Company Announcements

ANNUAL REPORT 2021

Source: RNS
RNS Number : 3523J
Air China Ld
26 April 2022
 

中國國際航空股份有限公司 (short name: 中國國航) (English name: Air China Limited, short name: Air China) is the only national flag carrier of China.

 

As the old saying goes, "Phoenix, a bird symbolizing benevolence" and "The whole world will be at peace once a phoenix reveals itself". The corporate logo of Air China is composed of an artistic phoenix figure, the Chinese characters of "中國國際航空公司" in calligraphy written by Deng Xiaoping, by whom the China's reform and opening-up blueprint was designed, and the characters of "AIR CHINA" in English. Signifying good auspices in the ancient Chinese legends, phoenix is the king of all birds. It "flies from the eastern Happy Land and travels over mountains and seas and bestows luck and happiness upon all parts of the world". Air China advocates the core spirit of phoenix which is to "serve the world, to lead and move forward to higher goals". By virtue of the immense historical heritage, Air China strives to create perfect travel experience and keep passengers safe by upholding the spirit of phoenix of being a practitioner, promoter and leader for the development of the Chinese civil aviation industry. The Company is also committed to leading the industrial development by establishing itself as a national brand, at the same time pursuing outstanding performance through innovation and excelling efforts.

 

Air China was listed on The Stock Exchange of Hong Kong Limited (stock code: 00753) and the London Stock Exchange (stock code: AIRC) on 15 December 2004, and was listed on the Shanghai Stock Exchange (stock code: 601111) on 18 August 2006.

 

Headquartered in Beijing, Air China has set up branches in Southwest China, Zhejiang, Chongqing, Tianjin, Shanghai, Hubei, Xinjiang, Guangdong, Guizhou, Tibet and Wenzhou. As at the end of the Reporting Period, the major subsidiaries of Air China are Shenzhen Airlines Company Limited (including Kunming Airlines Company Limited), Air Macau Company Limited, Beijing Airlines Company Limited, Dalian Airlines Company Limited, Air China Inner Mongolia Co., Ltd., Aircraft Maintenance and Engineering Corporation, Air China Import and Export Co., Ltd., Chengdu Falcon Aircraft Engineering Service Co., Ltd., Air China Shantou Industrial Development Company; and its joint ventures mainly include GA Innovation China Co., Ltd. and Sichuan Services Aero-Engine Maintenance Co., Ltd. Moreover, the associates of Air China are Cathay Pacific Airways Limited, Shandong Airlines Co., Ltd. and Tibet Airlines Co., Ltd.. Air China is also the largest shareholder of Shandong Aviation Group Co., Ltd.

 

With the goal of becoming "the world's leading airline", Air China adheres to the four strategic directions of "hub network, balanced development of cargo and passenger services, cost leadership and brand strategy" and remains dedicated to serving passengers with credibility, convenience, comfort and choice. "Air China Miles" is the oldest frequent flier programme in China, under which all members of the frequent flier programmes under various brands of its subsidiaries and associates have been consolidated into the brand of "Phoenix Miles".

 

 

 

Contents

 

3

Corporate Information

Financial Statements Prepared under International
Financial Reporting Standards

4

Chairman's Statement

76

Independent Auditor's Report

6

Summary of Financial Information

82

Consolidated Statement of Profit or Loss

7

Summary of Operating Data

83

Consolidated Statement of Profit or Loss and Other Comprehensive Income

9

Fleet Information

 

 

10

Business Overview

84

Consolidated Statement of Financial Position

21

Management's Discussion and Analysis of
Financial Position and Operating Results

86

Consolidated Statement of Changes in Equity

 

 

87

Consolidated Statement of Cash Flows

28

Corporate Governance Report

89

Notes to the Consolidated Financial Statements

44

Report of the Directors

193

Supplementary Information

68

Profile of Directors, Supervisors and
Senior Management

194

Glossary of Technical Terms

 

 

195

Definitions

 

 

 

 

 

 

 

 

 

Corporate Information

 

 

REGISTERED CHINESE NAME:

中國國際航空股份有限公司

 

ENGLISH NAME:

Air China Limited

 

REGISTERED OFFICE:

1st Floor-9th Floor 101

Building 1

30 Tianzhu Road

Shunyi District

Beijing, the PRC

 

PRINCIPAL PLACE OF BUSINESS IN HONG KONG:

5th Floor

CNAC House

12 Tung Fai Road

Hong Kong International Airport

Hong Kong

 

 

 

WEBSITE:

www.airchina.com.cn

 

DIRECTORS:1

Song Zhiyong

Ma Chongxian

Feng Gang

Patrick Healy

Li Fushen

He Yun

Xu Junxin

Winnie Tam Wan-chi

 

SUPERVISORS:2

He Chaofan

Wang Jie

Qin Hao

Lyu Yanfang

Guo Lina

 

LEGAL REPRESENTATIVE OF THE COMPANY:

Song Zhiyong

 

JOINT COMPANY SECRETARIES:

Huang Bin

Huen Ho Yin

 

 

 

AUTHORISED REPRESENTATIVES:

Song Zhiyong

Huang Bin

 

LEGAL ADVISERS TO THE COMPANY:

DeHeng Law Offices (as to PRC Law)

 

DLA Piper Hong Kong (as to Hong Kong and English Law)

 

INTERNATIONAL AUDITOR:

Deloitte Touche Tohmatsu

Registered Public Interest Entity Auditors

 

H SHARE REGISTRAR AND TRANSFER OFFICE:

Computershare Hong Kong Investor Services Limited

Rooms 1712-1716, 17th Floor, Hopewell Centre

183 Queen's Road East

Wanchai

Hong Kong

 

LISTING VENUES:

Hong Kong, London and Shanghai

 

 

 

 

 

1 For details of changes in Directors of the Company during the Reporting Period and up to the date of this annual report, please refer to page 49 of this annual report.

2 For details of changes in Supervisors of the Company during the Reporting Period and up to the date of this annual report, please refer to page 50 of this annual report.

 

 

Chairman's Statement

2021 REVIEW

 

In 2021, the Chinese Communist Party embraced the 100th anniversary of its founding. Under the strong leadership of the Central Committee of the Party with Comrade Xi Jinping at its core, China has completed the building of a moderately prosperous society in all respects, and is now setting off the new journey towards its second centenary goals. During the year, the Group has thoroughly implemented the decisions and deployments of the Central Committee of the Party and the State Council by having a keen grasp of the new development stage, implementing the new development philosophy and serving to foster the new development paradigm. The Group maintained a stable and safe development, put in great efforts to respond to the impact of the pandemic, strived to maximize the operating performance, accelerated and deepened the reform, continuously improved the quality of services, coordinated the promotion of strategic priorities, continuously enhanced the level of compliance operation and continuously strengthened the leadership and building of the Party, thereby entering a new stage of high-quality development.

 

Ensuring flight safety and smooth and orderly operation and management. The Group makes safety the top priority and has maintained a stable and safe operation in the face of a complex and challenging operating environment while holding fast to the bottom line of safe development. The Group strengthened the management and leadership of operation safety, strictly implemented safety responsibilities, and integrated the concept of safe development into the front line of operation. The Group strengthened the concept of systematic safety management, intensively implemented the Three-year Action Plan for Specific Safety Rectification, and improved the long-term mechanism of safety management. Highlighting the process control of safe operation and accurately grasping the characteristics of safe operation, the Group has made efforts in conducting normalized safety management and control of key links. During the year, the Group successfully accomplished important air transportation safeguard missions such as a series of celebration events for the 100th anniversary of the Founding of the Party, the Tokyo Olympics and the Beijing Winter Olympics, demonstrating the commitment and positive image as the national flag carrier and an aviation central enterprise.

 

Implementing own responsibility and continuously improving pandemic prevention and control mechanism. The Group is determined to abide by the national pandemic prevention and control policy, and makes every effort to carry out the work of "guarding against the importation of cases and the resurgence of domestic infections, and preventing infections from both people and contaminated objects". The Group strengthened the management and leadership, improved the regular control mechanism for pandemic prevention and control, and continuously improved the pandemic prevention and control system. Sticking to precise control, the Group used its best endeavours to prevent the risk of transmission on international flights and responded quickly to domestic sporadic cases. The Group made contributions for the economic and social development and strived to safeguard our external flight routes, or the "bridge in the sky (空中橋樑)", against any disruptions, thereby securing a stable international supply chain. In 2021, the Group operated 16 thousand cargo flights with passenger aircraft. Through its cold chain transportation service system, the Group transported 641 tons of COVID-19 vaccines.

 

Striving for maximizing the operating performance and ensuring stable operations with multiple measures. The Group has always adhered to the underlying principle of pursuing progress while ensuring stability. It strengthened market research and evaluation, taken proactive actions, and made every effort to maximize the operating performance to maintain a solid foundation for the main business operation. The Group has also strengthened the market position of its main bases by leveraging its advantages of hub network and brand, enhancing marketing control, and seizing opportunities in the passenger transportation market. The Group strengthened the conversion of passenger aircraft for cargo operations, coordinated the resources and market demand, and increased the input of air cargo flights operated by using the passenger aircraft to improve operational efficiency. The Group strictly controlled costs, optimized cost and operation matching. The Group optimized debt structure and strengthened cash flow control to prevent risks.

 

 

 

Improving service quality and continuously enhancing brand value. The Group adheres to the people-oriented development philosophy and strives to provide passengers with better and unique travel experience. The Group optimized its operation management, continued to enhance flight regularity and improved the service level of irregular flights. It also innovated and upgraded its services and products by promoting digital transformation. The Group has fully implemented remote self-service check-in at domestic terminals and operated a fleet that provides in-cabin Wi-Fi services on all of its aircraft. To enhance brand value and deepen the integrated brand management mechanism, the Group launched a series of "Dual Olympics" brand promotion activities to shape the brand image and build up brand value.

 

Promoting the implementation of strategies and serving to foster the new development paradigm. The Group deeply grasped its responsibility and mission in building the new development paradigm, actively practiced and served the country's fundamental interests, took the initiative to set strategy and pursue development in the context of the overall environment, systematically aligned with the national and industry development plans, scientifically formulated the Group's "14th Five-Year Plan", clearly defined the overall development concept of "one goal, four strategic directions, and enhancement of five capabilities" and eight key areas, established a planning index system, and consciously implemented the new development philosophy into safe operation and all areas of operation and development. The Group improved its aviation market layout, promoted the upgrading of the hub function of Beijing Capital International Airport, and smoothly achieved the operation of "One Airport, Two Terminals" at Beijing Capital International Airport and "One City, Two Airports" in Chengdu. The Group steadily promoted green and low-carbon development, continued to improve fuel efficiency and reduce carbon emission intensity, and successfully passed the ISO14001 environmental management system certification.

 

Strengthening the leadership of the Party and systematically promoting Party building work. The Group put political construction in the first place and established a sound mechanism for "top agenda (第一議題)" work. The Group focused on key tasks and carried out in-depth education on Party's history and "I do practical things for the public (我為群眾辦實事)" activities, helped the designated areas to achieve effective transition from consolidating the achievements of poverty alleviation to rural revitalization. The Group has been promoting the full and strict self-governance of the Party, implementing its own responsibility and supervisory responsibility for the full and strict self-governance of the Party from a detailed perspective, and continuously promoting the development of the Party's culture and integrity system and anti-corruption work to a deeper level.

 

In 2022, the Group will adhere to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, adhere to the underlying principle of pursuing progress while ensuring stability, fully, accurately and comprehensively implement the new development philosophy, accelerate its integration with, and participation in fostering the new development paradigm, thereby promoting high-quality development. The Group will unite and lead its cadres and staff to overcome difficulties with perseverance and dedication, focus on safe operation, pandemic prevention and control, serving the operating performance and risk prevention, solidly implement the three-year reform action plan, and greet the successful convening of the 20th National Congress of the Party with excellent results.

 

 

 

Chairman

 

Beijing, China

30 March 2022

 

 

Summary of Financial Information

(RMB'000)

 

 

2021

 

2020

 

2019

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

74,531,670

 

69,503,749

 

136,180,690

 

136,774,403

 

121,362,899

(Loss)/profit from operations

 

(16,862,176)

 

(11,168,820)

 

14,641,918

 

14,346,331

 

11,755,712

(Loss)/profit before taxation

 

(21,825,530)

 

(18,466,406)

 

9,120,263

 

9,977,017

 

11,486,232

(Loss)/profit after taxation
(including (loss)/profit attributable to
non-controlling interests)

 

(18,822,238)

 

(15,816,131)

 

7,263,764

 

8,214,871

 

8,641,449

(Loss)/profit attributable to
non-controlling interests

 

(2,187,060)

 

(1,412,788)

 

843,470

 

864,210

 

1,397,128

(Loss)/profit attributable to equity shareholders of the Company

 

(16,635,178)

 

(14,403,343)

 

6,420,294

 

7,350,661

 

7,244,321

EBITDA(1)

 

4,072,326

 

9,239,497

 

35,921,002

 

28,850,007

 

25,352,031

EBITDAR(2)

 

4,981,874

 

9,925,796

 

37,452,389

 

37,133,039

 

33,740,737

(Loss)/earnings per share attributable to equity shareholders of the Company (RMB)

 

(1.21)

 

(1.05)

 

0.47

 

0.54

 

0.54

(Loss)/return on equity attributable to equity shareholders of the Company (%)

 

(27.11)

 

(18.58)

 

6.87

 

7.89

 

8.42

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes:

 

(1)        EBITDA represents earnings before finance income and finance costs, exchange gains/losses, income tax expense, share of results of associates and joint ventures, depreciation and amortisation as computed under IFRSs.

 

(2)        EBITDAR represents EBITDA before deducting lease expenses on aircraft as well as other lease expenses.

 

(RMB'000)

 

 

31 December 2021

 

31 December 2020

 

31 December 2019

 

31 December 2018

 

31 December 2017

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

298,381,190

 

284,029,616

 

294,206,373

 

243,657,108

 

235,644,584

Total liabilities

 

232,550,079

 

200,256,580

 

192,876,910

 

143,159,074

 

140,785,986

Non-controlling interests

 

4,462,554

 

6,231,709

 

7,870,786

 

7,340,693

 

8,811,036

Equity attributable to equity shareholders of the Company

 

61,368,557

 

77,541,327

 

93,458,677

 

93,157,341

 

86,047,562

Equity attributable to equity shareholders of the Company per share (RMB)

 

4.23

 

5.34

 

6.43

 

6.41

 

5.92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary of Operating Data

The following is the operating data summary of the Company, Shenzhen Airlines (including Kunming Airlines), Air Macau, Beijing Airlines, Dalian Airlines and Air China Inner Mongolia.

 

 

 

Current period

 

Previous period

 

Increase/(decrease)

 

 

 

 

 

 

 

Capacity

 

 

 

 

 

 

ASK (million)

 

152,444.53

 

156,060.66

 

(2.32%)

International

 

4,152.23

 

18,639.58

 

(77.72%)

Mainland China

 

145,939.38

 

135,554.18

 

7.66%

Hong Kong SAR, Macau SAR and Taiwan, China

 

2,352.93

 

1,866.90

 

26.03%

 

 

 

 

 

 

 

AFTK (million)

 

10,760.61

 

9,634.66

 

11.69%

International

 

6,715.58

 

6,163.23

 

8.96%

Mainland China

 

3,937.54

 

3,375.26

 

16.66%

Hong Kong SAR, Macau SAR and Taiwan, China

 

107.49

 

96.17

 

11.77%

 

 

 

 

 

 

 

ATK (million)

 

24,490.45

 

23,685.73

 

3.40%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Traffic

 

 

 

 

 

 

RPK (million)

 

104,625.58

 

109,830.07

 

(4.74%)

International

 

1,880.33

 

11,753.53

 

(84.00%)

Mainland China

 

101,494.42

 

97,117.80

 

4.51%

Hong Kong SAR, Macau SAR and Taiwan, China

 

1,250.83

 

958.75

 

30.47%

 

 

 

 

 

 

 

RFTK (million)

 

4,302.85

 

3,558.06

 

20.93%

International

 

2,981.52

 

2,300.49

 

29.60%

Mainland China

 

1,281.20

 

1,229.44

 

4.21%

Hong Kong SAR, Macau SAR and Taiwan, China

 

40.13

 

28.13

 

42.63%

 

 

 

 

 

 

 

Passengers carried (thousand)

 

69,045.17

 

68,687.07

 

0.52%

International

 

301.31

 

2,241.20

 

(86.56%)

Mainland China

 

67,995.09

 

65,834.70

 

3.28%

Hong Kong SAR, Macau SAR and Taiwan, China

 

748.78

 

611.18

 

22.51%

 

 

 

 

 

 

 

Cargo and mail carried (tonnes)

 

1,186,701.55

 

1,113,676.51

 

6.56%

 

 

 

 

 

 

 

Kilometres flown (million)

 

994.20

 

973.01

 

2.18%

 

 

 

 

 

 

 

Block hours (thousand)

 

1,590.15

 

1,552.86

 

2.40%

 

 

 

 

 

 

 

Number of flights

 

572,264

 

551,373

 

3.79%

International

 

18,179

 

29,703

 

(38.80%)

Mainland China

 

545,724

 

513,747

 

6.22%

Hong Kong SAR, Macau SAR and Taiwan, China

 

8,361

 

7,923

 

5.53%

 

 

 

 

 

 

 

RTK (million)

 

13,598.95

 

13,285.14

 

2.36%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Load factor

 

 

 

 

 

 

Passenger load factor (RPK/ASK)

 

68.63%

 

70.38%

 

(1.75 ppt)

International

 

45.28%

 

63.06%

 

(17.78 ppt)

Mainland China

 

69.55%

 

71.65%

 

(2.10 ppt)

Hong Kong SAR, Macau SAR and Taiwan, China

 

53.16%

 

51.36%

 

1.80 ppt

 

 

 

 

 

 

 

Cargo and mail load factor (RFTK/AFTK)

 

39.99%

 

36.93%

 

3.06 ppt

International

 

44.40%

 

37.33%

 

7.07 ppt

Mainland China

 

32.54%

 

36.42%

 

(3.88 ppt)

Hong Kong SAR, Macau SAR and Taiwan, China

 

37.33%

 

29.25%

 

8.08 ppt

 

 

 

 

 

 

 

Overall load factor (RTK/ATK)

 

55.53%

 

56.09%

 

(0.56 ppt)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Utilisation

 

 

 

 

 

 

Daily utilisation of aircraft (block hours per day per aircraft)

 

6.28

 

6.34

 

(0.06 hours)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yield

 

 

 

 

 

 

Yield per RPK (RMB)

 

0.5574

 

0.5074

 

9.85%

International

 

1.8523

 

0.8204

 

125.78%

Mainland China

 

0.5318

 

0.4665

 

14.00%

Hong Kong SAR, Macau SAR and Taiwan, China

 

0.6872

 

0.8109

 

(15.25%)

 

 

 

 

 

 

 

Yield per RFTK (RMB)

 

2.5828

 

2.4040

 

7.44%

International

 

3.0329

 

2.9885

 

1.49%

Mainland China

 

1.3722

 

1.1574

 

18.56%

Hong Kong SAR, Macau SAR and Taiwan, China

 

7.7885

 

9.0770

 

(14.20%)

 

 

 

 

 

 

 

Unit cost

 

 

 

 

 

 

Operating expense per ASK (RMB)

 

0.6262

 

0.5448

 

14.94%

Operating expense per ATK (RMB)

 

3.8980

 

3.5899

 

8.58%

 

 

 

 

 

 

 

 

 

 

 

 

Fleet Information

 

During the year of 2021, the Group introduced a total of 43 aircraft, including four A350, 23 A320NEO, 11 A321NEO, four ARJ21-700 and one business jet, among which 29 were introduced under finance leases and 14 were introduced under operating leases. On the other hand, the Group phased out four aircraft, including one A330-200, two A321 and one business jet.

 

As at the end of the Reporting Period, the Group had a total of 746 passenger aircraft including business jets, with an average age of 8.23 years. Among the aircraft set out above, the Company operated a fleet of 467 aircraft in total, with an average age of 8.39 years. The Company introduced 37 aircraft, including five aircraft under the wet lease agreement with Air Macau, and phased out one aircraft.

 

Details of the fleet of the Group as at 31 December 2021 are set out in the table below:

 

 

Sub-total

Self-owned

Finance leases

Operating leases

Average age (year)

 

 

 

 

 

 

Airbus

408

155

135

118

7.94

 

 

 

 

 

 

A319

41

32

6

3

14.18

 

 

 

 

 

 

A320/A321

287

96

105

86

7.00

 

 

 

 

 

 

A330

64

27

8

29

9.56

 

 

 

 

 

 

A350

16

-

16

-

2.17

 

 

 

 

 

 

Boeing

326

143

97

86

8.76

 

 

 

 

 

 

B737

274

119

77

78

8.93

 

 

 

 

 

 

B747

10

8

2

-

12.47

 

 

 

 

 

 

B777

28

4

18

6

7.71

 

 

 

 

 

 

B787

14

12

-

2

4.86

 

 

 

 

 

 

COMAC

7

1

6

-

0.81

 

 

 

 

 

 

ARJ21

7

1

6

-

0.81

 

 

 

 

 

 

Business jets

5

1

-

4

8.52

 

 

 

 

 

 

Total

746

300

238

208

8.23

 

 

 

 

 

 

 

 

Introduction Plan

Phase-out Plan 

 

2022

2023

2024

2022

2023

2024

 

 

 

 

 

 

 

Airbus

36

6

-

10

10

10

 

 

 

 

 

 

 

A319

-

-

-

4

2

8

 

 

 

 

 

 

 

A320/A321

27

1

-

-

3

2

 

 

 

 

 

 

 

A330

-

-

-

6

5

-

 

 

 

 

 

 

 

A350

9

5

-

-

-

-

 

 

 

 

 

 

 

Boeing

-

-

-

12

5

1

 

 

 

 

 

 

 

B737

-

-

-

12

5

1

 

 

 

 

 

 

 

COMAC

10

9

9

-

-

-

 

 

 

 

 

 

 

ARJ21

10

9

9

-

-

-

 

 

 

 

 

 

 

Total

46

15

9

22

15

11

 

 

 

 

 

 

 

 

Note:    Please refer to the actual operation for the introduction and phase-out of the Group's fleet in the future.

 

 

Business Overview

 

Safe Operation

The Group enhanced its safety management capabilities and maintained a stable and safe operation. During the Reporting Period, the Group firmly established the concept of safe development and grasped the extreme importance of safety from a comprehensive perspective. The Group continued to implement specific measures for safe development, and solidly promoted the development of the safe operation system from four aspects: safety management, flight training, aircraft maintenance and operation management. The Group carried out operation management under the regular pandemic prevention and control, strengthened the capability of integrated operation control, and effectively ensured safe operation under the adjusted operation mode. The Group released the revised Air China's Overall Contingency Plan to enhance the Company's contingency response capability. The Group strengthened process management, enhanced supervision and inspection of key operational support units (e.g., flight and aircraft maintenance management), and carried out timely risk identification, control and warning alerts. The Group successfully commenced the operation of its Xinjiang and Guangdong branches, completed the transition to Chengdu Tianfu International Airport, and operated "One airport, Two terminals" at Beijing Capital International Airport.

 

The Group further implemented the Three-year Action Plan for Specific Safety Rectification, launched the investigation of hidden safety hazards and special load balancing management, strengthened the development of working style and professional management, drew up a list of typical negative behaviors and quantitative assessment indicators for each professional team to improve the system. The Group enhanced the operational support capacity for fleets of new aircraft model, so as to maintain safe, steady and smooth operation.

 

 

 

During the Reporting Period, the Group recorded 1.59 million safe flight hours and transported 69.05 million passengers safely. There was no transportation and aviation incident for which the Group was liable and the overall stable and safe operation was continuously maintained. The Group successfully accomplished important air transportation safeguard missions such as a series of celebration events for the 100th anniversary of the Founding of the Party, the Tokyo Olympic and Paralympics and the Beijing Winter Olympics and Paralympics.

 

Containing the Pandemic

The Group optimized the pandemic prevention mechanism while coordinating and maintaining effective pandemic prevention and safe operation. During the Reporting Period, in the face of continuous spread of COVID-19 abroad and the occurrence of sporadic cases at home, the Group always focused on the overall development of the Party and the country, insisted on making the pandemic containment the top priority, and carefully and consistently carried out the work of "guarding against the importation of cases and the resurgence of domestic infections, and preventing infections from both people and contaminated objects", fulfilling its political and social responsibility as the national flag carrier.

 

The Group continued to strengthen management and leadership, improved the control mechanism under the regular pandemic prevention and control, and continuously improve the containment system. The Group strengthened the management of pandemic prevention and control and established the Office of Pandemic Prevention and Control Leading Team as a dedicated office responsible for the overall coordination of the Company's pandemic containment work. The Group coordinated and directed the pandemic containment work with stricter requirements, better mechanisms, more effective organizations and efficient measures, embedding pandemic prevention and control into all aspects of operation.

 

The Group continued to focus on precise prevention and control and adjusted its response strategy in a timely manner to ensure its pandemic prevention and control measures were legal, scientific, relevant and timely. The Group made every effort to prevent the importation of cases from international flights and implemented the quarantine policy for international flight crew. Meanwhile, it responded quickly to domestic sporadic cases through flexible adjustment of operation arrangement. The Group continued to improve its informatization level of pandemic prevention and promoted the construction of "one person, one file, one aircraft, one file" information sharing platform for pandemic prevention and control.

 

The Group facilitated the economic and social development continuously by keeping the connection with other countries via air traffic, which helped sustain a steady global supply chain. During the Reporting Period, the Group operated 16 thousand cargo flights with passenger aircraft. Through its cold chain transportation service system, the Group transported 641 tons of COVID-19 vaccines.

 

 

 

Maximising Operating Performance

Focusing on the main air traffic business, the Group spared no efforts to maximise operating performance. During the Reporting Period, to maximise its operating performance at full throttle, the Group continued to strengthen operation management dynamically and took initiatives to cope with operating pressure. With the major goal of optimising the operation of the entire fleet, the Group strived to maximise income and performance through more effective market analysis and assessment, operation arrangement, resources coordination, conversion of passenger aircraft for cargo operations, strict control of costs and risks, and consolidation of operating competitiveness of main business.

 

The Group seized market opportunities and adapted to changes of demand by establishing six domestic express routes, which connected Beijing Capital International Airport with Shanghai Hongqiao Airport, Guangzhou Airport, Shenzhen Airport, Chengdu Shuangliu Airport, Chongqing Airport and Hangzhou Airport. At the same time, the Group rolled out more innovative products and carried out targeted marketing. Seizing on the opportunities arising from the promotion of high-quality red tourism, the Group launched red tourism products to increase demand and revenue significantly. It also released more products to meet tourists' safe travel demands during the pandemic. The Group enhanced internal resources coordination and optimised operation arrangement to make the best use of aircrew resources. Furthermore, the Group pushed forward the conversion of passenger aircraft for cargo operations and optimised its deployment by seizing market opportunities, which brought a revenue of RMB8,720 million during the Reporting Period.

