on 27 January 2002 extending the Company’s duration for an indefinite period.

The principal activities of the Company are to transport passengers and freight on a scheduled and chartered basis and to provide ground handling, catering and other airline related services.

In an extraordinary general meeting held on 12 April 2009, the shareholders approved an amendment to the articles of association of the Company. The amended articles of association allow the Company to establish and manage restaurants, coffee shops, hotels, apartments, tourist utilities, both inside and outside the airports, within the Sultanate of Oman or abroad.

Acquisition of business

Effective 1 January 2009 the Company acquired Golden Tulip Seeb (“the Hotel”). The Hotel is a division of the Company and is not a separately registered entity. The Hotel was acquired by the Company as a going concern from the Ministry of Tourism, Government of the Sultanate of Oman.

As on 1 January 2009, the assets and liabilities of the Hotel were transferred to the Company except the land on which the Hotel is located. The Company has been given a right by the Government to use the said land on a rental basis initially for a period of 50 years, subsequently renewable with the mutual consent of both the parties.

Goodwill arising on acquisition: RO’000

Consideration transferred 16,000Add: additional consideration paid in 2010 738Less: fair value of identifiable net assets acquired (1,601)

Goodwill 15,137


2. Going concern

The Company incurred a net loss of RO 86.33 million (2014: RO 109.58 million) during the year ended 31 December 2015, with accumulated losses of RO 687.53 million (2014: RO 601.2 million) as at 31 December 2015. As at 31 December 2015, the current liabilities of the Company exceed current assets by RO 152.87 million (2014: RO 242.43 million). These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern. The financial statements have been prepared under the going concern basis on the assumption that the Company’s shareholders will continue to support the operations and the management will successfully implement its business plan to generate sufficient funds to support its operations and meet its liabilities. The Government holds in excess of 99% of the Company’s equity and has contributed capital of RO 54 million in 2015 (2014: RO 138.11 million) to finance the Company’s operations and capital requirements.

3. Adoption of new and revised International Financial Reporting Standards (IFRS)

3.1 New and revised IFRSs applied with no material effect on the combined financial statements

The following new and revised IFRSs, which became effective for annual periods beginning on or after 1 January 2015, have been adopted in these financial statements. The application of these revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements.

• Annual Improvements to IFRSs 2010 - 2012 Cycle that includes amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38.

• Annual Improvements to IFRSs 2011 - 2013 Cycle that includes amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40.

• Amendments to IAS 19 Employee Benefits to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service.



3. Adoption of new and revised International Financial Reporting Standards (IFRS) (continued)

3.2 New and revised IFRS in issue but not yet effective

The Company has not yet applied the following new and revised IFRSs that have been issued but are not yet effective:

New and revised IFRSs Effective for annual periods beginning on or after

IFRS 14 Regulatory Deferral Accounts 1 January 2016

Amendments to IAS 1 Presentation of Financial Statementsrelating to Disclosure initiative 1 January 2016

Amendments to IFRS 11 Joint arrangements relating toaccounting for acquisitions of interests in joint operations 1 January 2016

Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets relating to clarification of acceptablemethods of depreciation and amortisation

1 January 2016

Amendments to IAS 16 Property, Plant and Equipment and IAS41 Agriculture relating to bearer plants 1 January 2016

Amendments to IAS 27 Separate Financial Statements relating to accounting investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equitymethod in separate financial statements

1 January 2016



3.2 New and revised IFRS in issue but not yet effective (continued)


Amendments to IFRS 10 Consolidated Financial Statements,IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investment in Associates and Joint Ventures relating to applying the consolidation exception for investment entities.

1 January 2016

Annual Improvements to IFRSs 2012 - 2014 Cycle covering amendments to IFRS 5, IFRS 7, IAS 19 and IAS 34.

1 January 2016

IFRS 9 Financial Instruments (revised versions in 2009, 2010, 2013 and 2014).IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition, and in November 2013 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2014 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement category for certain simple debt instruments.A finalised version of IFRS 9 which contains accounting requirements for financial instruments, replacing IAS 39 Financial Instruments: Recognition and Measurement. The standard contains requirements in the following areas:• Classification and measurement: Financial assets are classified

by reference to the business model within which they are held and their contractual cash flow characteristics. The 2014 version of IFRS 9 introduces a ‘fair value through other comprehensive income’ category for certain debt instruments. Financial liabilities are classified in a similar manner to under IAS 39, however there are differences in the requirements applying to the measurement of an entity’s own credit risk.

• Impairment: The 2014 version of IFRS 9 introduces an ‘expected credit loss’ model for the measurement of the impairment of financial assets, so it is no longer necessary for a credit event to have occurred before a credit loss is recognised

• Hedgeaccounting:Introduces a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures.

• Derecognition: The requirements for the derecognition of financial assets and liabilities are carried forward from IAS 39.

1 January 2018

Amendments to IFRS 7 Financial Instruments: Disclosures relating to disclosures about the initial application of IFRS 9.

When IFRS 9 is first applied

IFRS 7 Financial Instruments: Disclosures relating to the additional hedge accounting disclosures (and consequential amendments) resulting from the introduction of the hedge accounting chapter in IFRS 9.

When IFRS 9 is first applied




3.2 New and revised IFRS in issue but not yet effective (continued)


IFRS 15 Revenue from Contracts with Customers

In May 2014, IFRS 15 was issued which established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction Contracts and the related interpretations when it becomes effective.

The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer.• Step 2: Identify the performance obligations in the contract.• Step 3: Determine the transaction price.• Step 4: Allocate the transaction price to the performance

obligations in the contract.• Step 5: Recognise revenue when (or as) the entity satisfies

a performance obligation.

Under IFRS 15, an entity recognises when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.

1 January 2018

IFRS 16 Leases

IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.

1 January 2019

Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) relating to the treatment of the sale or contribution of assets from and investor to its associate or joint venture

Effective date deferred indefinitely



The Board of Directors anticipates that these new and revised standards, interpretations and amendments will be adopted in the Company’s financial statements for the year beginning 1 January 2016 or as and when they are applicable and adoption of these new standards, interpretations and amendments, except for IFRS 9, IFRS 15 and IFRS 16 may have no material impact on the financial statements of the Company in the period of initial application.

Management anticipates that IFRS 15 and IFRS 9 will be adopted in the Company’s financial statements for the annual year beginning 1 January 2018 and IFRS 16 in the annual year beginning 1 January 2019. The application of IFRS 9, IFRS 15 and IFRS 16 may have significant impact on amounts reported and disclosures made in the Company’s financial statements in respect of revenue from its customers, the Company’s financial assets and financial liabilities, lease liabilities and right to use assets. However, it is not practicable to provide a reasonable estimate of effects of the application of these standards until the Company performs a detailed review.

4. Basis of preparation and summary of significant accounting policies

Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards, (IFRS) and the requirements of the Commercial Companies Law of 1974, as amended.

A summary of significant accounting policies, which have been consistently applied by the Company and are consistent with those used in the previous year, is set out below:

Functional and presentation currency

These financial statements are presented in Rial Omani (“RO”), which is the Company’s functional currency. All financial information presented in RO has been rounded to the nearest thousands, except when otherwise indicated.

Basis of measurement

These financial statements are prepared on the historical cost basis except for available for sale financial assets which are measured at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis.

.



4. Basis of preparation and summary of significant accounting policies (continued)

Change in accounting policy during the year

During the current year, the Company changed its accounting policy of creating a maintenance provision for major maintenance costs for its owned aircraft, to capitalising the major maintenance costs and depreciating over the appropriate period until the next major maintenance event, in line with IAS 16 Property, plant and equipment.

The change in policy has been made to provide a more accurate disclosure of the benefit of the maintenance cost over the expected life of that component.

The impact of change in accounting policy on maintenance provision and aircraft, property, plant and equipment, accumulated losses and loss for the year are as follows:

31 December 2014 1 January 2014RO’000 RO’000

(Restated) (Restated)

Aircraft, property, plant and equipment (previously reported) 643,918 512,593Impact of change in accounting policy (10,546) (8,390)

Aircraft, property, plant and equipment (restated) 633,372 504,203

Provision for maintenance of aircraft, engines and rotables(previously reported) (44,186) (40,196)Impact of change in accounting policy 19,088 17,446

(25,098) (22,750)

Accumulated losses (previously reported) (609,738) (500,673)Impact of change in accounting policy 8,542 9,056

Accumulated losses (restated) (601,196) (491,617)

Impact on total loss for the year (514) 1,157



Aircraft, property, plant and equipment

Aircraft, property, plant and equipment are stated at cost less accumulated depreciation and any identified impairment loss. Borrowing costs, net of interest income, which are directly attributable to acquisition of qualifying items of aircraft, property, plant and equipment, are capitalized as part of the cost of aircraft, property, plant and equipment.

