TIDMAIRC
RNS Number : 7060W
Air China Ld
27 April 2021
(short name: ) (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 " " 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 innovative and excelling
efforts.
Air China was listed on The Stock Exchange of Hong Kong Limited
(stock code: 00753) and in London (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,
Guizhou, Tibet and Wenzhou, and a base in Southern China. 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 is actively implementing the strategic objectives of
"globally leading competitive advantages, constantly enhanced
development capability, excellent and unique customer experience,
and steadily improved interests and benefits". Air China is
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". As at the
end of the Reporting Period, the total number of "Phoenix Miles"
members amounted to 68.1766 million.
As at the end of the Reporting Period, the Group had a total of
707 aircraft of various types, with an average age of 7.74 years.
The Group operated a total of 674 passenger routes, including 48
international routes, 6 regional routes and 620 domestic routes.
Through cooperation with members of Star Alliance, the Company has
further expanded its service coverage to 1,300 destinations in 195
countries and regions.
Contents
3 Corporate Information Financial Statements Prepared
under
International Financial Reporting
Standards
4 Chairman's Statement
6 Chronicle of Events 80 Independent Auditor's Report
Consolidated Statement of
10 Summary of Financial Information 86 Profit or Loss
Consolidated Statement of
Profit or Loss and
11 Summary of Operating Data 87 Other Comprehensive Income
Consolidated Statement of
13 Fleet Information 88 Financial Position
Consolidated Statement of
14 Business Overview 90 Changes in Equity
Management's Discussion and Analysis
of
Financial Position and Operating Consolidated Statement of
30 Results 91 Cash Flows
Notes to the Consolidated
35 Corporate Governance Report 93 Financial Statements
Independent Auditor's Report
(Issued by a Third Country
Auditor registered with The
49 Report of the Directors 192 UK Financial Reporting Council)
Profile of Directors, Supervisors
71 and Senior Management 198 Supplementary Information
199 Glossary of Technical Terms
200 Definitions
Corporate Information
REGISTERED CHINESE NAME:
ENGLISH NAME:
Air China Limited
REGISTERED OFFICE:
Blue Sky Mansion
28 Tianzhu Road
Airport Industrial Zone
Shunyi District
Beijing
China
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
Feng Gang
Patrick Healy
Xue Yasong
Duan Hongyi
Stanley Hui Hon-chung
Li Dajin
SUPERVISORS:(2)
Zhao Xiaohang
He Chaofan
Lyu Yanfang
Wang Jie
Qin Hao
LEGAL REPRESENTATIVE OF THE COMPANY:
Song Zhiyong
COMPANY SECRETARY:
Zhou Feng
AUTHORISED REPRESENTATIVES:
Song Zhiyong
Zhou Feng
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 56 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 56 of this annual report.
Chairman's Statement
2020 REVIEW
The year of 2020 is the final year for the 13th Five-year Plan,
it is also the critical year for completing the building of a
moderately prosperous society in all respects and achieving the
first centenary goal. Under the strong leadership of the Central
Committee of the Party with General Secretary Xi Jinping at the
core, the Group resolutely carried out the decisions and deployment
plans of the Central Committee of the Party and the State Council.
The Group served the nation's needs for containing the pandemic and
resumption of work and production as well as poverty alleviation.
The Group has undertaken overall planning for various major tasks
including pandemic prevention, safe production, performance
maximization, targeted poverty alleviation, environmental
protection, risk prevention and control and passenger services,
thereby minimizing the impact of the pandemic and laying a solid
foundation for the new stage of development of the Group.
Bravely carrying out the risky and challenging mission of
fighting the pandemic. Facing the sudden outbreak of the COVID-19
pandemic, the Group immediately activated the emergency mechanism
and fulfilled the joint responsibilities of prevention and control.
The Group strictly implemented the pandemic prevention and control
policies, made every effort to sustain flights for key
international routes, made every effort to transport medical teams,
personnel and materials and facilitated the resumption of work,
production and schools. The Group has set up a three-dimensional
ground-to-air prevention and control network which allowed
international direct flights being resumed from Beijing. We ensured
employees' health and safety by pursuing the joint virus prevention
in respect of ground and aviation as well as individuals and
properties. Since the outbreak of the pandemic, 216 anti-epidemic
transport service charter flights have been operated, transporting
31,000 passengers, and 154 customized flights carrying 18,000
passengers for the resumption of work, production and schools. A
number of teams and individuals of the Group have been awarded
anti-pandemic honorary titles at the national level, and been
publicly honored outstanding anti-epidemic titles by the SASAC or
within the transportation industry.
Laying a safety foundation for high quality development. By
giving top priority to safety as the lifeline of the Company, the
Group strengthened the organizational leadership, specified the
safety-oriented responsibilities and strictly implemented the
responsibilities in safety supervision. The Group paid close
attention to prevent and control safety and risk, strengthened the
management and control of safety procedures and ensured normal
operation of flights. The Group enhanced the safety
infrastructures, organized and launched a specific program of
"revamping corporate culture, strengthening three basics, and
safeguarding the bottom line of safety", so that its requirements
for the development of business practices become a part of the
institution to maintain the stable position of the Group. In 2020,
amidst the complicated production and operation conditions, the
Group achieved a total of 1.553 million safe flight hours ensuring
the safety of all kinds of major transportation missions.
Putting every effort in maximizing operating performance. The
pandemic has brought unprecedented challenges to the aviation
transportation industry. Facing the severe environment, the Group
has strengthened market research and production organization, and
focused on improving the service quality and cost-effectiveness and
had taken various measures to promote operation, strengthen the
performance and prevent risks. Through timely application of
performance emergency response mechanism, the Group has increased
revenue and cost-effectiveness in full swing so as to reverse the
downward trend. The Group seized market opportunities and
coordinated the allocation of production resources by taking
abreast of the market changes precisely. The Group took the lead in
implementing the operation model of "passenger aircraft converted
for cargo operations" by grasping the trend of cargo freight supply
and demand and flexibly making adjustments between passenger
flights and cargo flights, resulted in 13,120 aircargo flights
operated by using the passenger aircraft. In addition, the Group
implemented stringent cost control to ensure a safe and steady fund
flow.
Comprehensively implementing the requirements of the three
critical battles. The Group focused on precision and promoted
enhancement, persisted in promoting and optimizing the "8+2"
targeted poverty alleviation model and dedicated to assisting the
targeted poverty alleviation regions to timely accomplish the task
of poverty alleviation with high quality, thereby ensuring feasible
and sustainable poverty alleviation. We would continue to implement
the Three-Year Action Plan for "battling against air pollution"
project, accelerate the establishment of a carbon emission system
and an energy conservation and environmental protection management
platform and to promote the "fuel to electricity" project. By
perfecting risk prevention and control, internal control,
compliance and law into the "four-in-one" management mechanism, the
Group would advance the development of internal audit system for
preventing operational and management risks and effectively
promoting the modernization of its corporate governance system and
capabilities.
Steadily enhancing the service quality. The Group adhered to
customer orientation, grasped the changes in passengers' demands
and adjusted the service procedures so as to continuously enhance
passengers' sense of security and achievement. We considered the
health of our passengers as the top priority that we strictly
implemented the epidemic prevention and control requirements in the
whole service process and ensured our passengers' safety. We have
developed a sound product management and service system and a
full-process product management system by product categorization
and classification. On one hand, we accelerated the establishment
of the global ground support platform to improve our ability in
fast response and flexible decision making under irregular
operation. On the other hand, we sped up the formulation of
hub-based strategic products and the development of new transit
centers, promoted the creation of innovative products for
convenient travel and actively promoted the domestic facial
recognition-based self-boarding travel services in Beijing, thereby
expanding the self-service and intelligent application. In
addition, we prepared for the provision of services to the Winter
Olympic Games and the Winter Paralympic Games in an orderly manner
and fulfilled the mission of various safeguarding services
successfully, which demonstrated the image of the Company as the
partner of both the Summer Olympic Games and the Winter Olympic
Games.
The period covered by the 14th Five-Year Plan is the period in
which embarks a new journey to build China into a modern socialist
country in all respects. Meanwhile, it is also a critical era for
the Group to deepen its reform and establish itself as a top-tier
global aviation and transportation group at the new stage of
national development. The year of 2021 is the inception year of the
14th Five-year Plan, the Group is committed to follow the
underlying principle of pursuing progress while ensuring stability.
The Group will continue to enhance development quality, consolidate
the success in containing the pandemic, strengthen the operational
safety and development. Taking a large stride towards the
development into a global leading enterprise, the Group will
embrace the 100th Anniversary of the Chinese Communist Party with
its outstanding performance, making new and greater contributions
to China on her new journey of building a modern socialist country
in all respects!
Chairman
Beijing, China
30 March 2021
Chronicle of Events
Jan
On 25 January, Air China undertook the charter flight mission of
the National Health Commission for the first Sichuan medical team
to fly from Chengdu to Wuhan; on 26 January, Air China undertook
another charter flight mission of the National Health Commission
and operated two charter flights for the first Beijing medical team
and one charter flight for the first Tianjin medical team, which
flew from Beijing and Tianjin to Wuhan, respectively.
Feb
On 4 February, the "Nature's Touch" cabin concept design of
ACJ320neo Business Jet, which was jointly developed by Aircraft
Maintenance and Engineering Corporation (AMECO) and Lufthansa
Technik, won the 2020 iF Design Award from iF International Forum
Design GmbH.
On 7 February, Air China actively responded to the nation's call
to maintain a stable supply chain and used its passenger aircraft
as freighters. It adopted the innovative model of "passenger
aircraft converted for cargo operations" to ensure smooth operation
of the worldwide supply chain, which played a positive role in the
normal operation of the global manufacturing sector given the
Covid-19 impact.
Mar
On 1 March, Air China celebrated the 55th anniversary of safe
flight along the Chengdu-Lhasa route, which was once regarded as an
"unflyable zone" by the global aviation industry for its widely
recognized difficulty. In total, Air China has completed 101,700
safe flights, carried 13.17 million domestic and international
passengers and transported 288,000 tonnes of cargoes and mails.
Apr
After 76 days of lockdown, Wuhan officially lifted its travel
restrictions. On 8 April, Wuhan Tianhe International Airport
recorded 38 inbound and outbound flights of the Group, connecting
Wuhan with other places again. As the so-called, "Air China,
distant shadow, vanish in the blue sky; on a whirlwind it mounts
thousand miles, Air China took off again ( ) ".
May
On 11 May, Zhaoping County, Hezhou City in Guangxi Zhuang
Autonomous Region, which was the paired poverty-stricken county of
CNAHC Group, had been officially lifted from the status as a
national-level poverty-stricken county. Since then, all aid
recipients of CNAHC Group had been lifted from the status as a
national-level poverty-stricken county as scheduled. The "8+2" and
"aviation+targeted poverty alleviation" plan of the Company was
elected as "Top 50 Comprehensive Cases of Targeted Poverty
Alleviation by Enterprises ( 50 )" by the former State Council
Leading Group Office of Poverty Alleviation and Development.
On 26 May, the Company held the 2019 annual general meeting at
which Mr. Feng Gang was elected as a non-executive Director and Mr.
Duan Hongyi was elected as an independent non-executive Director.
Since then, the new full-time deputy Party secretary and external
professional Director have joined the Board.
On 28 May, Air China received the Best Airline with Breakthrough
in Remote Check-in Award from the International Air Transport
Association (IATA). As of the end of 2020, Air China provided
electronic boarding pass service and "paperless" customs clearance
at 117 terminals, which greatly enhanced convenience for
passengers.
Jun
On 30 June, Beijing Airlines completed the first report in the
domestic civil aviation industry in relation to carbon emission
monitoring scheme, carbon emission reporting and third-party audit
(2019) as the only domestic airline with an established carbon
emission data monitoring system for public and business aviation
flights.
Jul
On 10 July, the first ARJ21-700 aircraft completed its first
voyage on the CA1109 Beijing-Xilinhot route. As an adaptive,
comfortable and economical model, ARJ21-700 aircraft will
supplement the carrying capacity of the regional aircraft of the
Group and facilitate the effective connection between domestic and
regional routes of the Group, thereby further optimizing the
overall layout of the Group's route network.
On 16 July, Air China ranked 9th and outperformed other Chinese
aviation enterprises in the "2020 Top 50 Chinese Global Brands
(2020 50 ) " that were jointly selected by WPP and Google.
On 22 July, Shenzhen Airlines won the "2019 Best Airline Award
(2019 )" and the "CAPSE 2019 In-flight Entertainment Service
Enhancement Excellent Award (CAPSE2019 )" in the 6th CAPSE (a civil
aviation passenger service evaluation). The refined and innovative
"Carefree Travel ( )" check-in service that covers the entire
process won the "CAPSE 2019 Excellent and Innovative Service Award
(CAPSE2019 )".
Aug
On 5 August, the World Brand Lab held the 17th "World Brand
Conference" in Beijing and released the "Top 500 Most Valuable
Chinese Brands 2020 (2020 500 )". Air China ranked 21st with a
brand value of RMB186.519 billion, which is the highest ranking
among civil aviation companies in China.
Sep
On 5 September, the 500-day countdown to the Winter Olympics,
the first Winter Olympics-themed painted aircraft "Winter Olympics
Ice and Snow" successfully completed its first voyage from Beijing
to Chengdu on CA1415. On 22 September, this first Winter
Olympics-themed painted aircraft "Winter Olympics Ice and Snow"
flew to Wuhan for the first time. Representatives of the Beijing
medical team and advanced individuals from Air China who
participated in the pandemic fight and relief in Hubei Province
were invited as honoured guests to participate in the specially
designed events on the plane.
On 8 September, the National Covid-19 Fight Award Ceremony was
held at the Great Hall of the People in Beijing. The General Fleet
of the Company was named as "National Advanced Unit in Pandemic
Prevention" and Ms. Liu Tingting, the chief flight attendant of the
Cabin Service Department, was awarded the title of "National
Advanced Individual in Pandemic Prevention".
Oct
On 15 October, WPP and Kantar jointly released the "2020
BrandZ(TM) Top 100 Most Valuable Chinese Brands" and Air China
ranked 43rd on the list, which is the highest among aviation
companies in China.
On 22 October, the Hubei Branch of the Company was awarded
"Advanced Unit of Central Enterprise in Pandemic Prevention" by the
Communist Party Committee of the SASAC, so as to recognise its
advanced and admirable spirit in fighting the pandemic and to
encourage concerted efforts and motivational positive energy.
Nov
On 7 November, the 2nd New Fortune Best Listed Company Award
Ceremony was held in Xiamen. Air China was elected as the "New
Fortune Best Listed Company ( ) ", which proved that its
achievements in standardised operation, information disclosure and
market capitalisation management were highly recognised in the
capital market.
On 16 November, Air China won the title of "Golden Airline ( ) "
at the "15th China Travel Golden List ( ) " Award Ceremony
organised by the Travel ( ) magazine.
On 22 November, the "Air China's Blue Sky Class" volunteer
teaching program was recommended by the Central Enterprise Working
Committee of the Communist Youth League of China to participate in
the 5th China Youth Volunteer Service Program Contest 2020 cum
Volunteer Service Exchange Seminar, where it received the National
Bronze Award.
Dec
On 3 December, Air China won two major awards, namely the "Best
Listed Company ( )" and the "Best Board Secretary of Listed
Companies ( )" at the 10th Hong Kong International Financial Forum
cum China Securities "Golden Bauhinia". On the same day, Air China
was honored with the title of the "2020 Golden Bee Two-star
Evergreen Enterprise Award for Excellent Corporate Social
Responsibility Report ( 2020 -- ) ".
On 22 December, the World Brand Lab released the "Top 500 Best
Global Brands 2020" at the 17th "World Brand Conference". With a
brand value of RMB186.519 billion, Air China ranked 282nd among
global brands and became the only Chinese civil aviation company on
the list among 43 Chinese companies. Meanwhile, Air China received
the "China No.1 Brand Award for the Year 2020 (Aviation Services
Industry) (2020 NO.1( ) )" and a special award named "2020 Cultural
Brand Award (2020 )".
On 29 December, the Company held the 24th meeting of the fifth
session of the Board at which Mr. Song Zhiyong was elected as the
Chairman of the Company. Mr. Song Zhiyong ceased to be the deputy
Chairman and President of the Company.
On 31 December, Mr. Song Zhiyong, the Chairman of the Company,
welcomed the last flight of the year at Beijing Capital
International Airport, wrapping up Air China's achievement of the
safe flight year of 2020. The Group achieved a total of 1.553
million safe flight hours, safely travelled 973.01 million
kilometers and transported 68.687 million passengers safely
throughout the year.
Summary of Financial Information
(RMB'000)
2020 2019 2018 2017 2016
Revenue 69,503,749 136,180,690 136,774,403 121,362,899 115,144,692
(Loss)/profit from operations (11,168,820) 14,641,918 14,346,331 11,755,712 17,532,575
(Loss)/profit before taxation (18,466,406) 9,120,263 9,977,017 11,486,232 10,212,902
(Loss)/profit after taxation
(including (loss)/profit
attributable to non-controlling
interests) (15,816,131) 7,263,764 8,214,871 8,641,449 7,758,681
(Loss)/profit attributable
to non-controlling interests (1,412,788) 843,470 864,210 1,397,128 949,522
(Loss)/profit attributable
to equity shareholders
of the Company (14,403,343) 6,420,294 7,350,661 7,244,321 6,809,159
EBITDA(1) 9,239,497 35,921,002 28,850,007 25,352,031 31,006,295
EBITDAR(2) 9,925,796 37,452,389 37,133,039 33,740,737 38,261,866
(Loss)/earnings per share
attributable to equity
shareholders of the Company
(RMB) (1.05) 0.47 0.54 0.54 0.55
(Loss)/return on equity
attributable to equity
shareholders of the Company
(%) (18.58) 6.87 7.89 8.42 9.90
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 31 December 31 December 31 December 31 December
2020 2019 2018 2017 2016
Total assets 284,029,616 294,206,373 243,657,108 235,644,584 224,050,951
Total liabilities 200,256,580 192,876,910 143,159,074 140,785,986 147,654,552
Non-controlling interests 6,231,709 7,870,786 7,340,693 8,811,036 7,597,144
Equity attributable
to equity shareholders
of the Company 77,541,327 93,458,677 93,157,341 86,047,562 68,799,255
Equity attributable
to equity shareholders
of the Company per
share (RMB) 5.34 6.43 6.41 5.92 5.26
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.
Previous
Current period period Increase/(decrease)
Capacity
ASK (million) 156,060.66 287,787.61 (45.77%)
International 18,639.58 109,336.78 (82.95%)
Mainland China 135,554.18 167,662.03 (19.15%)
Hong Kong SAR, Macau SAR and Taiwan,
China 1,866.90 10,788.80 (82.70%)
AFTK (million) 9,634.66 10,951.75 (12.03%)
International 6,163.23 6,471.54 (4.76%)
Mainland China 3,375.26 4,222.84 (20.07%)
Hong Kong SAR, Macau SAR and Taiwan,
China 96.17 257.38 (62.63%)
ATK (million) 23,685.73 36,917.59 (35.84%)
Traffic
RPK (million) 109,830.07 233,176.14 (52.90%)
International 11,753.53 86,618.30 (86.43%)
Mainland China 97,117.80 138,193.52 (29.72%)
Hong Kong SAR, Macau SAR and Taiwan,
China 958.75 8,364.31 (88.54%)
RFTK (million) 3,558.06 4,778.74 (25.54%)
International 2,300.49 3,150.59 (26.98%)
Mainland China 1,229.44 1,555.56 (20.97%)
Hong Kong SAR, Macau SAR and Taiwan,
China 28.13 72.59 (61.24%)
Passengers carried (thousand) 68,687.07 115,006.12 (40.28%)
International 2,241.20 17,096.11 (86.89%)
Mainland China 65,834.70 92,550.97 (28.87%)
Hong Kong SAR, Macau SAR and Taiwan,
China 611.18 5,359.05 (88.60%)
Cargo and mail carried (tonnes) 1,113,676.51 1,434,203.10 (22.35%)
Kilometres flown (million) 973.01 1,454.24 (33.09%)
Block hours (thousand) 1,552.86 2,285.05 (32.04%)
Number of flights 551,373 742,923 (25.78%)
International 29,703 97,785 (69.62%)
Mainland China 513,747 604,863 (15.06%)
Hong Kong SAR, Macau SAR and Taiwan,
China 7,923 40,275 (80.33%)
RTK (million) 13,285.14 25,363.67 (47.62%)
Load factor
Passenger load factor (RPK/ASK) 70.38% 81.02% (10.64 ppt)
International 63.06% 79.22% (16.16 ppt)
Mainland China 71.65% 82.42% (10.77 ppt)
Hong Kong SAR, Macau SAR and Taiwan,
China 51.36% 77.53% (26.17 ppt)
Cargo and mail load factor (RFTK/AFTK) 36.93% 43.63% (6.70 ppt)
International 37.33% 48.68% (11.35 ppt)
Mainland China 36.42% 36.84% (0.42 ppt)
Hong Kong SAR, Macau SAR and Taiwan,
China 29.25% 28.20% 1.05 ppt
(12.61 ppt
Overall load factor (RTK/ATK) 56.09% 68.70% )
Daily utilisation of aircraft (block (3.38 hours
hours per day per aircraft) 6.34 9.72 )
Yield
Yield per RPK (RMB) 0.5074 0.5340 (4.98%)
International 0.8204 0.4303 90.66%
Mainland China 0.4665 0.5902 (20.96%)
Hong Kong SAR, Macau SAR and Taiwan,
China 0.8109 0.6813 19.02%
Yield per RFTK (RMB) 2.4040 1.1995 100.42%
International 2.9885 1.2689 135.52%
Mainland China 1.1574 0.9778 18.37%
Hong Kong SAR, Macau SAR and Taiwan,
China 9.0770 2.9382 208.93%
Unit cost
Operating expense per ASK (RMB) 0.5448 0.4364 24.84%
Operating expense per ATK (RMB) 3.5899 3.4021 5.52%
Fleet Information
During the year of 2020, the Group introduced a total of 14
aircraft, including two A350, eight A320NEO, one A321NEO and three
ARJ21-700 aircraft, among which one was bought with our own funds,
11 were introduced under finance leases and two were introduced
under operating leases. On the other hand, the Group phased out six
aircraft, including two B737-800, one B737-300, one A320 and two
A319 aircraft.
As at the end of 2020, the Group had a total of 707 passenger
aircraft including business jets, with an average age of 7.74
years. Among the aircraft set out above, the Company operated a
fleet of 431 aircraft in total, with an average age of 7.99 years.
The Company introduced 10 aircraft and phased out five aircraft,
among which one was sold to Air China Inner Mongolia.
Details of the fleet of the Group are set out in the table
below:
Operating Average age
Sub-total Self-owned Finance lease leases (year)
Passenger aircraft 702 292 212 198 7.73
Airbus 373 148 118 107 7.77
A319 41 32 6 3 13.18
A320/A321 255 88 92 75 6.96
A330 65 28 8 29 8.65
A350 12 0 12 0 1.71
Boeing 326 143 92 91 7.76
B737 274 119 72 83 7.93
B747 10 8 2 0 11.47
B777 28 4 18 6 6.71
B787 14 12 0 2 3.86
COMAC 3 1 2 0 0.26
ARJ21 3 1 2 0 0.26
Business jets 5 1 0 4 8.41
Total 707 293 212 202 7.74
Introduction Plan Phase-out Plan
Passenger aircraft 2021 2022 2023 2021 2022 2023
Airbus 53 16 5 3 8 7
A319 - - - - 6 4
A320/A321 48 8 - - 2 3
A330 - - - 3 - -
A350 5 8 5 - - -
Boeing - - - 3 10 7
B737 - - - 3 10 7
COMAC 6 8 9 - - -
ARJ21 6 8 9 - - -
Total 59 24 14 6 18 14
Note: Please refer to the actual operation for the introduction
and phase-out of the Group's fleet in the future.
BUSINESS
OVERVIEW
Linking the World
Business Overview
Containing the pandemic
Facing the sudden outbreak of the COVID-19 pandemic, the Group
followed the important instructions of General Secretary Xi
Jinping, who proposed that "go where there is epidemic, flight it
till it perishes". The Group immediately activated the emergency
response mechanism and quickly set up a leading team for pandemic
prevention and control to provide support in the fight against the
epidemic "regardless of the conditions and at the most advanced
level". The Group has built anti-epidemic rescue transport channels
to aid the battle against the pandemic. This demonstrated the
Group's vision and commitment as the national flag carrier. The
Group strived to implement the deployment of "preventing the
coronavirus from spreading within the city/region or beyond" by
establishing the three-dimensional prevention and control network
covering from the ground to the air, so as to overcome difficulties
and pave way for the resumption of international direct flights
from Beijing. The Group consistently implemented regularized
pandemic prevention and control measures to ensure the health and
safety of passengers and employees.
In the year-long fight against the COVID-19 pandemic, all
employees of the Group firmly adhered to the idea that "the
epidemic calls us to action" and practiced the fighting spirit of
"the airports as the battlefields, the flight routes as the
frontline and the cabins as the 'mobile-cabin hospitals", so that
our staff remained courageous regardless of any dangers or risks.
In the time of crisis, the flight attendant team stayed calm and
stood up bravely. With a willingness to take responsibility and
sacrifice, they travelled between pandemic-stricken "battlefields"
and undertook urgent and high-risk tasks fearlessly. Our employees
were put under a total of 98,243 quarantine, of which 68,000
quarantine were for pilots. On average, each employee underwent
quarantines 2.6 times and the average quarantine time was more than
36 days per capita. In particular, the quarantine period for pilots
of wide-body aircraft of the General Fleet exceeded 100 days per
capita. Concurrently, the ground service team and the staff at the
aviation security centre were heedless of their own safety and
headed for the frontline against the virus, which they had orderly
organized diversion of international inbound flights, strenuously
discharged transit passengers and accomplished various mission to
safeguard the transportation of rescue charter flights, personnel
and supplies. While employees at the call centre worked around the
clock to handle approximately 10 million ticket exchange and refund
requests from passengers, overseas staff were eager to help the
country by promptly procuring pandemic control materials and
preventing interruption to the important international routes. At
the Hubei branch, the Group's employees were determined to stay
behind to fulfil their responsibility for local pandemic prevention
and securing the transportation for relief operations.
Approximately 100,000 frontline and backline employees have made
enormous efforts in fighting the epidemic. Together, we have forged
the backbone for overcoming difficulties. Since the outbreak of the
COVID-19 pandemic, 216 anti-epidemic transport service charter
flights have been operated transporting 31,000 passengers.
Approximately 32,000 passengers had been put on waitlist for
international flights and 631 international inbound flights had
been diverted and organized. The General Fleet of the Company was
named as National Advanced Unit in Pandemic Prevention and Ms. Liu
Tingting of the Cabin Service Department was awarded the title of
National Advanced Individual in Pandemic Prevention. In addition,
seven teams and 17 individuals were publicly recognized and awarded
by the SASAC and within the transportation industry.
The Group always puts the passengers first. With a focus on
passengers' needs and experience, the Company provides the
passengers with excellent services in a "fast", "customized" and
"flexible" manner. At the beginning of the COVID-19 outbreak, the
Group took the lead to offer e-health declaration forms to
passengers. In addition to taking strict sterilization measures for
aircraft interior, the Group ensures passengers are sanitized
before boarding. Moreover, the Group arranged measuring of
passengers' body temperature at the boarding gates to ensure steady
flight operation and passenger safety. The Group sent messages to
notify passengers of the refund and exchange policy and update them
on flight resumption. 258,000 prompt text messages were sent
throughout the year, which effectively improved communication and
ensured service continuity during the special period. At the same
time, the Group advanced the application of mobile technology by
completing 112 iterative development for the e-commerce platform
and website as it optimized and offered 1,970 new functions
addressing the pandemic scenario. The Group was the first domestic
airline to allow passengers of international flights to change
their waitlist and reservation status through its APP. In order to
upgrade passenger experience, the Group streamlined the
self-service ticket change process, launched the self-service
function for the change of names on tickets, rolled out the
self-service reservation function for special requirements such as
wheelchair service/checked-in baggage/carried on baggage, brought
in voice identification and control functions for visually impaired
passengers and developed a more user-friendly and convenient
interface. Based on passengers' preference, the Company actively
adjusted the in-flight entertainment content and mix. In an effort
to innovate flight operating models for an unusual period, the
Group launched new food presentation ideas with the "Henishuo" ( )
food box.
Safe operation
The Group is well aware that safety responsibility is a kind of
political responsibility and the guarantee for safe flight
underlies the foundation of the Group's original aspiration and
mission. The Group has firmly established the concept of safety
development and stayed committed to safety and risk control. Based
on the operational characteristics in times of pandemic prevention,
the Group took the approach of "one flight, one policy, one route,
one strategy" to prevent and control safety and risks and formulate
risk control measures for "passenger aircraft converted for cargo
operations". The Company strengthened the safety management and
control over the operation process, launched a special inspection
for in-flight shutdown prevention and engine management system and
implemented measures for proper dangerous goods transportation and
warehousing. The Group ensured the safe operation of new aircraft
and adopted specific risk control measures for introducing and
operating the ARJ21 aircraft. As a result, three ARJ21 have joined
the fleet and recorded 1,198 safe flight hours. Meanwhile, the
Group enhanced the basis of safety management by launching a
special program of "revamping corporate culture, strengthening
three basics, and safeguarding the bottom line of safety". The
Group revised the SMS manual and operating procedures/standards, so
that its requirements for the development of business practices
become a part of the institution. The Company properly arranged the
training plans and adjusted pace of trainings dynamically to ensure
the proficiency of key technicians. Furthermore, the Group
established cooperation with aviation schools for setting up
exclusive training base to increase support for aviation training.
The Group also held pilot skill competition to boost the competency
of the workforce.
During the Reporting Period, the Group maintained sound and safe
development in the complex operating environment. It recorded 1.553
million safe flight hours and 973.01 million safe flight kilometres
when transporting 68.687 million passengers safely, successfully
safeguarded the provision of important transportation services for
various events, such as the China International Import Expo and the
China (Beijing) International Fair for Trade in Services.
Maximising operating performance
During the Reporting Period, the Group strengthened the market
research and production organization in view of the challenging
conditions. Aiming for higher quality and efficiency, the Group
took a multipronged approach to promote operation, strengthen
performance and prevent risks. Aside from activating the
performance emergency response mechanism, the Group adopted a
series of extraordinary measures in the aspects of production
organization, marketing and cost management, so as to reverse the
downward trend by driving up revenue and cost-effectiveness. In
parallel to that, the Group seized market opportunities and kept
abreast of policy changes. For instance, the Group customized 154
flights and transported 18,000 passengers for business, production
and schools resumption. The Group precisely tapped the cargo
freight supply and demand and enhanced the collaboration between
passenger flights and cargo flights. To maintain capacity input and
utilize wide-body aircraft effectively, the Group pioneered the
"passenger aircraft converted for cargo operations" business model
which resulted in profit margin and sharing of fixed costs of
passenger aircraft. At the same time, the Group closely monitored
the recovery of the domestic market and customized production
organization to maximize profit margins. It rapidly resumed the
scale of production input, adjusted the allocation and structure of
transport capacity dynamically and developed detailed marketing and
product investment plans. In terms of value-added services, new
product models and precise marketing, the Group continued its
innovation efforts and rolled out the "Your Journey, Your Pick" ( )
travel product series. Through the online direct sales platform,
the Group launched the extensive product and service offering for a
wide range of customers, which comprised the "Two-city Card" ( ),
"Curiosity Calendar" ( ) and "Youth Right Card" ( ). Based on the
travel pattern of targeted passengers, the Group enriched its
value-added product mix by providing electronic upgrade coupons,
two-for-one ticket deals and other products developed from unsold
seats to cater to passengers' needs at different stages throughout
the journey, thereby offsetting the loss of revenue from premium
cabins services. The Group moved ahead with the
transition towards the customer-oriented business model, with
the view of supporting the transformation of Air China from a
flight provider to an integrated service provider. It expanded the
application of mileage credits monetization on an ongoing basis and
accelerated its value development. While establishing a more
comprehensive product system, it drove the growth of businesses
that generated additional revenue. The Group exercised stringent
cost control and aligned operation with costs in a scientific
manner. It relocated the cost structures and systems swiftly and
allowed internal financing to ensure safe and sound capital
flow.
Targeted poverty alleviation
The Group implemented the important instructions of General
Secretary Xi Jinping on surmounting the challenge of poverty
alleviation. The Company shouldered its political and social
responsibility as a national flag carrier and is dedicated to
ending poverty in designated areas. Based on the "8+2" targeted
poverty alleviation plan of CNAHC, the Group carried out various
supporting projects such as infrastructure construction as well as
poverty alleviation through industry, education, health and
ecological protection. During the Reporting Period, the Company
provided and introduced the same level of relief funds and
supporting funds to the targeted poverty alleviation regions. The
Company offered trainings to 4,890 grass-roots cadres and
technicians, procured the purchase of RMB56.28 million worth of
farming and livestock products from poor regions and assisted the
sales of such products for RMB10.73 million. During the Reporting
Period, the aid recipients, namely Sonid Right Banner of Xilingol
League in Inner Mongolia Autonomous Region and Zhaoping County of
Hezhou City in Guangxi Zhuang Autonomous Region, had been lifted
from the status as a national-level poverty-stricken county.
Environmental protection
Adhering to the concept of "green operation for sustainable
development", the Company is fully committed to battling against
air pollution. To this end, the Company has optimized its
energy-saving and environmental protection management system by
formulating and issuing the "Implementation Rules for the
Management of Energy Saving and Environmental Protection Fund" ( )
and the "Implementation Rules of Energy Saving and Environmental
Protection Inspection" ( ). As the Company established and launched
the energy-saving and environmental protection management platform,
the Company had achieved informatized and automated energy data
management for collective data processing and procedure
enhancement. In pursuit of a green and low-carbon operation, the
Company adopted various fuel-saving measures to lower the use of
jet fuel, including fair control over aircraft weight, monitor
aircraft performance, implement better route planning and refine
fuel consumption management and computation. The Group advanced the
replacement of aircraft APU with ground equipment and facilities,
which effectively reduced aircraft ground emissions. In addition,
the Company accelerated the "fuel to electricity" project. By the
end of the Reporting Period, the Company owned 653 new energy
vehicles, built 195 charging piles and completed flue gas
renovation for 1,431 on-site fossil fuel vehicles. Besides, the
Company improved its capacity of scientific management and control
of carbon emission and compiled the "Implementation Rules of Carbon
Emission Management" ( ) for further improvement of the carbon
emission management
system. The Company optimized and upgraded the carbon emission
monitoring and analysis system, and launched the carbon emission
calculator for passengers. In December 2020, Air China Passenger
Carbon Emission Calculator was launched on Air China APP, its
official website and WeChat mini-program simultaneously. In 2020,
the Company and its Southwest branch were honoured as the Advanced
Civil Aviation Unit in battling against air pollution.
Risk prevention and control
The Group continued to comprehensively reinforce the risk
management and highlight the forward-looking risk research and
assessment for expediting the optimization of the
compliance-focused internal control system of the Company. The
Company also strengthened the study, judgment and disposal of
material risks during the year and performed risk evaluation of
major decisions to the greatest extent. The Group carried out risk
monitoring and closed-loop management on an ongoing basis and
implemented stringent risk mitigation plans. During the year, the
Group prioritized overseas compliance facilities for its annual
system construction with a view to continuously enhancing the
compliance management system. Meanwhile, the Group cultivated
compliance culture by organizing compliance promotion month events
and holding 31 training sessions on risk control. The Group worked
conscientiously to fulfil its responsibility in internal audit and
supervision, set up an internal audit and organization structure
and optimized the internal audit system. The Group had completed 31
internal audit projects during the year. By strengthening the
research in key compliance areas, the Group ensured proper
forecasting for compliance risks. In order to keep decision-making
process in line with laws, the Group maintained operation
compliance and had different systems in place to uphold the rules.
The Group aimed to achieve more effective management process and
ensure the smooth operation of the risk management mechanism. The
compliance and risk prevention capabilities of the Company kept
growing, which provided strong support to its steady operation and
risk mitigation.
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 development of the Chinese civil aviation
industry. The Company is also committed to leading the industrial
development by establishing itself as a "National Brand", while
pursuing outstanding performance through innovative and excelling
efforts. By maintaining its world-class flight safety record and
leading comprehensive strengths in Mainland China, the Group has
extensive brand recognition and excellent brand reputation among
consumers. As the only national flag carrier in the civil aviation
industry in China, the Company has been providing special flights
and charter flights services to state leaders, diplomatic envoys,
cultural and sports representatives of China for a long time, which
is the best embodiment of the unique honorable status and
comprehensive strengths of the Company.
During 2020, Air China focused on brand communication activities
including the prevention and control of the pandemic, safeguarding
the Winter Olympic Games and introducing domestically manufactured
aircraft. The Company also launched hardcore works such as "pilot's
warm broadcast" and "flights to spring". Air China organized the
"Flying the national flag to the blue sky by operating the
domestically manufactured ARJ aircraft" event and hosted a series
of campaigns, including the "500 days of New Voyage for the Winter
Olympics" campaign for the first voyage of the color-painted
"Winter Olympic Ice and Snow" themed aircraft, so as to demonstrate
the good brand image of the aviation company representing "both the
Summer Olympic Games and the Winter Olympic Games" and building the
active brand image of a responsible central enterprise, which
marked the achievement we have made along with our development and
the aspiration of expanding the brand influence and the brand value
constantly.
In 2020, Air China ranked 21st in the list of "Top 500 Most
Valuable Chinese Brands 2020 (2020 500 )" released by World Brand
Lab with a brand value of RMB186.519 billion, which is the highest
ranking among civil aviation companies in China. Air China also
ranked 282nd among global brands in the "The World's 500 Most
Influential Brands 2020 (2020 500 )" released by World Brand Lab,
and was the only Chinese civil aviation company on the list among
43 Chinese enterprises. Meanwhile, Air China received the "China
No.1 Brand Award for Year 2020 (Aviation Services Industry) (2020
NO.1( ))" and a special award named "2020 Cultural Brand Award
(2020 )". In addition, Air China was elected "BrandZ(TM) Top 100
Most Valuable Chinese Brands 2020" (2020 BrandZ(TM) 100 )",
"Chinese Top 50 Global Brand Builders 2020 (2020 50 )", and
received an award named the "Best Listed Companies 2020 (2020
)".
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".
Situated at the intersection of Europe, the Americas and Asia,
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 local government
support, corporate 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 higher
yield level.