 

The Group raised awareness of stringent cost control. With the exception of investment in operation safety assurance and pandemic prevention and control, the Group exercised strict control over expenditures that were unnecessary and unrelated to production. Under the principle of "operation safety, structure stability and cost control", the Group continued to strengthen the prevention and control of financial risks to ensure healthy cash flows.

 

Enhancing Services

The Group was dedicated to the people-oriented development philosophy. On the premise of the implementation of various pandemic prevention and control policies, it improved service quality on all fronts, strived to enhance customer experience and made an all-out effort to establish brand and services.

 

Focusing on the investment of hardware and service upgrade, the Group renovated and built 10 new self-operated lounges while updating the design standards for lounges to incorporate oriental cultural features into passengers' rest spaces. To create an exclusive cabin environment, the Group developed new airline seat products and rolled out the new blanket design called "Phoenix Feathers (鳳羽霓裳)" and the limited edition of headrest covers in the Beijing Winter Olympics series. Apart from upgrading the in-flight entertainment system, the Group provided in-cabin WiFi on 359 aircraft and air-ground connection on sixteen A350 aircraft.

 

 

 

The Group also attached importance to strengthen its services and products. For example, it raised the quality standard of various services systematically by issuing new sets of conditions for passenger and luggage transportation and optimizing the interface of the self-service ticket return system. With a focus on elderly passengers, it set up dedicated service counters, offered ground service guidance and launched an APP specially designed for elderly passengers to improve their travel experience. In response to passengers' needs, the Group introduced the "Dainifei (袋你飛)" pocket meal, designed the special and exclusive "Red Trip (紅色之旅)" in-flight meal, and served the new "Henishuo (盒你說)" meal boxes at 50 domestic airports.

 

With a focus on service innovation, the Group diversified the applications for self-service and intelligent technology, keeping the self-service check-in rate at its main base and branches steady at 75%. In addition, it began to offer full-process baggage tracking and enquiry services at seven airline destinations such as the airports in Beijing and Chongqing. By optimising the intelligent FAQ database, its online customer service maintained a high accuracy rate of 80%. The Group developed and upgraded several system platforms including the service quality management system and the passenger service payment system, so as to enhance the level of service digitalization and innovation capability.

 

 

 

Safeguarding Mission For Winter Olympics

As the official air transportation service partner of the 2022 Beijing Winter Olympics and Paralympics, Air China thoroughly studied and implemented the important instructions and spirit proposed by General Secretary Xi Jinping for hosting the Winter Olympics, pursuant to which the Company strictly implemented the requirements for staging "simple, safe and splendid" competitions and made solid progress in the relevant works to accomplish various transportation safeguard mission for the Winter Olympics successfully.

 

To strengthen its management and leadership, the Company has established dedicated departments and reinforced the specific responsibilities, thereby forming a working system with centralized commands and actions. Each of the safeguard supporting unit designated their elite members and coordinated the resources allocation and hence amplified the synergy effect from the collaboration and accomplish major safeguard missions of transportation services such as the test events of the Winter Olympics and the charter flight services for the Winter Olympics Flame successfully. The Company also refined its flight schedules with highly efficient flight plans, and established a comprehensive ticketing support system and launched the Beijing-Frankfurt "Demonstration Route" for Winter Olympics. Meanwhile, the Company insisted on safe operation. It strengthened the monitoring of flight operation and information transmission, and improved its contingency plans. More security staff with enhanced capabilities to handle exceptional situations have been arranged. The Company formulated and strictly implemented various proposals for safeguarding pandemic prevention and control in relation to the transportation services of the Winter Olympics with an aim to reinforcing the requirements on "preventing infections from people, contaminated objects and environment" with high standards. Furthermore, by staying committed to the "athlete-oriented" approach, the Company provided quality services, improved the whole process of service safeguarding plan and continued to carry out service training. It also put in place new service standards for various special types of sports equipment used in the Winter Olympics and Paralympics, including in-flight wheelchairs for its fleet, as well as ticketing counters and early check-in services in the Winter Olympic Villages.

 

 

 

Risk Prevention and Control

The Group has been upgrading the risk management system while reinforcing the risk assessment and reporting mechanism. It performed material risk monitoring and established a multi-tiered information-sharing mechanism. The Group strengthened its foreign-related compliance management, focusing on enhancing its compliance management capabilities in key areas such as anti-trust, export control and sanctions. The Group strengthened its legal management capability and implemented the requirements that all the major decisions, business contracts and rules and regulations of the Company should be subject to legal review, and that risks relating to the "three major and one significant issues" of the Company should be evaluated to the fullest extent. The Group strengthened the life-cycle management of contracts, continued to improve the Group's contract templates and enhanced the monitoring of contract performance. The Group organized more than 20 compliance, risk control and legal training sessions with approximately 1,200 participants, covering topics such as export control and data protection and other compliance management or risk control practice, and legal training related to entry-exit inspection and quarantine. Based on the new starting point of the 14th Five-Year Plan and driven by the deepening of the rule of law in Air China, the Company has achieved positive results in supporting reform and development, supporting business decisions and comprehensive risk management.

 

CORE COMPETENCE ANALYSIS

Strong brand advantage

Air China positioned its brand as "professional and reliable with both international quality and Chinese temperament". By virtue of the immense historical heritage, Air China strives to create perfect travel experience and help passengers to stay safe by upholding the spirit of phoenix of being a practitioner, promoter and leader for the high-quality development of the aviation industry in the PRC. The Company is also committed to leading the industrial development by establishing itself as a "National Brand", while pursuing outstanding performance through innovation and excelling efforts. By maintaining its world-class safety operation performance and leading comprehensive operating strengths in Mainland China, the Group has extensive brand recognition and excellent brand reputation among consumers.

 

 

 

During 2021, Air China focused on brand communication activities, including the Winter Olympic Games in Beijing and commencement of operation of Chengdu Tianfu International Airport. As the strategic partner of "both the Summer Olympic Games and the Winter Olympic Games", Air China hosted a series of events in respect of the Winter Olympic Games in Beijing, including the Winter Olympics campaign for the first voyage of the colour-painted "Winter Olympic Sportsmanship (冬奧運動號)" themed aircraft and the one-year countdown campaign for Paralympic Winter Games in Beijing under the theme of "Embark on a New Journey in Beijing! (開啓新航程 相聚在北京)", so as to demonstrate the good brand image of the aviation company representing "both the Summer Olympic Games and the Winter Olympic Games". With respect to the commencement of operation of Chengdu Tianfu International Airport, a series of brand promotional campaigns themed "Connect with the World (與世界美好相'')" were kicked off to support the promotion of Tianfu International Airport and continuously enhance the brand influence. The Company leveraged large-scale fairs as the platform to exhibit its operational strength and brand image, with a view to promoting external collaboration and exchanges, boosting confidence of passengers and contributing to local economic and social development.

 

Market leader of the Beijing hub

The Company's principal base is located at Beijing Capital International Airport, also known as "the first gateway to China". Beijing has a unique and prime location advantage for establishing itself into a large international aviation hub in the Northeast Asia. Beijing is also a place with the best business customer and traveller bases. The advantages of Beijing in terms of both geographical location and customer structure are favourable to the Company for maintaining a stronger position for market competition.

 

In 2021, under the prolonged impact of the COVID-19 pandemic, the Group has actively recovered its transport capacity in Beijing while taking into account the benefits of route operation and striving to sustain flights in important international aviation markets. In January 2021, the Company started to operate domestic flights in both Terminal 2 and Terminal 3 of Beijing Capital International Airport. With the commencement of the operation model of "one airport and two terminals", the Company will gradually increase transport capacity, continue to enhance its operation efficiency and optimize the travel experience of passengers with a view to accelerating the development into a world-class hub. To support the safeguarding services for the 2022 Winter Olympics Games and Paralympic Winter Games, the Company efficiently completed the transfer of international flights to T2 in only 27 days, while following the pandemic containment requirements. In an effort to optimize hub functions and improve operation quality, Air China cooperated with Capital Airport to roll out the "Rebuilding the National Gateway (再造國門)" initiative. The renovation plan was submitted to the Civil Aviation Administration and obtained preliminary approval. In addition, the renovation and maintenance project in respect of the lounge on the second floor of T3C at Capital Airport was completed to better fulfil the demand of passengers.

 

Upon the commencement of operation of Beijing Daxing International Airport in 2019, the operation pattern of "one city, two airports" in Beijing was formed. As the principal base airline that currently operates in both airports and generates the largest business volume, the Company will fully grasp the historic opportunities arising from the establishment of the Beijing Hub to continuously focus its resources and efforts on accelerating the optimization of hub functions, enhancing the operation efficiency and quality assurance of services, constantly improving its route network, so as to establish Beijing Capital International Airport into a world- class aviation hub, and at the same time facilitating Beijing Daxing International Airport to become a "new source of momentum for national development".

 

Balanced and complementary route network

Adhering to the long-established principle for the market layout of "balanced development between domestic and overseas routes and support international routes with domestic routes", the Company comprehensively reinforced the global network and implemented national development strategies with consistent efforts made in building a world-class hub in Beijing and an international hub in Chengdu. Through the experience accumulated in its operation over the years, the Company formed an extensive and balanced domestic and international route network, covering the most economically-developed and densely-populated regions in China. After years of development, the Company has taken the lead in market share in respect of mainstream international routes from domestic cities to Europe and North America.

 

Against the backdrop of anti-pandemic work worldwide, the Company made full use of the resources of route network. According to the conditions of the pandemic and market recovery progress, the Company reasonably allocated the transport capacity of each base and sustain flights in major international aviation markets. Air China adjusted the structure of transport capacity on the account of domestic macro-circulation and grasped market opportunities to expand domestic capacity. As a result, the domestic capacity measured by seat kilometres for 2021 increased by 7.66% year-on-year.

 

 

 

During the Reporting Period, the Company's Beijing newly launched domestic routes such as Beijing Capital-Aksu-Tumushuke and Beijing Daxing-Quzhou; the Chengdu newly launched domestic routes such as Chengdu Shuangliu-Fuyang and Chengdu Tianfu-Beihai; and the Shanghai newly launched domestic routes such as Shanghai Pudong- Zhengzhou and Shanghai Pudong-Zhanjiang. The Company also newly launched international and domestic routes such as Changchun-Frankfurt, Tianjin-Nanning, Wuhan-Ningbo and Hangzhou-Zhongwei.

 

High quality customer base

In line with the Company's strategy for hub network, the Company targeted the mainstream market of mid-to-high- end government and corporate passengers, which is currently the most valuable passenger group in China. As at the end of the Reporting Period, the number of "Phoenix Miles" members has exceeded 72.0656 million. For the purpose of maintaining the stable premium membership base under the regular pandemic, the Company timely launched an adaptive membership protection scheme in stages. Revenue contributed by frequent fliers accounted for 56.8% of the Company's air passenger revenue, representing a year-on-year increase of 4.5 percentage points. The number of registered users of Air China APP has exceeded 14.2 million, recorded a stable yet rapid growth. In 2021, the Company newly acquired 407 major customers, which brought the total number of effective major customers to 3,861.

 

Leading cost control mechanism

In 2021, in face of the lingering impact of the COVID-19 pandemic, the Group formulated and resolutely implemented the overall work approach based on the principle of maximizing revenue and efficiency. Apart from investment in safety assurance and pandemic prevention, the Group put emphasis on cost control at source, enhanced the integrated use of its existing assets effectively, exercised strict control on new investment and gave due consideration to the cost-effectiveness and financial security. The Group also devoted strenuous efforts in allocation and coordination of aircraft introduction, investment in infrastructure and aircraft materials so as to control asset-related costs at source. In addition to continuously improving the matching of cost and production under abnormal situation, the Group innovated its business management model to better control major expenses and enhance cost efficiency, provided that investment in safety operation is secured. It also refined the management of rigid costs and vigorously curbed controllable expenses. allocation of funds was conducted to prioritize the security of liquidity, coordinate efficiency and cost and implement the requirements for maximizing the marginal contribution.

 

Continuous innovation of management mechanism

Staying committed to the strategic deployments of the Central Committee of the Party on technological self-reliance and self-improvement as well as enhancing the entity position of enterprises through innovation, the Company strengthened its strategic planning of technological innovation and formulated a Technological Innovation Development Plan for the "14th Five Year Plan" Period. This plan established the development goal of shifting from the system development stage to the effectiveness upgrading stage for technology innovation for the "14th Five Year Plan".

 

Striving to develop an innovative development base in the civil aviation industry, the Company not only secured the operation of "3+8" innovation laboratories, but also established and implemented a range of technological innovation projects in relation to digital transformation, aircraft maintenance and in-flight network. A number of achievements of the Company have won industry recognition, including the "Aircraft-ground Crossfeed Fuel System", which received the Innovation Project Award of the Fourth China Aviation Maintenance (MRO CHINA) Red Crown Award.

 

In a bid to promote recruitment of innovation talents and team building, the Group held the "First Innovation Awards and 2021 Innovation Contest (首屆創新獎評選暨2021年創新大賽)", which featured two major tracks: "Innovative Thinking (創意暢想)" and "Open Competition (揭榜應徵)". By soliciting projects in relation to the innovation of product, technology and process, the Company endeavoured to identify and cultivate technological innovation talents and teams.

 

With a view to broadening the network for synergistic innovation and collaboration, the Company joined the National Technical Standards Innovation Base (Civil Aviation) (國家技術標準創新基地(民航)) and the Technology Innovation Strategic Alliance for Civil Airport Cluster and the Integrated Transportation Industry (民航機場群綜合交通產業技術創新戰略聯盟). The Company also actively took part in various exchanges of the industry, such as the Smart Civil Aviation Technological Innovation Summit (智慧民航科技創新論壇) and the Civil Aviation Science and Education Innovation Achievement Exhibition (民航科教創新成果展), so as to demonstrate its significant progress and achievements in technological innovation.

 

 

MAJOR SUBSIDIARIES AND ASSOCIATES AND THEIR OPERATING RESULTS

 

 

 

Notes:   1.          CNACG is a wholly-owned subsidiary of CNAHC. Accordingly, CNAHC is directly and indirectly interested in 51.70% of the shares of the Company.

 

             2.          Shandong Aviation Group Corporation is owned as to 49.4% by the Company, while Shandong Airlines is owned as to 42% by Shandong Aviation Group Corporation. Accordingly, Shandong Airlines is directly and indirectly owned as to 43.548% by the Company.

 

 

 

 

During the Reporting Period, the operating results of the major subsidiaries and associates of the Company were as follows:

 

 

Shenzhen Airlines

Air Macau

Beijing Airlines

Dalian Airlines

Air China
Inner Mongolia

Ameco

CNAF

Cathay Pacific

Shandong Airlines

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year of establishment

1992

1994

2011

2011

2013

1989

1994

1946

1999

 

 

 

 

 

 

 

 

 

 

Place of domicile

Shenzhen

Macau

Beijing

Dalian

Inner Mongolia

Beijing

Beijing

Hong Kong

Shandong

 

 

 

 

 

 

 

 

 

 

Principal business

Air passenger and air cargo services

Air passenger and air cargo services

Business charter and public air passenger and air cargo services

Air passenger and air cargo services

Air passenger and air cargo services

Repair and overhaul of aircraft, engines and components

Provision of financial services to CNAHC Group and the Group

Air passenger and air cargo services

Air passenger and air cargo services

 

 

 

 

 

 

 

 

 

 

Registered capital

RMB5,360,000,000

MOP2,242,042,000

RMB1,000,000,000

RMB3,000,000,000

RMB1,000,000,000

USD300,052,800

RMB1,127,961,864

6,437,200,203
shares in issue

RMB400,000,000

 

 

 

 

 

 

 

 

 

 

Percentage of shareholding by the Company

51%

66.92%

51%

80%

80%

75%

51%

29.99%

22.8%

 

 

 

 

 

 

 

 

 

 

Revenue (RMB100 million)

185.00

9.33

3.17

10.17

11.43

81.67

2.29

378.20

125.15

 

 

 

 

 

 

 

 

 

 

Year-on-year changes (%)

6.36

40.30

(21.84)

(3.72)

16.75

(4.93)

0.78

(7.24)

18.80

 

 

 

 

 

 

 

 

 

 

Total assets (RMB100 million)

670.44

60.15

11.31

44.37

22.14

64.83

223.93

1,607.62

326.44

 

 

 

 

 

 

 

 

 

 

Profit/(loss) attributable to parent company
(RMB100 million)

(33.43)

(6.74)

(1.16)

(1.89)

(1.38)

(1.46)

0.46

(50.80)

(18.14)

 

 

 

 

 

 

 

 

 

 

Profit/(loss) attributable to parent company in the corresponding period of last year
(RMB100 million)

(20.62)

(9.18)

(0.32)

0.25

(0.35)

(1.53)

0.65

(190.04)

(23.82)

 

 

 

 

 

 

 

 

 

 

 

The fleet information and operating data of the major subsidiaries and associates of the Company were as follows:

 

As at the end of the Reporting Period/
During the Reporting Period

Shenzhen Airlines

Air Macau

Beijing Airlines*

Dalian Airlines

Air China
Inner Mongolia

Cathay Pacific

Shandong Airlines

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fleet size (unit)

229
(on a consolidated basis)

17

3

13

12

234
(on a consolidated basis)

134

 

 

 

 

 

 

 

 

Average age (year)

8.04

5.56

12.08

8.24

9.61

10.5

8.21

 

 

 

 

 

 

 

 

ASK (100 million)

518.35

19.62

4.51

26.01

28.79

132.28

350.94

 

 

 

 

 

 

 

 

Year-on-year changes (%)

(0.41)

11.14

(18.29)

(11.01)

17.01

(61.8)

3.83

 

 

 

 

 

 

 

 

RPK (100 million)

358.59

11.76

3.04

17.72

19.58

41.20

268.56

 

 

 

 

 

 

 

 

Year-on-year changes (%)

(3.57)

28.96

(22.40)

(12.11)

13.70

(79.5)

4.80

 

 

 

 

 

 

 

 

Passengers carried (10 thousand)

2,433.13

69.85

31.67

149.10

174.28

71.7

1,865.49

 

 

 

 

 

 

 

 

Year-on-year changes (%)

(4.51)

27.95

(26.19)

(5.52)

10.94

(84.5)

2.53

 

 

 

 

 

 

 

 

Average passenger load factor (%)

69.18

59.96

67.31

68.11

67.99

31.1

76.53

 

 

 

 

 

 

 

 

Year-on-year changes (ppt)

(2.27)

8.28

(3.57)

(0.85)

(1.98)

(26.9)

0.71

 

 

 

 

 

 

 

 

*Note:  As at the end of the Reporting Period, Beijing Airlines operated a fleet of four entrusted business jets and one self-owned business jet with an average age of 8.52 years. During the Reporting Period, in terms of business charter service, Beijing Airlines completed 294 flights, representing a year-on-year decrease of 15.52%; it completed 983.45 flying hours, representing a year-on-year decrease of 4.89%; it carried a total of 2,528 passengers, representing a year-on-year increase of 13.77%.

 

 

 

OPERATIONAL PLAN

The Company has established its operational focuses for 2022, including (1) focusing on enhancing operation safety resolutely and maintaining safety and stable operation; (2) staying committed to pandemic prevention and control and implementing the measures and requirements from a detailed perspective; (3) striving to maximise the operating performance despite difficulties and endeavouring to reduce and control loss; (4) persisting to strengthen the in-depth reform to fully unleash the effectiveness therefrom; (5)pursuing pragmatic innovation and adhering to enhancing services, thereby increasing brand value; (6) staying committed to seeking strategic progress and enhancing the quality of development; (7) adhering to the leadership of the Party and promoting the Party building, safeguarding high quality development.

 

OUTLOOK FOR FUTURE

Making contributions to the national development strategies by the civil aviation industry in China

China's civil aviation industry will further implement national initiatives and regional strategies, namely the "Belt and Road" initiative, the Ecological Protection and High-quality Development Strategy of Yellow River Basin, the Yangtze River Economic Belt Development Plan, the Yangtze River Delta Integration Plan, the "Beijing-Tianjin-Hebei" Integration Plan, the Plan for Xiong'an New Area, Chengdu-Chongqing Economic Circle Plan, and Guangdong-Hong Kong-Macau Greater Bay Area Development Plan, and will strengthen regional aviation links and coordination as well as the existing aviation market pattern. The "Belt and Road" initiative will promote China's economic and trade exchange and cooperation with Southeast Asia and Europe, not only strengthening the international hub status of, among others, Shanghai and Guangzhou, but also providing development opportunities for airports in domestic second-tier cities. The Ecological Protection and High-quality Development Strategy of Yellow River Basin will promote the economic development and optimization of industrial structure of the nine provinces and regions along the Yellow River Basin, which will present development opportunities for the aviation industry. The Yangtze River Economic Belt Development Plan and Yangtze River Delta Integration Plan will speed up the formation of the aviation network with Shanghai international aviation hub and regional aviation hub as the core. The strategy of coordinated development of Beijing-Tianjin-Hebei and the Plan for Xiong'an New Area will significantly enhance the international competitiveness of Beijing aviation hub, and the hub function will be further strengthened, which will promote the regional development of Tianjin and Hebei. Chengdu-Chongqing Economic Circle Plan will consolidate the coordinated development of Sichuan and Chongqing, accelerate the development of the international aviation hub of Chengdu Tianfu International Airport and promote the operation of "two integrated airports" in Chengdu, thereby pushing forward the coordinated development of airports in Chengdu and Chongqing. The Guangdong-Hong Kong-Macau Greater Bay Area Development Plan will deepen the cooperation among the Mainland, Hong Kong and Macau, and promote the construction of international hubs of Hong Kong, Guangzhou and Shenzhen. The construction of airport groups serving the four major urban agglomerations received increasing attention from the State, and the pattern of "one city, two airports" in Beijing, Shanghai, Chengdu and other major cities has taken or is taking shape.

 

Gradual resumption of passenger and freight volume in the civil aviation industry in China

There is no change in the fundamentals of the Chinese economy or in the basic trend of economic stability and long-term improvement, thereby the economy will achieve steady recovery. Although the world economy is undergoing profound adjustment, the overall trend of economic globalization will remain unchanged, while China's development still sees strategic opportunities. Leveraging the super large-scale domestic demand market formed with a population of 1.4 billion, including a middle-class group of more than 400 million, China is striving to build a new development paradigm which is based on domestic macro-circulation, along with the international and domestic dual-circulation under mutual promotion. Civil aviation demand in China will continue to rise and market potential will remain immense. The aviation market in China will continue its recovery. In the long run, the demand for air travel will remain strong with huge market potential. As the pandemic is brought under control, business travel and holiday tours continue to be growth drivers of the aviation industry, and air travel demand will become increasingly customized and popular. During the "14th Five-Year Plan" period, construction of new airports and airport renovations and expansions are underway in various regions and the management capability in air transportation is steadily increased, which can better satisfy the demand of the industrial development.

 

Competition landscape among global and domestic aviation markets

The original competition landscape is expected to continue in the global aviation market. With the impact of the global pandemic, aviation companies around the world are suffering from operating difficulties attributable to cash shortfall. Governments of various countries have provided financial relief of varying degrees to their local aviation industry respectively. According to the IATA statistics, the overall financial losses of airlines decreased during Q3 of 2021. Certain airlines achieved their first profitable quarter since the pandemic crisis, among which airlines in North America performed the best, while the air passenger volume increased in Europe, promoting the market recovery. Along with further recovery and opening up of the market, the global market competition landscape is expected to resume and continue the previous trend of the strong growing stronger.

 

It is expected that the competitive pressure will be mitigated in the domestic aviation market. Regarding the demand side, as the national economy remains stable and improved and domestic pandemic prevention and control situation is under control generally, the foundation of industrial recovery and development will be more solid, envisaging the domestic market demand will continue its revival. Regarding the supply side, according to the analysis in the "14th Five-Year Plan" of civil aviation, 2021-2022 is the recovery and consolidation period of the industry, and the growth rate of capacity deployment of the industry will slow down, but this will help alleviate the short-term excess capacity pressure brought by the transfer of some aircraft from the international market to the domestic market.

 

 

Management's Discussion and Analysis of Financial Position and Operating Results

The following discussion and analysis are based on the Group's consolidated financial statements and the notes thereto prepared in accordance with the IFRSs and are designed to assist the readers in further understanding the information provided in this report so as to better understand the financial conditions and results of operations of the Group as a whole.

 

Revenue

During the Reporting Period, the Group's revenue was RMB74,532 million, representing an increase of RMB5,028 million or 7.23% as compared with last year. Among which, air traffic revenue was RMB69,430 million, representing an increase of RMB5,150 million or 8.01% as compared with last year; other operating revenue was RMB5,102 million, representing a year-on-year decrease of RMB122 million or 2.33%.