An element of the cost of an aircraft is attributed on acquisition to prepaid maintenance and is depreciated over a period until the next maintenance event occurs based on the number of hours flown or cycles completed.

Subsequent expenditureSubsequent costs incurred which lend enhancement to future periods, such as long-term scheduled maintenance and major overhaul of aircraft and engines, are capitalised and depreciated over the length of period benefiting from these enhancements. All other maintenance costs are charged to the income statement as incurred. Other subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the item of aircraft, property, plant and equipment.

Cost of expenses incurred for regular inspections of airframe and engines are capitalized and depreciated over the period between consecutive inspections which is generally 8 and 3 years, respectively.

DepreciationDepreciation is recognised so as to write off the cost less estimated residual value of aircraft, property, plant and equipment (other than capital work in progress) on a straight line basis over the expected remaining useful economic life of the asset concerned. The useful lives are reviewed at each reporting date, with the effect of any changes in estimate accounted for on a prospective basis.

The gain or loss arising on the disposal or retirement of an item of aircraft, property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profit or loss.

The estimated useful lives used for this purpose are: Years

Airframe and buyer furnished equipment (BFE) 10 - 25Engines and rotables 15Tools 5Buildings 5 to 25Plant and equipment 5 to 7.5Vehicles, office equipment and furniture 3 to 5




Aircraft, property, plant and equipment (continued)

Pre-delivery and option payments made in respect of aircraft are recognised in capital work-in-progress at cost and are not depreciated.

Capital work-in-progress is stated at cost. When the assets are ready for their intended use, they are transferred from capital work-in-progress to the appropriate category under aircraft, property, plant and equipment and depreciated.

Non-current assets classified as held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Intangible assets

Intangible assets acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful lives are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment loss.

Subsequent expenditureSubsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates.

AmortisationExcept for goodwill, other intangible assets are amortised on a straight line basis in the profit or loss over their estimated useful lives from the date that they are available for use.

The estimated useful lives for the current and comparative years are as follows:

Time slots 5 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.



Impairment of tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of that asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.




Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Company as lessorRental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

The Company as lesseeAssets held under finance leases are initially recognised as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments.The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.

Capitalized leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Gains and losses arising on sale and leaseback transaction resulting in an operating lease and where the sale price is at fair value, are recognised immediately in the profit and loss. Where the sale price is below fair value, any loss is recognised in the profit and loss, except where the loss is compensated for by future lease payments at below market price, it is deferred and amortised in proportion to the lease payments over the period for which asset is expected to be used. Where the sale price is above fair value, the excess over fair value is deferred and amortised over the period for which the asset is expected to be used.



Investment in an associate company

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control overthose policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the statement of financial position at cost as adjusted for post-acquisition changes in the Company’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Company’s interest in that associate (which includes any long-term interests that, in substance, form part of the Company’s net investment in the associate) are recognised only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

Goodwill

Goodwill arising due to acquisition of a new line of business is recognised as an asset at the date that control is acquired (“the acquisition date”). Goodwill is measured as an excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree, if any, over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to the Company’s cash-generating units expected to benefit from the synergies of the acquisition. Cash-generating units to which goodwill has been allocated are tested for impairment annually. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Financial instruments

Financial assets and financial liabilities are recognised when the Company has become a party to the contractual provisions of the instrument. Financial assets are recognised and derecognised on the trade date when the Company becomes party to the contractual provisions of the instruments.The financial assets are initially recognised at fair value plus transactions costs. The financial assets which are non-derivative financial assets with fixed or determinable payments that are not quoted in active market are included in current assets, except for maturities greater than 12 months after the reporting date, which are classified as non-current assets.




Financial instruments (continued)

Financial assetsThe principal financial assets are available for sale investments, long term receivables, cash and bank balances and trade and other receivables.

Available-for-sale financial assets (AFS financial assets)Listed shares held by the Company that are traded in an active market are classified as AFS and are stated at fair value at the end of each reporting period. The Company also has other investments that are not traded in an active market but are also classified as AFS financial assets and stated at fair value because Management considers that fair value can be reliably measured. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the cumulative change in fair values with the exception of impairment losses, which are recognised in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the cumulative change in fair values is reclassified to profitor loss.

Dividends on AFS equity instruments are recognised in profit or loss when the Company’s right to receive the dividends is established.

The fair value of AFS monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the reporting date. The change in fair value attributable to translation differences that result from a change in amortised cost of the asset is recognised in the profit or loss, and other changes are recognised in other comprehensive income.

AFS equity investment that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period.

Long term receivables, trade and other receivables and term deposits Long term receivables, trade and other receivables and term deposits are initially measured at their fair value and subsequently measured at amortised cost, using the effective interest method.An allowance for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables.

Cash and cash equivalentsCash and cash equivalents comprise cash in hand, cash at bank and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to a known amount of cash which are subject to an insignificant risk of changes in value and have maturity of three months or less at the date of acquisition.



Financial instruments (continued)

Classification as debt and equity instrumentsDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Trade and other payablesTrade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are classified as non-current liabilities.

Trade and other payables and other financial liabilities are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. Settlement of borrowings are recognised over the respective terms of the agreements.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Impairment

Financial assetsFinancial assets other than those at fair value through profit and loss, are assessed for indicators of impairment at the end of each reporting date. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the asset have been affected.

For listed and unlisted equity investments classified as AFS financial assets, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidenceof impairment.

For all other financial assets, objective evidence of impairment could include:

• significantfinancialdifficultyoftheissuerorcounterparty; • breachofcontract,suchasadefaultordelinquencyininterestorprincipalpayments;or • itbecomingprobablethattheborrowerwillenterbankruptcyorfinancialre-organisation.




Impairment (continued)

Certain categories of financial assets, such as trade receivables that are assessed not to be impaired individually, are subsequently assessed for impairment on a collective basis.

Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period as well as observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of allowance account.

When a trade receivable is considered uncollectible, it is directly written off as bad. Subsequent recoveries of amounts previously written off are credited to the profit or loss.

Derecognition of financial assetsThe Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay.

Derecognition of financial liabilitiesThe Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or expired.

Government grants

Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets are adjusted to the cost of non-current assets purchased, constructed or acquired and the unutilised portion of the grant is recognised as a liability in the statement of financial position.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs comprise purchase cost and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated principally using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.



Legal reserve

In accordance with the Commercial Companies Law of 1974, as amended, 10% of the Company’s net profits after the deduction of taxes will be transferred to a non-distributable legal reserve each year until the amount of such legal reserve has reached a minimum one-third of the Company’s issued share capital. This reserve is not available for distribution to shareholders as dividends.

Provisions

Provisions are recognised when the Company has a present obligation, legal or constructive as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Onerous contractsPresent obligations arising under onerous contracts are recognised and measured as provisions.An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Employees’ end of service benefits

Provision for employees’ end of service benefits for non-Omani employees is made in accordance with the Oman Labour Law and is based on current remuneration and cumulative years of service at the reporting date.

End of service benefits for Omani employees are contributed in accordance with the terms of the Social Securities Law of 1991.




Aircraft maintenance

For the aircraft under operating lease agreements, wherein the Company has an obligation to maintain the aircraft, accruals are made during the lease term for the obligation based on estimated future costs of major airframe and certain engine maintenance checks by making appropriate chargesto the profit or loss calculated by reference to the number of hours or cycles operated andengineering estimates.

Taxation

Income tax expense comprises current and deferred tax.

Current taxThe tax currently payable is calculated as per the fiscal regulations of the Sultanate of Oman, based on taxable profits for the year. Taxable profits differ from profit as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible.

The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition, other than in a business combination,of other assets and liabilities in a transaction that affects neither the taxable profit nor theaccounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.



Taxation (continued)

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates and tax law that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax for the yearCurrent and deferred tax are recognised in the profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the tax is also recognised in other comprehensive income or directly in equity.

Revenue

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Sale of goodsRevenue from sale of goods is recognised when risks and rewards of ownership are transferred to the customer and are stated net of discounts and return.

Rendering of servicesPassenger ticket and cargo airway bills revenue, net of commission, is recognised as current liabilities in an unearned revenue account until recognised as revenue when the transportation service is provided. Unused tickets are recognised as revenue after one year from the date of sale.

Dividend and interest incomeDividend revenue from investments is recognised when the shareholders’ right to receive payment has been established.

Interest income is accrued on a time proportion basis, with reference to the principal outstanding and at the effective profit rate applicable, which is the rate that exactly discounts estimated future cash receipts throughout the expected life of the financial asset to the asset’s net carrying amount.