In 2020, under the huge impact of the COVID-19 pandemic, the
Group has rapidly 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. Upon
the implementation of the "Five-One" policy for international
flights by the Civil Aviation Administration, the Company was
allowed to operate 40 international flights per week, which ranked
first among airlines in China. 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 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. Such efforts included
proactively promoted the intelligent domestic travel services of
facial-recognition-based self-boarding at our principal base in
Beijing and realized facial recognition at the near-flight boarding
gates in Terminal 3, promoted transit services between airlines in
Beijing and provided check-in services for certain outbound routes
from Beijing with transit to Shenzhen Airlines and Shandong
Airlines, introduced passenger luggage whole process tracking and
enquiry services for 10 routes including Beijing-Chengdu and
Beijing-Wuhan and enhanced the hubs' luggage handling efficiency
and completed the expansion of lounge on the second floor of T3C in
Beijing.
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 development 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 made consistent
efforts in building a world-class hub in Beijing and an
international hub in Chengdu. During the course of the Company's
operation over the years, the Company implemented national
development strategies and hence 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
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 time slot resources and 35% of
international flight slots were transferred for the use of domestic
flights at the beginning of the summer flight season in 2020.
According to the conditions of the pandemic and market recovery
progress, the Company reasonably allocated the transport capacity
of each base and deployed wide-body aircraft in Beijing to execute
flight plans in markets such as Shanghai, Chengdu, Guangzhou and
Chongqing. The Company also provided connected international
flights to sustain flights in major international aviation
markets.
During the Reporting Period, the Company's Beijing world-class
hub newly launched domestic routes such as Beijing-Hengyang,
Beijing Daxing-Bazhong and Beijing-Yan'an; the Chengdu
international hub newly launched routes such as
Chengdu-Shijiazhuang and Chengdu-Bazhong; and the Shanghai
international portal newly launched international and domestic
routes such as Shanghai Pudong-Singapore, Shanghai Pudong-Zhuhai
and Shanghai Pudong-Xining. The Company newly launched
international and domestic routes such as Hangzhou-Singapore,
Chongqing- Zhanjiang, Chongqing-Shantou, Chongqing-Hefei, Nanchang-
Shijiazhuang, Hangzhou-Shantou, Tianjin-Ningbo, Hangzhou-Zhengzhou
and Nanchang-Xi'an.
As at the end of the Reporting Period, the Company, Shenzhen
Airlines (including Kunming Airlines), Air Macau, Beijing Airlines,
Dalian Airlines and Air China Inner Mongolia operated a total of
674 passenger routes, including 48 international routes, 6 regional
routes and 620 domestic routes. In 2020, the Company's passenger
routes reached 28 countries and regions and 147 cities, including
26 international cities, three regions and 118 domestic cities.
Through cooperation with members of Star Alliance, the Company has
further expanded its service coverage to 1,300 destinations in 195
countries and regions.
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 68.1766 million.
Air China was the first domestic airline to offer special
membership protection during the pandemic, providing frequent flyer
members who were subject to relegation or downgrade with automatic
membership renewal for a period of 12 months. Extension for
mileages of VIP members has also been introduced. Revenue
contributed by frequent fliers accounted for 52.3% of the Company's
air passenger revenue, representing a year-on-year increase of 6
percentage points to revenue. The number of registered users of Air
China APP has exceeded 12.34 million, which maintained stable yet
rapid growth. In 2020, the Company newly acquired 296 major
customers, which brought the total number of effective major
customers to 3,620 and the aggregate number of existing and newly
acquired customers under global agreements to 122. The Company
actively facilitated the resumption of work and production by
providing full-chain quality services for customized flights in
relation to the resumption of work and production of the
government, enterprises and schools. A total of over 100 customized
flights and chartered flights have been operated, which received
wide recognition from the customers.
Leading cost control advantages
In 2020, facing the impact of the pandemic, the Group insisted
to pursue the approach of "optimized operation for the entire
fleet" and the concept of "improving efficiency, optimizing
structure and focusing on major items", under which the Group put
emphasis on improving the efficiency in resource utilization,
optimizing resource allocation and enhancing cost-effectiveness.
Through coordination among various departments and with the synergy
effect from various segments, the Group adopted a refined
all-process management on the variable costs. By further promoting
the awareness of "preparing for going through hard times", the
Group enhanced refined management, limit management and benchmark
management on rigid costs and controllable expenses. On the basis
of ensuring secured liquidity for centralized allocation, the Group
gradually reduced the amount of funds on hand, increased the
capital utilization efficiency and reduced finance costs.
Continuous management innovation mechanism
With a great emphasis on innovative management, the Company has
established a set of relatively all-round and well-developed
innovation mechanism through practices, thereby formulating a
comprehensive technological innovation system. The system mainly
consists of the corporate culture encouraging innovation, and the
talent management regime motivating and supporting innovation.
During 2020, the Company continued to enhance the innovative
management system, formulated and issued the Implementation Rules
on Managing Special Funds for Scientific Research and Innovation (
) to ensure capital investment for technological innovation and
standardize the use and statistics of funds for scientific research
and innovation. With a view to accelerating the establishment and
operation of the innovation laboratories, the Company has set up
three company-level innovation laboratories and eight innovation
laboratories for special fields. The Company promulgated the
Supporting Mechanisms and Work Guidelines for Innovation
Laboratories/Engineering Technology Centers (Trial) ( / ( ) ),
specifying the mechanism for updating the supporting innovation
management system. With a focus on the actual needs of
technological innovation, the Company continued to optimize the
supporting management procedures. The Company organized the CNAHC
Group youth innovation talent seminar and sharing and exchange
activities with some leading innovation enterprises, aiming to
promote the exchange of views on the work of technological
innovation, foster internal and external innovation wisdom and
explore insights for innovative work approaches. In order to
improve synergistic innovation, the Company actively participated
in strategic alliances for industrial technological innovation to
facilitate the effective coordination between the innovation
laboratories and external business partners based on the guidance
of the needs for innovation resources and the intent of
collaboration. As of the end of the Reporting Period, the Company's
project named the "Management Platform for Aircraft Condition
Prediction and Maintenance Operation" ( ) won the second prize of
2020 Science and Technology Award granted by China Communications
and Transportation Association.
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:
Air China
Shenzhen Beijing Dalian Inner Cathay Shandong
Airlines Air Macau Airlines Airlines Mongolia AMECO CNAF Pacific Airlines
Year of 1992 1994 2011 2011 2013 1989 1994 1946 1999
establishment
Place of Shenzhen Macau Beijing Dalian Inner Beijing Beijing Hong Shandong
domicile Mongolia Kong
Principal Air passenger Air passenger Business Air passenger Air passenger Repair Provision Air passenger Air passenger
business and air and air charter and air and air and overhaul of financial and air and air
cargo cargo and public cargo cargo of aircraft, services cargo cargo
services services air passenger services services engines to CNAHC services services
and air and components Group
cargo and the
services Group
Registered RMB5,360,000,000 MOP442,042,000 RMB1,000,000,000 RMB3,000,000,000 RMB1,000,000,000 USD300,052,800 RMB1,127,961,864 6,437,200,203 RMB400,000,000
capital ordinary
shares
in issue
Percentage of
shareholding
by the
Company 51% 66.8995% 51% 80% 80% 75% 51% 29.99% 22.8%
17,394 40,772 10,534
(on a (on a (on a
Revenue (RMB consolidated consolidated consolidated
million) basis) 665 405 1,056 979 8,590 227 basis) basis)
Year-on-year
changes (%) (45.44) (81.94) (46.59) (43.22) (42.85) (5.07) (23.39) (56.98) (44.53)
Air traffic
revenue
(RMB million) 16,799 636 345 1,027 964 N/A N/A 34,609 9,830
Year-on-year
changes (%) (45.79) (82.35) (54.55) (44.72) (43.12) N/A N/A (60.06) (46.16)
Profit/(loss)
after
taxation
(RMB million) (2,133) (918) (32) 25 (35) (153) 65 (18,805) (2,382)
Profit in the
corresponding
period of
last
year (RMB
million) 1,152 113 79 141 202 238 105 1,498 361
(Loss)/profit
attributable
to parent
company
(RMB million) (2,062) (918) (32) 25 (35) (153) 65 (18,805) (2,382)
Profit
attributable
to parent
company
in the
corresponding
period of
last
year (RMB
million) 1,157 113 79 141 202 238 105 1,498 361
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 Shenzhen Beijing Air China Shandong
Period Airlines Air Macau Airlines* Dalian Airlines Inner Mongolia Cathay Pacific Airlines
222 239
(on a consolidated (on a consolidated
Fleet size (unit) basis) 21 3 13 12 basis) 131
Average age (year) 7.27 6.54 11.08 7.24 8.61 10.1 7.28
Aircraft
introduced
(unit) 4 0 0 0 1 13 7
Aircraft phased
out (unit) 0 2 0 0 0 10 0
ASK (100 million) 520.49 17.65 5.52 29.23 24.60 346.1 337.99
Year-on-year
changes (%) -26.34 -77.23 -29.35 -19.36 -11.48 -78.8 -24.57
RPK (100 million) 371.87 9.12 3.91 20.16 17.22 200.8 256.27
Year-on-year
changes (%) -35.75 -85.12 -39.78 -33.32 -24.23 -85.1 -31.94
Passengers carried
(thousand) 25,481.0 545.9 429.1 1,578.2 1,570.9 4,631 18,194.9
Year-on-year
changes (%) -32.68 -85.10 -41.00 -38.18 -26.69 -86.9 -29.58
Average passenger
load factor (%) 71.45 51.68 70.88 68.96 69.97 58.0 75.82
Year-on-year
changes (ppt) -10.47 -27.39 -12.28 -14.44 -11.78 -24.3 -8.20
5.9817
AFTK 1,175 million 27.9127 million million 24.8174 million 20.4057 million 11.33 billion 590 million
Year-on-year
changes (%) -10.32 -77.03 -28.46 -33.37 -35.96 -35.5 -23.18
2.2482
RFTK 578 million 8.9991 million million 15.0459 million 10.3126 million 8.31 billion 280 million
Year-on-year
changes (%) -15.15 -65.43 -41.89 -23.21 -14.06 -26.5 -9.56
Volume of cargo
and mail carried
(tonnes) 356,400 5,691.35 2,650.72 11,082.65 8,673.67 1,332,000 165,900
Year-on-year
changes (%) -12.48 -63.92 -43.05 -30.26 -24.36 -34.1 -8.91
Cargo and mail
load factor (%) 49.19 32.24 37.58 60.63 50.54 73.3 47.43
Year-on-year
changes (ppt) -2.80 10.82 -8.69 8.02 12.88 8.9 7.14
*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 8.41 years. During the
Reporting Period, in terms of business charter service, Beijing
Airlines completed 348 flights, representing a year-on-year
decrease of 6.7%; it completed 1,034 flying hours, representing a
year-on-year decrease of 27.78%; it carried a total of 2,222
passengers, representing a year-on-year decrease of 31.16%.
OPERATIONAL PLAN
The Company has established its operational focuses for 2021,
including (1) containing the pandemic in a solid and meticulous
manner; (2) strengthening operation safety; (3) effectively
maximizing operating performance; (4) continuously improving
product and service quality; (5) firmly deepening the reform; and
(6) relentlessly pushing forward the quality development of the
Party building.
OUTLOOK FOR FUTURE
In-depth implementation of national strategies for 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 and Guangdong-Hong Kong-Macau Greater Bay Area Development
Plan, and will strengthen regional aviation links and coordination
as well as the existing landscape of the aviation market. The "Belt
and Road" initiative will promote China's economic and trade
exchanges and cooperation with Southeast Asia and Europe, not only
strengthening the international hub status of 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,
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. The Guangdong-Hong Kong-Macau Greater Bay Area
Development Plan will deepen the cooperation between the Mainland
and Hong Kong and Macao, and promote the construction of
international hubs of Hong Kong, Guangzhou and Shenzhen. The
construction of airport groups serving the three 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
In 2020, the COVID-19 pandemic has brought great challenges to
the civil aviation industry. In 2021, as vaccines are gradually
becoming available, the global pandemic may be alleviated. There
will be 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 pattern which
is based on domestic macrocirculation, 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 drivers
of the development of the aviation industry, and air travel will
become increasingly customized and popular. During the "14th
Five-Year Plan" period, airport renovations and expansions are
underway in various regions and the industry will embrace immense
opportunities with increasing time slots and other key
resources.
More intense competition among global and domestic aviation
markets
As affected by the COVID-19 pandemic, as of the end of the
Reporting Period, over 40 airlines worldwide have either ceased or
suspended operation and more airlines are experiencing operation
difficulties due to cash consumption. Based on the current
situation, the global civil aviation industry may undergo a new
round of restructuring.
From the perspective of the international market, as the
pandemic prevails in overseas countries and regions, the demand for
travelling abroad will recover slowly in the future and hence the
Company will slow down the introduction of wide-body aircraft. From
the perspective of the domestic market, as the domestic airline
market has basically bottomed out, various airlines will shift
certain international market capacities to the domestic market,
which will further intensify the competition in 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 RMB69,504
million, representing a decrease of RMB66,677 million or 48.96% as
compared with last year. Among which, air traffic revenue was
RMB64,280 million, representing a decrease of RMB65,977 million or
50.65% as compared with last year; other operating revenue was
RMB5,224 million, representing a year-on-year decrease of RMB700
million or 11.82%.
Revenue Contributed by Geographical Segments
2020 2019
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 51,953,674 74.74% 89,000,172 65.35% (41.63%)
Hong Kong SAR, Macau SAR
and Taiwan, China 1,032,767 1.49% 5,911,532 4.34% (82.53%)
Europe 6,176,092 8.89% 13,374,965 9.82% (53.82%)
North America 3,397,082 4.89% 8,821,998 6.48% (61.49%)
Japan and Korea 2,123,022 3.05% 8,592,855 6.31% (75.29%)
Asia Pacific and others 4,821,112 6.94% 10,479,168 7.70% (53.99%)
Total 69,503,749 100.00% 136,180,690 100.00% (48.96%)
Air Passenger Revenue
During the Reporting Period, the Group recorded an air passenger
revenue of RMB55,727 million, representing a decrease of RMB68,798
million over the previous year. Among the air passenger revenue,
the decrease of capacity contributed a decrease of RMB56,998
million to the revenue, and the decrease of passenger load factor
led to a decrease of RMB8,874 million to the revenue, while the
decrease of passenger yield resulted in a decrease in revenue of
RMB2,926 million. The Group's capacity, passenger load factor and
yield per RPK in 2020 are as follows:
2020 2019 Change
ASK (million) 156,060.66 287,787.61 (45.77%)
Passenger load factor (%) 70.38 81.02 ( 10.64 ppt )
Yield per RPK (RMB) 0.5074 0.5340 (4.98%)
Air Passenger Revenue Contributed by Geographical Segments
2020 2019
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 45,307,186 81.30% 81,555,227 65.49% (44.45%)
Hong Kong SAR, Macau SAR
and Taiwan, China 777,411 1.40% 5,698,251 4.58% (86.36%)
Europe 3,567,703 6.40% 12,007,281 9.64% (70.29%)
North America 1,955,890 3.51% 7,917,567 6.36% (75.30%)
Japan and Korea 1,345,339 2.41% 7,817,141 6.28% (82.79%)
Asia Pacific and others 2,773,333 4.98% 9,529,116 7.65% (70.90%)
Total 55,726,862 100.00% 124,524,583 100.00% (55.25%)
Air Cargo and Mail Revenue
During the Reporting Period, the Group's air cargo and mail
revenue was RMB8,553 million, representing an increase of RMB2,821
million as compared with last year. Among which, the decrease of
capacity contributed a decrease of RMB689 million to the revenue,
while the decrease of cargo and mail load factor resulted in a
decrease in revenue of RMB775 million, and the increase of yield of
cargo and mail resulted in an increase of RMB4,285 million to the
revenue. The capacity, cargo and mail load factor and yield per
RFTK in 2020 are as follows:
2020 2019 Change
Available freight tonne kilometres
(million) 9,634.66 10,951.75 (12.03%)
Cargo and mail load factor (%) 36.93 43.63 ( 6.70 ppt )
Yield per RFTK (RMB) 2.4040 1.1995 100.42%
Air Cargo and Mail Revenue Contributed by Geographical
Segments
2020 2019
(in RMB'000) Amount Percentage Amount Percentage Change
Mainland China 1,423,008 16.64% 1,520,998 26.53% (6.44%)
Hong Kong SAR, Macau SAR
and Taiwan, China 255,356 2.98% 213,281 3.72% 19.73%
Europe 2,608,389 30.50% 1,367,684 23.86% 90.72%
North America 1,441,192 16.85% 904,431 15.78% 59.35%
Japan and Korea 777,683 9.09% 775,714 13.53% 0.25%
Asia Pacific and others 2,047,779 23.94% 950,052 16.58% 115.54%
Total 8,553,407 100.00% 5,732,160 100.00% 49.22%
Operating Expenses
During the Reporting Period, the Group's operating expenses were
RMB85,030 million, representing a decrease of 32.30% from
RMB125,598 million in the same period last year. The breakdown of
the operating expenses is set out below:
2020 2019
(in RMB'000) Amount Percentage Amount Percentage Change
Jet fuel costs 14,817,474 17.43% 35,965,239 28.64% (58.80%)
Take-off, landing and
depot charges 9,239,943 10.87% 16,440,081 13.09% (43.80%)
Depreciation and amortisation 20,408,317 24.00% 21,279,084 16.94% (4.09%)
Aircraft maintenance,
repair and overhaul costs 6,423,313 7.55% 6,119,539 4.87% 4.96%
Employee compensation
costs 22,012,834 25.89% 25,473,898 20.28% (13.59%)
Air catering charges 1,605,027 1.89% 4,026,090 3.21% (60.13%)
Selling and marketing
expenses 2,568,362 3.02% 4,684,722 3.73% (45.18%)
General and administrative
expenses 1,051,495 1.24% 1,844,232 1.47% (42.98%)
Others 6,902,750 8.12% 9,765,077 7.77% (29.31%)
Total 85,029,515 100.00% 125,597,962 100.00% (32.30%)
Jet fuel costs decreased by RMB21,148 million on a year-on-year
basis, mainly due to the combined effect of the decrease in the
consumption and prices of jet fuel.
Take-off, landing and depot charges decreased by RMB7,200
million on a year-on-year basis, mainly due to a decrease in the
number of take-offs and landings.
Depreciation and amortisation decreased by RMB871 million on a
year-on-year basis, mainly due to the change of depreciation method
of the Group's overhaul components of engine from straight-line
method to the units-of-production method (please refer to note 3A
to the consolidated financial statements contained in this annual
report for details).
Employee compensation costs decreased by RMB3,461 million on a
year-on-year basis, mainly due to the decrease in the number of
flights, the adjustment of compensation standards and the 50%
reduction in social insurance.
Air catering charges decreased by RMB2,421 million on a
year-on-year basis, mainly due to the decrease in the number of
passengers.
Selling and marketing expenses decreased by RMB2,116 million on
a year-on-year basis, mainly due to the decrease in handling fees
and booking fees resulting from the decrease in the sales volume
and the number of passengers.
Other operating expenses mainly included contributions to the
civil aviation development fund and ordinary expenses arising from
the core air traffic business not specifically mentioned above,
which decreased by 29.31% on a year-on-year basis. The decrease was
mainly due to the decrease in transport and the exemption of civil
aviation development fund.
Finance Income, Finance Costs and Net Exchange Gain/Loss
During the Reporting Period, the Group recorded a finance income
of RMB192 million, representing a year-on-year increase of RMB28
million or 17.41%; and incurred finance costs (excluding the
capitalised portion) of RMB5,100 million, representing a
year-on-year increase of RMB151 million. During the Reporting
Period, the Group recorded a net exchange gain of RMB3,604 million,
as compared to the net exchange loss of RMB1,211 million for the
same period of 2019, which was mainly attributable to the
deprecation of USD against RMB during the Reporting Period.
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 RMB5,993
million, as compared to the net gain of RMB475 million for the same
period of 2019. Among which, during the Reporting Period, the Group
recognized a loss on investment of Cathay Pacific of RMB5,109
million, as compared to the gain on investment of Cathay Pacific of
RMB67 million recognized for the same period last year; and
recognized a loss on investment of Shandong Aviation Group
Corporation and Shandong Airlines of RMB968 million, as compared to
the gain on investment of RMB197 million for the same period last
year.
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 RMB284,030 million, representing a decrease of 3.46% from
that as at 31 December 2019, among which current assets accounted
for RMB19,736 million or 6.95% of the total assets, while
non-current assets accounted for RMB264,294 million or 93.05% of
the total assets.
Among the current assets, cash and cash equivalents were
RMB5,838 million, accounting for 29.58% of the current assets and
representing a decrease of 34.66% from that as at 31 December
2019.
Among the non-current assets, the net book value of property,
plant and equipment and right-of-use assets as at the end of the
Reporting Period amounted to RMB215,886 million, accounting for
81.68% of the non-current assets and representing a decrease of
2.55% from that as at 31 December 2019.
Asset Mortgage
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 net book value of
approximately RMB79,981 million (RMB81,724 million as at 31
December 2019) and land use rights with net book value of
approximately RMB27 million (RMB27 million as at 31 December 2019).
In addition, as at the end of the Reporting Period, the Group had
restricted bank deposits of approximately RMB737 million
(approximately RMB728 million as at 31 December 2019), which were
mainly reserves deposited in the People's Bank of China.
Capital Expenditure
In 2020, the Group's capital expenditure totalled RMB13,319
million, of which the total investment in aircraft was RMB9,847
million, mainly including procurement of aircraft and engines,
aircraft modifications, flight simulators, etc. Other capital
expenditure investment amounted to RMB3,472 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 RMB10,938 million,
representing a decrease of 25.33% from that as at 31 December 2019.
Among this, the balance of the equity investment of the Group in
Cathay Pacific, Shandong Aviation Group Corporation and Shandong
Airlines amounted to RMB9,761 million, RMB673 million and RMB55
million, respectively, with such companies recording net loss
attributable to shareholders of RMB18,806 million, RMB927 million
and RMB2,382 million, respectively during the Reporting Period.
As at the end of the Reporting Period, the Group's equity
investment in its joint ventures was RMB1,581 million, representing
an increase of 2.44% from that as at 31 December 2019.
Debt Structure Analysis
As at the end of the Reporting Period, the Group's total
liabilities were RMB200,257 million, representing an increase of
3.83% from that as at 31 December 2019. Among them, current
liabilities amounted to RMB80,598 million, accounting for 40.25% of
the total liabilities; and non-current liabilities amounted to
RMB119,659 million, accounting for 59.75% of the total
liabilities.
Among the current liabilities, interest-bearing debts (including
bank loans and other borrowings, bills payable and lease
liabilities) amounted to RMB53,254 million, representing an
increase of 45.54% from that as at 31 December 2019, which is
mainly due to the increase of financing scale to cope with the
impact of Covid-19 pandemic so as to ensure the liquidity
safety.
Among the non-current liabilities, interest-bearing debts
(including bank loans and other borrowings and lease liabilities)
amounted to RMB107,738 million, representing an increase of 4.41%
from that as at 31 December 2019.
Details of interest-bearing debts of the Group categorized by
currency are set out below:
31 December 2020 31 December 2019
(in RMB'000) Amount Percentage Amount Percentage Change
RMB 109,420,080 67.97% 77,029,395 55.11% 42.05%
US dollars 49,669,410 30.85% 60,356,994 43.18% (17.71%)
Others 1,902,082 1.18% 2,390,421 1.71% (20.43%)
Total 160,991,572 100.00% 139,776,810 100.00% 15.18%
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 17.97% from RMB50,007 million as at
31 December 2019 to RMB41,020 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
RMB23 million as at the end of the Reporting Period, as compared to
RMB24 million as at 31 December 2019.
Details of the Group's contingent liabilities are set out in
note 42 to the consolidated financial statements of the Group for
2020.
Gearing Ratio
As at the end of the Reporting Period, the Group's gearing ratio
(total liabilities divided by total assets) was 70.51%,
representing an increase of 4.95 percentage points from that as at
31 December 2019. 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
RMB60,862 million, representing an increase of RMB7,706 million
from that as at 31 December 2019. Based on the structure of current
assets and current liabilities, the Group's current ratio (current
assets divided by current liabilities) was 0.24, representing a
decrease as compared to that of 0.32 as at 31 December 2019.
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 outflow from operating
activities was RMB4,017 million, as compared to the net cash inflow
of RMB33,599 million for the corresponding period in 2019, which
was mainly because the sales fell and the number of ticket refunds
rose on a year-on-year basis as affected by the Covid-19 pandemic.
Net cash outflow from investing activities was RMB15,865 million,
representing an increase of 33.58% from RMB11,967 million for the
corresponding period in 2019, mainly due to the subscription of the
shares of Cathay Pacific amounting to HK$3,514 million in August
2020. Net cash inflow from financing activities amounted to
RMB16,888 million, as compared with the net cash outflow from
financing activities of RMB19,510 million for the same period of
the previous year, mainly due to the increase of its financing
scale to cope with the impact of Covid-19 pandemic and ensure the
liquidity safety.
The Company has obtained bank facilities of RMB174,669 million
in aggregate granted by several banks in China, among which
approximately RMB52,427 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
With regularized pandemic prevention and control measures, China
stayed committed to the general working principle of pursuing
progress while ensuring stability in 2020. It continued to adopt
the new development concept and focused on the supply-side
structural reform. In order to promote high-quality development, it
devoted strenuous efforts to the "Six Stabilities", which led to
steady economic recovery and overall positive market expectation.
However, global economic growth was dragged down by the
significantly tightening external economic environment.
Oil Price Fluctuation
In 2020, the global economy took a heavy hit from the worldwide
pandemic, which led to the decline in the demand for crude oil.
During 2020, oil price remained at a relatively low range in
general. Jet fuel constitutes one of the major components of the
Group's operating costs, for which the Group's financial
performance is substantially subject to the fluctuation of 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
RMB741 million.
Exchange Rate Fluctuation
The Group's certain lease liabilities, bank loans and other
loans are mainly denominated in US dollar, Euro and Japanese Yen.
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 2020
by RMB357 million; the appreciation or depreciation of RMB against
Euro 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 2020 by RMB9.314 million;
the appreciation or depreciation of RMB against Japanese Yen 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 2020 by RMB6.59 million.
Details of the financial risk management objectives and policies
of the Group are set out in note 44 to the financial statements of
the Group for 2020.
Risks of Competition
Industry competition
As the Covid-19 pandemic weakened the global market demand,
domestic aviation companies increased their investments in the
domestic market, which might escalate the competition in the
domestic market. In addition, 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.
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 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 international
hubs. Regarding the domestic routes, as the Company's medium- and
short-haul routes account for a relatively low proportion in the
industry, the Company may suffer from the competition of high-speed
railway transportation to a limited extent overall.
Corporate Governance Report
MEMBERS OF THE FIFTH SESSION OF THE BOARD
Mr. Song Zhiyong
Mr. Feng Gang
Mr. Patrick Healy
Mr. Xue Yasong
Mr. Duan Hongyi
Mr. Stanley Hui Hon-chung
Mr. Li Dajin
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. The Company's corporate governance
practices are summarised and discussed below.
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 FIFTH SESSION OF THE SUPERVISORY COMMITTEE
Mr. Zhao Xiaohang
Mr. He Chaofan
Ms. Lyu Yanfang
Mr. Wang Jie
Mr. Qin Hao
As of the end of the Reporting Period, the Board of the Company
comprised eight Directors, out of which four were independent
non-executive Directors. All of the Directors have actively
participated in the activities of the Company. The attendance
records of all the Directors 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
Nomination
Audit and and Strategy
Risk Control Remuneration and Investment Aviation
Committee Committee Committee Safety Committee
General Meeting Board Meeting Meeting Meeting Meeting Meeting
Executive
Director
Song Zhiyong
(Chairman) 2/2 7/7 N/A N/A 3/3 2/2
Non-executive
Directors
Cai Jianjiang
(resigned
during the
Reporting
Period) 1/2 5/6 N/A 3/3 3/3 N/A
Feng Gang 1/1 3/4 N/A N/A N/A N/A
Patrick Healy 2/2 7/7 N/A N/A N/A N/A
Xue Yasong 2/2 7/7 N/A N/A N/A N/A
Independent
Non-executive
Directors
Wang Xiaokang
(resigned
after the
Reporting
Period) 2/2 7/7 N/A 4/4 N/A N/A
Liu Deheng
(resigned during
the Reporting
Period) N/A N/A N/A N/A N/A N/A
Duan Hongyi 1/1 4/4 4/4 N/A 2/2 N/A
Stanley Hui
Hon-chung 2/2 7/7 8/8 N/A N/A 2/2
Li Dajin 2/2 6/7 7/8 4/4 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, Secretary to
the Board, 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.
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 Secretary to the Board shall issue a notice of the
extraordinary Board meeting within 10 days from the receipt of the
proposal(s), and 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 require the presence of the
persons-in-charge of the relevant departments of the Company at the
Board meetings to answer queries, so that the Directors can have a
thorough understanding of the key issues and the general
situation.
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, the re-election and appointment of members of the Board
and the Supervisory Committee will be postponed. The terms of the
special committees of the fifth session of the Board will also be
extended accordingly. The Company will endeavour to complete the
re-election and appointment of members of the Board and the
Supervisory Committee as soon as possible and fulfill respective
information disclosure obligations in a timely manner. All members
of the fifth session of the Board and the Supervisory Committee
will continue 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 is completed. The
postponed re-election of the members of the Board and the
Supervisory Committee will 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. Cai Jianjiang resigned as
the Chairman and non-executive Director on 29 December 2020. On the
same day, Mr. Song Zhiyong was elected as the Chairman.
The Company has a President who shall be appointed or dismissed
by the Board. The President is authorised to oversee the Group's
business, implement various strategies and be responsible for the
Company's daily operation to attain overall commercial goals. Mr.
Song Zhiyong was appointed as the President on 28 January 2014. As
mentioned above, due to change of job assignments, Mr. Song Zhiyong
was elected as the Chairman on 29 December 2020 and resigned as the
President on the same day.
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 in September 2013, 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.
-- 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 recognised
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 Director
Song Zhiyong (Chairman) a,b
Non-executive Directors
Cai Jianjiang (resigned during the Reporting Period) a,b
Feng Gang a
Patrick Healy a
Xue Yasong a,b
Independent Non-executive Directors
Wang Xiaokang (resigned after the Reporting Period) a,b
Liu Deheng (resigned during the Reporting Period) a,b
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.
Pursuant to the Listing Rules, as at the end of the Reporting
Period, the four independent non-executive Directors, namely, Mr.
Wang Xiaokang (resigned after the Reporting Period), 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 all independent
non-executive Directors the annual statements concerning their
independence and re-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
As at the end of the Reporting Period, the Audit and Risk
Control Committee comprised Mr. Duan Hongyi, Mr. Li Dajin and Mr.
Stanley Hui Hon-chung, all of whom are independent non-executive
Directors, with Mr. Duan Hongyi serving as the chairman of the
committee.
The primary duties of the Audit and Risk Control 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 during the
Reporting Period includes reviewing the following documents: (1)
the 2019 annual report, the reports for the first and third
quarters and the interim report of 2020; (2) the 2019 profit
distribution plan; (3) the 2019 assessment report on internal
control and the audit report on internal control; (4) the 2020
financial plan and capital expenditure plan; (5) the special
reports regarding the deposit and actual use of the proceeds from
issuance of A Shares for 2019 and the first half of 2020; (6) the
re-appointment of international and domestic auditors and internal
control auditors for the year; (7) the guarantee business provided
by CNAF; (8) the performance report by the Audit and Risk Control
Committee; (9) the change of depreciation method of overhaul
components of engines of the Company; (10) the participation in the
recapitalization plan of Cathay Pacific; (11) the election of Mr.
Duan Hongyi as the chairman of the Audit and Risk Control
Committee; (12) the renewal of the trademark license framework
agreement between the Company and CNAHC; (13) the renewal of the
financial services framework agreement between the Company and CNAF
and the application of annual caps for continuing connected
transactions; and (14) the renewal of the financial services
framework agreement between CNAF and CNAHC and the application of
annual caps for continuing connected transactions.
In addition to the above, the Audit and Risk Control Committee
also received the following reports during the Reporting Period:
(1) the work requirements of the securities regulation authorities
with regard to annual report and the overall timetable for the
preparation of 2019 annual report of the Company; (2) the audit
report of the financial statements for the year of 2019; (3) the
summary of internal audit work for 2019; (4) the list of A share
related parties of the Company for the year of 2019 and the first
half of 2020; (5) the audit work plan for 2020; (6) the review of
the financial statements for the first half of 2020 and the plan
for internal control audit for the year of 2020; (7) the
self-assessment plan on internal control for the year of 2020; (8)
interim adjustment to the financial plan for the year of 2020; and
(9) the implementation report of the work arrangement for the final
budgets meeting of SASAC for the year of 2020.
The annual results and annual report of the Company for the year
of 2020 had been reviewed by the Audit and Risk Control
Committee.
Nomination and Remuneration Committee
As at the end of the Reporting Period, the Nomination and
Remuneration Committee comprised Mr. Li Dajin and Mr. Wang
Xiaokang, both are independent non-executive Directors, with Mr. Li
Dajin serving as the chairman of the committee. On 9 February 2021,
Mr. Wang Xiaokang resigned from his position as a member of the
Nomination and Remuneration Committee due to his age. On 30 March
2021, Mr. Duan Hongyi was elected as a member of the Nomination and
Remuneration 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
fulfilment of exercise conditions, and make recommendations to the
Board for consideration.
During the Reporting Period, the Nomination and Remuneration
Committee reviewed the proposals in relation to the election of Mr.
Song Zhiyong as the new Chairman, the nomination of Mr. Feng Gang
as a candidate for Director and Mr. Duan Hongyi as a candidate for
independent non-executive Director, the appointment of Mr. Ni
Jiliang as the chief engineer, the appointment of Mr. Zhang Sheng
as a vice president of the Company and the change of joint company
secretary.
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 average level of the listed
companies in the industry with the actual situation of the Company
taken into account, 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.
Details of the remuneration for the Directors and senior
management during the Reporting Period are disclosed 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, the Chairman, and
Mr. Duan Hongyi, an independent non-executive Director, with Mr.
Song Zhiyong 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.
During the Reporting Period, the Strategy and Investment
Committee considered and approved the investment plan of the
Company for 2020, and received reports on the implementation of the
three-year action plan of SASAC for the state-owned enterprise
reform, the social responsibility report work plan for the year of
2020, the completion of investment plans for the year of 2019 and
the implementation progress of investment plan for the year of
2020.
Aviation Safety Committee
As at the end of the Reporting Period, the Aviation Safety
Committee comprised Mr. Song Zhiyong, the Chairman, and Mr. Stanley
Hui Hon-chung, an independent non-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 fulfil the needs of safety
operation of the Company.
During the Reporting Period, the Aviation Safety Committee
received reports of the safety status of the Company and the
operation of China-made aircraft.
MANAGEMENT
Duties of the Management
The management shall be accountable to the Board and its main
responsibilities include: (1) to formulate the strategic
development plans of the Company; (2) to formulate the plans on the
establishment of the Company's internal management bodies; (3) to
implement annual business plans, investment proposals, preliminary
and final annual financial budgets; (4) to establish general
management systems regarding employment, remuneration and other
fundamental internal rules and regulations; (5) to make decisions
on major issues such as operation safety and business management;
(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; and (7) to implement Board resolutions, 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 and the
management of the Company.
The Group 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 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 and considered that the system was
adequate and effective. The review of the Audit and Risk Control
Committee covered key control aspects, including financial
controls, operational controls and compliance controls. The Audit
and Risk Control 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 Group 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 2020, 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 Group has established an audit department and legal
department to assist the Audit and Risk Control 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 for review of risk management and internal
control system. The Audit and Risk Control 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 Harbour", the Company will disclose such
inside information to the public as soon as practicable.
ARTICLES OF ASSOCIATION
During the Reporting Period, no amendments were made to the
Articles of Association.
On 18 March 2021, the Board resolved to propose to amend the
provisions relating to the Company's address and the business name
of the promotor of the Company in the Articles of Association. The
proposed amendments to the Articles of Association are subject to
shareholders' approval at the general meeting of the Company. For
details, please refer to the announcement of the Company dated 18
March 2021.
COMPANY SECRETARY
The company secretary, namely Mr. Zhou Feng, is 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
company secretary are set out in the section headed "Profile of
Directors, Supervisors and Senior Management" of this annual
report. During the Reporting Period, the company secretary attended
a total of more than 15 hours of professional training to update
his skill 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 financial statements for
the six months ended 30 June 2020 and for the audit of the Group's
financial statements for the year ended 31 December 2020; an
aggregate amount of RMB8,138,000 (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 2020; 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 RMB435,000 (including value-added tax) was charged for
providing other non-audit 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, 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 92 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, Shunyi District, Beijing, 101312
Email: ir@airchina.com
Telephone number: 86-10-61462560
Fax number: 86-10-61462805
Other EVENTS
On 9 February 2021, Mr. Wang Xiaokang resigned as an independent
non-executive Director and a member of the nomination and
remuneration committee of the Board due to his age. The resignation
took effect from 9 February 2021. For details, please refer to the
announcement of the Company dated 9 February 2021.
On 30 March 2021, Mr. Duan Hongyi, an independent non-executive
Director, was elected as a member of the nomination and
remuneration committee of the Board. For details, please refer to
the announcement of the Company dated 30 March 2021.