 

Revenue Contributed by Geographical Segments

 

2021

2020

 

(in RMB'000)

Amount

Percentage

Amount

Percentage

Change

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

60,833,951

81.63%

51,953,674

74.74%

17.09%

 

 

 

 

 

 

Hong Kong SAR, Macau SAR and Taiwan, China

1,172,112

1.57%

1,032,767

1.49%

13.49%

 

 

 

 

 

 

Europe

4,795,494

6.43%

6,176,092

8.89%

(22.35%)

 

 

 

 

 

 

North America

2,661,521

3.57%

3,397,082

4.89%

(21.65%)

 

 

 

 

 

 

Japan and Korea

958,898

1.29%

2,123,022

3.05%

(54.83%)

 

 

 

 

 

 

Asia Pacific and others

4,109,694

5.51%

4,821,112

6.94%

(14.76%)

 

 

 

 

 

 

Total

74,531,670

100.00%

69,503,749

100.00%

7.23%

 

 

 

 

 

 

Air Passenger Revenue

During the Reporting Period, the Group recorded an air passenger revenue of RMB58,317 million, representing an increase of RMB2,590 million over the previous year. Among the air passenger revenue, the decrease of capacity contributed a decrease of RMB1,291 million in the revenue, and the decrease of passenger load factor led to a decrease of RMB1,352 million in the revenue, while the increase of passenger yield resulted in an increase in revenue of RMB5,233 million. The Group's capacity, passenger load factor and yield per RPK in 2021 are as follows:

 

 

2021

2020

Change

 

 

 

 

 

 

 

 

ASK (million)

152,444.53

156,060.66

(2.32%)

 

 

 

 

Passenger load factor (%)

68.63

70.38

(1.75 ppt)

 

 

 

 

Yield per RPK (RMB)

0.5574

0.5074

9.85%

 

 

 

 

 

 

 

Air Passenger Revenue Contributed by Geographical Segments

 

2021

2020

 

(in RMB'000)

Amount

Percentage

Amount

Percentage

Change

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

53,974,171

92.56%

45,307,186

81.30%

19.13%

 

 

 

 

 

 

Hong Kong SAR, Macau SAR and Taiwan, China

859,594

1.47%

777,411

1.40%

10.57%

 

 

 

 

 

 

Europe

1,299,608

2.23%

3,567,703

6.40%

(63.57%)

 

 

 

 

 

 

North America

717,278

1.23%

1,955,890

3.51%

(63.33%)

 

 

 

 

 

 

Japan and Korea

344,866

0.59%

1,345,339

2.41%

(74.37%)

 

 

 

 

 

 

Asia Pacific and others

1,121,178

1.92%

2,773,333

4.98%

(59.57%)

 

 

 

 

 

 

Total

58,316,695

100.00%

55,726,862

100.00%

4.65%

 

 

 

 

 

 

Air Cargo and Mail Revenue

During the Reporting Period, the Group's air cargo and mail revenue was RMB11,113 million, representing an increase of RMB2,560 million as compared with last year. Among which, the increase of capacity contributed an increase of RMB1,000 million in the revenue, while the increase of cargo and mail load factor resulted in an increase in revenue of RMB791 million, and the increase of yield of cargo and mail resulted in an increase of RMB769 million in the revenue. The capacity, cargo and mail load factor and yield per RFTK in 2021 are as follows:

 

 

2021

2020

Change

 

 

 

 

 

 

 

 

Available freight tonne kilometres (million)

10,760.61

9,634.66

11.69%

 

 

 

 

Cargo and mail load factor (%)

39.99

36.93

3.06 ppt

 

 

 

 

Yield per RFTK (RMB)

2.5828

2.4040

7.44%

 

 

 

 

 

 

 

 

 

Air Cargo and Mail Revenue Contributed by Geographical Segments

 

2021

2020

 

(in RMB'000)

Amount

Percentage

Amount

Percentage

Change

 

 

 

 

 

 

 

 

 

 

 

 

Mainland China

1,758,093

15.82%

1,423,008

16.64%

23.55%

 

 

 

 

 

 

Hong Kong SAR, Macau SAR and Taiwan, China

312,518

2.81%

255,356

2.98%

22.39%

 

 

 

 

 

 

Europe

3,495,886

31.46%

2,608,389

30.50%

34.02%

 

 

 

 

 

 

North America

1,944,244

17.49%

1,441,192

16.85%

34.91%

 

 

 

 

 

 

Japan and Korea

614,032

5.53%

777,683

9.09%

(21.04%)

 

 

 

 

 

 

Asia Pacific and others

2,988,515

26.89%

2,047,779

23.94%

45.94%

 

 

 

 

 

 

Total

11,113,288

100.00%

8,553,407

100.00%

29.93%

 

 

 

 

 

 

Operating Expenses

During the Reporting Period, the Group's operating expenses were RMB95,465 million, representing an increase of 12.27% from RMB85,030 million in the same period last year. The breakdown of the operating expenses is set out below:

 

 

2021

2020

 

(in RMB'000)

Amount

Percentage

Amount

Percentage

Change

 

 

 

 

 

 

 

 

 

 

 

 

Jet fuel costs

20,703,780

21.69%

14,817,474

17.43%

39.73%

 

 

 

 

 

 

Take-off, landing and depot charges

9,667,650

10.13%

9,239,943

10.87%

4.63%

 

 

 

 

 

 

Depreciation and amortisation

20,934,502

21.93%

20,408,317

24.00%

2.58%

 

 

 

 

 

 

Aircraft maintenance, repair and overhaul costs

6,910,741

7.24%

6,423,313

7.55%

7.59%

 

 

 

 

 

 

Employee compensation costs

24,230,071

25.38%

22,012,834

25.89%

10.07%

 

 

 

 

 

 

Air catering charges

1,650,028

1.73%

1,605,027

1.89%

2.80%

 

 

 

 

 

 

Selling and marketing expenses

2,576,346

2.70%

2,568,362

3.02%

0.31%

 

 

 

 

 

 

General and administrative expenses

1,263,044

1.32%

1,051,495

1.24%

20.12%

 

 

 

 

 

 

Others

7,528,446

7.88%

6,902,750

8.12%

9.06%

 

 

 

 

 

 

Total

95,464,608

100.00%

85,029,515

100.00%

12.27%

 

 

 

 

 

 

 

 

 

 

 

Jet fuel costs increased by RMB5,886 million on a year-on-year basis, mainly due to the combined effect of the increase in the prices and consumption of jet fuel.

 

Take-off, landing and depot charges increased by RMB428 million on a year-on-year basis, mainly due to an increase in the number of take-offs and landings.

 

Depreciation and amortisation increased by RMB526 million on a year-on-year basis, mainly due to the increase in the fleet size.

 

Employee compensation costs increased by RMB2,217 million on a year-on-year basis, mainly due to the increase in the investment in production and operation and the adjustment of policy in relation to the 50% reduction in social insurance levy last year.

 

Air catering charges increased by RMB45 million on a year-on-year basis, mainly due to the increase in the number of passengers.

 

Other operating expenses mainly included operating lease expenses on aircraft and engines, civil aviation development fund and non-above-mentioned ordinary expenses arising from the core air traffic business, which increased by 9.06% on a year-on-year basis, mainly due to the increase in transport and the resumption on the levy of civil aviation development fund during the Reporting Period.

 

Finance Income, Finance Costs and Net Exchange Loss

During the Reporting Period, the Group recorded a finance income of RMB112 million, representing a year-on-year decrease of RMB80 million or 41.51%; and incurred finance costs (excluding the capitalised portion) of RMB5,495 million, representing a year-on-year increase of RMB395 million. During the Reporting Period, the Group recorded a net exchange gain of RMB1,235 million, representing a year-on-year decrease of RMB2,368 million.

 

Share of Results of Associates and Joint Ventures

During the Reporting Period, the net loss of the Group's share of results of its associates and joint ventures was RMB816 million, representing a year-on-year decrease of RMB5,177 million. Among which, during the Reporting Period, the Group recognized a loss on investment of Cathay Pacific of RMB865 million, representing a year-on-year decrease of RMB4,244 million; and recognized a loss on investment of Shandong Aviation Group Corporation and Shandong Airlines of RMB250 million, representing a year-on-year decrease of RMB718 million.

 

Material Acquisitions and Disposals

The Company did not make any material acquisitions and disposals of subsidiaries, associates or joint ventures during the Reporting Period.

 

Assets Structure Analysis

As at the end of the Reporting Period, the total assets of the Group was RMB298,381 million, representing an increase of 5.05% from that as at 31 December 2020, among which current assets accounted for RMB30,397 million or 10.19% of the total assets, while non-current assets accounted for RMB267,984 million or 89.81% of the total assets.

 

Among the current assets, cash and cash equivalents were RMB15,935 million, accounting for 52.42% of the current assets and representing an increase of 172.95% from that as at 31 December 2020.

 

Among the non-current assets, the book value of property, plant and equipment and right-of-use assets as at the end of the Reporting Period amounted to RMB220,415 million, accounting for 82.25% of the non-current assets and representing an increase of 2.10% from that as at 31 December 2020.

 

Asset Mortgage/Pledge

As at the end of the Reporting Period, the Group, pursuant to certain bank loans and finance leasing agreements, had mortgaged certain aircraft and premises with an aggregated book value of approximately RMB89,565 million (RMB79,983 million as at 31 December 2020) and land use rights with book value of approximately RMB26 million (RMB27 million as at 31 December 2020). In addition, as at the end of the Reporting Period, the Group had bank deposits restricted in ownership of approximately RMB775 million (approximately RMB737 million as at 31 December 2020), which were mainly statutory reserves deposited in the People's Bank of China.

 

 

 

 

Capital Expenditure

In 2021, the Group's capital expenditure totalled RMB20,170 million, of which the total investment in aircraft was RMB14,034 million, mainly including procurement of aircraft and engines, aircraft modifications, flight simulators, etc. Other capital expenditure investment amounted to RMB6,136 million, mainly including infrastructure construction, IT system construction, ground equipment procurement and cash component of the long-term investments.

 

Equity Investment

As at the end of the Reporting Period, the Group's equity investment in its associates amounted to RMB10,391 million, representing a decrease of 5.01% from that as at 31 December 2020. Among this, the balance of the equity investment of the Group in Cathay Pacific and Shandong Aviation Group Corporation amounted to RMB9,449 million and RMB475 million, respectively.

 

As at the end of the Reporting Period, the Group's equity investment in its joint ventures was RMB1,830 million, representing an increase of 15.75% from that as at 31 December 2020.

 

 

Debt Structure Analysis

As at the end of the Reporting Period, the Group's total liabilities were RMB232,550 million, representing an increase of 16.13% from that as at 31 December 2020. Among them, current liabilities amounted to RMB91,620 million, accounting for 39.40% of the total liabilities; and non-current liabilities amounted to RMB140,930 million, accounting for 60.60% of the total liabilities.

 

Among the current liabilities, interest-bearing debts (including bank loans and other borrowings, bills payable and lease liabilities) amounted to RMB54,935 million, representing an increase of 3.16% from that as at 31 December 2020.

 

Among the non-current liabilities, interest-bearing debts (including bank loans and other borrowings and lease liabilities) amounted to RMB129,467 million, representing an increase of 20.17% from that as at 31 December 2020.

 

Details of interest-bearing debts of the Group categorized by currency are set out below:

 

 

31 December 2021

31 December 2020

 

(in RMB'000)

Amount

Percentage

Amount

Percentage

Change

 

 

 

 

 

 

 

 

 

 

 

 

RMB

139,158,663

75.46%

 109,420,080

67.96%

27.18%

 

 

 

 

 

 

US dollars

43,949,421

23.84%

 49,669,410

30.85%

(11.52%)

 

 

 

 

 

 

Others

1,294,474

0.70%

 1,902,083

1.19%

(31.94%)

 

 

 

 

 

 

Total

184,402,558

100.00%

 160,991,573

100.00%

14.54%

 

 

 

 

 

 

 

 

 

 

 

Commitments and Contingent Liabilities

The Group's capital commitments, which mainly consisted of the payables in the next few years for purchasing certain aircraft and related equipment, decreased by 25.59% from RMB41,020 million as at 31 December 2020 to RMB30,522 million as at the end of the Reporting Period. The Group's investment commitments, which was mainly used in the investment agreements entered into, amounted to RMB22 million as at the end of the Reporting Period, as compared to RMB23 million as at 31 December 2020.

 

Details of the Group's contingent liabilities are set out in note 43 to the consolidated financial statements of the Group for 2021.

 

Gearing Ratio

As at the end of the Reporting Period, the Group's gearing ratio (total liabilities divided by total assets) was 77.94%, representing an increase of 7.43 percentage points from that as at 31 December 2020. Given that high gearing ratio is common among aviation enterprises, the current gearing ratio of the Group is at a relatively reasonable level and its long-term insolvency risk is within controllable range.

 

Working Capital and its Sources

As at the end of the Reporting Period, the Group's net current liabilities (current liabilities minus current assets) were RMB61,223 million, representing an increase of RMB361 million from that as at 31 December 2020. Based on the structure of current assets and current liabilities, the Group's current ratio (current assets divided by current liabilities) was 0.33, representing an increase from 0.24 as at 31 December 2020.

 

The Group meets its working capital needs mainly through its operating activities and external financing activities. During the Reporting Period, the Group's net cash inflow from operating activities was RMB7,130 million, as compared to the net cash outflow of RMB4,017 million for the corresponding period in 2020, which was mainly because the sales revenue increased and the number of ticket refunds declined on a year-on-year basis. Net cash outflow from investing activities was RMB4,453 million, representing a decrease of 71.93% from RMB15,865 million for the corresponding period in 2020, mainly due to the year-on-year decrease in the cash payment for the acquisition and construction of fixed assets and other long-term assets and the subscription of shares of Cathay Pacific during the corresponding period of last year. Net cash inflow from financing activities amounted to RMB7,469 million, representing a decrease of 55.77% from RMB16,888 million for the corresponding period in 2020, mainly due to the larger growth of its financing scale to cope with the impact of COVID-19 pandemic and ensure the liquidity safety during the corresponding period of the previous year.

 

The Company has obtained bank facilities of RMB175,405 million in aggregate granted by several banks in China, among which approximately RMB61,928 million has been utilised. The remaining amount is sufficient to meet our demands on working capital and future capital commitments.

 

RISK FACTORS

Risks of External Environment

Market Fluctuation

The Chinese economy has strong resilience and its long-term positive fundamentals will remain unchanged. Nonetheless, in view of the lingering impact of the COVID-19 pandemic, it is confronted with triple pressure of shrinking demand, supply shocks and weakening expectations. There exist certain uncertainties in the momentum of the general demand recovery accordingly. Based on the characteristics of the new development phase, the Group will fully implement the new development philosophy and establish new development paradigm with a primary focus on the supply-side structural reform, at the same time responding to the risks of market fluctuation actively.

 

Oil Price Fluctuation

Jet fuel is one of the main operating costs of the Group. The results of the Group is relatively more affected by the changes in jet fuel price. During the Reporting Period, with other variables remaining unchanged, if the average price of the jet fuel rises or falls by 5%, the Group's jet fuel costs will rise or fall by approximately RMB1,035 million.

 

Exchange Rate Fluctuation

The Group's certain lease liabilities, bank loans and other loans are mainly denominated in US dollar. Certain international income and expenses are denominated in currencies other than RMB. Assuming that the risk variables other than the exchange rate stay unchanged, the appreciation or depreciation of RMB against US dollar by 1% due to the changes in the exchange rate will result in the increase or decrease in the Group's net profit and shareholders' equity as at 31 December 2021 by RMB317 million.

 

 

 

Details of the financial risk management objectives and policies of the Group are set out in note 45 to the financial statements of the Group for 2021.

 

Risks of Competition

Industry competition

Affected by the COVID-19 pandemic, global airlines grounded a large number of planes and faced a cash flow crisis, while many aviation companies in the United States and Europe went bankrupt. Such integration is expected to alleviate excess capacity and facilitate the integration of civil aviation resources and subsequent development. During the early period of the "14th Five-Year" development of civil aviation, active adjustment and control on the growth rate of capacity based on the assessment of the industry on the period of market recovery will help alleviate the pressure of peer competition arising from short-term excess capacity in the domestic market.

 

Alternative competition

China has built up the world's largest high-speed railway network. It is extending its reach towards central and western China and accelerating the development through long-term planning. In the long run, the high-speed railway will change China's geographic pattern of the economy and, as a result of its cooperation and competition with civil aviation, the air-rail interlink operation will provide strong support to the development of aviation hubs.

 

 

 

Corporate Governance Report

 

MEMBERS OF THE SIXTH SESSION OF THE BOARD

 

Mr. Song Zhiyong

 

Mr. Ma Chongxian

 

Mr. Feng Gang

 

Mr. Patrick Healy

 

Mr. Li Fushen

 

Mr. He Yun

 

Mr. Xu Junxin

 

Ms. Winnie Tam Wan-chi

 

 

The Company has been committed to maintaining and enhancing the level of its corporate governance so as to ensure greater accountability and transparency of the Group and deliver long-term return to its shareholders. The Company has complied with the code provisions as set out in the Corporate Governance Code in Appendix 14 to the Listing Rules (the "Code") during the Reporting Period, except for code provision A.4.2.

 

BOARD OF DIRECTORS

Governance Structure

As at the end of the Reporting Period, the structure of the Board and each special committee is set out as follows:

 

 

 

 

 

MEMBERS OF THE SIXTH SESSION OF THE SUPERVISORY COMMITTEE

Mr. He Chaofan

 

Mr. Wang Jie

 

Mr. Qin Hao

 

Ms. Lyu Yanfang

 

Ms. Guo Lina

 

 

 

 

As of the end of the Reporting Period, the fifth session of the Board of the Company comprised eight Directors, out of which three were independent non-executive Directors. The Company completed the re-election of the Board on 25 February 2022. As at the date of this annual report, the sixth session of the Board comprises eight Directors, out of which four are independent non-executive Directors. All of the Directors of the fifth and sixth session of the Board have actively participated in the activities of the Company.

 

The attendance records of all the Directors of the fifth session of the Board present in person at general meetings, Board meetings and meetings of each special committee during the Reporting Period are as follows:

 

 

Number of meetings attended in person/should be attended

 

General
Meeting

Board
Meeting

Audit and Risk Control Committee (Supervision Committee) Meeting

Nomination and Remuneration Committee
Meeting

Strategy and
Investment
Committee
Meeting

Aviation
Safety
Committee
Meeting

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Directors

 

 

 

 

 

 

 

 

 

 

 

 

Song Zhiyong

2/3

10/11

N/A

N/A

7/7

2/2

 

 

 

 

 

 

Ma Chongxian

0/1

6/6

N/A

N/A

N/A

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-executive Directors

 

 

 

 

 

 

 

 

 

 

 

 

Feng Gang

2/3

11/11

N/A

N/A

N/A

N/A

 

 

 

 

 

 

Patrick Healy

3/3

11/11

N/A

N/A

N/A

N/A

 

 

 

 

 

 

Xue Yasong

2/3

10/11

N/A

N/A

N/A

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

Independent Non-executive Directors

 

 

 

 

 

 

 

 

 

 

 

 

Wang Xiaokang
(resigned during the Reporting Period)

0/0

0/1

N/A

0/0

N/A

N/A

 

 

 

 

 

 

Duan Hongyi

3/3

11/11

8/8

6/6

7/7

N/A

 

 

 

 

 

 

Stanley Hui Hon-chung

3/3

11/11

8/8

N/A

N/A

2/2

 

 

 

 

 

 

Li Dajin

3/3

10/11

7/8

6/6

N/A

N/A

 

 

 

 

 

 

 

For the Reporting Period, the number of Board meetings held, the convening procedures, minutes and records, rules of procedure and other relevant matters in connection with such meetings were in compliance with the relevant code provisions of the Code. It can be shown from the attendance rates that all Directors have discharged their duty of diligence and are dedicated to making contribution for the interest of the Company and its shareholders as a whole.

 

The Responsibilities of the Board

The Board is accountable to the general meeting and exercises the power according to the Articles of Association and the "Rules and the Procedures of the Board". Pursuant to the Articles of Association, the main responsibilities of the Board include: (1) to determine the Company's business policies and investment plans; (2) to formulate the Company's preliminary and final annual financial budgets; (3) to formulate the Company's profit distribution proposals and loss recovery proposals; (4) to determine the establishment of the Company's internal management bodies; and (5) to appoint or dismiss the President of the Company and the Secretary to the Board, as well as appraise them and determine their remuneration; and based on the nomination of the President, to appoint or dismiss the Vice President, the Chief Financial Officer, the Chief Pilot, the general counsel and other senior management personnel of the Company, as well as appraise them and determine their remuneration.

 

 

 

The Board shall be responsible for performing the following corporate governance duties: (1) to develop and review the Company's policies and practices on corporate governance, and provide recommendations in this regard; (2) to review and monitor the training and continuous professional development of the Directors and senior management; (3) to review and monitor the Company's policies and practices on compliance with legal and regulatory requirements; (4) to develop, review and monitor the code of conduct and compliance manual applicable to employees and Directors; and (5) to review the Company's compliance with the Corporate Governance Code and the disclosure in the Corporate Governance Report. During the Reporting Period, the Board actively performed the corporate governance duties. Please refer to the disclosure in this Corporate Governance Report for details of the implementation in this regard.

 

The Board has independent access to the senior management personnel for enquiries in relation to the Company's management. The Board has established special committees to provide support to the Board in its decision-making process. For details, please refer to the section headed "Special Committees of the Board" below.

 

Procedure of Board Meeting

Board meetings are held regularly throughout the year and generally include annual meeting, interim meeting and meetings for the first and third quarters. The Board shall formulate meeting plans on an annual basis, which mainly include matters such as the time and venue of the Board meeting as well as routine proposals such as review of financial reports, and shall inform all Directors of such plans in the beginning of the year.

 

Board meetings shall be convened by the Chairman and a notice of 14 days shall be given to all Directors before each meeting. The Directors may attend in person or through other electronic means of communication. If an extraordinary Board meeting is proposed to be convened, the Chairman of the Board shall issue a notice of the extraordinary Board meeting within 10 days from the receipt of the proposal(s). The relevant documents of the meeting shall be given to all Directors, Supervisors and other persons attending the meeting at least three days in advance.

 

For the purpose of considering resolutions or matters during Board meetings, the Directors may arrange the persons-in-charge of the relevant departments of the Company to attend the meetings as necessary to answer queries.

 

The Secretary to the Board shall be responsible for the communications and liaison with all Directors from the time when the notice is served to the commencement of the meeting, and shall provide in a timely manner the necessary information to the Directors to facilitate their decision-making on matters set out in the agenda. All Directors shall have access to the Secretary to the Board. Under the leadership of the Board and the Chairman, the Secretary to the Board shall take the initiative to keep himself or herself abreast of the implementation progress of the Board resolutions, and report to and advise the Board and the Chairman in a timely manner on major issues arising in the course of implementation. Minutes of Board meetings shall be kept by the Secretary to the Board and made available for inspection by any Director at any time.

 

Election of Directors

Directors other than employee representative director(s) are elected at the shareholders' general meeting of the Company, while employee representative director(s) is/are elected or dismissed by the employee representative meeting of the Company. Directors are appointed for a term of three years and are eligible for re-election and re-appointment upon expiry of their terms of office.

 

 

 

 

Code provision A.4.2 stipulates that, among others, every director, including those appointed for a specific term, should be subject to retirement by rotation at least once every three years. As disclosed in the announcement of the Company dated 23 October 2020, the terms of the fifth session of the Board and the Supervisory Committee expired on 26 October 2020. As the nomination process of candidates for Directors and Supervisors of the new session of the Board and the Supervisory Committee has not been completed during the Reporting Period, the re-election and appointment of members of the Board and the Supervisory Committee were postponed appropriately. The terms of the special committees of the fifth session of the Board of the Company were also extended accordingly. The Company completed the re-election and appointment of members of the Board and the Supervisory Committee on 25 February 2022 and fulfilled respective information disclosure obligations in a timely manner. All members of the fifth session of the Board and the Supervisory Committee have continued to fulfill their respective duties and responsibilities of Directors and Supervisors in accordance with the requirements of the laws, administrative rules and the Articles of Association until the re-election work are completed. The postponed re-election of the members of the Board and the Supervisory Committee did not affect the normal operation of the Company.

 

Chairman and President

The Chairman shall be elected and dismissed by a simple majority of the Directors. The term of office of the Chairman shall be three years, and the Chairman is eligible for re-election and re-appointment upon expiry of the term. The Chairman is responsible for leading the Board and ensuring the Board's efficient operation and that all major and relevant issues are discussed by the Board in a prompt and constructive manner. Mr. Song Zhiyong was elected as the Chairman of the Company on 29 December 2020 and was re-elected on 25 February 2022.

 

The Company has a President who shall be appointed or dismissed by the Board. The President is authorized to oversee the Group's business, implement various strategies and be responsible for the Company's daily operation to attain overall commercial goals. Mr. Ma Chongxian was appointed as the President of the Company on 31 May 2021 and was re-appointed on 25 February 2022.

 

Board Diversity Policy

The Directors have extensive expertise and experience in the fields of aviation, finance, law and financial management and provide substantial support for the scientific and effective decision-making of the Board. The "Board Diversity Policy" was adopted by the Board, which sets out the approach of the Company towards achieving diversity of the Board.

 

•           The Company takes into consideration a number of factors, including but not limited to professional experience and qualifications, cultural and educational background, skills, industry knowledge and reputation, knowledge of the laws and regulations applicable to the Company, gender, age, language skills and length of service, with a view to achieving diversity of the Board. These factors shall be taken into account by the Nomination and Remuneration Committee in reviewing the structure and composition of the Board and making recommendations to the Board on the appointment, re-appointment and succession of Directors.

 

•           The above factors should be balanced as appropriate in determining the optimal composition of the Board. For the appointment of Directors, the above factors shall be considered on a case-by-case basis in light of the actual circumstances of the Company and its business operations, development and strategies. Appointment by the Board should be made based on merits and the contributions that the individual is expected to bring to the Board with due regard for the benefits of diversity in the Board. The Board is structured to include more external Directors than internal Directors, and the members of the Board include one full-time deputy secretary of the Communist Party Committee as non-executive Director, one shareholder representative Director, one employee representative Director and four independent Directors. Among the four independent Directors, at least one shall possess extensive experience in accounting or relevant financial management areas with appropriate professional qualifications, and other Directors shall possess extensive experience in the aviation, legal and management areas to facilitate scientific decision-making of the Board. At least one female director shall be appointed to the Board of the Company. On 25 February 2022, the Company appointed Ms. Winnie Tam Wan-chi as an independent non-executive Director of the Company.

 

 

 

 

•           The Nomination and Remuneration Committee shall monitor the implementation of the Board Diversity Policy on an ongoing basis, and review this policy as appropriate.

 

Directors' Training and Continuous Professional Development

The management of the Company provides Directors with appropriate and sufficient information in a timely manner so as to update them with the latest developments of the Company and facilitate their discharge of duties.

 

Newly appointed Directors shall be given introduction in relation to the Company to ensure that they have a sufficient understanding of the management, business and governance practices of the Company. The Company also encourages its Directors to participate in seminars and courses conducted by recognized institutions so as to ensure that they constantly improve their skills and are aware of the latest developments or changes in laws and regulations, the Listing Rules and the Code with which they are required to comply in discharging their duties.

 

The Directors confirmed that they have complied with code provision A.6.5 of the Code in relation to the training of Directors. All Directors have participated in continuing professional development by attending trainings and courses or reading relevant materials to broaden their knowledge base and sharpen their skills, and have provided their training records to the Company.

 

Training for Directors during the Reporting Period

Category Notes

 

 

 

 

Executive Directors

 

 

 

Song Zhiyong (Chairman)

a, b

 

 

Ma Chongxian (President)

a, b

 

 

Non-executive Directors

 

 

 

Feng Gang

b

 

 

Patrick Healy

a

 

 

Xue Yasong

a, b

 

 

Independent Non-executive Directors

 

 

 

Wang Xiaokang (resigned during the Reporting Period)

a

 

 

Duan Hongyi

a, b

 

 

Stanley Hui Hon-chung

a, b

 

 

Li Dajin

a, b

 

 

Notes:

 

a.          Trainings on the responsibilities of the Directors provided by the Company's legal advisers and the information about the latest laws and regulations and regulatory developments in the domestic and foreign capital markets prepared by the Company on a regular basis, for the Directors to study by themselves.

 

b.          Special trainings provided by the regulatory authorities.