Other revenueOther revenue is recognised at the time the service is provided, net of rebate.




Foreign currencies

Transactions denominated in foreign currencies are initially translated into Rial Omani at the rates of exchange prevailing on the date of the transaction. Monetary assets and liabilities denominated in such currencies are translated at the rates prevailing as at the end of the reporting period. Gains and losses arising from foreign currency transactions are dealt with in the profit or loss.

Directors’ remuneration

Directors’ remuneration is computed in accordance with the provisions of the Commercial Companies Law of 1974, as amended, of Sultanate of Oman and is charged to the profit or loss.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker makes strategic decisions and is responsible for allocating resources and assessing performance of the operating segments.

Frequent flyer programme

The Company operates a frequent flyer programme that provides a variety of awards to programme members based on a mileage credit for flying with the Company and other airlines that participate in the programme. Members can also accrue miles by utilizing the services of non-airline programme participants.

The Company accounts for awards credits as a separately identifiable component of the sales transaction in which they are granted. The consideration in respect of the initial sale is allocated to award credits based on their fair value and is accounted for as a liability (other payable) in the statement of financial position. The fair value is determined using estimation techniques that take into account the fair value of awards for which miles could be redeemed. Miles accrued through utilizing the services of programme partners and paid for by the participating partners are also accounted for as deferred revenue until they are utilised. In these instances, a liability is not recognised for miles that are expected to expire.

Revenue is recognised in the profit or loss only when the Company fulfills its obligation by supplying free or discounted goods or services on redemption of the miles accrued.

Finance cost

Finance costs comprise interest expense on borrowings that are recognised in profit or loss and reclassifications of amounts previously recognised in other comprehensive income.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.



Manufacturers’ credits

The Company receives credits from manufacturers in connection with the acquisition of certain aircraft and engines. Depending on their nature these credits are either recorded as a reduction to the cost of the related aircraft and engines or reduced from ongoing operating expenses. Where the aircraft are held under operating leases these credits are deferred and reduced from the operating lease rentals on a straight-line basis over the period of the related lease as deferred credits.

5. Critical accounting judgements and key sources of estimation uncertainty

The preparation of the financial statements in conformity with IFRSs requires Management to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current andfuture periods.

Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimation, that management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

Classification of investmentsManagement decides on acquisition of a financial asset whether it should be classified as fair value through profit and loss (FVTPL), held for trading, Held to maturity (HTM) investments, loans and receivables or Available for sale (AFS) financial asset.

The Company has classified its investment as AFS financial asset as these investments are not falling under the category of FVTPL, held for trading, HTM investments or loans and receivables.



5. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying accounting policies (continued)

Valuation of unquoted investmentsValuation of unquoted investments is normally based on recent market transactions on an arm’s length basis, fair value of another instrument that is substantially the same, expected cash flows discounted at current rates for similar instruments or other valuation models.

Impairment of financial assetsThe Company determines whether AFS financial assets are impaired when there has been a significant or prolonged decline in their fair value below cost. This determination of what is significant or prolonged requires judgement. In making this judgement and to record whether an impairment occurred, the Company evaluates among other factors, the normal volatility in share price, the financial health of the investee, industry and sector performance, changes in technology and operational and financial cash flows.

Impairment of goodwill and other intangible assetsDetermining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation estimates the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

Leased aircraft maintenance costsThe Company incurs liabilities for maintenance costs in respect of its leased aircraft during the course of the lease term. These are a result of legal and constructive obligations in the lease contract in respect of the return conditions applied by lessors, which require aircraft airframes, engines, landing gear and auxiliary power units to reach at least a specified condition on their return at the end of the lease term. A charge is made in the profit or loss each month based on the number of flight hours or cycles used to build up an accrual to cover the cost of heavy-duty maintenance checks when they occur. Estimates involved in calculating the provision required include the expected date of the check, market conditions for heavy-duty maintenance checks pertaining at the expected date of check, the condition of asset at the time of the check, the likely utilisation of the asset in terms of either flying hours or cycles, and the regulations in relation to extensions to lives of life-limited parts, which form a significant proportion of the cost of heavy-duty maintenance costs of engines. Additional maintenance costs for aircraft engines are considered for accrual based on the estimates made by Engineering Department on the basis of operational requirements.


5. Critical accounting judgements and key sources of estimation uncertainty (continued)

The Company is also required to pay maintenance reserves to lessors on a monthly basis, based on usage. These maintenance reserves are then returned to the Company on production of evidence that qualifying maintenance expenditure has been incurred. Maintenance reserves paid are deducted from the accruals made. In some instances, not all of the maintenance reserves paid can be recovered by the Company and therefore, are retained by the lessor at the end of the lease term.

Assumptions made in respect of the basis of the accruals are reviewed for all aircraft once a year. In addition, when further information becomes available which could materially change an estimate made, such as a heavy-duty maintenance check taking place, utilisation assumptions changing, or return conditions being re-negotiated, then specific estimates are reviewed immediately, and the accrual is reset accordingly.

Accrual for aircraft flying costsManagement accrues for the landing, parking, ground handling and other charges applicable for each airport in which the Company operates flights on a monthly basis. These estimates are based on the rate of charges applicable to each airport based on the agreements and recent invoices received for the services obtained. Similarly, accruals for overflying charges are estimated based on the agreement entered with each country.

Actual charges may differ from the charges accrued and the differences are accounted for on a prospective basis.

Useful lives of aircraft, property, plant and equipmentThe cost of aircraft, property, plant and equipment is depreciated over the estimated useful life, which is based on expected usage of the asset, expected physical wear and tear, the repair and maintenance programme and technological obsolescence arising from changes using management’s best estimates.

Allowance for obsolete and slow moving inventoriesInventories are stated at the lower of cost and net realisable value. Adjustments to reduce the cost of inventory to its realisable value, if required, are made. Factors influencing these adjustments include changes in demand, product pricing, physical deterioration and quality issues. The fair value is determined based on the estimated selling price in the ordinary course of business less estimated cost of completion on sale, and a reasonable profit margin based on the efforts required to complete and sell the inventories.

Allowance for impaired debtsAn estimate of the collectible amount of trade receivables is made when collection of the full amount is no longer probable. This determination of whether these trade receivables are impaired entails the Company evaluating, the credit and liquidity position of the customers, historical recovery rates and collateral requirements from certain customers in certain circumstances. The difference between the estimated collectible amount and the book amount is recognised as an expense in the profit or loss. Any difference between the amounts actually collected in the future periods and the amounts expected will be recognised in the profit or loss at the time of collection.



5. Critical accounting judgements and key sources of estimation uncertainty (continued)

Determination of fair value

Impairment of goodwillDetermining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the management to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate present value.

Impairment of other intangible assetsThe fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets that are fully depreciated.

Passenger revenue recognitionPassenger sales are recognised as operating revenue when the transportation is provided. The value of unused tickets is included as sales in advance of carriage in the statement of financial position and recognised as revenue at the end of one year from the date of sale. This is estimated based on historical trends and experience of the Company whereby tickets uplift occurs mainly within the first two years. The carrying amount of the Company’s sales in advance of carriage at 31 December 2015 is RO 37.67 million (2014: RO 34.60 million), included in unearned revenue of trade and other payables in note 23.

Frequent flyer programmeThe Company operates a frequent flyer programme that provides travel awards to programme members based on accumulated mileage. A portion of passenger revenue attributable to the awards of frequent flyer benefits is deferred until they are utilised. The deferment of the revenue is estimated based on the historical trends of breakage and redemption, which is then used to project the expected utilisation of these benefits. Any remaining unutilised benefits are recognised as revenue upon expiry. The carrying amount of the Company’s deferred revenue at 31 December 2015 is RO 2.725 million (2014: RO 2.980 million), included in other payables of trade and other payables in note 23.

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Notes to the Financial Statementsfor the year ended 31 December 2015 (continued)

6. Aircraft, property, plant and equipment (continued)

Capital work in progress includes pre-delivery payments in the amount of RO 47.58 million(2014: RO 80.38 million) for four B737-800 aircraft (delivery in 2016), four B787-8 aircraft(deliveries in 2017 to 2021) and twenty B737-8 MAX aircraft (deliveries in 2019 to 2023).

During the current year, the Board of Directors resolved to dispose-off two ATR aircraft. These have been classified as assets held for sale (note 15).

Borrowing costs capitalized during the year amounts to RO 1.712 million (2014: RO 0.882 million).