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 enhance 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 2020 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, environmental
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 2020 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:
Percentage of the
Category of shares Number of shares 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
Percentage Percentage
Percentage of the total of the total
Type and number of the total issued A issued H
Type of of shares held issued shares shares of shares of
Name interests by the Company of the Company the Company the Company Short positions
Beneficial 5,952,236,697
CNAHC owner A Shares 40.98% 59.75% - -
Equity 1,332,482,920
CNAHC(1) attributable A Shares 9.17% 13.38% - -
Equity 223,852,000
CNAHC(1) attributable H Shares 1.54% - 4.91% -
Beneficial 1,332,482,920
CNACG owner A Shares 9.17% 13.38% - -
Beneficial 223,852,000
CNACG owner H Shares 1.54% - 4.91% -
Beneficial 2,633,725,455
Cathay Pacific owner H Shares 18.13% - 57.72% -
Swire Pacific Equity 2,633,725,455
Limited(2) attributable H Shares 18.13% - 57.72% -
John Swire & Sons Equity 2,633,725,455
(H.K.) Limited(2) attributable H Shares 18.13% - 57.72% -
John Swire & Sons Equity 2,633,725,455
Limited(2) attributable 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 55.20%
equity interest and 64.28% 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 176,299 accounts, of which
as at the end of the Reporting Period (account) 3,144 accounts are registered
holders of H Shares
Total number of holders of ordinary shares 160,622 accounts, of which
as at the end of the month preceding to the 3,121 accounts are registered
disclosing date of the annual results (account) 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
Shares pledged
or frozen
Number of Number
shares held of shares
Change(s) as at the held
Name of during end of the Shareholding subject
shareholder the Reporting Reporting percentage to selling Nature of
(full name) Period Period (%) restrictions Status Number shareholder
China National
Aviation
Holding
Corporation State-owned
Limited 0 5,952,236,697 40.98 0 Frozen 127,445,536 legal person
Cathay Pacific
Airways Foreign
Limited 0 2,633,725,455 18.13 0 Nil 0 legal person
HKSCC NOMINEES Foreign
LIMITED -84,040 1,687,734,388 11.62 0 Nil 0 legal person
China National
Aviation
Corporation
(Group) Foreign
Limited 0 1,556,334,920 10.72 0 Frozen 36,454,464 legal person
China National
Aviation
Fuel Group State-owned
Corporation 0 466,583,102 3.21 0 Nil 0 legal person
China Securities
Finance
Corporation State-owned
Limited 0 311,302,365 2.14 0 Nil 0 legal person
Hong Kong
Securities
Clearing Company Foreign
Limited 94,437,174 154,556,873 1.06 0 Nil 0 legal person
Beijing Chengtong
Financial
Investment Co.,
Ltd. State-owned
( ) 36,366,210 36,366,210 0.25 0 Nil 0 legal person
Domestic
natural
Ke Yunjun ( ) 30,252,050 30,252,050 0.21 0 Nil 0 person
Huaxia Life
Insurance
Company Limited
- Own Domestic
funds non-state-owned
( ) 18,971,300 23,224,900 0.16 0 Nil 0 legal person
Shareholdings of the top 10 shareholders not subject to selling
restrictions
Class and number of shares
Number of tradable
shares held
not subject
to selling
Name of shareholder restrictions Class Number
China National Aviation Holding RMB ordinary
Corporation Limited 5,952,236,697 shares 5,952,236,697
Overseas listed
Cathay Pacific Airways Limited 2,633,725,455 foreign shares 2,633,725,455
Overseas listed
HKSCC NOMINEES LIMITED 1,687,734,388 foreign shares 1,687,734,388
China National Aviation Corporation RMB ordinary
(Group) Limited 1,556,334,920 shares 1,332,482,920
Overseas listed
foreign shares 223,852,000
China National Aviation Fuel Group RMB ordinary
Corporation 466,583,102 shares 466,583,102
China Securities Finance Corporation RMB ordinary
Limited 311,302,365 shares 311,302,365
Hong Kong Securities Clearing Company RMB ordinary
Limited 154,556,873 shares 154,556,873
Beijing Chengtong Financial Investment
Co., Ltd. RMB ordinary
( ) 36,366,210 shares 36,366,210
RMB ordinary
Ke Yunjun ( ) 30,252,050 shares 30,252,050
Huaxia Life Insurance Company Limited RMB ordinary
- Own funds ( ) 23,224,900 shares 23,224,900
Explanation on connected relationship China National Aviation Corporation (Group)
or action in concert among the Limited is a wholly-owned subsidiary
above shareholders of China National Aviation Holding Corporation
Limited. Accordingly, China National
Aviation Holding Corporation Limited
is directly and indirectly interested
in 51.70% of the shares of the Company.
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 1,687,734,388 H shares held by it in
the Company do not include the 166,852,000 shares held by it as
nominee of China National Aviation Corporation (Group) Limited.
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) ( ( [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 China National Aviation Holding
Corporation Limited, the controlling shareholder of the Company,
and China National Aviation Corporation (Group) Limited
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.
DIVID 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.
DIVIDS
According to the audit under the Chinese accounting standards
and the international accounting standards, the Company recorded a
net loss attributable to the owner of the parent company in 2020.
As considered and approved by the 27th meeting of the fifth session
of the Board, the Company proposed not to make profit distribution
for the year of 2020. 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 2021. The register of members of H Shares will be closed from
Sunday, 25 April 2021 to Tuesday, 25 May 2021 (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 Friday, 23 April 2021. The holders of H
Shares whose names appear on the register of members of the Company
on Sunday, 25 April 2021 are entitled to attend 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.
USE OF THE PROCEEDS RAISED IN THE NON-PUBLIC ISSUANCE OF A
SHARES
On 10 March 2017, the Company completed the non-public issue of
1,440,064,181 A Shares to CNAHC, China Structural Reform Fund Co.,
Ltd., Zhongyuan Equity Investment Management Co., Ltd., China
National Aviation Fuel Group Corporation, Caitong Fund Management
Co., Ltd., CIB Asset Management Co., Ltd., Horizon Asset Management
Co., Ltd. and E Fund Management Co., Ltd., at an issue price of
RMB7.79 per share (the "Non-public Issuance of A Shares"). The net
proceeds raised is RMB11,200.4185 million. The table below shows
the use of the proceeds raised by the Non-public Issuance of A
Shares:
Unit: RMB (million)
Outstanding
Cumulative amount to
Amount available amount invested be invested
Total committed as at the Amount invested as at the as at the
investment beginning during the end of the end of the
Committed investment amount of of the Reporting Reporting Reporting Reporting
project target proceeds Period Period Period Period
1. Purchase of 15
Boeing B787 aircraft 7,450 - - 7,450 -
2. Upgrade of e-commerce
direct sale project 100 20.1662 20.1662 100 -
3. On-board WIFI
(first phase) project 50.4185 - - 50.4185 -
4. Replenish the
working capital 3,600 - - 3,600 -
Total: 11,200.4185 20.1662 20.1662 11,200.4185 -
Note: According to the plan on the Non-public Issuance of A
Shares, if the actual proceeds raised by the Non-public Issuance of
A Shares are less than the total amount of proceeds proposed to be
invested in the projects, the Company will adjust and determine the
specific amount invested in each project based on the net proceeds
actually raised and priorities of projects. As the proceeds
actually raised are less than the total proposed investment amount
of RMB12.0 billion, the Company has adjusted the specific
investment amount in "upgrade of e-commerce direct sale project"
and "on-board WIFI (first phase) project" according to the above
authorization (that was, RMB800 million and RMB150 million
respectively before adjustment). Please refer to the above table
for the total investment amount after adjustment. As at the end of
the Reporting Period, there is no change in the use of
proceeds.
As at the end of the Reporting Period, the proceeds raised by
the Company were fully applied to the intended proposes. Total
amount applied was RMB11,200,418,471.06, among which the amount
applied in prior years and 2020 was RMB11,180,252,323.58 and
RMB20,166,147.48, respectively. The interest income generated from
the above proceeds totalled RMB49,742,010.19 and was used to
replenish the working capital of the Company.
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).
Date of election and if applicable, leaving
Name office as Director
Song Zhiyong (Chairman and executive Elected as executive Director on 22 May
Director) 2014 and as Vice Chairman on 6 June 2016,
elected as Chairman on 29 December 2020
Cai Jianjiang (Then Chairman and Elected as non-executive Director on
non-executive Director) 28 January 2014 and as Chairman on 21
February 2014, resigned on 29 December
2020
Feng Gang (Non-executive Director) Elected on 26 May 2020
Patrick Healy (Non-executive Director) Elected on 19 December 2019
Xue Yasong (Non-executive Director Elected on 29 March 2018
and employee representative Director)
Wang Xiaokang (Then independent Elected on 25 May 2017, resigned on 9
non-executive Director) February 2021
Liu Deheng (Then independent non-executive Elected on 25 May 2017, resigned on 21
Director) January 2020
Duan Hongyi (Independent non-executive Elected on 26 May 2020
Director)
Stanley Hui Hon-chung (Independent Elected on 22 May 2015
non-executive Director)
Li Dajin (Independent non-executive Elected on 22 December 2015
Director)
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).
Date of election and if applicable, leaving
Name office as Supervisor
Zhao Xiaohang (Chairman of the Elected on 19 December 2019
Supervisory Committee)
He Chaofan Elected on 29 October 2013
Lyu Yanfang Elected on 18 December 2020
Xiao Yanjun (Then employee representative Elected on 16 June 2011 and resigned
Supervisor) on 25 September 2020
Li Guixia (Then employee representative Elected on 27 October 2017 and resigned
Supervisor) on 25 September 2020
Wang Jie Elected on 25 September 2020
Qin Hao Elected on 25 September 2020
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. Cai Jianjiang (then
non-executive Director who have resigned), Mr. Song Zhiyong
(executive Director) and Mr. Patrick Healy (non-executive Director)
also served as directors of Cathay Pacific. Cathay Pacific and its
wholly-owned Cathay Dragon compete or are likely to compete either
directly or indirectly with some aspects of the business of the
Company as they operate 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 or Supervisors
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.
EMPLOYEES
As at the end of the Reporting Period, the Group had a total of
89,373 employees, among which, the Company had 46,819 employees and
the subsidiaries of the Company had 42,554 employees. The
categories of employees of the Group are as follows:
As at 31 December As at 31 December
Professional Categories 2020 2019 Increase/(Decrease)
Management 11,001 10,538 463
Marketing and Sales 6,277 6,709 (432)
Operation 4,705 4,708 (3)
Ground Handling 11,278 11,146 132
Cabin Service 23,619 23,501 118
Logistics and Support 7,323 8,331 (1,008)
Flight Crew 9,632 8,899 733
Engineering and Maintenance 13,628 13,724 (96)
Information Technology 820 730 90
Others 1,090 1,538 (448)
Total 89,373 89,824 (451)
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 has continually established and
improved a linkage mechanism combining salary distribution with
performance, and implemented differentiated management on gross
payroll and budget. During the Reporting Period, the Company
continued to deepen the reform of its remuneration and welfare
system. It pushed forward the market-oriented remuneration
benchmarking, established a scientific mechanism on wage decision
and growth that reflects the labour market standards. In addition,
the Company implemented the differentiated salary adjustment for
employees and increased incentives to staff with continuous
outstanding performance.
TRAINING PROGRAMME
In 2020, the Company adhered to the working approach of
"fighting against the pandemic while maintaining the training
scheme". It actively expanded the training model in times of the
pandemic and explored the new mode for online training. It
organised cadre education and training on the online learning
platform and took various measures including the launch of online
training on the "CNAHC Group Leadership" WeChat learning platform
and the online live sharing session on the special topic of
"Benchmarking with World-class Aviation Enterprises". With a total
of 1,411 participants completing 98,022 hours of training, these
programs provided strong support for the knowledge-driven fight
against the pandemic. 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 outbreak
by establishing 13 live streaming lecture rooms and offering 813
live training sessions, which recorded a total of 277,689
participants and 215,311 hours of training. As pandemic prevention
and control became part of the routine, the Company timely adjusted
the training programmes, actively coordinated learning resources,
improved and optimized course content. It adopted multiple measures
with flexibility to roll out education and training programs for
all levels and categories of cadres, so as to enhance the relevance
and effectiveness of training on an ongoing basis. It launched a
total of 17 off-the-job training sessions for 345 participants with
14,778 training hours in aggregate. This has profoundly safeguarded
the quality training of cadre team and the development of the Group
with their high standard services.
In 2021, the Company will take the initiative to resume work,
production and training, so that all types of training can be
rolled out smoothly. Capitalising on a wide range of education and
training bases as well as the "CNAHC Group Leadership" WeChat
learning platform, the Company will organise cadre and employees
education and training by integrating online and offline channels.
Through theory learning, education of the Communist Party mindset,
professional training and knowledge update, the Group will further
enhance the commitment, theoretical knowledge and Party mindset of
its employees, and improve their operational practice, ethical
standards and job competency, thereby laying a sound foundation for
building an outstanding world-class aviation group.
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 Company
and the Group are set out in note 36 to the financial statements of
this annual report.
FIXED ASSETS
Changes in the fixed assets of the Group for the year ended 31
December 2020 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
43 to the financial statements of this annual report.
CAPITALISED INTERESTS
Details of the capitalised interests of the Group for the year
ended 31 December 2020 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 41 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 RMB95.28 million.
MAJOR CUSTOMERS AND SUPPLIERS
During the Reporting Period, the purchases of the Group from the
largest supplier accounted for 15.95% of the total purchases of the
Group, while the purchases of the Group from the five largest
suppliers accounted for 33.25% 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.
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 (
) 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 42 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).
One-Off Connected Transaction - Subscription of Cathay Pacific
Rights Shares
On 9 June 2020, the Company issued an irrevocable undertaking to
Cathay Pacific, pursuant to which the Company has irrevocably
undertaken to procure each of the relevant subsidiaries to take up
in full at the subscription price of HK$4.68 per Cathay Pacific
Rights Share its respective entitlement to Cathay Pacific Rights
Shares according to the Cathay Pacific Rights Issue. Cathay Pacific
Rights Issue was completed on 10 August 2020 and the relevant
subsidiaries of the Company have taken up a total of 750,756,347
Cathay Pacific Rights Shares which were allocated to such
subsidiaries in the Cathay Pacific Rights Issue at a total
consideration of approximately HK$3,514 million. Immediately after
the subscription, the Company's shareholding percentage in Cathay
Pacific remained unchanged at 29.99%. Cathay Pacific is a
substantial shareholder of the Company and therefore a connected
person of the Company. For details, please refer to the
announcement of the Company dated 9 June 2020.
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:
Parties and Execution
Connected Date and
Agreement Relationship Term of Agreement Contents of Agreement Pricing Policy
1 Properties The Company Renewed on The Group agreed The rent payable will be
Leasing Framework and CNAHC 30 October to lease from consulted
Agreement (a substantial 2018 with and to CNAHC and determined based on
shareholder a term from Group a number the
of the Company 1 January of properties price for leasing
and therefore 2019 to 31 services available
a connected December from independent third
person of 2021 parties
the Company) for the same type of
The details properties
are set out in close proximity to
in the announcement the properties
of the Company with reference to other
dated 30 factors
October 2018 including property
service quality,
location, district of
properties
and specific needs of
the parties
2 Sales Agency The same The same Certain subsidiaries The air passenger agency
Services as above as above of CNAHC Group services:
Framework will (i) solicit agency service fee shall
Agreement customers and be
act as the Group's consulted and determined
sales agents on
for the Group's a fair and voluntary
air tickets and basis;
cargo spaces specific sales targets
on a commission and the
basis; or (ii) corresponding incentive
purchase air plans
tickets (other for achieving such
than domestic targets may
air tickets) be agreed to the extent
and cargo spaces permitted
from the Group by law and in accordance
and resell such with
air tickets and the industry practice
cargo spaces
to end customers The air cargo agency
services:
the transportation
prices shall
be not less favorable
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 The same The same (i) The subsidiaries Ancillary services in
Services as above as above of CNAHC engaged relation
Framework in ancillary to air transportation
Agreement services in relation business:
to air transportation (i) the prices of
business will airline catering
be appointed services will be
as suppliers consulted and
of ancillary determined based on the
services in relation price
to production for the same type of
or supply services catering
business to the services available from
Company independent
third parties with
(ii) The Company reference
is commissioned to relevant factors;
by CNAHC to provide (ii) the
welfare-logistics prices of property
services for management
CNAHC's retired services will be
employees 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 The same The same CNAHC agreed Hourly rate of the
Charter Flight as above as above to resort to charter flight
Service Framework the Company's services = Total cost
Agreement charter flight per flight
services so as hour * (1 + 6.5%). Total
to fulfill the cost
government charter per flight hour includes
flight assignment direct
costs and indirect costs
5 Media Services The Company The same CNAMC provided For the entrusted media
Framework and CNAMC as above the Group with services
Agreement (CNAMC is media services. provided by CNAMC to the
a wholly-owned Among them, the Company,
subsidiary Company grants the Company should pay
of CNAHC CNAMC an exclusive the relevant
and therefore right to distribute service fee at market
a connected the in-flight price
person of reading materials to CNAMC
the Company) of the Company
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 The Company Signed on CNACD was commissioned CNACD receives service
Project Management and CNACD 30 October by the Company fees
Framework (a wholly-owned 2018 with to serve as the based on the audited
Agreement subsidiary a term from manager of the amounts
of CNAHC 1 January construction in the financial
and therefore 2019 to 31 projects and settlement
a connected December establish project of specific commissioned
person of 2021 headquarters. projects
the Company) It shall provide in accordance with the
The details management services commissioned
are set out for the Company's management contract. The
in the announcement projects based service
of the Company on its project fees shall be calculated
dated 30 characteristics at
October 2018 using its industry 3% of the audited amount
expertise and in
professional the financial settlement
skills 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-labor
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 The Company Renewed and CNAF agreed to Interest rates
Services and CNAF revised on provide the Group applicable to
Agreement (CNAF is 30 August with a range deposits: not be lower
a non-wholly 2017 with of financial than
owned subsidiary a term from services including (i) the interest rates
of the Company 1 January deposit services, for the
that CNAHC 2018 to 31 credit services same type of services
holds 49% December and other financial charged
of its equity 2020 services by state-owned
interest commercial banks
and therefore The details to the Group under the
a connected are set out same
subsidiary in the announcement conditions; and (ii) the
of the Company) of the Company interest
dated 30 rates for the same type
August 2017 of services
charged by CNAF to other
Renewed and CNAHC
revised on member companies under
28 August the same
2020 with conditions
a term from
1 January Interest rates
2021 to 31 applicable to
December credit services: not be
2023 higher
than (i) the interest
The details rates
are set out for the same type of
in the announcement services
of the Company offered by state-owned
dated commercial
28 August banks to the Group under
2020 the
same conditions; and
(ii) the
interest rates for the
same
type of services offered
by
CNAF to other CNAHC
member companies
under the same
conditions
Fees for other financial
services:
not be higher than (i)
those
for the same type of
services
charged by state-owned
commercial
banks to the Group under
the
same conditions; and
(ii) those
for the same type of
services
charged by CNAF to other
CNAHC
member companies under
the same
conditions
8 Financial CNAF (a non-wholly The same CNAF agreed to The interest rates for
Services owned subsidiary as above provide CNAHC deposits:
Framework of the Company), Group with a not be higher than (i)
Agreement and CNAHC range of financial the interest
(a substantial services including rates for the same type
shareholder deposit services, of services
of the Company credit services charged by state-owned
and therefore and other financial commercial
a connected services banks to CNAHC Group
person of under the
the Company) same conditions; and
(ii) the
interest rates for the
same
type of services charged
by
CNAF to other CNAHC
member companies
under the same
conditions
The interest rates
applicable
to credit services: not
be lower
than (i) the interest
rates
for the same type of
services
offered by state-owned
commercial
banks to CNAHC Group
under the
same conditions; and
(ii) the
interest rates for the
same
type of services offered
by
CNAF to other CNAHC
member companies
under the same
conditions
Fees for other financial
services:
not be lower than (i)
the fees
for the same type of
services
charged by state-owned
commercial
banks to CNAHC Group
under the
same conditions; and
(ii) fees
for the same type of
services
charged by CNAF to the
Group
under the same
conditions
9 Framework The Company Renewed and Finance and operating Finance and operating
Agreement and CNACG revised on lease services: lease
(CNACG is 30 October CNACG Group agreed services: The final
a substantial 2019 with to provide finance transaction
shareholder a term from and operating price will be determined
of the Company 1 January lease services on
and therefore 2020 to 31 in respect of, arm's length
a connected December among other things, negotiations between
person of 2022 aircraft, engines, both parties with
the Company) simulators, equipment reference
The details and vehicles to the prices for the
are set out to the Group; same type
in the announcement the Group agreed of lease services
of the Company to provide finance offered by
dated 30 and operating independent third
October 2019 lease services parties and
in respect of, after taking into
among other things, account certain
equipment and factors. Such factors
vehicles to CNACG include
Group purchasing price of the
leasing
Ground support subject, interest rate
services and and arrangement
other services: fees (if any) (for
including but finance lease),
not limited to rental fee (for
the following operating lease),
transactions the lease terms, the
conducted between features
any member of of the leasing subject
the Group on and the
the one hand comparable market rental
and any member prices.
of CNACG Group The final transaction
on the other price
hand: ground shall not be higher than
support services, the
aircraft maintenance transaction prices
services, aircraft offered by
repair services, at least two independent
property investment third
and management parties on the same
services, ticket conditions
and tourism services,
logistics services, Ground support services
administrative and
management services, other services:
cleaning and
washing services, (1) Follow the
resident security government pricing
services, lounge or guidance price if it
supplies procurement is available
services and
aircraft material (2) If no government
procurement services 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
favourable
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 The Company Renewed on Providing a framework Interline arrangements
Agreement and Cathay 1 October for the transactions and code
Pacific (Cathay 2019 with between the Group share arrangements:
Pacific is a term from and Cathay Pacific Revenue
a substantial 1 January Group arising is apportioned between
shareholder 2020 to 31 from interline the parties
of the Company December arrangements, in accordance with
and therefore 2022 code sharing bilateral
a connected arrangements, prorate agreements which
person of The details joint operating follow
the Company) are set out arrangements, the principles in the
in the announcement aircraft leasing, Multi-lateral
of the Company frequent flyer Prorate Agreement of
dated 28 programmes, the International
August 2019 provision of Air Transport
airline catering, Association
ground support
and engineering Joint operating
services and arrangements:
other services Revenue is apportioned
agreed to be between
provided and the parties having
other transactions regard to
agreed to be the fleet capacity of
undertaken under both parties
the Cathay Pacific and the values of seats
Framework Agreement 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 The Company Renewed and Bellyhold space Contracting Operation
Agreement and Air China revised on business contracting Income:
Cargo (a 30 October operation: The The Company will
51%-owned 2019 with Company has contracted regularly receive
subsidiary a term from the operation the contracting
of CNAHC 1 January of all bellyhold operation income
and therefore 2020 to 31 space business from Air China Cargo in
a connected December to Air China respect
person of 2022 Cargo. Air China of bellyhold space
the Company) Cargo shall undertake business
The details the overall each year. The parties
are set out responsibilities shall
in the announcement for transporting determine the benchmark
of the Company the cargos in income
dated 30 the capacity (excluding tax) of
October 2019 of contracted bellyhold
carrier to the space business
consignors with contracting operation
respect to the after arm's length
cargos which negotiations
are transported with reference to the
through the bellyhold Company's
spaces of passenger fleet capacity, overall
aircraft load
factor and yield level.
Ground support The
services and specific formula is as
other services: follows:
The ground support benchmark income
services and (excluding
other services tax) = ATK (available
provided by the tonne
Group to ACC kilometres) × OLF
Group include (overall
but are not limited load factor) ×
to operation yield level
support services, per kilometre
IT sharing services,
comprehensive The parties agreed to
support services, jointly
engine and other appoint a qualified
aircraft-related accounting
materials lease firm to conduct a
services and special audit
labour management on the actual income
services. The (excluding
ground support tax) of Air China Cargo
services and for
other services the operation of
provided by ACC bellyhold space
Group to the business of the previous
Group include financial
but are not limited year within three months
to terminal cargo after
and mail services, the end of each
airport apron financial year.
services, container Where there is any
and pallet management difference
services, engine between the benchmark
and other income
aircraft-related (excluding tax) and the
materials lease actual
services 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 favourable 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
favourable
than those provided by
the Group
to the independent third
parties
(with regards to the
rendering
of services by the
Group)
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 900 425
Comprehensive services RMB 2,500 967
Total value of right-of-use assets involved
in property leasing RMB 550 34
Media and advertising services RMB 700 114
Expenditure on construction project management
services RMB 130 44
Financial services
Maximum daily balance of loans and other
credit services granted by CNAF
to CNAHC Group RMB 10,000 540
Transactions with CNACG Group:
Ground handling and other services RMB 600 111
Total value of right-of-use assets involved
in financing and operating leasing RMB 14,500 1,959
Transactions with Cathay Pacific Group:
Aggregate amount payable/paid by the
Group to Cathy Pacific Group HKD 900 54
Aggregate amount payable/paid by Cathay
Pacific Group to the Group HKD 900 71
Transactions with ACC Group:
Operation expenses of bellyhold space
paid by the Group to ACC Group RMB 800 351
Aggregate amount of ground handling and
other services paid by the Group to ACC
Group RMB 1,000 569
Bellyhold space business contracting
operation paid by ACC Group to the Group RMB 8,000 7,685
Aggregate amount of ground handling and
other services paid by ACC Group to the
Group RMB 800 603
Transactions with CNAF:
Maximum daily balance of deposits placed
by the Group with CNAF RMB 15,000 9,665
CONFIRMATION FROM INDEPENT 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
transaction 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
unqualified letter containing their findings and conclusions 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
47 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 are summarised as the
followings:
Unit: RMB billion Currency: RMB
Payment
of
Balance Interest principal
Name of Corporate Expiry of the Rate and Transaction
Bond Abbreviation Code Issue Date Date Bond (%) interest Venue
Air China Limited
2012 Corporate Bond 18 January 18 January On annual Shanghai
(First Tranche) 12AC01 122218 2013 2023 5.243 5.10 basis Stock Exchange
Air China Limited
2012 Corporate Bond 16 August 16 August On annual Shanghai
(Second Tranche) 12AC03 122269 2013 2023 1.530 5.30 basis Stock Exchange
Air China Limited
2016 Corporate Bond 20 October 20 October On annual Shanghai
(Second Tranche) 16AC02 136776 2016 2021 4.025 3.08 basis Stock Exchange
Air China Limited
2020 Corporate Bond 17 April 17 April On annual Shanghai
(First Tranche) 20AC01 163459 2020 2021 1.520 1.95 basis Stock Exchange
Shenzhen Airlines
Company Limited 2018
Corporate Bond
(First 13 March 14 March On annual Shanghai
Tranche) 18SA02 143499 2018 2021 0.521 5.27 basis Stock Exchange
Shenzhen Airlines
Company Limited 2018
Corporate Bond
(Second 23 April 24 April On annual Shanghai
Tranche) 18SA04 143601 2018 2021 0.825 4.55 basis Stock Exchange
Shenzhen Airlines
Company Limited 2018
Corporate Bond
(Third 6 September 7 September On annual Shanghai
Tranche) 18SA06 143793 2018 2021 0.608 4.35 basis Stock Exchange
Shenzhen Airlines
Company Limited 2019
Corporate Bond
(First 25 April 26 April On annual Shanghai
Tranche) 19SA01 155388 2019 2022 1.027 4.00 basis Stock Exchange
Shenzhen Airlines
Company Limited 2020
Non-public Issue
Short-term
Corporate Bond
(First 17 March 19 March On annual Shenzhen
Tranche) 20SAD1 114694 2020 2021 0.511 2.74 basis Stock Exchange
Interest payments for corporate bonds
On 18 January 2020, the Company paid the interests on 2012
Corporate Bond (First Tranche) for the current period.
On 17 August 2020, the Company paid the interests on 2012
Corporate Bond (Second Tranche) for the current period.
On 20 October 2020, the Company paid the interests on 2016
Corporate Bond (Second Tranche) for the current period.
On 14 March 2020, Shenzhen Airlines paid the interests on 2018
Corporate Bond (First Tranche) for the current period.
On 24 April 2020, Shenzhen Airlines paid the interests on 2018
Corporate Bond (Second Tranche) for the current period.
On 26 April 2020, Shenzhen Airlines paid the interests on 2019
Corporate Bond (First Tranche) for the current period.
On 7 September 2020, Shenzhen Airlines paid the interests on
2018 Corporate Bond (Third Tranche) for the current period.
The proceeds from the issuance of "12AC01", "12AC03", "16AC02"
and "20AC01" 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 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.
The proceeds from the issuance of "18SA02", "18SA04", "18SA06",
"19SA01" and "20SAD1"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 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.
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 2020. The auditor of the
Company has been changed to Deloitte since 2017.
SUBSEQUENT EVENTS
On 18 March 2021, the Company and Air China Import and Export
Co., Ltd. ( ) entered into the Aircraft Purchase Agreement with AFS
Investments I, Inc. Pursuant to which, the Company will purchase
five Airbus A320-200N aircraft and 13 Airbus A321-200NX aircraft
from AFS Investments I, Inc. For details, please refer to the
announcement of the Company dated 18 March 2021.
On 18 March 2021, the Board resolved to propose to amend the
provisions relating to the Company's address and the business name
of the promotor of the Company in the Articles of Association. The
proposed amendments to the Articles of Association are subject to
shareholders' approval at the general meeting of the Company by way
of a special resolution. For details, please refer to the
announcement of the Company dated 18 March 2021.
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 2021
Profile of Directors, Supervisors and Senior Management
DIRECTORS
Mr. Song Zhiyong , aged 55, 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 China's civil aviation
industry in 1987 and was previously a pilot, Assistant Manager,
Chief Pilot, and Deputy General Manager of the Third Fleet, Deputy
General Manager of the General Fleet and the General Manager of the
Training Department of Air China International Corporation. He
served as the General Manager and Deputy Secretary of the Communist
Party Committee of the General Fleet of the Company from November
2002 to June 2008. Mr. Song held the post of Assistant to President
of the Company from September 2004 to October 2006. He was the Vice
President, a member and a standing member of the Communist Party
Committee of the Company from October 2006 to December 2010. Mr.
Song served as the Deputy General Manager of CNAHC from December
2010 to April 2014. He has been a member of the Communist Party
Group of CNAHC since December 2010. 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 has served as an executive Director of the
Company since May 2014 and the Secretary of the Communist Party
Group of CNAHC from February 2016 to December 2016. 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 Cathay
Pacific since December 2020.
Mr. Feng Gang , aged 57, graduated from Sichuan University
majoring in semiconductor. He started his career in July 1984. Mr.
Feng was appointed as the Deputy General Manager of China Southwest
Airlines in October 1995, the Assistant to President of Air China
International Corporation in October 2002, and the General Manager
and Secretary of the Communist Party Committee of China National
Aviation Holding Assets Management Company in February 2003. He was
appointed as the Chairman, President and Deputy Secretary of the
Communist Party Committee of Shandong Aviation Group Corporation in
May 2007. He served as the Vice President of the Company from April
2010 and August 2014, and concurrently as the Director, President,
Deputy Secretary of the Communist Party Committee of Shenzhen
Airlines between May 2010 and May 2014. From April 2014, Mr. Feng
served as a member of the Communist Party Group of CNAHC. From
April 2014 to November 2019, he served as the Deputy General
Manager of CNAHC. He was the non-executive Director of the Company
between August 2014 and October 2017. From May 2017 to November
2019, he was the 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 55, graduated from the University of
Cambridge with a Bachelor of Arts (Honours) degree in Modern
Languages. He joined the Swire Group in August 1988 and worked in
Swire Group's offices in Hong Kong SAR, Germany and Mainland China.
He acted as the chief executive officer of Taikoo (Xiamen) Aircraft
Engineering Company Limited from August 2008 to July 2012, and the
chief executive officer of Swire Coca-Cola Limited from August 2012
to September 2019. 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, and a director of Swire Properties Limited since January
2015. He has been serving as the chairman of Swire Coca-Cola
Limited since October 2019 and the chairman of Cathay Pacific
Airways Limited since November 2019. He has been serving as a
non-executive Director of the Company since December 2019.
Mr. Xue Yasong , aged 59, graduated from the Institute of
Financial Science under the Ministry of Finance with a master's
degree in Economics. He joined Guangdong Yuecai Trust &
Investment Co., Ltd. in July 1994 and consecutively served as
assistant to the general manager of the international finance
department, head of the asset reorganization group and head of
preparatory group for the securities company. He served as a
director, executive deputy general manager and secretary of the
board of directors of Guangdong Guanhao High-tech Co., Ltd. since
March 1999, the deputy general manager of CNAHC from November 2004
to July 2009, the chairman of the labour union of CNAHC in July
2009. He was elected as the chairman of the labour union of the
Company in October 2016. He has been serving as an employee
representative director of CNAHC since December 2017, and was
elected as employee representative Director of the Company in March
2018.
Mr. Wang Xiaokang , aged 65, graduated from Peking University
majoring in law. He served as chairman and deputy secretary of the
Communist Party Committee of China Energy Conservation and
Environmental Protection Group from May 2010 to December 2016.
Since December 2011, he has been serving as the president of China
Industrial Energy Conservation and Clean Production Association. He
is also currently a member of the Twelfth National Committee of the
Chinese People's Political Consultative Conference (CPPCC) and a
member of the Committee of Population, Resources and Environment
under the Twelfth National Committee the CPPCC, a member of China
Economic and Social Council, a member of National Manufacturing
Strategy Advisory Committee and a member of the Sixth China Council
for International Cooperation on Environment and Development. He
served as an independent non-executive Director of the Company
between May 2017 and February 2021. He served as an external
director of China Datang Corporation Ltd. from August 2018 to
August 2019.
Mr. Duan Hongyi , aged 57, is a professorate senior accountant
and a holder of master's degree in business administration. He held
various positions including vice director, director of planning and
accounting department and vice chief accountant of Harbin Electric
Company Limited, deputy general manager of the Harbin Turbine
Company Limited and vice chairman of Harbin Power Technology &
Trade Incorporation. He was also the deputy general manager of
Harbin Electric Corporation, the director of Harbin Electric
Company Limited and the chairman of Harbin Electric Finance Company
Limited. He served as an executive director and general manager of
Nam Kwong (Group) Company Limited, as well as 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 was appointed as the Independent
Non-executive Director of the Company in May 2020.
Mr. Stanley Hui Hon-chung , aged 70, holds the bachelor's degree
of Science from the Chinese University of Hong Kong. He joined
Cathay Pacific in 1975 and had held a range of management positions
in Hong Kong and overseas. From 1990 to 1992, Mr. Hui served in
Cathy Dragon as general manager of Planning and International
Affairs and was appointed as the chief representative of John Swire
& Sons (China) Limited in Beijing in 1992. He assumed the
position of chief operating officer of AHK Air Hong Kong Limited
from 1994 to 1997. Mr. Hui joined Hong Kong Dragon Airlines Limited
as its chief executive officer from 1997 to 2006. During the period
from February 2007 to July 2014, he served as the chief executive
officer of Hong Kong Airport Authority. Mr. Hui was appointed as
member of the Greater Pearl River Delta Business Council twice by
the Chief Executive of the HKSAR, and held civic duties including
member of the Commission on Strategic Development of the HKSAR
Government, member of the Hong Kong Government's Aviation
Development Advisory Committee and member of the Hong Kong Tourism
Board. Mr. Hui is currently 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 has been serving as an independent non-executive
Director of the Company since May 2015. From September 2015 to
October 2017, Mr. Hui was an executive director and the Vice CEO of
NWS Holdings Limited. He served as independent non-executive
director of Guangzhou Baiyun International Airport Co., Ltd. from
December 2016, and served as advisor in NWS Holdings Limited from
October 2017 to October 2018. He served as 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.
Mr. Li Dajin , aged 62, graduated from Peking University
majoring in law. He is a director, partner and lawyer of East &
Concord Partners. He has practiced law since 1982 and was one of
the first lawyers who obtained the qualifications to engage in
securities law business in 1994. He was the vice president of the
sixth All China Lawyers Association, the president of the seventh
Beijing Lawyers Association, member of the 13th standing committee
of Beijing Municipal People's congress, member of Internal and
Judicial Affairs Committee and the deputy to the 12th National
People's Congress. Mr. Li currently also 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. Since December 2015, he
has been serving as an independent non-executive Director of the
Company.
SUPERVISORS
Mr. Zhao Xiaohang , aged 59, 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 August 1986 and served various positions,
including the assistant of the Planning Department of Beijing
Administration of Civil Aviation Administration of China,
assistant, section chief and deputy division chief of the Planning
Department, manager and deputy secretary of the Ground Handling
Department, general manager of the Planning and Development
Department, and assistant president of Air China. He served as the
director and vice president of CNACG from September 2003 to
February 2011, and a secretary of the Commission for Discipline
Inspection of CNACG from May 2004 to February 2011. He served as
the general manager of CNAC from July 2005 to May 2016. From April
2007 to February 2016, he served as director and general manager of
China National Aviation Corporation (Macau) Company Limited. From
December 2009 to April 2011, he served as chairman, executive
director and general manager of Air Macau. Mr. Zhao has been
serving as the vice president and a member of the Standing
Committee of Communist Party Committee of the Company since
February 2011. He has been serving as the chairman of Air Macau
since March 2016, a member of the Communist Party Group of CNAHC
since August 2016, the vice general manager of CNAHC and 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. Since December
2019, he has been serving as Chairman of the Supervisory Committee
of the Company. He was appointed as the chairman of CNACG in May
2020.
Mr. He Chaofan , aged 58, graduated from Civil Aviation
University of China majoring in operation management. Mr. He
started his career in China's civil aviation industry in 1983. He
served as an accountant at the Finance Department of Beijing
Administration of Civil Aviation Administration of China (CAAC),
and served various positions in Air China International
Corporation, including the section chief, deputy director and
director of the finance department and general manager of the
revenue accounting centre of Air China International Corporation.
From March 2003 to October 2008, he served as the general manager
and the deputy secretary of Communist Party Committee of CNAF. He
served as the general manager of the finance department of CNAHC
and a Supervisor of the Company concurrently from October 2008 to
April 2011. He served as vice president of CNACG from May 2011 to
December 2018, and concurrently served as a director, general
manager, member of Party Committee and the deputy secretary of the
Communist Party Committee of Zhongyi Aviation Investment Co., Ltd.
from August 2013 to December 2018. He served as the chairman of
Zhongyi Aviation Investment Co., Ltd. between February 2019 and
September 2020. Mr. He was appointed as a Supervisor of the Company
in October 2013 and has been serving as the director, president,
member of Party Committee of CNACG since December 2018.
Ms. Lyu Yanfang , aged 49, 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 project manager of
legal affairs, deputy manager, manager and senior manager of the
president's office of the Company. She served as deputy director of
the president's office of the Company from May 2013 to August 2017.
She has been serving as the general manager of the legal department
of China National Aviation Holding Corporation Limited and the
Company since August 2017. From April 2018, she has served as the
chairwoman of the supervisory committee of Beijing Golden Phoenix
Human Resource Co., Ltd. and the supervisor of China National
Aviation Construction and Development Company and of China National
Aviation Capital Holding Co., Ltd. From August 2018, she has served
as the supervisor of China National Aviation Media 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.
Mr. Wang Jie, aged 55, graduated from China Europe International
Business School with a master's degree in Business Administration.
He started his career since August 1989 and was the head of
secretary of the organization department of the Communist Party
Committee, personnel manager of the human resource department,
general manager of the human resource department of the engineering
technology branch, as well as the deputy general manager, deputy
secretary of the Communist Party Committee, secretary of the
Communist Party Committee, secretary of Committee for Discipline
Inspection and chairman of the labour union of the base in Southern
China of the Company. From December 2009 to November 2014, he
served as the general manager of the human resource department of
the Company. 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 labour union of the commercial committee of the Company since
May 2019. He has been serving as the employee representative
Supervisor of the Company since September 2020.
Mr. Qin Hao , aged 52, graduated from Party School of the
Central Committee of the Chinese Communist Party with a master's
degree in Political Economics. He started his career since August
1989 and was the head of quality management division of the ground
service department, deputy manager of the passenger traffic office,
manager of quality management of operation and quality management
department and deputy general manager of service development
department of the Company. From June 2009 to November 2014, he
served as the deputy general manager and a member of the Communist
Party Committee of Hubei Branch of the Company. He has been serving
as the deputy general manager and secretary of the Communist Party
Committee of the passenger cabin service department of the Company
since November 2014 as well as chairman of the labour union of the
passenger cabin service department of the Company since August
2019. He has been serving as the employee representative Supervisor
of the Company since September 2020.