 

Biographical Details and Other Information of Directors

The list of Directors and their respective roles on the Board and special committees under the Board are set out in this annual report and published on the websites of the Company and Hong Kong Stock Exchange. For biographical details of the Directors, please refer to the section headed "Profile of Directors, Supervisors and Senior Management" of this annual report.

 

 

 

On 5 September 2005, the Company formulated and adopted the Model Code for Securities Transactions, which was subsequently amended on 19 March 2007 and 4 December 2009, respectively, on terms no less exacting than the required standards of the Model Code. The Model Code for Securities Transactions of the Company also applies to the Supervisors and the relevant employees. After making specific enquiries, the Company confirmed that each Director and each Supervisor have complied with the required standards of the Model Code set out in Appendix 10 to the Listing Rules and the Company's code of conduct throughout the Reporting Period.

 

The three independent non-executive Directors of the Company as at the end of the Reporting Period, namely, Mr. Duan Hongyi, Mr. Stanley Hui Hon-chung and Mr. Li Dajin, have confirmed their independence with the Hong Kong Stock Exchange when they were elected. The Company had already received from those independent non-executive Directors the annual statements concerning their independence and re-confirmed their independence. The four independent non-executive Directors of the sixth session of the Board of the Company, namely Mr. Li Fushen, Mr. He Yun, Mr. Xu Junxin and Ms. Winnie Tam Wan-chi, have also confirmed their independence. The Company considers all independent non-executive Directors as independent within the meaning of Rule 3.13 of the Listing Rules.

 

Besides the working relationships in the Company, there are no financial, business, family relationship or other material relationships among the Directors, Supervisors and senior management.

 

The Company has purchased liability insurance for the Directors, Supervisors and senior management.

 

SPECIAL COMMITTEES OF THE BOARD

Audit and Risk Control Committee (Supervision Committee)

As at the end of the Reporting Period, the Audit and Risk Control Committee (Supervision Committee) comprised Mr. Duan Hongyi, Mr. Stanley Hui Hon-chung and Mr. Li Dajin, all of whom are independent non-executive Directors, with Mr. Duan Hongyi serving as the chairman of the committee. As at the date of this annual report, the Audit and Risk Control Committee (Supervision Committee) comprises Mr. Li Fushen, Mr. He Yun and Ms. Winnie Tam Wan-chi, all of whom are independent non-executive Directors, with Mr. Li Fushen serving as the chairman of the committee.

 

The primary duties of the Audit and Risk Control Committee (Supervision Committee) include: (1) to propose the engagement or change of external auditors, conduct appropriate review and evaluation, as well as give opinion in writing to the Board, in connection with the appointment of new accounting firms or re-appointment of the existing accounting firms; (2) to review and supervise the Company's internal auditing system and its implementation, review the duties and responsibilities of the internal audit personnel and receive and consider the work report prepared by the responsible person of the audit department; (3) to be responsible for the communications between the internal audit department and external auditors; (4) to review and verify the Company's financial information and its disclosure; (5) to review the Company's financial control, internal control and risk control system, and evaluate the appropriateness of the system; (6) to monitor the implementation and self-assessment of the Company's internal control system, review the risk control and internal control system with the management, ensuring that the management have performed their duties properly and established an effective internal control system; (7) to study the results of the important investigation on the internal control and the feedback of the management on the results; (8) to assess the effectiveness of the control rules and the operational standards relating to risk investments, including but not limited to financial derivative instruments, and consider the strategies and proposals of the Company's risk investment; (9) to be responsible for the control and daily management of the related/connected transactions of the Company, and to review the Company's significant related/connected transactions; and (10) to receive reports relating to fraudulent acts and discovery and complaints.

 

The main work of the Audit and Risk Control Committee (Supervision Committee) during the Reporting Period includes reviewing the following documents: (1) the 2020 annual report, the reports for the first and third quarters and the interim report of 2021; (2) the 2020 profit distribution plan; (3) the 2020 assessment report on internal control and the audit report on internal control; (4) the 2020

 

 

performance report by the Audit and Risk Control Committee; (5) the special reports regarding the deposit and actual use of the proceeds from issuance of A Shares for 2020; (6) the 2021 financial plan and investment plan; (7) the re-appointment of international and domestic auditors and internal control auditors for 2021; (8) The signing of five framework agreements for continuing related (connected) transactions between Air China and China National Aviation Holding Corporation Limited and its subsidiaries and the application of annual caps for 2022 to 2024; and (9) Adjustment to the annual caps for 2021 to 2022 on the continuing related (connected) transactions of contracting operation income from bellyhold space business with Air China Cargo Co. Ltd..

 

In addition to the above, the Audit and Risk Control Committee (Supervision Committee) also received the following reports during the Reporting Period: (1) Announcement of profit warning for 2020; (2) Preparation plan for the 2020 annual report; (3) Auditing of the 2020 financial report; (4) List of related parties in A shares for 2020; (5) Special self-inspection on corporate governance of listed companies; (6) Auditing and work plan for rectification; (7) Work plan on internal audit for 2021; (8) Air China's annual report and industry analysis and research report; (9) the 2020 assessment on internal control; (10) Analysis and study of the reports for the first quarter of 2021 of the three major airlines; (11) Auditing rectification; (12) Work plan on internal control self-assessment for 2021; (13) Interim review of financial plan and internal control audit plan for 2021; (14) Overview of the capital market in June and the first half of 2021; (15) List of related parties in A shares for the first half of 2021; and (16) Implementation of the three-year action plan for the reform of State-owned enterprises.

 

The annual results and annual report of the Company for the year of 2021 had been reviewed by the Audit and Risk Control Committee (Supervision Committee).

 

Nomination and Remuneration Committee

As at the end of the Reporting Period, the Nomination and Remuneration Committee comprised Mr. Duan Hongyi and Mr. Li Dajin, both are independent non-executive Directors, with Mr. Li Dajin serving as the chairman of the committee. As at the date of this annual report, the Nomination and Remuneration Committee comprises Mr. He Yun and Mr. Xu Junxin, two independent non-executive Directors, and Mr. Song Zhiyong, an executive Director, with Mr. He Yun serving as the chairman of the committee.

 

The primary duties of the Nomination and Remuneration Committee include: (1) to study on the criteria and procedures for selecting candidates for the Directors and senior management and make recommendations to the Board; (2) to nominate to the Board the candidates to fill casual vacancies on the Board, and make recommendations regarding the Directors' remuneration to the Board; (3) to evaluate the performance of the senior management of the Company and determine their remuneration structure; (4) to make recommendations to the Board on the remuneration policy and structure for the Directors and senior management and on the establishment of a set of formal and transparent procedures for formulating remuneration policy, and supervise the implementation of the remuneration policy of the Company; (5) to assess the independence of the independent non-executive Directors; and (6) to formulate the proposal of the Company's share incentive plan, verify the compliance with relevant regulations on granting and fulfillment of exercise conditions, and make recommendations to the Board for consideration.

 

The main work of the Nomination and Remuneration Committee during the Reporting Period includes: nomination of Mr. Ma Chongxian as a candidate for Director and appointment as President of the Company, nomination of Mr. Yan Simeng as Chief Information Officer of the Company, nomination of Mr. Huang Bin as Secretary to the Board and Joint Company Secretary of the Company, and nomination of Mr. Huang Bin as Assistant to the President of the Company. In addition to the above, the Nomination and Remuneration Committee also received the report on the Company's remuneration incentive policy.

 

During the Reporting Period, the nomination policy for Directors of the Company implemented by the Nomination and Remuneration Committee is as follows: The Nomination and Remuneration Committee shall review the qualification of candidates for directorship and senior management according to the standards as set out in the Articles of Association and the Board Diversity Policy and submit a report to the Board. For the diversity policy, please refer to the section headed "Board Diversity Policy" above. A shareholder holding 3% or more of the shares of the Company is entitled to nominate Directors to the Nomination and Remuneration Committee.

 

 

 

During the Reporting Period, the remuneration policy for Directors implemented by the Nomination and Remuneration Committee is as follows: except for independent non-executive Directors, other Directors will not receive director's remuneration. The remuneration standards of the independent non-executive Directors shall be determined according to the relevant national policies, and the remuneration of the senior management shall be determined in accordance with the relevant laws and regulations of the PRC and the provisions of the "Interim Measures for Remuneration Administration of Responsible Persons of Enterprise" of the Company. The Nomination and Remuneration Committee made recommendations to the Board on the remuneration packages of independent non-executive Directors and senior management based on the above-mentioned standards. The remuneration of the Directors and Supervisors of the Company shall be determined by the general meeting, and that of the senior management shall be determined by the Board after being considered by the Nomination and Remuneration Committee.

 

Changes in shareholdings and remuneration of the existing and resigned Directors, Supervisors and senior management during the Reporting Period

Name

Position

Gender

Age

Starting date of term
of office

Expiry date of term
of office

Total remuneration payables received from the Company during the Reporting Period

(RMB0'000)

Whether received remuneration from the Company's related parties or not

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Song Zhiyong

Executive Director

Male

56

22 May 2014

-

-

Yes

 

 

 

 

 

 

 

 

 

Secretary of the Communist Party Committee

 

 

14 December 2020

-

-

 

 

 

 

 

 

 

 

 

 

Chairman

 

 

29 December 2020

-

-

 

 

 

 

 

 

 

 

 

Ma Chongxian

Vice President

Male

56

8 April 2010

31 May 2021

-

Yes

 

 

 

 

 

 

 

 

 

Vice Chairman

 

 

20 July 2021

-

-

 

 

 

 

 

 

 

 

 

 

President

 

 

31 May 2021

-

-

 

 

 

 

 

 

 

 

 

 

Deputy Secretary of the Communist Party Committee

 

 

11 May 2021

-

-

 

 

 

 

 

 

 

 

 

Feng Gang

Deputy Secretary of the Communist Party Committee

Male

58

19 November 2019

-

-

Yes

 

 

 

 

 

 

 

 

 

Non-executive Director

 

 

26 May 2020

-

-

 

 

 

 

 

 

 

 

 

Patrick Healy

 

Non-executive Director

Male

56

19 December 2019

-

-

Yes

 

 

 

 

 

 

 

 

Xue Yasong

Employee Representative Director

Male

60

29 March 2018

25 February 2022

82.81

No

 

 

 

 

 

 

 

 

 

Chairman of the Labour Union

 

 

31 October 2016

15 December 2021

-

 

 

 

 

 

 

 

 

 

Wang Xiaokang

Independent Non-executive Director

Male

66

25 May 2017

9 February 2021

1

No

 

 

 

 

 

 

 

 

Duan Hongyi

Independent Non-executive Director

Male

58

26 May 2020

25 February 2022

-

No

 

 

 

 

 

 

 

 

Stanley Hui Hon-chung

Independent Non-executive Director

Male

71

22 May 2015

25 February 2022

20

No

 

 

 

 

 

 

 

 

Li Dajin

Independent Non-executive Director

Male

63

22 December 2015

25 February 2022

20

No

 

 

 

 

 

 

 

 

Li Fushen

Independent Non-executive Director

Male

59

25 February 2022

-

-

No

 

 

 

 

 

 

 

 

He Yun

Independent Non-executive Director

Male

60

25 February 2022

-

-

No

 

 

 

 

 

 

 

 

Xu Junxin

Independent Non-executive Director

Male

57

25 February 2022

-

-

No

 

 

 

 

 

 

 

 

Winnie Tam Wan-chi

Independent Non-executive Director

Female

60

25 February 2022

-

-

No

 

 

 

 

 

 

 

 

Zhao Xiaohang

Vice President

Male

60

22 February 2011

25 February 2022

-

Yes

 

 

 

 

 

 

 

 

 

Chairman of the Supervisory Committee

 

 

19 December 2019

25 February 2022

-

 

 

 

 

 

 

 

 

 

He Chaofan

Supervisor

Male

59

29 October 2013

-

-

Yes

 

 

 

 

 

 

 

 

 

Chairman of the Supervisory Committee

 

 

25 February 2022

-

 

 

 

 

 

 

 

 

 

 

Wang Jie

Employee Representative Supervisor

Male

56

25 September 2020

-

85.73

No

 

 

 

 

 

 

 

 

Qin Hao

Employee Representative Supervisor

Male

53

25 September 2020

-

78.53

No

 

 

 

 

 

 

 

 

Lyu Yanfang

Supervisor

Female

50

18 December 2020

-

65.13

No

 

 

 

 

 

 

 

 

Guo Lina

Supervisor

Female

51

25 February 2022

-

-

No

 

 

 

 

 

 

 

 

Tan Huanmin

Secretary of Committee
for Discipline Inspection

Male

57

19 January 2019

-

-

Yes

 

 

 

 

 

 

 

 

Wang Mingyuan

Vice President

Male

56

22 February 2011

-

-

Yes

 

 

 

 

 

 

 

 

Zhang Sheng

Vice President

Male

49

9 June 2020

-

-

Yes

 

 

 

 

 

 

 

 

Chen Zhiyong

Vice President

Male

58

17 December 2012

-

-

Yes

 

 

 

 

 

 

 

 

Chai Weixi

Vice President

Male

59

14 March 2012

-

96.79

No

 

 

 

 

 

 

 

 

Xu Chuanyu

Chief Safety Officer

Male

57

17 December 2012

-

137.06

No

 

 

 

 

 

 

 

 

Zhang Hua

General Counsel

Male

56

9 August 2017

-

95.77

No

 

 

 

 

 

 

 

 

Xiao Feng

Chief Accountant

Male

53

28 July 2014

-

94.89

No

 

 

 

 

 

 

 

 

Wang Yingnian

Chief Pilot

Male

58

27 November 2014

-

136.13

No

 

 

 

 

 

 

 

 

Ni Jiliang

Chief Engineer

Male

55

21 January 2020

-

94.24

No

 

 

 

 

 

 

 

 

Yan Simeng

Chief Information Officer

Male

39

7 September 2021

-

46.61

No

 

 

 

 

 

 

 

 

Zhou Feng

Secretary to the Board

Male

60

30 August 2017

30 September 2021

40.97

No

 

 

 

 

 

 

 

 

Huang Bin

Secretary to the Board

Male

58

30 September 2021

-

24.41

No

 

 

 

 

 

 

 

 

 

Assistant to the President

 

 

10 December 2021

-

 

 

 

 

 

 

 

 

 

 

Shao Bin

Assistant to the President

Male

56

14 March 2012

8 November 2021

205.89

No

 

 

 

 

 

 

 

 

Zhao Yang

Assistant to the President

Male

54

27 October 2017

-

146.80

No

 

 

 

 

 

 

 

 

Total

/

/

/

/

/

1,472.76

/

 

 

 

 

 

 

 

 

1.         During the Reporting Period, apart from the 10,000 A shares of the Company held by Mr. Zhou Feng, the former Secretary to the Board of the Company, all other Directors, Supervisors and senior management of the Company did not acquire, sell or hold any shares of the Company.

 

2.          The remuneration of Mr. Wang Xiaokang and Mr. Duan Hongyi, both being non-executive independent Directors, will be determined pursuant to relevant national policies.

 

3.          Total salaries received by the Directors, Supervisors and senior management, who are subject to changes during the year, from the Company for the Reporting Period represent the total remuneration for his/her term of office during the year.

 

Details of the remuneration for the Directors during the Reporting Period are set out in note 13 to the financial statements of this annual report.

 

 

 

Strategy and Investment Committee

As at the end of the Reporting Period, the Strategy and Investment Committee comprised Mr. Song Zhiyong, an executive Director, and Mr. Duan Hongyi, an independent non-executive Director, with Mr. Song Zhiyong serving as the chairman of the Committee. As at the date of this annual report, the Strategy and Investment Committee comprises Mr. Ma Chongxian, an executive Director, Mr. Xu Junxin, an independent non-executive Director, and Mr. Song Zhiyong, an executive Director, with Mr. Ma Chongxian serving as the chairman of the committee.

 

The primary duties of the Strategy and Investment Committee include: (1) to study the Company's strategic plan for long-term development and significant investment and financing proposals, as well as important operation and production decisions, and make recommendations on other significant matters that may affect the Company's development; (2) to formulate the environmental, social and governance structure, objectives, management approaches and strategies of the Company; and (3) to make decisions on the establishment, merger and dissolution of branches of the Company.

 

The main work of the Strategy and Investment Committee during the Reporting Period includes: consideration and approval of the amendment to the Working Rules of the Strategy and Investment Committee of the Board, the investment plan for 2021, the procurement of eighteen A320NEO aircraft, the amendment to the Articles of Association, the 2020 Corporate Social Responsibility Report, the retirement of twelve A330-200 aircraft and the outline of the Company's "14th Five-Year" Development Plan. In addition to the above, the Strategy and Investment Committee also received the report on Air China's development strategy and implementation of the three-year action for the reform of State-owned enterprises.

 

Aviation Safety Committee

As at the end of the Reporting Period, the Aviation Safety Committee comprised Mr. Song Zhiyong, an executive Director, and Mr. Stanley Hui Hon-chung, an independent non-executive Director, with Mr. Song Zhiyong serving as the chairman of the committee. As at the date of this annual report, the Aviation Safety Committee comprises Mr. Song Zhiyong, an executive Director, Mr. Li Fushen, an independent non-executive Director, and Mr. Ma Chongxian, an executive Director, with Mr. Song Zhiyong serving as the chairman of the committee.

 

The primary duties of the Aviation Safety Committee include: (1) to receive the safety report of the Company on a regular basis and report to the Board; (2) to study and deal with significant problems in relation to aviation safety work of the Company; and (3) to supervise and guide the production activities of the Company and the allocation of various kinds of resources such as human resources, properties and materials to fulfill the needs of safety operation of the Company.

 

The Aviation Safety Committee received the special report on aviation safety of the Company twice during the Reporting Period.

 

MANAGEMENT

Duties of the Management

The management shall be accountable to the Board and its main responsibilities include: (1) to manage the operation of the Company and to implement the resolutions of the Board; (2) to formulate the plans on the establishment of the Company's internal management bodies; (3) to implement annual business plans and investment proposals; (4) to establish fundamental rules and regulations of the Company; (5) to formulate fundamental management systems of the Company; (6) to make decision on transactions relating to the Company's main business involving a value within a monetary threshold or within a specific proportion of the Company's latest audited net asset value, subject to applicable laws and the Articles of Association; and (7) to appoint or dismiss responsible management personnel other than those appointed or dismissed by the Board, etc.

 

The Company established the "Rules and Procedures for President's Office" to regulate the daily operation of the President's Office.

 

 

 

FINANCIAL REPORTING

The Company prepares and publishes annual reports, interim reports and quarterly reports in accordance with the requirements of the regulatory rules of the listing places of the Company and other relevant laws and regulations in a timely manner each year, and the information disclosed is adequate for the shareholders to evaluate the performance, financial position and prospects of the Company.

 

Key operating data of the Company are published monthly in order to improve the transparency of the Company's performance and to provide the latest developments of the Company in a timely manner.

 

The Company has a sound environment for implementing internal controls. The Company has set up an effective electronic information system to support business development which comprises various operation systems, settlement system and a core accounting and audit platform, i.e. the Oracle financial information system. For treasury management, the Company has implemented a global online banking management system. An effective accounting information system was also established.

 

The responsibilities of the Directors in relation to the financial statements are set out below and shall be read together with the "Independent Auditor's Report" set out in this annual report. The statement of reporting responsibility of the auditors is included in the section headed "Independent Auditor's Report" set out in this annual report.

 

•           Annual reports and accounts

The Directors acknowledge that they are responsible for preparing the financial statements for each financial year so as to present a true and fair view of the financial position of the Company and the Group, and of the financial performance and cash flow of the Group.

 

•           Accounting policies

When preparing the financial statements of the Company and the Group, the Directors have consistently applied appropriate accounting policies under the relevant accounting standards.

 

•           Accounting records

The Directors are responsible for ensuring that the Company shall keep the accounting records, which will reflect the financial position of the Company with reasonable accuracy, enabling the Group to prepare the financial statements in accordance with the requirements of the Listing Rules, Hong Kong Companies Ordinance and the relevant accounting standards.

 

•           Ongoing operation

After making appropriate enquiries, the Directors believe that the Group has sufficient resources for operation in the foreseeable future. Accordingly, the Group's financial statements should be prepared on a going concern basis.

 

RISK MANAGEMENT AND INTERNAL CONTROL

The Board bears the ultimate responsibility for the Group's risk management and internal control system and for reviewing the effectiveness of the system. The risk management and internal control system is designed to manage rather than eliminate the risk of failing to achieve business objectives and to make reasonable, but not absolute, assurances that there will be no material misstatement or loss. The Board monitors the risk level with the assistance of the Audit and Risk Control Committee (Supervision Committee) and the management of the Company.

 

The Company conducts at least one review of the soundness and effectiveness of the risk management and internal control system every year. The Board will publish the self-assessment annual report on the internal control after it is reviewed by the Audit and Risk Control Committee (Supervision Committee) and reported to the Board.

 

 

 

During the Reporting Period, the Board reviewed the Group's risk management and internal control system for the year through the Audit and Risk Control Committee (Supervision Committee) and considered that the system was adequate and effective. The review of the Audit and Risk Control Committee (Supervision Committee) covered key control aspects, including financial controls, operational controls and compliance controls. The Audit and Risk Control Committee (Supervision Committee) also reviewed the Group's resources, qualifications and experience of the responsible staff, training courses and budget in respect of the accounting, internal audit and financial reporting functions and expressed satisfaction with the adequacy of such measures. The Board also confirmed that the Company has established effective systems and procedures to ensure the control and management of the strategic risks, financial risks, operational risks, legal risks, contingent risks, etc..

 

The basic procedures of the Group's risk management include: (1) collection of risk information; (2) identification and assessment of risks; (3) formulation and implementation of risk reduction measures; and (4) monitoring of risk management.

 

The Company has established a clear organizational structure to allocate responsibilities for formulation, implementation and monitoring as required. An information reporting mechanism has been formed for risk management, which covers the Company's main business units to ensure that significant risks are effectively monitored and coped with within the Group.

 

The Group ranks the risks based on priority so as to pay special attention to critical risks. It sets risk indicators for critical risks, and monitors and judges the key indicators on a regular basis so that the risks are always under control. All the business units are required to compile a summary of the risks and report to the Risk Management Working Group Office on a regular basis. The Risk Management Working Group Office has set up a monthly reporting procedure to regularly report the risk status and risk tracking to the management and regulatory authorities.

 

According to the risk assessment in 2021, the main risks that the Group is facing are set out in the section headed "Management's Discussion and Analysis of Financial Position and Operating Results - Risk Factors" of this annual report.

 

The Company has established an audit department and legal department to assist the Audit and Risk Control Committee (Supervision Committee) and to analyze and evaluate the adequacy and effectiveness of the Group's internal control and risk management system and to supervise and evaluate the risk management and internal control of the Group. The audit department and legal department regularly reports the annual, interim work reports and annual audit plans to the Audit and Risk Control Committee (Supervision Committee) for review of risk management and internal control system. The Audit and Risk Control Committee (Supervision Committee) reviews the reporting compliance, reviews and monitors the effectiveness of the internal audit, internal control development and risk compliance, keeps tracks of the corrective actions for the problems spotted and guides business units to operate efficiently.

 

The Company has implemented a registration and filing system for the insiders and established the profiles of the insiders, who should bear the responsibility of confidentiality for the inside information they are aware of. The Board should guarantee the truthfulness, accuracy and completeness of the profiles of the insiders. The Company will conduct regular and occasional inquiries on the trading of shares and derivatives of the Company by the insiders. If insiders are found to have involved in insider dealing or have breached the laws and regulations due to dereliction of duty, the Company will ensure that the relevant personnel are held accountable in accordance with relevant laws and regulations and the Company's policies. The Company is also aware of its obligations under the SFO and the Listing Rules for the handling and disclosure of inside information, and unless the information falls within the "Safe Harbor", the Company will disclose such inside information to the public as soon as practicable.

 

 

 

ARTICLES OF ASSOCIATION

During the Reporting Period, amendments were made to the Articles of Association as follows:

 

On 18 March 2021, the Board of Directors proposed to amend the articles relating to the Company's address and the business name of the promotor of the Company in the Articles of Association, of which the amendments were approved by the shareholders at the annual general meeting of the Company held on 25 May 2021. For details, please refer to the Company's circular dated 8 April 2021 and the announcement dated 25 May 2021.

 

On 26 November 2021, according to the provisions and regulatory requirements of the Company Law of the People's Republic of China, the Securities Law of the People's Republic of China, the Official Reply of the State Council regarding Adjusting the Application of Provisions to Matters Including the Notice Period for Convention of Shareholders' Meetings by Overseas Listed Companies (國務院關於調整適用在境外上市公司召開股東大會通知期限等事項規定的批覆), the Guidelines for the Articles of Association of Listed Companies (上市公司章程指引), the Code of Corporate Governance for Listed Companies (上市公司治理準則) and other laws and regulations and regulatory documents as well as the actual operational and management needs of the Company, the Board of Directors proposed to amend the Articles of Association as well as the "Rules and the Procedures of General Meeting" and "Rules and the Procedures of the Board". The proposed amendments were approved by the shareholders at the extraordinary general meeting of the Company held on 30 December 2021. For details, please refer to the Company's circular dated 14 December 2021 and the announcement dated 30 December 2021.

 

COMPANY SECRETARY

The joint company secretaries, namely Mr. Huang Bin and Mr. Huen Ho Yin, are responsible for facilitating the procedures of the Board, as well as facilitating the communications among Board members, and communications with shareholders and with the management. The biographies of the joint company secretaries are set out in the section headed "Profile of Directors, Supervisors and Senior Management" of this annual report. During the Reporting Period, the joint company secretaries respectively attended a total of more than 15 hours of professional training to update their skills and knowledge.

 

AUDITORS AND THEIR REMUNERATION

The international and domestic auditors of the Company are Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP respectively. Breakdown of the remuneration to the Company's external auditors for providing audit and non-audit services for the Reporting Period is as follows:

 

RMB9,522,000 (including value-added tax) was charged in aggregate for the review of the Group's condensed consolidated financial statements for the six months ended 30 June 2021 and for the audit of the Group's consolidated financial statements for the year ended 31 December 2021; an aggregate amount of RMB7,495,000 (including value-added tax) was charged for the audit of the financial statements of certain subsidiaries of the Group for the year ended 31 December 2021; an aggregate of RMB1,000,000 (including value-added tax) was charged for providing internal control audit services to the Group; and an aggregate of RMB1,581,000 (including value-added tax) was charged for the rendering of other non-audit services, such as tax advisory services, to the Group.

 

COMMUNICATION WITH SHAREHOLDERS

The Company has established and maintained various communication channels with its shareholders through the publication of annual reports, interim reports and quarterly reports, press releases and announcements on the websites of the Company and the stock exchanges (if applicable), results presentations, roadshows, briefings on dividend distribution, etc. The Company has formulated the "Measures for Investors Relation Management" to regulate and strengthen its communication with the shareholders and investors, so as to optimize its corporate governance and enhance its corporate image.