The Company owns one Boeing 737-800, four Airbus A330-200, six Airbus A330-300, four Embraer and two ATR 42-500 aircraft. The Company has also acquired one Boeing 787-8, one Airbus A330-300 aircraft under term loan financing; and one additional Boeing 787-8 under finance lease arrangement. In 2008, the Company entered into a lease agreement with Frankincense of Oman Limited, a company registered in the Cayman Islands, for the lease of one Boeing 737-800 (delivered in March 2008)(note 21). The net carrying amount of the leased aircraft was in the amount of approximatelyRO 10.16 million (2014: RO 11.84 million). In 2009, the Company entered into two lease agreements with Oryx of Oman Limited, a company registered in the Cayman Islands, for the lease of two Airbus A330-300 aircraft (first delivered in October 2009 and second in November 2009) (note 21). The net carrying amounts of the leased aircraft were in the amount of approximately RO 31.92 million (2014: RO 34.39 million) andRO 30.82 million (2014: RO 33.23 million respectively). Further in 2010, the Company entered two lease agreements with Oryx of Oman Limited, a company registered in the Cayman Islands, for the lease of two Airbus A330 aircraft (note 21). The net carrying amounts of the leased aircraft were approximately RO 23.37 million (2014: RO 25.30 million) andRO 23.66 million (2014: RO 25.59 million) respectively.

The other two lease agreements were entered with Luban of Oman, a company registered in the Cayman Islands, for the lease of two Airbus A330 aircraft (note 21). The net carrying amounts of the leased aircraft were approximately RO 32.39 million (2014: RO 34.83 million) and RO 28.56 million (2014: RO 30.68 million) respectively. In 2010, the Company entered into a term loan for financing of one spare engine for A330 aircraft with Ahli Bank SAOG. The engine has been mortgaged in favour of Ahli Bank SAOG (note 20) and net carrying amount of the engine is approximately RO 3.82 million (2014: RO 4.25 million).

In 2011, the Company entered into a term loan for financing of two Embraer aircraft withBank Dhofar. The aircraft has been mortgaged in favour of Bank Dhofar (note 20) and net carrying amount of the aircraft is approximately RO 8.90 million (2014: RO 9.44 million) and RO 8.89 million(2014: RO 9.44 million) respectively.


6. Aircraft, property, plant and equipment (continued)

In 2011, the Company entered into a lease agreement with Oryx of Oman, a company registered in the Cayman Islands, for the lease of one Airbus A330-200 (delivered in May 2011) (note 21). The net carrying amount of the leased aircraft is approximately RO 31.97 million (2014: RO 34.15 million).

In 2011, the Company entered into a term loan for financing of one spare engine for A330 aircraft with Oman International Bank SAOG. The engine has been mortgaged in favour of HSBC Bank SAOG – Oman (formerly Oman International Bank SAOG) (note 20) and net carrying amount of the engine is approximately RO 1.66 million (2014: RO 1.82 million).

In 2012, the Company entered into a term loan for financing of two Embraer aircraft withBank Muscat SAOG (note 20). Net carrying amount of the aircraft is approximately RO 10.08 million(2014: RO 10.65 million) and RO 10.23 million (2014: RO 10.79 million) respectively.

In 2014, the Company entered into a term loan for financing of two B737-800 aircraft with Bank Muscat SAOG. Term loans were settled during the year through sale and lease back of these aircrafts.

In 2014, the Company entered into a term loan for financing of two A330-300 aircraft withBank Muscat SAOG (note 20). Net carrying amount of the aircraft is approximately RO 45.39 million (2014: RO 48.01 million) and RO 45.92 million (2014: RO 48.55 million) respectively.

In 2015, the Company entered into a term loan for financing of two A330-300 aircraft withBank Muscat SAOG (note 20). Net carrying amount of the aircraft is approximately RO 47.46 million (2014: nil).

In 2015, the Company entered into a term loan for financing of one Boeing 787-8 aircraft withBank Muscat SAOG (note 20). Net carrying amount of the aircraft is approximately RO 49.24 million.

In 2015, the Company entered into a lease agreement with Meethaq Islamic Banking, for lease of one Boeing 787-8 aircraft (note 20). Net carrying amount of the aircraft is approximately RO 49.07 million (2014: nil).

Aircraft on finance lease are mortgaged in favour of the leasing company.

Land on which buildings have been constructed by the Company is owned by the Directorate General of Civil Aviation and Meteorology (DGCAM). In accordance with the combined term sheet agreement with the DGCAM, dated June 2001, the Company was granted the continuing right to occupy and use the premises for the provision of ground handling, cargo handling and catering services at the Seeb International Airport (renamed Muscat International Airport effective from February 2008) and Salalah Airport (note 29).



6. Aircraft, property, plant and equipment (continued) On expiry of the term sheet agreement, the assets in existence, purchased prior to 1 January 2002, will be purchased by the airport operator at their open market value, as determined by an independent valuer except for the catering premises building which will be purchased at its net book value. Additions to assets subsequent to 1 January 2002, approved by the airport operator during the validity of the term sheet agreement, will be purchased by the airport operator at an agreed residual value on expiry of the agreement. The land on which the Hotel is situated is owned by the Ministry of Commerce and Industry and was made available for the use of the Hotel on 13 April 1985, for a period of 50 years.

In 2014, the Company received a government grant of RO 11.262 million for the purchase of furniture and equipment for the Muscat and Salalah airports. As at 31 December 2015, the unutilised portion of the grant amounting to RO 0.979 million (2014: RO 4.554 million) is presented as government grant (note 24).

7. Goodwill 2015 2014

RO’000 RO’000Cost

At 1 January and 31 December 15,137 15,137

Impairment 1 January 8,542 7,295Impairment for the year (note 27) 1,216 1,247

31 December 9,758 8,542Net book value

31 December 5,379 6,595

Impairment losses recognised in the year

The recoverable amount of the Hotel’s line of business was assessed by reference to the cash-generating unit’s value in use calculation which used cash flow projections covering a period of5 years using a discount rate of 10% p.a.

The cash flow beyond 5 years have been extrapolated using a terminal growth rate of 2% which is the average economic growth rate.

The values assigned to the key assumptions represent management’s assessment of external sources and internal sources (historical data).


8. Available for sale investments2015 2014

RO’000 RO’000

1 January 549 583Fair value changes during the year (35) (34)

31 December 514 549

Quoted local equity investments 414 449Unquoted local equity investments 100 100

514 549

The movement in the investments revaluation reserve is as follows:

1 January 246 280Fair value change during the year (35) (34)

31 December 211 246

Available-for-sale investments are analyzed as follows:

Fair value Cost2015 2014 2015 2014

RO’000 RO’000 RO’000 RO’000Quoted local equity investments

Banks and investment 249 274 89 89Services 165 175 30 30

414 449 119 119 Unquoted local equityinvestmentsServices 100 100 100 100

514 549 219 219

Management considers that the carrying value of unquoted local investments is not materially different from their fair value at the end of the reporting period.

At the current and prior year reporting date none of the Company’s investment holdings represents 10% or more of the investee’s share capital.



8. Available for sale investments (continued)

Details of the Company’s investment holding exceeding 10% of the market value of the Company’s total quoted investment portfolio as of 31 December 2015 are as follows:

Number of securities

Portfolioholding Fair value Cost

(’000) (%) RO’000 RO’000MSM quoted securities:

National Finance Company SAOG 1,871 60 249 89

Gulf Hotels Oman SAOG 13 32 133 14

9. Equity accounted investee2015 2014

RO’000 RO’000

Cost 75 75Changes in net assets at the beginning of the year 1,842 1,741Share of profits for the year 1,868 1,826Dividends received in the year (1,900) (1,725)

1,884 1,917

Investment in an equity accounted investee represents 50% equity in Oman Sales and Services LLC,a limited liability company registered in the Sultanate of Oman, at a cost of RO 75,000.

Summarised financial information of the equity accounted investee is as follows:

RO in ’000 Total assets

Total liabilities

Net assets Income Expense Profit

Company share of net

assets

Company share of

profit

2015 7,985 4,223 3,762 24,758 21,022 3,736 1,881 1,868

2014 8,590 4,763 3,827 24,845 21,194 3,651 1,914 1,826

In year 2015, the Company received dividends of RO 1.9 million from its investments in equity accounted investee (2014: RO 1.7 million).