SENIOR MANAGEMENT
Mr. Ma Chongxian , aged 55, graduated from Inner Mongolia
University majoring in planning and statistics and holds a degree
of EMBA in Tsinghua University. Mr. Ma started his career in July
1988 and served as Planner of the Mechanical Division of Inner
Mongolia Administration of CAAC and various positions in Air China
International Corporation, including deputy chief and secretary of
the Party branch of aircraft repair plant in Inner Mongolia branch,
general manager of the bluesky customer service department, deputy
general manager of Inner Mongolia branch, deputy general manager,
secretary of the Communist Party Committee and general manager of
Zhejiang branch. He served as general manager and deputy secretary
of the Communist Party Committee of Hubei Branch of the Company
from June 2009. Mr. Ma has been serving as Vice President and a
member of the Standing Committee of the Communist Party Committee
of the Company since April 2010. From April 2010 to November 2016,
he served as chairman and president of Shandong Aviation Group
Corporation and vice chairman of Shandong Airlines. He has been a
member of the Communist Party Group of CNAHC since August 2016 and
vice general manager of CNAHC since December 2016.
Mr. Zhao Xiaohang , aged 59, 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 August 1986 and served various positions,
including the assistant of the Planning Department of Beijing
Administration of Civil Aviation Administration of China,
assistant, section chief and deputy division chief of the Planning
Department, manager and deputy secretary of the Ground Handling
Department, general manager of the Planning and Development
Department, and assistant president of Air China. He served as the
director and vice president of CNACG from September 2003 to
February 2011, and a secretary of the Commission for Discipline
Inspection of CNACG from May 2004 to February 2011. He served as
the general manager of CNAC from July 2005 to May 2016. From April
2007 to February 2016, he served as director and general manager of
China National Aviation Corporation (Macau) Company Limited. From
December 2009 to April 2011, he served as chairman, executive
director and general manager of Air Macau. Mr. Zhao has been
serving as the vice president and a member of the Standing
Committee of Communist Party Committee of the Company since
February 2011. He has been serving as the chairman of Air Macau
since March 2016, a member of the Communist Party Group of CNAHC
since August 2016, the vice general manager of CNAHC and 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. Since December
2019, he has been serving as Chairman of the Supervisory Committee
of the Company. He was appointed as the Chairman of CNACG in May
2020.
Mr. Tan Huanmin , aged 56, graduated from Jilin University
School of Law majoring in constitutional law. Mr. Tan previously
served as the deputy principal officer and principal officer of
Policies and Laws Department of the Ministry of Supervision. From
January 1993 to May 2008, Mr. Tan consecutively served as principal
officer and deputy director of the Review Division of Regulation
Office of the Central Commission for Discipline Inspection, deputy
director, director-level inspector and supervisor of Supervision
and Regulation Division, deputy director of Supervision and
Regulation Division, and director of Supervision and Regulation
Division. From May 2008 to December 2016, Mr. Tan consecutively
served as Discipline Inspector of vice-bureau level and specialised
Supervisor of Regulation Office of the Central Commission for
Discipline Inspection, deputy director of Regulation Office, and
Discipline Inspector of bureau level, specialised Supervisor and
deputy director of Regulation Office. 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 55, graduated from Xiamen University
majoring in planning and statistics. Mr. Wang started his career in
July 1988 and served various positions in China Southwest Airlines,
including assistant of the planning department, manager of the
production plan office of the sales & marketing department,
deputy manager of the sales & marketing department, deputy
manager and manager of the market department, and served various
positions in Air China International Corporation, including deputy
general manager of the marketing department, member of the commerce
commission, Member of the Communist Party Committee and general
manager of network revenue department. Mr. Wang served as the
director of the commerce commission and Deputy Secretary of the
Communist Party Committee of the Company from July 2008 to March
2012. Mr. Wang was appointed as the Vice President and a member of
the Standing Committee of CPC of the Company in February 2011. He
was appointed as the deputy general manager and a member of the
Communist Party Group of CNAHC in April 2020.
Mr. Zhang Sheng , aged 48, 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 July 1992 and
served various positions including the deputy manager of the
marketing division of the transportation department, the deputy
director of the general dispatching office and the deputy general
manager of the marketing department of the former China Xinjiang
Airlines, the general manager of the marketing department of the
Xinjiang branch of China Southern Airlines Company Limited, the
deputy general manager of the capacity network division of the
marketing committee, the deputy general manager of Shanghai Base
and the deputy general manager of the Xinjiang Branch of China
Southern Airlines Company Limited, the general manager, deputy
secretary of the Communist Party Committee and the executive deputy
general manager of the Beijing Branch of Guizhou Airlines. 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 57, 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 October 1982 and
served various positions, including navigator of the Third Section
of the Seventh Fleet of CAAC, section manager and general manager
of Chengdu flight department of China Southwest Airlines and
general manager of Flight Technology Management Department of China
Southwest Airlines, general manager of Chengdu Flight Department of
Southwest Branch of Air China International Corporation, and deputy
general manager, member of the Standing Committee of the Communist
Party Committee and Chief Pilot of Southwest Branch. He served as
general manager and Deputy Secretary of the Communist Party
Committee of southwest branch of the Company from December 2009 to
December 2012. 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. Between December 2012 and April
2015, he concurrently served as the Chief Operating Officer of the
Company. 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 58, graduated from City University of
Seattle and holds a postgraduate diploma and a master's degree. Mr.
Chai is a senior engineer. Mr. Chai started his career in September
1980 and served various positions, including engineer and manager
of airframe team of engineering department of AMECO, deputy
director of the engineering division under the aircraft engineering
department of Air China International Corporation, manager of
aircraft Maintenance Subdivision and manager of aircraft overhaul
division, general manager of aircraft engineering department of
AMECO and deputy general manager of the engineering technology
branch of the Company. From October 2005 to March 2009, he served
as general manager and a member of the Communist Party Committee of
AMECO as well as a member of the Communist Party Committee of the
engineering technology branch of the Company. He served as general
manager and Deputy Secretary of the Communist Party Committee of
the engineering technology branch of the Company from March 2009 to
June 2015. He was the director of AMECO between October 2005 and
January 2020, and appointed as Vice President and a member of the
Standing Committee of the Communist Party Committee of the Company
in March 2012. He also served as the chief executive officer of
AMECO from June 2015 to September 2017.
Mr. Xue Yasong , aged 59, graduated from the Institute of
Financial Science under the Ministry of Finance with a master's
degree in Economics. He joined Guangdong Yuecai Trust &
Investment Co., Ltd. in July 1994 and consecutively served as
assistant to the general manager of the international finance
department, head of the asset reorganization group and head of
preparatory group for the securities company. He served as a
director, executive deputy general manager and secretary of the
board of directors of Guangdong Guanhao High-tech Co., Ltd. since
March 1999, the deputy general manager of CNAHC from November 2004
to July 2009, the chairman of the labour union of CNAHC in July
2009. He was elected as the chairman of the labour union of the
Company in October 2016. He has been serving as an employee
representative director of CNAHC since December 2017, and was
elected as employee representative Director of the Company in March
2018.
Mr. Xu Chuanyu , aged 56, 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 started his career in July 1985. Mr. Xu previously served
various positions in Air China International Corporation, including
pilot, assistant manager of the flight technology office of the
third fleet of the general fleet, an inspector of the safety
monitoring office and the general manager of the third fleet. In
December 2001, Mr. Xu was appointed as the deputy general manager
of the general fleet of Air China International Corporation. In
March 2006, Mr. Xu was appointed as the general manager and deputy
secretary of the Communist Party Committee of the Tianjin branch of
the Company. Mr. Xu served as deputy operation officer of the
Company, and concurrently served as general manager, a member and
Deputy Secretary of the Communist Party Committee of the operation
control centre of the Company from January 2009 to March 2011. He
served as the Chief Pilot of the Company from January 2009 to April
2011 and as Vice President of the Company from February 2011 to
December 2012. 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 55, 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 started his career in 1986 and served various positions,
including a director of China Factory Director (Manager) Work
Research Association, an officer at vice-director level of China
Enterprise Management Association, the project manager of China
Business Consulting Company, an officer at director level, deputy
director and director of Division of Economic Law and Regulations
of State Economic and Trade Commission as well as the director and
deputy legal director of Bureau of Policies, Laws and Regulations
of the SASAC. He was appointed as the general legal counsel of
CNAHC and of the Company in August 2016 and August 2017,
respectively.
Mr. Xiao Feng , aged 52, graduated from Harbin Civil Engineering
& Architectural Institute majoring in management engineering.
Mr. Xiao holds an undergraduate degree and is a senior accountant.
He started his career in July 1990, and served as an accountant of
the infrastructure office, deputy section chief and section chief
of the finance office, treasury manager of the finance department
and deputy general manager of the finance department of Air China
International Corporation and the chief accountant and deputy
general manager of Shandong Airlines. Mr. Xiao served as the
general manager of the finance department of the Company from
December 2009 to July 2014. He has been serving as the chief
accountant of the Company since July 2014.
Mr. Wang Yingnian , aged 57, graduated from Sichuan Guanghan
Aviation College majoring in airplane piloting and is a first-class
pilot. Mr. Wang started his career in China's civil aviation
industry in August 1984 and has been engaged in work related to
piloting. He was deputy general manager, a member and a standing
member of the Communist Party Committee of the general fleet of the
Company from August 2007 to April 2011. Mr. Wang served as the
general manager, Deputy Secretary of Communist Party Committee of
the general fleet of the Company from April 2011 to December 2014.
He has been serving as Chief Pilot of the Company since November
2014 and served 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 54, graduated from Civil Aviation College
of China majoring in maintenance of aircraft, engines and equipment
under the department of aviation machinery. He started his career
in July 1988 and served various positions, including process
engineer of the engine maintenance department at the civil aviation
maintenance base in Beijing; the system engineer of the engineering
department, the manager of engine team of engine division under the
engineering department, the division manager of the engine division
under the engineering department, the manager of the engine section
and the section manager of the operation department of AMECO; the
general manager and Deputy Secretary of the Communist Party
Committee of the maintenance base in Chengdu of the engineering
technology branch of Air China; the deputy general manager and a
member of the Communist Party Committee of the engineering
technology branch of Air China (during which he concurrently served
as the general manager and a member of the Communist Party
Committee of AMECO); and the deputy secretary of the Communist
Party Committee and the chief strategy officer of AMECO. 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.
Mr. Zhou Feng , aged 59, 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
served as the director of the financial planning and audit
department of Zhejiang Administration of CAAC in 1992; the chief
accountant of CNAC Zhejiang Airlines in 1997; assistant to the
general manager of China National Aviation Corporation (Macau)
Company Limited and an executive director of Air Macau in 2001; the
deputy general manager of CNAF in 2003; director and executive vice
president of Samsung Air China Life Insurance Co., Ltd. in 2005;
secretary of the Communist Party Committee of CNAF in 2010. Mr.
Zhou served as the general manager of the finance department of
CNAHC from April 2011 to May 2017 and as a Supervisor of the
Company from November 2011 to August 2017. He has been serving as
the head of the office of the board of CNAHC and the Company since
June 2017 and was appointed as Secretary to the Board of the
Company from August 2017.
Mr. Shao Bin , aged 55, graduated from Tsinghua University
School of Economics and Management majoring in EMBA, and is a
first-class pilot. He started his career in July 1987 and had held
various positions in Tianjin branch of Air China International
Corporation, including assistant manager and manager of the first
section, deputy general manager and general manager of the general
fleet, manager of the flight department, deputy general manager and
a member of the Communist Party Committee; he was appointed as the
general manager of flight safety monitoring department in December
2006 and as the general manager of the aviation safety management
department in August 2008. Mr. Shao served as assistant to the
president and the general manager of the flight department of
Shenzhen Airlines since April 2010; as assistant to the president
of the Company and the general manager of the aviation safety
management department since March 2012. He has been serving as
assistant to the President of the Company and the vice president of
Shenzhen Airlines since November 2014.
Mr. Zhao Yang , aged 53, graduated from Civil Aviation Flight
University of China majoring in flight technology. Mr. Zhao started
his career in August 1988 and served various positions in Southwest
Branch of Air China International Corporation, including the
manager of the seventh section, the general manager of the first
fleet, deputy general manager, general manager and deputy secretary
of the Communist Party Committee of the flight department. 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 the assistant to the President of the
Company since October 2017.
COMPANY SECRETARY
Mr. Zhou Feng , aged 59, 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
served as the director of the financial planning and audit
department of Zhejiang Administration of CAAC in 1992; the chief
accountant of CNAC Zhejiang Airlines in 1997; assistant to the
general manager of China National Aviation Corporation (Macau)
Company Limited and an executive director of Air Macau in 2001; the
deputy general manager of CNAF in 2003; director and executive vice
president of Samsung Air China Life Insurance Co., Ltd. in 2005;
secretary of the Communist Party Committee of CNAF in 2010. Mr.
Zhou served as the general manager of the finance department of
CNAHC from April 2011 to May 2017 and as a Supervisor of the
Company from November 2011 to August 2017. He has been serving as
the head of the office of the board of CNAHC and the Company since
June 2017 and was appointed as Secretary to the Board of the
Company in August 2017.
INDEPENT
AUDITOR'S REPORT
TO THE SHAREHOLDERS OF AIR CHINA LIMITED
( )
(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 86 to 191, which
comprise the consolidated statement of financial position as at 31
December 2020, 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 2020, 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)
How our audit addressed the key
Key audit matter audit matter
Provision for major overhauls
As at 31 December 2020, the provision Our procedures in relation to
for major overhauls of RMB6,011 provision for major overhauls
million was recorded in the consolidated to fulfil the return condition
statement of financial position. of aircraft under leases included:
The Group held certain aircraft -- Testing and evaluating the
under leases at 31 December 2020. design and operating effectiveness
Under the terms of the lease arrangements, of the key internal controls relevant
the Group is contractually committed to the audit of provision for
to return the aircraft to the major overhauls to fulfil the
lessors in a certain condition return condition of aircraft under
agreed with the lessors at the leases.
inception of each lease. In order
to fulfil these return conditions, -- Evaluating the appropriateness
major overhauls are required to of the methodology and key assumptions
be conducted on a regular basis. adopted by management in estimating
the provision for these major
Management estimates the maintenance overhauls. This evaluation based
costs of major overhauls for aircraft on the terms of the leases and
held under leases at the end of the Group's maintenance cost experience.
each reporting period and accrues
such costs over the lease terms. -- Performing a retrospective
The calculation of such costs review of the provision for major
includes a number of variable overhauls to evaluate the appropriateness
factors and assumptions, including of the assumptions adopted by
the anticipated utilisation of management by comparing the assumptions
the aircraft and the expected adopted by management in prior
costs of maintenance. years with actual maintenance
costs incurred.
We identified provision for major
overhauls to fulfil the return -- Discussing with managers in
condition of aircraft under leases the engineering department responsible
as a key audit matter because for aircraft engineering about
of the significant management the utilisation pattern of aircraft,
estimation and judgement required obtaining relevant operating data,
in assessing the variable factors performing recalculation and checking
and assumptions in order to quantify the assumptions adopted by management
the amount of provision required and the mathematical accuracy
at each reporting date. of the calculation of provision
for major overhauls prepared by
Details of the related estimation management for those aircraft
uncertainty are set out in Notes under leases.
4, 5 and 37 to the consolidated
financial statements.
--------------------------------------------
Key Audit Matters (continued)
How our audit addressed the key
Key audit matter audit matter
Passenger revenue recognition
The Group's revenue primarily Our procedures in relation to
consists of passenger revenue passenger revenue recognition
amounting to RMB55,727 million included:
for the year ended 31 December
2020. -- Testing and evaluating the
design and operating effectiveness
Passenger revenue are recognised of the key internal controls,
as revenue when the related transportation including IT controls, relevant
service is provided. The value to our audit of passenger revenue
of passenger revenue for which recognition.
the related transportation service
has not yet been provided at the -- Performing substantive analytical
end of the reporting period is procedures on passenger revenue
recorded as air traffic liabilities by developing an expectation for
in the consolidated statement passenger revenue using independent
of financial position. inputs and information generated
from the Group's IT systems and
The Group allocates the transaction to obtain evidence to support
price to passenger revenue and the reasonableness of the amounts
miles awards on a relative stand-alone recorded.
selling price basis. The transaction
price allocated to miles awards -- Evaluating the appropriateness
under the Group's frequent-flyer of the assumptions adopted by
programme is deferred and included management in estimating the stand-alone
in contract liabilities in the selling price of miles in the
consolidated statement of financial frequent-flyer programme by comparison
position. with historical experience and
planned changes to the programme
The Group maintains complex information that may impact future redemption
technology ("IT") systems in order activities.
to track the point of service
provision for each sale and also -- Checking underlying supporting
to track the issuance and subsequent documents for passenger revenue
redemption and utilisation and transactions which are material
expiry of frequent-flyer programme or meet other specified criteria
awards. on a sample basis.
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.
-------------------------------------------
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 2021
CONSOLIDATED STATEMENT
OF PROFIT OR LOSS
For the Year Ended 31 December 2020
2020 2019
NOTES RMB'000 RMB'000
Revenue 6 69,503,749 136,180,690
Other income and gains 8 4,356,946 4,059,190
73,860,695 140,239,880
Operating expenses
Jet fuel costs (14,817,474) (35,965,239)
Employee compensation costs 9 (22,012,834) (25,473,898)
Depreciation and amortisation (20,408,317) (21,279,084)
Take-off, landing and depot charges (9,239,943) (16,440,081)
Aircraft maintenance, repair and overhaul
costs (6,423,313) (6,119,539)
Air catering charges (1,605,027) (4,026,090)
Aircraft and engine lease expenses (223,034) (966,227)
Other lease expenses (463,265) (565,160)
Other flight operation expenses (5,869,393) (8,193,008)
Selling and marketing expenses (2,568,362) (4,684,722)
General and administrative expenses (1,051,495) (1,844,232)
Impairment loss recognised on property,
plant and equipment 17 (439,656) -
Net impairment loss reversed/(recognised)
under
expected credit loss model 10 92,598 (40,682)
(85,029,515) (125,597,962)
(Loss)/profit from operations 11 (11,168,820) 14,641,918
Finance income 191,598 163,185
Finance costs 12 (5,099,785) (4,948,928)
Share of results of associates (6,148,692) 215,532
Share of results of joint ventures 155,541 259,727
Exchange gain/(loss), net 3,603,752 (1,211,171)
(Loss)/profit before taxation (18,466,406) 9,120,263
Income tax credit/(expense) 14 2,650,275 (1,856,499)
(Loss)/profit for the year (15,816,131) 7,263,764
Attributable to:
* Equity shareholders of the Company (14,403,343) 6,420,294
* Non-controlling interests (1,412,788) 843,470
(15,816,131) 7,263,764
(Loss)/earnings per share
* Basic and diluted 15 RMB(104.87) cents RMB46.74 cents
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the Year Ended 31 December 2020
2020 2019
RMB'000 RMB'000
(Loss)/profit for the year (15,816,131) 7,263,764
Other comprehensive (expense)/income for
the year
Items that will not be reclassified to profit
or loss:
* Fair value (losses)/gains on investments in equity
instruments at fair value through other comprehensive
income (19,933) 3,842
* Income tax relating to items that will not be
reclassified to profit or loss 4,983 (59)
* Remeasurement of net defined benefit liability 3,265 (3,905)
* Share of other comprehensive income of associates 94,761 441,862
Items that may be reclassified subsequently
to profit or loss:
* Fair value (losses)/gains on investments in debt
instruments at fair value through other comprehensive
income (4,310) 3,551
* Impairment loss on investments in debt instruments at
fair value through other comprehensive income
included in profit or loss 7,637 8,096
* Income tax relating to items that may be reclassified
subsequently to profit or loss (832) (2,912)
* Share of other comprehensive income of associates 139,255 23,272
* Exchange differences on translation of foreign
operations (1,111,691) 495,324
Other comprehensive (expense)/income for
the year (net of tax) (886,865) 969,071
Total comprehensive (expense)/income for
the year (16,702,996) 8,232,835
Attributable to:
* Equity shareholders of the Company (15,260,368) 7,370,539
* Non-controlling interests (1,442,628) 862,296
(16,702,996) 8,232,835
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
At 31 December 2020
31 December 31 December
NOTES 2020 2019
RMB'000 RMB'000
Non-current assets
Property, plant and equipment 17 101,346,490 102,158,432
Right-of-use assets 18 114,539,680 119,376,500
Investment properties 19 600,329 637,986
Intangible assets 20 36,580 36,610
Goodwill 21 1,099,975 1,099,975
Interests in associates 23 10,938,428 14,647,561
Interests in joint ventures 24 1,581,105 1,543,509
Advance payments for aircraft and flight
equipment 24,907,862 22,413,867
Deposits for aircraft under leases 615,537 636,671
Equity instruments at fair value through
other comprehensive income 25 233,180 253,113
Debt instruments at fair value through
other comprehensive income 26 1,344,829 1,688,451
Deferred tax assets 27 6,750,883 4,352,452
Other non-current assets 298,836 544,390
264,293,714 269,389,517
Current assets
Inventories 28 1,853,990 2,098,673
Accounts receivable 29 2,942,799 5,997,690
Bills receivable 6,593 362
Prepayments, deposits and other receivables 30 3,912,471 3,724,468
Restricted bank deposits 31 737,245 728,385
Cash and cash equivalents 31 5,837,998 8,935,282
Other current assets 32 4,444,806 3,331,996
19,735,902 24,816,856
Total assets 284,029,616 294,206,373
Current liabilities
Air traffic liabilities (2,002,649) (9,980,300)
Accounts payable 33 (12,510,582) (16,578,153)
Bills payable (62,570) -
Dividends payable (98,000) -
Other payables and accruals 34 (11,177,928) (11,977,447)
Current taxation (45,614) (938,732)
Lease liabilities 35 (13,560,862) (13,861,503)
Interest-bearing bank loans and other
borrowings 36 (39,630,365) (22,729,991)
Provision for return condition checks 37 (229,514) (869,651)
Contract liabilities 38 (1,280,102) (1,037,031)
(80,598,186) (77,972,808)
Net current liabilities (60,862,284) (53,155,952)
Total assets less current liabilities 203,431,430 216,233,565
Non-current liabilities
Lease liabilities 35 (76,098,678) (86,586,353)
Interest-bearing bank loans and other
borrowings 36 (31,639,097) (16,598,965)
Provision for return condition checks 37 (8,580,560) (7,538,095)
Provision for early retirement benefit
obligations (1,351) (1,989)
Long-term payables (21,022) (115,190)
Contract liabilities 38 (2,264,843) (2,670,910)
Defined benefit obligations 39 (229,332) (249,933)
Deferred income 40 (488,791) (521,227)
Deferred tax liabilities 27 (334,720) (621,440)
(119,658,394) (114,904,102)
NET ASSETS 83,773,036 101,329,463
CAPITAL AND RESERVES
Issued capital 41 14,524,815 14,524,815
Treasury shares 41 (3,047,564) (3,047,564)
Reserves 66,064,076 81,981,426
Total equity attributable to equity
shareholders of the Company 77,541,327 93,458,677
Non-controlling interests 6,231,709 7,870,786
TOTAL EQUITY 83,773,036 101,329,463
The consolidated financial statements on pages 86 to 191 were
approved and authorised for issue by the board of directors on 30
March 2021 and signed on its behalf by:
Song Zhiyong Feng Gang
DIRECTOR DIRECTOR
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
For the Year Ended 31 December 2020
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
2019 14,524,815 (3,047,564) 29,449,636 9,953,163 93,188 (1,705,555) 38,328,805 87,596,488 6,811,867 94,408,355
Changes in equity
for 2019
Profit for the
year - - - - - - 6,420,294 6,420,294 843,470 7,263,764
Other
comprehensive
income - - 468,589 - - 481,656 - 950,245 18,826 969,071
Total comprehensive
income - - 468,589 - - 481,656 6,420,294 7,370,539 862,296 8,232,835
Capital
contribution
from
non-controlling
shareholder of a
subsidiary - - - - - - - - 400,000 400,000
Appropriation of
statutory
reserve funds - - - 537,682 - - (537,682) - - -
Appropriation of
discretionary
reserve funds
and others - - - 535,760 - - (543,966) (8,206) (2,837) (11,043)
Appropriation of
general
reserve - - - - 17,440 - (17,440) - - -
Dividends paid to
non-controlling
shareholders - - - - - - - - (200,540) (200,540)
Dividends declared
in respect of the
previous year 16 - - - - - - (1,500,123) (1,500,123) - (1,500,123)
Disposal of an
equity
instruments at
fair
value through
other
comprehensive
income - - (1,839) - - - 1,839 - - -
Others - - - - - - (21) (21) - (21)
As at 31 December
2019 and 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 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
CONSOLIDATED STATEMENT OF
CASH FLOWS
For the Year Ended 31 December 2020
2020 2019
RMB'000 RMB'000
Operating activities
(Loss)/profit before taxation (18,466,406) 9,120,263
Adjustments for:
Share of results of associates and joint
ventures 5,993,151 (475,259)
Exchange (gain)/loss, net (3,603,752) 1,211,171
Finance income (191,598) (163,185)
Finance costs 5,099,785 4,948,928
Depreciation of property, plant and equipment 9,168,355 9,704,731
Depreciation of right-of-use assets 11,214,630 11,548,619
Gain on disposal of property, plant and equipment (38,943) (65,319)
Gain on disposal of right-of-use assets (348) -
Gain on derecognition of land use rights - (52,798)
Loss on disposal of interests in joint ventures
and associates - 414
Depreciation of investment properties 25,302 25,692
Amortisation of intangible assets 30 42
Impairment loss on property, plant and equipment 439,656 -
Impairment loss on debt instruments at fair
value through
other comprehensive income 7,637 8,096
Impairment losses recognised/(reversed) on
inventories 35,958 (2,805)
Impairment loss (reversed)/recognised on
accounts receivable, net (73,882) 39,051
Impairment losses recognised/(reversed) on
deposits and
other receivables, net 2,508 (190)
Impairment losses reversed on other non-current
assets, net (3,174) (299)
Impairment losses reversed on other current
assets, net (25,687) (5,976)
Dividend income (8,034) (12,550)
Operating cash flows before movements in
working capital 9,575,188 35,828,626
Decrease/(increase) in deposits for aircraft
under leases 21,134 (23,325)
Decrease in other non-current assets 115,531 28,687
Decrease/(increase) in inventories 212,825 (199,630)
Decrease/(increase) in accounts receivable 3,174,548 (665,276)
(Increase)/decrease in bills receivable (6,231) 41
(Increase)/decrease in prepayments, deposits
and other receivables (56,132) 199,319
Decrease in other current assets 599,807 1,120,610
(Decrease)/increase in air traffic liabilities (7,977,651) 1,094,026
(Decrease)/increase in accounts payable (4,419,169) 1,384,618
Increase in bills payable 62,570 -
Increase in dividends payable 98,000 -
Increase in other payables and accruals 1,002,580 2,473,507
Increase/(decrease) in provision for return
condition checks 247,016 (16,797)
Decrease in provision for early retirement
benefit obligations (638) (1,116)
Decrease in defined benefit obligations (26,548) (26,714)
Decrease in deferred income (32,436) (146)
Decrease in contract liabilities (162,996) (656,316)
Decrease in long-term payables (94,168) (38,981)
Cash generated from operations 2,333,230 40,501,133
Income tax paid (925,056) (2,160,950)
Interest paid (5,425,047) (4,740,840)
Net cash (used in)/generated from operating
activities (4,016,873) 33,599,343
NOTE 2020 2019
RMB'000 RMB'000
Investing activities
Payments for the purchase of property,
plant and equipment (5,030,019) (7,456,399)
Advance payments for aircraft and flight
equipment (7,008,116) (5,626,747)
Proceeds from disposal of property,
plant and equipment 133,118 344,537
Proceeds from derecognition of land
use rights - 421,412
Payments for purchase of investment
properties - (25,536)
Cash refunded on intangible assets - 261
(Increase)/decrease in restricted bank
deposits against
aircraft leases and others (920) 190,558
Disposal of investment in joint ventures
and associates - (414)
Payment for ordinary shares of an associate
(Note 23) (2,957,136) -
Purchase of debt instruments at fair
value through other
comprehensive income (1,331,309) (632,199)
Proceeds from disposal of equity instruments
at fair value
through other comprehensive income - 18,800
Interest received 191,598 163,185
Dividends received from associates
and joint ventures 129,999 623,362
Dividends received from equity instruments
at fair value
through other comprehensive income 7,472 12,550
Net cash used in investing activities (15,865,313) (11,966,630)
Financing activities
Capital contribution from a non-controlling
shareholder of
a subsidiary - 400,000
New bank loans and other loans 63,607,615 21,918,459
Proceeds from issuance of corporate
bonds and short-term
commercial papers 29,700,000 15,500,000
Repayment of bank loans and other loans (27,348,267) (28,273,520)
Repayment of lease liabilities (14,332,052) (14,754,685)
Repayment of corporate bonds and short-term
commercial papers (34,000,000) (12,600,000)
Dividends paid (739,697) (1,700,663)
Net cash from/(used in) financing activities 16,887,599 (19,510,409)
Net (decrease)/increase in cash and
cash equivalents (2,994,587) 2,122,304
Cash and cash equivalents at 1 January 31 8,935,282 6,763,183
Effect of foreign exchange rate changes (102,697) 49,795
Cash and cash equivalents at 31 December 31 5,837,998 8,935,282
Notes to the Consolidated
Financial Statements
For the Year Ended 31 December 2020
1. CORPORATE INFORMATION
Air China Limited (the "Company") was established as a joint
stock limited company in Beijing, the People's Republic of China
(the "PRC"), on 30 September 2004. The Company's H shares are
listed on The Stock Exchange of Hong Kong Limited (the "HKSE") and
the London Stock Exchange (the "LSE") while the Company's A shares
are listed on the Shanghai Stock Exchange. In the opinion of the
directors of the Company (the "Directors"), the Company's parent
and ultimate holding company is China National Aviation Holding
Corporation Limited ("CNAHC"), a state-owned enterprise established
in the PRC under the supervision of the State Council.
The principal activities of the Company and its subsidiaries
(together referred to as the "Group") are provision of airline and
airline-related services, including aircraft engineering services
and airport ground handling services.
The registered office of the Company is located at Blue Sky
Mansion, 28 Tianzhu Road, Airport Industrial Zone, Shunyi District,
Beijing 101312, the PRC.
The consolidated financial statements are presented in Renminbi
("RMB"), the currency of the primary economic environment in which
most of the group entities operate (the functional currency of the
Company and most of the entities comprising the Group), and all
values are rounded to the nearest thousand ('000) unless otherwise
indicated.
2. BASIS OF PREPARATION
As at 31 December 2020, the Group's current liabilities exceeded
its current assets by approximately RMB60,862 million. The
liquidity of the Group is primarily dependent on its ability to
maintain adequate cash inflows from operations and sufficient
financing to meet its financial obligations as and when they fall
due. Considering the Company's sources of liquidity and the
unutilised bank facilities of RMB122,242 million as at 31 December
2020, the Directors believe that adequate funding is available to
fulfil the Group's debt obligations and capital expenditure
requirements when preparing the consolidated financial statements
for the year ended 31 December 2020. Accordingly, the consolidated
financial statements have been prepared on a basis that the Group
will be able to continue as a going concern.
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRSs") issued by the International Accounting Standards Board
(the "IASB"). For the purpose of preparation of the consolidated
financial statements, information is considered material if such
information is reasonably expected to influence decisions made by
primary users. In addition, the consolidated financial statements
include applicable disclosures required by the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited
("Listing Rules") and by the Hong Kong Companies Ordinance
("Companies Ordinance").
The consolidated financial statements have been prepared on the
historical cost basis, except for certain financial instruments
that are measured at fair values at the end of each reporting
period, as explained in the accounting policies set out below.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
2. BASIS OF PREPARATION (continued)
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset or a
liability, the Group takes into account the characteristics of the
asset or liability if market participants would take those
characteristics into account when pricing the asset or liability at
the measurement date. Fair value for measurement and/or disclosure
purposes in these consolidated financial statements is determined
on such a basis, except for leasing transactions that are accounted
for in accordance with IFRS 16 Leases, and measurements that have
some similarities to fair value but are not fair value, such as net
realisable value in IAS 2 Inventories or value in use in IAS 36
Impairment of Assets.
For financial instruments which are transacted at fair value and
a valuation technique that unobservable inputs is to be used to
measure fair value in subsequent periods, the valuation technique
is calibrated so that at initial recognition the results of the
valuation technique equals the transaction price.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurement in its entirety, which are described as follows:
-- Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
-- Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
-- Level 3 inputs are unobservable inputs for the asset or liability.
3. APPLICATION OF AMMENTS TO IFRS s
Amendments to IFRSs that are mandatorily effective for the
current year
In the current year, the Group has applied the Amendments to
References to the Conceptual Framework in IFRS Standards and the
following amendments to IFRSs for the first time, which are
mandatorily effective for the annual period beginning on or after 1
January 2020 for the preparation of the consolidated financial
statements:
Amendments to IAS 1 and IAS 8 Definition of Material
Amendments to IFRS 3 Definition of a Business
Amendments to IFRS 9, IAS 39 and
IFRS 7 Interest Rate Benchmark Reform
3. APPLICATION OF AMMENTS TO IFRS s (continued)
In addition, the Group has early applied the Amendment to IFRS
16 Covid-19-Related Rent Concessions. Rent concessions relating to
lease contracts that occurred as a direct consequence of the
Covid-19 pandemic, the Group has elected to apply the practical
expedient not to assess whether the change is a lease modification
if all the specified conditions are met. Forgiveness or waiver of
lease payments are accounted for as variable lease payments. The
related lease liabilities are adjusted to reflect the amounts
forgiven or waived with a corresponding adjustment recognised in
profit or loss in the period in which the event occurs.
The application of the Amendments to References to the
Conceptual Framework in IFRS Standards and the amendments to IFRSs
in the current year has had no material impact on the Group's
financial positions and performance for the current and prior years
and/or on the disclosures set out in these consolidated financial
statements.
New and amendments to IFRSs in issue but not yet effective
The Group has not early applied the following new and amendments
to IFRSs that have been issued but are not yet effective:
IFRS 17 Insurance Contracts and the related
Amendments(1)
Amendments to IFRS 3 Reference to the Conceptual Framework(2)
Amendments to IFRS 9, IAS 39, Interest Rate Benchmark Reform-Phase
IFRS 7, IFRS 4 and IFRS 16 2(4)
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between
an Investor and
its Associate or Joint Venture(3)
Amendments to IAS 1 Classification of Liabilities as Current
or Non-current(1)
Amendments to IAS 1 and Disclosure of Accounting Policies(1)
IFRS Practice Statement 2
Amendments to IAS 8 Definition of Accounting Estimates(1)
Amendments to IAS 16 Property, Plant and Equipment: Proceeds
before Intended Use(2)
Amendments to IAS 37 Onerous Contracts-Cost of Fulfilling
a Contract(2)
Amendments to IFRS Standards Annual Improvements to IFRS Standards
2018-2020(2)
1 Effective for annual periods beginning on or after 1 January 2023.
2 Effective for annual periods beginning on or after 1 January 2022.
3 Effective for annual periods beginning on or after a date to be determined.
4 Effective for annual periods beginning on or after 1 January 2021.
The Directors anticipate that the application of all new and
amendments to IFRSs will have no material impact on the
consolidated financial statements in the foreseeable future.
3A. CHANGE IN AN ACCOUNTING ESTIMATE
During the current year, the Group changed the depreciation
method of overhaul components of engines, included in property,
plant and equipment and right-of-use assets, from straight-line
method to the units of production method. The change was accounted
for as a change in an accounting estimate in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
effect from 1 January 2020 and the impact on the consolidated
financial statements for the year ended 31 December 2020 was a
reduction in depreciation expense of approximately RMB1,611
million.
4. SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
and its subsidiaries. Control is achieved when the Company:
-- has power over the investee;
-- is exposed, or has rights, to variable returns from its
involvement with the investee; and
-- has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control
of the subsidiary. Specifically, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated statement of profit or loss from the date the
Group gains control until the date when the Group ceases to control
the subsidiary.
Profit or loss and each component of other comprehensive income
are attributed to the owners of the Company and to the
non-controlling interests. Total comprehensive income of
subsidiaries is attributed to the owners of the Company and to the
non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements
of subsidiaries to bring their accounting policies into line with
the Group's accounting policies.
All intra-group assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented
separately from the Group's equity therein, which represent present
ownership interests entitling their holders to a proportionate
share of net assets of the relevant subsidiaries upon
liquidation.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Goodwill
Goodwill arising on an acquisition of a business is carried at
cost as established at the date of acquisition of the business less
accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to
each of the Group's cash-generating units (or group of
cash-generating units) that is expected to benefit from the
synergies of the combination, which represent the lowest level at
which the goodwill is monitored for internal management purposes
and not larger than an operating segment.
A cash-generating unit (or group of cash-generating units) to
which goodwill has been allocated is tested for impairment
annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the
cash-generating unit is less than its carrying amount, the
impairment loss is allocated first to reduce the carrying amount of
any goodwill and then to the other assets on a pro rata basis based
on the carrying amount of each asset in the unit (or group of
cash-generating units). Any impairment loss for goodwill is
recognised directly in profit or loss. An impairment loss
recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit or any of the
cash-generating unit within the group of cash-generating units, the
attributable amount of goodwill is included in the determination of
the amount of profit or loss on disposal. When the Group disposes
of an operation within the cash-generating unit (or a
cash-generating unit within a group of cash-generating units), the
amount of goodwill disposed of is measured on the basis of the
relative values of the operation (or the cash-generating unit)
disposed of and the portion of the cash-generating unit (or the
group of cash-generating units) retained.
The Group's policy for goodwill arising on the acquisition of an
associate and a joint venture is described below.
Investments in associates and joint ventures
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in the
financial and operating policy decisions of the investee but is not
control or joint control over those policies.
A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets
of the joint arrangement. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when
decisions about the relevant activities require unanimous consent
of the parties sharing control.
The results and assets and liabilities of associates or joint
ventures are incorporated in the consolidated financial statements
using the equity method of accounting, except when the investment,
or a portion thereof, is classified as held for sale, in which case
it is or the portion so classified is accounted for in accordance
with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations. Any retained portion of an investment in an associate
or a joint venture that has not been classified as held for sale
shall be accounted for using the equity method. Appropriate
adjustments have been made to conform the associates' and the joint
ventures' accounting policies to those of the Group if these
accounting policies differ from those of the Group for like
transactions and events in similar circumstances. Under the equity
method, an investment in an associate or a joint venture is
initially recognised in the consolidated statement of financial
position at cost and adjusted thereafter to recognise the Group's
share of the profit or loss and other comprehensive income of the
associate or joint venture. When the Group's share of losses of an
associate or a joint venture exceeds the Group's interest in that
associate or joint venture (which includes any long-term interests
that, in substance, form part of the Group's net investment in the
associate or joint venture), the Group discontinues recognising its
share of further losses. Additional losses are recognised only to
the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate or joint
venture.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments in associates and joint ventures (continued)
An investment in an associate or a joint venture is accounted
for using the equity method from the date on which the investee
becomes an associate or a joint venture. On acquisition of the
investment in an associate or a joint venture, any excess of the
cost of the investment over the Group's share of the net fair value
of the identifiable assets and liabilities of the investee is
recognised as goodwill, which is included within the carrying
amount of the investment. Any excess of the Group's share of the
net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognised
immediately in profit or loss in the period in which the investment
is acquired.