 

 

 

 

The annual general meeting represents an effective means for the shareholders to exchange their views with the Board. The Chairman of the Board, as well as the respective chairmen of the Audit and Risk Control Committee (Supervision Committee), Nomination and Remuneration Committee, Strategy and Investment Committee and Aviation Safety Committee will answer queries raised by shareholders at the annual general meeting. Resolutions in respect of independent matters, including the election and change of the Directors, shall be tabled as separate resolutions at the annual general meeting.

 

Other than the annual general meeting, the Company would also hold extraordinary general meeting ("EGM") as required. In accordance with articles 66 and 91 of the Articles of Association, shareholder(s), individually or in aggregate, holding more than 10% of the shares of the Company may request the Board to convene an extraordinary general meeting by making one or more written request(s) in the same form to the Board with a clear agenda. The Board shall respond to such written request(s) within ten days of receipt of such written request(s). If the Board agrees to convene an extraordinary general meeting, it shall within five days of the Board resolution resolving to hold an extraordinary general meeting issue a notice convening an extraordinary general meeting within two months of receiving such request(s) from the shareholder(s). If the Board does not accept the request(s) from shareholder(s) for a meeting or fails to respond within ten days of the receipt of such written request(s), such shareholder(s) shall request the Supervisory Committee to convene an extraordinary general meeting by written request(s). If the Supervisory Committee fails to issue a notice convening a meeting within five days of the receipt of such written request(s), shareholder(s), individually or in aggregate, holding more than 10% of the shares of the Company for a consecutive 90 days or more may convene and hold a meeting by themselves.

 

For including a resolution relating to other matters in a general meeting, shareholders are requested to follow the requirements and procedures as set out in article 68 of the Articles of Association which provides that shareholder(s), individually or in aggregate, holding more than 3% of the shares of the Company may put forward proposal(s) by providing a written request to the convener of the meeting not less than ten days before the meeting. The convener of the meeting shall, within two days of the receipt of such written request, give supplemental meeting notice to shareholders which specifies information on such proposal(s).

 

The Board values the views and input of shareholders. Shareholders may send their enquiries and concerns to the Board at any time by addressing them to the Company Secretary, whose contact details are as follows:

 

Address:

Air China Headquarter, 30 Tian Zhu Road, Airport Industrial Zone, Beijing, 101312

Email:

ir@airchina.com

Telephone number:

86-10-61462560

Fax number:

86-10-61462805

 

 

 

 

Report of the Directors

STRATEGIC OBJECTIVES

The Group will, on the basis of enhancing safety management, continue to advance the implementation of its strategies; improve global network coverage to increase the commercial value of hub network; optimise the allocation of its core resources to improve the efficiency of resource utilisation; reasonably deploy transport capacity to grasp opportunities in the market; take multiple measures to strengthen marketing competitiveness; enhance service management, promote product innovation to improve customer experience with an aim to ensure sound operation and bring better returns to its shareholders and investors.

 

GROUP ACTIVITIES AND RESULTS

The Group is a provider of air passenger, air cargo and airline-related services. The results of the Group for the year ended 31 December 2021 and the financial position of the Group and the Company as at the same date are set out in the audited financial statements of this annual report.

 

REVIEW OF BUSINESS

Description of the fair review of the Group's business and the analysis using the financial key performance indicators, description of the principal risks and uncertainties facing the Group, future prospects of the Group's business, the environment policy and performance and the important relations statement with employees, customers and suppliers of the Group are set out in this Report of the Directors, the section headed "Business Overview" and the section headed "Management's Discussion and Analysis of Financial Position and Operating Results" of this annual report.

 

FIVE-YEAR FINANCIAL HIGHLIGHTS

The Group's results and balance sheet prepared in accordance with IFRSs for the five years ended 31 December 2021 are summarized and set out in the section headed "Summary of Financial Information" of this annual report.

 

SHARE CAPITAL STRUCTURE

As at the end of the Reporting Period, the Company had a total share capital of RMB14,524,815,185, divided into 14,524,815,185 shares of RMB1.00 each. The following table sets out the share capital structure of the Company as at the end of the Reporting Period:

 

Category of shares

Number of shares

Percentage
of the total share capital

 

 

 

 

 

 

A Shares

9,962,131,821

68.59%

 

 

 

H Shares

4,562,683,364

31.41%

 

 

 

Total

14,524,815,185

100.00%

 

 

 

 

 

 

 

 

SIGNIFICANT INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY

As at the end of the Reporting Period, to the knowledge of the Directors, Supervisors and chief executive of the Company, the interests or short positions of the following persons (other than a Director, Supervisor or chief executive of the Company) in the shares and underlying shares of the Company which were required to be recorded in the register kept by the Company pursuant to Section 336 of the SFO are as follows:

 

Total long positions in the shares and underlying shares of the Company

Name

Type of interests

Type and number of shares held
by the Company

Percentage of the total issued shares of the Company

Percentage of the total issued

A shares of the

Company

Percentage of the total issued H shares of the Company

Short positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CNAHC

Beneficial owner

5,952,236,697
A Shares

40.98%

59.75%

-

-

 

 

 

 

 

 

 

CNAHC(1)

Equity attributable

1,332,482,920
A Shares

9.17%

13.38%

-

-

 

 

 

 

 

 

 

CNAHC(1)

Equity attributable

223,852,000
H Shares

1.54%

-

4.91%

-

 

 

 

 

 

 

 

CNACG

Beneficial owner

1,332,482,920
A Shares

9.17%

13.38%

-

-

 

 

 

 

 

 

 

CNACG

Beneficial owner

223,852,000
H Shares

1.54%

-

4.91%

-

 

 

 

 

 

 

 

Cathay Pacific

Beneficial owner

2,633,725,455
H Shares

18.13%

-

57.72%

-

 

 

 

 

 

 

 

Swire Pacific Limited(2)

Equity attributable

2,633,725,455
H Shares

18.13%

-

57.72%

-

 

 

 

 

 

 

 

John Swire & Sons (H.K.) Limited(2)

Equity attributable

2,633,725,455
H Shares

18.13%

-

57.72%

-

 

 

 

 

 

 

 

John Swire & Sons Limited(2)

Equity attributable

2,633,725,455
H Shares

18.13%

-

57.72%

-

 

 

 

 

 

 

 

Notes:   Based on the information available to the Directors, Supervisors and chief executive (including such information as was available on the website of the Hong Kong Stock Exchange) and to the knowledge of the Directors, Supervisors and chief executive, as at the end of the Reporting Period:

 

1.          By virtue of CNAHC's 100% interest in CNACG, CNAHC was deemed to be interested in the 1,332,482,920 A Shares and 223,852,000 H Shares directly held by CNACG.

 

2.          By virtue of John Swire & Sons Limited's 100% interest in John Swire & Sons (H.K.) Limited and their approximately 57.89% equity interest and 66.24% voting rights in Swire Pacific Limited, and Swire Pacific Limited's approximately 45.00% interest in Cathay Pacific as at the end of the Reporting Period, John Swire & Sons Limited, John Swire & Sons (H.K.) Limited and Swire Pacific Limited were deemed to be interested in the 2,633,725,455 H Shares of the Company directly held by Cathay Pacific.

 

 

 

 

Total short positions in the shares and underlying shares of the Company

As at the end of the Reporting Period, the Company was not aware of any substantial shareholders holding short positions in the shares or underlying shares of the Company.

 

Save as disclosed above, as at the end of the Reporting Period, to the knowledge of the Directors, Supervisors and chief executive of the Company, no other person had an interest or short position in the Shares or underlying shares of the Company which were required to be recorded in the register kept by the Company pursuant to Section 336 of the SFO.

 

INFORMATION OF SHAREHOLDERS

Total number of shareholders

 

 

Total number of holders of ordinary shares as at the end
of the Reporting Period (account)

120,745 accounts, of which 3,040 accounts are registered holders of H Shares

Total number of holders of ordinary shares as at the end of the month preceding to the disclosing date of the annual report (account)

111,460 accounts, of which 3,203 accounts are registered holders of H Shares

 

 

Shareholdings of the top 10 shareholders and the top 10 holders of tradable shares (or shares not subject to selling restrictions) as at the end of the Reporting Period

 

 

 

 

 

 

 

 

Unit: Share

 

Shareholdings of the top 10 shareholders

Name of shareholder (full name)

Change(s) during the Reporting Period

Number of shares held as at the end of the Reporting Period

Shareholding percentage (%)

Number of shares held subject to selling restrictions

Shares pledged,
marked or frozen

Nature of shareholder

Status

Number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China National Aviation Holding Corporation Limited

0

5,952,236,697

40.98

0

Frozen

127,445,536

State-owned legal person

 

 

 

 

 

 

 

 

Cathay Pacific Airways Limited

0

2,633,725,455

18.13

0

Nil

0

Foreign legal person

 

 

 

 

 

 

 

 

HKSCC NOMINEES LIMITED

399,977

1,688,134,365

11.62

0

Nil

0

Foreign legal person

 

 

 

 

 

 

 

 

China National Aviation Corporation (Group) Limited

0

1,556,334,920

10.72

0

Frozen

36,454,464

Foreign legal person

 

 

 

 

 

 

 

 

China National Aviation Fuel Group Corporation

(40,910,035)

425,673,067

2.93

0

Nil

0

State-owned legal person

 

 

 

 

 

 

 

 

China Securities Finance Corporation Limited

0

311,302,365

2.14

0

Nil

0

State-owned legal person

 

 

 

 

 

 

 

 

Hong Kong Securities Clearing Company Limited

(78,569,831)

75,987,042

0.52

0

Nil

0

Foreign legal person

 

 

 

 

 

 

 

 

Agricultural Bank of China Limited - Guangfa Balanced Preferred Hybrid Securities Investment Fund
(中國農業銀行股份有限公司-廣發均衡優選混合型證券投資基金)

67,263,829

67,263,829

0.46

0

Nil

0

Domestic non-State-owned legal person

 

 

 

 

 

 

 

 

Industrial Bank Co. Ltd. - Guangfa Stable Preferred Six-Month Holding Period Hybrid Securities Investment Fund
(興業銀行股份有限公司-廣發穩健優選六個月持有期混合型證券投資基金)

33,734,114

33,734,114

0.23

0

Nil

0

Domestic non-State-owned legal person

 

 

 

 

 

 

 

 

China Construction Bank Corporation - Guangfa Value Leadership Hybrid Securities Investment Fund
(中國建設銀行股份有限公司-廣發價值領先混合型證券投資基金)

28,410,985

28,410,985

0.20

0

Nil

0

Domestic non-State-owned legal person

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholdings of the top 10 shareholders not subject to selling restrictions

Name of shareholder

Number of tradable shares held not subject to selling restrictions

Class and number of shares

Class

Number

 

 

 

 

 

 

 

 

China National Aviation Holding Corporation Limited

5,952,236,697

RMB ordinary shares

5,952,236,697

 

 

 

 

Cathay Pacific Airways Limited

2,633,725,455

Overseas listed foreign shares

2,633,725,455

 

 

 

 

HKSCC NOMINEES LIMITED

1,688,134,365

Overseas listed foreign shares

1,688,134,365

 

 

 

 

China National Aviation Corporation (Group) Limited

1,556,334,920

RMB ordinary shares

1,332,482,920

 

 

 

 

 

 

Overseas listed foreign shares

223,852,000

 

 

 

 

China National Aviation Fuel Group Corporation

425,673,067

RMB ordinary shares

425,673,067

 

 

 

 

China Securities Finance Corporation Limited

311,302,365

RMB ordinary shares

311,302,365

 

 

 

 

Hong Kong Securities Clearing Company Limited

75,987,042

RMB ordinary shares

75,987,042

 

 

 

 

Agricultural Bank of China Limited - Guangfa Balanced Preferred Hybrid Securities Investment Fund
(中國農業銀行股份有限公司-廣發均衡優選混合型證券投資基金)

67,263,829

RMB ordinary shares

67,263,829

 

 

 

 

Industrial Bank Co. Ltd. - Guangfa Stable Preferred Six-Month Holding Period Hybrid Securities Investment Fund
(興業銀行股份有限公司-廣發穩健優選六個月持有期混合型證券投資基金)

33,734,114

RMB ordinary shares

33,734,114

 

 

 

 

China Construction Bank Corporation - Guangfa Value Leadership Hybrid Securities Investment Fund
(中國建設銀行股份有限公司-廣發價值領先混合型證券投資基金)

28,410,985

RMB ordinary shares

28,410,985

 

 

 

 

Explanation on the repurchase special accounts
among the top 10 shareholders

Nil

 

 

Explanation on the right to vote by proxy, proxy and abstention from voting among the above shareholders

Nil

 

 

Explanation on connected relationship or action in concert among the above shareholders

CNACG is a wholly-owned subsidiary of CNAHC. Accordingly, CNAHC is directly and indirectly interested in 51.70% of the shares of the Company.

 

 

Explanation on preference shareholders whose voting rights have been restored and the number of shares held

Nil

 

 

1.          HKSCC NOMINEES LIMITED is a subsidiary of The Stock Exchange of Hong Kong Limited and its principal business is acting as nominee for and on behalf of other corporate shareholders or individual shareholders. The 1,688,134,365 H shares held by it in the Company do not include the 166,852,000 shares held by it as nominee of CNACG.

 

2.          According to the "Implementation Measures on Partial Transfer of State-owned Shares to the National Social Security Fund in the Domestic Securities Market" (Cai Qi [2009] No. 94) (《境內證券市場轉持部分國有股充實全國社會保障基金實施辦法》(財企[2009]94)) and the Notice ([2009] No. 63) jointly issued by the Ministry of Finance, the SASAC, China Securities Regulatory Commission and the National Council for Social Security Fund, 127,445,536 and 36,454,464 shares held by CNAHC, the controlling shareholder of the Company, and CNACG respectively are frozen at present.

 

 

 

 

PUBLIC FLOAT

Pursuant to public information available to the Company and to the knowledge of the Directors of the Company, the Company has maintained a public float as required by the Listing Rules and agreed by the Hong Kong Stock Exchange as at the date of this annual report.

 

DIVIDEND POLICY

In accordance with the relevant requirements of the China Securities Regulatory Commission and the CSRC Beijing Bureau on the cash dividends of listed companies and the provisions of the "Articles of Association of Air China Limited" (the "Articles of Association"), the Company implements an active dividend distribution policy and attaches importance to the reasonable return for investment of investors. The Company maintains a consistent and stable dividend distribution policy and prioritizes cash dividends when distributing profits. It is clearly stipulated in the Articles of Association that in the case that the distributable profits (representing the profit after tax after making up for the losses and making contributions to the common reserve fund in accordance with the provisions of the Articles of Association as well as deducting otherwise approved by the relevant national departments) realized for the current year in the financial statement of the parent company prepared in accordance with applicable domestic and overseas accounting standards and regulations are positive, the Company will distribute dividends in cash with the cash dividends to be distributed each year no less than 15% of the applicable distributable profits. The applicable distributable profits represent the distributable profits in the financial statement of the parent company prepared in accordance with applicable domestic and overseas accounting standards and regulations, whichever is lower. The Company's profit distribution plan should be reviewed by independent non-executive Directors and the Board forms a resolution which is then submitted to the general meeting for consideration. The Company should actively communicate with shareholders, especially minority shareholders, through various means (including online voting and inviting minority shareholders to participate in the meetings) to fully understand the opinions and needs of minority shareholders and timely answer the questions of their concerns.

 

Please refer to Article 195, Article 196 and Article 197 of the Articles of Association for details of the principles and policies of dividend distribution of the Company.

 

DIVIDENDS

According to the audited financial statements of the Company prepared in accordance with the CASs and the IFRSs, the Company recorded a net loss attributable to the owner of the parent company in 2021. As considered and approved by the 2nd meeting of the sixth session of the Board of the Company, the Company proposed not to make profit distribution for the year of 2021. Such proposal is subject to the approval by the shareholders of the Company at the general meeting.

 

ANNUAL GENERAL MEETING

The Company proposed to convene the annual general meeting on 25 May 2022. The register of members of H Shares will be closed from Wednesday, 18 May 2022 to Wednesday, 25 May 2022 (both days inclusive), during which period no transfer of H Shares will be effected. In order to qualify for attendance and voting at the annual general meeting, the holders of H Shares must return all the transfer documents to the Company's H Shares registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong by 4:30 p.m. on Tuesday, 17 May 2022. The holders of H Shares whose names appear on the register of members of the Company after the close of business on Tuesday, 17 May 2022 are entitled to attend and vote at the annual general meeting.

 

 

 

 

PURCHASES, SALES OR REDEMPTION OF LISTED SECURITIES

During the Reporting Period, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the listed securities (the term "securities" has the meaning ascribed to it under Paragraph 1 of Appendix 16 to the Listing Rules) of the Company.

 

PRE-EMPTIVE RIGHTS

The Articles of Association does not provide for any pre-emptive rights requiring the Company to offer new shares to the existing shareholders in proportion to their existing shareholdings.

 

DIRECTORS AND SUPERVISORS OF THE COMPANY

Directors

Set out below is the list of Directors during the Reporting Period and as at the date of this annual report (unless otherwise stated).

 

Name

Date of election and if applicable, leaving office as Director

 

 

 

 

Song Zhiyong (Chairman and executive Director)

Elected as executive Director on 22 May 2014 and as Vice Chairman on 6 June 2016, elected as Chairman on 29 December 2020

 

 

Ma Chongxian (President, Vice Chairman and executive Director)

Elected as President on 31 May 2021 and as executive Director on 20 July 2021

 

 

Feng Gang (Non-executive Director)

Elected on 26 May 2020

 

 

Patrick Healy (Non-executive Director)

Elected on 19 December 2019

 

 

Xue Yasong (Then non-executive Director and employee representative Director)

Elected on 29 March 2018, retired on 25 February 2022

 

 

Wang Xiaokang (Then independent non-executive Director)

Elected on 25 May 2017, resigned on 9 February 2021

 

 

Duan Hongyi (Then independent non-executive Director)

Elected on 26 May 2020, retired on 25 February 2022

 

 

Stanley Hui Hon-chung (Then independent non-executive Director)

Elected on 22 May 2015, retired on 25 February 2022

 

 

Li Dajin (Then independent non-executive Director)

Elected on 22 December 2015, retired on 25 February 2022

 

 

Li Fushen (Independent non-executive Director)

Elected on 25 February 2022

 

 

He Yun (Independent non-executive Director)

Elected on 25 February 2022

 

 

Xu Junxin (Independent non-executive Director)

Elected on 25 February 2022

 

 

Winnie Tam Wan-chi (Independent non-executive Director)

Elected on 25 February 2022

 

 

 

 

 

Supervisors

Set out below is the list of Supervisors during the Reporting Period and as at the date of this annual report (unless otherwise stated).

 

Name

Date of election and if applicable, leaving office as Supervisor

 

 

 

 

Zhao Xiaohang (Then Chairman of the Supervisory Committee)

Elected on 19 December 2019, retired on 25 February 2022

 

 

He Chaofan (Chairman of the Supervisory Committee)

Elected on 29 October 2013

 

 

Wang Jie (Employee representative Supervisor)

Elected on 25 September 2020

 

 

Qin Hao (Employee representative Supervisor)

Elected on 25 September 2020

 

 

Lyu Yanfang

Elected on 18 December 2020

 

 

Guo Lina

Elected on 25 February 2022

 

 

DIRECTORS AND SUPERVISORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES

At any time during the Reporting Period or as at the end of the Reporting Period, none of the Company, its holding company, any of the Company's subsidiaries or fellow subsidiaries was a party to any agreement or arrangement which enables the Directors and Supervisors of the Company to acquire benefits by means of the acquisition of Shares in, or debentures, of the Company or any other body corporate.

 

INTERESTS AND SHORT POSITIONS OF DIRECTORS, SUPERVISORS AND THE CHIEF EXECUTIVE IN THE SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY

As at the end of the Reporting Period, none of the Directors, Supervisors or the chief executive of the Company had interests or short positions in the shares, underlying shares and/or debentures (as the case may be) held by the Company or its associated corporations (within the meaning of Part XV of the SFO) which shall be recorded and maintained in the register pursuant to section 352 of the SFO, or which shall be notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code.

 

INTERESTS OF DIRECTORS AND SUPERVISORS IN CONTRACTS AND SERVICE CONTRACTS

Each of the Directors has entered into a service contract with the Company. All Directors shall serve a term of three years.

 

None of the Directors or Supervisors has any existing or proposed service contract with any member of the Group which is not terminable by the Group within one year without payment of compensation (other than statutory compensation).

 

Save as disclosed in the section headed "Connected Transactions" set out in this Report of the Directors, none of the Company, its holding company, or any of the Company's subsidiaries or fellow subsidiaries has entered into any significant transactions, arrangements or contracts relating to the Group's business, in which a Director or Supervisor or his or her connected entity directly or indirectly had any material interest, and which subsisted at the end of the Reporting Period or at any time during the Reporting Period.

 

 

 

 

During the Reporting Period, Mr. Song Zhiyong (executive Director), Mr. Ma Chongxian (executive Director) and Mr. Patrick Healy (non-executive Director) also served as directors of Cathay Pacific. Cathay Pacific competes or is likely to compete either directly or indirectly with some aspects of the business of the Company as it operates airline services to certain destinations, which are also served by the Company. At the same time, Mr. Song Zhiyong (executive Director of the Company) also served as director of Air China Cargo. Air China Cargo competes or is likely to compete either directly or indirectly with some aspects of the business of the Company as it operates cargo airline services by cargo aircraft to certain destinations, which are also served by the bellyhold cargo of the Company.

 

Save as disclosed above, none of the Directors and their respective close associates (as defined in the Listing Rules) has any competing interests which would be required to be disclosed under Rule 8.10 of the Listing Rules if they were controlling shareholders of the Company.

 

PERMITTED INDEMNITY PROVISION

Appropriate directors' liability insurance coverage has been arranged by the Company to indemnify the Directors for liabilities arising out of corporate activities. These directors' liability insurance was valid throughout the financial year ended 31 December 2021 and remains in effect as at the date of this report.

 

EMPLOYEES

As at the end of the Reporting Period, the Group had a total of 88,395 employees, among which, the Company had 46,485 employees and the subsidiaries of the Company had 41,910 employees. The categories of employees of the Group are as follows:

 

Professional Categories

As at 31 December 2021

As at 31 December 2020

Increase/(Decrease)

 

 

 

 

 

 

 

 

Management

10,856

11,001

(145)

 

 

 

 

Marketing and Sales

5,337

6,277

(940)

 

 

 

 

Operation

4,531

4,705

(174)

 

 

 

 

Ground Handling

11,698

11,278

420

 

 

 

 

Cabin Service

23,382

23,619

(237)

 

 

 

 

Logistics and Support

6,964

7,323

(359)

 

 

 

 

Flight Crew

10,644

9,632

1,012

 

 

 

 

Engineering and Maintenance

13,146

13,628

(482)

 

 

 

 

Information Technology

809

820

(11)

 

 

 

 

Others

1,028

1,090

(62)

 

 

 

 

Total

88,395

89,373

(978)

 

 

 

 

 

 

 

 

 

REMUNERATION POLICY

Upholding the concept of "paying salary with reference to the job value, personal ability as well as performance appraisal" and centering on enhancing enterprises vitality and improving benefit and efficiency, the Company advances high-quality development. During the Reporting Period, the Company continued to deepen the reform of the distribution system and sought a breakthrough in the increase and decrease of salary. We improved the total labor cost management mechanism, and continuously enhanced the level of labor cost control and output efficiency; we promoted the reform of the assessment and incentive mechanism for heads of departments, and reasonably widened the salary gap for the heads; we advanced the reform of the market-oriented salary system for mixed reform enterprises and demonstration enterprises of scientific reform, while establishing and improving the medium- and long-term incentive mechanism to strengthen the positive incentives for core talents; furthermore, we dynamically optimized the pandemic subsidy policy, and continued to implement the subsidies for aircrew and front-line staff of pandemic prevention and control; we also improved the salary benchmarking and analysis mechanism, and continuously promoted differentiated and precise incentives to stimulate the vitality of the workforce.

 

TRAINING PROGRAMME

In 2021, the Company closely focused on strategic work priorities and actively explored ways to carry out cadre education and training under normalized pandemic prevention and control. In terms of online training, in response to the growing demand for personalized and differentiated online learning among cadres and employees, the Company iterated and optimized the WeChat learning platform "CNAHC Leadership", by enriching training course content, improving platform functions and operating innovative activities. A total of 3,777,726 participants completed 992,171 hours of learning in the year. In terms of off-the-job training, the Company took active measures to cope with the impact of the pandemic, completing the selection and deployment of 31 transferring training projects organized by higher-level units and implementing six categorized and graded training programs for middle to senior management. To maintain valid qualification of all operating staff, the Company provided various types of qualification training for pilots, flight attendants, flight trainees, aircraft maintenance personnel, aviation dispatch personnel and ground service personnel during the Covid-19 pandemic by organizing and completing 317 live broadcast training sessions, which recorded a total of 220,420 hours of training, and 131,836 hours of full-motion simulator training for pilots. Through continuously optimising the training content, actively developing course resources and flexibly using a variety of teaching methods to improve the quality and effectiveness of training, the relevance, practicality and effectiveness of training is constantly improved, providing a solid guarantee for the Company to achieve high-quality training.

 

In 2022, the Company will actively implement the cadre education and training plan, highlighting three aspects of training, namely political theory, Communist Party of China's history and character, and professional abilities. By continuously strengthening political attributes, further improving the system of cadre education and training, strengthening the construction of online learning platforms, and optimizing the setting of training programs, the Company will enhance the relevance and effectiveness of training, cultivate the roots and cast the spirit of our cadre to empower them, and provide talent and intellectual support for the development of a world-class aviation and transportation group with global competitiveness.

 

SUPPLIER MANAGEMENT

The Company firmly promoted open procurement with a focus on "compliance, efficiency and quality", and strived to improve procurement management capabilities. We facilitated the establishment of procurement system, comprehensively strengthened procurement risk management and control and continuously deepened standardized management, which has resulted in better procurement compliance. The Company also achieved steady improvement in procurement efficiency through dynamic integration of management optimization with service refinement. The Company improved the regulations concerning supplier selection, access management and annual performance appraisal to ensure the good operation and maintenance of supplier information base, and established a good cooperative relationship with its suppliers to achieve sustainable development together.

 

 

 

 

EMPLOYEES AND EMPLOYEES' PENSION SCHEME

Details of the employees' pension scheme and other welfare are set out in note 9 to the financial statements, and retired employees are entitled to benefits under the social pension scheme approved and provided by the labour and social security authority of the local governments.