10. Long-term receivables

Long-term receivables represent interest free security deposits placed to secure the lease of aircraft. Fair value of these deposits has been discounted based on an effective interest rate method using a discount rate of 1.178% (2014: 0.629%). The maturity profile of such deposits is as follows:

2015 2014RO’000 RO’000

MaturityAfter 1 year 2,613 2,685 Between 2-5 years 2,431 7725 years and beyond 15,876 4,373

20,920 7,830

11. Inventories

Aircraft consumables 16,891 15,378Catering stock 370 443Passenger consumables 1,169 1,373General 977 1,637Hotel stock 135 95

19,542 18,926Less: transferred to assets held-for-sale (1,704) -

17,838 18,926

Allowance for obsolete and slow moving inventories (2,805) (2,712)Less: transferred to assets held-for-sale 426 -

(2,379) (2,712)

15,459 16,214

Movement in allowance for obsolete and slow moving inventories:

1 January 2,712 2,394Charge for the year 93 318Less: transferred to assets held-for-sale (426) -

31 December 2,379 2,712



12. Trade and other receivables2015 2014

RO’000 RO’000

Airlines and charterers 4,309 3,549Travel agents 26,664 28,075Ministries 1,938 2,948Others 470 479

33,381 35,051Allowance for doubtful debts (1,095) (824)

Trade receivables 32,286 34,227Other receivables 27,826 19,773Prepaid expenses 7,417 4,370

67,529 58,370

Movement in allowance for doubtful debts :1 January 824 651Charge for the year 271 173

31 December 1,095 824

Owing to the nature of the Company’s operations, it undertakes transactions with a large number of customers in various countries.

Trade receivables include amounts RO 17.304 million (2014: RO 17.146 million) due in foreign currencies, mainly Euros and US Dollars.

13. Term deposits

Term deposits, in the amounts of RO 6.5 million (2014: RO 5.6 million), represent deposits with commercial banks in Oman.

These term deposits mature within six months from the end of the reporting period and are denominated in Rial Omani, earning interest ranging between 1.75% to 2.35% (2014: 0.50% to 0.75%) per annum.


14. Cash and cash equivalents2015 2014

RO’000 RO’000

Cash in hand and at bank 10,549 19,748

Cash and bank balances include amounts aggregating RO 2.29 million (2014: RO 0.88 million) held with banks in India, Sri Lanka, Pakistan and Bangladesh in local currencies.

Prior approval from regulatory authorities of the respective countries is required for the transfer of these funds.

15. Assets classified as held-for-sale 2015 2014

RO’000 RO’000

Aircraft, engine, rotables and tools 12,096 -Less: accumulated depreciation (8,711) -

Net carrying value of aircraft, engine, rotables and tools 3,385 -Inventory net of provision 1,278 -

4,663 -Impairment (997) -

3,666 -

During the year, the Board of Directors through a resolution agreed to dispose off two ATR aircraft from its fleet. Management is actively looking for buyers for the aircraft and expects the sale to be effected in 2016. The net carrying value of these aircraft including related tools and consumables have been classified as assets-held-for-sale. The management has recorded an impairment loss ofRO 0.997 million on assets held-for-sale.

16. Share capital2015 2014

RO’000 RO’000

Authorised share capital (shares of RO 1 each) 700,000 700,000

Issued and paid up share capital (shares of RO 1 each) 684,158 546,048



16. Share capital (continued)

Shareholders who own 10% or more of the Company’s shares, whether in their name, or through a nominee account, and the number of shares they hold are as follows:

% of Shareholding No. of shares2015 2014 2015 2014

Government of the Sultanate of Oman 99.928 99.908 683,663,285 545,546,842

17. Government contribution to equity

Government contribution to equity represents government’s contribution to finance Company’s operations and capital requirement.

In 2014, the authorised share capital of the Company was increased from RO 500 million toRO 700 million after the approval of shareholders at the Extraordinary General Meeting (“EGM”). Furthermore, equity injection of RO 75 million in 2013 disclosed in statement of changes in equity as ‘Government contribution to Equity’ has been converted into paid up capital in the same EGM.

During the current year, the Government contributed RO 54 million (2014: RO 138.110 million) disclosed in statement of changes in equity as ‘Government contribution to equity’. The contribution will be converted into paid up capital after the approval of the shareholders at the Extraordinary General Meeting. Other receivables includes RO 14 million in respect of government’s commitment to contribution to equity and has been received subsequent to year end.

18. Legal reserve

In accordance with the Commercial Companies Law of 1974, as amended, 10% of the profit for the year is required to be transferred to a legal reserve until the reserve is equal to one third of the issued share capital. The Company may resolve to discontinue such annual transfers when the reserve totals one third of the issued share capital. During the year, the Company has not added to this reserve as the Company incurred net loss for the year.

19. Provision for maintenance of aircraft, engines and rotables2015 2014

RO’000 RO’000(Restated)

Current portion 11,217 13,789Non-current portion 18,413 11,309

29,630 25,098


19. Provision for maintenance of aircraft, engines and rotables (continued)

Movement during the year is as follows:

2015 2014RO’000 RO’000

(Restated)

At 1 January 25,098 22,750Additional provisions during the year 37,956 30,346Utilized during the year (33,424) (27,998)

At 31 December 29,630 25,098

Provision for maintenance of aircraft, engines and rotables is recognised only when the Company has a present obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and can be measured reliably. The amount to be incurred within the next year is shown under the current liabilities.

20. Borrowings2015 2014

RO’000 RO’000

Term loans 272,337 293,184Finance lease liabilities (note 21) 199,349 176,470

471,686 469,654

Current portionTerm loans 77,945 168,586Finance lease liabilities (note 21) 26,047 24,046

103,992 192,632

Non-current portionTerm loans 194,392 124,598Finance lease liabilities (note 21) 173,302 152,424

367,694 277,022



20. Borrowings (continued)

Term loans (continued)

At the end of the reporting period the Company has sixteen term loans.

(i) The first term loan in the amount of RO 0.31 million (2014: RO 1.53 million) denominated in US Dollars is for the financing of one spare engine for A330 aircraft obtained from Al Ahli Bank SAOG (note 6). The loan is repayable in 24 equal quarterly installments commencing from June 2010 and carries a fixed interest rate of 5.00% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates. The spare engine is mortgaged in favour of Al Ahli Bank SAOG.

(ii) The second term loan in the amount of RO 1.28 million (2014: RO 2.26 million) denominated in

Omani Rials is for the financing of one A330 Engine obtained from HSBC Bank Oman SAOG (formerly Oman International Bank SAOG) in 2011. The loan is repayable in 24 equal quarterly installments commencing from June 2011 and carries a fixed interest rate of 3.50% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(iii) The third term loan in the amount of RO 2.07 Million (2014: RO 3.72 million) denominated in Omani Rials is for the financing of one E175 aircraft obtained from Bank Dhofar SAOG in 2011 (note 6). The loan is repayable in 24 quarterly equal principal installments commencing from June 2011 and carries a fixed interest rate of 3.15% per annum for the first two years with a reset clause of the rate after every two years. The Company has the option to switch the currency (in between USD/OMR) on interest reset dates. The benchmark for reset at the end of every two years will be 2 years IRS rate plus 200 basis points for continuing as USD denominated loan or Bank Dhofar SAOG fixed deposit rate for 2 years plus 75 basis points if the loan is switched to RO currency. The Company decided to switch the currency from USD to OMR and the interest rate was reset to 2.25% per annum on the last reset date in March 2015. The Company has the option to repay the loan in part or full on any of the repayment dates.

(iv) The fourth term loan in the amount of RO 2.07 million (2014: RO 3.72 million) denominated in Omani Rials is for the financing of one E175 aircraft obtained from Bank Dhofar SAOG in 2011 (note 6). The loan is repayable in 24 quarterly equal principal installments commencing from June 2011 and carries a fixed interest rate of 3.15% per annum for the first two years with reset clause of rate after every two years. The Company has the option to switch the currency (in between USD/OMR) on interest reset dates. The benchmark for reset at the end of every two years will be 2 years IRS rate plus 200 basis points for continuing with the USD denominated loan or the Bank Dhofar SAOG fixed deposit rate for 2 years plus 75 basis points if the loan is switched to OMR currency. The Company decided to switch the currency from USD to OMR and the interest rate was reset to 2.25% per annum on the last reset date in March 2015.

The Company has the option to repay the loan in part or full on any of the repayment dates.