The Group assesses whether there is an objective evidence that
the interest in an associate or a joint venture may be impaired.
When any objective evidence exists, the entire carrying amount of
the investment (including goodwill) is tested for impairment in
accordance with IAS 36 as a single asset by comparing its
recoverable amount (higher of value in use and fair value less
costs of disposal) with its carrying amount. Any impairment loss
recognised is not allocated to any asset, including goodwill, that
forms part of the carrying amount of the investment. Any reversal
of that impairment loss is recognised in accordance with IAS 36 to
the extent that the recoverable amount of the investment
subsequently increases.
When the Group ceases to have significant influence over an
associate or joint control over a joint venture, it is accounted
for as a disposal of the entire interest in the investee with a
resulting gain or loss being recognised in profit or loss. When the
Group retains an interest in the former associate or joint venture
and the retained interest is a financial asset within the scope of
IFRS 9 Financial instruments, the Group measures the retained
interest at fair value at that date and the fair value is regarded
as its fair value on initial recognition. The difference between
the carrying amount of the associate or joint venture and the fair
value of any retained interest and any proceeds from disposing
relevant interest in the associate or joint venture is included in
the determination of the gain or loss on disposal of the associate
or joint venture. In addition, the Group accounts for all amounts
previously recognised in other comprehensive income in relation to
that associate or joint venture on the same basis as would be
required if that associate or joint venture had directly disposed
of the related assets or liabilities. Therefore, if a gain or loss
previously recognised in other comprehensive income by that
associate or joint venture would be reclassified to profit or loss
on the disposal of the related assets or liabilities, the Group
reclassifies the gain or loss from equity to profit or loss (as a
reclassification adjustment) upon disposal/partial disposal of the
relevant associate or joint venture.
When a group entity transacts with an associate or a joint
venture of the Group, profits and losses resulting from the
transactions with the associate or joint venture are recognised in
the Group's consolidated financial statements only to the extent of
interests in the associate or joint venture that are not related to
the Group.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue from contracts with customers
The Group recognises revenue when (or as) a performance
obligation is satisfied, i.e. when "control" of the goods or
services underlying the particular performance obligation is
transferred to the customer.
A performance obligation represents a good or service (or a
bundle of goods or services) that is distinct or a series of
distinct goods or services that are substantially the same.
Control is transferred over time and revenue is recognised over
time by reference to the progress towards complete satisfaction of
the relevant performance obligation if one of following criteria is
met:
-- the customer simultaneously receives and consumes the
benefits provided by the Group's performance as the Group
performs;
-- the Group's performance creates or enhances an asset that the
customer controls as the Group performs; or
-- the Group's performance does not create an asset with an
alternative use to the Group and the Group has an enforceable right
to payment for performance completed to date.
Otherwise, revenue is recognised at a point in time when the
customer obtains control of the distinct good or service.
A contract asset represents the Group's right to consideration
in exchange for goods or services that the Group has transferred to
a customer that is not yet unconditional. It is assessed for
impairment in accordance with IFRS 9. In contrast, a receivable
represents the Group's unconditional right to consideration, i.e.
only the passage of time is required before payment of that
consideration is due.
A contract liability represents the Group's obligation to
transfer goods or services to a customer for which the Group has
received consideration (or an amount of consideration is due) from
the customer.
A contract asset and a contract liability relating to the same
contract are accounted for and presented on a net basis.
Contracts with multiple performance obligations (including
allocation of transaction price)
The Group operates frequent-flyer programme and provides free
services or products to the customers according to the miles they
earn. The Group maintains complex 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. The amount allocated to the miles
earned by the frequent-flyer programme members is deferred until
the miles are redeemed when the Group fulfils its obligations to
supply services or products or when the miles expire.
For contracts that contain more than one performance
obligations, i.e. frequent-flyer programme, the Group allocates the
transaction price to each performance obligation on a relative
stand-alone selling price basis.
The stand-alone selling price of the distinct good or service
underlying each performance obligation is determined at contract
inception. It represents the price at which the Group would sell a
promised good or service separately to a customer. If a stand-alone
selling price is not directly observable, the Group estimates it
using appropriate techniques such that the transaction price
ultimately allocated to any performance obligation reflects the
amount of consideration to which the Group expects to be entitled
in exchange for transferring the promised goods or services to the
customer.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Maintenance and overhaul costs
In respect of aircraft and engines, costs of major overhauls are
recognised in the carrying amount of the property, plant and
equipment or right-of-use asset as a replacement if the recognition
criteria are satisfied. Overhaul components subject to replacement
during major overhauls are depreciated over the expected life
between major overhauls.
The Group has the responsibility to fulfil certain return
conditions under the relevant leases agreements. In order to fulfil
these return conditions, major overhauls are required to be
conducted. Accordingly, estimated overhaul costs for aircraft under
leases are accrued and charged to the profit or loss over the lease
terms using the ratios per flying hours/cycles. Differences between
the estimated costs and the actual costs of overhauls are included
in the profit or loss in the period of overhaul.
All other routine repair and maintenance costs incurred in
restoring such property, plant and equipment and leased assets to
their normal working condition are charged to the profit or loss as
and when incurred.
Leases
Definition of a lease
A contract is, or contains, a lease if the contract conveys the
right to control the use of an identified asset for a period of
time in exchange for consideration.
For contracts entered into or modified on or after the date of
initial application or arising from business combinations, the
Group assesses whether a contract is or contains a lease based on
the definition under IFRS 16 at inception, modification date or
acquisition date, as appropriate. Such contract will not be
reassessed unless the terms and conditions of the contract are
subsequently changed.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessee
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to
leases of buildings and other equipment that have a lease term of
12 months or less from the commencement date and do not contain a
purchase option. It also applies the recognition exemption for
lease of low-value assets. Lease payments on short-term leases and
leases of low-value assets are recognised as expense on a
straight-line basis or another systematic basis over the lease
term.
Right-of-use assets
The cost of right-of-use assets includes:
-- the amount of the initial measurement of the lease liability;
-- any lease payments made at or before the commencement date,
less any lease incentives received;
-- any initial direct costs incurred by the Group; and
-- an estimate of costs to be incurred by the Group in
dismantling and removing the underlying assets, restoring the site
on which it is located or restoring the underlying asset to the
condition required by the terms and conditions of the lease.
Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities.
Right-of-use assets in which the Group is reasonably certain to
obtain ownership of the underlying leased assets at the end of the
lease term are depreciated from commencement date to the end of the
useful life. Otherwise, right-of-use assets are depreciated on a
straight-line basis over the shorter of its estimated useful life
and the lease term.
When the Group obtains ownership of the underlying leased assets
at the end of the lease term, upon exercising purchase options, the
cost of the relevant right-of-use assets and the related
accumulated depreciation and impairment loss are transferred to
property, plant and equipment.
The Group presents right-of-use assets as a separate line item
on the consolidated statement of financial position.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessee (continued)
Lease liabilities
At the commencement date of a lease, the Group recognises and
measures the lease liability at the present value of lease payments
that are unpaid at that date. In calculating the present value of
lease payments, the Group uses the incremental borrowing rate at
the lease commencement date if the interest rate implicit in the
lease is not readily determinable.
The lease payments include:
-- fixed payments (including in-substance fixed payments) less
any lease incentives receivable;
-- variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement
date;
-- amounts expected to be payable by the Group under residual value guarantees;
-- the exercise price of a purchase option if the Group is
reasonably certain to exercise the option; and
-- payments of penalties for terminating a lease, if the lease
term reflects the Group exercising an option to terminate the
lease.
Variable lease payments that reflect changes in market rental
rates are initially measured using the market rental rates as at
the commencement date. Variable lease payments that do not depend
on an index or a rate are not included in the measurement of lease
liabilities and right-of-use assets, and are recognised as expense
in the period on which the event or condition that triggers the
payment occurs.
After the commencement date, lease liabilities are adjusted by
interest accretion and lease payments.
The Group remeasures lease liabilities (and makes a
corresponding adjustment to the related right-of-use assets)
whenever:
-- the lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the
related lease liability is remeasured by discounting the revised
lease payments using a revised discount rate at the date of
reassessment.
-- the lease payments change due to changes in market rental
rates following a market rent review/expected payment under a
guaranteed residual value, in which cases the related lease
liability is remeasured by discounting the revised lease payments
using the initial discount rate.
The Group presents lease liabilities as a separate line item on
the consolidated statement of financial position.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessee (continued)
Lease modifications
Except for Covid-19-related rent concessions in which the Group
applied the practical expedient, the Group accounts for a lease
modification as a separate lease if:
-- the modification increases the scope of the lease by adding
the right to use one or more underlying assets; and
-- the consideration for the leases increases by an amount
commensurate with the stand-alone price for the increase in scope
and any appropriate adjustments to that stand-alone price to
reflect the circumstances of the particular contract.
For a lease modification that is not accounted for as a separate
lease, the Group remeasures the lease liability based on the lease
term of the modified lease by discounting the revised lease
payments using a revised discount rate at the effective date of the
modification.
The Group accounts for the remeasurement of lease liabilities
and lease incentives from lessor by making corresponding
adjustments to the relevant right-of-use asset. When the modified
contract contains a lease component and one or more additional
lease or non-lease components, the Group allocates the
consideration in the modified contract to each lease component on
the basis of the relative stand-alone price of the lease component
and the aggregate stand-alone price of the non-lease
components.
Covid-19 related rent concessions
In relation to rent concessions that occurred as a direct
consequence of the Covid-19 pandemic, the Group has elected to
apply the practical expedient not to assess whether the change is a
lease modification if all of the following conditions are met:
-- the change in lease payments results in revised consideration
for the lease that is substantially the same as, or less than, the
consideration for the lease immediately preceding the change;
-- any reduction in lease payments affects only payments
originally due on or before 30 June 2021; and
-- there is no substantive change to other terms and conditions of the lease.
A leasee applying the practical expedient accounts for changes
in lease payments resulting from rent concessions the same way it
would account for the changes applying IFRS 16 if the changes are
not a lease modification. Forgiveness or waiver of lease payments
are accounted for as variable lease payments. The related lease
liabilities are adjusted to reflect the amounts forgiven or waived
with a corresponding adjustment recognised in the profit or loss in
the period in which the event occurs.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Leases (continued)
The Group as a lessor
Classification and measurement of leases
Leases for which the Group is a lessor are classified as finance
or operating leases. Whenever the terms of the lease transfer
substantially all the risks and rewards incidental to ownership of
an underlying asset to the lessee, the contract is classified as a
finance lease. All other leases are classified as operating
leases.
Rental income from operating leases is recognised in profit or
loss on a straight-line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the leased
asset, and such costs are recognised as an expense on a
straight-line basis over the lease term.
Lease modification
Changes in considerations of lease contracts that were not part
of the original terms and conditions are accounted for as lease
modifications, including lease incentives provided through
forgiveness or reduction of rentals.
The Group accounts for a modification to an operating lease as a
new lease from the effective date of the modification, considering
any prepaid or accrued lease payments relating to the original
lease as part of the lease payments for the new lease.
Sale and leaseback transactions
The Group applies the requirements of IFRS 15 Revenue from
Contracts with Customers to assess whether sale and leaseback
transaction constitutes a sale by the Group.
The Group acts as a seller-lessee
For a transfer that does not satisfy the requirements as a sale,
the Group as a seller-lessee continues to recognise the assets and
accounts for the transfer proceeds as borrowings within the scope
of IFRS 9.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currencies
In preparing the financial statements of each individual group
entity, transactions in currencies other than the functional
currency of that entity (foreign currencies) are recognised at the
rates of exchanges prevailing on the dates of the transactions. At
the end of the reporting period, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at that
date. Non-monetary items carried at fair value that are denominated
in foreign currencies are retranslated at the rates prevailing on
the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign currency
are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are recognised
in profit or loss in the period in which they arise.
For the purposes of presenting the consolidated financial
statements, the assets and liabilities of the Group's foreign
operations are translated into the presentation currency of the
Group (i.e. RMB) at the rate of exchange prevailing at the end of
the reporting period. Income and expenses are translated at the
average exchange rates for the year, unless exchange rates
fluctuate significantly during the year, in which case, the
exchange rates prevailing at the dates of transactions are used.
Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity under the heading of
foreign exchange translation reserve (attributed to non-controlling
interests as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the
Group's entire interest in a foreign operation, or a disposal
involving loss of control over a subsidiary that includes a foreign
operation, or a partial disposal of an interest in a joint venture
or an associate that includes a foreign operation of which the
retained interest becomes a financial asset), all of the exchange
differences accumulated in equity in respect of that operation
attributable to the owners of the Company are reclassified to
profit or loss.
Goodwill and fair value adjustments on identifiable assets
acquired arising on an acquisition of a foreign operation are
treated as assets and liabilities of that foreign operation and
translated at the rate of exchange prevailing at the end of each
reporting period. Exchange differences arising are recognised in
other comprehensive income.
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale.
Any specific borrowing that remain outstanding after the related
asset is ready for its intended use or sale is included in the
general borrowing pool for calculation of capitalisation rate on
general borrowings. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for
capitalisation.
All other borrowing costs are recognised in profit or loss in
the period in which they are incurred.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Government grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching
to them and that the grants will be received.
Government grants are recognised in profit or loss on a
systematic basis over the periods in which the Group recognises as
expenses the related costs for which the grants are intended to
compensate. Specifically, government grants whose primary condition
is that the Group should purchase, construct or otherwise acquire
non-current assets are recognised as deferred income in the
consolidated statement of financial position and transferred to
profit or loss on a systematic and rational basis over the useful
lives of the related assets.
Government grants related to income that are receivable as
compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the Group with no
future related costs are recognised in profit or loss in the
periods in which they become receivable.
Employee benefits
Retirement benefit costs
Payments to defined contribution retirement benefit plans are
recognised as an expense when employees have rendered service
entitling them to the contributions.
For defined benefit retirement benefit plans, the cost of
providing benefits is determined using the projected unit credit
method, with actuarial valuations being carried out at the end of
each annual reporting period. Remeasurement, comprising actuarial
gains and losses, the effect of the changes to the asset ceiling
(if applicable) and the return on plan assets (excluding interest),
is reflected immediately in the consolidated statement of financial
position with a charge or credit recognised in other comprehensive
income in the period in which they occur. Remeasurement recognised
in other comprehensive income will not be reclassified to profit or
loss.
Past service cost is recognised in profit or loss in the period
of a plan amendment or curtailment and a gain or loss on settlement
is recognised when settlement occurs. When determining past service
cost, or a gain or loss on settlement, an entity shall remeasure
the net defined benefit liability or asset using the current fair
value of plan assets and current actuarial assumptions, reflecting
the benefits offered under the plan and the plan assets before and
after the plan amendment, curtailment or settlement, without
considering the effect of asset ceiling (i.e. the present value of
any economic benefits available in the form of refunds from the
plan or reductions in future contributions to the plan).
Net interest is calculated by applying the discount rate at the
beginning of the period to the net defined benefit liability or
asset. However, if the Group remeasures the net defined benefit
liability or asset before plan amendment, curtailment or
settlement, the Group determines net interest for the remainder of
the annual reporting period after the plan amendment, curtailment
or settlement using the benefits offered under the plan and the
plan assets after the plan amendment, curtailment or settlement and
the discount rate used to remeasure such net defined benefit
liability or asset, taking into account any changes in the net
defined benefit liability or asset during the period resulting from
contributions or benefit payments.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Employee benefits (continued)
Retirement benefit costs (continued)
Defined benefit costs are categorised as follows:
-- service cost (including current service cost, past service
cost, as well as gains and losses on curtailments and
settlements);
-- net interest expense or income; and
-- remeasurement.
The Group presents the first two components of defined benefit
costs in profit or loss in the line items of administrative
expenses and finance costs or finance income. Curtailment gains and
losses are accounted for as past service costs.
The retirement benefit obligation recognised in the consolidated
statement of financial position represents the actual deficit or
surplus in the Group's defined benefit plans. Any surplus resulting
from this calculation is limited to the present value of any
economic benefits available in the form of refunds from the plans
or reductions in future contributions to the plans.
Termination benefits
A liability for a termination benefit is recognised at the
earlier of when the Group can no longer withdraw the offer of the
termination benefit and when the Group recognises any related
restructuring costs.
Short-term and other long-term employee benefits
A liability is recognised for benefits accruing to employees
(such as wages and salaries, annual leave and sick leave) after
deducting any amount already paid.
Liabilities recognised in respect of short-term employee
benefits are measured at the undiscounted amount of the benefits
expected to be paid in exchange for the related service. All
short-term employee benefits are recognised as an expense unless
another IFRS require or permits the inclusion of the benefits in
the cost of an asset.
Liabilities recognised in respect of other long-term employee
benefits are measured at the present value of the estimated future
cash outflows expected to be made by the Group in respect of
services provided by employees up to the reporting date. Any
changes in the liabilities' carrying amounts resulting from service
cost, interest and remeasurements are recognised in profit or loss
except to the extent that another IFRS requires or permits their
inclusion in the cost of an asset.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit/loss before tax because of
income or expense that are taxable or deductible in other years and
items that are never taxable or deductible. The Group's liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting
period.
Deferred tax
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a
business combination) of assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting
profit.
Deferred tax liabilities are recognised for taxable temporary
differences associated with interests/investments in subsidiaries,
associates and joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future. Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are only
recognised to the extent that it is probable that there will be
sufficient taxable profits against which to utilise the benefits of
the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the
end of the reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the periods in which the
liability is settled or the asset is realised, based on tax rate
(and tax laws) that have been enacted or substantively enacted by
the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
to the same taxable entity by the same taxation authority.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Taxation (continued)
Current and deferred tax for the year
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case, the
current and deferred tax are also recognised in other comprehensive
income or directly in equity respectively. Where current tax or
deferred tax arises from the initial accounting for a business
combination, the tax effect is included in the accounting for
business combination
In assessing any uncertainty over income tax treatments, the
Group considers whether it is probable that the relevant tax
authority will accept the uncertain tax treatment used, or proposed
to be use by individual group entities in their income tax filings.
If it is probable, the current and deferred taxes are determined
consistently with the tax treatment in the income tax filings. If
it is not probable that the relevant taxation authority will accept
an uncertain tax treatment, the effect of each uncertainty is
reflected by using either the most likely amount or the expected
value.
Investment properties
Investment properties are properties held to earn rentals and/or
for capital appreciation.
Investment properties are measured initially at cost or deemed
cost, including any directly attributable expenditure. Subsequent
to initial recognition, investment properties are stated at cost
less subsequent accumulated depreciation and any accumulated
impairment losses. Depreciation is recognised so as to write off
the cost of each item of investment property over its estimated
useful life and after taking into account its estimated residual
value, using straight-line method.
Construction costs incurred for investment properties under
construction are capitalised as part of the carrying amount of the
investment properties under construction.
An investment property is derecognised upon disposal or when the
investment property is permanently withdrawn from use and no future
economic benefits are expected from the disposal. Any gain or loss
arising on derecognition of the property (calculated as the
difference between the net disposal proceeds and the carrying
amount of the asset) is included in profit or loss in the period in
which the property is derecognised.
Property, plant and equipment
Property, plant and equipment including buildings held for use
in the production or supply of goods or services, or for
administrative purposes (other than construction in progress), are
stated in the consolidated statement of financial position at cost,
less subsequent accumulated depreciation and subsequent accumulated
impairment losses, if any.
Properties in the course of construction for production, supply
or administrative purposes are carried at cost, less recognised
impairment loss, if any. Costs include any costs directly
attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended
by management and, for qualifying assets, borrowing costs
capitalised in accordance with the Group's accounting policy.
Depreciation of these assets, on the same basis as other property
assets, commences when the assets are ready for their intended
use.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Property, plant and equipment (continued)
Depreciation of overhaul components of engines is calculated
using the units of production method based on the estimated flying
hours. Depreciation for other property, plant and equipment is
recognised so as to write off the cost of items of property, plant
and equipment less their residual values over their estimated
useful lives, using the straight-line method. The estimated useful
lives as well as the estimated flying hours, residual values and
depreciation method are reviewed at the end of the reporting
period, with the effect of any changes in estimate accounted for on
a prospective basis.
If an owner-occupied property becomes an investment property
because its use has changed as evidenced by end of
owner-occupation, the cost and accumulated depreciation of that
item at the date of transfer are transferred to investment property
for subsequent measurement and disclosure purposes.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in
profit or loss.
Intangible assets
Intangible assets with finite useful lives that are acquired
separately are recorded at cost on initial acquisition and
subsequently stated at cost less accumulated amortisation and
impairment. Amortisation for intangible assets with finite useful
lives is provided on a straight-line basis over their estimated
useful lives. The estimated useful life and amortisation method are
reviewed at the end of the reporting period, with the effect of any
changes in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are acquired
separately are carried at cost less any subsequent accumulated
impairment losses.
An intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal. Gains
or losses arising from derecognition of an intangible asset,
measured as the difference between the net disposal proceeds and
the carrying amount of the asset, are recognised in profit or loss
when the asset is derecognised.
Impairment of tangible and intangible assets (other than
goodwill)
At the end of the reporting period, the Group reviews the
carrying amounts of its tangible and intangible assets with finite
useful lives to determine whether there is any indication that
those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the relevant asset is
estimated in order to determine the extent of the impairment loss
(if any). Intangible assets with indefinite useful lives are tested
for impairment at least annually, and whenever there is an
indication that they may be impaired.
The recoverable amount of tangible and intangible assets are
estimated individually. When it is not possible to estimate the
recoverable amount of an asset individually, the Group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs.
In addition, the Group assesses whether there is indication that
corporate assets may be impaired. If such indication exists,
corporate assets are also allocated to individual cash-generating
units, when a reasonable and consistent basis of allocation can be
identified, or otherwise they are allocated to the smallest group
of cash-generating units for which a reasonable and consistent
allocation basis can be identified.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of tangible and intangible assets (other than
goodwill) (continued)
Recoverable amount is the higher of fair value less costs of
disposal and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset (or a
cash-generating unit) for which the estimates of future cash flows
have not been adjusted.
If the recoverable amount of an asset (or a cash-generating
unit) is less than its carrying amount, the carrying amount of the
asset (or a cash-generating unit) is reduced to its recoverable
amount. For corporate assets or portion of corporate assets which
cannot be allocated on a reasonable and consistent basis to a
cash-generating unit, the Group compares the carrying amount of a
group of cash-generating units, including the carrying amounts of
the corporate assets or portion of corporate assets allocated to
that group of cash-generating units, with the recoverable amount of
the group of cash-generating units. In allocating the impairment
loss, the impairment loss is allocated first to reduce the carrying
amount of any goodwill (if applicable) and then to the other assets
on a pro-rata basis based on the carrying amount of each asset in
the unit or the group of cash-generating units. The carrying amount
of an asset is not reduced below the highest of its fair value less
costs of disposal (if measurable), its value in use (if
determinable) and zero. The amount of the impairment loss that
would otherwise have been allocated to the asset is allocated pro
rata to the other assets of the unit or the group of
cash-generating units. An impairment loss is recognised immediately
in profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or a cash-generating unit or a group of
cash-generating units) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset (or a cash-
generating unit or a group of cash-generating units) in prior
years. A reversal of an impairment loss is recognised immediately
in profit or loss.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs of inventories are determined on a weighted average
basis. Net realisable value represents the estimated selling price
for inventories less all estimated costs of completion and costs
necessary to make the sale.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the amount of
the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the end
of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. When a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash
flows (when the effect of the time value of money is material).
Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous contract is
considered to exist where the Group has a contract under which the
unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received from the
contract.
Provisions for the costs to restore leased assets to their
original condition, as required by the terms and conditions of the
lease, are recognised at the date of inception of the lease at the
directors' best estimate of the expenditure that would be required
to restore the assets. Estimates are regularly reviewed and
adjusted as appropriate for new circumstances.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments
Financial assets and financial liabilities are recognised when a
group entity becomes a party to the contractual provisions of the
instrument. All regular way purchases or sales of financial assets
are recognised and derecognised on a trade date basis. Regular way
purchases or sales are purchases or sales of financial assets that
require delivery of assets within the time frame established by
regulation or convention in the market place.
Financial assets and financial liabilities are initially
measured at fair value except for accounts receivable arising from
contracts with customers which are initially measured in accordance
with IFRS 15. Transaction costs that are directly attributable to
the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities
at fair value through profit or loss ("FVTPL")) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at FVTPL are recognised immediately in
profit or loss.
The effective interest method is a method of calculating the
amortised cost of a financial asset or financial liability and of
allocating interest income and interest expense over the relevant
period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts and payments (including
all fees and points paid or received that form an integral part of
the effective interest rate, transaction costs and other premiums
or discounts) through the expected life of the financial asset or
financial liability, or, where appropriate, a shorter period, to
the net carrying amount on initial recognition.
Financial assets
Classification and subsequent measurement of financial
assets
Financial assets that meet the following conditions are
subsequently measured at amortised cost:
-- the financial asset is held within a business model whose
objective is to collect contractual cash flows; and
-- the contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
Financial assets that meet the following conditions are
subsequently measured at fair value through other comprehensive
income ("FVTOCI"):
-- the financial asset is held within a business model whose
objective is achieved by both selling and collecting contractual
cash flows; and
-- the contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest on the
principal amount outstanding.
All other financial assets are subsequently measured at FVTPL,
except that at the initial recognition of a financial asset the
Group may irrevocably elect to present subsequent changes in fair
value of an equity investment in other comprehensive income if that
equity investment is neither held for trading nor contingent
consideration recognised by an acquirer in a business combination
to which IFRS 3 Business Combinations applies.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial assets (continued)
Classification and subsequent measurement of financial assets
(continued)
(i) Amortised cost and interest income
Interest income is recognised using the effective interest
method for financial assets measured subsequently at amortised cost
and debt instruments subsequently measured at FVTOCI. Interest
income is calculated by applying the effective interest rate to the
gross carrying amount of a financial asset, except for financial
assets that have subsequently become credit-impaired (see below).
For financial assets that have subsequently become credit-impaired,
interest income is recognised by applying the effective interest
rate to the amortised cost of the financial assets from the next
reporting period. If the credit risk on the credit-impaired
financial instrument improves so that the financial asset is no
longer credit-impaired, interest income is recognised by applying
the effective interest rate to the gross carrying amount of the
financial asset from the beginning of the reporting period
following the determination that the asset is no longer credit
impaired.
(ii) Debt instruments classified as at FVTOCI
Subsequent changes in the carrying amounts for debt instruments
classified as at FVTOCI as a result of interest income calculated
using the effective interest method are recognised in profit or
loss. All other changes in the carrying amount of these debt
instruments are recognised in other comprehensive income and
accumulated under the heading of capital reserve. Impairment
allowance are recognised in profit or loss with corresponding
adjustment to other comprehensive income without reducing the
carrying amount of these debt instruments. When these debt
instruments are derecognised, the cumulative gains or losses
previously recognised in other comprehensive income are
reclassified to profit or loss.
(iii) Equity instruments designated as at FVTOCI
Investments in equity instruments at FVTOCI are subsequently
measured at fair value with gains and losses arising from changes
in fair value recognised in other comprehensive income and
accumulated in the capital reserve; and are not subject to
impairment assessment. The cumulative gain or loss will not be
reclassified to profit or loss on disposal of the equity
investments, and will be transferred to retained earnings.
Dividends from these investments in equity instruments are
recognised in profit or loss when the Group's right to receive the
dividends is established, unless the dividends clearly represent a
recovery of part of the cost of the investment. Dividends are
included in the "other income and gains" line item in profit or
loss.
(iv) Financial assets at FVTPL
Financial assets that do not meet the criteria for being
measured at amortised cost or FVTOCI or designated as FVTOCI are
measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end
of each reporting period, with any fair value gains or losses
recognised in profit or loss. The net gain or loss recognised in
profit or loss excludes any dividend or interest earned on the
financial asset and is included in the "other income and gains"
line item.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets and other items subject to
impairment assessment under IFRS 9
The Group performs impairment assessment under expected credit
loss ("ECL") model on financial assets (including accounts
receivable, bills receivable, deposits and other receivables,
restricted bank deposits, cash and cash equivalents, financial
assets included in other current assets and other non-current
assets, and debt instruments at FVTOCI) and financial guarantee
contracts which are subject to impairment assessment under IFRS 9.
The amount of ECL is updated at each reporting date to reflect
changes in credit risk since initial recognition.
Lifetime ECL represents the ECL that will result from all
possible default events over the expected life of the relevant
instrument. In contrast, 12-month ECL ("12m ECL") represents the
portion of lifetime ECL that is expected to result from default
events that are possible within 12 months after the reporting date.
Assessment are done based on the Group's historical credit loss
experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current
conditions at the reporting date as well as the forecast of future
conditions.
The Group always recognises lifetime ECL for accounts
receivable. The ECL on these assets are assessed individually
and/or collectively using a provision matrix with appropriate
groupings.
For all other instruments, the Group measures the loss allowance
equal to 12m ECL, unless when there has been a significant increase
in credit risk since initial recognition, in which case the Group
recognises lifetime ECL. The assessment of whether lifetime ECL
should be recognised is based on significant increases in the
likelihood or risk of a default occurring since initial
recognition.
(i) Significant increase in credit risk
In assessing whether the credit risk has increased significantly
since initial recognition, the Group compares the risk of a default
occurring on the financial instrument as at the reporting date with
the risk of a default occurring on the financial instrument as at
the date of initial recognition. In making this assessment, the
Group considers both quantitative and qualitative information that
is reasonable and supportable, including historical experience and
forward-looking information that is available without undue cost or
effort.
In particular, the following information is taken into account
when assessing whether credit risk has increased significantly:
-- an actual or expected significant deterioration in the
financial instrument's external (if available) or internal credit
rating;
-- significant deterioration in external market indicators of
credit risk, e.g. a significant increase in the credit spread, the
credit default swap prices for the debtor;
-- existing or forecast adverse changes in business, financial
or economic conditions that are expected to cause a significant
decrease in the debtor's ability to meet its debt obligations;
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets and other items subject to
impairment assessment under IFRS 9 (continued)
(i) Significant increase in credit risk (continued)
-- an actual or expected significant deterioration in the
operating results of the debtor;
-- an actual or expected significant adverse change in the
regulatory, economic, or technological environment of the debtor
that results in a significant decrease in the debtor's ability to
meet its debt obligations.
Irrespective of the outcome of the above assessment, the Group
presumes that the credit risk has increased significantly since
initial recognition when contractual payments are more than 30 days
past due, unless the Group has reasonable and supportable
information that demonstrates otherwise.
Despite the aforegoing, the Group assumes that the credit risk
on a debt instrument has not increased significantly since initial
recognition if the debt instrument is determined to have low credit
risk at the reporting date. A debt instrument is determined to have
low credit risk if i) it has a low risk of default, ii) the
borrower has a strong capacity to meet its contractual cash flow
obligations in the near term and iii) adverse changes in economic
and business conditions in the longer term may, but will not
necessarily, reduce the ability of the borrower to fulfil its
contractual cash flow obligations. The Group considers a debt
instrument to have low credit risk when it has an internal or
external credit rating of 'investment grade' as per globally
understood definitions.
For financial guarantee contracts, the date that the Group
becomes a party to the irrevocable commitment is considered to be
the date of initial recognition for the purposes of assessing
impairment. In assessing whether there has been a significant
increase in the credit risk since initial recognition of a
financial guarantee contract, the Group considers the changes in
the risk that the specified debtor will default on the
contract.
The Group regularly monitors the effectiveness of the criteria
used to identify whether there has been a significant increase in
credit risk and revises them as appropriate to ensure that the
criteria are capable of identifying significant increase in credit
risk before the amount becomes past due.
(ii) Definition of default
For internal credit risk management, the Group considers an
event of default occurs when information developed internally or
obtained from external sources indicates that the debtor is
unlikely to pay its creditors, including the Group, in full
(without taking into account any collaterals held by the
Group).
Irrespective of the above, the Group considers that default has
occurred when a financial asset is more than 90 days past due
unless the Group has reasonable and supportable information to
demonstrate that a more lagging default criterion is more
appropriate.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets and other items subject to
impairment assessment under IFRS 9 (continued)
(iii) Credit-impaired financial assets
A financial asset is credit-impaired when one or more events
that have a detrimental impact on the estimated future cash flows
of that financial asset have occurred. Evidence that a financial
asset is credit-impaired includes observable data about the
following events:
(a) significant financial difficulty of the issuer or the borrower;
(b) a breach of contract, such as a default or past due event;
(c) the lender(s) of the borrower, for economic or contractual
reasons relating to the borrower's financial difficulty, having
granted to the borrower a concession(s) that the lender(s) would
not otherwise consider;
(d) it is becoming probable that the borrower will enter
bankruptcy or other financial reorganisation; or
(e) the disappearance of an active market for that financial
asset because of financial difficulties.
(iv) Write-off policy
The Group writes off a financial asset when there is information
indicating that the counterparty is in severe financial difficulty
and there is no realistic prospect of recovery, for example, when
the counterparty has been placed under liquidation or has entered
into bankruptcy proceedings. Financial assets written off may still
be subject to enforcement activities under the Group's recovery
procedures, taking into account legal advice where appropriate. A
write-off constitutes a derecognition event. Any subsequent
recoveries are recognised in profit or loss.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial assets (continued)
Impairment of financial assets and other items subject to
impairment assessment under IFRS 9 (continued)
(v) Measurement and recognition of ECL
The measurement of ECL is a function of the probability of
default, loss given default (i.e. the magnitude of the loss if
there is a default) and the exposure at default. The assessment of
the probability of default and loss given default is based on
historical data adjusted by forward-looking information. Estimation
of ECL reflects an unbiased and probability-weighted amount that is
determined with the respective risks of default occurring as the
weights. The Group uses a practical expedient in estimating ECL on
accounts receivable using a provision matrix taking into
consideration historical credit loss experience, adjusted for
forward looking information that is available without undue cost or
effort.
Generally, the ECL is the difference between all contractual
cash flows that are due to the Group in accordance with the
contract and the cash flows that the Group expects to receive,
discounted at the effective interest rate determined at initial
recognition.
For a financial guarantee contract, the Group is required to
make payments only in the event of a default by the debtor in
accordance with the terms of the instrument that is guaranteed.
Accordingly, the ECL is the present value of the expected payments
to reimburse the holder for a credit loss that it incurs less any
amounts that the Group expects to receive from the holder, the
debtor or any other party.
When collective assessment is performed, the Group takes into
consideration the following characteristics when formulating the
grouping:
-- Past-due status;
-- Nature, size and industry of debtors; and
-- External credit ratings where available.
The grouping is regularly reviewed by management to ensure the
constituents of each group continue to share similar credit risk
characteristics.
Interest income is calculated based on the gross carrying amount
of the financial asset unless the financial asset is credit
impaired, in which case interest income is calculated based on
amortised cost of the financial asset.
For financial guarantee contracts, the loss allowances are
recognised at the higher of the amount of the loss allowance
determined in accordance with IFRS 9; and the amount initially
recognised less, where appropriate, cumulative amount of income
recognised over the guarantee period.
Except for investments in debt instruments that are measured at
FVTOCI and financial guarantee contracts, the Group recognises an
impairment gain or loss in profit or loss for all financial
instruments by adjusting their carrying amount through a loss
allowance account. For investments in debt instruments that are
measured at FVTOCI, the loss allowance is recognised in other
comprehensive income and accumulated in the capital reserve without
reducing the carrying amounts of these debt instruments. Such
amount represents the changes in the capital reserve in relation to
accumulated loss allowance.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial assets (continued)
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
On derecognition of a financial asset measured at amortised
cost, the difference between the asset's carrying amount and the
sum of the consideration received and receivable is recognised in
profit or loss.
On derecognition of an investment in a debt instrument
classified as at FVTOCI, the cumulative gain or loss previously
accumulated in the capital reserve is reclassified to profit or
loss.
On derecognition of an investment in equity instrument which the
Group has elected to measure at FVTOCI upon initial
recognition/application of IFRS 9, the cumulative gain or loss
previously accumulated in the capital reserve is not reclassified
to profit or loss, but is transferred to retained earnings.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified either as financial
liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial
liability and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the group entities after deducting all of
its liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
Repurchase of the Company's own equity instruments (treasury
shares) is recognised and deducted directly in equity. No gain or
loss is recognised in profit or loss on the purchase, sale, issue
or cancellation of the Group's own equity instruments.
Financial liabilities
All financial liabilities are subsequently measured at amortised
cost using the effective interest method or at FVTPL.
4. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
Financial liabilities and equity (continued)
Financial liabilities at amortised cost
Financial liabilities (including accounts payable, bills
payable, dividends payable, other payables, interest-bearing bank
loans and other borrowings and long-term payables) are subsequently
measured at amortised cost using the effective interest method.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the
issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payments
when due in accordance with the terms of a debt instrument.
Financial guarantee contract liabilities are measured initially at
their fair values. It is subsequently measured at the higher
of:
-- the amount of the loss allowance determined in accordance with IFRS 9; and
-- the amount initially recognised less, where appropriate,
cumulative amortisation recognised over the guarantee period.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or have
expired. The difference between the carrying amount of the
financial liability derecognised and the consideration paid and
payable is recognised in profit or loss.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are
described in Note 4, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
The following are the key assumptions concerning the future, and
other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)
Estimated impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the recoverable amount of the cash-generating unit (or group of
cash-generating units) to which goodwill has been allocated, which
is the higher of the value in use or fair value less costs of
disposal. The value in use calculation requires the Group to
estimate the future cash flows expected to arise from the
cash-generating unit (or group of cash-generating units) and a
suitable discount rate in order to calculate the present value.
Where the actual future cash flows are less than expected, or
change in facts and circumstances which results in downward
revision of the future cash flows or upward revision of discount
rate, a further impairment loss may rise.
As at 31 December 2020, the carrying amount of goodwill was
RMB1,100 million (31 December 2019: RMB1,100 million) (net of
impairment). Details of the recoverable amount calculation are
disclosed in Note 21.
Impairment of non-financial assets (other than goodwill)
The Group assesses whether there are any indicators of
impairment for all non-financial assets at the end of each
reporting period. Intangible assets with indefinite life are tested
for impairment annually and at other times when such indicator
exists. Other non-financial assets are tested for impairment when
there are indicators that the carrying amounts may not be fully
recoverable. If any such indication exists, the recoverable amount
of the individual asset or the cash-generating unit to which the
asset belongs is estimated in order to determine the extent of the
impairment loss (if any). The recoverable amount of the individual
asset or the cash-generating unit is determined based on the higher
of fair value less costs of disposal and value in use.