 

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

Details of the subsidiaries, associates and joint ventures of the Group as at the end of the Reporting Period are set out respectively in notes 22, 23 and 24 to the financial statements of this annual report.

 

BANK LOANS AND OTHER BORROWINGS

Details of the bank loans and other borrowings of the Group are set out in note 37 to the financial statements of this annual report.

 

FIXED ASSETS

Changes in the fixed assets of the Group for the year ended 31 December 2021 are set out in note 17 to the financial statements of this annual report.

 

AIRCRAFT AND FLIGHT EQUIPMENT

The aggregate net book value of the Group's aircraft, engines and flight equipment as at the end of the Reporting Period are set out in note 17 to the financial statements of this annual report. The Group's capital commitment amounts for aircraft and flight equipment as at the end of the Reporting Period are set out in note 44 to the financial statements of this annual report.

 

CAPITALISED INTERESTS

Details of the capitalised interests of the Group for the year ended 31 December 2021 are set out in note 12 to the financial statements of this annual report.

 

RESERVES

Changes in the reserves of the Company and the Group during the year are set out in note 42 and the consolidated statement of changes in equity to the financial statements of this annual report.

 

DONATIONS

During the Reporting Period, the Group made donations for charitable and other purposes amounting to RMB63.54 million.

 

 

 

 

MAJOR CUSTOMERS AND SUPPLIERS

During the Reporting Period, the purchases of the Group from the largest supplier accounted for 20.77% of the total purchases of the Group, while the purchases of the Group from the five largest suppliers accounted for 32.47% of the total purchases of the Group. None of the Directors or Supervisors, their associates, nor any shareholder of the Company, who to the knowledge of the Directors owns 5% or more of the Company's share capital, had any interest in the five largest suppliers of the Company.

 

During the Reporting Period, the sales of the Group to the five largest customers accounted for not more than 30% of the total sales of the Group.

 

PROPERTY TITLE CERTIFICATE

The Company effected the changes of titles of assets (land, buildings and vehicles), in accordance with its undertakings as disclosed in the Company's prospectus when shares were issued. The title transfer procedures for the underlying assets relating to the above undertakings have been completed.

 

ENVIRONMENTAL POLICY AND PERFORMANCE OF THE GROUP

Focusing on the task of building a strong civil aviation country in the new era and the requirements of high-quality development, taking reform and innovation as the driving force, as well as carbon reduction and pollution control as the approaches, and targeting to meet the demand for green aviation from relevant stakeholders, the Group has continuously improved its management and governance system, striven to improve the efficiency of energy use, strictly implemented the requirements of pollution prevention and control, enhanced the management capability of carbon assets in a scientific manner, actively participated in green public welfare, and integrated green development into the overall layout of the Group's high-quality development.

 

During the Reporting Period, the Group steadfastly pursued the major deployment of the Central Committee of CPC for the development of ecological civilization and solidly advanced the sound results of energy conservation and environmental protection. The Group continued to improve its management system and enhance its management capabilities, strengthened energy management and steadily achieved low-carbon development. We also enhanced risk control of pollution prevention and control to steadily promote the ban on plastic. Meanwhile, we implemented the requirements of the Civil Aviation's Blue Sky Protection Campaign, promoted APU (aircraft auxiliary power units) replacement facilities on the basis of "maximizing the use if appropriate", and continuously deepened the results of the "fuel-to-electricity" work. In addition, we scientifically managed carbon emissions and enhanced the management capabilities of carbon assets. We actively promoted the energy conservation and environmental protection and fulfilled our social responsibility. In 2021, Air China obtained the certificate of ISO14001, becoming the first airline in mainland China to be fully accredited with environmental management systems. In December, we launched a new green travel service, "Enjoy Low Carbon Flight (淨享飛行低碳行)", on Air China App, which allowed passengers to enjoy fast and efficient air travel services while participating in carbon emission reduction projects such as reforestation through flight miles and donations to offset their carbon emissions in the flights and achieve "carbon neutrality".

 

 

 

 

COMPLIANCE OPERATIONS

As a Chinese company listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange, the Company shall comply with regulations such as the Company Laws of the People's Republic of China, the Securities Law of the People's Republic of China, the Securities and Futures Ordinance, the Hong Kong Companies Ordinance, the Stock Listing Rules of the Shanghai Stock Exchange (《上海證券交易所股票上市規則》) and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited in relation to listed companies' securities issue and trading. CNAF, a non-wholly owned subsidiary of the Company, as a non-bank financial institution established in Mainland China, shall comply with rules in respect of financial regulation in Mainland China. The Group, with civil aviation transportation and related services as its principal businesses, shall comply with requirements in relation to civil aviation safety regulations of locations where the Group operates, and laws and regulations in respect of consumer rights protection, environmental protection, anti-monopoly, anti-unfair competition and tax, etc.

 

The Group has the procedure of compliance in place to ensure compliance with applicable laws, regulations and normative legal documents, and in particular those having a significant impact on its principal businesses. The Group will notify the relevant employees and operating teams of any change in applicable laws, regulations and normative legal documents relating to its principal businesses from time to time.

 

During the Reporting Period, so far as the Directors of the Company were aware, the Group did not commit any violations of laws and regulations in all material aspects that would have a significant impact on the Group.

 

Save as disclosed in note 43 to the financial statements of this annual report, as at the end of the Reporting Period, the Company was not involved in any significant litigation or arbitration and to the knowledge of the Company, there was no litigation or claim of material importance pending or threatened or initiated against the Company.

 

CONNECTED TRANSACTIONS

The Group has entered into several connected transaction agreements with certain connected persons of the Group as described in the paragraphs below. The Company has complied with the disclosure requirements of the connected transactions in accordance with Chapter 14A of the Listing Rules.

 

For the purpose of this section headed "Connected Transactions" in this Report of the Directors, "CNAHC Group" refers to CNAHC, its subsidiaries and associates (as defined under the Listing Rules) excluding the Group, "ACC Group" refers to Air China Cargo, its subsidiaries and its 30%-controlled companies (as defined under the Listing Rules), "Cathay Pacific Group" refers to Cathay Pacific and its subsidiaries (as defined under the Listing Rules).

 

 

 

 

Continuing connected transactions

During the Reporting Period, the transactions under the following continuing connected transaction framework agreements constituted non-exempt continuing connected transactions of the Company:

 

 

Agreement

Parties and Connected Relationship

Execution Date and Term of Agreement

Contents of Agreement

Pricing Policy

 

 

 

 

 

 

 

 

 

 

 

 

1

Properties Leasing

Framework Agreement

The Company and CNAHC (a substantial shareholder of the Company and therefore a connected person of the Company)

Renewed on 30 October 2018 with a term from 1 January 2019 to 31 December 2021

 

The details are set out in the announcement of the Company dated 30 October 2018

The Group agreed to lease from and to CNAHC Group a number of properties.

The rent payable will be consulted and determined based on the price for leasing services available from independent third parties for the same type of properties in close proximity to the properties with reference to other factors including property service quality, location, district of properties and specific needs of the parties.

 

 

 

 

 

 

2

Sales Agency Services Framework Agreement

The same as above

The same as above

Certain subsidiaries of CNAHC Group will (i) solicit customers and act as the Group's sales agents for the Group's air tickets and cargo spaces on a commission basis; or (ii) purchase air tickets (other than domestic air tickets) and cargo spaces from the Group and resell such air tickets and cargo spaces to end customers.

The air passenger agency services: agency service fee shall be consulted and determined on a fair and voluntary basis; specific sales targets and the corresponding incentive plans for achieving such targets may be agreed to the extent permitted by law and in accordance with the industry practice.

 

The air cargo agency services: the transportation prices shall be not less favourable than the prices offered by independent third parties in China's air cargo transportation market for transporting such products, with reference to prices charged by air cargo agencies of the same scale and type as well as the specific product types and required transportation time; specific sales targets and the corresponding price discounts on cargo transportation for achieving such sales targets may be agreed in accordance with the industry practice.

 

 

 

 

 

 

3

Comprehensive Services Framework Agreement

The same as above

The same as above

(i)  The subsidiaries of CNAHC engaged in ancillary services in relation to air transportation business will be appointed as suppliers of ancillary services in relation to production or supply services business to the Company.

 

(ii)  The Company is commissioned by CNAHC to provide welfare logistics services for CNAHC's retired employees.

Ancillary services in relation to air transportation business: (i) the prices of airline catering services will be consulted and determined based on the price for the same type of catering services available from independent third parties with reference to relevant factors; (ii) the prices of property management services will be consulted and determined based on the price for the same type of property management services available from independent third parties with reference to relevant factors; (iii) the prices of hotel accommodation and staff recuperation services shall be no less favourable than the price for the same type of guest room products or services available to the Group from independent third parties with equivalent level in the same location of the hotel and determined with reference to relevant factors; and (iv) catering supplies, publications and other services are provided in accordance with the bidding management requirements of the Group, and the prices shall be no less favourable than the price of similar products or services available from independent third parties to the Group.

 

Welfare-logistics services for CNAHC's retired employees: management fee charged by the Company at a rate of 4% of the actual aggregate welfare expense paid to such retired employees as confirmed by CNAHC.

 

 

 

 

 

 

4

Government Charter Flight Service Framework Agreement

The same as above

The same as above

CNAHC agreed to resort to the Company's charter flight services so as to fulfill the government charter flight assignment.

Hourly rate of the charter flight services = Total cost per flight hour * (1 + 6.5%). Total cost per flight hour includes direct costs and indirect costs.

 

 

 

 

 

 

5

Media Services Framework Agreement

The Company and CNAMC (CNAMC is a wholly-owned subsidiary of CNAHC and therefore a connected person of the Company)

The same as above

CNAMC provided the Group with media services. Among them, the Company grants CNAMC an exclusive right to distribute the in-flight reading materials of the Company.

For the entrusted media services provided by CNAMC to the Company, the Company should pay the relevant service fee at market price to CNAMC.

 

For the media resources of the Company used in the course of the Company's media business by CNAMC, CNAMC should pay the Company RMB13.8915 million as media usage fee for each year within the term of the agreement.

 

 

 

 

 

 

6

Construction Project Management Framework Agreement

The Company and CNACD (a wholly-owned subsidiary of CNAHC and therefore a connected person of the Company)

The same

as above

CNACD was commissioned by the Company to serve as the manager of the construction projects and establish project headquarters. It shall provide management services for the Company's projects based on its project characteristics using its industry expertise and professional skills.

CNACD receives service fees based on the audited amounts in the financial settlement of specific commissioned projects in accordance with the commissioned management contract. The service fees shall be calculated at 3% of the audited amount in the financial settlement of the investment relating to the management contents provided by CNACD as commissioned by the Company, with the rewards and penalties agreed by both parties based on the project management progress and the balance. Alternatively, CNACD may receive service fees from the Company as per the commissioned management contents based on the size of or investment in the projects to be commissioned, and the service fees shall be calculated as per the full-labour cost (including management fee) based on the human resources and materials invested by CNACD, with the rewards and penalties agreed by both parties based on the project management progress and the balance.

 

 

 

 

 

 

7

Financial Services Agreement

The Company and CNAF (CNAF is a non-wholly owned subsidiary of the Company that CNAHC holds 49% of its equity interest and therefore a connected subsidiary of the Company)

Renewed on 28 August 2020 with a term from 1 January 2021 to 31 December 2023

 

The details are set out in the announcement of the Company dated 28 August 2020

CNAF agreed to provide the Group with a range of financial services including deposit services, credit services and other financial services.

Interest rates applicable to deposits: should (i) comply with the requirements prescribed by the People's Bank of China on the interest rates for such type of deposit; (ii) not be lower than the interest rates for the same type of services charged by State-owned commercial banks to the Group under the same conditions; and (iii) not be lower than the interest rates for the same type of services charged by CNAF to other CNAHC member companies under the same conditions.

 

Interest rates applicable to credit services: should (i) comply with the requirements prescribed by the People's Bank of China on the interest rates for such type of loan; (ii) not be higher than the interest rates for the same type of services offered by State-owned commercial banks to the Group under the same conditions; and (iii) not be higher than the interest rates for the same type of services offered by CNAF to other CNAHC member companies under the same conditions.

 

Fees for other paid financial services: should (i) comply with the relevant charging standards (if any) prescribed by the People's Bank of China, CBIRC, CSRC, NAFMII or other regulatory authorities; (ii) not be higher than those for the same type of services charged by State-owned commercial banks to the Group under the same conditions; and (iii) not be higher than those for the same type of services charged by CNAF to other CNAHC member companies under the same conditions.

 

 

 

 

 

 

8

Financial Services Framework Agreement1

CNAF (a non-wholly owned subsidiary of the Company), and CNAHC (a substantial shareholder of the Company and therefore a connected person of the Company)

The same as above

CNAF agreed to provide CNAHC Group with a range of financial services including deposit services, credit services and other financial services.

Interest rates applicable to deposits: should (i) comply with the requirements prescribed by the People's Bank of China on the interest rates for such type of deposit; (ii) not be higher than the interest rates for the same type of services charged by State-owned commercial banks to CNAHC Group under the same conditions; and (iii) not be higher than the interest rates for the same type of services charged by CNAF to other CNAHC member companies under the same conditions.

 

Interest rates applicable to credit services: should (i) comply with the requirements prescribed by the People's Bank of China on the interest rates for such type of loan; (ii) not be lower than the interest rates for the same type of services offered by State-owned commercial banks to the CNAHC Group under the same conditions; and (iii) not be lower than the interest rates for the same type of services offered by CNAF to other CNAHC member companies under the same conditions.

 

Fees for other paid financial services: should (i) comply with the relevant charging standards (if any) prescribed by the People's Bank of China, CBIRC, CSRC, NAFMII or other regulatory authorities; (ii) not be lower than those for the same type of services charged by State-owned commercial banks to the CNAHC Group under the same conditions; and (iii) not be lower than those for the same type of services charged by CNAF to other CNAHC member companies under the same conditions.

 

 

 

 

 

 

9

Framework Agreement

The Company and CNACG (CNACG is a substantial shareholder of the Company and therefore a connected person of the Company)

Renewed and revised on 30 October 2019 with a term from 1 January 2020 to 31 December 2022

 

The details are set out in the announcement of the Company dated 30 October 2019

Finance and operating lease services: CNACG Group agreed to provide finance and operating lease services in respect of, among other things, aircraft, engines, simulators, equipment and vehicles to the Group; the Group agreed to provide finance and operating lease services in respect of, among other things, equipment and vehicles to CNACG Group.

 

Ground support services and other services: including but not limited to the following transactions conducted between any member of the Group on the one hand and any member of CNACG Group on the other hand: ground support services, aircraft maintenance services, aircraft repair services, property investment and management services, ticket and tourism services, logistics services, administrative management services, cleaning and washing services, resident security services, lounge supplies procurement services and aircraft material procurement services.

Finance and operating lease services: The final transaction price will be determined on arm's length negotiations between both parties with reference to the prices for the same type of lease services offered by independent third parties and after taking into account certain factors. Such factors include purchasing price of the leasing subject, interest rate and arrangement fees (if any) (for finance lease), rental fee (for operating lease), the lease terms, the features of the leasing subject and the comparable market rental prices. The final transaction price shall not be higher than the transaction prices offered by at least two independent third parties on the same conditions.

 

Ground support services and other services:

 

(1) Follow the government pricing or guidance price if it is available;

 

(2) If no government pricing or guidance price is available, the final transaction price will be determined on arm's length negotiations between the parties, with reference to the market prices offered by at least two independent third parties on the market for the same type of service, and after taking into account certain factors such as the service standard, service scope, business volume and specific needs of the parties. If any service needs of the service recipient changes, appropriate adjustment will be made to the transaction price after negotiation between both parties based on the extent of variation in the relevant costs, service quality or other factors;

 

(3) If neither of the above cases is applicable, the price will be determined on the basis of costs plus reasonable profit. The costs are mainly based on the costs and expenses of the service provider, including costs of human resources, facility, equipment and materials. Reasonable profit margin will be determined with mainly making reference to the historical average prices of similar products or services (where possible) published in the relevant industry, and/or the profit margin of the comparable products and services disclosed by other listed companies. The profit margin of CNACG Group shall not exceed 10%. The final transaction prices shall be determined on terms that, to the Group, are no less favorable to those provided by independent third parties to the Group or those provided by CNACG Group to independent third parties (with regards to the receipt of services by the Group), or no more favorable than those provided by the Group to the independent third parties (with regards to the rendering of services by the Group).

 

 

 

 

 

 

10

Framework Agreement

The Company and Cathay Pacific (Cathay Pacific is a substantial shareholder of the Company and therefore a connected person of the Company)

Renewed on 1 October 2019 with a term from 1 January 2020 to 31 December 2022

 

The details are set out in the announcement of the Company dated 28 August 2019

Providing a framework for the transactions between the Group and Cathay Pacific Group arising from interline arrangements, code sharing arrangements, joint operating arrangements, aircraft leasing, frequent flyer programmes, the provision of airline catering, ground support and engineering services and other services agreed to be provided and other transactions agreed to be undertaken under the Cathay Pacific Framework Agreement.

Interline arrangements and code share arrangements: Revenue is apportioned between the parties in accordance with bilateral prorate agreements which follow the principles in the Multi-lateral Prorate Agreement of International Air Transport Association.

 

Joint operating arrangements: Revenue is apportioned between the parties having regard to the fleet capacity of both parties and the values of seats sold by each party.

 

Aircraft leasing: Rentals payable under aircraft leases are determined after negotiations at arm's length between the parties having regard to rentals payable under comparable leases between unconnected parties for comparable aircraft and comparable periods and prevailing long-term interest rates.

 

Frequent flyer programmes: Frequent flyers of either party can earn mileage credits by taking the other party's flights. Payments by each party to the other for mileage values are determined by the parties on an arm's length basis having regard to comparable mileage values payable by unconnected airlines to each other.

 

Airline catering: The parties determine the pricing of airline catering having regard to quotations provided by unconnected caterers, taking due account of material and labor costs, quality, assurance of supply, safety and innovation (including changes in the foregoing matters).

 

Ground support and engineering services: The pricing is required to be no less favorable than that offered for comparable services to unconnected parties taking due account of the quality of services.

 

Other products and services (including leasing premises and customs declaration services): The pricing is determined having regard to relevant market information (including independent third party quotations for comparable products and services), costs incurred by the relevant party and the quality of products and services.

 

 

 

 

 

 

11

Framework Agreement

The Company and Air China Cargo (a 51%-owned subsidiary of CNAHC and therefore a connected person of the Company)

Renewed and revised on 30 October 2019 with a term from 1 January 2020 to 31 December 2022

 

The details are set out in the announcement of the Company dated 30 October 2019

Bellyhold space business contracting operation: The Company has contracted the operation of all bellyhold space business to Air China Cargo. Air China Cargo shall undertake the overall responsibilities for transporting the cargos in the capacity of contracted carrier to the consignors with respect to the cargos which are transported through the bellyhold spaces of passenger aircraft.

 

Ground support services and other services: The ground support services and other services provided by the Group to ACC Group include but are not limited to operation support services, IT sharing services, comprehensive support services, engine and other aircraft-related materials lease services and labor management services. The ground support services and other services provided by ACC Group to the Group include but are not limited to terminal cargo and mail services, airport apron services, container and pallet management services, engine and other aircraft related materials lease services.

Contracting Operation Income: The Company will regularly receive the contracting operation income from Air China Cargo in respect of bellyhold space business each year. The parties shall determine the benchmark income (excluding tax) of bellyhold space business contracting operation after arm's length negotiations with reference to the Company's fleet capacity, overall load factor and yield level. The specific formula is as follows: benchmark income (excluding tax) = ATK (available tonne kilometres) × OLF (overall load factor) × yield level per kilometer.

 

The parties agreed to jointly appoint a qualified accounting firm to conduct a special audit on the actual income (excluding tax) of Air China Cargo for the operation of bellyhold space business of the previous financial year within three months after the end of each financial year. Where there is any difference between the benchmark income (excluding tax) and the actual income (excluding tax), the excess income or risk incurred shall be allocated between Air China Cargo and the Company at the proportion of 51% and 49%, respectively, and paid accordingly.

 

The operation expense of the bellyhold space business: The Company shall pay the operation expenses of the bellyhold space business to Air China Cargo on a regular basis per year. In accordance with the common industry practice, the operation expense shall be determined according to the settlement price (determined according to the method as set out above in the paragraph headed "Contracting Operation Income") and the Expense Rate, and the calculation formula is as follows: Operation Expense = Settlement Price × Expense Rate. The expense rate shall be determined by the parties through arm's length negotiation with reference to historical expense rates and other factors such as expense rates of companies in the relevant industry and their variation trends.

 

Ground support services and other services: The pricing policies for the ground support services and other services provided to or by the Group are set forth below:

 

(1) Follow the government pricing or guidance price if it is available;

 

(2) If no government pricing or guidance price is available, the final transaction price will be determined on arm's length negotiations between the parties, with reference to the market prices offered by at least two independent third parties on the market for the same type of service, and after taking certain factors into account such as the service standard, service scope, business volume and specific need of parties. If any service needs of the service recipient changes, appropriate adjustment will be made to the transaction price after negotiation between both parties based on the extent of variation in relevant costs, service quality or other factors;

 

(3) If neither of the above cases is applicable, the price will be determined on the basis of costs plus reasonable profit. The costs are mainly based on the costs and expenses of the service provider, including costs of human resources and costs of facility, equipment and materials. Reasonable profit margin will be determined with mainly making reference to the historical average prices of similar products or services (where possible) published in the relevant industry, and/or the profit margin of the comparable products and services disclosed by other listed companies. The profit margin of ACC Group shall not exceed 10%. The final transaction prices shall be determined on terms that, to the Group, are no less favorable to those provided by independent third parties to the Group or those provided by ACC Group to independent third parties (with regards to the receipt of services by the Group), or no more favorable than those provided by the Group to the independent third parties (with regards to the rendering of services by the Group).

 

 

 

 

 

 

 

 

 

 

 

The agreements No.1 to No.6 as set out above were renewed and revised for a term of three years from 1 January 2022 to 31 December 2024 as approved by the independent shareholders on 30 December 2021. Please refer to the Company's announcements dated 29 October 2021 and 30 December 2021 for further details.

 

The Company has confirmed that the execution and implementation of the specific agreements under the continuing connected transactions set out above during the Reporting Period has followed the pricing policies of such continuing connected transactions.

 

Transaction Caps and Actual Transaction Amounts for the Reporting Period

Actual transaction amounts and transaction caps of the above-mentioned continuing connected transactions for the Reporting Period are as follows:

 

 

Total amount for
the Reporting Period

 

Currency

Annual cap

Actual amount

 

 

(in millions)

(in millions)

 

 

 

 

 

 

 

 

Transactions with CNAHC Group:

 

 

 

 

 

 

 

Charter flight services

RMB

900

365

 

 

 

 

Comprehensive services

RMB

3,000

1,123

 

 

 

 

Total value of right-of-use assets involved in property leasing

RMB

620

92

 

 

 

 

Media and advertising services

RMB

750

152

 

 

 

 

Expenditure on construction project management services

RMB

130

34

 

 

 

 

Financial services

 

 

 

 

 

 

 

Maximum daily balance of loans and other credit services granted by CNAF to CNAHC Group

RMB

6,500

90

 

 

 

 

Transactions with CNACG Group:

 

 

 

 

 

 

 

Ground handling and other services

RMB

696

91

 

 

 

 

Total value of right-of-use assets involved in financing and operating leasing

RMB

16,000

3,526

 

 

 

 

Transactions with Cathay Pacific Group:

 

 

 

 

 

 

 

Aggregate amount payable/paid by the Group to Cathy Pacific Group

HKD

900

20

 

 

 

 

Aggregate amount payable/paid by Cathay Pacific Group to the Group

HKD

900

39

 

 

 

 

Transactions with ACC Group:

 

 

 

 

 

 

 

Operation expenses of bellyhold space paid by the Group to ACC Group

RMB

960

609

 

 

 

 

Aggregate amount of ground handling and other services paid by the Group to ACC Group

RMB

1,200

630

 

 

 

 

Bellyhold space business contracting operation paid by ACC Group to the Group(1)

RMB

11,000

10,491

 

 

 

 

Aggregate amount of ground handling and other services paid by ACC Group to the Group

RMB

1,000

789

 

 

 

 

Transactions with CNAF:

 

 

 

 

 

 

 

Maximum daily balance of deposits placed by the Group with CNAF

RMB

15,000

10,798

 

 

 

 

Note:    (1) The revised annual caps applicable to the contracting operation income from bellyhold space business payable to the Group by ACC Group for the two years ending 31 December 2022 have been approved on 30 December 2021 at the EGM of the Company. Please refer to the Company's announcements dated 10 December 2021 and 30 December 2021 for details.

 

 

 

 

CONFIRMATION FROM INDEPENDENT NON-EXECUTIVE DIRECTORS

The independent non-executive Directors of the Company have confirmed that during the Reporting Period, all continuing connected transactions to which the Company was a party have been entered into in the ordinary and usual course of business of the Company, on normal commercial terms or better and have been carried out according to the agreements governing them and that the terms of them were fair and reasonable and in the interests of the shareholders of the Company as a whole.

 

CONFIRMATION FROM THE AUDITOR

Pursuant to Rule 14A.56 of the Listing Rules, the listed issuer must engage its auditors to report on the continuing connected transactions every year. The auditors must provide a letter to the listed issuer's board of directors confirming whether anything has come to their attention that causes them to believe that the continuing connected transactions:

 

(1)        have not been approved by the listed issuer's board of directors;

 

(2)        were not, in all material respects, in accordance with the pricing policies of the listed issuer's group if the transactions involve the provision of goods or services by the listed issuer's group;

 

(3)        were not entered into, in all material respects, in accordance with the relevant agreement governing the transactions; and

 

(4)        have exceeded the cap.

 

Pursuant to the above requirement under Rule 14A.56 of the Listing Rules, the Board engaged the auditors of the Company to report on the Group's continuing connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants. The auditors have issued their unmodified letter containing their conclusion in respect of the continuing connected transactions in accordance with Rule 14A.56 of the Listing Rules. A copy of the auditors' letter has been provided by the Company to the Hong Kong Stock Exchange.

 

RELATED PARTY TRANSACTIONS

Details of the significant related party transactions entered into by the Group during the Reporting Period are set out in note 48 to the financial statements of this annual report. None of these related party transactions constitutes a disclosable connected transaction as defined under the Listing Rules, except for the transactions described in the section headed "Connected Transactions" in this Report of the Directors, in respect of which the disclosure requirements under Chapter 14A of the Listing Rules have been complied with.