(v) The fifth term loan in the amount of RO 5.57 million (2014: RO 7.60 million) denominated in Rial Omani is for the financing of E175 aircraft obtained from Bank Muscat SAOG in 2012. The loan is repayable in 24 quarterly equal principal installments commencing from November 2012 and carries a fixed interest rate of 3.50% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(vi) The sixth term loan in the amount of RO 6.08 million (2014: RO 8.11 million) denominated in Rial Omani is for the financing of E175 aircraft obtained from Bank Muscat SAOG in 2012. The loan is repayable in 24 quarterly equal principal installments commencing from February 2013 and carries a fixed interest rate of 3.50% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(vii) The seventh term loan in the amount of RO 21.35 million (2014: RO 5.82 million) denominated in Rial Omani is for the financing of pre-delivery payments of two B737 aircraft obtained from Oman Arab Bank SAOC during 2014. The entire loan is repayable during August and November 2016 and carries a fixed interest rate of 1.90% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(viii) The eighth term loan in the amount of RO 17.50 million (2014: RO 2.14 million) denominated in Rial Omani is for the financing of pre-delivery payments of two B737 aircraft obtained from Oman Arab Bank SAOC during 2014. The entire loan is repayable during September and December 2016 and carries a fixed interest rate of 1.90% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(ix) The ninth term loan in the amount of RO 9.29 million (2014: RO 10.15 million) denominated in Rial Omani is for the financing of additional Buyer Furnished Equipments and Seller Purchased Equipments of four B737-800 aircraft obtained from Bank Muscat SAOG during 2014. The loan is repayable in 40 equal quarterly installments commencing from January 2015 and carries a fixed interest rate of 3.65% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(x) The tenth term loan in the amount of RO 44.84 million (2014: RO 48.10 million) denominated in Rial Omani is for the financing of one A330-300 aircraft obtained from Bank Muscat SAOG in 2014. The loan is repayable in 48 equal quarterly installments commencing from February 2015 and carries a fixed interest rate of 3.65% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(xi) The eleventh term loan in the amount of RO 45.13 million (2014: RO 48.41 million) denominated in Rial Omani is for the financing of one A330-300 aircraft obtained from Bank Muscat SAOG in 2014. The loan is repayable in 48 equal quarterly installments commencing from February 2015 and carries a fixed interest rate of 3.65% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.





(xii) The twelfth term loan in the amount of RO 47.01 million denominated in Rial Omani is for the financing of one A330-300 aircraft obtained from Bank Muscat SAOG in 2015. The loan is repayable in 48 equal quarterly installments commencing from May 2015 and carries a fixed interest rate of 3.65% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(xiii) The thirteenth term loan in the amount of RO 2.79 million denominated in Rial Omani is for the financing of additional Buyer Furnished Equipments and Seller Purchased Equipments of one B737-800 aircraft obtained from Bank Muscat SAOG during 2015. The loan is repayable in 40 equal quarterly installments commencing from May 2015 and carries a fixed interest rate of 3.65% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(xiv) The fourteenth term loan in the amount of RO 2.79 million denominated in Rial Omani is for the financing of additional Buyer Furnished Equipments and Seller Purchased Equipments of one B737-800 aircraft obtained from Bank Muscat SAOG during 2015. The loan is repayable in 32 equal quarterly installments commencing from June 2015 and carries a fixed interest rate of 3.65% per annum. The Company has the option to repay the loan in part or full on any of the repayment dates.

(xv) The fifteenth term loan in the amount of RO 49.26 million denominated in Rial Omani is for the financing of one B787-8 aircraft obtained from Bank Muscat SAOG in 2015. The loan is repayable in 48 equal quarterly installments commencing from January 2016 and carries a fixed interest rate of 2.33% per annum for the first 4 years and thereafter 3.30% per annum for the remaining period of 8 years. The Company has the option to repay the loan in part or full on any of the repayment dates only after the end of first six years.

(xvi) The sixteenth term loan is a short term loan in the amount of RO 15 million (2014: RO 5 million) denominated in Rial Omani, is for the working capital requirements of Oman Air obtained from Bank Muscat SAOG in 2014. The loan is repayable in 3 months with an option to roll over for another 3 months and carries a fixed interest rate of 1.25% per annum. The Company has the option to prepay this facility by providing two (2) days advance notice.

As at 31 December 2015, the Company was not in any breach of loan covenant (2014: Nil).


21. Lease liabilities

Finance lease liabilities

The Company has finance lease liabilities in respect of four Airbus 330-200 (2014: four) and three Airbus 330-300 (2014: three) and one Boeing 737-800 aircraft (2014: three) as of reporting date. Finance lease liabilities are payable as follows:

Minimum lease payments Present value of minimum lease payments

2015 2014 2015 2014RO’000 RO’000 RO’000 RO’000

Not later than one year 32,640 30,518 26,047 24,046Later than one year and not later than five years 128,364 112,731 111,717 96,165Later than five years 66,277 59,037 61,585 56,259

227,281 202,286 199,349 176,470Future finance charges (27,932) (25,816) - -

199,349 176,470 199,349 176,470

Finance leases are for a period of five to twelve years with interest rates ranging from 2.33% to 4.41% (2014: 3.13% to 4.91%) per annum. The aircraft are mortgaged in favour of the leasing companies.

Under the terms of the lease agreement no contingent rents are payable.

22. Employees’ end of service benefits

Movement in the provision for end of service benefits during the year is as follows:

2015 2014RO’000 RO’000

1 January 9,561 8,332Charge for the year (note 27) 2,260 1,730Payments during the year (881) (501)

31 December 10,940 9,561



23. Trade and other payables2015 2014

RO’000 RO’000

Trade payables 16,550 19,027Due to related parties (note 32) 641 312Unearned revenue 37,047 37,705Other payables 47,257 40,432

Accrued expenses 38,887 33,883

140,382 131,359

Trade payables include aggregate amounts of RO 3.368 million (2014: RO 12.931 million) due in foreign currencies, mainly in Euro and US Dollars.

Unearned revenue relates to sales of scheduled passenger revenue which will be recognised when the Company fulfills its service obligation by providing flight services.

24. Government grant

In the year 2014, the Company received a government grant of RO 11.262 million for the purchase of furniture and equipment for Muscat and Salalah airports. As at 31 December 2015, government grant represents the unutilised portion of the grant amounting to RO 0.979 million (2014: RO 4.554 million).

25. Net assets per share

Net assets per share is calculated by dividing the net assets at the year-end by the number of shares outstanding as follows: 2015 2014


Net assets 54,977 87,345

Number of shares outstanding at the year end 684,158 546,048

Net assets per share (RO) 0.080 0.160


26. Revenue2015 2014

RO’000 RO’000

Scheduled services - international 399,174 347,590Scheduled services - domestic 23,495 22,129Air charter services 13,215 12,888Handling fees - engineering 4,957 3,831Handling fees - others 17,610 14,346Catering 3,615 3,807Rooms, food and beverage revenue - Hotel 3,268 2,997Other revenue 637 812

465,971 408,400

27. Expenditure2015 2014


Fuel cost 122,783 161,634Employee costs 131,168 114,935Other aircraft operating expenses 64,180 52,562Maintenance cost 45,654 38,043Passenger related costs 46,785 40,803Others 35,858 27,720Depreciation (note 6) 38,475 29,718Allowance for doubtful debts (note 12) 271 173Operating lease rentals on aircraft 35,977 29,089Cost of catering materials consumed 5,794 6,140Insurance costs 1,782 1,560Impairment (note 7 & note 15) 2,213 1,247Omani training and development costs 1,318 982Management fee - Hotel 164 174

532,422 504,780

Employee cost includes the following:

Wages and salaries 102,515 84,320Other benefits 20,665 24,506Increase in liability for employee benefits (note 22) 2,260 1,730Contribution to a defined retirement plan 5,728 4,379

131,168 114,935



28. Interest and investment income 2015 2014

RO’000 RO’000

Interest on term deposits 442 342Dividends 30 33

472 375

29. Aviation services agreement and combined term sheet agreement

In accordance with the aviation services agreement between the Company and the Ministry of Communications, Government of the Sultanate of Oman (the “Government”), the Company has been granted the right to operate domestic and international airline services, to provide aircraft passenger and cargo handling facilities, airline catering and other services in Oman. The Company has the sole right to use the utilities and facilities provided by the Government for such purposes. The agreement was for a period of twenty years up to 24 May 2001.

In June 2001 through a combined term sheet agreement, the Director General of Civil Aviation and Meteorology (“DGCAM”), acting in accordance with a Cabinet Decision of 4 April 2000 and a decision issued by the Committee of Ministers dated 13 June 2000, the Company’s ground handling and cargo handling services concessions was extended for a period of five years, and its catering services concession for a period of ten years, all effective from 1 January 2002. The Company’s rights to operate its scheduled and charter airline services were extended for an indefinite period. In 2014, the ground handling services and cargo handling services were further extended until31 May 2015 on the existing terms. Further, the catering business concession was also extended till 30 June 2015. The Company paid the charges payable to the concerned concessionaire Oman Airport Management Company SAOC (“OAMC”) in line with the amounts payable under the amended terms of the concession agreements as enumerated herein.

In November 2015, new concession agreement has been effective with different method of calculation for concession fees.