In estimating the aforesaid recoverable amount of the individual
asset or the cash-generating unit, management consider all relevant
factors, including but not limited to the future cash flows and
discount rate with reasonable and supportable assumptions to make
significant accounting estimations and judgement.
The calculation of the fair value less costs of disposal is
based on available data from binding sales transactions in an arm's
length transaction of similar assets or observable market prices
less incremental costs for disposal of the asset. When value in use
calculations are undertaken, management must estimate the expected
future cash flows from the asset or cash-generating unit and choose
a suitable discount rate in order to calculate the present value of
those cash flows.
During the year, the Group recognised impairment loss of
approximately RMB439,7 million for certain aircraft included in
property, plant and equipment that will be retired before the end
of year 2021, and as at 31 December 2020, the aggregate carrying
amount of property, plant and equipment, right-of-use assets,
investment properties, intangible assets, interests in associates
and interests in joint ventures (net of impairment) was RMB229,043
million (31 December 2019: RMB238,401 million). Details of these
items are set out in Notes 17, 18, 19, 20, 23 and 24.
5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)
Overhaul provisions
Overhaul provisions for aircraft under leases are accrued using
the estimated maintenance costs for aircraft to fulfil these return
conditions. 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 term. 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. Different estimates could
significantly affect the estimated overhaul provision and the
results of operations.
As at 31 December 2020, overhaul provisions of the Group
amounted to RMB6,011 million (31 December 2019: RMB5,629 million)
and details are disclosed in Note 37.
Frequent-flyer programme
The transaction price allocated to the miles earned by the
members of the Group's frequent-flyer programme is estimated based
on the stand-alone selling price of the miles awarded. The
stand-alone selling price of the miles awarded is estimated
relating to the expected redemption rate. The expected redemption
rate was estimated considering the number of the miles that will be
available for redemption in the future after allowing for miles
which are not expected to be redeemed. Any change in estimate would
affect profit or loss in future years.
As at 31 December 2020, the contract liabilities related to
frequent-flyer programme was RMB3,093 million (31 December 2019:
RMB3,454 million) and details are disclosed in Note 38.
Expected breakage
For those passenger flight tickets the Group expects to be
entitled to breakage because the passenger has not required the
Group to perform and is unlikely to do so, the Group recognises the
expected breakage amount as revenue in proportion to the pattern of
rights exercised by the passenger (or flown revenue) based on
historical experience. The air traffic liabilities recorded in
consolidated statement of financial position is after adjusting the
effect of expected breakage.
Deferred tax assets
Deferred tax assets are recognised for all unused tax losses and
deductible temporary differences to the extent that it is probable
that taxable profit will be available against which the losses and
deductible temporary differences can be utilised. Significant
management judgement is required to determine the amount of
deferred tax assets that can be recognised, based upon the likely
timing and level of future taxable profits together with future tax
planning strategies. In cases where the actual future profits
generated are less or more than expected, or effective tax rate is
changed, or change in facts and circumstances which result in
revision of future taxable profits estimation, a material reversal
or further recognition of deferred tax assets may arise, which
would be recognised in profit or loss for the period in which such
change takes places.
As at 31 December 2020, deferred tax assets of RMB6,751 million
(31 December 2019: RMB4,352 million) in relation to differences in
value of property, plant and equipment, provisions and accruals,
unrealised profit of intra-group transactions, impairment of
assets, deductible tax losses and temporary differences relating to
right-of-use assets and lease liabilities have been recognised in
the Group's consolidated statement of financial position. No
deferred tax asset has been recognised on the deductible tax losses
of RMB500 million (31 December 2019: RMB36 million) and other
deductible temporary differences of RMB0.2 million (31 December
2019: RMB5 million) due to the unpredictability of the future
streams and details are disclosed in Note 27.
6. REVENUE
2020 2019
RMB'000 RMB'000
Revenue from contracts with customers 69,244,930 135,898,971
Rental income (included in revenue of
airline operations segment) 258,819 281,719
Total revenue 69,503,749 136,180,690
Disaggregation of revenue from contracts with customers
2020 2019
Airline Other Airline Other
Segments operations operations operations operations
RMB'000 RMB'000 RMB'000 RMB'000
Type of goods or services
Airline operations
Passenger 55,726,862 - 124,524,583 -
Cargo and mail 8,553,407 - 5,732,160 -
Ground service income 239,713 - 753,272 -
Others 1,565,162 - 2,078,460 -
66,085,144 - 133,088,475 -
Other operations
Aircraft engineering
income - 2,771,588 - 2,491,912
Others - 388,198 - 318,584
- 3,159,786 - 2,810,496
Total 66,085,144 3,159,786 133,088,475 2,810,496
Geographical markets
Mainland China 48,535,069 3,159,786 85,907,957 2,810,496
Hong Kong, Special Administrative
Region ("SAR"), Macau
SAR and Taiwan, China 1,032,767 - 5,911,532 -
International 16,517,308 - 41,268,986 -
Total 66,085,144 3,159,786 133,088,475 2,810,496
6. REVENUE (continued)
Performance obligations for contracts with customers
Passenger revenue is recognised when transportation services are
provided. Besides, the Group recognises the expected breakage
amount as passenger revenue in proportion to the pattern of rights
exercised by the passenger (or flown revenue) based on historical
experience. Ticket sales for transportation not yet provided are
recorded in air traffic liabilities.
The Group operates frequent-flyer programme and provides free
services or products to the customers according to the miles they
earn. The Group allocates the transaction price to each performance
obligation on a relative stand-alone selling price basis. The
amount allocated to the miles earned by the frequent-flyer
programme members is recorded in contract liabilities and deferred
until the miles are redeemed when the Group fulfils its obligations
to supply services or products or when the miles expire. During the
year, the Group recognised revenue of RMB1,537 million (2019:
RMB2,304 million) which was included in contract liabilities in
relation to frequent-flyer programme at the beginning of the
year.
Cargo and mail revenue is recognised when transportation
services are provided.
Revenue from other airline-related services is recognised when
the related performance obligations are satisfied.
Sale of goods is recognised when control of the goods has
transferred to the customer, being at the point the goods are
delivered to the customer.
Transaction price allocated to the remaining performance
obligation for contracts with customers
The customer loyalty points in frequent-flyer programme have a
three-year term and these points can be redeemed anytime at
customers' discretion during the valid period.
7. SEGMENT INFORMATION
The Group's operating businesses are structured and managed
separately, according to the nature of their operations and the
services they provide. The Group has the following reportable
operating segments:
(a) the "airline operations" segment which mainly comprises the
provision of air passenger and air cargo services; and
(b) the "other operations" segment which comprises the provision
of aircraft engineering and other airline-related services.
Intersegment sales and transfers are transacted with reference
to the selling prices used for sales made to third parties at the
then prevailing market prices.
7. SEGMENT INFORMATION (continued)
Operating segments
The following tables present the Group's consolidated revenue
and (loss)/profit before taxation regarding the Group's operating
segments in accordance with the Accounting Standards for Business
Enterprises of the PRC ("CASs") for the years ended 31 December
2020 and 2019 and the reconciliations of reportable segment revenue
and (loss)/profit before taxation to the Group's consolidated
amounts under IFRSs:
Year ended 31 December 2020
Airline Other
operations operations Elimination Total
RMB'000 RMB'000 RMB'000 RMB'000
Revenue
Sales to external customers 66,343,963 3,159,786 - 69,503,749
Inter-segment sales 171,659 6,406,908 (6,578,567) -
Revenue for reportable segments
under
CASs and IFRSs 66,515,622 9,566,694 (6,578,567) 69,503,749
Segment loss before taxation
Loss before taxation for
reportable
segments under CASs (18,129,295) (62,012) (283,213) (18,474,520)
Effect of differences between
IFRSs
and CASs 8,114
Loss before taxation for
the year
under IFRSs (18,466,406)
7. SEGMENT INFORMATION (continued)
Operating segments (continued)
Year ended 31 December 2019
Airline Other
operations operations Elimination Total
RMB'000 RMB'000 RMB'000 RMB'000
Revenue
Sales to external customers 133,370,194 2,810,496 - 136,180,690
Inter-segment sales 147,968 7,999,141 (8,147,109) -
Revenue for reportable segments
under
CASs and IFRSs 133,518,162 10,809,637 (8,147,109) 136,180,690
Segment profit before taxation
Profit before taxation for
reportable
segments under CASs 8,425,964 899,234 (220,559) 9,104,639
Effect of differences between
IFRSs
and CASs 15,624
Profit before taxation for
the year
under IFRSs 9,120,263
7. SEGMENT INFORMATION (continued)
Operating segments (continued)
The following tables present the segment assets, liabilities and
other information of the Group's operating segments under CASs as
at 31 December 2020 and 2019 and the reconciliations of reportable
segment assets, liabilities and other information to the Group's
consolidated amounts under IFRSs:
Airline Other
operations operations Elimination Total
RMB'000 RMB'000 RMB'000 RMB'000
Segment assets
Total assets for reportable
segments as at
31 December 2020 under
CASs 276,189,234 21,125,795 (13,244,319) 284,070,710
Effect of differences between
IFRSs
and CASs (41,094)
Total assets under IFRSs 284,029,616
Total assets for reportable
segments as at
31 December 2019 under
CASs 286,516,534 25,238,859 (17,501,840) 294,253,553
Effect of differences between
IFRSs
and CASs (47,180)
Total assets under IFRSs 294,206,373
Airline Other
operations operations Elimination Total
RMB'000 RMB'000 RMB'000 RMB'000
Segment liabilities
Total liabilities for reportable
segments
as at 31 December 2020
under
CASs and IFRSs 198,629,828 14,553,683 (12,926,931) 200,256,580
Total liabilities for reportable
segments
as at 31 December 2019
under
CASs and IFRSs 194,202,329 15,917,668 (17,243,087) 192,876,910
7. SEGMENT INFORMATION (continued)
Operating segments (continued)
Year ended 31 December 2020
Effect
of differences
between
Airline Other IFRSs Amounts
under
operations operations Elimination Total and CASs IFRSs
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Other segment information
Share of (losses)/profit
of associates
and joint ventures (6,146,027) 152,876 - (5,993,151) - (5,993,151)
Impairment losses reversed
on
financial assets 9,351 73,780 9,467 92,598 - 92,598
Impairment losses recognised
on
non-financial assets 443,373 32,241 - 475,614 - 475,614
Depreciation and amortisation 20,123,001 427,606 (127,810) 20,422,797 (14,480) 20,408,317
Income tax (credit)/expense (2,639,082) 7,353 (20,574) (2,652,303) 2,028 (2,650,275)
Interests in associates
and joint ventures 10,636,087 1,803,195 (59,668) 12,379,614 139,919 12,519,533
Additions to non-current
assets 18,799,950 261,633 (92,187) 18,969,396 - 18,969,396
Year ended 31 December 2019
Effect
of differences
between
Airline Other IFRSs Amounts
under
operations operations Elimination Total and CASs IFRSs
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Other segment information
Share of profit of
associates and
joint ventures 143,914 331,345 - 475,259 - 475,259
Impairment losses
recognised/(reversed)
on financial assets 42,615 (6,555) 4,622 40,682 - 40,682
Impairment losses
recognised/(reversed)
on non-financial assets 2,041 (4,846) - (2,805) - (2,805)
Depreciation and amortisation 20,991,268 337,462 (32,152) 21,296,578 (17,494) 21,279,084
Income tax expense 1,726,798 148,744 (22,949) 1,852,593 3,906 1,856,499
Interests in associates
and joint ventures 14,327,393 1,776,946 (53,188) 16,051,151 139,919 16,191,070
Additions to non-current
assets 34,636,914 281,948 - 34,918,862 - 34,918,862
7. SEGMENT INFORMATION (continued)
Geographical information
The following table presents the Group's consolidated revenue
under IFRSs by geographical location for the years ended 31
December 2020 and 2019, respectively:
Year ended 31 December 2020
Hong Kong
SAR,
Macau SAR
Mainland and
China Taiwan, China International Total
RMB'000 RMB'000 RMB'000 RMB'000
Sales to external customers
and total revenue 51,953,674 1,032,767 16,517,308 69,503,749
Year ended 31 December 2019
Hong Kong
SAR,
Macau SAR
Mainland and
China Taiwan, China International Total
RMB'000 RMB'000 RMB'000 RMB'000
Sales to external customers
and total revenue 89,000,172 5,911,532 41,268,986 136,180,690
In determining the Group's geographical information, revenue is
attributed to the segments based on the origin or destination of
each flight. Assets, which consist principally of aircraft and
ground equipment, supporting the Group's worldwide transportation
network, are mainly registered/located in Mainland China. According
to the business demand, the Group needs to flexibly allocate
different aircraft to match the need of the route network. An
analysis of the assets of the Group by geographical distribution
has therefore not been included.
There was no revenue from transactions with a single customer
amounting to 10% or more of the Group's revenue during the year
ended 31 December 2020 (2019: Nil).
8. OTHER INCOME AND GAINS
2020 2019
RMB'000 RMB'000
Co-operation routes income and subsidy
income 4,076,199 3,643,407
Dividend income 8,034 12,550
Gain/(loss) on disposal of
* Interests in joint ventures - (414)
* Property, plant and equipment 38,943 65,319
* Right-of-use assets 348 -
Gain on derecognition of land use rights - 52,798
Others 233,422 285,530
4,356,946 4,059,190
9. EMPLOYEE COMPENSATION COSTS
An analysis of the Group's employee compensation costs,
including the emoluments of Directors and supervisors, is as
follows:
2020 2019
RMB'000 RMB'000
Wages, salaries and other benefits 20,338,486 22,475,397
Retirement benefit costs:
- Contributions to defined contribution
retirement scheme 1,674,117 2,998,431
- Early retirement benefits 231 70
22,012,834 25,473,898
The employees of the Group in the PRC are members of a
state-managed retirement benefits scheme operated by the PRC
government. The Group is required to contribute a specific
percentage of the total monthly basic salaries of its current
employees to the retirement benefits scheme to fund the
benefits.
In addition to the above benefits scheme, the Group also
provides annuity schemes for certain qualified employees in the
PRC. The employees' and the Group's contributions for the annuity
schemes are calculated based on certain percentage of Group's
salaries and recognised in profit or loss as expense in profit or
loss when incurred.
There were no forfeited contributions in respect of the Group's
defined contribution plan as mentioned above.
10. NET IMPAIRMENT LOSS REVERSED/(RECOGNISED) UNDER EXPECTED CREDIT LOSS MODEL
2020 2019
RMB'000 RMB'000
Impairment losses reversed/(recognized)
on financial assets:
* Accounts receivable 73,882 (39,051)
* Deposits and other receivables (2,508) 190
* Debt instruments at FVTOCI (7,637) (8,096)
* Financial assets included in other current assets 25,687 5,976
* Financial assets included in other non-current assets 3,174 299
92,598 (40,682)
Details of impairment assessment are set out in Note 44.
11. (LOSS)/PROFIT FROM OPERATIONS
The Group's (loss)/profit from operations is arrived at after
charging/(crediting):
2020 2019
RMB'000 RMB'000
Depreciation of property, plant and equipment 9,168,355 9,704,731
Depreciation of right-of-use assets 11,214,630 11,548,619
Depreciation of investment properties 25,302 25,692
Amortisation of intangible assets 30 42
Impairment losses recognised on property,
plant
and equipment (Note 17) 439,656 -
Impairment losses recognised/(reversed)
on inventories 35,958 (2,805)
Auditors' remuneration:
- Audit related services 18,660 17,923
- Other services 435 -
12. FINANCE COSTS
2020 2019
RMB'000 RMB'000
Interest on interest-bearing bank loans
and other borrowings 1,848,869 1,581,534
Interest on lease liabilities 3,694,546 3,897,514
Imputed interest expenses on defined
benefit obligations 8,163 8,880
5,551,578 5,487,928
Less: Interest capitalised (451,793) (539,000)
5,099,785 4,948,928
The interest capitalisation rates during the year ranged from
1.9% to 4.41% (2019: 3.14% to 4.75%) per annum relating to the
costs of related borrowings during the year.
13. DIRECTORS', CHIEF EXECUTIVE'S, SUPERVISORS' AND EMPLOYEES' EMOLUMENTS
Directors', chief executive's and supervisors' remuneration for
the year, disclosed pursuant to the applicable Listing Rules and
Companies Ordinance, was as follows:
2020 2019
RMB'000 RMB'000
Directors' fee 465 520
Salaries and other allowances 1,041 1,272
Discretionary bonus 663 457
Retirement benefit scheme contributions 113 233
2,282 2,482
13. DIRECTORS', CHIEF EXECUTIVE'S, SUPERVISORS' AND EMPLOYEES' EMOLUMENTS (continued)
2020
Salaries Retirement
and benefit
Directors' other Discretionary scheme
fee allowances bonus contributions Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Executive director
Song Zhiyong (Note (a)) - - - - -
Non-executive directors
Patrick Healy (Note (b)) - - - - -
Xue Yasong - 476 527 54 1,057
Feng Gang (Note (a))
(Appointed on 26 May 2020) - - - - -
Cai Jianjiang (Note (a))
(Resigned on 29 December 2020) - - - - -
- 476 527 54 1,057
Independent non-executive directors
Wang Xiaokang 60 - - - 60
Stanley Hui Hon-chung 200 - - - 200
Li Dajin 200 - - - 200
Duan Hongyi (Note (a))
(Appointed on 26 May 2020) - - - - -
Liu Deheng
(Resigned on 21 January 2020) 5 - - - 5
465 - - - 465
Supervisors
Zhao Xiaohang (Note (a)) - - - - -
He Chaofan (Note (a)) - - - - -
Lyu Yanfang (Note(a))
(Appointed on 30 October 2020) - - - - -
Wang Jie (Appointed on 25 September
2020) - 166 44 13 223
Qin Hao (Appointed on 25 September
2020) - 147 33 13 193
Li Guixia (Resigned on 25 September
2020) - 252 59 33 344
Xiao Yanjun (Note (a))
(Resigned on 25 September
2020) - - - - -
- 565 136 59 760
465 1,041 663 113 2,282
13. DIRECTORS', CHIEF EXECUTIVE'S, SUPERVISORS' AND EMPLOYEES' EMOLUMENTS (continued)
2019
Retirement
Salaries benefit
Directors' and Discretionary scheme
fee other allowances bonus contributions Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Executive director
Song Zhiyong (Note (a)) - - - - -
Non-executive directors
Cai Jianjiang (Note (a)) - - - - -
Xue Yasong - 719 160 110 989
Patrick Healy (Note (b))
(Appointed on 19 December
2019) - - - - -
Cao Jianxiong (Note (a)) (Appointed
on 30 May
2019 and resigned on 27 December
2019) - - - - -
John Robert Slosar (Note (b))
(Resigned on 6 November 2019) - - - - -
- 719 160 110 989
Independent non-executive directors
Wang Xiaokang 60 - - - 60
Liu Deheng 60 - - - 60
Stanley Hui Hon-chung 200 - - - 200
Li Dajin 200 - - - 200
520 - - - 520
Supervisors
He Chaofan (Note (a)) - - - - -
Xiao Yanjun - 251 160 46 457
Li Guixia - 302 137 77 516
Zhao Xiaohang (Note (a))
(Appointed on 19 December
2019) - - - - -
Wang Zhengang (Note (a))
(Resigned on 19 December 2019) - - - - -
- 553 297 123 973
520 1,272 457 233 2,482
13. DIRECTORS', CHIEF EXECUTIVE'S, SUPERVISORS' AND EMPLOYEES' EMOLUMENTS (continued)
Notes:
(a) These directors or supervisors did not receive any
remuneration for their services in the capacity of the directors or
supervisors of the Company. They also held management positions in
CNAHC and salaries were borne by CNAHC.
(b) These directors did not receive any remuneration for their
services in the capacity of the directors. They also held
management positions in Cathay Pacific Airways Limited ("Cathay
Pacific"), the associate of the Group, and salaries were borne by
Cathay Pacific.
(c) None of the directors, supervisors and chief executive (Mr.
Song Zhiyong) has waived any emoluments during the years ended 31
December 2020 and 2019.
(d) For the year ended 31 December 2020, the Group received cash
consideration from Cathay Pacific of HKD2,672,000 for making
available directors' services to Cathay Pacific (2019:
HKD2,579,000).
Five highest paid individuals
For both 2020 and 2019, the five highest paid employees were not
directors, supervisors nor chief executive of the Group.
Details of the remuneration of the five highest paid individuals
during the year were as follows:
2020 2019
RMB'000 RMB'000
Salaries and other allowances 9,950 13,289
Discretionary bonuses 187 144
Retirement benefit scheme contributions 130 162
10,267 13,595
Discretionary bonuses are calculated based on the Group's or
respective member's performance for such financial year.
The number of the five highest paid individuals whose
remuneration fell within the following bands is as follows:
2020 2019
HKD2,000,001 to HKD2,500,000 5 -
HKD2,500,001 to HKD3,000,000 - 2
HKD3,000,001 to HKD3,500,000 - 3
5 5
During the year, no emoluments were paid by the Group to any of
the directors, supervisors, chief executive, or the five highest
paid individuals as an inducement to join or upon joining the Group
or as compensation for loss of office (2019: Nil).
14. INCOME TAX (CREDIT)/EXPENSE
2020 2019
RMB'000 RMB'000
Current income tax:
* Mainland China 23,894 2,047,335
* Hong Kong SAR and Macau SAR, China 326 23,227
Under-provision in respect of prior years 7,718 5,182
Deferred tax (Note 27) (2,682,213) (219,245)
(2,650,275) 1,856,499
On 21 March 2018, the Hong Kong Legislative Council passed The
Inland Revenue (Amendment) (No.7) Bill 2017 (the "Bill") which
introduced the two-tiered profits tax rates regime. The Bill was
signed into law on 28 March 2018 and was gazetted on the following
day. Under the two-tiered profits tax rates regime, the first HK$2
million of profits of the qualifying group entity will be taxed at
8.25% and profits above HK$2 million will be taxed at 16.5%. The
profits of group entities not qualifying for the two-tiered profits
tax rates regime will continue to be taxed at a flat rate of
16.5%.
Accordingly, the Hong Kong SAR profits tax is calculated at
8.25% on the first HK$2 million of the estimated assessable profits
and at 16.5% on the estimated assessable profits above HK$2
million.
Under the relevant Corporate Income Tax Law and regulations in
the PRC, except for two branches and two subsidiaries which are
taxed at a preferential rate of 15% (2019: 15%), all group
companies located in Mainland China are subject to a corporate
income tax rate of 25% (2019: 25%) during the year. Subsidiaries in
Hong Kong SAR, China are taxed at corporate income tax rates of
8.25% and 16.5% (2019: 8.25% and 16.5%) and subsidiaries in Macau
SAR, China are taxed at corporate income tax rate of 12% (2019:
12%).
In respect of majority of the Group's overseas airline
activities, the Group has either obtained exemptions from overseas
taxation pursuant to the bilateral aviation agreements between the
overseas governments and the PRC government, or has sustained tax
losses in these overseas jurisdictions. Accordingly, no provision
for overseas tax has been made for overseas airlines activities in
the current and prior years.
14. INCOME TAX (CREDIT)/EXPENSE (continued)
The taxation for the year can be reconciled to the (loss)/profit
before taxation per consolidated statement of profit or loss as
follows:
2020 2019
RMB'000 RMB'000
(Loss)/profit before taxation (18,466,406) 9,120,263
Tax at the applicable tax rate of 25% (4,616,602) 2,280,066
Preferential tax rates on income/(loss)
of group entities 304,015 (113,980)
Tax effect of share of results of associates
and joint ventures 1,498,288 (118,815)
Tax effect of non-deductible expenses 48,931 100,099
Tax effect of non-taxable income (8,133) (30,749)
Tax effect of deductible temporary differences
and
tax losses not recognised 118,485 613
Tax effect of utilisation of tax losses
not recognised in prior years (1,818) (18,180)
Tax effect of utilisation of deductible
temporary differences not
recognised in prior years (1,159) (247,737)
Under-provision in respect of prior years 7,718 5,182
Income tax (credit)/expense for the year (2,650,275) 1,856,499
15. (LOSS)/EARNINGS PER SHARE
The calculation of the basic and diluted (loss)/earnings per
share attributable to equity shareholders of the Company is based
on the following data:
2020 2019
RMB'000 RMB'000
(Loss)/earnings
(Loss)/earnings for the purpose of basic
and diluted (loss)/earnings
per share (14,403,343) 6,420,294
2020 2019
'000 '000
Number of shares
Number of ordinary shares for the purpose
of basic and
diluted (loss)/earnings per share 13,734,961 13,734,961
15. (LOSS)/EARNINGS PER SHARE (continued)
The number of ordinary shares for the purpose of basic and
diluted (loss)/earnings per share is calculated based on the number
of ordinary shares in issue during the year, as adjusted to reflect
the number of treasury shares held by Cathay Pacific through
reciprocal shareholding (Note 41(c)).
The Group had no potential dilutive ordinary shares in issue
during both years.
16. DIVIDS
Dividends for the shareholders of ordinary shares of the Company
recognised as distribution during the year:
2020 2019
RMB'000 RMB'000
Final dividend in respect of the previous
financial year,
approved during the current year, of
RMB0.4442 per ten shares
(including tax) (2019: RMB1.0328 per
ten shares (including tax)) 645,192 1,500,123
Subsequent to the end of the reporting period, no dividend has
been proposed in respect of the year ended 31 December 2020 by the
Directors.
17. PROPERTY, PLANT AND EQUIPMENT
Aircraft,
engines
and flight Other Construction
equipment Buildings equipment in progress Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 1 January 2019 145,595,953 12,335,198 11,121,703 10,875,931 179,928,785
Additions 1,535,811 28,201 320,503 18,763,027 20,647,542
Transfer from construction
in progress 3,982,850 91,548 526,452 (4,600,850) -
Transfer from right-of-use
assets upon obtaining ownership
of the underlying leased assets 2,700,946 - - - 2,700,946
Transfer to right-of-use assets - - - (12,175,957) (12,175,957)
Disposals (3,584,566) (28,067) (467,419) - (4,080,052)
Exchange realignment 38,167 - 1,747 - 39,914
At 31 December 2019 150,269,161 12,426,880 11,502,986 12,862,151 187,061,178
Additions 876,309 9,090 211,886 11,392,091 12,489,376
Transfer from construction
in progress 5,670,677 230,541 387,829 (6,289,047) -
Transfer from right-of-use
assets upon obtaining ownership
of the underlying leased assets 2,180,463 - - - 2,180,463
Transfer to right-of-use assets - - - (4,728,612) (4,728,612)
Transfer to investment properties - - - (5,579) (5,579)
Disposals (2,443,673) (16,480) (172,859) - (2,633,012)
Exchange realignment (109,360) - (9,833) - (119,193)
At 31 December 2020 156,443,577 12,650,031 11,920,009 13,231,004 194,244,621
Accumulated depreciation
At 1 January 2019 (65,128,091) (4,719,615) (7,005,467) - (76,853,173)
Depreciation charge for the
year (8,542,105) (444,066) (718,560) - (9,704,731)
Transfer from right-of-use
assets upon obtaining ownership
of the underlying leased assets (1,409,983) - - - (1,409,983)
Eliminated on disposals 3,362,028 13,882 284,745 - 3,660,655
Exchange realignment (9,868) - (1,181) - (11,049)
At 31 December 2019 (71,728,019) (5,149,799) (7,440,463) - (84,318,281)
Depreciation charge for the
year (8,040,603) (418,740) (709,012) - (9,168,355)
Transfer from right-of-use
assets upon obtaining ownership
of the underlying leased assets (910,760) - - - (910,760)
Eliminated on disposals 2,271,177 3,508 157,479 - 2,432,164
Exchange realignment 53,831 - 8,168 - 61,999
At 31 December 2020 (78,354,374) (5,565,031) (7,983,828) - (91,903,233)
17. PROPERTY, PLANT AND EQUIPMENT (continued)
Aircraft,
engines
and flight Other Construction
equipment Buildings equipment in progress Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Impairment
At 1 January 2019 (701,666) - - - (701,666)
Eliminated on disposals 117,201 - - - 117,201
At 31 December 2019 (584,465) - - - (584,465)
Recognised for the year (Note) (439,656) - - - (439,656)
Eliminated on disposals 29,223 - - - 29,223
At 31 December 2020 (994,898) - - - (994,898)
Net book value
At 31 December 2020 77,094,305 7,085,000 3,936,181 13,231,004 101,346,490
At 31 December 2019 77,956,677 7,277,081 4,062,523 12,862,151 102,158,432
Note: During the year, the Group recognised impairment loss
amounting to approximately RMB439.7 million for certain aircraft
that will be retired before the end of year 2021.
17. PROPERTY, PLANT AND EQUIPMENT (continued)
Depreciation of overhaul components of engines is calculated
using the units of production method based on the estimated flying
hours. The items of other property, plant and equipment, less their
estimated residual value, if any, except for construction in
progress, are depreciated on a straight-line basis at the following
rates per annum.
Depreciation
Estimated Residual rate
useful life/flying value per annum/per
hours thousand hours
Aircraft, engines and flight equipment:
Core parts of airframe and engines 15 to 30 years 5% 3.17% - 6.33%
Overhaul of airframe and cabin
refurbishment 5 to 12 years Nil 8.33% - 20.00%
9 to 43 thousand
Overhaul components of engines hours Nil 2.33% - 11.11%
Rotable 3 to 15 years Nil 6.67% - 33.33%
Buildings 5 to 50 years 3%-5% 1.90% - 19.40%
Other equipment 3 to 20 years Nil-5% 4.75% - 33.33%
As at 31 December 2020, the Group's aircraft and flight
equipment, buildings and machinery with an aggregate net book value
of approximately RMB1,593 million (31 December 2019: RMB2,779
million) were pledged to secure certain bank loans of the Group
(Note 36).
As at 31 December 2020, the Group was in the process of applying
for the title certificates of certain buildings with an aggregate
net book value of approximately RMB3,478 million (31 December 2019:
RMB3,445 million). The Directors are of the opinion that the Group
is entitled to lawfully and validly occupy and use the
above-mentioned buildings, and the aforesaid matter did not have
any significant impact on the Group's financial position as at 31
December 2020.
18. RIGHT-OF-USE ASSETS
Aircraft
and engines Land Buildings Others Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
Cost
At 1 January 2019 147,114,032 3,218,555 1,141,040 12,341 151,485,968
Additions 10,422,081 56,818 640,710 160,456 11,280,065
Transfer from property, plant
and equipment 12,175,957 - - - 12,175,957
Transfer to property, plant
and
equipment upon obtaining ownership
of the underlying leased assets (2,700,946) - - - (2,700,946)
Reduction upon completion/early
termination of lease (571,489) (55,427) (87,688) - (714,604)
Exchange adjustments (2,708) - (86) - (2,794)
At 31 December 2019 166,436,927 3,219,946 1,693,976 172,797 171,523,646
Additions 2,864,993 3,504 253,746 9,246 3,131,489
Transfer from property, plant
and equipment 4,725,726 - - 2,886 4,728,612
Transfer to property, plant
and
equipment upon obtaining ownership
of the underlying leased assets (2,180,463) - - - (2,180,463)
Reduction upon completion/early
termination of leases (1,241,205) (25,775) (96,291) (1,730) (1,365,001)
Exchange adjustments (277,991) - (10,598) - (288,589)
At 31 December 2020 170,327,987 3,197,675 1,840,833 183,199 175,549,694
Accumulated depreciation
At 1 January 2019 (41,986,013) (619,497) - - (42,605,510)
Depreciation charged for the
year (10,912,057) (67,949) (548,618) (19,995) (11,548,619)
Transfer to property, plant
and
equipment upon obtaining ownership
of the underlying leased assets 1,409,983 - - - 1,409,983
Reduction upon completion/early
termination of lease 568,370 16,783 10,607 - 595,760
Exchange adjustments 1,207 - 33 - 1,240
At 31 December 2019 (50,918,510) (670,663) (537,978) (19,995) (52,147,146)
Depreciation charged for the
year (10,456,209) (67,746) (669,212) (21,463) (11,214,630)
Transfer to property, plant
and
equipment upon obtaining ownership
of the underlying leased assets 910,760 - - - 910,760
Reduction upon completion/early
termination of lease 1,226,946 6,266 77,334 401 1,310,947
Exchange adjustments 123,972 - 6,083 - 130,055
At 31 December 2020 (59,113,041) (732,143) (1,123,773) (41,057) (61,010,014)
Net book value
At 31 December 2020 111,214,946 2,465,532 717,060 142,142 114,539,680
At 31 December 2019 115,518,417 2,549,283 1,155,998 152,802 119,376,500
18. RIGHT-OF-USE ASSETS (continued)
During the year, expense relating to short-term leases amounted
to approximately RMB686 million (2019: RMB1,517 million), expense
relating to leases of low-value assets, excluding short-term leases
of low value assets, amounted to approximately RMB1 million (2019:
RMB14 million).
Leases committed
As at 31 December 2020, the Group had future undiscounted lease
payments under non-cancellable period of RMB1,386 million (31
December 2019: RMB1,092 million), which was not recognised as lease
liabilities since leases have yet to be commenced.
During the year, total cash outflow for leases was RMB15,018
million (2019: RMB16,286 million).
Details of the lease maturity analysis of lease liabilities are
set out in Notes 35 and 44.
As at 31 December 2020, the Group's land use rights, which are
recorded as part of right-of-use assets and all located in Mainland
China, with an aggregate carrying amount of approximately RMB27
million (31 December 2019: RMB27 million) were pledged to secure
certain bank loans and other borrowings of the Group (Note 36).
As at 31 December 2020 and 2019, the Group had title
certificates for all the land use rights acquired.
19. INVESTMENT PROPERTIES
2020 2019
RMB'000 RMB'000
Cost
As at 1 January 779,134 766,242
Additions - 25,536
Transfer from property, plant and equipment 5,579 -
Decrease (20,260) (12,644)
As at 31 December 764,453 779,134
Accumulated depreciation
As at 1 January (141,148) (115,456)
Depreciation for the year (25,302) (25,692)
Decrease 2,326 -
As at 31 December (164,124) (141,148)
Net carrying amount
As at 31 December 600,329 637,986
20. INTANGIBLE ASSETS
2020 2019
RMB'000 RMB'000
As at 1 January 36,610 36,913
Amortisation for the year (30) (42)
Cash refund upon admission of new Star
Alliance members - (261)
As at 31 December 36,580 36,610
The Group's intangible assets include the admission rights of
the Company and Shenzhen Airlines Company Limited ("Shenzhen
Airlines") to Star Alliance (the "Admission Rights"), which are
stated at cost less impairment losses amounting to approximately
RMB35 million as at 31 December 2020 (31 December 2019:
approximately RMB35 million). The Admission Rights have an
indefinite useful life due to their lasting legal and economic
significance.
21. GOODWILL
2020 2019
RMB'000 RMB'000
Carrying amount
As at 1 January and 31 December 1,099,975 1,099,975
Impairment testing of goodwill
For the purposes of impairment testing, goodwill acquired
through business combinations has been allocated to Shenzhen
Airlines cash-generating unit.
The recoverable amount of the Shenzhen Airlines cash-generating
unit was determined based on a value in use calculation. That
calculation uses cash flow projections based on financial budgets
approved by management covering a five-year period and pre-tax
discount rate of 12.5% (2019: 10%). The discount rate used is a
long-term weighted-average cost of capital, which is based on the
management's best estimation of the investment returns that market
participants would require for the relevant assets. Shenzhen
Airlines' cash flows beyond the five-year period were extrapolated
using a 2% growth rate. This growth rate is based on the relevant
industry growth forecasts and does not exceed the average long-term
growth rate for the relevant industry. Other key assumptions for
the value in use calculations relate to the estimation of cash
inflows/outflows which include budgeted sales and gross margin,
such estimation is based on the unit's past performance and
management's expectations for the market development. Management
believes that any reasonably possible change in any of these
assumptions would not cause the carrying amount of Shenzhen
Airlines cash-generating unit to exceed the recoverable amount of
Shenzhen Airlines cash-generating unit.
22. INTERESTS IN SUBSIDIARIES
Particulars of the principal subsidiaries as at 31 December 2020
and 31 December 2019 were as follows:
Percentage
of equity
interests
attributable
to the Company
Place of
incorporation/ Paid up
registration issued/
and registered Principal
Company name operations Legal status capital Direct Indirect activities
% %
China National
Aviation
Company Limited Limited
("CNAC") Hong Kong liability Investment
( ) SAR, China company HK$331,268,000 69 31 holding
Air China Import
and Export Co., Ltd. Limited
(#) PRC/Mainland liability Import and
( )(Note(a)) China company RMB95,080,786 100 - export trading
Provision
of cabin
Zhejiang Aviation Limited service
Service Co., Ltd.(#) PRC/Mainland liability and airline
( ) (Note(a)) China company RMB20,000,000 100 - catering
Shanghai International
Aviation
Air Service Co., Limited Provision
Ltd.(#) PRC/Mainland liability of ground
( ) (Note(a)) China company RMB2,000,000 100 - service
Air China Development
Corporation Limited Provision
(Hong Kong) Limited Hong Kong liability of air ticketing
( ) SAR, China company HK$9,379,010 95 - services
Beijing Golden Phoenix
Human
Resource Co., Ltd. Provision
(#) Limited of human
( ) PRC/Mainland liability resources
(Note(a)) China company RMB2,000,000 100 - services
Limited
Total Transform Group British Virgin liability Investment
Ltd. Islands company HK$13,765,440,000 99.94 0.06 holding
( )
Air Macau Company Macau SAR, Limited MOP442,042,000 - 66.9 Airline
Limited China liability operator
( ) company
22. INTERESTS IN SUBSIDIARIES (continued)
Percentage
of equity
interests
attributable
to the Company
Place of
incorporation/ Paid up
registration issued/
and registered Principal
Company name operations Legal status capital Direct Indirect activities
% %
Chengdu Falcon Aircraft
Engineering Provision
Service Co., Ltd. of aircraft
(#) Limited overhaul
( ) PRC/Mainland liability and maintenance
(Note(b)) China company RMB80,000,000 30 30 services
Limited
Shenzhen Airlines PRC/Mainland liability Airline
( ) (Note(b)) China company RMB5,360,000,000 51 - operator
Kunming Airlines PRC/Mainland Limited RMB80,000,000 - 80 Airline
Co., Ltd. (#) China liability operator
company
( ) (Note(b))
Limited
Beijing Airlines PRC/Mainland liability Airline
Co., Ltd. (#) China company RMB1,000,000,000 51 - operator
( ) (Note(a))
Limited
Dalian Airlines Co., PRC/Mainland liability Airline
Ltd. (#) China company RMB3,000,000,000 80 - operator
( ) (Note(a))
Air China Inner
Mongolia
Co., Ltd. (#) Limited
( ) PRC/Mainland liability Airline
(Note(a)) China company RMB1,000,000,000 80 - operator
Provision
Aircraft Maintenance of aircraft
and Engineering Limited overhaul
Corporation ("AMECO") PRC/Mainland liability and maintenance
( ) (Note(b)) China company US$300,052,800 75 - services
China National Aviation
Finance Co., Ltd.