 

CONTRACT OF SIGNIFICANCE

Save as disclosed in the section headed "Connected Transactions" of this Report of the Directors, none of the Company or any of its subsidiaries entered into any contract of significance with the controlling shareholder or any of its subsidiaries, and there is no contract of significance in relation to provision of services by the controlling shareholder or any of its subsidiaries to the Company or any of its subsidiaries.

                                     

 

 

 

CORPORATE BONDS

The Group's corporate bonds as at the end of the Reporting Period are summarised as the followings:

 

 

 

 

 

 

 

 

 

 

 

 

Unit: RMB billion, Currency: RMB

 

 

 

 

 

 

 

 

 

 

 

Name of Corporate Bond

Abbreviation

Code

Issue Date

Value Date

Expiry Date

Balance of the Bond

Interest Rate (%)

Payment of principal and interest

Investor suitability arrangement (if any)

Trading Mechanism

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Air China Limited 2012 Corporate Bond (First Tranche)

12AC01

122218

18 January 2013

18 January 2013

18 January 2023

5.243

5.10

Interest on annual basis

Repayment of principal on maturity

Issued to public and institutional investors

Listed and traded on the Auction Trading System and Fixed Income Platform of SSE

 

 

 

 

 

 

 

 

 

 

 

Air China Limited 2012 Corporate Bond (Second Tranche)

12AC03

122269

16 August 2013

16 August 2013

16 August 2023

1.530

5.30

Interest on annual basis

Repayment of principal on maturity

Issued to public and institutional investors

Listed and traded on the Auction Trading System and Fixed Income Platform of SSE

 

 

 

 

 

 

 

 

 

 

 

Shenzhen Airlines Company Limited 2019 Corporate Bond (First Tranche)

19SA01

155388

25 April 2019

26 April 2019

26 April 2022

1.027

4.00

Interest on annual basis

Repayment of principal on maturity

Issued to qualified investors only

Listed and traded on the Auction Trading System and Fixed Income Platform of SSE

 

 

 

 

 

 

 

 

 

 

 

Shenzhen Airlines Company Limited 2021 Public Offering of Short-term Corporate Bond for Professional Investors (First Tranche)

21SAD1

149379

4 February 2021

5 February 2021

5 February 2022

0.514

3.09

Payment of principal and interest on maturity

For institutional investors among professional investors only

Bilateral listed and traded on the Centralized Bidding System and Integrated Agreement Trading Platform of SZSE

 

 

 

 

 

 

 

 

 

 

 

Shenzhen Airlines Company Limited 2021 Non-public Offering Short-term Corporate Bond (First Tranche)

21SAD2

133010

3 June 2021

4 June 2021

4 June 2022

2.036

3.10

Payment of principal and interest on maturity

For not more than 200 institutional investors among professional investors only

Listed and Transfered on the Integrated Agreement Trading Platform of SZSE

 

 

 

 

 

 

 

 

 

 

 

 

 

"12AC01", "12AC03" and "19SA01" are traded on the Shanghai Stock Exchange (SSE), while "21SAD1" and "21SAD2" are traded on the Shenzhen Stock Exchange (SZSE). No bond in the table is subject to the risk of termination of listing and trading.

 

 

 

 

Payment of principal and interest for corporate bonds during the Reporting Period

Name of Corporate Bond

Payment of Principal and Interest

 

 

 

 

Air China Limited 2012 Corporate Bond (First Tranche)

On 18 January 2021, the Company completed the interest payment on "12AC01" Corporate Bond.

 

 

Air China Limited 2012 Corporate Bond (Second Tranche)

On 16 August 2021, the Company completed the interest payment on "12AC03" Corporate Bond.

 

 

Air China Limited 2016 Corporate Bond (Second Tranche)

On 22 October 2021, the Company completed the payment of principal and interest on "16AC02" Corporate Bond.

 

 

Air China Limited 2020 Public Offering Corporate Bond (First Tranche)

On 19 April 2021, the Company completed the payment of principal and interest on "20AC01" Corporate Bond.

 

 

Shenzhen Airlines Company Limited 2019 Public Offering Corporate Bond (First Tranche)

On 25 April 2021, Shenzhen Airlines completed the interest payment on "19SA01" Corporate Bond.

 

 

Shenzhen Airlines Company Limited 2018 Public Offering Corporate Bond (Second Tranche)

On 14 March 2021, Shenzhen Airlines completed the payment of principal and interest on "18SA02" Corporate Bond.

 

 

Shenzhen Airlines Company Limited 2018 Public Offering Corporate Bond (Fourth Tranche)

On 23 April 2021, Shenzhen Airlines completed the payment of principal and interest on "18SA04" Corporate Bond.

 

 

Shenzhen Airlines Company Limited 2018 Public Offering Corporate Bond (Sixth Tranche)

On 7 September 2021, Shenzhen Airlines completed the payment of principal and interest on "18SA06" Corporate Bond.

 

 

Shenzhen Airlines Company Limited 2020 Public Offering Short-term Corporate Bond (First Tranche)

On 19 March 2021, Shenzhen Airlines completed the payment of principal and interest on "20SAD1" Short-term Corporate Bond.

 

 

 

 

The proceeds from the issuance of "12AC01" and "12AC03" Corporate Bonds were used towards the replenishment of liquidity and repayment of bank loans so as to satisfy the needs of the Company's daily production and operation. The proceeds from the issuance of "19SA01", "21SAD1" and "21SAD2"Corporate Bonds were used towards the repayment of corporate debts and replenishment of working capital. The abovementioned proceeds have been fully utilized in accordance with the use of proceeds as set out in the prospectuses and the balance of proceed as at the end of the Reporting Period is zero.

 

 

 

 

Basic information on debt financing instruments as at the end of the Reporting Period

 

 

 

 

 

 

 

 

 

Unit: RMB billion, Currency: RMB

 

 

 

 

 

 

 

 

 

Name of Bond

Abbreviation

Code

Issue Date

Value Date

Expiry Date

Balance of the Bond

Interest Rate (%)

Payment of principal and interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Air China Limited 2021 Super Short-term Commercial Paper (First Tranche)

21ACSCP001

012103630

8 October 2021

8 October 2021

8 April 2022

2.011

2.42

One-off payment of principal and interest on maturity

 

 

 

 

 

 

 

 

 

Air China Limited 2021 Super Short-term Commercial Paper (Second Tranche)

21ACSCP002

012103651

11 October 2021

11 October 2021

8 July 2022

1.005

2.43

One-off payment of principal and interest on maturity

 

 

 

 

 

 

 

 

 

Air China Limited 2021 Super Short-term Commercial Paper (Third Tranche)

21ACSCP003

012103822

20 October 2021

21 October 2021

19 January 2022

1.758

2.34

One-off payment of principal and interest on maturity

 

 

 

 

 

 

 

 

 

Air China Limited 2021 Super Short-term Commercial Paper (Fourth Tranche)

21ACSCP004

012103867

22 October 2021

25 October 2021

22 July 2022

1.005

2.5

One-off payment of principal and interest on maturity

 

 

 

 

 

 

 

 

 

Air China Limited 2021 Super Short-term Commercial Paper (Fifth Tranche)

21ACSCP005

012105420

15 December 2021

16 December 2021

14 June 2022

2.002

2.34

One-off payment of principal and interest on maturity

 

 

 

 

 

 

 

 

 

Air China Limited 2021 Super Short-term Commercial Paper (Sixth Tranche)

21ACSCP006

012105483

21 December 2021

22 December 2021

16 September 2022

2.001

2.49

One-off payment of principal and interest on maturity

 

 

 

 

 

 

 

 

 

Shenzhen Airlines Company Limited 2019 Medium Term Note (First Tranche)

19SAMTN001

101900344

14 March 2019

18 March 2019

18 March 2022

1.030

3.73

Interest on annual basis

Repayment of principal on maturity

 

 

 

 

 

 

 

 

 

Shenzhen Airlines Company Limited 2019 Medium Term Note (Second Tranche)

19SAMTN002

101900725

21 May 2019

23 May 2019

23 May 2022

1.023

3.79

Interest on annual basis

Repayment of principal on maturity

 

 

 

 

 

 

 

 

 

Shenzhen Airlines Company Limited 2020 Medium Term Note (First Tranche) (i.e. Bond for COVID-19 prevention and control)

20SAMTN001(Bond for COVID-19 prevention and control)

102000224

3 March 2020

5 March 2020

5 March 2023

1.024

3.00

Interest on annual basis

Repayment of principal on maturity

 

 

 

 

 

 

 

 

 

Shenzhen Airlines Company Limited 2021 Medium Term Note (First Tranche)

21SAMTN001

102101631

19 August 2021

23 August 2021

23 August 2024

2.023

3.2

Interest on annual basis

Repayment of principal on maturity

 

 

 

 

 

 

 

 

 

 

The bonds set out in the table, namely "21ACSCP001", "21ACSCP002", "21ACSCP003", "21ACSCP004", "21ACSCP005", "21ACSCP006", "19SAMTN001", "19SAMTN002", "20SAMTN001(Bond for COVID-19 prevention and control)" and "21SAMTN001", are all traded on the interbank bond market, issued to institutional investors in the national interbank bond market, performed in accordance with the trading rules of the National Interbank Funding Centre (全國銀行間同業拆借中心), and are not subject to the risk of termination of listing and trading.

 

 

 

 

Payment of principal and interest for bonds during the Reporting Period

Name of Bond

Payment of Principal and Interest

 

 

 

 

Shenzhen Airlines Company Limited 2021 Super Short-term Commercial Paper (First Tranche)

On 9 July 2021, Shenzhen Airlines completed the payment of principal and interest on "21SASCP001" Super Short-term Commercial Paper

 

 

Shenzhen Airlines Company Limited 2021 Super Short-term Commercial Paper (Second Tranche)

On 26 August 2021, Shenzhen Airlines completed the payment of principal and interest on "21SASCP002" Super Short-term Commercial Paper

 

 

Shenzhen Airlines Company Limited 2021 Super Short-term Commercial Paper (Third Tranche)

On 31 August 2021, Shenzhen Airlines completed the payment of principal and interest on "21SASCP003" Super Short-term Commercial Paper

 

 

Shenzhen Airlines Company Limited 2021 Super Short-term Commercial Paper (Fourth Tranche)

On 1 September 2021, Shenzhen Airlines completed the payment of principal and interest on "21SASCP004" Super Short-term Commercial Paper

 

 

Shenzhen Airlines Company Limited 2019 Medium Term Note (First Tranche)

On 1 March 2021, Shenzhen Airlines completed the interest payment on "19SAMTN001" Medium Term Note

 

 

Shenzhen Airlines Company Limited 2019 Medium Term Note (Second Tranche)

On 23 May 2021, Shenzhen Airlines completed the interest payment on "19SAMTN002" Medium Term Note

 

 

Shenzhen Airlines Company Limited 2020 Medium Term Note (First Tranche) (i.e. Bond for COVID-19 prevention and control)

On 5 March 2021, Shenzhen Airlines completed the interest payment on "20SAMTN001(Bond for COVID-19 prevention and control)" Medium Term Note

 

 

 

The proceeds from the issuance of "21ACSCP001", "21ACSCP002", "21ACSCP003", "21ACSCP004", "21ACSCP005", "21ACSCP006", "19SAMTN001", "19SAMTN002""20SAMTN001(Bond for COVID-19 prevention and control)" and "21SAMTN001" were used towards the repayment of corporate debts and replenishment of working capital. The abovementioned proceeds have been fully utilized in accordance with the use of proceeds as set out in the prospectus and the balance of proceed as at the end of the Reporting Period is zero.

 

 

 

 

SUBSEQUENT EVENT

The Company completed the re-election and appointment of members of the Board and the Supervisory Committee on 25 February 2022. For details, please refer to the announcement of the Company dated 25 February 2022.

 

AUDITOR

The Company has appointed Deloitte Touche Tohmatsu and Deloitte Touche Tohmatsu Certified Public Accountants LLP (collectively, "Deloitte") as the Company's international auditor and domestic auditor respectively for the year of 2021. The auditor of the Company has been changed to Deloitte since 2017.

 

The sections, reports or notes of this annual report mentioned above constitute a part of this Report of the Directors.

 

 

 

 

 

By Order of the Board

Song Zhiyong

Chairman

30 March 2022

 

 

 

Profile of Directors, Supervisors and Senior Management

 

DIRECTORS

Mr. Song Zhiyong, aged 56, is a senior pilot and graduated from the First Flying Academy of China Air Force with a bachelor's degree in aviation. He started his career in the civil aviation industry in 1987. From January 2014 to December 2020, he served as President and Deputy Secretary of the Communist Party Committee of the Company to handle the comprehensive work of the Company. Mr. Song served as a non-executive Director of Cathay Pacific since March 2014. He has served as an executive Director of the Company since May 2014. He served as the Vice Chairman of the Company from June 2016 to December 2020, the director, General Manager and Deputy Secretary of the Communist Party Group of CNAHC from December 2016 to October 2020. He has been serving as the Chairman and Secretary of the Communist Party Group of CNAHC since October 2020, and the Chairman and Secretary of the Communist Party Committee of the Company since December 2020. He has served as the vice chairman of the board of directors of Cathay Pacific since December 2020.

 

Mr. Ma Chongxian, aged 56, graduated from the department of economics of Inner Mongolia University majoring in planning and statistics and holds a degree of EMBA in Tsinghua University. Mr. Ma started his career in the civil aviation industry in July 1988. Mr. Ma has been serving as the Vice President and a member of the Standing Committee of the Communist Party Committee of Air China from April 2010 to May 2021. From December 2016 to April 2021, he served as Deputy General Manager and a member of the Communist Party Group of CNAHC. He was the Deputy Secretary of the Communist Party Group of CNAHC from April 2021, as well as the director and General Manager of CNAHC, and concurrently the President and Deputy Secretary of the Communist Party Committee of the Company from May 2021. He has served as non-executive director of Cathay Pacific since June 2021 and an executive Director and the Vice Chairman of the Company since July 2021.

 

Mr. Feng Gang, aged 58, graduated from Sichuan University majoring in semiconductor. He started his career in July 1984. From April 2014 to November 2019, he served as the Deputy General Manager of CNAHC. He served as non-executive Director of the Company between August 2014 and October 2017. From May 2017 to November 2019, he served as Deputy President of the Company. Since November 2019, he has served as the director and the Deputy Secretary of the Communist Party Group of CNAHC and the Deputy Secretary of the Communist Party Committee of the Company. From May 2020, he has been the non-executive Director of the Company.

 

Mr. Patrick Healy, aged 56, graduated from the University of Cambridge with a Bachelor of Arts (Honours) degree in Modern Languages. He has acted as an executive director of the beverages division of Swire Pacific Limited since January 2013, a director of John Swire & Sons (H.K.) Limited since December 2014. He has been serving as the chairman of Swire Coca-Cola Limited since October 2019 and the executive Director and chairman of Cathay Pacific Airways Limited since November 2019. He has been serving as a non-executive Director of Air China Limited since December 2019, and a director of Swire Pacific Limited since August 2021.

 

 

 

 

Mr. Xue Yasong, aged 60, graduated from the Institute of Financial Science under the Ministry of Finance with a master's degree in Economics. He served as the deputy general manager of CNAHC from November 2004 to July 2009, and the chairman of the labour union of CNAHC from July 2009 to December 2021. He was the chairman of the labour union of the Company from October 2016 to December 2021. He has been serving as an employee representative director of CNAHC since December 2017, and was the employee representative Director of the Company from March 2018 to February 2022.

 

Mr. Wang Xiaokang, aged 66, graduated from Peking University majoring in law. Since December 2011, he has been serving as the president of China Industrial Energy Conservation and Clean Production Association. He served as an independent non-executive Director of the Company between May 2017 and February 2021, and an external director of China Datang Corporation Ltd. from August 2018 to August 2019.

 

Mr. Duan Hongyi, aged 58, is a professorate senior accountant and a holder of master's degree in business administration. He held various positions including a director and general manager of Nam Kwong (Group) Company Limited [China Nam Kwong (Group) Company Limited]. He has been a professional external director for State-owned enterprises since November 2019. He has also served as the external director of both China Telecommunications Corporation and China National Nuclear Corporation since March 2020. He served as an independent non-executive Director of the Company from May 2020 to February 2022.

 

Mr. Stanley Hui Hon-chung, aged 71, holds the bachelor's degree of Science from the Chinese University of Hong Kong. Mr. Hui is the member of the 13th session of National Committee of CPPCC and the General Committee of the Hong Kong General Chamber of Commerce. In July 2006, Mr. Hui was appointed as a Justice of the Peace by the Chief Executive of the HKSAR. Mr. Hui served as an independent non-executive Director of the Company from May 2015 to February 2022. He served as independent non-executive director of Guangzhou Baiyun International Airport Co., Ltd. from December 2016, and the independent non-executive director of Beijing Capital International Airport Co., Ltd. since June 2020. In October 2020, he was appointed as the director of NWFB Services and Citybus Limited. In December 2020, he was appointed as the Director of Greater Bay Airlines Company Limited in Hong Kong, and in June 2021, he was appointed as a director of China Power International Development Limited.

 

Mr. Li Dajin, aged 63, graduated from Peking University majoring in law. He is a director, partner and lawyer of East & Concord Partners. Mr. Li currently serves as a member of the 13th CPPCC, legislative consultant to the Standing Committee of Beijing Municipal People's Congress, invited supervisor to the PRC Supreme People's Court, visiting professor to Lawyer College Renmin University of China, lecturer for master candidate of Tsinghua University Law School, and visiting professor of Southwest University of Political Science & Law. From December 2015 to February 2022, he served as an independent non-executive Director of the Company.

 

 

 

 

Mr. Li Fushen, aged 59, is a senior accountant with a bachelor's degree in engineering. He was a non-executive director of PCCW Limited from July 2007 to December 2021. He held various positions from January 2009 to May 2021, including deputy general manager, a member of the Communist Party Group, chief accountant, executive director and deputy secretary of the Communist Party Group of China United Network Communications Group Company Limited. He served as an executive director of China Unicom (Hong Kong) Limited from March 2011 to June 2021, a director of China United Network Communications Limited from May 2011 to June 2021, and a non-executive director of HKT Trust and HKT Limited as well as a non-executive director of HKT Management Limited from November 2011 to December 2021. He has been a professional external director for State-owned enterprises since June 2021, and has been an external director of China Energy Conservation and Environmental Protection Group and COFCO Corporation since July 2021. He has been serving as an independent non-executive Director of the Company since February 2022.

 

Mr. He Yun, aged 60, holds a postgraduate diploma in software engineering from Beijing Institute of Technology. He served as the deputy director and director of the Supervisory Committee of Central Enterprises Working Commission and the Board of Supervisors Office of the State-owned Assets Supervision and Administration Commission of the State Council, head of the work department of Board of Supervisors and head of the first supervision department of the State-owned Assets Supervision and Administration Commission of the State Council from July 2000 to March 2018; and the head of the fourth corporate audit office of the National Audit Office from April 2018 to March 2021. He has been serving as an independent non-executive Director of the Company since February 2022.

 

Mr. Xu Junxin, aged 57, is a senior economist and holds a doctorate's degree in technical economics and management. From June 2018 to September 2021, he served as the secretary to the Board and director of the general office (office of the Communist Party Group as well as office of the board of directors and supervisory committee), assistant to general manager, secretary to the Board and director of group affairs office (office of the Communist Party Group and office of the board of directors) of China Three Gorges Corporation (中國長江三峽集團有限公司). He has been a professional external director for State-owned enterprises since September 2021. He has been an external director of China Anneng Construction Group Corporation Limited since December 2021. He has been serving as an independent non-executive Director of the Company since February 2022.

 

Ms. Winnie Tam Wan-chi, aged 60, graduated from the Faculty of Law of The University of Hong Kong, a barrister, international arbitrator and mediator. She was appointed as a "Senior Counsel" in 2006, and was awarded the Justice of the Peace and the Silver Bauhinia Star for her contributions to public service. She is currently the Head of Chambers of Des Voeux Chambers and a recorder of the Court of First Instance of the High Court of Hong Kong. She is the Chairman of the Hong Kong Communications Authority, the Chairman of the Committee on Sports Law of the Hong Kong Bar Association, a member of the Chief Executive's Council of Advisers on Innovation and Strategic Development, a member of the Qianhai and Shekou Free Trade Zone Development Advisory Committee, a member of the Law Reform Commission, a member of the Independent Commission on Remuneration for Members of the Executive Council and the Legislature and Officials under the Political Appointment System of the Hong Kong Special Administrative Region, a member of the board of directors of eBRAM International Online Dispute Resolution Centre Limited, a member of the Board of the West Kowloon Cultural District Authority, a member of the board of governors of Hong Kong Philharmonic Society Limited and a member of the Mainland Business Advisory Committee of the Hong Kong Trade Development Council. She has been serving as an independent non-executive Director of the Company since February 2022.

 

 

 

 

SUPERVISORS

Mr. Zhao Xiaohang, aged 60, graduated from the School of Economics and Management of Tsinghua University majoring in management engineering, and holds a postgraduate diploma. He started his career in the civil aviation industry in August 1986. Mr. Zhao served as the Vice President and a member of the Standing Committee of Communist Party Committee of the Company from February 2011 to February 2022. He has been serving as the chairman of Air Macau since March 2016, and a member of the Communist Party Group of CNAHC from August 2016 to February 2022. He was the Vice General Manager of CNAHC from December 2016 to March 2022, the chairman of CNAMC since December 2016, and the deputy chairman of CNACG between December 2016 and May 2020. He has been serving as chairman of Capital Holding since September 2018. From December 2019 to February 2022, he served as Chairman of the Supervisory Committee of the Company. He was appointed as the chairman of CNACG in May 2020.

 

Mr. He Chaofan, aged 59, graduated from Civil Aviation University of China majoring in operation management. Mr. He started his career in the civil aviation industry in 1983. He served as the chairman of Zhongyi Aviation Investment Co., Ltd. between February 2019 and September 2020. He has been serving as the chairman of China National Aviation Leasing Company Limited (中國航空租賃有限公司), chairman of CNAC (Macau) Aviation Limited (中航(澳門航空有限公司), chairman of CNAC (Beijing) Financial Leasing Company Limited (中航(北京)融資租賃有限公司) and chairman of China National Aviation Corporation (Hong Kong) Limited (中國航空公司(香港)有限公司) since February 2019. Mr. He was appointed as a Supervisor of the Company in October 2013 and has been serving as the director, president, member of Communist Party Committee of CNACG since December 2018. He has been serving as Chairman of the Supervisory Committee of the Company since February 2022.

 

Mr. Wang Jie, aged 56, graduated from China Europe International Business School with a master's degree in Business Administration. He joined Air China in August 1989 and served as the general manager of the human resource department of the Company from December 2009 to November 2014. He has been serving as the deputy director and secretary of the Communist Party Committee of the commercial committee of the Company since November 2014 as well as chairman of the labor union of the commercial committee of the Company since May 2019. He has been serving as an employee representative Supervisor of the Company since September 2020.

 

Mr. Qin Hao, aged 53, graduated from Party School of the Central Committee of the Communist Party of China with a master's degree in Political Economics. He joined Air China in August 1989. He was the Deputy General Manager and secretary of the Communist Party Committee of the passenger cabin service department of the Company between November 2014 and April 2021, as well as chairman of the labor union of the passenger cabin service department of the Company from August 2019 to April 2021. He has been serving as an employee representative Supervisor of the Company since September 2020. He has been the secretary of the Communist Party Committee of Air China Inner Mongolia Co., Ltd. since April 2021 and the deputy general manager of Air China Inner Mongolia Co., Ltd. since May 2021.

 

Ms. Lyu Yanfang, aged 50, graduated from Northwest Institute of Politics and Law majoring in law and holds a bachelor's degree in law. She joined Air China in 1996 and served as the general manager of the legal department of CNAHC (Air China) since August 2017. From April 2018, she has been serving as the supervisor of China National Aviation Capital Holding Co., Ltd. From August 2018, she has served as the chairwoman of the supervisory committee of China National Aviation Finance Co., Ltd. She has been serving as the Supervisor of the Company since December 2020. She has been a supervisor of Shenzhen Airlines Company Limited since June 2021 and was appointed as the chairwoman of the supervisory committee since October 2021.

 

 

 

 

Ms. Guo Lina, aged 51, graduated from Chinese Academy of Fiscal Sciences of the Ministry of Finance majoring in finance and obtained a master degree in economics. She also graduated from the School of Economics and Management of Tsinghua University majoring in executive business administration and obtained a master's degree in business administration, and is a senior accountant. She started her career in the civil aviation industry in October 2001. From April 2017, she has served as the supervisor of Air China Inner Mongolia Co., Ltd. She served as the deputy general manager of the finance department of CNAHC (Air China) from May 2017 to April 2021. She has also served as a supervisor of Dalian Airlines Company Limited since July 2020 and was appointed as the chairwoman of the supervisory committee since September 2020. She served as the deputy general manager of the audit department of CNAHC (Air China) from April 2021 to February 2022. Since February 2022, she has been serving as a Supervisor of the Company, and general manager of the audit department of CNAHC. She was appointed the general manager of the audit department of the Company in March 2022.

 

SENIOR MANAGEMENT

Mr. Ma Chongxian, aged 56, graduated from the department of economics of Inner Mongolia University majoring in planning and statistics and holds a degree of EMBA in Tsinghua University. Mr. Ma started his career in the civil aviation industry in July 1988. Mr. Ma has been serving as the Vice President and a member of the Standing Committee of the Communist Party Committee of Air China from April 2010 to May 2021. From December 2016 to April 2021, he served as Deputy General Manager and a member of the Communist Party Group of CNAHC. He was the Deputy Secretary of the Communist Party Group of CNAHC from April 2021, as well as the director and General Manager of CNAHC, and concurrently the President and Deputy Secretary of the Communist Party Committee of the Company from May 2021. He has served as the non-executive director of Cathay Pacific since June 2021 and an executive Director and the Vice Chairman of the Company since July 2021.

 

Mr. Zhao Xiaohang, aged 60, graduated from the School of Economics and Management of Tsinghua University majoring in management engineering, and holds a postgraduate diploma. He started his career in the civil aviation industry in August 1986. Mr. Zhao served as the Vice President and a member of the Standing Committee of Communist Party Committee of the Company from February 2011 to February 2022. He has been serving as the chairman of Air Macau since March 2016, and a member of the Communist Party Group of CNAHC from August 2016 to February 2022. He was the Vice General Manager of CNAHC from December 2016 to March 2022, the chairman of CNAMC since December 2016, and the deputy chairman of CNACG between December 2016 and May 2020. He has been serving as chairman of Capital Holding since September 2018. From December 2019 to February 2022, he served as Chairman of the Supervisory Committee of the Company. He was appointed as the chairman of CNACG in May 2020.