The following charges set out in the aviation services agreement are included in the financial statements:

2015 2014RO’000 RO’000

Rent 283 200

Concession fee 1,733 1,290


29. Aviation services agreement and combined term sheet agreement (continued)

Under the combined term sheet agreement, effective 1 January 2002, the Company will pay to the OAMC the following concession fees:

Ground handling fee

: 2% of monthly turnover from NOC handling, crew transport and radio rental revenue provided to third parties.

7.5% of the monthly turnover received from ground handling services provided to third parties.

For November and December 2015, concession fee was based on maximum take-off weight of an aircraft (MTOW) and each departing passenger

RO 0.353/metric tonne of MTOW for full handling flights RO 0.088/metric tonne of MTOW for technical flights RO 0.125 per departing passenger

Cargo handling fee : 2% of monthly turnover from agency commission and 50% of demurrage collected from third parties.

7.5% of the monthly turnover received from cargo handling services provided to third parties.

Catering fees : 5% of the monthly turnover received from catering services provided for use on Airport for third parties and 3% of monthly turnover for off-airport catering services.For November and December 2015, 5% of the monthly Gross Revenue which is attributable to the provision of Catering Services to airlines with the exception to Oman Air, which is charged at 2%.

The operator collects a property fee for the land mass that is occupied by the catering service provider at the Current Airport in the amount of RO 1.000 per sqm. payable monthly.

The catering service provider shall pay property rental fee in consideration of occupying and using the new catering premises (listed in Schedule 3of the agreement) as follows.Area within the building: RO 1.500 per sqm.Area outside the building: RO 0.500 per sqm.

Line maintenance : 2% of monthly turnover on services other than Aircraft related provided to third parties.

7.5% of the monthly turnover received from line maintenance services provided to third parties.

For November and December 2015, line maintenance concession fees was part of the Ground handling concession fee working as per revisions stated above.

In April 2009, commercial departure lounge concession agreement has been signed for occupying commercial space at the airport. This agreement commenced from the opening date of the designated Oman Air first and business class lounge and will continue till 31 October 2011 or until the end of operation at the current Muscat International Airport terminal. The Company will pay to the OAMC fixed amount of RO 2,500 plus 10% of the monthly sales.



30. Taxation

Recognised in statement of profit or loss and other comprehensive income

2015 2014RO’000 RO’000

Deferred tax 5,800 4,450

Recognised in statement of financial position

Non-current liabilityDeferred tax 28,401 22,601

The Company is subject to income tax at the rate of 12% (2014: 12%) of taxable income in excess of RO 30,000. No provision for income tax has been made in these financial statements in view of the tax losses incurred during the year. The tax returns of the Company for the years 2010 to 2014 have not yet been agreed with the Secretariat General for Taxation at the Ministry of Finance. The Board of Directors are of the opinion that additional taxes, if any, related to the open tax years would not be significant to the Company’s financial position as at 31 December 2015. As at 31 December 2015, the tax losses available for offset against future taxable profit amounted to approximately RO 634 million (2014: RO 610 million). The tax loss are available for carry forward for a period of five years from the year when it was incurred.

Deferred tax liability

Deferred tax liabilities are calculated on all temporary differences using a principal tax rate of 12% (2014: 12%). The net deferred tax (liability) / asset and deferred tax charge in the statement of income are attributable to the following items:

2015 1 January Charged to profit or loss 31 December

RO’000 RO’000 RO’000AssetCarried forward losses 250 - 250Liability

Accelerated tax depreciation (22,851) (5,800) (28,651)

(22,601) (5,800) (28,401)

2014AssetCarried forward losses 250 - 250LiabilityAccelerated tax depreciation (18,401) (4,450) (22,851)

(18,151) (4,450) (22,601)


31. Loss per share – basic and diluted 2015 2014

Loss for the year (RO’000) (86,333) (109,579)

Weighted average number of shares outstanding duringthe year (’000)

684,158 546,048

Loss per share - basic and diluted loss per share (RO) (0.126) (0.201)

The par value of each share is RO 1. The loss per share is calculated by dividing the loss for the year by the weighted average number of shares outstanding during the year.

32. Related parties

Related parties comprise the shareholders, directors, key Management personnel and business entities in which they have the ability to control or exercise significant influence in financial and operating decisions. The Government is not considered as a related party.

The Company maintains balances with these related parties which arise in the normal course of business from the commercial transactions and are entered into on terms and conditions which the directors consider to be comparable with those adopted for arms’ length transactions with third parties. Outstanding balances at the year-end are unsecured and settlement occurs in cash.

No expenses have been recognised in the year for impaired debts in respect of amounts owed by related parties. Following is the summary of significant transactions with related parties during the year:

2015 2014RO’000 RO’000

Revenue and expensesPurchase of goods / services 17,355 14,288

Sale of goods / services 54 74

Management and marketing fee 181 193

The amount due from related parties is included in note 12.

Oman Airports Management Company 28 8Public Authority for Civil Aviation 14 15Al Shasha Al Masia Co. SAOC 35 -

77 23



32. Related parties (continued)

The amount due to related parties is included in note 23. 2015 2014

RO’000 RO’000

Oman Airport Management Company SAOC 464 123Public Authority For Civil Aviation (PACA) 144 180Flamingo Hotel Management 33 19Oman Housing Bank - 3Al Shasha Al Maasia Co. SAOC - 6

641 331

Key Management personnel benefits

Key Management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any director (whether executive or otherwise).

2015 2014RO’000 RO’000

Short term benefits 1,806 1,446Postemployment benefits 71 54Directors’ remuneration and sitting fees 125 114

2,002 1,614

33. Segment information

Information regarding the Company’s operating segments is set out below in accordance with IFRS 8 Operating segments. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Company that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

Primary reporting format - business segments

The Company is organised into three major operating divisions - airline, hotels & catering and ground & cargo handling. The airline division provides passenger and cargo services on a scheduled and charter basis.

The Hotel division operates Golden Tulip Seeb Hotel and catering division provides in-flight and airport retail catering services.


33. Segment information (continued)

Primary reporting format - business segments (continued)

The cargo division provides cargo handling services. The ground handling division provides airline support services.

The Company reports its primary segments information separately for its airline and catering divisions and by combining its cargo and ground handling divisions. This information is presented as follows:

Airline Hotels andcatering

Ground andcargo handling Total

2015 2014 2015 2014 2015 2014 2015 2014RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

(Restated) (Restated)RevenueTotal revenue 445,901 389,933 29,283 28,594 32,452 25,320 507,636 443,847Inter division revenue

(5,060) (3,495) (22,400) (21,790) (14,842) (10,974) (42,302) (36,259)

External revenue 440,841 386,438 6,883 6,804 17,610 14,346 465,334 407,588Other income 637 812

465,971 408,400Segment (loss) profitincluding inter division (loss) profit (68,135) (95,437) 12,706 11,684 6,748 1,710 (48,681) (82,043)

Common costs (17,770) (14,337)

Operating loss (66,451) (96,380)Finance cost (13,744) (9,397)Interest and investment income 472 375Share of profits of an associate company 1,868 1,826Increase in fair value of long-term receivables (945) (263)Concession fee (1,733) (1,290)Deferred tax charge (5,800) (4,450)

Net loss for the year (86,333) (109,579)



33. Segment information (continued)

Segment assets and liabilities

2015 2014RO’000 RO’000

(Restated)

Segment assetsAirline and airport services

720,394 733,365

Hotel14,203 14,471

Others2,398 2,336

Total assets 736,995 750,172

Segment liabilitiesAirline and airport services 653,136 639,837Hotel 481 519Others 28,401 22,471

Total liabilities 682,018 662,827

For the purposes of monitoring segment performance and allocating resources between segments:

• Allassetsareallocatedtoreportablesegmentsotherthaninvestmentsinequityaccountedinvesteeand available-for-sale investments. Goodwill is allocated to Company’s hotel cash generating unit. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments; and

• All liabilitiesareallocatedtoreportablesegmentsotherthancurrentanddeferredtaxliabilities.Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.

Geographical information

The Company operates in two principal geographical markets, the domestic market in the Sultanate of Oman and the overseas markets. The following table shows the distribution of the Company’s revenues; inclusive of inter division revenues, by geographical market:

Oman Overseas Total

2015 2014 2015 2014 2015 2014RO’000 RO’000 RO’000 RO’000 RO’000 RO’000

Revenue including inter division revenues 26,763 24,799 482,556 409,037 509,319 433,836


34. Commitments and contingencies

Capital commitments

As at 31 December 2015, the Company has commitments for previously placed aircraft orders amounting to RO 753.37 million (2014: RO 547.57 million). As at 31 December 2015 prepayments on aircraft orders have been made, amounting to RO 47.58 million (2014: RO 80.38 million).