("CNAF") Limited Provision
( ) PRC/Mainland liability of financial
(Note(a)) China company RMB1,127,961,864 51 - services
(#) The English names of these companies are direct translations of their Chinese names.
Notes:
(a) These companies are wholly-domestic owned enterprises.
(b) These companies are sino-foreign equity joint ventures.
22. INTERESTS IN SUBSIDIARIES (continued)
The above table lists the subsidiaries of the Company which, in
the opinion of the Directors, principally affected the results or
assets of the Group. To give details of other subsidiaries would,
in the opinion of the Directors, result in particulars of excessive
length.
Information of debt securities, representing corporate bonds and
short-term commercial papers, issued by a subsidiary of the
Group:
As at 31 December 2020, the Company had a subsidiary which had
outstanding issued debt securities as follows:
Face value Carrying value
of of
Name debt securities debt securities Maturity date
RMB'000 RMB'000
Shenzhen Airlines 500,000 521,080 14/03/2021
800,000 824,974 24/04/2021
600,000 608,265 07/09/2021
1,000,000 1,028,929 18/03/2022
1,000,000 1,027,222 26/04/2022
1,000,000 1,022,500 23/05/2022
1,000,000 1,024,063 05/03/2023
500,000 510,810 19/03/2021
6,567,843
As at 31 December 2019, the Company had a subsidiary which had
outstanding issued debt securities as follows:
Face value Carrying value
of of
Name debt securities debt securities Maturity date
RMB'000 RMB'000
Shenzhen Airlines 500,000 521,080 14/03/2021
800,000 824,974 24/04/2021
600,000 608,265 07/09/2021
1,000,000 1,029,322 26/04/2022
1,000,000 1,026,517 18/03/2022
1,000,000 1,022,191 23/05/2022
500,000 511,403 15/01/2020
500,000 511,114 21/01/2020
800,000 815,650 22/01/2020
500,000 508,847 01/03/2020
500,000 507,608 22/03/2020
500,000 506,208 22/01/2020
500,000 504,819 14/02/2020
500,000 504,484 25/02/2020
500,000 503,531 24/03/2020
500,000 502,581 10/04/2020
500,000 502,325 17/04/2020
500,000 502,058 13/03/2020
500,000 501,053 20/05/2020
500,000 500,252 12/06/2020
12,414,282
22. INTERESTS IN SUBSIDIARIES (continued)
Composition of the Group
Place of incorporation/registration Number of principal
Principal activity and operations subsidiaries
2020 2019
Airline operator PRC/Macau SAR 6 6
Investment holding Hong Kong SAR/BVI 2 2
Import and export trading PRC 1 1
Provision of cabin service
and airline catering PRC 1 1
Provision of ground service PRC 1 1
Provision of air ticketing
service Hong Kong SAR 1 1
Provision of human resources
services PRC 1 1
Provision of aircraft overhaul
and
maintenance services PRC 2 2
Provision of financial services PRC 1 1
16 16
Details of non-wholly owned subsidiary that have material
non-controlling interests
The table below shows the details of a non-wholly owned
subsidiary of the Company that has material non-controlling
interests:
Proportion of (Loss)/profit
equity interests allocated to
Place and voting rights non-
of held by non- controlling interests Accumulated non-
registration controlling interests year ended 31 controlling interests
Name of subsidiary and operations at 31 December December at 31 December
2020 2019 2020 2019 2020 2019
RMB'000 RMB'000 RMB'000 RMB'000
Shenzhen Airlines PRC 49% 49% (1,081,740) 561,986 2,991,480 4,178,018
Individually
immaterial
subsidiaries
with
non-controlling
interests (331,048) 281,484 3,240,229 3,692,768
Total (1,412,788) 843,470 6,231,709 7,870,786
Summarised financial information in respect of the Company's
subsidiary that has material non-controlling interests is set out
below. The summarised financial information below represents
amounts before intra-group elimination. The summarised financial
information below represents amounts shown in the subsidiary's
financial statements prepared in accordance with IFRSs.
22. INTERESTS IN SUBSIDIARIES (continued)
Details of non-wholly owned subsidiary that have material
non-controlling interests (continued)
Shenzhen Airlines
2020 2019
RMB'000 RMB'000
Current assets 2,266,583 3,424,615
Non-current assets 61,551,957 63,191,261
Current liabilities (24,638,535) (25,125,117)
Non-current liabilities (33,037,450) (33,000,911)
Net assets 6,142,555 8,489,848
* Equity contributed to equity shareholders of Shenzhen
Airlines 6,178,578 8,454,568
* Equity contributed to the non-controlling interests
("NCI")
of Shenzhen Airlines' subsidiaries (36,023) 35,280
Carrying amount of NCI 2,991,480 4,178,018
Revenue 17,394,252 31,879,423
(Loss)/profit for the year (2,133,420) 1,152,011
Total comprehensive (expense)/income (2,147,294) 1,155,139
* attributable to equity shareholders of Shenzhen
Airlines (2,075,991) 1,160,041
* attributable to NCI of Shenzhen Airlines'
subsidiaries (71,303) (4,902)
Dividend paid to NCI (98,000) (122,598)
Cash generated from operating activities 1,364,932 3,745,448
Cash used in investing activities (1,004,598) (2,725,432)
Cash used in financing activities (1,026,268) (971,867)
23. INTERESTS IN ASSOCIATES
2020 2019
RMB'000 RMB'000
Share of net assets
* Listed shares in the PRC - 552,008
* Listed shares in Hong Kong SAR, China 7,372,164 9,794,836
* Unlisted investments 976,857 1,545,736
Goodwill 2,589,407 2,754,981
As at 31 December 10,938,428 14,647,561
Market value of listed shares 12,207,958 13,008,238
23. INTERESTS IN ASSOCIATES (continued)
Particulars of the principal associates of the Group as at 31
December 2020 and 31 December 2019 were as follows:
Percentage
of
Place of equity
incorporation/ interests
registration Paid up attributable
and issued/registered to the
Company name operations capital Group Principal activities
%
Cathay Pacific * Hong Kong HK$787,139,514 29.99 Airline operator
( ) SAR, China
Shandong Aviation Group Co., PRC/Mainland RMB580,000,000 49.4 Investment
Ltd. China holding
( )
Shandong Airlines Co., Ltd. PRC/Mainland RMB400,000,000 22.8 Airline operator
China
( )
Menzies Macau Airport Services Macau SAR, MOP10,000,000 41 Provision of
Limited* China airport ground
( ) handling services
Yunnan Airport Aircraft Maintenance PRC/Mainland RMB10,000,000 40 Civil aircraft
& China line
Services Co., Ltd. maintenance
( )
Chongqing Civil Aviation Cares PRC/Mainland RMB14,800,000 24.5 Provision of
Information China airline-related
Technology Co., Ltd. (#) information
( ) system
services
Chengdu Civil Aviation Southwest PRC/Mainland RMB10,000,000 35 Provision of
Cares Co., Ltd. (#) China airline-related
( ) information
system
services
Tibet Airlines Co., Ltd.(#) PRC/Mainland RMB280,000,000 31 Airline operator
China
( )
* The equity interests of these associates are held indirectly
through certain subsidiaries of the Company.
(#) The English names of these companies are direct translations of their Chinese names.
The above table lists the associates of the Group which, in the
opinion of the Directors, principally affected the results or
assets of the Group. To give details of other associates would, in
the opinion of the Directors, result in particulars of excessive
length.
On 6 August 2020, the Group further subscribed 750,756,347
ordinary shares of Cathay Pacific at HK$4.68 per share, total
consideration of which were HK$3.514 billion. The Group's
percentage of equity interests in Cathay Pacific remained unchanged
after the subscription.
Summarised financial information in respect of Cathay Pacific,
the only individually material associate of the Group, and a
reconciliation to the carrying amount in the consolidated financial
statements, are set out below. The summarised financial information
below represents amounts shown in the associate's financial
statements.
23. INTERESTS IN ASSOCIATES (continued)
Cathay Pacific
2020 2019
RMB'000 RMB'000
Gross amounts of the associate's
Current assets 23,201,490 24,441,007
Non-current assets 148,976,171 167,722,426
Current liabilities (39,324,787) (50,936,980)
Non-current liabilities (71,193,486) (84,991,712)
Equity 61,659,388 56,234,741
* Equity contributed to equity shareholders of the
associate 45,244,041 56,232,054
* Equity contributed to preferred shareholders of the
associate 16,411,980 -
* Equity contributed to NCI of the associate 3,367 2,687
Revenue 40,772,035 94,778,078
(Loss)/profit for the year (18,804,965) 1,498,226
Other comprehensive income 862,629 874,482
Total comprehensive (expenses)/income (17,942,336) 2,372,708
Dividend received from the associate - 397,195
Reconciled to the Group's interests in
the associate
Gross amounts of net assets of the associate 45,244,041 56,232,054
Group's effective interest 29.99% 29.99%
Group's share of net assets of the associate 13,568,688 16,863,993
Elimination of reciprocal shareholding (6,196,524) (7,069,157)
Goodwill 2,388,549 2,542,196
Carrying amount in the consolidated financial
statements 9,760,713 12,337,032
Aggregate information of associates that are not individually
material:
2020 2019
RMB'000 RMB'000
Aggregate carrying amounts of individually
immaterial associates in
the consolidated financial statements 1,177,715 2,310,529
Aggregate amounts of the Group's share
of those associates'
* (Loss)/profit for the year (1,039,558) 148,966
* Other comprehensive (expense)/income for the year (81,202) 156,239
* Total comprehensive (expense)/income for the year (1,120,760) 305,205
24. INTERESTS IN JOINT VENTURES
2020 2019
RMB'000 RMB'000
Share of net assets 1,574,610 1,537,014
Goodwill 6,495 6,495
1,581,105 1,543,509
Particulars of the joint ventures of the Group at 31 December
2020 and 31 December 2019 were as follows:
Percentage of
Place of Paid up
registration issued/
and registered Ownership Profit Principal
Company name operations capital interest sharing activities
% %
Shanghai Pudong International
Airport Cargo Terminal Provision
Co., Ltd.(#) PRC/Mainland of cargo carriage
( ) China RMB680,000,000 39 39 services
Provision
of engine
Sichuan Services Aero-Engine overhaul and
Maintenance Co., Ltd.(#) PRC/Mainland maintenance
( ) China US$88,000,000 60 60 services
Wholesale
and import
GA Innovation China PRC/Mainland of aircraft
Co., Ltd. (#) China US$10,000,000 50 50 and components
( )
Shanghai International
Airport Provision
Ground Service Co., of airport
Ltd. (#) PRC/Mainland ground handling
( ) China RMB360,000,000 24 24 services
Wuxi Xiangyi Development PRC/Mainland
Co., Ltd.(#) China RMB20,000,000 46.3 46.3 Property development
( )
(#) The English names of these companies are the direct
translations of their Chinese names.
The decisions about the relevant activities of the above
investees require unanimous consent of the Group and other
investors pursuant to the articles of association of these
investees.
24. INTERESTS IN JOINT VENTURES (continued)
The Directors are of the opinion that no joint ventures are
individually material to the Group. Aggregate information of joint
ventures that are not individually material are listed as
follows:
2020 2019
RMB'000 RMB'000
Aggregate carrying amounts of individually
immaterial joint ventures
in the consolidated financial statements 1,581,105 1,543,509
Aggregate amounts of the Group's share
of those joint ventures'
- Profit for the year 155,541 259,727
- Total comprehensive income for the
year 155,541 259,727
25. EQUITY INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
2020 2019
RMB'000 RMB'000
Unlisted investments:
- Equity securities 233,180 253,113
The above unlisted equity investments represent the Group's
equity interests in a number of private entities established in the
PRC and certain interest in unlisted securities of a listed
company. The Directors have elected to designate these investments
in equity instruments at FVTOCI as they believe that these equity
instruments are not held for trading and not expected to be sold in
the foreseeable future.
26. DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
2020 2019
RMB'000 RMB'000
Investments in listed bonds 1,344,829 1,291,250
Negotiable certificates of deposits - 397,201
Total 1,344,829 1,688,451
The above investments are held by the Group within a business
model whose objective is both to collect their contractual cash
flows which are solely payments of principal and interest on the
principal amount outstanding and to sell these financial assets.
Hence, these investments are classified as at FVTOCI.
Details of impairment assessment are set out in Note 44.
27. DEFERRED TAXATION
The movements in deferred tax assets and liabilities during the
year were as follows:
2020 2019
RMB'000 RMB'000
Deferred tax assets:
As at 1 January 5,604,557 5,557,278
Credited to profit or loss (Note 14) 2,576,398 46,883
Exchange realignment (1,213) 396
Gross deferred tax assets as at 31 December 8,179,742 5,604,557
Deferred tax liabilities:
As at 1 January 1,873,545 2,042,936
Credited to profit or loss (Note 14) (105,815) (172,362)
(Credited)/charged to other comprehensive
income (4,151) 2,971
Gross deferred tax liabilities as at
31 December 1,763,579 1,873,545
Net deferred tax assets as at 31 December 6,416,163 3,731,012
27. DEFERRED TAXATION (continued)
The principal components of the Group's deferred tax assets and
liabilities were as follows:
2020 2019
RMB'000 RMB'000
Deferred tax assets:
Differences in value of property, plant
and equipment 58,920 60,948
Provisions and accruals 3,169,837 3,333,043
Unrealised profit of intra-group transactions 195,515 172,208
Impairment 414,705 327,874
Deductible tax losses 3,098,764 -
Impairment of investments in debt instruments
at FVTOCI 5,640 3,731
Right-of-use assets and lease liabilities 1,236,361 1,706,753
Gross deferred tax assets 8,179,742 5,604,557
Deferred tax liabilities:
Changes in fair value of equity instruments
at FVTOCI (49,013) (53,996)
Changes in fair value of debt instruments
at FVTOCI (3,246) (4,323)
Depreciation allowances in excess of
the related depreciation (1,429,407) (1,535,222)
Impairment of investments in debt instruments
at FVTOCI (5,640) (3,731)
Others (276,273) (276,273)
Gross deferred tax liabilities (1,763,579) (1,873,545)
Net deferred tax assets 6,416,163 3,731,012
The following amounts, determined after appropriate offsetting,
are shown separately on the consolidated statement of financial
position:
2020 2019
RMB'000 RMB'000
Net deferred tax assets 6,750,883 4,352,452
Net deferred tax liabilities (334,720) (621,440)
6,416,163 3,731,012
27. DEFERRED TAXATION (continued)
Details of tax losses and other deductible temporary differences
not recognised are set out below:
2020 2019
RMB'000 RMB'000
Deductible tax losses 500,376 35,898
Other unrecognised deductible temporary
differences 232 4,864
500,608 40,762
At the end of the reporting period, the Group has unused tax
losses of approximately RMB12,895 million (2019: RMB36 million)
available for offset against future profits. Deferred tax asset has
been recognised in respect of approximately RMB12,395 million
(2019: Nil) of such losses. No deferred tax asset has been
recognised in respect of the remaining tax losses of approximately
RMB500 million (2019: RMB36 million) which relate to subsidiaries
that have been loss-making for some years and it is not considered
probable that sufficient taxable profits will be available in the
near future against which the tax losses can be utilised. Included
in unrecognised tax losses are losses of approximately RMB488
million (2019: RMB36 million) with expiry dates as disclosed in the
following table. Other tax losses may be carried forward
indefinitely.
2020 2019
RMB'000 RMB'000
2020 - 9,457
2021 11,582 11,582
2022 8,219 8,219
2023 445,810 4,189
2024 2,451 2,451
2025 19,980 -
488,042 35,898
28. INVENTORIES
An analysis of inventories as at the end of the reporting period
is as follows:
2020 2019
RMB'000 RMB'000
Spare parts of flight equipment 1,089,743 1,194,998
Catering supplies 92,538 81,434
Equipment 8,836 10,321
Others 662,873 811,920
1,853,990 2,098,673
29. ACCOUNTS RECEIVABLE
2020 2019
RMB'000 RMB'000
Accounts receivable 3,102,328 6,242,241
Less: Allowance for expected credit losses (159,529) (244,551)
2,942,799 5,997,690
The ageing analysis of the accounts receivable as at the end of
the reporting period, based on the transaction date, net of
allowance for expected credit losses, was as follows:
2020 2019
RMB'000 RMB'000
Within 30 days 1,270,198 2,589,150
31 to 60 days 488,965 789,472
61 to 90 days 259,396 452,542
Over 90 days 924,240 2,166,526
2,942,799 5,997,690
Details of impairment assessment of accounts receivable are set
out in Note 44.
30. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
An analysis of prepayments, deposits and other receivables as at
the end of the reporting period, net of impairment loss, was as
follows:
2020 2019
RMB'000 RMB'000
Manufacturers' credits 1,036,936 1,341,074
Prepayments of jet fuel 61,520 105,580
Other prepayments 359,717 373,449
Others 15,604 39,520
1,473,777 1,859,623
Deposits and other receivables 2,438,694 1,864,845
3,912,471 3,724,468
As at 31 December 2020, the impairment loss mainly consisted of
the full provision for the amount due from Shenzhen Airlines
Property Development Co., Ltd. of RMB468,796,000 (31 December 2019:
RMB468,796,000).
Details of impairment assessment of deposits and other
receivables are set out in Note 44.
31. RESTRICTED BANK DEPOSITS, CASH AND CASH EQUIVALENTS
Note 2020 2019
RMB'000 RMB'000
Time deposits with banks 93,765 345,573
Bank and cash 6,481,478 9,318,094
Less: Restricted bank deposits (i) (737,245) (728,385)
Cash and cash equivalents 5,837,998 8,935,282
Note:
(i) Details of restricted bank deposits are as follows:
2020 2019
RMB'000 RMB'000
Deposits with The People's Bank of
China by CNAF 629,042 612,060
Restricted bank deposits against aircraft
leases and others 108,203 116,325
737,245 728,385
32. OTHER CURRENT ASSETS
2020 2019
RMB'000 RMB'000
The value added tax credit 2,682,245 2,083,311
Debt instruments at fair value through
other comprehensive income 1,686,930 -
Loans to related parties 20,000 559,600
Others 56,241 715,382
4,445,416 3,358,293
Impairment (610) (26,297)
4,444,806 3,331,996
Loans to related parties mainly represented loans to CNAHC and
its subsidiaries by CNAF at a rate of 3.3% (2019: 3.40% to 4.02%)
per annum.
Details of impairment assessment of other current assets are set
out in Note 44.
33. ACCOUNTS PAYABLE
The following was an ageing analysis of the accounts payable
presented based on the transaction date as at the end of the
reporting period:
2020 2019
RMB'000 RMB'000
Within 30 days 4,674,784 7,760,994
31 to 60 days 1,394,258 1,599,072
61 to 90 days 1,385,660 1,201,101
Over 90 days 5,055,880 6,016,986
12,510,582 16,578,153
The accounts payable are non-interest-bearing and have normal
credit terms up to 90 days.
34. OTHER PAYABLES AND ACCRUALS
An analysis of other payables and accruals as at the end of the
reporting period was as follows:
2020 2019
RMB'000 RMB'000
Accrued salaries, wages and benefits 2,717,751 3,307,210
Accrued operating expenses 172,655 498,742
Other tax payables 160,933 316,324
Deposits received from sales agents 564,275 907,911
Current portion of long-term payables 28,449 32,038
Deposits received by CNAF from related
parties 4,460,614 3,372,495
Others 3,073,251 3,542,727
11,177,928 11,977,447
35. LEASE LIABILITIES
The Group has obligations under lease agreements expiring during
the years from 2021 to 2033 (31 December 2019: from 2020 to 2033).
An analysis of the lease payments as at the end of the reporting
period, together with the present values of the lease payments
which are principally denominated in foreign currencies, is as
follows:
At 31 December 2020 At 31 December 2019
Present values Present values
Lease of lease lease of lease
payments payments payments payments
RMB'000 RMB'000 RMB'000 RMB'000
Amounts repayable
- Within 1 year 16,632,893 13,560,862 17,453,162 13,861,503
- After 1 year but within
2 years 15,824,712 13,160,310 16,599,398 13,485,697
- After 2 years but within
5 years 41,987,455 36,749,314 44,314,764 37,984,614
- After 5 years 27,801,689 26,189,054 37,941,936 35,116,042
Total 102,246,749 89,659,540 116,309,260 100,447,856
Less: Amounts representing
future finance costs (12,587,209) (15,861,404)
Present values of lease
payments 89,659,540 100,447,856
Less: Portion classified
as current liabilities (13,560,862) (13,861,503)
Non-current portion 76,098,678 86,586,353
The weighted average incremental borrowing rates applied to
lease liabilities ranged from 0.27% to 5.22% per annum at 31
December 2020 (2019: from 0.25% to 5.83%).
Under the terms of certain lease agreements, the Group has the
option to purchase these aircraft at the end of or during the lease
term, at the price as stipulated in the lease agreements.
36. INTEREST-BEARING BANK LOANS AND OTHER BORROWINGS
2020 2019
RMB'000 RMB'000
Bank loans and other borrowings
* Secured 2,023,792 1,634,858
* Unsecured 50,359,853 14,482,144
52,383,645 16,117,002
Corporate bonds and short-term commercial
papers:
* Secured 6,773,214 6,773,099
* Unsecured 12,112,603 16,438,855
18,885,817 23,211,954
71,269,462 39,328,956
2020 2019
RMB'000 RMB'000
Bank loans and other borrowings repayable:
* Within 1 year or payable on demand 31,242,946 14,916,572
* After 1 year but within 2 years 733,833 525,214
* After 2 years but within 5 years 20,175,216 491,075
* After 5 years 231,650 184,141
52,383,645 16,117,002
Corporate bonds and short-term commercial
papers repayable:
* Within 1 year 8,387,419 7,813,419
* After 1 year but within 2 years 2,999,157 5,900,000
* After 2 years but within 5 years 7,499,241 9,498,535
18,885,817 23,211,954
Total interest-bearing bank loans and
other borrowings 71,269,462 39,328,956
Less: Portion classified as current liabilities (39,630,365) (22,729,991)
Non-current portion 31,639,097 16,598,965
36. INTEREST-BEARING BANK LOANS AND OTHER BORROWINGS (continued)
Bank and other borrowings denominated in currencies other than
the functional currencies of respective entities are set out
below:
2020 2019
RMB'000 RMB'000
United State Dollar ("USD") 532,013 750,690
European Dollar ("EURO") 648,209 1,184,451
Hong Kong Dollar ("HKD") 42,178 -
Macau Pataca ("MOP") 164,539 -
1,386,939 1,935,141
The carrying amount of the bank and other borrowings and the
range of interest rates are as below:
2020 2019
RMB'000 % RMB'000 %
Fixed rate bank and other
borrowings 38,204,596 1.50-4.38 14,877,652 1.40-4.75
Fixed rate corporate bonds
and
short-term commercial papers 18,885,817 1.95-5.30 23,211,954 2.20-5.30
Floating rate bank and other
borrowings 14,179,049 2.57-4.75 1,239,350 3.14-4.90
71,269,462 39,328,956
The floating rate bank and other borrowings are arranged at the
interest rate based on benchmark interest rates of The People's
Bank of China or at London Interbank Offered Rate.
The nominal amount of the Group's bank loans and corporate bonds
of approximately RMB8,797 million as at 31 December 2020 (31
December 2019: RMB8,408 million) were secured or guaranteed by:
(a) Mortgages over certain of the Group's aircraft and flight
equipment, buildings and machinery with an aggregate net carrying
amount of approximately RMB1,593million as at 31 December 2020 (31
December 2019: RMB2,779 million) (Note 17); and land use rights
with an aggregate carrying amount of approximately RMB27 million as
at 31 December 2020 (31 December 2019: RMB27 million) (Note
18);
(b) As at 31 December 2020, the Group pledged its rights to
collect cash flows in relation to Billing and Settlement Plan
("BSP") to secure bank loans of RMB150 million (31 December 2019:
RMB150 million);
(c) As at 31 December 2020, corporate bonds issued by the Group
with a face value of RMB6,500 million (31 December 2019: RMB6,500
million) were guaranteed by CNAHC.
As at 31 December 2020, corporate bonds and short-term
commercial papers with carrying amount of RMB6,568 million (31
December 2019: RMB12,414 million) were issued by Shenzhen Airlines,
a subsidiary of the Company.
37. PROVISION FOR RETURN CONDITION CHECKS
Details of the movements in provision for return condition
checks in respect of aircraft under leases at the end of the
reporting period are as follows:
2020 2019
RMB'000 RMB'000
As at 1 January 8,407,746 7,999,889
Provision for the year 1,052,793 2,168,934
Utilisation during the year (650,465) (1,761,077)
As at 31 December 8,810,074 8,407,746
Less: Portion classified as current liabilities (229,514) (869,651)
Non-current portion 8,580,560 7,538,095
As at 31 December 2020, provision for major overhauls was
RMB6,011 million (31 December 2019: RMB5,629 million). Provision
for major overhauls is calculated based on a number of variable
factors and assumptions, including the anticipated utilisation of
the aircraft and the expected costs of maintenance. The estimates
are reviewed on an ongoing basis and revised whenever
appropriate.
38. CONTRACT LIABILITIES
2020 2019
RMB'000 RMB'000
Frequent-flyer programme (Note) 3,092,542 3,453,557
Others 452,403 254,384
3,544,945 3,707,941
Analysed as:
Current portion 1,280,102 1,037,031
Non-current portion 2,264,843 2,670,910
3,544,945 3,707,941
Note:
The movements of the Group's frequent-flyer programme during the
year were as follows:
2020 2019
RMB'000 RMB'000
As at 1 January 3,453,557 3,794,006
Additions during the year 1,176,071 1,963,244
Recognised as revenue during the year (1,537,086) (2,303,693)
As at 31 December 3,092,542 3,453,557
Less: Portion classified as current liabilities (827,699) (782,647)
Non-current portion 2,264,843 2,670,910
39. DEFINED BENEFIT OBLIGATIONS
The liabilities recognised in the consolidated statement of
financial position represent:
2020 2019
RMB'000 RMB'000
Post-retirement benefit obligations 254,932 276,582
Less: current portion (25,600) (26,649)
Long-term portion 229,332 249,933
AMECO, a subsidiary of the Company, provides monthly retirement
benefits for those staff who were retired before AMECO adopted its
own enterprise annuity plan (the "Plan"). These retirement benefits
are recognised as defined benefit obligations.
Movements of the defined benefit obligations were set out as
follows:
2020 2019
RMB'000 RMB'000
At 1 January 276,582 291,178
Remeasurement (gain)/loss (3,265) 3,905
Interest cost 8,163 8,880
Payments (26,548) (27,381)
At 31 December 254,932 276,582
Less: current portion (25,600) (26,649)
Long-term portion 229,332 249,933
Expenses recognised in the consolidated statement of profit or
loss and other comprehensive income are as follows:
2020 2019
RMB'000 RMB'000
Finance costs
- Interest cost 8,163 8,880
Other comprehensive (income)/expense
- Remeasurement (gain)/loss (3,265) 3,905
Total defined benefit costs 4,898 12,785
39. DEFINED BENEFIT OBLIGATIONS (continued)
The Plan exposes the Group to actuarial risks such as interest
rate risk and longevity risk.
Interest rate The present value of the defined benefit plan obligation
risk is calculated using a discount rate determined by
reference to government bond yields. A decrease in
the bond interest rate will increase the plan liability.
Longevity risk The present value of the defined benefit plan obligation
is calculated by reference to the best estimate of
the mortality of plan participants after their employment.
An increase in the life expectancy of the plan participants
will increase the plan liability.
The most recent actuarial valuations of the present value of the
defined benefit obligations as at 31 December 2020 were carried out
by an independent firm of actuaries, Mercer (China) Limited Beijing
Branch, fellow of China Association of Actuaries. The present value
of the defined benefit obligations, and the related past cost were
measured using the projected unit credit method.
Significant actuarial assumptions (expressed as weighted
averages) are as follows:
2020 2019
Discount rate 3.20% 3.1%
Average expected remaining life of eligible
participants 12.8 years 13.4 years
Significant actuarial assumptions for the determination of the
defined benefit obligation are discount rate and mortality. The
sensitivity analyses below have been determined based on reasonably
possible changes of the respective assumptions occurring at the end
of the reporting period, while holding all other assumptions
constant.
-- If the discount rate on benefit obligation decreases by 0.5%,
the defined benefit obligations would increase by RMB9.8 million
(2019: increase by RMB11.0 million).
-- If the mortality changes to 95% of original assumption, the
defined benefit obligations would increase by RMB5.2 million (2019:
increase by RMB5.4 million).
40. DEFERRED INCOME
2020 2019
RMB'000 RMB'000
Government grants 379,747 407,646
Others 109,044 113,581
488,791 521,227
41. CAPITAL AND RESERVES
(a) Movements in components of equity
The reconciliation between the opening and closing balances of
each component of the Group's consolidated equity is set out in the
consolidated statement of changes in equity. Details of the changes
in the Company's individual components of equity between the
beginning and the end of the year are set out below:
Issued Capital Reserve Retained
Notes capital reserve funds earnings Total
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
As at 1 January 2019 14,524,815 27,459,940 9,916,057 25,684,109 77,584,921
Total comprehensive
income for
the year - 155,052 - 5,388,540 5,543,592
Appropriation of statutory
reserve funds (ii) - - 537,682 (537,682) -
Appropriation of discretionary
reserve fund (iii) - - 535,760 (535,760) -
Dividends declared
in respect of
the previous year - - - (1,500,123) (1,500,123)
As at 31 December
2019 14,524,815 27,614,992 10,989,499 28,499,084 81,628,390
Total comprehensive
expense
for the year - (78,095) - (7,167,938) (7,246,033)
Appropriation of discretionary
reserve fund (iii) - - 537,682 (537,682) -
Dividends declared
in respect of
the previous year - - - (645,192) (645,192)
As at 31 December
2020 14,524,815 27,536,897 11,527,181 20,148,272 73,737,165
41. CAPITAL AND RESERVES (continued)
(a) Movements in components of equity (continued)
Under the PRC Company Law and the Company's articles of
association, profit after taxation as reported in the PRC statutory
financial statements can only be distributed as dividends after
allowances have been made for the following:
(i) making up prior years' cumulative losses, if any;
(ii) allocations to the statutory reserve fund of at least 10%
of the after-tax profit, until the fund reaches 50% of the
Company's registered capital (for the purpose of calculating
transfers to reserves, profit after taxation would be the amount
determined under CASs). The transfers to reserves should be made
before any distribution of dividends to shareholders. The statutory
reserve fund can be used to offset previous years' losses, if any,
and part of the statutory reserve fund can be capitalised as the
Company's share capital provided that the amount of such reserve
remaining after the capitalisation shall not be less than 25% of
the share capital of the Company; and
(iii) allocations to the discretionary reserve fund approved by the shareholders.
The above reserves cannot be used for purposes other than those
for which they are created and are not distributable as cash
dividends. As at 31 December 2020, in accordance with the PRC
Company Law, amount of approximately RMB11,527 million (2019:
RMB10,989 million) standing to the credit of the Company's reserve
funds, as determined in accordance with CASs, were available for
distribution by way of future capitalisation issue. In addition,
the Company had retained earnings of approximately RMB18,913
million available for distribution as at 31 December 2020 (2019:
RMB27,270 million), as determined in accordance with CASs.
(b) Share capital
The number of shares of the Company and their nominal values as
at 31 December 2020 and 31 December 2019 are as follows:
Number of Nominal Number of Nominal
shares value shares value
2020 2020 2019 2019
RMB'000 RMB'000
Registered, issued and
fully paid:
H shares of RMB1.00
each:
- Tradable 4,562,683,364 4,562,683 4,562,683,364 4,562,683
A shares of RMB1.00
each:
- Tradable 9,962,131,821 9,962,132 9,448,653,003 9,448,653
- Trade-restricted - - 513,478,818 513,479
14,524,815,185 14,524,815 14,524,815,185 14,524,815
A shares rank pari passu, in all material respects, with H
shares of the Company.
41. CAPITAL AND RESERVES (continued)
(c) Treasury shares
As at 31 December 2020, the Group owned 29.99% equity interest
in Cathay Pacific (31 December 2019: 29.99%), which in turn owned
18.13% equity interest in the Company (31 December 2019: 18.13%).
Accordingly, the 29.99% of Cathay Pacific's shareholding in the
Company was recorded in the Group's consolidated financial
statements as treasury shares through deduction from equity.
(d) Capital management
The primary objectives of the Group's capital management are to
safeguard the Group's ability to continue as a going concern and to
maintain healthy capital ratios in order to support its business
and maximise shareholders' value.
The Group manages its capital structure and makes adjustments to
it in light of changes in economic conditions. To maintain or
adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue
new shares. No changes were made in the objectives, policies or
processes for managing capital during the years ended 31 December
2020 and 2019.
The Group monitors capital structure by reference to the gearing
ratio, which represents total liabilities divided by total assets.
The gearing ratio as at the end of the reporting periods was as
follows:
2020 2019
RMB'000 RMB'000
Total liabilities 200,256,580 192,876,910
Total assets 284,029,616 294,206,373
Gearing ratio 70.51% 65.56%
42. CONTINGENT LIABILITIES
As at 31 December 2020, the Group had the following contingent
liabilities:
(a) Pursuant to the restructuring of CNAHC in preparation for
the listing of the Company's H shares on the HKSE and the LSE, the
Company entered into a restructuring agreement (the "Restructuring
Agreement") with CNAHC and China National Aviation Corporation
(Group) Limited ("CNACG", a wholly-owned subsidiary of CNAHC) on 20
November 2004. According to the Restructuring Agreement, except for
liabilities constituting or arising out of or relating to business
undertaken by the Company after the restructuring, no liabilities
would be assumed by the Company and the Company would not be
liable, whether severally, or jointly and severally, for debts and
obligations incurred prior to the restructuring by CNAHC and CNACG.
The Company has also undertaken to indemnify CNAHC and CNACG
against any damage suffered or incurred by CNAHC and CNACG as a
result of any breach by the Company of any provision of the
Restructuring Agreement.
(b) Shenzhen Airlines provided guarantees to banks for certain
employees in respect of their residential loans. As at 31 December
2020, Shenzhen Airlines had outstanding guarantees for employees'
residential loans amounting to RMB952,000 (31 December 2019:
RMB1,328,000). The Directors consider that the fair value of these
guarantees are insignificant.
43. COMMITMENTS
(a) Capital commitments
The Group had the following amounts of contractual commitments
for the acquisition and construction of property, plant and
equipment as at the end of the reporting period:
2020 2019
RMB'000 RMB'000
Contracted, but not provided for:
- Aircraft and flight equipment 38,456,252 47,297,426
- Buildings and others 2,564,193 2,709,622
Total capital commitments 41,020,445 50,007,048
(b) Investment commitments
The Group had the following amount of investment commitments as
at the end of the reporting period:
2020 2019
RMB'000 RMB'000
Contracted, but not provided for:
- investment commitment to a joint
venture 22,837 24,417
44. FINANCIAL INSTRUMENTS
a. Categories of financial instruments
2020 2019
RMB'000 RMB'000
Financial assets
Amortised cost:
Accounts receivable 2,942,799 5,997,690
Deposits and other receivables 2,438,694 1,864,845
Deposits for aircraft under leases 615,537 636,671
Bills receivable 6,593 362
Loans to related parties 20,000 722,400
Other current assets - others - 500,000
Restricted bank deposits 737,245 728,385
Cash and cash equivalents 5,837,998 8,935,282
Subtotal 12,598,866 19,385,635
Equity instruments at FVTOCI 233,180 253,113
Debt instruments at FVTOCI
(including debt instruments at FVTOCI
included in other current assets) 3,031,759 1,688,451
Financial liabilities
Amortised cost:
Accounts payable 12,510,582 16,578,153
Bills payable 62,570 -
Other payables 7,776,154 7,451,614
Interest-bearing bank loans and other
borrowings 71,269,462 39,328,956
Long-term payables - 65,000
Dividends payable 98,000 -
91,716,768 63,423,723
Lease liabilities 89,659,540 100,447,856
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies
The above table lists the Group's major financial instruments.
Details of these financial instruments are disclosed in the
respective notes. The risks associated with these financial
instruments include market risks (interest rate risk and foreign
currency risk), credit risk and liquidity risk. The policies on how
to mitigate these risks are set out below. The management manages
and monitors these exposures to ensure appropriate measures are
implemented on a timely and effective manner.
Market risk
(i) Interest rate risk
The Group is exposed to fair value interest rate risk which
arises from fixed rate bank and other borrowings and lease
liabilities (see Notes 35 and 36 for details).
In addition, the Group is exposed to cash flow interest rate
risk which arises from floating rate bank and other borrowings,
lease liabilities, restricted bank deposits and bank balances. The
Group's exposures to interest rates on financial liabilities are
detailed in the liquidity risk management section of this note.
Sensitivity analysis
The sensitivity analyses below have been determined based on the
exposure to interest rates for bank balances, restricted bank
deposits, floating rate bank and other borrowings and lease
liabilities at the end of the reporting period. The analysis is
prepared assuming the financial instruments outstanding at the end
of reporting period were outstanding for the whole year. A 50 basis
points increase or decrease in interest rate are used which
represent management's assessment of the reasonably possible
changes in interest rates.
If interest rates had been 50 basis points (2019: 50 basis
points) higher/lower with all other variables held constant, the
Group's post-tax loss for the year ended 31 December 2020 would
increase/decrease by approximately RMB207,744,000 (2019: post-tax
profit decrease/increase by RMB144,535,000) taking into account the
capitalisation of borrowing costs.
In management's opinion, the sensitivity analysis is
unrepresentative of the inherent interest rate risk as exposure at
the end of the reporting period does not reflect the exposure
during the year.
A fundamental reform of major interest rate benchmarks is being
undertaken globally, including the replacement of some interbank
offered rates ("IBORs") with alternative nearly risk-free rates.
Several of the Group's LIBOR to bank and other borrowings will be
subject to the interest rate benchmark reform. The Group is closely
monitoring the transition to new benchmark interest rates.
(ii) Currency risk
The Group's exposure to currency risk is attributable to cash
and cash equivalents, accounts receivable, other receivables,
accounts payable, other payables, lease liabilities and
interest-bearing bank loans and other borrowings which are
denominated in the currencies other than the functional currency of
the relevant group entities. The management manages and monitors
this exposure to ensure appropriate measures are implemented on a
timely and effective manner.