 

Mr. Tan Huanmin, aged 57, graduated from Jilin University School of Law majoring in constitutional law. From December 2016 to January 2019, Mr. Tan was a member of the Communist Party Group and team leader of the Discipline Inspection Group of Communist Party Group of China Aerospace Science & Technology Corporation. Since January 2019, Mr. Tan has been serving as team leader of the Discipline Inspection and Supervision Group and a member of the Communist Party Group of CNAHC, and in January 2019, he was appointed as a standing member of the Communist Party Committee and the Secretary of Committee for Discipline Inspection of the Company.

 

Mr. Wang Mingyuan, aged 56, graduated from Xiamen University majoring in planning and statistics. Mr. Wang started his career in the civil aviation industry in July 1988. He served as a director of Shandong Airlines Co., Ltd. from March 2006 to June 2021, and a director and a member of the Executive Board Committee of Air Macau Company Limited from March 2007 to July 2021. Mr. Wang was appointed as the Vice President and a member of the Standing Committee of CPC of the Company in February 2011. Since April 2011, he has served as chairman of Air China Development Corporation (Hong Kong) Limited. He was appointed as the deputy general manager and a member of the Communist Party Group of CNAHC in April 2020. He has been serving as vice chairman of Tibet Airlines Co., Ltd. since June 2020.

 

 

 

 

Mr. Zhang Sheng, aged 49, graduated from the Renmin University of China/American City University with a bachelor's degree in business administration and a master's degree in business administration. Mr. Zhang started his career in the civil aviation industry in July 1992. From August 2017 to May 2020, he served as the general manager and the deputy secretary of the Communist Party Committee of the Beijing Branch of China Southern Airlines Company Limited. In May 2020, he was appointed as the deputy general manager and a member of the Communist Party Group of CNAHC as well as a member of the Standing Committee of the Communist Party Committee of the Company. In June 2020, he was appointed as the Vice President of the Company.

 

Mr. Chen Zhiyong, aged 58, graduated from Civil Aviation Flight University of China majoring in flight technology. Mr. Chen is a first-class pilot. Mr. Chen started his career in the civil aviation industry in October 1982. Mr. Chen has been serving as Vice President and a member of the Standing Committee of the Communist Party Committee of the Company since December 2012. He was appointed as the director of Shenzhen Airlines in May 2014. Between May 2014 and September 2020, he was also the president and deputy secretary of the Community Party Committee of Shenzhen Airlines. He was appointed as the Chairman of Shenzhen Airlines in March 2020. Since July 2020, he served as the deputy general manager and a member of the Communist Party Group of CNAHC.

 

Mr. Chai Weixi, aged 59, graduated from City University of Seattle and holds a postgraduate diploma and a master's degree. Mr. Chai is a senior engineer. Mr. Chai joined Air China in September 1980. He was the director of Ameco between October 2005 and January 2020, and was appointed as Vice President and a member of the Standing Committee of the Communist Party Committee of the Company in March 2012. Mr. Chai has been the chairman of Sichuan Services Aero-Engine Maintenance Co., Ltd. since October 2012. Since October 2020, he has been serving as the chairman of Beijing Airlines Company Limited.

 

Mr. Xue Yasong, aged 60, graduated from the Institute of Financial Science under the Ministry of Finance with a master's degree in Economics. He served as the deputy general manager of CNAHC from November 2004 to July 2009, and the chairman of the labor union of CNAHC from July 2009 to December 2021. He was the chairman of the labor union of the Company from October 2016 to December 2021. He has been serving as an employee representative director of CNAHC since December 2017, and was the employee representative Director of the Company from March 2018 to February 2022.

 

Mr. Xu Chuanyu, aged 57, graduated from Civil Aviation Flight University of China majoring in airplane piloting and obtained an MBA degree from Tsinghua University. Mr. Xu is a first-class pilot. He joined Air China in July 1985. He has been serving as the Chief Pilot of CNAHC and chief safety officer of the Company since December 2012. Mr. Xu was appointed as chairman, president, deputy secretary of the Communist Party Committee of Shandong Aviation Group Corporation in November 2016.

 

Mr. Zhang Hua, aged 56, graduated from Zhongnan University of Finance and Economics majoring in industrial economics and is an on-job postgraduate of the Party School of the Central Committee of the Communist Party of China majoring in economics and management. He was appointed as the general legal counsel of CNAHC and of the Company in August 2016 and August 2017, respectively. He has been a supervisor of Zhongyi Aviation Investment Co., Ltd. since April 2018, chairman of Dalian Airlines Company Limited since March 2020, and a director of Air China Cargo Co. Ltd. since September 2021.

 

Mr. Xiao Feng, aged 53, graduated from Harbin Civil Engineering & Architectural Institute majoring in management engineering. Mr. Xiao holds an undergraduate degree and is a senior accountant. He joined Air China in July 1990. He has been serving as a director of Ameco since September 2012 and the chief accountant of the Company since July 2014. In October 2015, he became a director of Air China Overseas Holding Company (國航海外控股公司). Since November 2015, he has been serving as the chairman of the board of directors of China National Aviation Company Limited, and in February 2016, he became the chairman of China National Aviation Finance Co., Ltd. He has served as a non-executive director of Cathay Pacific since January 2017, and a director of Air China Cargo Co. Ltd. since September 2021.

 

 

 

 

Mr. Wang Yingnian, aged 58, graduated from Sichuan Guanghan Aviation College majoring in airplane piloting and is a firstclass pilot. Mr. Wang started his career in the civil aviation industry in August 1984. He has been serving as a director of Beijing Airlines Company Limited since February 2011, and Chief Pilot of the Company since November 2014. He served concurrently as general manager and Deputy Secretary of Communist Party Committee of the training department of the Company from February 2017 to November 2019. He has also been serving as the chairman of Air China Inner Mongolia Co., Ltd. since November 2017.

 

Mr. Ni Jiliang, aged 55, graduated from Civil Aviation College of China majoring in maintenance of aircraft, engines and equipment under the department of aviation machinery. He joined Air China in July 1988. He has been the chief executive officer and the deputy secretary of the Communist Party Committee of Ameco between September 2017 and April 2020, and the chief engineer of the Company since January 2020. Since April 2020, he has served as the chairman and secretary to the Communist Party Committee of Ameco. Since November 2021, he has been serving as a director of China Aircraft Services Limited (中國飛機服務有限公司).

 

Mr. Yan Simeng, aged 39, graduated from the Department of Physics of Peking University and obtained his doctorate in theoretical and computational physics from the University of California, Irvine. He was a senior data scientist of Google (formerly Fitbit) in the United States from November 2017 to April 2018. He served as vice president of engineering at All in Eyes Co. Ltd. (瞰天科技有限公司) from April 2018 to July 2021. Mr. Yan has been serving as Chief Information Officer of the Company since September 2021.

 

Mr. Zhou Feng, aged 60, obtained a master's degree in economics from Shanghai University of Finance and Economics and a master's degree of business administration (EMBA) from China Europe International Business School, and is a senior accountant. He started his career in the civil aviation industry in 1983. He served as the head of the office of the board of CNAHC and the Company from June 2017 to June 2021, and the Secretary to the Board of the Company from August 2017 to September 2021.

 

Mr. Huang Bin, aged 58, graduated from the Civil Aviation Institute of China, majoring in Planning and Finance, is a senior accountant. He joined Air China in 1983. Between April 2011 and August 2021, he served as secretary of the Communist Party Committee, vice president, member of the Communist Party Committee and Standing Committee of Air China Cargo Co. Ltd.. He was appointed as a director and a member of the Executive Committee of Air China Cargo Co. Ltd. in April 2011, secretary to the Board and Joint Company Secretary of Air China Limited in September 2021 and assistant to the President of the Company in December 2021.

 

Mr. Shao Bin, aged 56, graduated from Tsinghua University School of Economics and Management majoring in EMBA, and is a senior pilot. He joined Air China in July 1987. He served as assistant to the president of the Company from November 2014 to November 2021. He has been serving as vice president of Shenzhen Airlines since December 2014. He was also the chief pilot of Shenzhen Airlines from July 2016 to August 2017. He has been concurrently serving as chairman of Kunming Airlines Company Limited since January 2022.

 

Mr. Zhao Yang, aged 54, graduated from Civil Aviation Flight University of China majoring in flight technology. Mr. Zhao started his career in the civil aviation industry in August 1988. Mr. Zhao served as the deputy general manager and Chief Pilot, a member and standing member of the Communist Party Committee of the southwest branch of the Company since November 2014. He served as the deputy operation officer of the Company and the general manager of the operation control centre, and Deputy Secretary of the Communist Party Committee of the operation control centre since October 2017. Mr. Zhao has been serving as assistant to the President of the Company since October 2017.

 

 

 

 

Joint Company Secretaries

Mr. Huang Bin, aged 58, graduated from the Civil Aviation Institute of China, majoring in Planning and Finance, is a senior accountant. He joined Air China in 1983. Between April 2011 and August 2021 he served as secretary of the Communist Party Committee, vice president, member of the Communist Party Committee and Standing Committee of Air China Cargo Co. Ltd.. He was appointed as a director and a member of the Executive Committee of Air China Cargo Co. Ltd. in April 2011, secretary to the Board and joint company secretary of Air China Limited in September 2021 and assistant to the President of the Company in December 2021.

 

Mr. Huen Ho Yin, aged 59, holds a Bachelor of Laws (Hons) Degree from the University of Leicester in the United Kingdom and a Postgraduate Certificate in Laws from the University of Hong Kong. Mr. Huen has been practicing as a solicitor of the High Court of Hong Kong. He is currently a partner of Huen & Partners Solicitors. From August 1994 to April 2003, he served as a partner of Richard Tai & Co., Solicitors. Since April 2003, he has been serving as a partner of Huen & Partners Solicitors. From June 2018 to February 2020, he served as an independent non-executive director of Grand Peace Group Holdings Limited. From April 2020 to August 2020, Mr. Huen served as joint company secretary of the Company. Mr. Huen has been serving as joint company secretary of the Company since September 2021.

 

 

 

Independent Auditor's Report

 

TO THE SHAREHOLDERS OF AIR CHINA LIMITED

(中國國際航空股份有限公司)

(Incorporated in the People's Republic of China with limited liability)

 

Opinion

We have audited the consolidated financial statements of Air China Limited (the "Company") and its subsidiaries (collectively referred to as the "Group") set out on pages 82  to 186, which comprise the consolidated statement of financial position as at 31 December 2021, and the consolidated statement of profit or loss and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

 

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2021, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ("IFRSs") issued by the International Accounting Standards Board (the "IASB") and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

 

Basis for Opinion

 

We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA").  Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report.  We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Key Audit Matters

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the current period.  These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

 

Key Audit Matters (continued)

 

Key audit matter

How our audit addressed the key audit matter

 

 

Provision for major overhauls

 

As at 31 December 2021, the provision for major overhauls of RMB6,373 million was recorded in the consolidated statement of financial position.

 

The Group held certain aircraft under leases at 31 December 2021. Under the terms of the lease arrangements, the Group is contractually committed to return the aircraft to the lessors in a certain condition agreed with the lessors at the inception of each lease. In order to fulfil these return conditions, major overhauls are required to be conducted on a regular basis.

 

Management estimates the maintenance costs of major overhauls for aircraft held under leases at the end of each reporting period and accrues such costs over the lease terms. The calculation of such costs includes a number of variable factors and assumptions, including the anticipated utilisation of the aircraft and the expected costs of maintenance.

 

We identified provision for major overhauls to fulfil the return condition of aircraft under leases as a key audit matter because of the significant management estimation and judgement required in assessing the variable factors and assumptions in order to quantify the amount of provision required at each reporting date.

 

Details of the related estimation uncertainty are set out in Notes 4, 5 and 38 to the consolidated financial statements.

 

Our procedures in relation to provision for major overhauls to fulfil the return condition of aircraft under leases included:

 

·      Testing and evaluating the design and operating effectiveness of the key internal controls relevant to the audit of provision for major overhauls to fulfil the return condition of aircraft under leases.

 

·      Evaluating the appropriateness of the methodology and key assumptions adopted by management in estimating the provision for these major overhauls. This evaluation based on the terms of the leases and the Group's maintenance cost experience.

 

·      Performing a retrospective review of the provision for major overhauls to evaluate the appropriateness of the assumptions adopted by management by comparing the assumptions adopted by management in prior years with actual maintenance costs incurred.

 

·      Discussing with managers in the engineering department responsible for aircraft engineering about the utilisation pattern of aircraft, obtaining relevant operating data, performing recalculation and checking the assumptions adopted by management and the mathematical accuracy of the calculation of provision for major overhauls prepared by management for those aircraft under leases.

 

 

 

 

 

Key Audit Matters (continued)

 

Key audit matter

How our audit addressed the key audit matter

 

 

Passenger revenue recognition

 

The Group's revenue primarily consists of passenger revenue amounting to RMB58,317 million for the year ended 31 December 2021.

 

Passenger revenue are recognised as revenue when the related transportation service is provided. The value of passenger revenue for which the related transportation service has not yet been provided at the end of the reporting period is recorded as air traffic liabilities in the consolidated statement of financial position.

 

The Group allocates the transaction price to passenger revenue and miles awards on a relative stand-alone selling price basis. The transaction price allocated to miles awards under the Group's frequent-flyer programme is deferred and included in contract liabilities in the consolidated statement of financial position.

 

The Group maintains complex information technology ("IT") systems in order to track the point of service provision for each sale and also to track the issuance and subsequent redemption and utilisation and expiry of frequent-flyer programme awards.

 

We identified passenger revenue recognition as a key audit matter because revenue is one of the key performance indicators of the Group and because it involves complex IT systems and an estimation of the stand-alone selling price of miles in the frequent-flyer programme, both of which give rise to an inherent risk that revenue could be recorded in the incorrect period or could be subject to management manipulation.

 

Details of passenger revenue are set out in Notes 4, 5, and 6 to the consolidated financial statements.

 

Our procedures in relation to passenger revenue recognition included:

 

·      Testing and evaluating the design and operating effectiveness of the key internal controls, including IT controls, relevant to our audit of passenger revenue recognition.

 

·      Performing substantive analytical procedures on passenger revenue by developing an expectation for passenger revenue using independent inputs and information generated from the Group's IT systems and to obtain evidence to support the reasonableness of the amounts recorded.

 

·      Evaluating the appropriateness of the assumptions adopted by management in estimating the stand-alone selling price of miles in the frequent-flyer programme by comparison with historical experience and planned changes to the programme that may impact future redemption activities.

 

·      Checking  underlying supporting documents for passenger revenue transactions which are material or meet other specified criteria on a sample basis.

 

 

Other Information

 

The directors of the Company are responsible for the other information.  The other information comprises the information included in the annual report, but does not include the consolidated financial statements and our auditor's report thereon.

 

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.  If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.  We have nothing to report in this regard.

 

Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements

 

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRSs issued by the IASB and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing the Group's financial reporting process.

 

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
 

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements (continued)

 

As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

 

Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion.  Our conclusions are based on the audit evidence obtained up to the date of our auditor's report.  However, future events or conditions may cause the Group to cease to continue as a going concern.

 

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

 

 

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements (continued)

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

The engagement partner on the audit resulting in the independent auditor's report is Yam Siu Man.

 

 

 

 

 

Deloitte Touche Tohmatsu

Certified Public Accountants

 

Hong Kong

30 March 2022

 

 

Consolidated Statement of Profit or Loss

For the Year Ended 31 December 2021

 

 

 

 

2021

2020

 

NOTES

RMB'000

RMB'000

 

 

 

 

 

 

 

 

Revenue

6

74,531,670

69,503,749

Other income and gains

8

4,070,762

4,356,946

 

 

 

 

 

 

 

 

 

 

78,602,432

73,860,695

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

Jet fuel costs

 

(20,703,780)

(14,817,474)

Employee compensation costs

9

(24,230,071)

(22,012,834)

Depreciation and amortisation

11

(20,934,502)

(20,408,317)

Take-off, landing and depot charges

 

(9,667,650)

(9,239,943)

Aircraft maintenance, repair and overhaul costs

 

(6,910,741)

(6,423,313)

Air catering charges

 

(1,650,028)

(1,605,027)

Aircraft and engine lease expenses

 

(236,287)

(223,034)

Other lease expenses

 

(673,261)

(463,265)

Other flight operation expenses

 

(6,488,734)

(5,869,393)

Selling and marketing expenses

 

(2,576,346)

(2,568,362)

General and administrative expenses

 

(1,263,044)

(1,051,495)

Impairment loss recognised on property, plant and equipment

17

(292,562)

(439,656)

Impairment loss recognised on intangible assets

20

(750)

-

Net impairment loss reversed under expected credit loss model

10

163,148

92,598

 

 

 

 

 

 

 

 

 

 

(95,464,608)

(85,029,515)

 

 

 

 

 

 

 

 

Loss from operations

11

(16,862,176)

(11,168,820)

Finance income

 

112,062

191,598

Finance costs

12

(5,495,052)

(5,099,785)

Share of results of associates

 

(1,088,759)

(6,148,692)

Share of results of joint ventures

 

272,965

155,541

Exchange gain, net

 

1,235,430

3,603,752

 

 

 

 

 

 

 

 

Loss before taxation

 

(21,825,530)

(18,466,406)

Income tax credit

14

3,003,292

2,650,275

 

 

 

 

 

 

 

 

Loss for the year

 

(18,822,238)

(15,816,131)

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 - Equity shareholders of the Company

 

(16,635,178)

(14,403,343)

 - Non-controlling interests

 

(2,187,060)

(1,412,788)

 

 

 

 

 

 

 

 

 

 

(18,822,238)

(15,816,131)

 

 

 

 

 

 

 

 

Loss per share

 

 

 

 - Basic and diluted

15

RMB(121.12) cents

RMB(104.87) cents

 

 

 

 

 

 

Consolidated Statement of Profit or Loss

and other Comprehensive Income

For the Year Ended 31 December 2021

 

 

 

2021

2020

 

RMB'000

RMB'000

 

 

 

 

 

 

Loss for the year

(18,822,238)

(15,816,131)

 

 

 

 

 

 

Other comprehensive income/(expense) for the year

 

 

Items that will not be reclassified to profit or loss:

 

 

- Fair value losses on investments in equity instruments at fair value through other comprehensive income

(56,457)

(19,933)

- Remeasurement of net defined benefit liability

(5,787)

3,265

- Share of other comprehensive income of associates

121,787

94,761

- Income tax relating to items that will not be reclassified to profit or loss

14,114

4,983

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

- Fair value gains/(losses) on investments in debt instruments at fair value through other comprehensive income

3,234

(4,310)

- Impairment loss (recognised)/reversed on investments in debt instruments at fair value through other comprehensive income included in profit or loss

(10,647)

7,637

- Share of other comprehensive income of associates

813,808

139,255

- Exchange differences on translation of foreign operations

(464,804)

(1,111,691)

- Income tax relating to items that may be reclassified subsequently to profit or loss

1,854

(832)

 

 

 

 

 

 

Other comprehensive income/(expense) for the year (net of tax)

417,102

(886,865)

 

 

 

 

 

 

Total comprehensive expense for the year

(18,405,136)

(16,702,996)

 

 

 

 

 

 

Attributable to:

 

 

- Equity shareholders of the Company

(16,172,537)

(15,260,368)

- Non-controlling interests

(2,232,599)

(1,442,628)

 

 

 

 

 

 

 

(18,405,136)

(16,702,996)

 

 

 

 

 

 

 

Consolidated Statement of Financial Position

At 31 December 2021

 

 

 

31 December

31 December

 

 

2021

2020

 

NOTES

RMB'000

RMB'000

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

17

98,804,707

101,346,490

Right-of-use assets

18

121,610,254

114,539,680

Investment properties

19

571,798

600,329

Intangible assets

20

35,430

36,580

Goodwill

21

1,099,975

1,099,975

Interests in associates

23

10,390,940

10,938,428

Interests in joint ventures

24

1,830,070

1,581,105

Advance payments for aircraft and flight equipment

 

21,510,230

24,907,862

Deposits for aircraft under leases

 

566,684

615,537

Equity instruments at fair value through other comprehensive income

25

176,323

233,180

Debt instruments at fair value through other comprehensive income

26

1,373,634

1,344,829

Deferred tax assets

27

9,757,097

6,750,883

Other non-current assets

 

257,320

298,836

 

 

 

 

 

 

 

 

 

 

267,984,462

264,293,714

 

 

 

 

 

 

 

 

Current assets

 

 

 

Inventories

28

2,050,282

1,853,990

Accounts receivable

29

2,991,037

2,942,799

Bills receivable

 

3,591

6,593

Prepayments, deposits and other receivables

30

3,631,521

3,912,471

Financial assets at fair value through profit or loss

 

4,157

-

Restricted bank deposits

31

774,951

737,245

Cash and cash equivalents

31

15,934,713

5,837,998

Assets held for sale

32

333,884

-

Other current assets

33

4,672,592

4,444,806

 

 

 

 

 

 

 

 

 

 

30,396,728

19,735,902

 

 

 

 

 

 

 

 

Total assets

 

298,381,190

284,029,616

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

Air traffic liabilities

 

(2,116,028)

(2,002,649)

Accounts payable

34

(12,590,775)

(12,510,582)

Bills payable

 

(199,276)

(62,570)

Dividends payable

 

(98,000)

(98,000)

Other payables and accruals

35

(19,593,940)

(11,177,928)

Current taxation

 

(4,572)

(45,614)

Lease liabilities

36

(14,534,309)

(13,560,862)

Interest-bearing borrowings

37

(40,201,875)

(39,630,365)

Provision for return condition checks

38

(801,235)

(229,514)

Contract liabilities

39

(1,479,717)

(1,280,102)

 

 

 

 

 

 

 

 

 

 

(91,619,727)

(80,598,186)

 

 

 

 

 

 

 

 

Net current liabilities

 

(61,222,999)

(60,862,284)

 

 

 

 

Total assets less current liabilities

 

206,761,463

203,431,430

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

Lease liabilities

36

(76,347,051)

(76,098,678)

Interest-bearing borrowings

37

(53,120,047)

(31,639,097)

Provision for return condition checks

38

(8,583,611)

(8,580,560)

Provision for early retirement benefit obligations

 

(1,006)

(1,351)

Long-term payables

 

(15,646)

(21,022)

Contract liabilities

39

(1,772,209)

(2,264,843)

Defined benefit obligations

40

(218,336)

(229,332)

Deferred income

41

(544,383)

(488,791)

Deferred tax liabilities

27

(328,063)

(334,720)

 

 

 

 

 

 

 

 

 

 

(140,930,352)

(119,658,394)

 

 

 

 

 

 

 

 

NET ASSETS

 

65,831,111

83,773,036

 

 

 

 

 

 

 

 

CAPITAL AND RESERVES

 

 

 

Issued capital

42

14,524,815

14,524,815

Treasury shares

42

(3,047,564)

(3,047,564)

Reserves

 

49,891,306

66,064,076

 

 

 

 

 

 

 

 

Total equity attributable to equity shareholders of the Company

 

61,368,557

77,541,327

Non-controlling interests

 

4,462,554

6,231,709

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

65,831,111

83,773,036

 

 

 

 

 

 

The consolidated financial statements on pages 82 to 186 were approved and authorised for issue by the board of directors on 30 March 2022 and signed on its behalf by:

 

 

 

                                               Song Zhiyong                                                             Ma Chongxian

                                                 DIRECTOR                                                                  DIRECTOR

 

 

Consolidated Statement of

Changes in Equity

For the Year Ended 31 December 2021

 

 

 

 

Attributable to equity shareholders of the Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange

 

 

Non-

 

 

 

Issued

Treasury

Capital

Reserve

General

translation

Retained

 

controlling

Total

 

Note

capital

shares

reserve

funds

reserve

reserve

earnings

Total

interests

equity

 

 

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 January 2020

 

14,524,815

(3,047,564)

29,916,386

11,026,605

110,628

(1,223,899)

42,151,706

93,458,677

7,870,786

101,329,463

Changes in equity for 2020

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

 

-

-

-

-

-

-

(14,403,343)

(14,403,343)

(1,412,788)

(15,816,131)

Other comprehensive income/(expense)

 

-

-

230,112

-

-

(1,087,137)

-

(857,025)

(29,840)

(886,865)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income/(expense)

 

-

-

230,112

-

-

(1,087,137)

(14,403,343)

(15,260,368)

(1,442,628)

(16,702,996)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appropriation of discretionary reserve funds and others

 

-

-

-

537,682

-

-

(549,472)

(11,790)

(3,944)

(15,734)

Dividends paid to non-controlling shareholders

 

-

-

-

-

-

-

-

-

(192,505)

(192,505)

Dividends declared in respect of the previous year

16

-

-

-

-

-

-

(645,192)

(645,192)

-

(645,192)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2020 and
1 January 2021

 

14,524,815

(3,047,564)

30,146,498

11,564,287

110,628

(2,311,036)

26,553,699

77,541,327

6,231,709

83,773,036

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in equity for 2021

 

 

 

 

 

 

 

 

 

 

 

Loss for the year

 

-

-

-

-

-

-

(16,635,178)

(16,635,178)

(2,187,060)

(18,822,238)

Other comprehensive income/(expense)

 

-

-

906,826

-

-

(444,185)

-

462,641

(45,539)

417,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income/(expense)

 

-

-

906,826

-

-

(444,185)

(16,635,178)

(16,172,537)

(2,232,599)

(18,405,136)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital contribution from non-controlling shareholder of a subsidiary

 

-

-

-

-

-

-

-

-

490,148

490,148

Appropriation of discretionary reserve funds and others

 

-

-

-

-

-

-

(233)

(233)

(155)

(388)

Appropriation of general reserve

 

-

-

-

-

21,288

-

(21,288)

-

-

-

Dividends paid to non-controlling shareholders

 

-

-

-

-

-

-

-

-

(26,549)

(26,549)

Others

 

-

-

3,637

-

-

-

(3,637)

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 31 December 2021

 

14,524,815

(3,047,564)

31,056,961

11,564,287

131,916

(2,755,221)

9,893,363

61,368,557

4,462,554

65,831,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows

For the Year Ended 31 December 2021

 

2021

2020

 

RMB'000

RMB'000

 

 

 

 

 

 

 

Operating activities

 

 

Loss before taxation

(21,825,530)

(18,466,406)

Adjustments for:

 

 

Share of results of associates and joint ventures

815,794

5,993,151

Exchange gains, net

(1,235,430)

(3,603,752)

Finance income

(112,062)

(191,598)

Finance costs

5,495,052

5,099,785

Fair value changes of financial assets at fair value through profit or loss

404

-

Depreciation of property, plant and equipment

9,259,782

9,168,355

Depreciation of right-of-use assets

11,649,695

11,214,630

Gain on disposal of property, plant and equipment

(21,112)

(38,943)

Loss/(gain) on disposal of right-of-use assets

-

(348)

Depreciation of investment properties