Other commitments2015 2014

RO’000 RO’000

Capital expenditure commitments 5,960 9,162

Operating lease commitments

The fixed lease commitments are as follows:

Not later than one year 38,222 22,257Later than one year and not later than five years 104,279 51,943After five years 77,680 19,458

220,181 93,658

During the year, the Company has entered into three sale and leaseback transactions resulting in an operating lease.

In addition to the above fixed lease commitments, there is a variable lease rental element depending on the flying hours of the leased aircraft.

Contingent liabilities

As at 31 December 2015, there are no contingent liabilities.



35. Financial risk management

Fair value of financial instruments

Financial assets consist of available for sale investments, long term receivables, trade and other receivables, term deposits and cash in hand and at bank. Financial liabilities consist of trade and other payables and borrowings.

Financial assets2015 2014

RO’000 RO’000Available for sale financial assets 514 549Loans and advances Long term receivables 20,920 7,830Trade receivables 32,286 34,227Other receivables 27,826 19,773Term deposits 6,500 5,577Cash and cash equivalent 10,549 19,748

98,595 87,704

Financial liabilities Liabilities measured at amortised costTrade payables 16,550 19,008Due to related parties 641 331Other payables and accrued expenses 86,144 74,315Borrowings 471,686 469,654

575,021 563,308

The fair value of the financial assets and liabilities approximates their carrying value as stated in the statement of financial position.

Fair value hierarchy

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities that entity can access at the measurement date.

Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).


35. Financial risk management (continued)

Fair value measurements recognised in the statement of financial position

31 December 2015 Level 1 Level 2 Level 3 Total RO’000 RO’000 RO’000 RO’000

Available for sale financial assetsQuoted local equity investments 414 - - 414Unquoted local equity investments - - 100 100

414 - 100 514

31 December 2014Available for sale financial assetsQuoted local equity investments 449 - - 449Unquoted local equity investments - - 100 100

449 - 100 549

There were no transfers between Level 1, 2 and 3 during the year.

No gain or loss was included in profit or loss relating to unquoted equities held at the end of the reporting date. The management believes that there will not be any significant differences between the carrying value and the fair value of other financial instruments.

Financial risk factors

Financial instruments carried on the statement of financial position comprise cash and cash equivalents, available for sale investments, term deposits, long term receivables, trade and other receivables, trade and other payables and borrowings.

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been impacted.

The classification of financial assets depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Overview

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.




Financial risk factors (continued)

Risk management is carried out by management under policies approved by the Board of Directors.

(i) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers.

Trade and other receivables The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Owing to the nature of the Company’s operations, it undertakes transactions with a large number of customers in various countries.

The Company has established credit policies and procedures that are considered appropriate and commensurate with the nature and size of receivables.

In monitoring customer credit risk, customers are segmented according to their credit characteristics in the following categories:

• Airlines and charterers • Travel agents • Government customers • Other customers

The potential risk in respect of amounts receivable is limited to their carrying values as Management regularly reviews these balances whose recoverability is in doubt.

The Company establishes a provision for impairment that represents its estimate of potential losses in respect of trade and other receivables. The main components of this loss are specific loss component that relates to individual exposures.

The sale of passenger and cargo transportation is largely achieved through International Air Transport Association (“IATA”) approved sales agents. All IATA agents have to meet minimum financial criteria applicable to their country of operation to remain accredited. Adherence to the financial criteria is monitored on an ongoing basis by IATA through their Agency programme.

The credit risk associated with such sales agents is relatively small owing to a broad diversification.


35. Financial risk management


(i) Credit risk (continued)

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The exposure to credit risk at the end of the reporting period was on account of:

2015 2014RO’000 RO’000

Available for sale financial assets 514 549Long term receivables 20,920 7,830Trade receivables 33,381 35,051Other receivables 27,826 19,773Term deposits 6,500 5,577Cash at bank 10,512 19,717

99,653 88,497

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company’s customer base, including the default risks of the industry and country in which customers operate, as these factors may have an influence on credit risks.

During 2015, approximately 34% (2014: 35%) of the Company’s passenger revenue was attributable to sales transactions relating to Indian subcontinent.

The exposure to credit risk for trade receivables at the end of the reporting period by type of customer was:

2015 2014RO’000 RO’000

Travel agents 26,664 28,075Airlines and charterers 4,309 3,549Ministries 1,938 2,948

Other customers 470 479

33,381 35,051





(i) Credit risk (continued)

Exposure to credit risk

The age of trade receivables and related impairment loss at the end of the reporting period was:

2015 2014Gross Impairment Gross Impairment

RO’000 RO’000 RO’000 RO’000

Not past due 17,665 - 20,608 -Past due 0 to 150 days 13,006 - 12,169 -Past due 151 to 365 days 1,335 - 538 -More than 1 year 1,375 (1,095) 1,736 (824)

33,381 (1,095) 35,051 (824)

Included in the Company’s trade receivable balance are debtors with a carrying amount ofRO 14.62 million (2014: RO 13.62 million) which are past due at the end of the reporting period for which the Company has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Company holds collaterals in respect of certain parties in the form of cash deposits / bank guarantees to the extent of RO 4.89 million(2014: RO 4.998 million). The average collection period of these receivables is 27 days.

The movement in provision for doubtful debts has been disclosed in note 12.

The allowance account in respect of trade receivables is used to record impairment losses unless the Company is satisfied that no recovery of the amount owing is possible, at which point the amount considered irrecoverable is written off against allowance account.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Typically, the Company ensures that it has sufficient cash on demand to meet expected operational expenses including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Company has access to credit facilities.




(ii) Liquidity risk

The maturity profile of the financial liabilities is as follows:

Carrying amount

1 year or less

1 to 2 years

2 to 5 years

Beyond 5 years

RO’000 RO’000 RO’000 RO’000 RO’00031 December 2015Trade payables 16,550 16,550 - - -Due to related parties 641 641 - - -Other payables andaccrued expenses 86,144 86,144 - - -Borrowings 471,686 103,992 48,025 139,169 180,500

575,021 207,327 48,025 139,169 180,500

31 December 2014Trade payables 19,008 19,008 - - -Due to related parties 331 331 - - -Other payables and accrued expenses 74,315 74,315 - - -

Borrowings 469,654 192,632 48,142 105,753 123,127

563,308 286,286 48,142 105,753 123,127

Unearned revenue is excluded from liquidity risk as it represents tickets sold but not flown as at the end of the reporting period.

(iii) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.





(iii) Market risk

Fuel price risks

The Company is exposed to volatility in the price of fuel and closely monitors the actual cost against the forecast cost.

Aircraft lease foreign currency exchange rate risk:

There are no significant exchange rate risks as all aircraft lease rental agreements, new aircraft commitments and deposits are made in US Dollars to which Rials Omani is fixed.

Interest rate risk

The Company has long term borrowings, which are interest bearing and exposed to changes in market interest rates.

At the end of the reporting period the interest rate profile of the Company’s interest bearing financial instruments was:

2015 2014RO’000 RO’000

Fixed rate instrumentsFinancial assets 6,500 5,577

Financial liabilities 471,686 469,654

(iv) Other price risks

A change of 10% on equity securities – available for sale would have increased or decreased equity by RO 41,400 (2014: RO 44,900).


36. Restructuring of cargo and ground handling During the year, shareholders of the Company in the EGM held on 25 October 2015, approved the restructuring of cargo handling divisions of the company. Under the restructuring plan, the Company will incorporate a separate entity for cargo handling division with an initial share capital ofRO 500,000. The assets and liabilities of cargo handling division will be transferred to the newly formed entity, 100% subsidiary of the Company. The Company will initially own 100% shares in the newly formed entity.

The above events will have an impact on the financial statements of the company in 2016.

37. Capital managementThe Company’s objectives when managing capital are to safeguard its ability to continue as a going concern and benefit other stakeholders. Management’s policy is to maintain a strong capital base so as to maintain creditor and market confidence and to sustain future development of the business.

The capital requirements of the Company are determined by the Commercial Companies Law of 1974, as amended of Sultanate of Oman.

38. Comparative informationCertain corresponding figures for the previous year have been reclassified in order to confirm with the presentation for the current year. Such reclassifications did not affect previously reported profit or shareholders’ equity.

39. Approval of the financial statementsThe financial statements were approved by the Board of Directors and authorized for issue in their meeting held on 24 February 2016.


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His Majesty Sultan Qaboos bin Said - Oman Air behalf of the Board of Directors of Oman Air, it gives...

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