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Market risk (continued)
(ii) Currency risk (continued)
The carrying amounts of the Group's major foreign currency
denominated monetary assets and monetary liabilities other than the
functional currency of the relevant group entities at the end of
the reporting period are as follows:
Assets Liabilities
2020 2019 2020 2019
RMB'000 RMB'000 RMB'000 RMB'000
USD 3,157,561 2,320,624 50,759,652 61,576,439
EURO 75,765 191,324 1,317,565 1,859,968
HKD 156,701 164,800 60,511 180,328
JPY 24,573 75,270 903,179 1,495,403
Sensitivity analysis
The sensitivity analysis below has been determined based on a 1%
(2019: 1%) increase/decrease in functional currency of respective
group entities against the relevant foreign currencies. 1% (2019:
1%) is the sensitivity rate used and represents management's
assessment of the reasonably possible change in foreign exchange
rates. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation
at the end of the reporting period for a 1% (2019: 1%) change in
foreign currency rates. A positive number below indicates an
increase/(decrease) in the Group's post-tax profit/(loss), where
functional currency of respective group entities had strengthened
1% (2019:1%) against the relevant foreign currency. For a 1% (2019:
1%) weakening of functional currency of respective group entities
against the relevant foreign currency, there would be an equal and
opposite impact on the post-tax profit/(loss) for the year.
Decrease/
(increase) in Increase in
the Group's the Group's
post-tax loss post-tax profit
2020 2019
RMB'000 RMB'000
* if RMB strengthens against USD 357,016 444,419
* if RMB strengthens against EURO 9,314 12,515
* if RMB strengthens against HKD (721) 116
* if RMB strengthens against JPY 6,590 10,651
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Credit risk and impairment assessment
Credit risk refers to the risk that counterparty will default on
its contractual obligations resulting in financial loss to the
Group. At the end of the reporting period, the Group's maximum
exposure is arising from the carrying amount of the respective
recognised financial assets as stated in the consolidated statement
of financial position and the amount of financial guarantees
provided by the Group disclosed in Note 42.
A significant portion of the Group's air tickets are sold by
agents participating in the BSP, a clearing system between airlines
and sales agents organised by the International Air Transportation
Association. The balance due from the BSP agents amounted to
approximately RMB221 million or 7% of accounts receivable as at 31
December 2020 (31 December 2019: RMB1,094 million or 18% of
accounts receivable). The credit risk exposure to BSP and the
remaining accounts receivable balance are monitored by the Group on
an ongoing basis. In addition, the Group performs impairment
assessment under ECL model on accounts receivable individually or
based on provision matrix.
In the opinion of management, the Group has no significant
credit risk with BSP as the Group maintains long-term and stable
business relationships with BSP with healthy repayment history.
The credit risk on liquid funds is limited because the
counterparties are banks and financial institutions with good
reputation.
Other than the above mentioned concentration of credit risk, the
Group does not have any other significant concentration of credit
risk associated with financial assets and financial guarantees
contracts.
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
The tables below detail the credit risk exposures of the Group's
financial assets, which are subject to ECL assessment:
External 12m or 2020 2019
credit lifetime Gross carrying Gross carrying
Notes rating ECL amount amount
RMB'000 RMB'000 RMB'000 RMB'000
Financial assets
at FVTOCI
Investments in
listed bonds 26 AAA 12m ECL 1,344,829 1,291,250
Negotiable certificates
of deposits 26 AAA 12m ECL - 397,201
Other current
assets- debt
instruments 32 AAA 12m ECL 1,686,930 3,031,759 - 1,688,451
Financial assets
at amortised costs
Lifetime
Accounts receivable 29 N/A ECL 2,964,346 6,033,921
(provision
matrix)
Credit-impaired 137,982 3,102,328 208,320 6,242,241
Deposits and other
receivables 30 N/A 12m ECL 2,420,409 1,845,384
Lifetime
ECL (not
credit-impaired) 49,169 49,169
Credit-impaired 808,891 3,278,469 808,891 2,703,444
Deposits for aircraft
under leases N/A 12m ECL 615,537 615,537 636,671 636,671
Bills receivable N/A 12m ECL 6,593 6,593 362 362
Loans to related
parties N/A 12m ECL 20,000 20,000 740,224 740,224
Other current
assets-others 32 N/A 12m ECL - - 512,628 512,628
Restricted bank
deposits 31 N/A 12m ECL 737,245 737,245 728,385 728,385
Cash and cash
equivalents 31 N/A 12m ECL 5,837,998 5,837,998 8,935,282 8,935,282
Note:
For accounts receivable, the Group has applied the simplified
approach in IFRS 9 to measure the loss allowance at lifetime ECL.
Except for debtors which are credit-impaired, the Group determines
the ECL on these items by using a provision matrix. The following
table provides information about the exposure to credit risk for
accounts receivable which are assessed based on provision matrix as
at 31 December 2020. Debtors with credit-impaired with gross
carrying amounts of RMB138 million as at 31 December 2020 (31
December 2019: RMB208 million) were assessed individually.
For deposits and other receivables, financial assets included in
other current assets, the Group measures the loss allowance equal
to 12m ECL, unless when these has been a significant increase in
credit risk since initial recognition, the Group recognises
lifetime ECL.
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
Gross carrying amount of accounts receivable using a provision
matrix
2020 2019
Accounts Accounts
Customer group Loss rate receivable Loss rate receivable
RMB'000 RMB'000
Ground service receivable 1% 66,405 1% 78,577
BSP international 1% 1,282 1% 116,605
Others 0.1%-4% 2,896,659 0.1%-4% 5,838,739
2,964,346 6,033,921
The estimated loss rates are estimated based on historical loss
rates of the debtors and are adjusted for forward-looking
information that is available without undue cost or effort.
The following table shows the movements in lifetime ECL that has
been recognised for accounts receivable under the simplified
approach.
Lifetime ECL
(not credit- Lifetime ECL
impaired) (credit-impaired) Total
RMB'000 RMB'000 RMB'000
As at 1 January 2019 30,253 185,887 216,140
Changes due to financial
instruments
recognised as at 1 January
2019:
- Transfer to credit-impaired (1,637) 1,637 -
- Impairment losses recognised 7,533 49,050 56,583
- Impairment losses reversed - (17,532) (17,532)
- Write-offs - (10,722) (10,722)
Exchange adjustments 82 - 82
As at 31 December 2019 36,231 208,320 244,551
Changes due to financial
instruments
recognised as at 1 January
2020:
- Transfer to credit-impaired (968) 968 -
- Impairment losses recognised - 19,667 19,667
- Impairment losses reversed (13,528) (80,021) (93,549)
- Write-offs - (10,952) (10,952)
Exchange adjustments (188) - (188)
As at 31 December 2020 21,547 137,982 159,529
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Credit risk and impairment assessment (continued)
The following table shows reconciliation of loss allowances that
has been recognised for deposits and other receivables.
Lifetime
ECL Lifetime
(not credit- ECL
12m ECL impaired) credit-impaired Total
RMB'000 RMB'000 RMB'000 RMB'000
As at 1 January 2019 25,312 5,319 1,967,992 1,998,623
Changes due to financial
instruments
recognised as at 1
January 2019:
- Transfer to credit-impaired (700) (53) 753 -
- Net impairment losses
recognised/(reversed) 7 (197) - (190)
- Write-offs - - (1,159,854) (1,159,854)
Exchange adjustments 20 - - 20
As at 31 December 2019 24,639 5,069 808,891 838,599
Changes due to financial
instruments
recognised as at 1
January 2020:
- Transfer to credit-impaired (1,303) (16) 1,319 -
- Net impairment losses
recognised 2,488 20 - 2,508
- Write-offs - - (1,319) (1,319)
Exchange adjustments (13) - - (13)
As at 31 December 2020 25,811 5,073 808,891 839,775
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Liquidity risk
In the management of the liquidity risk, the Group monitors and
maintains a level of cash and cash equivalents as well as undrawn
banking facilities deemed adequate by the management to finance the
Group's operations and mitigate the effects of fluctuations in cash
flows. The management monitors the utilisation of bank borrowings
to ensure compliance with loan covenants.
The liquidity of the Group is primarily dependent on its ability
to maintain adequate cash inflows from operations to meet its
financial obligations as and when they fall due, and its ability to
obtain external financing to meet its committed future capital
expenditure. With regard to its future capital commitments and
other financing requirements, the Company has already obtained
banking facilities with several PRC banks of up to an aggregate
amount of RMB174,669 million as at 31 December 2020 (31 December
2019: RMB137,148 million), of which an amount of approximately
RMB52,427 million was utilised (31 December 2019: RMB27,711
million).
The Directors had carried out a detailed review of the cash flow
forecast of the Group for the year ended 31 December 2020. Based on
such forecast, the Directors had determined that adequate liquidity
existed to finance the working capital and capital expenditure
requirements of the Group. In preparing the cash flow forecast, the
Directors had considered historical cash requirements of the Group
as well as other key factors, including the availability of the
above-mentioned loans financing which may impact the operations of
the Group. The Directors are of the opinion that the assumptions
and sensitivities which are included in the cash flow forecast are
reasonable. However, these are subject to inherent limitations and
uncertainties and some or all of these assumptions may not be
realised.
The following tables detail the Group's remaining contractual
maturities for its non-derivative financial liabilities. The tables
have been drawn up based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the Group
can be required to pay. The maturity dates for other non-derivative
financial liabilities are based on the agreed repayment dates.
44. FINANCIAL INSTRUMENTS (continued)
b. Financial risk management objectives and policies (continued)
Liquidity risk (continued)
The table includes both interest and principal cash flows. To
the extent that interest flows are floating rate, the undiscounted
amount is derived from interest rate at the end of the reporting
period.
Repayable
on demand Total
or within In the In the In the In the After undiscounted Carrying
second third fourth fifth five
one year year year year year years cash flows amount
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 31 December
2020
Accounts payable 12,510,582 - - - - - 12,510,582 12,510,582
Bills payable 62,570 - - - - - 62,570 62,570
Other payables 7,776,154 - - - - - 7,776,154 7,776,154
Lease liabilities 16,632,893 15,824,712 14,776,804 14,401,389 12,809,262 27,801,689 102,246,749 89,659,540
Interest-bearing
bank loans
and other
borrowings 40,964,343 4,853,865 28,247,879 200,638 133,016 240,666 74,640,407 71,269,462
Dividends
payables 98,000 - - - - - 98,000 98,000
78,044,542 20,678,577 43,024,683 14,602,027 12,942,278 28,042,355 197,334,462 181,376,308
Repayable
on demand Total
or within In the In the In the In the After undiscounted Carrying
second third fourth fifth five
one year year year year year years cash flows amount
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
At 31 December
2019
Accounts payable 16,578,153 - - - - - 16,578,153 16,578,153
Other payables 7,451,614 - - - - - 7,451,614 7,451,614
Lease liabilities 17,453,162 16,599,398 15,429,780 14,938,749 13,946,235 37,941,936 116,309,260 100,447,856
Interest-bearing
bank loans
and other
borrowings 23,381,961 7,126,878 3,701,425 7,007,020 151,079 196,840 41,565,203 39,328,956
Long-term
payables - 68,554 - - - - 68,554 65,000
64,864,890 23,794,830 19,131,205 21,945,769 14,097,314 38,138,776 181,972,784 163,871,579
44. FINANCIAL INSTRUMENTS (continued)
c. Fair value measurements of financial instruments
Fair value measurements for financial instruments measured at
fair value on a recurring basis
The following table presents the fair value of the Group's
financial instruments measured at the end of the reporting period
on a recurring basis, categorised into the three-level fair value
hierarchy as defined in IFRS 13 Fair value measurement. The level
into which a fair value measurement is classified is determined
with reference to the observability and significance of the inputs
used in the valuation technique.
Fair value Fair value measurements
at as at 31 December 2020 categorised
31 December into
2020 Level 1 Level 2 Level 3
RMB'000 RMB'000 RMB'000 RMB'000
Equity instruments at FVTOCI 233,180 - - 233,180
Debt instruments at FVTOCI 1,344,829 - 1,344,829 -
Debt instruments at FVTOCI
included
in other current assets 1,686,930 - 1,686,930 -
Total financial assets
at fair value 3,264,939 - 3,031,759 233,180
Fair value Fair value measurements
at as at 31 December 2019 categorised
31 December into
2019 Level 1 Level 2 Level 3
RMB'000 RMB'000 RMB'000 RMB'000
Equity instruments at FVTOCI 253,113 - - 253,113
Debt instruments at FVTOCI 1,688,451 - 1,688,451 -
_______ ______ _______ ______
Total financial assets
at fair value 1,941,564 - 1,688,451 253,113
_______ ______ _______ ______
During the year ended 31 December 2020, there were not transfers
between Level 1 and Level 2, or transfers into or out of Level 3.
During the year ended 31 December 2019, due to changes in market
conditions for certain debt securities, the quoted prices in the
market were no longer active and these securities were transferred
from Level 1 to Level 2, and there were no transfers into or out of
Level 3. The Group's policy is to recognise transfers between
levels of fair value hierarchy as at the end of the reporting
period in which they occur.
44. FINANCIAL INSTRUMENTS (continued)
c. Fair value measurements of financial instruments (continued)
Fair value measurements for financial instruments measured at
fair value on a recurring basis (continued)
Valuation techniques and inputs used in Level 2 fair value
measurements
All financial instruments classified within Level 2 of the fair
value hierarchy are debt investments, the fair value of which were
determined based upon the valuation conducted by the China Central
Depository & Clearing Co., Ltd..
Valuation techniques and inputs used in Level 3 fair value
measurements
The fair value of equity instruments at FVTOCI was mainly
estimated by reference to the quoted prices in an active market
with an adjustment of discount for lack of marketability.
Fair values of financial assets and liabilities carried at other
than fair value
Except as detailed in the following table, the Directors
consider that the carrying amounts of financial assets and
financial liabilities measured at amortised cost in these
consolidated financial statements approximate their fair
values.
Carrying amounts Fair values
As at As at As at As at
31 December 31 December 31 December 31 December
2020 2019 2020 2019
RMB'000 RMB'000 RMB'000 RMB'000
Financial liabilities
- corporate bonds (fixed
rate) 18,375,007 15,830,021 18,123,860 15,695,850
Fair value hierarchy as at 31 December 2020
Level 1 Level 2 Level 3 Total
RMB'000 RMB'000 RMB'000 RMB'000
Financial liabilities
- corporate bonds (fixed
rate) - 18,123,860 - 18,123,860
Fair value hierarchy as at 31 December 2019
Level 1 Level 2 Level 3 Total
RMB'000 RMB'000 RMB'000 RMB'000
Financial liabilities
- corporate bonds (fixed
rate) - 15,695,850 - 15,695,850
45. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details major changes in the Group's liabilities
arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those
for which cash flows were, or future cash flows will be, classified
in the Group's consolidated statement of cash flows as cash flows
from financing activities.
Corporate
bonds and
short-term
commercial Lease
Borrowings papers liabilities Total
Note 36 Note 36 Note 35
RMB'000 RMB'000 RMB'000 RMB'000
At 1 January 2019 22,518,724 20,261,658 93,548,961 136,329,343
Financing cash flows (6,355,061) 2,900,000 (14,754,685) (18,209,746)
Foreign exchange translation (9,313) - 935,143 925,830
New leases entered/lease
modified - - 20,731,409 20,731,409
Reduction upon early
termination of lease - - (81,642) (81,642)
(Decrease)/increase in
accrued interest (37,348) 50,296 68,670 81,618
At 31 December 2019 16,117,002 23,211,954 100,447,856 139,776,812
Financing cash flows 36,259,348 (4,300,000) (14,332,052) 17,627,296
Foreign exchange translation (8,693) - (3,522,162) (3,530,855)
New leases entered/lease
modified - - 7,142,041 7,142,041
Reduction upon early
termination of lease - - (34,864) (34,864)
Increase/(decrease) in
accrued interest 15,988 (26,137) (41,279) (51,428)
At 31 December 2020 52,383,645 18,885,817 89,659,540 160,929,002
46. MAJOR NON-CASH TRANSACTIONS
During the year, the Group entered into new lease agreements for
the use of aircraft and engines, land, buildings and others and
recognised right-of-use assets of RMB7,857 million (2019: RMB23,399
million) and lease liabilities of RMB7,142 million (2019: RMB20,731
million).
47. RELATED PARTY TRANSACTIONS
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the
Group), joint ventures and associates (collectively, the "CNAHC
Group"); (ii) its joint ventures; and (iii) its associates:
(i) Transactions with related parties
2020 2019
RMB'000 RMB'000
Service provided to the CNAHC
Group
Sales commission income 9,287 10,716
Sale of cargo space 7,688,836 4,894,265
Government charter flights 424,921 487,151
Ground services income 100,055 72,666
Air catering income 39,601 77,869
Income from advertising media
business 13,105 13,105
Aircraft maintenance income 234,402 347,596
Land and buildings rental income 135,576 142,852
Aviation communication expenses 22,589 22,187
Others 131,966 203,804
8,800,338 6,272,211
Service provided by the CNAHC
Group
Sales commission expenses 351,242 381,596
Air catering charges 660,396 1,249,755
Airport ground services, take-off,
landing
and depot expenses 1,085,708 1,688,929
Repair and maintenance costs 9,282 31,045
Management fees 170,809 128,056
Expense relating to short-term
leases and
leases of low-value assets 120,390 174,708
Other procurement and maintenance 213,675 293,717
Aviation communication expenses 408,374 624,996
Interest expenses 29,041 45,512
Media advertisement expenses 137,696 220,736
Construction management expenses 44,102 12,589
Others 23,252 10,179
3,253,967 4,861,818
47. RELATED PARTY TRANSACTIONS (continued)
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the
Group), joint ventures and associates (collectively, the "CNAHC
Group"); (ii) its joint ventures; and (iii) its associates:
(continued)
(i) Transactions with related parties (continued)
2020 2019
RMB'000 RMB'000
Loans to the CNAHC Group by CNAF:
Net repayment of loans 510,000 495,000
Interest income 3,263 24,513
Deposits from the CNAHC Group
received by CNAF:
Increase in deposits received 1,090,264 215,623
Interest expenses 43,278 41,984
As a lessee with CNAHC Group:
Addition in right-of-use assets
on new leases 2,000,363 5,612,307
Addition in lease liabilities
on new leases 2,000,363 5,612,307
Lease payments paid 1,526,060 1,132,337
Interest on lease liabilities 346,230 301,975
Service provided to joint ventures
and associates
Sales commission income 1,176 3,423
Ground services income 101,481 155,046
Aircraft maintenance income 103,315 170,124
Air catering income 2,947 5,100
Frequent-flyer programme income 31,294 52,273
Land and buildings rental income 6,596 8,972
Others 1,543 3,684
248,352 398,622
47. RELATED PARTY TRANSACTIONS (continued)
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the
Group), joint ventures and associates (collectively, the "CNAHC
Group"); (ii) its joint ventures; and (iii) its associates:
(continued)
(i) Transactions with related parties (continued)
2020 2019
RMB'000 RMB'000
Service provided by joint ventures
and associates
Sales commission expenses 655 1,122
Air catering charges 1,971 23,586
Airport ground services, take-off,
landing
and depot expenses 217,864 395,892
Repair and maintenance costs 1,506,834 1,686,610
Expense relating to short-term
leases and
leases of low value assets 1,160 3,818
Other procurement and maintenance 17,850 27,990
Aviation communication expenses 5,407 6,072
Frequent-flyer programme expenses 588 4,729
Airline joint operation expenses 10,482 3,549
1,762,811 2,153,368
Loans to joint ventures and associates
by CNAF:
Net repayment of loans 192,400 29,600
Interest income 5,187 8,216
Deposits from joint ventures and
associates
received by CNAF:
(Decrease)/increase in deposits
received (71,997) 114,473
Interest expenses 3,809 1,071
The Directors are of the opinion that the above transactions
were conducted in the ordinary course of business of the Group.
Part of the related transactions above also constitute connected
transactions or continuing connected transactions as defined in
Chapter 14A of Listing Rules.
47. RELATED PARTY TRANSACTIONS (continued)
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the
Group), joint ventures and associates (collectively, the "CNAHC
Group"); (ii) its joint ventures; and (iii) its associates:
(continued)
(ii) Balances with related parties
2020 2019
RMB'000 RMB'000
Outstanding balances with related
parties*
Amount due from the ultimate holding
company 591,909 192,820
Amounts due from associates 209,549 179,927
Amounts due from joint ventures 486 86,210
Amounts due from other related
companies 1,895,852 3,396,452
Amount due to the ultimate holding
company 43,703 44,188
Amounts due to associates 87,810 144,975
Amounts due to joint ventures 432,560 306,176
Amounts due to other related companies 12,985,411 14,582,574
* Outstanding balances with related parties exclude borrowing
balances with related parties and outstanding balances between CNAF
and related parties.
The above outstanding balances with related parties are
unsecured, interest-free and repayable within one year or have no
fixed terms of repayment.
2020 2019
RMB'000 RMB'000
Outstanding borrowing balances
with related parties:
Interest-bearing borrowings:
* Due to the ultimate holding company - 200,000
* Due to other related companies 1,361,244 775,856
47. RELATED PARTY TRANSACTIONS (continued)
(a) During the year, the Group had the following significant
transactions with (i) CNAHC, its subsidiaries (other than the
Group), joint ventures and associates (collectively, the "CNAHC
Group"); (ii) its joint ventures; and (iii) its associates:
(continued)
(ii) Balances with related parties (continued)
2020 2019
RMB'000 RMB'000
Outstanding balances between CNAF
and related parties:
(1) Outstanding balances between
CNAF
and CNAHC Group
Loans granted 20,000 530,000
Deposits received 4,359,469 3,269,205
Interest payable to related parties 11,488 6,721
Interest receivable from related
parties 20 313
(2) Outstanding balances between
CNAF and
joint ventures and associates
of the Group
Loans granted - 192,400
Deposits received 89,498 161,495
Interest payable to related parties 158 74
Interest receivable from related
parties - 240
The outstanding balances between CNAF and related parties
represent loans to related parties or deposits received by CNAF
from related parties. The applicable interest rates are determined
in accordance with the prevailing borrowing rates/deposit saving
rates published by The People's Bank of China.
47. RELATED PARTY TRANSACTIONS (continued)
(b) An analysis of the compensation of key management personnel of the Group is as follows:
2020 2019
RMB'000 RMB'000
Short term employee benefits 15,134 17,230
Retirement benefits 682 1,639
Total emoluments for key management
personnel 15,816 18,869
The breakdown of emoluments for key management personal are as
follows:
2020 2019
RMB'000 RMB'000
Directors and supervisors 2,282 2,482
Senior management 13,534 16,387
15,816 18,869
Further details of the remuneration of the directors and
supervisors are included in Note 13 to the consolidated financial
statements.
47. RELATED PARTY TRANSACTIONS (continued)
(c) Guarantee with related parties
Amount of guaranty at 31 December 2020:
Amount of
guaranty
at Inception Maturity
31 December date date
Name of guarantor Name of guarantee 2020 of guaranty of guaranty
RMB'000
Corporate bonds:
CNAHC Air China Limited 5,000,000 18/01/2013 18/07/2023
CNAHC Air China Limited 1,500,000 16/08/2013 16/02/2024
Amount of guaranty at 31 December 2019:
Amount of
guaranty
at Inception Maturity
31 December date date
Name of guarantor Name of guarantee 2019 of guaranty of guaranty
RMB'000
Corporate bonds:
CNAHC Air China Limited 5,000,000 18/01/2013 18/07/2023
CNAHC Air China Limited 1,500,000 16/08/2013 16/02/2024
47. RELATED PARTY TRANSACTIONS (continued)
(d) Transactions with other government-related entities in the PRC
The Company is ultimately controlled by the PRC government and
the Group operates in an economic environment currently
predominated by entities controlled, jointly controlled or
significantly influenced by the PRC government ("government-related
entities").
Apart from above transactions with CNAHC Group, the Group has
collectively, but not individually significant transactions with
other government-related entities, which include but are not
limited to the following:
-- Rendering and receiving services
-- Sales and purchases of goods, properties and other assets
-- Lease of assets
-- Depositing and borrowing money
-- Use of public utilities
The transactions between the Group and other government-related
entities are conducted in the ordinary course of the Group's
business within normal business operations. The Group has
established its approval process for providing of services,
purchase of products, properties and services, purchase of lease
service and its financing policy for borrowing. Such approval
processes and financing policy do not depend on whether the
counterparties are government-related entities or not.
48. INFORMATION ABOUT THE STATEMENT OF FINANCIAL POSITION OF THE COMPANY
Information about the statement of financial position of the
Company at the end of the reporting period included:
31 December 31 December
2020 2019
RMB'000 RMB'000
Non-current assets
Property, plant and equipment 74,974,274 74,596,782
Right-of-use assets 78,626,049 82,336,388
Intangible assets 11,312 11,312
Interests in subsidiaries (Note 22) 20,155,167 20,155,167
Interests in associates 1,130,610 2,237,606
Interests in joint ventures 1,481,943 1,428,247
Advance payments for aircraft and flight
equipment 16,212,663 13,424,966
Deposits for aircraft under leases 481,531 497,008
Equity instruments at fair value through
other comprehensive income 22,110 22,110
Deferred tax assets 5,679,491 3,745,093
Other non-current assets 671,414 701,900
199,446,564 199,156,579
Current assets
Inventories 88,664 79,558
Accounts receivable 2,259,952 4,746,976
Prepayments, deposits and other receivables 3,260,947 2,883,989
Restricted bank deposits 42,226 30,418
Cash and cash equivalents 4,609,130 6,751,816
Other current assets 2,327,892 1,773,630
12,588,811 16,266,387
Total assets 212,035,375 215,422,966
48. INFORMATION ABOUT THE STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)
31 December 31 December
2020 2019
RMB'000 RMB'000
Current liabilities
Air traffic liabilities (1,652,124) (8,200,724)
Accounts payable (10,370,375) (13,550,793)
Other payables and accruals (5,873,289) (10,523,520)
Current taxation (32,658) (845,292)
Lease liabilities (9,300,338) (9,611,985)
Interest-bearing bank loans and other
borrowings (27,764,649) (12,195,632)
Provision for return condition checks (5,990) (364,514)
Contract liabilities (1,006,813) (785,481)
(56,006,236) (56,077,941)
Net current liabilities (43,417,425) (39,811,554)
Total assets less current liabilities 156,029,139 159,345,025
Non-current liabilities
Lease liabilities (51,955,400) (59,443,076)
Interest-bearing bank loans and other
borrowings (22,967,910) (11,151,779)
Provision for return condition checks (5,022,067) (4,346,678)
Provision for early retirement benefit
obligations (1,351) (1,989)
Long-term payables (8,650) (42,850)
Contract liabilities (1,981,139) (2,345,017)
Deferred income (355,457) (385,246)
(82,291,974) (77,716,635)
NET ASSETS 73,737,165 81,628,390
CAPITAL AND RESERVES
Issued capital 14,524,815 14,524,815
Reserves 59,212,350 67,103,575
TOTAL EQUITY 73,737,165 81,628,390
INDEPENT
AUDITOR'S REPORT
(Issued by a Third Country Auditor registered with The UK
Financial Reporting Council)
TO THE SHAREHOLDERS OF AIR CHINA LIMITED
( )
(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 86 to 191, which
comprise the consolidated statement of financial position as at 31
December 2020, 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 2020, 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 International
Standards on Auditing ("ISAs"). 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
International Ethics Standards Board for Accountants' 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 2020, the provision for major Our procedures in relation to provision for major overhauls
overhauls of RMB6,011 million was recorded to fulfil the return condition
in the consolidated statement of financial of aircraft under leases included:
position.
* Testing and evaluating the design and operating
The Group held certain aircraft under leases at effectiveness of the key internal controls relevant
31 December 2020. Under the terms of the lease to the audit of provision for major overhauls to
arrangements, the Group is contractually fulfil the return condition of aircraft under leases.
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 * Evaluating the appropriateness of the methodology and
these return conditions, major overhauls are key assumptions adopted by management in estimating
required to be conducted on a regular basis. the provision for these major overhauls. This
evaluation based on the terms of the leases and the
Management estimates the maintenance costs of Group's maintenance cost experience.
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 * Performing a retrospective review of the provision
factors and assumptions, including the for major overhauls to evaluate the appropriateness
anticipated of the assumptions adopted by management by comparing
utilisation of the aircraft and the expected the assumptions adopted by management in prior years
costs of maintenance. with actual maintenance costs incurred.
We identified provision for major overhauls to
fulfil the return condition of aircraft under
leases as a key audit matter because of the * Discussing with managers in the engineering
significant management estimation and judgement department responsible for aircraft engineering about
required in assessing the variable factors and the utilisation pattern of aircraft, obtaining
assumptions in order to quantify the amount relevant operating data, performing recalculation and
of provision required at each reporting date. checking the assumptions adopted by management and
the mathematical accuracy of the calculation of
Details of the related estimation uncertainty provision for major overhauls prepared by management
are set out in Notes 4, 5 and 37 to the for those aircraft under leases.
consolidated
financial statements.
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 Our procedures in relation to passenger revenue recognition
revenue amounting to RMB55,72 7 million included:
for the year ended 31 December 2020.
* Testing and evaluating the design and operating
Passenger revenue are recognised as revenue when the effectiveness of the key internal controls, including
related transportation service is provided. IT controls, relevant to our audit of passenger
The value of passenger revenue for which the related revenue recognition.
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. * Performing substantive analytical procedures on
passenger revenue by developing an expectation for
The Group allocates the transaction price to passenger revenue using independent inputs and
passenger revenue and miles awards on a relative information generated from the Group's IT systems and
stand-alone selling price basis. The transaction to obtain evidence to support the reasonableness of
price allocated to miles awards under the the amounts recorded.
Group's frequent-flyer programme is deferred and
included in contract liabilities in the consolidated
statement of financial position.
* Evaluating the appropriateness of the assumptions
The Group maintains complex information technology adopted by management in estimating the stand-alone
("IT") systems in order to track the point selling price of miles in the frequent-flyer
of service provision for each sale and also to track programme by comparison with historical experience
the issuance and subsequent redemption and planned changes to the programme that may impact
and utilisation and expiry of frequent-flyer future redemption activities.
programme awards.
We identified passenger revenue recognition as a key
audit matter because revenue is one of * Checking underlying supporting documents for
the key performance indicators of the Group and passenger revenue transactions which are material or
because it involves complex IT systems and meet other specified criteria on a sample basis.
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.
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 ISAs 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 ISAs, 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 LLP
Certified Public Accountants
(Registered as a Third Country Auditor with the UK Financial
Reporting Council)
Shanghai, China
30 March 2021
SUPPLEMENTARY INFORMATION
EFFECTS OF DIFFERENCES BETWEEN IFRS s AND CASs
The effects of differences between the consolidated financial
statements of the Group prepared under IFRSs and CASs are as
follows:
Notes 2020 2019
RMB'000 RMB'000
Net (loss)/profit attributable to shareholders
of the Company
under CASs (14,409,429) 6,408,576
Deferred taxation (i) (2,028) (3,906)
Differences in value of fixed assets
and other non-current assets (ii) 8,114 15,624
Net (loss)/profit attributable to shareholders
of the Company
under IFRSs (14,403,343) 6,420,294
31 December 31 December
Notes 2020 2019
RMB'000 RMB'000
Equity attributable to shareholders
of the Company under CASs 77,582,421 93,505,857
Deferred taxation (i) 58,920 60,948
Differences in value of fixed assets
and other non-current assets (ii) (239,933) (248,047)
Unrealised profit of the disposal of
Hong Kong Dragon
Airlines Limited (iii) 139,919 139,919
Equity attributable to shareholders
of the Company under IFRSs 77,541,327 93,458,677
Notes:
(i) The differences in deferred taxation were mainly caused by
the differences under IFRSs and CASs as explained below.
(ii) The differences in the value of fixed assets and other
non-current assets mainly consist of the following three types: (1)
fixed assets acquired in foreign currencies prior to 1 January 1994
and translated at the equivalent amount of RMB at the then
prevailing exchange rates prescribed by the government (i.e., the
government-prescribed rates) under CASs. Under IFRSs, the costs of
fixed assets acquired in currencies prior to 1 January 1994 should
be translated at the then prevailing market rate (i.e., the swap
rate) and therefore resulted in differences in the costs of fixed
assets in the financial statements prepared under IFRSs and CASs;
(2) in accordance with the accounting policies under IFRSs, all
assets are recorded at historical cost. Therefore, the revaluation
surplus or deficit (and the related depreciation/amortisation or
impairment) recorded under CASs should be reversed in the financial
statements prepared under IFRSs; (3) the differences were caused by
the adoption of component accounting in different years under IFRSs
and CASs. Component accounting was adopted by the Group on a
prospective basis under IFRSs since 2005 and under CASs since 2007.
Such differences are expected to be eliminated through depreciation
or disposal of fixed assets in future.
(iii) The difference was caused by the disposal of Hong Kong
Dragon Airlines Limited to Cathay Pacific and is expected to be
eliminated when the Group's interest in Cathay Pacific is disposed
of.
Glossary of Technical Terms
CAPACITY MEASUREMENTS
"available tonne kilometres" the number of tonnes of capacity available
or "ATK(s)" for transportation multiplied by the
kilometres flown
"available seat kilometres" the number of seats available for sale
or "ASK(s)" multiplied by the kilometres flown
"available freight tonne kilometres" the number of tonnes of capacity available
or "AFTK(s)" for the carriage of cargo and mail multiplied
by the kilometres flown
TRAFFIC MEASUREMENTS
"passenger traffic" measured in RPK, unless otherwise specified
"revenue passenger kilometres" the number of revenue passengers carried
or "RPK(s)" multiplied by the kilometres flown
"cargo and mail traffic" measured in RFTK, unless otherwise specified
"revenue freight tonne kilometres" the revenue cargo and mail load in tonnes
or "RFTK(s)" multiplied by the kilometres flown
"revenue tonne kilometres" the revenue load (passenger and cargo)
or "RTK(s)" in tonnes multiplied by the kilometres
flown
EFFICIENCY MEASUREMENTS
"overall load factor" RTK expressed as a percentage of ATK
"passenger load factor" RPK expressed as a percentage of ASK
"cargo and mail load factor" RFTK expressed as a percentage of AFTK
"Block hours" whole and/or partial hour elapsing from
the moment the chocks are removed from
the wheels of the aircraft for flights
until the chocks are next again returned
to the wheels of the aircraft
YIELD MEASUREMENTS
"passenger yield"/"yield per revenues from passenger operations divided
RPK" by RPKs
"cargo yield"/"yield per RFTK" revenues from cargo operations divided
by RFTKs
Definitions
In this annual report, the following expressions shall have the
following meanings unless the context requires otherwise:
"Air China Cargo" Air China Cargo Co., Ltd., a non-wholly owned
subsidiary of CNAHC
"Air China Inner Mongolia" Air China Inner Mongolia Co., Ltd., a non-wholly
owned subsidiary of the Company
"Air Macau" Air Macau Company Limited, a non-wholly owned
subsidiary of the Company
"AMECO" Aircraft Maintenance and Engineering Corporation,
a non-wholly owned subsidiary of the Company
"Articles of Association" the articles of association of the Company,
as amended from time to time
"A Share(s)" ordinary share(s) in the share capital of the
Company, with a nominal value of RMB1.00 each,
which are subscribed for and traded in Renminbi
and listed on Shanghai Stock Exchange
"Beijing Airlines" Beijing Airlines Company Limited, a non-wholly
owned subsidiary of the Company
"Board" the board of directors of the Company
"CASs" China Accounting Standards for Business Enterprises
"Capital Holding" China National Aviation Capital Holding Co.,
Ltd., a wholly-owned subsidiary of CNAHC
"Cathay Dragon" Hong Kong Dragon Airlines Limited, a subsidiary
of Cathay Pacific
"Cathay Pacific" Cathay Pacific Airways Limited, an associate
of the Company
"Cathay Pacific Rights the rights issue of Cathay Pacific Rights Shares
Issue" on the basis of seven (7) Cathay Pacific Rights
Shares for every eleven (11) existing Cathay
Pacific Shares at the subscription price of
HK$4.68 per Cathay Pacific Rights Share
"Cathay Pacific Rights the new Cathay Pacific Shares to be allotted
Shares" and issued pursuant to the Cathay Pacific Rights
Issue
"Cathay Pacific Shares" the ordinary shares of Cathay Pacific
"CNACD" China National Aviation Construction and Development
Company, a wholly-owned subsidiary of CNAHC
"CNACG" China National Aviation Corporation (Group)
Limited, a wholly-owned subsidiary of CNAHC
"CNACG Group" CNACG and its subsidiaries
"CNAF" China National Aviation Finance Co., Ltd, a
non-wholly owned subsidiary of the Company
"CNAHC" China National Aviation Holding Corporation
Limited
"CNAHC Group" CNAHC and its subsidiaries
"COMAC" Commercial Aircraft Corporation of China, Ltd.
"CNAMC" China National Aviation Media Co., Ltd, a wholly-owned
subsidiary of CNAHC
"Company, "We", or "Air Air China Limited, a company incorporated in
China" the PRC, whose H Shares are listed on the Hong
Kong Stock Exchange as its primary listing
venue and on the Official List of the UK Listing
Authority as its secondary listing venue, and
whose A Shares are listed on the Shanghai Stock
Exchange
"CSRC" China Securities Regulatory Commission
"Dalian Airlines" Dalian Airlines Company Limited, a non-wholly
owned subsidiary of the Company
"Director(s)" the director(s) of the Company
"Group" the Company and its subsidiaries
"Hong Kong" the Hong Kong Special Administrative Region
of the People's Republic of China
"Hong Kong Stock Exchange" The Stock Exchange of Hong Kong Limited
"H Share(s)" overseas-listed foreign invested share(s) in
the share capital of the Company, with a nominal
value of RMB1.00 each, which are listed on
the Hong Kong Stock Exchange as primary listing
venue and have been admitted into the Official
List of the UK Listing Authority as secondary
listing venue
"International Financial International Financial Reporting Standards
Reporting Standards"
or "IFRSs"
"Kunming Airlines" Kunming Airlines Company Limited, a subsidiary
of Shenzhen Airlines
"Listing Rules" The Rules Governing the Listing of Securities
on The Stock Exchange of Hong Kong Limited
"Reporting Period" from 1 January 2020 to 31 December 2020
"RMB" Renminbi, the lawful currency of the PRC
"SASAC" State-owned Assets Supervision and Administration
Commission of the State Council
"SFO" the Securities and Futures Ordinance (Chapter
571 of the Laws of Hong Kong)
"Shandong Airlines" Shandong Airlines Co., Ltd., a non-wholly owned
subsidiary of Shandong Aviation Group Corporation
"Shandong Aviation Group Shandong Aviation Group Company Limited, an
Corporation" associate of the Company
"Shenzhen Airlines" Shenzhen Airlines Company Limited, a non-wholly
owned subsidiary of the Company
"Supervisor(s)" The supervisor(s) of the Company
"Supervisory Committee" The supervisory committee of the Company
"US dollars" United States dollars, the lawful currency
of the United States
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END
FR UBUBRAOUSURR
(END) Dow Jones Newswires
April 27, 2021 06:53 ET (10:53 GMT)
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